Preview | Split Dollar Insurance Agreement |

This Split Dollar Agreement (the Agreement) is made and entered into as of the day of , by and between AAR CORP., a corporation duly organized and existing under the laws of the State of Delaware (the Corporation) and (the Employee).

WHEREAS, the Employee presently is employed by the Corporation, or an affiliated company, his services have contributed to the successful operation of the Corporation, and the Corporation and its directors determined that it is in the best interest of the Corporation to provide for life insurance on the life of the Employee under a split-dollar arrangement and entered into a Split Dollar Agreement dated Setting forth the terms of the arrangement; and

WHEREAS, the Employee presently is the owner of the following insurance policy insuring the life of the Employee (the Policy):

Insurance Company		Policy Number		Face Amount

WHEREAS, the Corporation and the Employee agree to make the Policy subject to this Agreement;

NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration, receipt of which is hereby acknowledged, the Corporation and the Employee hereby mutually covenant and agree as follows:

A. Each premium on the Policy shall be paid by the Corporation as it becomes due; provided, however, that in the event of a Change in Control (defined in paragraph B of this Article), the Corporation shall pay immediately into the Policy (i) all premiums owed for all future periods as shown on the original illustrations for the Policy, plus (ii) such additional sum as is required by the Insurance Company (the Insurer) in order for the cash values and death benefits to be at the level on the date of the Change in Control as was originally illustrated for the Policy for that date, but based on then current dividend and mortality assumptions. For each taxable year that this Agreement is in force, the Employee shall have taxable income equal to the value of the economic benefit (defined in paragraph B of this Article) of the life insurance protection enjoyed by the Employee for that taxable year. In addition, for each taxable year that this Agreement is in force, the Corporation shall pay to the appropriate federal, state or local government revenue collection agency a cash distribution equal to the sum of (i) the amount needed to pay applicable income and Medicare taxes (taxes) on the economic benefit of the life insurance protection which is taxed on the cash distribution under clause (i) of this sentence and this clause (ii). The top income tax rate then in effect for single individuals shall be used to calculate all distributions.

1. The economic benefit of the life insurance protection for each taxable year shall equal the lower of the amount computed by MetLife or the lowest amount computed in accordance with the alternative methods authorized under Revenue Ruling 64-328, 1964-2 C.B. 11, and Revenue Ruling 66-110, 1966-1 C.B. 12, or under any subsequent modification of those rulings;

2. The Corporations premium contributions shall equal the total premiums paid hereunder by the Corporation for all premium periods; and

(a) any person (as such term is used in Section 13(d) of the Securities Exchange Act of 1934, as amended (Exchange Act)), has acquired (other than directly from the Corporation) beneficial ownership (as that term is defined in Rule 13d-3 under the Exchange Act), of more than 20% of the outstanding capital stock of the Corporation entitled to vote for the election of directors; or