AAR CORP (Form: 8-K, Received: 07/11/2008 12:57:17)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

July 9, 2008

Date of Report (Date of earliest event reported)

AAR CORP.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

(State or other jurisdiction of incorporation)

1-6263		36-2334820
(Commission File Number)		(IRS Employer Identification No.)

One AAR Place, 1100 N. Wood Dale Road

Wood Dale, Illinois 60191

(Address and Zip Code of Principal Executive Offices)

Registrant’s telephone number, including area code: (630) 227-2000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

On July 9, 2008, AAR CORP. (the “Company”) entered into Severance and Change in Control Agreements (each, an “Agreement”) with two executive officers: Richard J. Poulton, Vice President, Chief Financial Officer and Treasurer, and Robert J. Regan, Vice President and General Counsel (each, an “Executive”).

The Agreement provides that upon termination of the Executive’s employment by the Company for other than Cause the Executive is entitled to payment of base salary for up to 12 months, any earned but unpaid bonus for the prior fiscal year, and a prorata bonus for the current fiscal year, subject to the Executive’s compliance with confidentiality and non-compete covenants under the Agreement. If the Executive’s employment is terminated within 18 months following a Change in Control by the Company for other than Cause or Disability or by the Executive for Good Reason, or if the Executive’s employment terminates for any reason other than Disability or death during the 30-day period following such 18 ^th month, the Executive is entitled to a lump sum payment of (i) base salary earned through the date of termination, (ii) any earned but unpaid bonus for the prior fiscal year, (iii) a prorata bonus for the current fiscal year, and (iv) two times base salary and cash bonus for either the most recently completed fiscal year or the prior fiscal year, whichever produces the higher amount. The Executive is also entitled to continued medical, dental and life insurance coverage for the two-year period following termination of employment. Capitalized terms not defined herein shall have the meanings given to them in the Agreement.

This description of the Agreement is qualified in its entirety by reference to the full text of the Agreement, a form of which is filed as Exhibit 10.1 to this Form 8-K and incorporated herein by reference.

Item 5.03. Amendments to Articles of Incorporation or By-Laws; Change in Fiscal Year.

On July 9, 2008, the Board of Directors of the Company, upon the recommendation of the Nominating and Governance Committee, adopted amended and restated By-Laws of the Company.

The principal changes effected by the amendment and restatement of the By-Laws are: (i) the addition of position descriptions for the offices of the Company and the separation of the offices of the Chief Executive Officer and President; (ii) revisions to the advance notice stockholder nomination of director provisions and the advance notice stockholder proposal provisions, including the addition of disclosure requirements relating to hedging activity by a stockholder proposing director nominations or other business to be transacted at a stockholder meeting; and (iii) non-substantive revisions to numerous By-Law provisions to conform the language to the language of the Delaware General Corporation Law.

The By-Laws, as amended and restated, took effect upon adoption by the Board of Directors on July 9, 2008.

This description of the amendment and restatement of the By-Laws is qualified in its entirety by reference to the By-Laws, as amended and restated through July 9, 2008, a copy of which is filed as Exhibit 3.1 to this Form 8-K and incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

3.1 By-Laws, as amended and restated through July 9, 2008

10.1 Form of Severance and Change in Control Agreement dated as of July 9, 2008 (entered into between the Registrant and each of Richard J. Poulton and Robert J. Regan)

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 11, 2008

		AAR CORP.


	By:	/s/ TIMOTHY J. ROMENESKO
		Timothy J. Romenesko
		President and Chief Operating Officer

EXHIBIT INDEX

Exhibit Number		Description

3.1		By-Laws, as amended and restated through July 9, 2008

10.1		Form of Severance and Change in Control Agreement dated as of July 9, 2008 (entered into between the Registrant and each of Richard J. Poulton and Robert J. Regan)

Exhibit 3.1

BY-LAWS

AAR CORP.

a Delaware corporation

(as amended and restated through July 9, 2008)

ARTICLE I

OFFICES

SECTION 1. REGISTERED OFFICE. The registered office of the corporation shall be located in the City of Wilmington, County of New Castle, State of Delaware. The corporation may also have such other offices, within or without the State of Delaware, as the Board of Directors may designate or the business of the corporation require from time to time.

SECTION 2. PRINCIPAL OFFICE. The principal office of the corporation shall be located in Wood Dale, Illinois.

ARTICLE II

STOCKHOLDERS’ MEETINGS

SECTION 1. TIME. The annual meeting of the stockholders of the corporation for the election of directors and the transaction of such other business as may properly come before such meeting shall be held each year on the second Wednesday in October at 9:00 a.m. (Chicago time), or if said day be a legal holiday, then on the next succeeding day not a legal holiday, or shall be held on such other date and at such other time as shall be determined by the Board of Directors. A special meeting of the stockholders shall be held on the date and at the time fixed by those persons authorized by the Certificate of Incorporation to call such meeting.

SECTION 2. PLACE. Annual meetings and special meetings shall be held at such place, within or without the State of Delaware, as may be designated from time to time by the Board of Directors. If authorized by the Board of Directors, a meeting may be held solely by means of remote communications as authorized by the General Corporation Law. Whenever the directors shall fail to designate a place for a meeting or authorize holding the meeting solely by means of remote communications, the meeting shall be held at the principal office of the corporation.

SECTION 3. NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be given, stating the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Except as otherwise provided by the General Corporation Law, notice of any meeting shall be given, personally or by mail or electronic transmission, not less

than ten days nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to each stockholder at such stockholder’s address as it appears on the records of the corporation. If a meeting is adjourned to another time or place, except as provided below notice need not be given of the adjourned meeting if the time, place, if any, thereof and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than 30 days, or if after the announcement a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder or record entitled to vote at the meeting. A written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission.

SECTION 4. RECORD DATE FOR STOCKHOLDERS.

(a) In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty days nor less than ten days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

(b) In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or the allotment of any rights, or the stockholders entitled to exercise any rights in respect of any change, conversion, or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty days prior to any such action. If no record date is fixed by the Board of Directors, the record date for determining stockholders for any other purpose shall be the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

SECTION 5. STOCKHOLDER LIST. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders,

a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder, provided that the corporation shall not be required to include electronic mail addresses or any other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten days prior to the meeting, either (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the principal place of business of the corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the corporation, or to vote in person or by proxy at any meeting of stockholders.

SECTION 6. CONDUCT OF MEETING. Meetings of the stockholders shall be presided over by one of the following officers in the order presented and if present and acting: the Chairman of the Board, a Vice Chairman, if any, the President, an Executive Vice President, a Vice President, or the Chairman of the Nominating and Governance Committee, or, if none of the designated persons is in office and present and acting, by a chairman to be chosen by the stockholders. The person presiding over the meeting shall have authority to prescribe the agenda for the meeting and to control the length and order of discussion. The Secretary of the corporation, or in the Secretary’s absence, an Assistant Secretary, shall act as Secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present, the chairman of the meeting shall appoint a secretary of the meeting.

SECTION 7. PROXY REPRESENTATION. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date unless the proxy provides for a longer period. Without limiting the manner in which a stockholder may authorize another person or person to act for such stockholder as proxy pursuant to this section, a stockholder may grant such authority by (a) executing a writing authorizing another person or persons to act for such stockholder as proxy or (b) transmitting or authorizing the transmission of a telegram, cablegram or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder or stockholders’ attorney-in-fact, or (c) any other means permitted under the General Corporation Law. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally.

SECTION 8. INSPECTORS OF ELECTIONS. The corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The corporation may designate one of more person as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability. The inspectors shall ascertain the number of shares outstanding and the voting power of each; determine the shares represented at the meeting and the validity of proxies and ballots; count all votes and ballots; determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots.

SECTION 9. QUORUM. The holders of a majority of the outstanding shares of stock present or represented by proxy at any meeting of stockholders shall constitute a quorum at such meeting for the transaction of any business. Once a quorum is established at a meeting, it shall remain duly constituted for such meeting notwithstanding the subsequent withdrawal of stockholders. If a quorum shall not be present or represented at any meeting of stockholders, the presiding officer at the meeting or the stockholders present or represented by proxy at the meeting shall have power to adjourn the meeting from time to time until a quorum shall be present or represented.

SECTION 10. VOTING. Each stockholder shall be entitled to one vote for each share of stock held by such stockholder. In all matters other than the election of directors, if a quorum is present, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless a different number of votes is required by the Certificate of Incorporation or the General Corporation Law. If a quorum is present, directors shall be elected by a plurality of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. In determining whether a proposal has been approved, shares abstaining or not voting but otherwise present at the meeting will not be counted as having been voted on the proposal. All elections of directors shall be by written ballot. Voting by ballot shall not be required for any other corporate action except as otherwise provided by the General Corporation Law.

SECTION 11. NOTICE OF STOCKHOLDER PROPOSALS.

(a) No business may be transacted at an annual meeting of stockholders, other than business that is either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the annual meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (c) otherwise properly brought before the annual meeting by any stockholder of the corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 11 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 11.

(b) In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, such stockholder must h ave given timely notice thereof in proper written form to the Secretary of the corporation. To be timely, a stockholder’s notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the corporation not less than one-hundred eighty (180) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs.

(c) To be in proper written form, a stockholder’s notice to the Secretary must set forth as to each matter such stockholder proposes to bring before the annual meeting:

(i) (A) a brief description of the business desired to be brought before the annual meeting and (B) the reasons for conducting such business at the annual meeting, a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder or any Stockholder Associated Person (as defined below) in such business;

(ii) a representation that such stockholder intends to appear in person or by proxy at the meeting to bring such business before the meeting;

(iii) as to the stockholder giving the notice and any Stockholder Associated Person, (A) the class, series and number of all shares of stock of the corporation which are owned of record by such stockholder or such Stockholder Associated Person, if any, (B) the class, series and number of, and the nominee holder for, any shares of stock of the corporation owned beneficially but not of record by such stockholder or such Stockholder Associated Person, if any; and (C) a description of all Derivative Transactions (as defined below) by such stockholder or such Stockholder Associated Person during the previous twelve (12) month period, including the date of the transactions and the class, series and number of securities involved in, and the material economic terms of, the transactions, such description to include all information that such stockholder or Stockholder Associated Person would be required to report on an Insider Report (as defined below) if such stockholder or Stockholder Associated Person were a director of the corporation or the beneficial owner of more than ten percent (10%) of the shares of the corporation at the time of the transactions;

(iv) as to the stockholder giving the notice and any Stockholder Associated Person, (A) the name and address of such stockholder and such Stockholder Associated Person, as they appear on the corporation’s stock ledger and, if different, their current names and addresses and (B) the investment strategy or objective, if any, of such stockholder or Stockholder Associated Person and a copy of the prospectus, offering memorandum or similar document, if any, provided to investors or potential investors in such stockholder or Stockholder Associated Person; and

(v) to the extent known by the stockholder giving the notice, the name and address of any other person who owns, beneficially or of record, any shares of stock of the corporation and who supports the proposal of other business on the date of such stockholder’s notice.

(d) No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 11, provided, that once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 11 shall be deemed to preclude discussion by any stockholder of any such business. If the Chairman of an annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted.

(e) For purposes of this Section 11:

(i) a “Stockholder Associated Person” of any stockholder shall mean (A) any person controlling, directly or indirectly, or acting in concert with, such stockholder, (B) any beneficial owner of shares of stock of the corporation owned of record or beneficially by such stockholder and (C) any person controlling, controlled by or under common control with such stockholder or a Stockholder Associated Person as defined in the foregoing clauses (A) and (B);

(ii) “Derivative Transaction” by a person shall mean any (A) transaction in, or arrangement, agreement or understanding with respect to, any option, warrant, convertible security, stock appreciation right or similar right with an exercise, conversion or exchange privilege, or settlement payment or mechanism related to, any security of the corporation, or similar instrument with a value derived in whole or in part from the value of a security of the corporation, in any such case whether or not it is subject to settlement in a security of the corporation or otherwise and (B) any transaction, arrangement, agreement or understanding which included or includes an opportunity for such person, directly or indirectly, to profit or share in any profit derived from any increase or decrease in the value of any security of the corporation, to mitigate any loss or manage any risk associated with any increase or decrease in the value of any security of the corporation or to increase or decrease the number of securities of the corporation which such person was, is or will be entitled to vote, in any case whether or not it is subject to settlement in a security of the corporation or otherwise; and

(iii) “Insider Report” shall mean a statement required to be filed pursuant to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (or any successor provisions) by a person who is a director of the corporation or who is directly or indirectly the beneficial owner of more than ten percent (10%) of the shares of the corporation.

ARTICLE III

DIRECTORS

SECTION 1. NUMBER AND QUALIFICATIONS. The Board of Directors shall consist of between three and fifteen directors, with the exact number of directors to be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the Board of Directors then in office.

SECTION 2. MEETINGS. Meetings of the Board of Directors shall be held at such places within or outside the State of Delaware as may from time to time be fixed by resolution of the Board of Directors, or as may be specified in the notice of the meeting. A regular meeting of the Board of Directors may be held without other notice than this by-law immediately after, and at the same place as, the annual meeting of stockholders. Regular meetings of the Board of Directors shall be held at such times as may from time to time be fixed by resolution of the Board of Directors, and no notice of such regular meetings need be given other than such resolution. Special meetings may be held at any time upon the call of the Chairman of the Board or, in the absence of the Chairman of the Board, the President or any Vice President or the Secretary or any two directors by oral, electronic or written notice given in accordance with Section 3 of this Article III. The notice of any meeting need not specify the purpose of the meeting. A written waiver, signed by the director entitled to notice, or a waiver by electronic transmission by the director entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except when the director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

SECTION 3. NOTICE. Notice of the place, date, and hour of each special meeting, unless waived, shall be given to each director either by mail not less than forty-eight (48) hours before the date of the meeting, by telephone, telegram or electronic transmission on twenty-four (24) hours’ notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances. Such notice may be given by the Secretary or by the officer or directors calling the meeting. If notice is given:

(a) in person, such notice shall be deemed to have been given when delivered;

(b) by mail, such notice shall be deemed to have been given when deposited in the United States mail, postage prepaid, addressed to the director at such address as appears on the records of the corporation for such director;

(c) by telegram, cable or other similar means (not including mail) that provide written notice, such notice shall be deemed to have been given when delivered to any transmission company, with charges prepaid, addressed to the director at such address as appears on the records of the corporation for such director; and

(d) by telephone or electronic transmission, such notice shall be deemed to have been given when transmitted to such number or designation as appears on the records of the corporation for such director.

SECTION 4. COMMITTEES.

(a) The Board of Directors shall appoint from among its members the following committees: audit, compensation, nominating and governance and executive. Each of these committees shall consist of such number of directors and shall have such powers, authority and duties as shall from time to time be prescribed by the Board of Directors.

(b) The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate one or more other committees, each committee to consist of one or more directors of the corporation. Any such committee shall have and may exercise such powers and authority of the Board of Directors as shall be conferred or authorized by the resolution designating such committee.

(c) The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not the member or members present constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

(d) A majority of the members of any committee of the Board of Directors, if such committee be composed of more than two members, may determine its action and fix the time and place of its meetings unless the Board of Directors shall otherwise provide. The Board of Directors shall have power at any time to fill vacancies in, to change the membership of, or to discharge any such committee.

(e) Any and all actions by any committee shall be reported to the Board of Directors at the board meeting succeeding such action.

SECTION 5. QUORUM. A majority of the total number of directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors. A majority of the total number of members of any committee of the Board of Directors shall constitute a quorum for the transaction of business at any meeting of such committee. If at any meeting of the Board of Directors or any committee there shall be less than a quorum present, a majority of those present may adjourn the meeting, without further notice from time to time until a quorum shall have been obtained. Interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or a committee thereof. Members of the Board of Directors or any committee designated by the Board of Directors may participate in a meeting of the Board of Directors or such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this sentence shall constitute presence in person at the meeting.

SECTION 6. MANNER OF ACTING. The vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors or committee, as the case may be, unless the Certificate of Incorporation or these by-laws shall require a vote of a greater number.

SECTION 7. DIVIDENDS. Subject always to the provisions of the law and the Certificate of Incorporation, the Board of Directors shall have full power to determine whether any, and if any, what part of any, funds legally available for the payment of dividends shall be declared in dividends and paid to stockholders; the division of the whole or any part of such funds of the corporation shall rest wholly within the lawful discretion of the Board of Directors, and it shall not be required at any time, against such discretion, to divide or pay any part of such funds among or to the stockholders as dividends or otherwise; and the Board of Directors may fix a sum which may be set aside or reserved over and above the capital paid in of the corporation as working capital for the corporation or as a reserve for any proper purpose, and from time to time may increase, diminish, and vary the same in its absolute judgment and discretion.

SECTION 8. INFORMAL ACTION. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes or proceedings of the Board of Directors or committee.

SECTION 9. NOMINATION OF DIRECTORS.

(a) Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the corporation, except as may be otherwise provided in the Certificate of Incorporation with respect to the right of holders of preferred stock of the corporation to nominate and elect a specified number of directors in certain circumstances. Nominations of persons for election to the Board of Directors may be made at any annual meeting of stockholders, or at any special meeting of stockholders called for such purpose, (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (b) by any stockholder of the corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 9 and on the record date for the determination of stockholders entitled to vote at such meeting and (ii) who complies with the notice procedures set forth in this Section 9.

(b) In addition to any other applicable requirements (including, where applicable, Section 11 of Article II of these by-laws), for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the corporation. To be timely, a stockholder’s notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the corporation (i) in the case of an annual meeting called for a date that is within thirty (30) days before or after the anniversary date of the immediately preceding annual meeting of stockholders, not less than one-hundred eighty (180) days prior to such anniversary date and (ii) in the case of an annual meeting called for a date that is more than thirty (30) days before or after such anniversary date, or in the case of a special meeting, not later than the close of business on the tenth (10th) day following

the day on which such notice of the date of the meeting was mailed or such public disclosure of the date of the meeting was made, whichever first occurs.

(i) as to each person whom the stockholder proposes to nominate for election as a director (A) the name, age, business address and residence address of the person, (B) the principal occupation or employment of the person, (C) the class or series and number of shares of capital stock of the corporation which are owned beneficially or of record by the person and (D) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with a solicitation of proxies for election of directors in an election contest (even if an election contest is not involved), or would otherwise be required, pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder;

(ii) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate each person named in its notice;

(v) to the extent known by the stockholder giving the notice, the name and address of any other person who owns, beneficially or of record, any shares of stock of the corporation and who supports the nominee(s) for election on the date of such stockholder’s notice.

Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected. For purposes of this Section 9, the terms “Stockholder Associated Person,” “Derivative Transaction” and “Insider Report” shall have the same meanings as given them in Article II, Section 11(e).

(d) No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 9. If the Chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded.

ARTICLE IV

OFFICERS

SECTION 1. NUMBER. The officers of the corporation shall be a Chairman of the Board and a President, one of whom shall be designated Chief Executive Officer by the Board of Directors, may include one or more Vice Chairmen and one or more Vice Presidents, as may be determined by the Board of Directors, and shall include a Chief Financial Officer, a Secretary, a Treasurer and such Assistant Secretaries, Assistant Treasurers and other officers as may be designated by the Board of Directors. Any two or more offices may be held by the same person. The Chairman, any Vice Chairman and the President may, but need not, be chosen from among the directors. The Treasurer shall report to the Chief Financial Officer if not also elected to the position of Chief Financial Officer.

SECTION 2. TERM AND REMOVAL. The officers of the Corporation shall be elected or appointed annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of stockholders. Vacancies may be filled, and new offices may be created and filled, at any meeting of the Board of Directors. Each officer shall hold office until such officer’s successor is elected or appointed and has qualified or until such officer’s earlier death, resignation or removal. Any officer may be removed from office, either with or without cause, at any time by the affirmative vote of a majority of the members of the Board of Directors then in office.

SECTION 3. THE CHAIRMAN OF THE BOARD. The Chairman of the Board shall have such powers as are vested in him or her by the Board of Directors, by law or by these by-laws. The Chairman shall preside at the meetings of the stockholders, of the Board of Directors and of the Executive Committee.

SECTION 4. THE VICE CHAIRMEN. A Vice Chairman shall have such powers and perform such duties as are vested in or assigned to him or her by the Board of Directors, the Chairman or these By-laws. In the absence or inability to act of the Chairman of the Board, or upon the request of the Chairman of the Board, the Vice Chairman (or in the event there be more than one Vice Chairman, the Vice Chairmen in the order designated, or in the absence of any designation, then in the order of their election) shall perform the duties of the Chairman of the Board and when so acting shall have all the powers of and be subject to all the restrictions upon the Chairman of the Board. In the absence or inability to act of the Chairman of the Board and

the Vice Chairmen, if any, the Chairman of the Nominating and Governance Committee shall preside at meetings of the Board of Directors and shall have and exercise all of the powers and duties of the Chairman of the Board, subject to Article II, Section 6.

SECTION 5. THE PRESIDENT. The President shall have the powers and duties vested in him or her by the Board of Directors, by law or by these by-laws.

SECTION 6. THE CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have, subject to the supervision and direction of the Board of Directors or of the Executive Committee, general supervision of the business, property and affairs of the corporation and the powers vested in him or her by the Board of Directors, by law or by these by-laws or which usually attach or pertain to such office. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the corporation or a different mode of execution is expressly prescribed by the Board of Directors, the Chief Executive Officer may execute for the corporation any contracts, deeds, mortgages, bonds or other instruments that the Board of Directors has authorized, and the Chief Executive Officer may (without previous authorization by the Board of Directors) execute such contracts and other instruments as the conduct of the corporation’s business in its ordinary course requires.

SECTION 7. THE VICE PRESIDENTS. The Vice Presidents shall perform such duties as may be assigned to them from time to time by the Chairman of the Board, a Vice Chairman, the President, the Board of Directors or these by-laws. Any Vice President may sign, with the Secretary or an Assistant Secretary, certificates for shares of the Corporation.

SECTION 8. THE TREASURER. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his or her duties in such sum and with such surety or sureties as the Board of Directors shall determine. The Treasurer shall (a) have charge and custody of and be responsible for all funds and securities of the corporation; receive and give receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such banks, trust companies or other depositaries as shall be selected; and (b) in general perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him or her by the Chairman of the Board, a Vice Chairman, the President, the Board of Directors or these by-laws.

SECTION 9. THE SECRETARY. The Secretary shall have the custody of the corporate seal and the Secretary or any Assistant Secretary shall affix the same to all instruments or papers requiring the seal of the Corporation. The Secretary, or in his or her absence, any Assistant Secretary, shall see that proper notices are sent of the meetings of the stockholders, the Board of Directors and the Executive Committee, and shall see that all proper notices are given, as required by these by-laws. The Secretary or any Assistant Secretary shall keep the minutes of all meetings of stockholders and directors and all committees which may request their services.

SECTION 10. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The Assistant Treasurers shall respectively, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. The Assistant Secretaries as thereunto authorized by the Board of Directors may sign with the Chairman of the Board, a Vice Chairman, the President or a Vice President

certificates for shares of the Corporation, the issue of which shall have been authorized by a resolution of the Board of Directors. The Assistant Treasurers and Assistant Secretaries, in general, shall perform such duties as shall be assigned to them by the Treasurer or the Secretary, respectively, or by the Chairman of the Board, a Vice Chairman, the President, the Board of Directors or these by-laws.

SECTION 11. VOTING CORPORATION’S SECURITIES. Unless otherwise ordered by the Board of Directors, the Chairman of the Board, or in the event of his inability to act, the President, or in the event of his inability to act, the Vice President designated by the Board of Directors to act in the absence of the President shall have full power and authority on behalf of the corporation to attend and to act and to vote at any meetings of security holders of corporations in which the corporation may hold securities, and at such meetings shall possess and may exercise any and all rights and powers incident to the ownership of such securities, and which as the owner thereof the corporation might have possessed and exercised, if present. The Board of Directors, by resolution from time to time, may confer like powers upon any other person or persons.

ARTICLE V

CERTIFICATED AND UNCERTIFICATED STOCK

SECTION 1. FORM. The shares of the corporation’s stock shall either be represented by certificates or be uncertificated shares. Any stockholder, upon written request to the transfer agent or registrar of the corporation, shall be entitled to a certificate representing shares of the corporation’s stock. Any certificates representing shares of the corporation’s stock shall be in such form not inconsistent with the Certificate of Incorporation as the Board of Directors may from time to time prescribe. Such certificates shall be signed by or in the name of the corporation by the Chairman or Vice Chairman of the Board of Directors, or the President or a Vice President, and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and shall be sealed with the seal of the corporation. Such seal may be a facsimile. If a stock certificate is countersigned by a transfer agent or registrar (other than, in each case, the corporation or an employee of the corporation), any or all of the other signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. The name of the person to whom the shares represented by a certificate are issued, and the number of shares and date of issue, shall be entered on the books of the corporation.

SECTION 2. TRANSFER. Upon compliance with any provisions restricting the transferability of shares that may be set forth in the Certificate of Incorporation, these by-laws or any written agreement in respect thereof, transfers of shares of the capital stock of the corporation shall be made only on the books of the corporation by the holder of record thereof or by such holder’s legal representative, who shall furnish proper evidence of authority to transfer, or by the holder’s attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation, or with a transfer agent appointed as provided in Section 5

of this Article, and either (a) in the case of stock represented by a certificate, on surrender for cancellation of the certificate or certificates for such shares or (b) in the case of uncertificated shares, on proper instructions from the holder of record of such shares or the holder’s legal representative or attorney. and the payment of all taxes thereon. The person in whose name shares of stock stand on the books of the corporation shall be deemed the owner thereof for all purposes as regards the corporation. The Board may, from time to time, make such additional rules and regulations as it may deem expedient, not inconsistent with these by-laws, concerning the issue, transfer and registration of certificates for shares of the capital stock of the corporation.

SECTION 3. LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATES. No certificates for shares of stock in the corporation shall be issued in place of any certificate alleged to have been lost, destroyed or stolen, except on production of such evidence of such loss, destruction or theft and on delivery to the corporation, if the Board of Directors shall so require, of a bond of indemnity in such amount (not exceeding twice the value of the shares represented by such certificate), upon such terms and secured by such surety as the Board of Directors may in its discretion require.

SECTION 4. TRANSFER AGENT AND REGISTRAR. The Board of Directors may appoint one or more transfer agents and one or more registrars, and may require all certificates of stock to bear the signature or signatures of any of them.

ARTICLE VI

FISCAL YEAR

The fiscal year of the corporation shall begin on the first day of June in each year and shall end on the last day of May next following, unless otherwise determined by the Board of Directors.

ARTICLE VII

CORPORATE SEAL

The corporate seal of the corporation shall be in such form as the Board of Directors shall prescribe.

ARTICLE VIII

AMENDMENTS

These by-laws may be amended, altered or repealed and new by-laws not inconsistent with any provision of the Certificate of Incorporation may be made (a) by the affirmative vote of a majority of the members of the Board of Directors then in office, or (b) by the affirmative vote of the holders of at least 80% of the total voting power of all shares of stock of the corporation entitled to vote in the election of directors, considered for purposes of this Article VIII as one class.

Exhibit 10.1

SEVERANCE AND CHANGE IN CONTROL AGREEMENT

(Effective from and after July 9, 2008)

This Severance and Change in Control Agreement (“Agreement”) made and entered into as of the th day of , by and between , a corporation (“Company”), and (“Employee”).

WHEREAS, the Company currently employs Employee as an employee at will in the capacity of , and

WHEREAS, the Company and Employee desire to enter into an Agreement as herein set forth to reflect certain mutually agreed changes to the terms and conditions thereof; and

NOW, THEREFORE, in consideration of the mutual agreements herein set forth and other good and valuable consideration, the parties hereto agree as follows:

1. Employment . Employee will continue employment with the Company as an at-will employee subject to the terms and conditions hereinafter set forth.

2. Duties . During the continuation of Employee’s employment, Employee shall:

(a) well and faithfully serve the Company and do and perform assigned duties and responsibilities in the ordinary course of Employee’s employment and the business of the Company (within such limits as the Company may from time to time prescribe), professionally, faithfully and diligently.

(b) devote Employee’s full time, energy and skill to the business of the Company and Employee’s assigned duties and responsibilities, and to the promotion of the best interests of the Company; provided that Employee shall not (to the extent not inconsistent with Section 5 below) be prevented from (a) serving as a director of any corporation consented to in advance in writing by the Company, (b) engaging in charitable, religious, civic or other non-profit community activities, or (c) investing his personal assets in such form or manner as will not require any substantial services on Employee’s part in the operation or affairs of the business in which such investments are made or which would detract from or interfere or cause a conflict of interest with performance of Employee’s duties hereunder.

(c) observe all policies and procedures of the Company in effect from time to time applicable to employees of the Company including, without limitation, policies with respect to employee loyalty and prohibited conflicts of interest.

3. Benefits . Employee shall be entitled to participate, according to the eligibility provisions of each, in such welfare plans (including but not limited to medical, dental, life, accident and disability insurance programs), vacation, retirement plans and other fringe benefits as may be in effect from time to time and available to other officers of the Company during Employee’s employment term. Employee shall also be entitled to participate in such additional executive fringe benefits as may be authorized from time to time by the

President and Chief Executive Officer of the Company. Employee shall be eligible to participate in the Company’s Supplemental Key Employee Retirement Plan as an executive level participant.

4. Confidential Information, Assignment of Inventions .

(a) Employee acknowledges that the trade secrets, confidential information, secret processes and know-how developed and acquired by AAR CORP. and its affiliates or subsidiaries (together the “Affiliated Companies”) are among their most valuable assets and that the value of such information may be destroyed by unauthorized disclosure. All such trade secrets, confidential information, secret processes and know-how imparted to or learned by Employee in the course of his employment with respect to the business of the Affiliated Companies (whether acquired before or after the date hereof) will be deemed to be confidential and will not be used or disclosed by Employee, except to the extent necessary to perform Employee’s duties and, in no event, disclosed to anyone outside the employ of the Affiliated Companies and their authorized consultants and advisors, unless (i) such information is or has been made generally available to the public, (ii) disclosure of such information is required by law in the opinion of Employee’s counsel (provided that written notice thereof is given to Company as soon as possible but not less than 24 hours prior to such disclosure), or (iii) express written authorization to use or disclose such information has been given by the Company. If Employee ceases to be employed by the Company for any reason, Employee shall not take any electronically stored data, documents or other papers containing or reflecting trade secrets, confidential information, secret processes, know-how, or computer software programs from Company. Employee acknowledges that Employee’s employment hereunder will place Employee in a position of utmost confidence and that Employee will have access to confidential information concerning the operation of the business of the Affiliated Companies, including, but not limited to, manufacturing methods, developments, secret processes, know-how, computer software programs, costs, prices and pricing methods, sources of supply and customer names and relations. All such information is in the nature of a trade secret and is the sole and exclusive property of the Affiliated Companies and shall be deemed confidential information for the purposes of this paragraph.

(b) Employee hereby assigns to the Company all rights that Employee may have as author, designer, inventor or otherwise as creator of any written or graphic material, design, invention, improvement, or any other idea or thing whatever that Employee may write, draw, design, conceive, perfect, or reduce to practice during employment with the Company or within 120 days after termination of such employment, whether done during or outside of normal work hours, and whether done alone or in conjunction with others (“Intellectual Property”), provided, however, that Employee reserves all rights in anything done or developed entirely by Employee on Employee’s own personal time and without the use of any Company equipment, supplies, facilities or information, or the participation of any other Company employee, unless it relates to the Company’s business or reasonably anticipated business, or grows out of any work performed

by Employee for the Company. Employee will promptly disclose all such Intellectual Property developed by Employee to the Company, and fully cooperate at the Company’s request and expense in any efforts by the Company or its assignees to secure protection for such Intellectual Property by way of domestic or foreign patent, copyright, trademark or service mark registration or otherwise, including executing specific assignments or such other documents or taking such further action as may be considered necessary to vest title in Company or its assignees and obtain patents or copyrights in any and all countries.

5. Non-Compete; Severance .

(a) Employee agrees that during Employee’s continuation of employment with the Company and for one (1) year thereafter so long as the Company makes severance payments to Employee pursuant to subsections 5(b) or 5(c) below, Employee shall not, without the express written consent of the Company, either alone or as a consultant to, or partner, employee, officer, director, or stockholder of any organization, entity or business, (i) take or convert for Employee’s personal gain or benefit or for the benefit of any third party, any business opportunities which may be of interest to the Company or any Affiliated Company which Employee becomes aware of during the term of his employment; (ii) engage in direct or indirect competition with the Company or any Affiliated Company within 100 miles of any location within the United States of America or any other country where the Company or any Affiliated Company does business from time to time during the term hereof; (iii) solicit in connection with any activity which is competitive with any of the businesses of the Company or any Affiliated Company, any customers of the Company or any Affiliated Company; (iv) solicit for employment any sales, marketing or management employee of Company or any Affiliated Company or induce or attempt to induce any customer or supplier of the Company or any Affiliated Company to terminate or materially change such relationship. Company and Employee acknowledge the reasonableness of the foregoing covenants not to compete and non-solicitation, including but not limited to the geographic area and duration of time which are a part hereof, and further, that the restrictions stated in this Section 5 are reasonably necessary for the protection of Employer’s legitimate proprietary interests. This covenant not to compete may be enforced with respect to any geographic area in which the Company or any Affiliated Company does business during the term hereof. Nothing herein shall prohibit Employee from being the legal or equitable holder, solely for investment purposes, of less than 5% of the capital stock of any publicly held corporation which may be in direct or indirect competition with the Company or any Affiliated Company.

(b) The Company will pay Employee, upon termination of Employee’s employment by the Company prior to a Change in Control (as defined in 7(c)(i) below) for any reason other than Cause (as defined in 7(c)(iv) below), severance each month for 12 months, in an amount (subject to applicable withholding) equal to 1/12 of Employee’s base salary; and, further, if the Company pays discretionary bonuses to its officers for the fiscal year in which Employee’s employment is terminated, Employee will be paid a bonus in a lump sum at the time any such bonuses are

paid to other officers or at such time as the Severance Period is complete, whichever is later (with interest at prime rate plus one percentage point from the earlier of such dates), (1) for the completed fiscal year preceding termination if such bonus has not been paid prior to termination, and (2) for the fiscal year in which employment is terminated, prorata for the period prior to termination of employment based on Employee’s performance during such period; provided, however, that (i) all such monthly payment obligations shall terminate immediately upon Employee obtaining full time employment in a comparable position in terms of salary level, and (ii) all such payment obligations shall terminate or lapse immediately upon any breach by Employee of Section 4 or 5(a) of this Agreement or if Employee shall commence any action or proceeding in any court or before any regulatory agency arising out of or in connection with termination of Employee’s employment.

(c) If Employee terminates Employee’s employment or Employee’s employment is terminated by the Company for Cause (as defined below), the Company may elect (but is not required to), by written notice thereof to Employee, within five (5) days of any such termination of Employee’s employment with the Company prior to a Change in Control (as defined below), to pay Employee severance as provided in and subject to the provisions of subsection 5(b) above.

(d) Employee may terminate this Severance and Change in Control Agreement effective immediately upon notice thereof in writing to Company at any time while still employed within a sixty (60) calendar day period immediately following the effective date of any reduction by Company in (i) Employee’s level of responsibility or position from that held by Employee as «4» on the effective date of this Agreement, or (ii) Employee’s level of compensation, including retirement benefits in effect immediately prior to any such change.

(e) The Employee acknowledges and agrees that the Company would be irreparably harmed by violations of Section 4 or Section 5(a) above, and in recognition thereof, the Company shall be entitled to an injunction or other decree of specific performance with respect to any violation thereof (without any bond or other security being required) in addition to other available legal and equitable remedies.

6. Termination of Employment .

(a) Upon and after termination of employment howsoever arising, Employee shall, upon request by Company:

(1) immediately return to the Company all correspondence, documents, business calendars/diaries, or other property belonging to the Company which is in Employee’s possession,

(2) immediately resign from any office Employee holds with the Company or any Affiliated Company; and

(3) cooperate fully and in good faith with the Company in the resolution of all matters Employee worked on or was involved in during Employee’s employment with the Company. Employee’s cooperation will include reasonable consultation by telephone. Further, in connection therewith, Employee will, at Company’s request upon reasonable advance notice and subject to Employee’s availability, make Employee available to Company in person at Company’s premises, for testimony in court, or elsewhere; provided, however, that in such event, Company shall reimburse all Employee’s reasonable expenses and pay Employee a reasonable per diem or hourly stipend.

7. Change in Control .

(a) In the event (i) a Change in Control of AAR CORP. occurs and (ii) (A) at any time during the 18 month period commencing on the date of the Change in Control the Company terminates Employee’s employment for other than Cause or Disability, or Employee terminates Employee’s employment for Good Reason, in either case by written notice to the other party (including the particulars thereof), and having given the other party the opportunity to be heard with respect thereto, or (B) Employee’s employment with the Company terminates for any reason other than Disability or death during the 30 day period commencing on the expiration of the aforementioned 18 month period, then:

(1) The Company shall promptly pay to Employee, in a lump sum, a cash payment in an amount equal to the sum of (A) all base salary earned through the date of termination, (B) any annual cash bonus earned by Employee for the fiscal year of the Company most recently ended prior to the date of termination to the extend unpaid on the date of termination, (C) a prorata portion of the annual cash bonus, including the value of any restricted stock grant in lieu of annual cash bonus, Employee would have earned had Employee been employed by the Company on the last day of the fiscal year in which the date of termination occurs (as if all performance targets have been met or, in the event the bonus is of the “discretionary” type, the bonus shall be based on a percentage of base salary which is not less than percentage of base salary received as bonus for the preceding fiscal year) that is applicable to the period commencing on the first day of such fiscal year and ending on the date of termination, and (D) any and all other benefits and amounts earned by Employee prior to the date of termination to the extent unpaid, all subject to applicable withholding.

(2) The Company shall promptly pay to Employee in a lump sum, a cash payment in an amount equal to two times Employee’s total compensation (base salary plus annual cash bonus) for either the fiscal year of the Company most recently ended prior to the date of termination, or the preceding fiscal year, whichever is the highest total compensation, subject to applicable withholding. Employee may elect to take payment of any amounts on a schedule of Employee’s own choosing; provided that such

schedule shall be completed no later than two years from the date of Employee’s termination of employment.

(3) Employee and Employee’s dependents shall continue to be covered by, and receive employee welfare and executive fringe benefits (including but not limited to medical, dental, life, accident and disability insurance available to officers of the Company and additional executive retirement and other fringe benefits approved by the President and CEO of the Company) in accordance with the terms of the Company’s benefit plans and executive fringe benefit programs, for two years following the date of termination, and at no less than the levels Employee and Employee’s dependents were receiving immediately prior to the Change in Control. Employee’s dependents shall be entitled to continued benefits coverage pursuant to the preceding sentence for the balance of such two year period in the event of Employee’s death during such period. The period during which Employee and Employee’s dependents are entitled to continuation of group health plan coverage pursuant to Section 4980B of the Internal Revenue Code of 1986, as amended, and Part 6 of Title I of the Employee Retirement Income Security Act of 1974, as amended, shall commence on the date next following the expiration of the aforementioned two year period.

(4) The Company, at its expense, shall provide Employee with outplacement services of a nationally recognized outplacement firm of the Employee’s choosing until the earlier of (a) the Employee’s attainment of employment, or (b) the date eighteen (18) months from the date of Employee’s termination of employment; provided, however, that the cost of such outplacement services shall not exceed 3.5% of the cash payment due to Employee pursuant to subsection 7(a)(2) above.

(5) The amounts paid to Employee under this Change in Control provision applicable to Employee shall be considered severance pay in consideration of past service Employee has rendered to the Company and in consideration of Employee’s continued service from the date hereof to entitlement of those payments.

(b) In the event that a Change in Control occurs, whether or not such Change in Control has the prior written approval of a majority of the Continuing Directors (as defined in the AAR CORP. Stock Benefit Plan), and notwithstanding any conditions or restrictions related to any Award granted to Employee under the Plan, all Options or Limited Rights, or both, granted to Employee under the Plan will become immediately exercisable and remain exercisable for the full remaining life of the option whether or not Employee’s employment continues, and all restrictions on Restricted Stock granted to Employee under the Plan will immediately lapse.

(i) “Change in Control” means the earliest of:

(1) 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; or

(2) the effective time of (i) 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 (ii) 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

(3) 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 (i) three directors, or (ii) directors constituting a majority of the number of directors of the Company then in office.

(ii) “Good Reason” means:

(1) a material reduction in the nature or scope of Employee’s duties, responsibilities, authority, power or functions from those enjoyed by Employee immediately prior to the Change in Control, or a material reduction in Employee’s compensation (including benefits), occurring at any time during the two-year period immediately after the Change in Control; or

(2) if the incumbent in the position of CEO of the Company on August 8, 1997 is not the CEO of the Company at the time of termination, a good faith determination by Employee that as the result of a Change in Control and a material change in employment circumstances at any time during the immediate two year period after the Change in Control, Employee is unable to carry out Employee’s assigned duties and responsibilities in a manner consistent with the practices, standards, values or philosophy of the Company immediately prior to the Change in Control; or

(3) a relocation of the primary place of employment of at least 100 miles.

(iii) “Disability” means:

(1) a physical or mental condition which has prevented Employee from substantially performing Employee’s assigned duties for a period of 180 consecutive days and which is expected to continue to render Employee unable to substantially perform Employee’s duties on a full-time basis and otherwise meets the benefit eligibility requirements of the Company’s Long Term Disability Welfare Benefit Plan or any executive program in which Employee was a participant at the time of a Change in Control. The Company will make reasonable accommodation for any handicap of Employee as may be required by applicable law.

In the event of termination by the Company for Disability after a Change in Control, a good faith determination of the existence of a Disability shall be made by resolution of the Compensation Committee of the Board of Directors of the Company, in its sole discretion, setting forth the particulars of the Disability which shall be final and binding upon the Employee. The Company may require the submission of such medical evidence as to the condition of the Employee as it may deem necessary in order to arrive at its determination of the occurrence of a Disability, and Employee will cooperate in providing any such information. Employee will be provided with reasonable opportunity to present additional medical evidence as to the medical condition of Employee for consideration prior to the Board making its determination of the occurrence of a Disability.

Upon termination of Employment by Company for Disability after a Change in Control, Employee will receive Disability payments pursuant to the Company’s short and long term Disability welfare benefit plans then in effect according to the terms of such plans and continue to be eligible to participate in the Company’s medical, dental and life insurance programs then in effect and available to officers of the Company in accordance with their terms for a period of 3 years from the date of such termination of this Agreement.

(iv) “Cause” means:

(1) Employee engages, during the performance of Employee’s duties hereunder, in acts or omissions constituting dishonesty, intentional breach of fiduciary obligation or intentional wrongdoing or malfeasance;

(2) Employee intentionally disobeys or disregards a lawful and proper direction of the Board or the Company; or

(3) Employee materially breaches the Agreement and such breach by its nature, is incapable of being cured, or such breach remains uncured for more than 10 days following receipt by Employee of written notice from the Company specifying the nature of the breach and demanding the cure thereof. For purposes of this

clause (3), a material breach of the Agreement that involves inattention by Employee to Employee’s duties under the Agreement shall be deemed a breach capable of cure.

Without limiting the generality of the foregoing, the following shall not constitute Cause for the termination of employment of Employee or the modification or diminution of any of Employee’s authority hereunder:

(1) any personal or policy disagreement between Employee and the Company or any member of the Board; or

(2) any action taken by Employee in connection with Employee’s duties hereunder, or any failure to act, if Employee acted or failed to act in good faith and in a manner Employee reasonably believed to be in and not opposed to the best interest of the Company and Employee had no reasonable cause to believe Employee’s conduct was unlawful; or

(3) termination of Employee’s employment for overall unsatisfactory performance (including, but not limited to, failure to meet financial goals).

Termination for Cause shall be limited to a good faith finding by resolution of the Compensation Committee of the Board, setting forth the particulars thereof. Any such action shall be taken at a regular or specially called meeting of the Compensation Committee of the Board, after a minimum 10 days notice thereof to Employee, with termination of Employee’s employment with the Company for Cause listed as an agenda item. Employee will be given a reasonable opportunity to be heard at such meeting with counsel present if Employee desires. Any such resolution shall be final and binding.

Upon termination of employment by Company for Cause, no further compensation or benefits shall accrue or be payable to Employee by the Company, except for any compensation, bonus or other benefits which have accrued to Employee prior to the date of any such termination.

Nothing herein shall be construed to prevent the Company from terminating Employee’s employment at any time for any reason or for no reason.

(d) The Company will pay reasonable legal/attorney’s fees (including court costs and other costs of litigation) incurred by Employee in connection with enforcement of any right or benefit under this Agreement.

(e) The Company will continue to provide SKERP retirement benefits to Employee and Employee’s spouse at no less than the level they are

receiving or entitled to receive under the SKERP as it was in effect immediately prior to the Change in Control.

8. Changes in Business . The Company, acting through its Board of Directors, will at all times have complete control over the Company’s business and retirement and other employee health and welfare benefit plans (“Plans”). Without limiting the generality of the foregoing, the Company may at any time or times change or discontinue any or all of its present or future operations or Plans (subject to their terms), may close or move any one or more of its divisions or offices, may undertake any new servicing or sales operation, may sell any one or more of its divisions or offices to any company not controlled, directly or indirectly, by the Company or may take any and all other steps which its Board of Directors, in its exclusive judgment, shall deem desirable, and Employee shall have no claim or recourse against the Company, its officers, directors or employees by reason of such action except for enforcement of the provisions of Sections 5 and 7 of this Agreement.

9. Severance Payment as Sole Obligation . Except as expressly provided in Sections 5 and 7 above, no further compensation, payments, liabilities or benefits shall accrue or be payable to Employee upon or as a result of termination of Employee’s employment for any reason whatsoever except for any compensation, bonus or other benefits which accrued to Employee prior to the date of employment termination.

The amounts paid to the Employee under Section 5 and 7 of this Agreement shall be considered severance pay in consideration of past services Employee has rendered to the Company and in consideration of Employee’s continued service from the date hereof to entitlement to those payments.

10. Notices . Any notice or other instrument or thing required or permitted to be given, served or delivered to any of the parties hereto shall be delivered personally or deposited in the United States mail, with proper postage prepaid, telegram, teletype, cable or facsimile transmission to the addresses listed below:

(a) If to the Company, to:

AAR CORP.

1100 N. Wood Dale Road

Wood Dale, Illinois 60191

Attention: Chairman

With a copy to:

AAR CORP.

1100 N. Wood Dale Road

Wood Dale, Illinois 60191

Attention: General Counsel

(b) If to Employee, to:

or to such other address as either party may from time to time designate by notice to the other. Each notice shall be effective when such notice and any required copy are delivered to the applicable address.

11. Non-Assignment .

(a) The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of Employee, and any attempted unpermitted assignment shall be null and void and without further effect; provided, however, that, upon the sale or transfer of all or substantially all of the assets of the Company, or upon the merger by the Company into or the combination with another corporation or other business entity, or upon the liquidation or dissolution of the Company, this Agreement will inure to the benefit of and be binding upon the person, firm or corporation purchasing such assets, or the corporation surviving such merger or consolidation, or the shareholder effecting such liquidation or dissolution, as the case may be. After any such transaction, the term Company in this Agreement shall refer to the entity which conducts the business now conducted by the Company. The provisions of this Agreement shall be binding upon and inure to the benefit of the estate and beneficiaries of Employee and upon and to the benefit of the permitted successors and assigns of the parties hereto.

(b) The Employee agrees on behalf of Employee, Employee’s heirs, executors and administrators, and any other person or person claiming any benefit under Employee by virtue of this Agreement, that this Agreement and all rights, interests and benefits hereunder shall not be assigned, transferred, pledged or hypothecated in any way by the Employee or by any beneficiary, heir, executor, administrator or other person claiming under the Employee by virtue of this Agreement and shall not be subject to execution, attachment or similar process. Any attempted assigned, transfer, pledge or hypothecation or any other disposition of this Agreement or of such rights, interests and benefits contrary to the foregoing provisions or the levy or any execution, attachment or similar process thereon shall be null and void and without further effect.

12. Severability . If any term, clause or provision contained herein is declared or held invalid by any court of competent jurisdiction, such declaration or holding shall not affect the validity of any other term, clause or provision herein contained.

13. Construction . Careful scrutiny has been given to this Agreement by the Company, Employee, and their respective legal counsel. Accordingly, the rule of construction that the ambiguities of the contract shall be resolved against the party which caused the contract to be drafted shall have no application in the construction or interpretation of this Agreement or any clause or provision hereof.

14. Entire Agreement . This Agreement as amended and restated herein and the other agreements referred to herein set forth the entire understanding of the parties and supersede all prior agreements, arrangements and communications, whether oral or written, pertaining to the subject matter hereof.

15. Waiver . No provision of this Agreement may be amended, modified, waived or discharged unless such amendment, modification, waiver or discharge is agreed to in writing signed by Employee and an authorized officer of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

16. Governing Law . The validity, interpretation, construction and performance of this Agreement shall be governed by and construed in accordance with the laws of the State of Illinois without regard to its conflicts of law principles.

17. Execution . This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and which shall constitute but one and the same Agreement.

WITNESS the due execution of this Agreement by the parties hereto as of the day and year first above written.

Employer:


By:
Title:


Employee: