UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
In July 2020, AAR CORP. (the “Company”) received financial support under the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”). As a result, the Company is currently subject to CARES Act restrictions on the amount of compensation that can be paid to certain executives of the Company during the restricted period, which ends on March 24, 2022.
Due to these restrictions, the Fiscal Year 2021 equity grant made in July 2020 to our President and Chief Executive Officer, John M. Holmes, was reduced by approximately 92,904 stock options and 53,537 shares subject to a restricted stock award, or RSAs, having an aggregate grant date fair value of $1,538,000 on the date of grant, from the amount that the Compensation Committee (the “Committee”) intended to grant him, had such restrictions not been in place.
At its meeting on July 12, 2021, the Committee reviewed and considered the intended long-term equity compensation levels for Fiscal 2022 as an element of the annual total target compensation package based on peer benchmarking and other factors. However, in designing the Fiscal 2022 program, the Committee determined to reduce the grant level of the long-term equity awards to comply with the CARES Act compensation limits. As a result, three of the Named Executive Officers, Mr. Holmes, Christopher A. Jessup, Vice President and Chief Commercial Officer, and Eric S. Pachapa, Vice President, Controller and Chief Accounting Officer, had their July 2021 equity awards reduced to comply with the CARES Act limits, as detailed in the table below and based on grant date fair value.
| Name | Intended Fiscal 2022 LTI Equity Award Level ($) | Actual Fiscal 2022 LTI Equity Award Level ($) | Reduction For CARES Act Limit ($) | |||||||||
| John M. Holmes | $ | 3,380,000 | $ | 1,280,078 | $ | 2,099,922 | ||||||
| Christopher A. Jessup | $ | 800,000 | $ | 405,076 | $ | 394,924 | ||||||
| Eric S. Pachapa | $ | 403,000 | $ | 260,045 | $ | 142,955 | ||||||
In light of the compensation reductions made to comply with the CARES Act restrictions in Fiscal 2021 and Fiscal 2022, Mr. Holmes’ successful management of the Company during the Coronavirus pandemic and in recognition of the need to retain Mr. Holmes and maintain competitive compensation with our peer group, on July 13, 2021, the Board awarded a deferred cash retention award to Mr. Holmes in the amount of $1,000,000. In making the determination to grant this award, the Board considered Mr. Holmes’ strong leadership and performance over the past year, concerns related to the need to retain and reward Mr. Holmes, considerations related to compensation benchmarking and external pay parity, and Mr. Holmes’ voluntary pay reduction taken during the beginning of the pandemic. The Committee may consider additional actions in the future following the expiration of the CARES Act restricted period to maintain competitive compensation for and incentivize retention of those individuals impacted by the CARES Act. The deferred cash retention award will be paid to Mr. Holmes following the expiration of the CARES Act restricted period only if he remains continuously employed at the Company through such date (the award will be paid earlier in the case of his death or disability).
| Item 9.01. | Financial Statements and Exhibits. |
| (d) | Exhibits |
| Exhibit No. | Description | |
| 10.1* | Deferred Cash Award Agreement dated July 13, 2021 between AAR CORP. and John M. Holmes (filed herewith) | |
| 104 | Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document) | |
| * | Management contract and compensatory arrangement. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: July 16, 2021
| AAR CORP. | ||
| By: | /s/ Jessica A. Garascia | |
| Jessica A. Garascia | ||
| Vice President, General Counsel, Chief Compliance Officer and Secretary | ||