AAR CORP
EX-10.12
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<TYPE>EX-10.12
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<FILENAME>a03-3941_1ex10d12.htm
<DESCRIPTION>EX-10.12
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<p align="right" style="font-weight:bold;margin:0in 0in .0001pt;text-align:right;text-transform:uppercase;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;text-transform:none;">Exhibit 10.12</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-weight:bold;margin:0in 0in .0001pt;text-align:center;text-transform:uppercase;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;text-transform:none;">THIRD AMENDMENT TO<br>
AAR CORP. NONEMPLOYEE DIRECTORS&#146;<br>
DEFERRED COMPENSATION PLAN</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="left" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:left;text-indent:.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">WHEREAS</font></b>,
AAR&nbsp;CORP., a Delaware corporation (the &#147;Company&#148;) maintains the
AAR&nbsp;CORP. Nonemployee Directors&#146; Deferred Compensation Plan as amended and
restated effective April&nbsp;8, 1997 (the &#147;Plan&#148;); and</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="left" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:left;text-indent:.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">WHEREAS</font></b>, the Company
amended the Plan effective May&nbsp;26, 2000 and December&nbsp;18, 2002, and
now deems it appropriate to further amend the Plan in certain respects.</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="left" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:left;text-indent:.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">NOW, THEREFORE</font></b>, the
Plan is hereby amended, effective July&nbsp;1, 2003 as follows:</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="left" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:left;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Paragraph&nbsp;(h)
of Section&nbsp;V is hereby amended to read as follows:</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="left" style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-align:left;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#147;(h)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Notwithstanding
any provision in the Plan to the contrary, the following provisions shall apply
to all amounts credited to each Participant&#146;s Stock Unit Account and his Cash
Account (&#147;Accounts&#148;) following the first to occur of:&#160; (i)&nbsp;a drop in the overall credit rating of the Company below
S&amp;P BB or Moody&#146;s Ba; (ii)&nbsp;a drop in the Company&#146;s market capitalization
below $75&nbsp;million for five (5)&nbsp;consecutive trading days; (iii)&nbsp;a
drop in the aggregate of cash and existing available bank lines of the Company
below $35&nbsp;million; and (iv)&nbsp;receipt of a notice of material adverse
change under any of the Company&#146;s then existing debt agreements:</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="left" style="font-size:10.0pt;margin:0in 0in .0001pt 1.5in;text-align:left;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(1)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>During
the thirty&nbsp;day period commencing on the date an event described in
clause&nbsp;(i), (ii), (iii), or&nbsp;(iv) occurs, the Company, in its sole
discretion, may distribute all or any portion of a Participant&#146;s Accounts,
including credits, dividends and interest credited in accordance with
Section&nbsp;IV to the date of distribution, to him in a lump sum as the
Company deems appropriate and in the best interest of the Company.</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="left" style="font-size:10.0pt;margin:0in 0in .0001pt 1.5in;text-align:left;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(2)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>No
distribution due to the occurrence of an event described in clause&nbsp;(i),
(ii), (iii), or&nbsp;(iv) shall be made from and after the thirtieth&nbsp;day
following the date of such event.</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="left" style="font-size:10.0pt;margin:0in 0in .0001pt 1.5in;text-align:left;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(3)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Following
the expiration of the thirty&nbsp;day period following the date of an event
described in clause&nbsp;(i), (ii), (iii), or&nbsp;(iv), a Participant shall
continue to make deferrals pursuant to Section&nbsp;III.</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="left" style="font-size:10.0pt;margin:0in 0in .0001pt 1.5in;text-align:left;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(4)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
Company shall be entitled to make separate decisions in accordance with
clause&nbsp;(1) with respect to the interests of each Participant hereunder.&#148;</p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>


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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

<p align="left" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:left;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Paragraph&nbsp;(m)
of Section&nbsp;VIII is hereby amended to read as follows:</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="left" style="margin:0in 0in .0001pt .5in;text-align:left;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#147;(m)&#160; Notwithstanding anything to the contrary
contained in the Plan, (i)&nbsp;if the Internal Revenue Service prevails in a
claim by it that amounts credited to a Participant&#146;s Accounts, and/or earnings
thereon, constitute taxable income to the Participant or his beneficiary for
any taxable year of his prior to the taxable year in which such credits and/or
earnings are distributed to him or (ii)&nbsp;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&#146;s Accounts, to the extent constituting taxable
income, shall be immediately distributed to the Participant or his
beneficiary.&#160; 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.&#148;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="left" style="font-size:10.0pt;line-height:normal;margin:0in 0in .0001pt;text-align:left;text-indent:.5in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">IN WITNESS WHEREOF</font></b>,
this Third Amendment has been executed on this 25th&nbsp;day of August, 2003.</p>

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  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">AAR CORP.</font></b></p>
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  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
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  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>
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  <td width="37%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:37.52%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ DAVID P. STORCH</font></p>
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  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
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  <td width="37%" valign="top" style="padding:0in 0in 0in 0in;width:37.52%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">David P. Storch, President</font></p>
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