Exhibit

10.13




 




SECOND

AMENDMENT TO THE




AAR CORP. NONEMPLOYEE DIRECTORS’ DEFERRED COMPENSATION PLAN




 




 




WHEREAS, AAR CORP.

(“Company”) adopted the Amended and Restated AAR CORP. Nonemployee Directors’

Deferred Compensation Plan (“Plan”), effective April 8, 1997; and




 




WHEREAS, the

Company amended the Plan effective May 26, 2000, and deems it appropriate to

further amend the Plan in certain respects;




 




NOW, THEREFORE, the

Plan is hereby further amended, as follows, effective December 18, 2002:




 




1.             Amend

Section II – Plan Participants to read as follows:




 




“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 (i) the annual Board retainer (“Retainer”) and (ii) the Committee retainer

and meeting fees (“Meeting Fees”) payable to the Nonemployee Director for his

services as a member of the Board.”




 




2.             Amend

Section III – Deferral Elections, subparagraphs (a)(ii) and (e)(ii), to read as

follows:




 




“(a)(ii)     If an election is not made pursuant to

clause (i) above, a Participant shall receive quarterly payment of the Retainer

in cash.”




 




“(e)(ii)     An election made by a Participant in the calendar

year in which he first becomes eligible to participate in the Plan, or

following an amendment to 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, or a Plan amendment becomes

effective, 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.”




 




3.             Add

the following new paragraphs (g) and (h) to Article V, Distribution of

Accounts:




 





























 




(g)           Notwithstanding any provision in the

Plan to the contrary, a Participant may elect a distribution of all or any

portion of the amounts credited to his Stock Unit Account or Cash Account at

any time if (i) he elects such distribution by written instrument delivered to

the Plan Administrator at least six months in advance of the date of

distribution is received, or (ii) the distribution is subject to a forfeiture

penalty equal to 10% of the amount of distribution.  Such distribution shall be made pursuant to the provisions of the

Plan.




 




(h)           Notwithstanding any provision in the

Plan to the contrary, all amounts credited to a Participant’s Stock Unit

Account and Cash Account shall be distributed to him in a lump sum, if payable

in cash, or by issuance of shares of common stock, if payable in stock, as soon

as practicable following the first to occur of (i) a drop in the credit rating

of the Company below S&P BB or Moody’s Ba; (ii) a drop in the Company’s

market capitalization below $75 million for five (5) consecutive trading days;

(iii) a drop in the aggregate of cash and existing available bank lines of the

Company below $35 million; and (iv) receipt of a notice of material adverse change

under any of the Company’s then existing debt agreements.




 




 




IN WITNESS WHEREOF, this

Second Amendment has been executed this 18th day of December, 2002.




 




	

   


  	

  AAR CORP.


  
	

   


  	

   


  
	

   


  	

   


  
	

   


  	

   


  
	

   


  	

  By:


  	

   /s/ DAVID P. STORCH


  	

   


  
	

   


  	

   


  	

  David P. Storch,

  President


  





 




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