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AAR CORP.
SUPPLEMENTAL KEY EMPLOYEE RETIREMENT PLAN

As Amended and Restated Effective January 1, 2005

TABLE OF CONTENTS

		Page
ARTICLE I	DEFINITIONS	1
ARTICLE II	ELIGIBILITY	6
ARTICLE III	SUPPLEMENTAL RETIREMENT BENEFIT AND SUPPLEMENTAL SURVIVING SPOUSE BENEFIT	7
ARTICLE IV	SUPPLEMENTAL CONTRIBUTIONS	11
ARTICLE V	FORFEITURES	18
ARTICLE VI	ADMINISTRATION OF THE PLAN	19
ARTICLE VII	AMENDMENT OR TERMINATION	20
ARTICLE VIII	GENERAL PROVISIONS	21

AAR CORP.
SUPPLEMENTAL KEY EMPLOYEE RETIREMENT PLAN

As Amended and Restated Effective January 1, 2005

WHEREAS, the AAR CORP. Supplemental Key Employee Retirement Plan (SKERP) was adopted effective June 1, 1994, for the Executive Officers, and other designated officers and key employees, of AAR CORP. and its Affiliated Companies who participate in the qualified retirement plans from time to time established and maintained by AAR CORP. The purpose of the Plan is to ensure that the retirement benefits provided to Executive Officers and certain other officers and key employees enhance the overall effectiveness of the AAR CORP. executive compensation program and attract, retain and motivate such individuals;

WHEREAS, the Company amended the Plan on June 1, 1995, January 1, 1996 and June 1, 1996, amended and restated the Plan effective April 11, 2000, and further amended the Plan effective July 1, 2003;

WHEREAS, the Company now desires to further amend the Plan to comply with Code Section 409A and guidance and regulations issued thereunder with respect to benefits earned and vested under the Plan from and after January 1, 2005; and

WHEREAS, benefits under the Plan earned and vested prior to January 1, 2005 shall be administered without giving effect to Code Section 409A and guidance and regulations issued thereunder.

NOW, THEREFORE, the AAR CORP. Supplemental Key Employee Retirement Plan is hereby amended and restated, effective January 1, 2005, as set forth below:

ARTICLE I
DEFINITIONS

Wherever used herein the following terms shall have the meanings hereinafter set forth:

1.1 Additional Supplemental Company Account means the account maintained by the Company for a Participant under the Plan that is credited with Additional Supplemental Company Contributions.

1.2 Additional Supplemental Company Contribution means the contribution made by the Company for the benefit of a Participant pursuant to Section 4.5 of the Plan.

1.3 Affiliated Company means a business entity, or predecessor of such entity, if any, which controls, or is under common control with, the Company.

1.4 Board means the Board of Directors of the Company.

1.5 Change in Control means:

(a) With respect to a Pre-2005 Benefit the earliest of:

(i) the time 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 Company) 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 Company entitled to vote for the election of directors;

(ii) the effective time of (1) a merger or consolidation or other business combination of the Company with one or more other corporations as a result of which the holders of the outstanding voting stock of the Company immediately prior to such business combination hold less than 60% of the voting stock of the surviving or resulting corporation, or (2) a transfer of substantially all of the assets of the Company other than to an entity of which the Company owns at least 80% of the voting stock; or

(iii) the election, over any period of time, to the Board of Directors of the Company without the recommendation or approval of the incumbent Board of Directors of the Company, of the lesser of (1) three directors, or (2) directors constituting a majority of the number of directors of the Company then in office.

(b) With respect to a Post-2004 Benefit, the earliest of:

(i) the time any person (as such term is used in Section 13(d) of the Exchange Act) has acquired (other than directly from the Company) beneficial ownership (as that term is defined in Rule 13(d)-3 under the Exchange Act) of more than 35% of the outstanding capital stock of the Company entitled to vote for the election of directors;

(ii) the effective time of (1) a merger or consolidation or other business combination of the Company with one or more other corporations as a result of which the holders of the outstanding voting stock of the Company immediately prior to such business combination hold less than 60% of the voting stock of the surviving or resulting corporation, or (2) a transfer of substantially all of the assets of the Company, other than to an entity of which the Company owns at least 80% of the voting stock; or

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AAR CORP.SUPPLEMENTAL KEY EMPLOYEE RETIREMENT PLANAs Amended and Restated Effective January 1, 2005

AAR CORP.
SUPPLEMENTAL KEY EMPLOYEE RETIREMENT PLAN

As Amended and Restated Effective January 1, 2005