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COMPOSITE* OF
AAR CORP.
NONEMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN
AS AMENDED AND RESTATED EFFECTIVE APRIL 8, 1997
*includes Amendment No. 1
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AAR CORP.
NONEMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN
AS AMENDED AND RESTATED EFFECTIVE APRIL 8, 1997
TABLE OF CONTENTS
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SECTION I - INTRODUCTION......................................................................................- 1 -
SECTION II - PLAN PARTICIPANTS................................................................................- 1 -
SECTION III - DEFERRAL ELECTIONS..............................................................................- 1 -
SECTION IV - PARTICIPANT ACCOUNTS.............................................................................- 4 -
SECTION V - DISTRIBUTION OF ACCOUNTS..........................................................................- 5 -
SECTION VI - ADMINISTRATION OF THE PLAN.......................................................................- 8 -
SECTION VII - AMENDMENT OR TERMINATION........................................................................- 10-
SECTION VIII - GENERAL PROVISIONS.............................................................................- 10-
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AAR CORP.
NONEMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN
AS AMENDED AND RESTATED EFFECTIVE APRIL 8, 1997
SECTION I - INTRODUCTION
Effective January 1, 1996 AAR CORP. ("Company") established the
Nonemployee Directors' Deferred Compensation Plan ("Plan") for members of its
Board of Directors ("Board"), who are not employees of the Company or an
affiliate ("Nonemployee Directors"). The Plan is amended and restated, effective
April 8, 1997, as set forth below:
SECTION II - PLAN PARTICIPANTS
Each Nonemployee Director shall become a Participant under the Plan by
filing the written Election Form described in Section III below with the Plan
Administrator appointed by the Compensation Committee of the Board ("Committee")
with respect to the Retainers and Meeting Fees payable to the Nonemployee
Director for his services as a member of the Board.
SECTION III - DEFERRAL ELECTIONS
(a) Each Participant shall make the following election with
respect to his Retainer:
(i) The Participant may elect to defer receipt of his
entire Retainer until the date on which his service on the Board
terminates for any reason, and have the cash value of such Retainer
credited to the Stock Unit Account established for him under the Plan
and converted to Stock Units, pursuant to the provisions of paragraph
(a) of Section IV below; or
(ii) If an election is not made pursuant to clause (i)
above, a Participant shall
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receive distribution of a number of shares of common stock of AAR CORP.
("Common Stock") equal to the cash value of each quarterly payment of
his Retainer divided by the Fair Market Value (as defined in paragraph
(b) of Section VIII) of a share of Common Stock on the date on which
such quarterly payment of such Retainer is payable. Such distribution
shall be evidenced by a certificate representing the applicable number
of shares of Common Stock, registered in the name of the Participant,
and distributed to the Participant as soon as practicable after the
date on which each quarterly payment of such Retainer is payable.
(b) Each Participant shall elect (i) to have his entire Meeting
Fee paid to him in cash as soon as practicable after the date on which such
Meeting Fee is otherwise payable, or (ii) to defer receipt of his entire Meeting
Fee until the date on which his service on the Board terminates for any reason,
and have the cash value of such Meeting Fee credited to the Cash Account
established for him under the Plan pursuant to the provisions of paragraph (b)
of Section IV below.
(c) Each election with respect to a Retainer and Meeting Fee for a
calendar year shall be set forth on an Election Form provided by the Plan
Administrator. Such Election Form shall be in writing and shall specify the
elections described above with respect to Retainers and Meeting Fees.
(d) An Election Form effective for a calendar year shall be
delivered to the Plan Administrator prior to the first day of such calendar
year. An Election Form shall remain in effect for subsequent calendar years
until a written notice to revise the Election Form is delivered to the Plan
Administrator on or before the first day of the calendar year in which the
revision is
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to become effective. Except as provided in paragraph (e) below, an initial
Election Form or a revised Election Form shall only apply to a Retainer or
Meeting Fee otherwise payable to a Participant after the end of the calendar
year in which such initial or revised Election Form is delivered to the Plan
Administrator. Any Election Form delivered by a Participant shall be irrevocable
with respect to any Retainer or Meeting Fee covered by the elections set forth
therein. If an Election Form is not in effect for a Nonemployee Director for a
calendar year, he shall be deemed to have elected the options specified in
clause (i) of paragraphs (a) and (b) of this Section for such calendar year.
(e) Notwithstanding the preceding provisions of this Section:
(i) An election by a Participant with respect to a
Retainer or Meeting Fee payable on or after April 8, 1997 may be made
pursuant to an Election Form delivered to the Plan Administrator prior
to April 8, 1997; and
(ii) An election made by a Participant in the calendar
year in which he first becomes eligible to participate in the Plan may
be made pursuant to an Election Form delivered to the Plan
Administrator within 30 days after the date on which he initially
becomes eligible to participate, and such Election Form shall be
effective with respect to Retainers and Meeting Fees earned from and
after the date such Election Form is delivered to the Plan
Administrator.
(f) All Retainers and Meeting Fees deferred by a Participant
pursuant to the provisions of the Plan prior to April 8, 1997, shall be credited
to the Cash Account established for the Participant under the Plan.
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SECTION IV - PARTICIPANT ACCOUNTS
(a) (i) A Retainer of a Participant deferred pursuant to
clause (i) of paragraph (a) of Section III shall be credited as a dollar amount
to the Participant's Stock Unit Account as of the quarterly date on which each
quarterly payment of such Retainer otherwise would have been paid, and shall be
converted as of such date into Stock Units equivalent to Common Stock. Such
conversion shall be determined by dividing the dollar balance of the quarterly
payment of such Retainer by the Fair Market Value of a share of Common Stock on
such quarterly date. The number of Stock Units for full shares of Common Stock
so determined shall be credited to the Participant's Stock Unit Account and the
aggregate value thereof shall be charged to the cash balance of his Stock Unit
Account. Any cash balance remaining in the Participant's Stock Unit Account
after such conversion, together with other subsequent credits of deferred
Retainers thereto and credits thereto pursuant to clause (ii) next below, shall
be converted into Stock Units on the next quarterly conversion date.
(ii) Additional credits shall be made to a Participant's
Stock Unit Account in dollar amounts equal to the cash dividends (or the fair
market value of dividends paid in property other than Common Stock) that the
Participant would have received had he been the owner on each record date of a
number of shares of Common Stock equal to the number of Stock Units in his Stock
Unit Account on such date. In the case of a dividend in Common Stock or a Common
Stock split, additional credits will be made to a Participant's Stock Unit
Account of a number of Stock Units equal to the number of full shares of Common
Stock that the Participant would have received had he been the owner on each
record date of a number of shares of Common Stock equal to the number of Stock
Units in his Stock Unit Account on such date. Any cash dividends
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(or dividends paid in property other than Common Stock) shall be converted into
Stock Units at the next quarterly conversion date as set forth in clause (i) of
this paragraph.
(b) A Meeting Fee of a Participant deferred pursuant to clause
(ii) of paragraph (b) of Section III shall be credited to the Participant's Cash
Account as of the date it would otherwise have been paid. Until the entire
balance of a Cash Account has been paid to the Participant, or to the
beneficiaries of a deceased Participant, such balance shall be increased on the
last day of each calendar quarter to reflect accrued interest on such balance
based on the 10 year United States Treasury Bond rate at the end of the
applicable calendar quarter. The Committee may, from time to time, change
prospectively the interest rate applied with respect to Participants' Cash
Balance Accounts.
(c) Each Stock Unit Account and each Cash Account shall be
maintained on the books of the Company until full payment of the balance thereof
has been made to the applicable Participant (or the beneficiaries of a deceased
Participant). No funds shall be set aside or earmarked for any Account, which
shall be purely a bookkeeping device.
SECTION V - DISTRIBUTION OF ACCOUNTS
(a) The entire balance of a Participant's Stock Unit Account and
of his Cash Account shall be paid to him (or to his beneficiaries in the event
of his death) in a single lump sum as of the January 31 next following the date
the Participant's service on the Board terminates for any reason.
(b) The balance of a Participant's Stock Unit Account shall be
distributed in shares of Common Stock or in cash as designated by the
Participant (or his beneficiaries in the event of his
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death) by written notice delivered to the Plan Administrator prior to the
applicable January 31 distribution date. If a timely designation is not received
by the Plan Administrator, distribution shall be made in cash or in Common Stock
as the Company shall decide. In the event of a distribution in Common Stock, a
certificate representing a number of shares of Common Stock equal to the number
of Stock Units in the Participant's Stock Unit Account, registered in the name
of the Participant (or his beneficiaries), and any remaining cash in the Stock
Unit Account, shall be distributed to the Participant (or his beneficiaries). In
the event of a cash distribution, the Participant (or his beneficiaries) shall
receive an amount in cash equal to the aggregate of (i) the number of Stock
Units in the Stock Unit Account multiplied by the Fair Market Value of a share
of Common Stock on the applicable January 31, and (ii) any remaining cash in the
Stock Unit Account.
(c) The balance of a Participant's Cash Account shall be
distributed to the Participant (or his beneficiaries) in cash on the applicable
January 31 distribution date.
(d) If a Participant's service on the Board shall terminate by
reason of his death, or if he shall die after becoming entitled to distribution
hereunder, but prior to receipt of his entire distribution, all cash or Common
Stock then distributable hereunder with respect to him shall be distributed to
such beneficiary or beneficiaries as such Participant shall have designated by
an instrument in writing last filed with the Committee prior to his death, or in
the absence of such designation or of any living beneficiary, to his spouse, or
if not then living, to his then living descendants, PER STIRPES, or if none is
then living, to the personal representative of his estate, in the same manner as
would have been distributed to the Participant had he continued to live.
(e) In the written discretion of the Plan Administrator, and at
the written request of a Participant, up to 100% of the balance in his Stock
Unit Account and in his Cash Account,
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determined as of the last day of the calendar month prior to the date of
distribution, may be distributed to a Participant in a lump sum in the case of
an Unforeseeable Emergency, subject to the limitations set forth below. For
purposes of this paragraph an Unforeseeable Emergency is a severe financial
hardship of the Participant resulting from a sudden and unexpected illness or
accident of the Participant or of a dependent (as defined in Section 152(a) of
the Internal Revenue Code) of the Participant, loss of the Participant's
property due to casualty or other similar, extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant. The circumstances that will constitute an Unforeseeable Emergency
will depend upon the facts of each case, as determined by the Plan Administrator
in its discretion, but in any case payment may not be made to the extent that
such hardship is or may be relieved:
(i) through reimbursement or compensation by insurance or
otherwise;
(ii) by liquidation of the Participant's assets to the
extent the liquidation of such assets would not itself cause severe
financial hardship; or
(iii) by cessation of deferrals under the Plan.
Withdrawal of amounts because of an Unforeseeable Emergency shall be permitted
only to the extent reasonably needed to satisfy the Unforeseeable Emergency.
(f) Notwithstanding any other provisions of the Plan, the entire
balance of each Participant's Stock Unit Account and Cash Account shall be
distributed to such Participant on the earlier to occur of (1) within 10 days
after the date the Board, in its discretion, deems a Change in Control of the
Company likely to occur, and (2) the date a Change in Control actually occurs.
Distribution of each Participant's Cash Account shall be made in cash.
Distribution of each Participant's Stock Unit Account shall be made in shares of
Common Stock or in cash as
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designated by the Participant (or his beneficiaries in the event of his death)
pursuant to the procedures set forth in paragraph (b) of this Section V;
provided that the references to "the applicable January 31" in paragraph (b)
shall be references to the date set forth in this paragraph for distribution of
the Participant's Stock Unit Account. For purposes of this paragraph (f), the
definition of a Change in Control of the Company shall be the same as that found
in the AAR CORP. Stock Benefit Plan, as amended and restated from time to time.
SECTION VI - ADMINISTRATION OF THE PLAN
(a) The Committee shall appoint one or more employees of the
Company to act as the Plan Administrator. The Plan Administrator shall be
responsible for the general operation and administration of the Plan, and shall
have such powers as are necessary to discharge its duties under the Plan,
including, without limitation, the following:
(i) with the advice of the General Counsel of the
Company, to construe and interpret the Plan, to decide all questions of
eligibility, to determine the amount, manner and time of payment of any
benefits hereunder, to prescribe rules and procedures to be followed by
Participants and their beneficiaries under the Plan, and to otherwise
to carry out the purposes of the Plan; and
(ii) To appoint or employ individuals to assist in the
administration of the Plan and any other agents deemed advisable.
The decisions of the Plan Administrator shall be binding and conclusive upon all
Participants, beneficiaries and other persons.
(b) Any Participant claiming a benefit, requesting an
interpretation or ruling, or
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requesting information, under the Plan, shall present the request in writing to
the Plan Administrator, which shall respond in writing as soon as practicable.
If the claim or request is denied, the written notice of denial shall state the
following:
(i) The reasons for denial, with specific reference to
the Plan provisions upon which the denial is based;
(ii) A description of any additional material or
information required and an explanation of why it is necessary; and
(iii) An explanation of the Plan's review procedure.
The initial notice of denial shall normally be given within 90 days after
receipt of the claim. If special circumstances require an extension of time, the
claimant shall be so notified and the time limit shall be 180 days. Any person
whose claim or request is denied, or who has not received a response within 30
days, may request review by notice in writing to the Plan Administrator. The
original decision shall be reviewed by the Plan Administrator, which may, but
shall not be required to, grant the claimant a hearing. On review, whether or
not there is a hearing, the claimant may have representation, examine pertinent
documents and submit issues and comments in writing. The decision on review
shall ordinarily be made within 60 days. If an extension of time is required for
a hearing or other special circumstances, the claimant shall be so notified and
the time limit shall be extended to 120 days. The decision on review shall be in
writing and shall state the reasons and the relevant Plan provisions. All
decisions on review shall be final and bind all parties concerned.
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SECTION VII - AMENDMENT OR TERMINATION
(a) The Company intends the Plan to be permanent but reserves the
right to amend or terminate the Plan when, in the sole opinion of the Company,
such amendment or termination is advisable. Any such amendment or termination
shall be made pursuant to a resolution of the Board and shall be effective as of
the date of such resolution or such later date as the resolution may expressly
state.
(b) No amendment or termination of the Plan shall (i) directly or
indirectly deprive any current or former Participant or his beneficiaries of all
or any portion of his Accounts as determined as of the effective date of such
amendment or termination, or (ii) directly or indirectly reduce the balance of
any Account held hereunder as of the effective date of such amendment or
termination. Upon termination of the Plan, distribution of balances in all
Accounts shall be made to Participants or their beneficiaries in the manner and
at the time described in Section V as if each Participant's service on the Board
had then terminated. No additional deferred Retainers or Meeting Fees shall be
credited to the Accounts of Participants after termination of the Plan, but the
Company shall continue to credit earnings, gains and losses to Accounts pursuant
to Section IV until the balances of such Accounts have been fully distributed to
Participants or their beneficiaries.
SECTION VIII - GENERAL PROVISIONS
(a) The Plan at all times shall be entirely unfunded and no
provision shall at any time be made with respect to segregating any assets of
the Company for payment of any benefits hereunder. The right of a Participant or
his beneficiary to receive a benefit hereunder shall be an
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unsecured claim against the general assets of the Company, and neither the
Participant nor a beneficiary shall have any rights in or against any specific
assets of the Company. All amounts credited to Accounts shall constitute general
assets of the Company.
(b) For all purposes of the Plan, the Fair Market Value of a share
of Common Stock as of a given date shall be the closing price per share of the
Common Stock on the New York Stock Exchange on such date, or if such date is not
a regular trading date on such Exchange, on the next following regular trading
date.
(c) Shares of Common Stock distributed under the Plan may be
treasury shares of the Company or shares purchased by the Company on the open
market. The Company shall reserve such number of shares of Common Stock as may
be issuable under the Plan.
(d) Nothing contained in the Plan shall constitute a guaranty by
the Company, the Committee, the Plan Administrator, or any other person or
entity, that the assets of the Company will be sufficient to pay any benefit
hereunder. No Participant or beneficiary shall have any right to receive a
distribution under the Plan except in accordance with the terms of the Plan.
(e) Establishment of the Plan shall not be construed to give any
Participant the right to be retained as a member of the Board.
(f) No interest of any person or entity in, or right to receive a
distribution under, the Plan, shall be subject in any manner to sale, transfer,
assignment, pledge, attachment, garnishment, or other alienation or encumbrance
of any kind; nor may such interest or right to receive a distribution be taken,
either voluntarily or involuntarily, for the satisfaction of the debts of, or
other obligations or claims against, such person or entity, including claims for
alimony, support, separate maintenance and claims in bankruptcy proceedings.
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(g) The Plan shall be construed and administered under the laws of
the State of Illinois, except to the extent preempted by federal law.
(h) If any person entitled to a payment under the Plan is deemed
by the Company to be incapable of personally receiving and giving a valid
receipt for such payment, then, unless and until claim therefor shall have been
made by a duly appointed guardian or other legal representative of such person,
the Company may provide for such payment or any part thereof to be made to any
other person or institution that is contributing toward or providing for the
care and maintenance of such person. Any such payment shall be a payment for the
account of such person and a complete discharge of any liability of the Company,
the Committee, the Plan Administrator and the Plan therefor.
(i) The Plan shall be continued, following a transfer or sale of
assets of the Company, or following the merger or consolidation of the Company
into or with any other corporation or entity, by the transferee, purchaser or
successor entity, unless the Plan has been terminated by the Company pursuant to
the provisions of Section VII prior to the effective date of such transaction.
(j) Each Participant or beneficiary shall keep the Plan
Administrator informed of his current address. The Plan Administrator shall not
be obligated to search for the whereabouts of any person. If the location of a
Participant is not made known to the Plan Administrator within three years after
the date on which payment of the Participant's benefits under the Plan may first
be made, payment may be made as though the Participant had died at the end of
the three year period. If, within one additional year after such three year
period has elapsed, or, within three years after the actual death of a
Participant, the Plan Administrator is unable to locate any beneficiary of the
Participant, then the Company shall have no further obligation to pay any
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benefit hereunder to such Participant, or beneficiary or any other person and
such benefit shall be forfeited. If such Participant, or his beneficiary or any
other person, subsequently makes a valid claim for distribution of the amount
forfeited, such amount, without gains or earnings thereon, shall be distributed
to such Participant or his beneficiary or such other person pursuant to Section
V.
(k) Notwithstanding any of the preceding provisions of the Plan,
none of the Company, any member of the Committee, any Plan Administrator or any
individual acting as an employee or agent of the Company, the Committee or the
Plan Administrator, shall be liable to any Participant, former Participant, or
any beneficiary or other person for any claim, loss, liability or expense
incurred by such Participant, or beneficiary or other person in connection with
the Plan.
(l) The aggregate number of Stock Units that may be issuable under
the Plan and the number of Stock Units in each Stock Unit Account shall all be
appropriately adjusted as the Committee may determine for any increase or
decrease in the number of shares of issued Common Stock resulting from a
subdivision or consolidation of shares, whether through reorganization,
recapitalization, stock split-up, spin-off, stock distribution or combination of
shares or other increase or decrease in the number of such shares outstanding
effected without receipt of consideration by the Company. Adjustments under this
paragraph (l) shall be made in the sole discretion of the Committee, and its
decisions shall be binding and conclusive.
(m) Notwithstanding anything to the contrary contained in the
Plan, (a) if the Internal Revenue Service prevails in a claim by it that amounts
credited to a Participant's Account, and/or earnings thereon, constitute taxable
income to the Participant or his beneficiary for any taxable
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year of his, prior to the taxable year in which such credits and/or earnings are
distributed to him or (b) legal counsel satisfactory to the Company, and the
applicable Participant or his beneficiary, renders an opinion that the Internal
Revenue Service would likely prevail in such a claim, the balance of such
Participant's Account shall be immediately distributed to the Participant or his
beneficiary. For purposes of this paragraph, the Internal Revenue Service shall
be deemed to have prevailed in a claim if such claim is upheld by a court of
final jurisdiction, or if the Company, or a Participant or beneficiary, based
upon an opinion of legal counsel satisfactory to the Company and the Participant
or his beneficiary, fails to appeal a decision of the Internal Revenue Service,
or a court of applicable jurisdiction, with respect to such claim, to an
appropriate Internal Revenue Service appeals authority or to a court of higher
jurisdiction, within the appropriate time period.
(n) The Company shall withhold from any deferred or nondeferred
Retainer or Meeting Fee, or any payments made pursuant to Section V, any amounts
required by applicable federal, state and local tax laws and regulations
thereunder. A Participant may pay any applicable taxes due with respect to any
shares of Common Stock distributed under the Plan in cash or in Common Stock,
either by having the Company withhold a portion of the shares of Common Stock
otherwise distributable, or by delivering to the Company shares of Common Stock
otherwise owned by the Participant.
(o) Any notice under the Plan shall be in writing, or by
electronic means, and shall be received when actually delivered, or mailed
postage paid as first class U.S. Mail. Notices shall be directed to the Company
at its principal business office at One AAR Place, 1100 North Wood Dale Road,
Wood Dale, Illinois 60191, to a Nonemployee Director at the address stated in
his
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Election Form, and to a beneficiary entitled to benefits at the address stated
in the Participant's beneficiary designation, or to such other addresses any
party may specify by notice to the other parties.
IN WITNESS WHEREOF, this amendment and restatement of the Plan has been
executed on behalf of the Company on this 9th day of April, 1997.
AAR CORP.
By: /s/ Ira A. Eichner
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Ira A. Eichner, Chairman of the Board
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