Definitions

For MIP purposes, the following terms will have the following meanings:

a)                                                       Base Salary will mean the annualized base salary of a participant on the last day of the Plan year — that is, exclusive of any form of incentive or lump sum payments and before any reduction for any voluntary contribution

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)                                                      Pre-Tax Income (PTI) will mean those pre-tax net income goals established annually for the Company and its operating units, by the President and CEO in conjunction with the Compensation Committee of the AAR Corp. Board of Directors.

c)                                                       Return on Invested Capital (ROIC) will mean the percentage which results from dividing operating profit over the FY by the average invested capital over the FY.

d)                                                      Cash Flow (Cash) will mean the target amount of Fiscal Year End (FYE) cash and cash equivalents, established annually for the Company and its operating units by the President and CEO, and reported in the Consolidated Statements of Cash Flows of AAR CORP. and Subsidiaries.

e)                                                       Target Bonus (TB) will mean the percentage of base salary which may be earned by a participant upon full achievement of all assigned quantitative and personal performance goals. A participant’s TB percentage is directly related to his or her salary grade and potential impact on the overall performance of the Company.

f)                                                         Nominal Bonus (NB) will mean the amount of incentive award derived from the percentage of the TB which can be earned by a participant as a result of the level of achievement measured against the participant’s quantitative goals (i.e., PTI and ROIC) and measured against the Company’s FYE Cash Flow target.

Definitions:

A.             Assignee:       AAR CORP., a Delaware corporation

B.               Owner:                                                                                                                                                                               

C.               Insured:                                                                                                                                                                             

D.              Insurer:                                                                                                                                                                              

E.                Policy:                                                                                                                                                                                

F.                Policy Interest:   The Assignee’s Policy Interest shall be the amounts determined under Article III of the Split Dollar Agreement. The Insurer shall be entitled to rely on the Assignee’s certificate of the amount of its Policy Interest.

G.               Split Dollar Agreement:   That certain agreement executed as of                      between the Owner and the Assignee.

DEFINITIONS

Section 101.                                Definitions below:

“145 Certificate” has the meaning set forth in Section 302(G) of this Lease.

“Act” means Indiana Code 8-22-3.

“Activate” or “Activation” has the meaning set forth in Section 205(A) of this Lease.

“Activation Notice” has the meaning set forth in Section 205(A) of this Lease.

“Actual Facilities Costs and Expenses” has the meaning set forth in Section 601(B)(2) of this Lease.