**Exhibit 10.7**

 

**AIRNET SYSTEMS, INC.**

**DIRECTOR DEFERRED COMPENSATION PLAN**

**(Reflects amendments through March 17, 2004)**

 

Section 1.  PURPOSE - TheCompany desires and intends to recognize the value to the Company and itsAffiliates of the past and present services of the Directors of the Company andits Affiliates, to encourage their continued service to the Company and itsAffiliates and to be able to attract and retain superior Directors by adoptingand implementing this Plan to provide such Directors an opportunity to defercompensation otherwise payable to them from the Company and/or Affiliate.

 

Section 2.  CERTAINDEFINITIONS - The following terms will have the meanings providedbelow.

 

“Additions” means the credits applied to DeferredCompensation Accounts as provided in Section 4 hereof.

 

“Adjustment Date” means the last business day ofeach calendar quarter.

 

“Affiliate” means any organization or entity which,together with the Company, is a member of a controlled group of corporations orof a commonly controlled group of trades or businesses [as defined in Sections414(b) and (c) of the Code], or of an affiliated service group [as defined inCode Section 414(m)] or other organization described in Code Section 414(o).

 

“Annual Retainer” means, with respect to anycalendar year or other period, the fixed retainer which, absent an election todefer hereunder, would be payable to a Participant during those pay periodsbeginning in the given calendar year or other period.

 

“Beneficiary” means the person or personsdesignated in writing as such and filed with the Plan Administrator at any timeby a Participant.  Any such designationmay be withdrawn or changed in writing (without the consent of theBeneficiary), but only the last designation on file with the Plan Administratorshall be effective.

 

“Board” means the Board of Directors of theCompany.

 

“Code” means the Internal Revenue Code of 1986, asmay be amended from time to time.

 

“Common Shares” means the common shares of theCompany.

 

“Company” means AirNet Systems, Inc. and anysuccessor entity.

 

“Deferred Compensation Account” means the separateDeferred Compensation Account established for each Participant pursuant toSection 4 of the Plan.

 

“Director” means any director of the Company andany director of an Affiliate of the Company.

 

“Effective Date” means May 27, 1998.

 

“Eligible Compensation” means, to the extentapplicable to any given Participant, the Annual Retainer and all MeetingFees.  The extent to which a givenParticipant may defer a given component of Eligible Compensation shall be basedupon such Participant’s eligibility to receive the given component of EligibleCompensation (as determined under applicable agreements and pay practices ofthe Company or applicable Affiliate) and the provisions and limitationsapplicable to the given component as provided under this Plan.

 

“Fair Market Value” of the Common Shares means themost recent closing price of the Common Shares on any securities exchange onwhich the Common Shares are then listed.

 

“Meeting Fees” means, with respect to any calendaryear or other period, the fees for attendance at meetings of the Board ofDirectors of the Company or applicable Affiliate or any committees thereof(exclusive of expenses) which, absent an election to defer hereunder, would bepayable to a Participant during those pay periods beginning in the givencalendar year or other period.

 

“Participant” has the meaning specified in Section3 of the Plan.

 

“Plan” means the AirNet Systems, Inc. DirectorDeferred Compensation Plan, as reflected in this document, as the same may beamended from time to time after the Effective Date.

 

----

 

“Plan Administrator” means the Company.

 

“Plan Year” means the calendar year.

 

Section 3.  PARTICIPANTS

 

Each Director as of the Effective Date shall beeligible for participation in the Plan as of such date.  Each Director who first becomes a Directorafter the Effective Date shall be eligible for participation in the Plan as ofthe date on which he becomes a Director. A Director who is eligible for participation in the Plan and who electsto make deferral contributions pursuant to Section 4 shall be designated a“Participant” in the Plan.  AParticipant shall continue to participate in the Plan until his status as aParticipant is terminated by either a complete distribution of his DeferredCompensation Account pursuant to the terms of the Plan or by written directiveof the Company.

 

Section 4.  DEFERREDCOMPENSATION ACCOUNTS

 

A.            Establishment ofDeferred Compensation Accounts.  The PlanAdministrator will establish a Deferred Compensation Account for eachParticipant.  A Participant’s DeferredCompensation Account shall have two subaccounts— a Cash Account to recordamounts allocated under Section 4.D.(ii) and a Stock Account to record amountsallocated under Section 4.D.(iii).  SuchDeferred Compensation Account shall be a bookkeeping account only, maintainedas part of the books and records of the Company or applicable Affiliate.

 

B.            Election ofParticipant.  With respect to each Plan Year,a Participant may elect to have a percentage or a flat dollar amount of hisEligible Compensation which is to be paid to him by the Company or applicableAffiliate for the Plan Year in question allocated to his Deferred CompensationAccount and paid on a deferred basis pursuant to the terms of the Plan.  To exercise such an election for any PlanYear, within thirty (30) days prior to the commencement of the Plan Year, theParticipant must advise the Plan Administrator of his election, in writing, ona form prescribed by the Plan Administrator (each, a “Deferral Notice”).  Notwithstanding the preceding sentence, inthe first year of the Plan, or in the case of a Director who first becomeseligible to participate in the Plan after the Effective Date, a Participant maycomplete a Deferral Notice at any time within thirty (30) days following thedate on which he is first eligible to participate in the Plan.  Such Deferral Notice shall apply only toEligible Compensation payable to, or earned by, the Participant after the dateon which the Deferral Notice is received by the Plan Administrator.  To the extent that a Participant completes aDeferral Notice in accordance with the provisions of this paragraph, suchDeferral Notice shall remain in effect for future Plan Years until changed orrevoked by the Participant.

 

C.            CompanyContributions.  Each time a Deferral Notice issubmitted to the Plan Administrator in accordance with Section 4.B. above,during the next Plan Year (or, if applicable, the remaining Plan Year), theCompany or applicable Affiliate will allocate to the Participant’s DeferredCompensation Account the percentage or dollar amount of Eligible Compensationspecified in the Deferral Notice.  Anyamounts allocated by the Company or Affiliate under this Section 4.C. arecalled “Company Contributions.”

 

D.            Adjustment ofAccount Balances.

 

(i)            ParticipantElection.  At the time that a Participantsubmits a Deferral Notice, he shall elect the percentage of his deferredamounts to be allocated to his Cash Account (to be adjusted pursuant toParagraph (ii) of this Section 4.D.) and his Stock Account (to be adjustedpursuant to Paragraph (iii) of this Section 4.D.).  Any election made pursuant to this Paragraph (i) shall beirrevocable with respect to the affected amounts.

 

(ii)           As of each Adjustment Date, the PlanAdministrator shall credit the balance in the Participant’s Cash Account withAdditions which shall mirror a specific interest rate.  For this purpose, the interest rate to be usedshall be equal to the rate of return on      [designate investment (e.g. 3-year Treasury Bill)] as of the applicableAdjustment Date.  The crediting ofAdditions shall be determined by multiplying the Participant’s Cash Accountbalance as of the previous Adjustment Date by the applicable rate of interestdetermined under the preceding sentence. The crediting of Additions shall occur so long as there is a balance inthe Participant’s Cash Account regardless of whether the Participant hasterminated service as a Director or has died. The Plan Administrator may prescribe any reasonable method or procedurefor the accounting of Additions.

 

(iii)          As of each Adjustment Date, the amountcredited to the Stock Account of each Participant shall be divided by the thenFair Market Value of the Common Shares. Upon completion of this calculation, each Stock Account shall becredited with the resulting number of whole Common Shares; and any remainingamounts shall continue to be credited to the Stock Account until converted towhole Common Shares at a future Adjustment Date.  The Stock Account of each Participant shall be credited with cashdividends on the Common Shares on and after the date credited to the StockAccount.

 

2

----

 

At the following AdjustmentDate, the amount of cash dividends credited to each Stock Account (and anyother amounts then credited to such account) shall be divided by the then FairMarket Value of the Common Shares; and the Stock Account of each Participantshall be credited with the resulting number of whole Common Shares and anyremaining amounts shall continue to be credited to the Stock Account untilconverted to whole Common Shares at a future Adjustment Date.  The Plan Administrator may prescribe anyreasonable method or procedure for the accounting of Additions.

 

E.             Stock Adjustments.  The number of Common Shares in the StockAccount of each Participant shall be adjusted from time to time to reflectstock splits, stock dividends or other changes in the Common Shares resultingfrom a change in the Company’s capital structure.

 

F.             Participant’sRights in Accounts.  A Participant’s only rightwith respect to his Deferred Compensation Account (and amounts allocatedthereto) will be to receive payments in accordance with the provisions ofSection 5 of the Plan.

 

Section 5.  PAYMENTOF DEFERRED BENEFITS

 

A.            Time of Payment.  Distribution of a Participant’s DeferredCompensation Account shall commence within thirty (30) days of the earlier of(i) the date specified by the Participant in the Deferral Notice deliveredto the Plan Administrator at the time the deferral election is made; or(ii) the date of the Participant’s termination of service as a Directordue to resignation, retirement, death or otherwise.

 

B.            Method ofDistribution.  A Participant’s DeferredCompensation Account shall be distributed to the Participant either in a singlelump sum payment or in equal annual installments over a period of not more thanten (10) years.  To the extent that aDeferred Compensation Account is distributed in installment payments, theundisbursed portions of such account shall continue to be credited withAdditions in accordance with the applicable provisions of Section 4.D.  In addition, if, as of any Adjustment Date,the amount allocated to a Participant’s Deferred Compensation Account is lessthan $1,000, the Plan Administrator may elect to pay such amount to theParticipant and reduce the balance of his Deferred Compensation Account tozero.  The method of distribution shall beelected by the Participant in the Deferral Notice delivered to the PlanAdministrator at the time the deferral election is made.  Cash Accounts shall be distributed incash.  Stock Accounts shall bedistributed either in Common Shares or in cash at the election of the PlanAdministrator.  In the event that adistribution of a Participant’s Stock Account is made in cash, the PlanAdministrator shall determine the amount of such distribution by using the FairMarket Value of the Common Shares as of either the date of distributionspecified by the Participant in his Deferral Notice or the date on which theParticipant’s service as a Director terminated, whichever may be applicable.

 

C.            HardshipDistributions.  Prior to the time aParticipant’s Deferred Compensation Account becomes payable, the PlanAdministrator, in its sole discretion, may elect to distribute all or a portionof such account in the event such Participant requests a distribution due tosevere financial hardship.  For purposesof this Plan, severe financial hardship shall be deemed to exist in the eventthe Plan Administrator determines that a Participant needs a distribution tomeet immediate and heavy financial needs resulting from a sudden or unexpectedillness or accident of the Participant or a member of the Participant’s family,loss of the Participant’s property due to casualty or other similarextraordinary and unforeseeable circumstances arising as a result of eventsbeyond the control of the Participant. A distribution based on financial hardship shall not exceed the amountrequired to meet the immediate financial need created by the hardship and shallbe made in cash.  With respect to aParticipant’s Stock Account, any hardship distribution shall be made in cash,based upon the Fair Market Value of the Common Shares as of the date ofdistribution.

 

D.            Designation ofBeneficiary.  Upon the death of aParticipant, his Deferred Compensation Account shall be paid to the Beneficiarydesignated by the Participant.  If thereis no designated Beneficiary or no designated Beneficiary surviving at aParticipant’s death, payment of the Participant’s Deferred Compensation Accountshall be made to the Participant’s estate.

 

E.             Taxes.  In the event any taxes are required by lawto be withheld or paid from any payments made pursuant to the Plan, the PlanAdministrator shall deduct such amounts from such payments and shall transmitthe withheld amounts to the appropriate taxing authority.

 

Section 6.  ASSIGNMENTOR ALIENATION - The right of a Participant, Beneficiary or anyother person to the payment of a benefit under this Plan may not be assigned,transferred, pledged or encumbered except by Will or by the laws of descent anddistribution.

 

Section 7.  PLANADMINISTRATION - The Plan Administrator will have the right tointerpret and construe the Plan and to determine all questions of eligibilityand of status, rights and benefits of Participants and all other personsclaiming benefits under the Plan.  Inall such interpretations and constructions, the Plan Administrator’sdetermination will be based upon

 

3

----

 

uniform rules and practices applied in anondiscriminatory manner and will be binding upon all persons affectedthereby.  Subject to the provisions ofSection 8 below, any decision by the Plan Administrator with respect to anysuch matters will be final and binding on all parties.  The Plan Administrator will have absolutediscretion in carrying out its responsibilities under this Section 7.

 

Section 8.  CLAIMSPROCEDURE

 

A.            Filing Claims.  Any Participant or Beneficiary entitled tobenefits under the Plan will file a claim request with the Plan Administrator.

 

B.            Notification toClaimant.  If a claim request is whollyor partially denied, the Plan Administrator will furnish to the claimant anotice of the decision within ninety (90) days in writing and in a mannercalculated to be understood by the claimant, which notice will contain thefollowing information:

 

(i)                                     the specific reasonor reasons for the denial;

 

(ii)                                  specific referenceto pertinent Plan provisions upon which the denial is based;

 

(iii)                               a description ofany additional material or information necessary for the claimant to perfectthe claim and an explanation of why such material or information is necessary;and

 

(iv)                              an explanation ofthe Plan’s claims review procedure describing the steps to be taken by aclaimant who wishes to submit his claims for review.

 

C.            Review Procedure.  A claimant or his authorized representativemay, with respect to any denied claim:

 

(i)                                     request a reviewupon a written application filed within sixty (60) days after receipt by theclaimant of written notice of the denial of his claim;

 

(ii)                                  review pertinentdocuments; and

 

(iii)                               submit issues andcomments in writing.

 

Any request or submission will be in writing andwill be directed to the Plan Administrator (or its designee).  The Plan Administrator (or its designee)will have the sole responsibility for the review of any denied claim and willtake all steps appropriate in the light of its findings.

 

D.            Decision on Review.  The Plan Administrator (or its designee)will render a decision upon review.  Ifspecial circumstances (such as the need to hold a hearing on any matterpertaining to the denied claim) warrant additional time, the decision will berendered as soon as possible, but not later than one hundred twenty (120) daysafter receipt of the request for review. Written notice of any such extension will be furnished to the claimantprior to the commencement of the extension. The decision on review will be in writing and will include specificreasons for the decision, written in a manner calculated to be understood bythe claimant, as well as specific references to the pertinent provisions of thePlan on which the decision is based.  Ifthe decision on review is not furnished to the claimant within the time limitsprescribed above, the claim will be deemed denied on review.

 

Section 9.  UNSECUREDAND UNFUNDED OBLIGATION - Notwithstanding any provision herein tothe contrary, the benefits offered under the Plan shall constitute an unfunded,unsecured promise by the Company and its Affiliates to pay benefits determinedhereunder which are accrued by Participants while such Participants areDirectors.  No provision shall at anytime be made with respect to segregating any assets of the Company or anyAffiliate for payment of any benefits hereunder.  No Participant, Beneficiary or any other person shall have anyinterest in any particular assets of the Company or any Affiliate by reason ofthe right to receive a benefit under the Plan and any such Participant,Beneficiary or other person shall have only the rights of a general unsecuredcreditor of the Company and its Affiliates with respect to any rights under thePlan.  Nothing contained in the Planshall constitute a guaranty by the Company, any Affiliate or any other entityor person that the assets of the Company or its Affiliates will be sufficientto pay any benefit hereunder.  Allexpenses and fees incurred in the administration of the Plan shall be paid bythe Company or an Affiliate.

 

Section 10.  AMENDMENTAND TERMINATION OF THE PLAN - The Company reserves the right, bya resolution of the Board, to amend the Plan at any time, and from time totime, in any manner which it deems desirable, provided that no amendment willadversely affect the accrued benefits of any Participant under the Plan.  The Company also reserves the right, by aresolution of the Board, to terminate this Plan at any time without providingany advance notice to any Participant;

 

4

----

 

and in the event of any Plan termination, theCompany reserves the right to then distribute all amounts allocated toParticipants’ Deferred Compensation Accounts.

 

Section 11.  BINDINGUPON SUCCESSORS - The Plan shall be binding upon and inure to thebenefit of the Company, its Affiliates, any of their successors and assigns andthe Participants and their heirs, executors, administrators and legalrepresentatives.  In the event of themerger or consolidation of the Company or any of its Affiliates with or intoany other corporation, or in the event substantially all of the assets of theCompany or any of its Affiliates shall be transferred to another corporation,the successor corporation resulting from the merger or consolidation, or thetransferee of such assets, as the case may be, shall, as a condition to theconsummation of the merger, consolidation or transfer, assume the obligationsof the Company or Affiliate hereunder and shall be substituted for the Companyor Affiliate hereunder.

 

Section 12.  NOGUARANTEE OF PLAN PERMANENCY - This Plan does not contain anyguarantee of provisions for continued service as a Director to any Participantnor is it guaranteed by the Company or any of its Affiliates to be a permanentplan.

 

Section 13.  GENDER - Anyreference in the Plan made in the masculine pronoun shall apply to both men andwomen.

 

Section 14.  INCAPACITYOF RECIPIENT - In the event that a Participant or Beneficiary isdeclared incompetent and a guardian, conservator or other person legallycharged with the care of his person or of his estate is appointed, any benefitsunder the Plan to which such Participant or Beneficiary is entitled shall bepaid to such guardian, conservator or other person legally charged with thecare of his person or his estate. Except as provided hereinabove, when the Plan Administrator, in its solediscretion, determines that a Participant or Beneficiary is unable to managehis financial affairs, the Plan Administrator may, but shall not be requiredto, direct the Company to make distribution(s) to any one or more of thespouse, lineal ascendants or descendants or other closest living relatives ofsuch Participant or Beneficiary who demonstrates to the satisfaction of thePlan Administrator the propriety of making such distribution(s).  Any payment made under this Section 14 shallbe in complete discharge of any liability under the Plan for such payment.  The Plan Administrator shall not be requiredto see to the application of any such distribution made to any person.

 

Section 15.  GOVERNINGLAW - This Plan shall be construed in accordance with andgoverned by the laws of the State of Ohio.

 

INWITNESS WHEREOF, the Company has caused this Plan to be executed by a dulyauthorized officer as of the Effective Date.

 

 
|   | AIRNET SYSTEMS, INC. |
|--------|----------------------|
|   |                 |
|   |                 |
|   | By:                  |   |   |
|   |                 |   |   |
|   | Its:                 |   |   |

 

**AIRNET SYSTEMS, INC.**

**DIRECTOR DEFERRED COMPENSATION PLAN**

 

**DEFERRAL NOTICE**

 

1.             ELECTION TO DEFER.

 

In accordance with the provisions of the AirNetSystems, Inc. Director Deferred Compensation Plan (the “Plan”), I hereby electto defer            percent or $             of the Eligible Compensation (as defined in the Plan) payable to me forservices as a Director of AirNet Systems, Inc., or any of its Affiliates.  This election supersedes any prior deferralelection made by me and shall remain in effect until terminated or otherwiseamended.

 

5

----

 

2.             DISTRIBUTIONELECTION.

 

I hereby elect to commence distribution of myDeferred Compensation Account in the Plan within 30 days of my termination as aDirector or, if earlier, within 30 days of                       .

 

3.                                       INVESTMENTELECTION.

 

I hereby elect to have amounts deferred pursuant tothis election allocated to the applicable subaccounts in the followingpercentages (total must equal 100%):

 

              Cash Account

 

              Stock Account

 

4.                                       METHOD OF PAYMENT.

 

I hereby elect to receive the distribution of myDeferred Compensation Account in the Plan in the following form of payment:

 

              A single lump sum payment; or

 

              Substantially equal annual installments over a period of              (not to exceed 10) years.

 

5.                                       DESIGNATION OFBENEFICIARY.

 

I hereby designate                                     as my primary Beneficiary and                                     as my contingent Beneficiary(ies) to receive any amounts payable under the Planin the event of my death.

 

6.                                       ACKNOWLEDGMENT.

 

I hereby acknowledge that my election to deferEligible Compensation under the Plan is irrevocable with respect to amountswhich are deferred under the Plan and shall remain in effect until terminatedor modified.

 
|   |                |      |   |
|--------|---------------------|-----------|--------|
| Date   |                | Signature |   |
|   |                |      |
|   |                |      |
|   | Name (please print) |      |

 

6

----