AAR Corporation (AIR)

Base Salary

The Company provides competitive base salaries designed to reward individual performance and contributions consistent with an executive officer's position and responsibilities. The Compensation Committee annually reviews the base salaries of all corporate officers, including the Chief Executive Officer and the other named executive officers, and may adjust base salaries depending upon:

•

the executive's current salary;



•

the executive's qualifications, responsibilities, and assessed performance contribution, including significant changes in responsibility or performance related to established goals;



•

the executive's tenure with the Company and the position held by the executive;



•

competitive salary considerations relative to similar positions at other companies competing for talent in the Company's employment market, including the cited peer group companies; and



•

the recommendation of the Chief Executive Officer, in the case of all other executive officers.

Historically, the Compensation Committee has set the base salaries of the Company's named executive officers in the 50^th to 75^th percentile of salary levels of comparable positions in its peer group companies. The Company does not target base salaries as any specific percentage of total compensation when setting base salary; however, given the emphasis on the link between pay and performance, base salaries are a less significant percentage of total compensation compared to the Company's variable performance-based compensation.

Based upon the above factors, the Compensation Committee, in July 2008, approved base salary increases, effective June 1, 2008, as shown in the "Salary" column of the Summary Compensation Table, reflecting a Company-wide salary increase of 3.0%, and an additional 10% increase in the case of Mr. Romenesko and an additional 7% increase in the case of Mr. Poulton in recognition of their contributions to the Company during their first years as President and Chief Financial Officer, respectively.

In 2009, management recommended and the Compensation Committee approved the freezing of Fiscal 2010 base salaries of all employees, including the named executive officers, who earned more than $100,000 (employees earning $75,000 or less received a 2% salary increase and

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employees earning between $75,000 and $100,001 received a 1% salary increase). Notwithstanding the Company's excellent financial performance in Fiscal 2009, the Compensation Committee and management determined that a conservative approach to Fiscal 2010 was warranted in light of continuing economic uncertainty in the United States and abroad, ongoing challenges faced by the commercial aviation industry, and questions relating to the level of government and defense spending. The one exception to the above relates to Mr. Poulton's base salary, which was adjusted to $360,000 from $330,000 to put Mr. Poulton at the 50^th percentile of base salary levels among chief financial officers of the Company's new peer group.

Base Salary

The Company provides competitive base salaries designed to reward individual performance and contributions consistent with an executive officer's position and responsibilities. Base salary levels of all corporate officers, including the Chief Executive Officer and the other named executive officers, are reviewed annually by the Compensation Committee and may be adjusted depending upon:

•

the executive's current salary;



•

the executive's qualifications, responsibilities, and assessed performance contribution, including significant changes in responsibility or performance related to established goals;



•

the executive's tenure with the Company and the position held by the executive;



•

competitive salary considerations relative to similar positions at other companies competing for talent in the Company's employment market, including the cited comparative or peer group companies; and



•

the recommendation of the Chief Executive Officer, in the case of all other executive officers.

Base salaries are generally set in the 50^th to 75^th percentile of salary levels of comparable positions in the cited comparative or peer group companies. The Company does not target base salaries as any specific percentage of total compensation when setting base salary; however, given the emphasis on the link between pay and performance, base salaries are a less significant percentage of total compensation compared to the Company's variable performance-based compensation. Based upon the above factors, the Compensation Committee approved base salary increases effective June 1, 2007, as shown in the "Salary" column of the Summary Compensation Table,

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reflecting a Company-wide salary increase of 3.5%, and an additional increase in the case of Messrs. Romenesko and Poulton as a result of their promotions to President and Chief Financial Officer, respectively.

At its meeting on July 8, 2008, the Compensation Committee approved the following new base salaries, effective June 1, 2008, reflecting a Company-wide salary increase of 3.0%, and an additional increase in the case of Messrs. Romenesko and Poulton in light of their contributions during their first years as President and Chief Financial Officer, respectively: Mr. Storch: $791,295; Mr. Romenesko: $450,000; Mr. Clark: $319,815; and Mr. Poulton: $330,000. Mr. Pulsifer retired as Vice President and General Counsel on May 31, 2008.

Base Salary

The Company provides competitive base salaries designed to reward individual performance and contributions consistent with an executive officer’s position and responsibilities. Base salary levels of all elected corporate officers, including the Chairman of the Board and Chief Executive Officer, and the other named executive officers are reviewed annually by the Compensation Committee and may be adjusted depending upon:

·       the executive’s current salary;

·       the executive’s qualifications, responsibilities, assessed performance contribution, including significant changes in responsibility or performance related to established goals;

·       the executive’s tenure with the Company and the position held by the executive;

·       competitive salary considerations relative to similar positions at other companies competing for talent in the Company’s employment market; and

·       the recommendation of the Chief Executive Officer, in the case of all other executive officers.

Base salaries are generally set in the second and third quartiles of salary levels of comparable positions in the cited comparative group of companies. The Company does not target any specific proportion of total compensation when setting base salary.

authorized under any qualified retirement plan sponsored by the Company or before any amount which a participant may elect to defer under any other deferred compensation plan of the Company.

b)