Our Compensation Committee made significant changes to the Company's executive compensation program in Fiscal 2015 based on its consideration of the following factors: the macro-environment in which the Company operates its businesses; the Company's performance in Fiscal 2014 and its expected performance in Fiscal 2015; the executive compensation assessment prepared by its independent compensation consultant in July 2014; the Company's commitment to meeting the burn rate parameters under the AAR CORP. 2013 Stock Plan; stockholder concerns identified in our stockholder outreach program; and other relevant items. In sum, the Compensation Committee took the following Fiscal 2015 executive compensation actions:

~~The following policies and practices are key elements of the Company's executive compensation program:~~

Good corporate governance isremains an essential part of the Company's culture. The Board of Directors annually reviews the Company's key corporate governance documents, including the Corporate Governance Guidelines and the Board Committee ~~charters,~~charters. We also seek feedback from our stockholders on our corporate governance practices through our stockholder engagement program. Our goal is to ensure that ~~they~~our corporate governance practices reflect best practices consistent with the Company's culture, strategy and ~~strategy. The creation of a Lead Director position is one recent example of the Company's commitment to corporate governance best practices.~~business performance.

The following table identifies the Company's key corporate governance practices and related information:

We will hold our ~~2014~~2016 annual meeting of stockholders on ~~Wednesday,~~Tuesday, October ~~8, 2014,~~11, 2016 at 9:00 a.m., Chicago time, at AAR CORP.'s corporate headquarters located at One AAR Place, 1100 North Wood Dale Road, Wood Dale, Illinois 60191. We cordially invite you to attend the annual meeting and ask that you vote on the proposals described in this proxy statement.

~~QUESTIONS AND ANSWERS ABOUT OUR ANNUAL MEETING~~

QUESTIONS AND ANSWERS ABOUT OUR ANNUAL MEETING

Why am I receiving the proxy materials?

Our Board of Directors is providing these proxy materials to you, beginning on or about August ~~29, 2014,~~31, 2016, in connection with its solicitation of proxies for use at the Company's ~~2014~~2016 annual meeting of stockholders.

What information is contained in the proxy materials?

The proxy materials contain information about the proposals to be voted on at the annual meeting, the compensation of our directors and our most highly paid executive officers, corporate governance and other information about the ~~Company.~~Company required by the rules of the Securities and Exchange Commission ("SEC").

How do I access the proxy materials electronically?

~~Again this year we~~We are ~~pleased to be~~ distributing our proxy materials via the Internet under the "notice and access" approach permitted by ~~the rules of the Securities and Exchange Commission ("SEC").~~SEC rules. This approach reduces the cost and environmental impact of printing and distributing the proxy materials for our annual meeting.

We mailed a "Notice of Internet Availability of Proxy Materials" to all of our stockholders on or about August 29, 2014. The Notice gives you the choice to receive your proxy materials and vote your shares over the Internet or receive your proxy materials in printed form and vote by mailing back your proxy card.31, 2016. The Notice provides you with instructions on how to:

•

Access and review our proxy materials over the Internet;

•

Submit your vote over the Internet; and

•

Request ~~and receive~~ printed copies of our proxy materials.

This proxy statement, our annual report to stockholders for the fiscal year ended May 31, ~~2014 (referred to in this proxy statement as "Fiscal 2014"~~2016 ("Fiscal 2016") and our Fiscal ~~2014~~2016 annual report on Form 10-K may be viewed online atwww.proxyvote.com.

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What proposals ~~are stockholders~~am I voting on at the annual meeting?
~~Stockholders~~You will vote on ~~three~~four proposals at the annual meeting:
•
Proposal 1 — The election of ~~Patrick~~Norman R. Bobins, Ronald R. Fogleman, James E. Goodwin and Marc J. ~~Kelly, Peter Pace, Timothy J. Romenesko and Ronald B. Woodard~~Walfish as ~~Class III~~ directors to serve until the ~~2017~~2019 annual meeting of stockholders;

•
Proposal 2 — An advisory resolution to approve the Company's Fiscal ~~2014~~2016 executive compensation; ~~and~~

•
Proposal 3 — The approval of amendments to the AAR CORP. 2013 Stock Plan; and
Proposal 4 — The ratification of the appointment of KPMG LLP as the Company's independent registered public accounting firm for the fiscal year ending May 31, ~~2015 (referred to in this proxy statement as "Fiscal 2015"~~2017 ("Fiscal 2017").

Who is entitled to vote?
You are entitled to vote ~~your shares~~ if you were an AAR CORP. stockholder at the close of business on August ~~19, 2014.~~16, 2016. This date is referred to in this proxy statement as the "record date."

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Stockholder of Record.    ~~If you were a "stockholder of record" at the close of business on the record date, you may vote your shares at the annual meeting.~~    You are a "stockholder of record" if your shares are registered in your name with Computershare, the Company's transfer agent. If you were a stockholder of record at the close of business on the record date, you may vote your shares by proxy by completing, signing, dating and returning the enclosed proxy card or voting by telephone or over the Internet, or in person by attending and voting at the annual meeting.
Beneficial Owner.    You are a "beneficial owner" of shares if your shares are held in a brokerage account or by a bank or other nominee. If you were a ~~"beneficial owner"~~beneficial owner of shares at the close of business on the record date, you may vote your shares by giving voting instructions to your broker, bank or other nominee who is the "stockholder of record" of your shares. ~~You are a "beneficial owner" of shares if your shares are held in a stock brokerage account or by a bank or other nominee.~~ The Company has directed brokers, banks and other nominees to obtain voting instructions from their beneficial owners. Proxies submitted ~~by nominees~~ on behalf of beneficial owners will count toward a quorum and will be voted as instructed by the beneficial owners. You will receive additional instructions from your broker, bank or other nominee explaining how you may vote your shares.
You may receive more than one set of proxy materials. This means you hold your shares ~~held by~~in more than one account. Please vote all of your ~~nominee.~~shares.
A list of stockholders of record entitled to vote will be available at the Company's corporate headquarters for 10 days prior to the meeting and ~~at the meeting location~~ during the meeting.
On the record date, ~~39,891,158~~34,299,774 shares of common stock of the Company were outstanding. Each share of common stock is entitled to one vote for each director nominee and one vote for each of the other proposals to be voted on at the annual meeting.

How do ~~stockholders vote by proxy or in person?~~
Stockholders of record at the close of business on the record date may vote on the matters that are before the annual meeting by proxy by completing, signing, dating and returning the enclosed proxy card or by voting by telephone or over the Internet, or in person by attending and voting at the annual meeting.

~~How do stockholders~~I vote by telephone or over the Internet?
Specific instructions for using the telephone and Internet voting methods are set forth on the proxy card. These instructions are designed to authenticate your identity, allow you to give your voting instructions and confirm that those instructions have been properly recorded. You may vote by telephone or over the Internet 24 hours a day, seven days a week, until 10:59 p.m.

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~~(Chicago~~ (Chicago time) on the day prior to the annual meeting. If you vote by telephone or over the Internet, please do not return your proxy card.

How do ~~stockholders~~I revoke a proxy?
You may revoke your proxy (e.g., to change your vote) at any time before it is exercised by:
•
Sending a written notice of revocation to the Secretary of the Company at the Company's address listed on the first page of this proxy statement;

•
Submitting ~~another~~a later-dated proxy by telephone, or over the ~~Internet;~~Internet or by mail; or

•
~~Delivering a later dated, signed proxy; or~~

•
Voting in person at the annual meeting.

How will the proxy holders vote the shares?
The persons designated on the proxy ~~holders~~card as the Company's "proxy holders" will vote all shares covered by your proxy card in accordance with your instructions on the proxy card. If no instructions are given, the proxy holders will vote the shares as follows:
•
FOR the election of ~~all of~~ the four ~~Class III~~ director nominees;

•
FOR the advisory resolution to approve our Fiscal ~~2014~~2016 executive compensation;
FOR the approval of the amendments to the AAR CORP. 2013 Stock Plan; and

•
FOR the ratification of KPMG LLP as our independent registered public accounting firm for Fiscal ~~2015.~~2017.
If any other matter properly comes before the annual meeting, the proxy holders will use their judgment to vote in a manner consistent with the best interest of stockholders. If any director nominee becomes unavailable for election for any reason prior to the annual meeting vote, the Board may reduce the number of directors to be elected or substitute another person as nominee, in which case the proxy holders will vote for the substitute nominee.

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What are the quorum and vote requirements?
A quorum of stockholders is necessary to hold a valid meeting. A quorum will exist if a majority of the outstanding shares of common stock entitled to vote at the meeting is present in person or by proxy at the annual meeting. Abstentions and broker non-votes, if any, will be counted as present for purposes of determining whether there is a quorum. A "broker non-vote" will occur when a broker, bank or other nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that proposal and has not received instructions on how to vote from the beneficial ~~owner.~~owner of the shares.
Please note that brokers, bank and other nominees will have discretionary authority to vote shares on the ratification of ~~KPMG;~~KPMG LLP; however, ~~brokers~~they may not vote shares on the election of directors, ~~or on~~ the advisory resolution to approve executive compensation or the approval of the amendments to the AAR CORP. 2013 Stock Plan without specific instructions from their beneficial owners. Accordingly, please ~~follow~~provide voting instructions to your ~~broker's instructions~~broker, bank or other nominee so that your vote may be counted.
The following table indicates the vote required for approval of each matter to be presented to the stockholders at the annual meeting and the effect of "withhold" votes, abstentions, and broker non-votes.
Required Vote Effect of "Withhold" Votes,
Abstentions and Broker Non-Votes

Proposal 1 —
Election of Four Directors
Affirmative vote of a plurality of the shares of common stock present and entitled to vote (the four nominees who receive the greatest number of votes will be elected directors of the Company). "Withhold" votes and broker non-votes will have no effect on the voting for this matter.

Proposal 2 —
Advisory Resolution to Approve Fiscal 2016 Executive Compensation
Affirmative vote of a majority of the shares of common stock present and entitled to vote. Abstentions will have the effect of a vote "against" and broker non-votes will have no effect on the voting for this matter.

Proposal 3 —
Approval of Amendments to the AAR CORP. 2013 Stock Plan
Affirmative vote of a majority of the shares of common stock present and entitled to vote. Abstentions will have the effect of a vote "against" and broker non-votes will have no effect on the voting for this matter.

Proposal 4 —
Ratification of the Appointment of KPMG LLP
Affirmative vote of a majority of the shares of common stock present and entitled to vote. Abstentions will have the effect of a vote "against"; there will be no broker non-votes for this matter.

How will the vote be tabulated?
Inspectors of election appointed for the annual meeting will tabulate all votes cast in person or by proxy at the annual meeting. In the event a quorum is not present at the annual meeting, we expect that the annual meeting will be adjourned or postponed to solicit additional proxies.

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The following table indicates the vote required for approval of each matter to be presented to the stockholders at the annual meeting and the effect of "withhold" votes, abstentions, and broker non-votes.

~~Required Vote~~

~~Effect of "Withhold" Votes,~~
~~Abstentions and Broker Non-Votes~~

~~Proposal 1 —~~
~~Election of Class III Directors~~
~~Affirmative vote of a plurality of the shares of common stock present and entitled to vote (the three nominees who receive the greatest number of votes will be elected directors of the Company).~~
~~"Withhold" votes and broker non-votes will have no effect on the voting for the election of directors."~~
~~Proposal 2 —~~
~~Advisory Resolution to Approve Fiscal 2014 Executive Compensation~~
~~Affirmative vote of a majority of the shares of common stock present and entitled to vote.~~
~~Abstentions will have the effect of a vote "against" and broker non-votes will have no effect on the voting for this matter.~~
~~Proposal 3 —~~
~~Ratification of the Appointment of KPMG LLP~~
~~Affirmative vote of a majority of the shares of common stock present and entitled to vote.~~
~~Abstentions will have the effect of a vote "against"; there will be no broker non-votes for this matter.~~

Who is the Company's proxy solicitor?
The Company has engaged D. F. King & Co., Inc., 48 Wall Street, New York, New York 10005, to assist the Company in soliciting proxies at a total estimated cost of ~~$11,500,~~$12,000, plus reasonable out-of-pocket expenses. The cost of soliciting proxies will be paid by the Company. D. F. King & Co., Inc. may solicit proxies by mail, telephone, facsimile, e-mail, or in person. Certain officers, directors and employees of the Company may also solicit proxies for no additional compensation.
Where can I find the voting results for the proposals at the annual meeting?
We intend to announce preliminary voting results at the annual meeting. We will publish the final voting results on a Current Report on Form 8-K to be filed with the SEC within four business days of the annual meeting.

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~~PROPOSAL 1 — ELECTION OF OUR DIRECTORS~~
PROPOSAL 1 — ELECTION OF OUR DIRECTORS
The Company's Restated Certificate of Incorporation and By-Laws provide that the Board of Directors shall consist of between three and 15 directors, with the exact number of directors to be set from time to time by the Board. The number of directors is currently set at ~~11.~~12. The members of the Board are divided into three ~~classes, each having a three-year term that expires in successive years:~~classes: Class I ~~(three~~(four directors), Class II (four directors), and Class III (four directors). Each class has a three-year term.
The Board of Directors has nominated four individuals to be elected as Class ~~III~~II directors at the annual meeting, each to serve a three-year term expiring at the ~~2017~~2019 annual meeting or until the individual is succeeded by another qualified director who has been duly elected. The nominees for director in Class ~~III at the annual meeting~~II are ~~Patrick~~Norman R. Bobins, Ronald R. Fogleman, James E. Goodwin and Marc J. ~~Kelly, Peter Pace, Timothy J. Romenesko and Ronald B. Woodard.~~Walfish.
Each nominee is currently serving as a director of the Company. Each nominee ~~other than Mr. Romenesko,~~ has been determined by the Board to be "independent" within the meaning of the rules of the New York Stock Exchange ("NYSE") and the SEC. ~~As President and Chief Operating Officer of the Company, Mr. Romenesko does not qualify as an independent director under the NYSE and SEC rules.~~
~~OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS~~
~~THAT YOU VOTEFOR~~ ~~THE ELECTION OF ALL OF OUR DIRECTOR NOMINEES.~~

Information about Our Director Nominees and Our Continuing Directors
Information about ~~the~~our director nominees and continuing directors whose terms expire in future years is set forth below:
OUR DIRECTOR NOMINEES

Director
Since
Class II Directors whose terms expire at the 2016 annual meeting
NORMAN R. BOBINS, 73: Since 2008, Non-Executive Chairman of The PrivateBank and Trust Company – Chicago (a financial services company) and Chief Executive Officer of Norman Bobins Consulting, LLC (a financial consulting company). From May 2007 until October 2007, Chairman of the Board of LaSalle Bank Corporation. From 2002 to 2007, President and Chief Executive Officer of LaSalle Bank Corporation.

2007
Other current public company directorships: Omega Healthcare Investors, Inc. and PrivateBancorp, Inc.

Other public company directorships held in the past five years: AGL Resources Inc., Aviv REIT, Inc., Nicor Inc. and SIMS Metal Management Limited.

Director Qualifications: The Board of Directors concluded that Mr. Bobins should serve as a director of the Company based on his 45 years of banking experience, his financial and accounting knowledge, his service as a director of other public companies, and his civic involvement and business acumen as a director of numerous not-for-profit organizations.
RONALD R. FOGLEMAN, 74: Since 2009, Non-Executive Chairman of Orbital ATK, Inc. (an aerospace and defense technologies company). Since 1997, President and Chief Operating Officer of B Bar J Cattle & Consulting Company (a consulting company). From 1994 to 1997, General, Chief of Staff of the United States Air Force, Washington, D.C.

2001
Other current public company directorships: Orbital ATK Inc.

Other public company directorships held in the past five years: Alliant Techsystems, Inc.

Director Qualifications: The Board of Directors concluded that General Fogleman should serve as a director of the Company based on his leadership ability and record of accomplishment during a 34-year career with the United States Air Force, his business experience and business relationships gained during and subsequent to his military service, his understanding of the government and defense markets, and his service as a director of other public companies. General Fogleman currently serves as the Company's Lead Director.

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Director
Since
JAMES E. GOODWIN, 72: Since April 2016, Lead Director of Federal Signal Corporation (a safety and security products manufacturer). From 2009 to April 2016, Chairman of Federal Signal Corporation. From 2007 to 2008, Interim President and Chief Executive Officer of Federal Signal Corporation. From 2001 to 2007, an independent business consultant. From 1999 to 2001, Chairman and Chief Executive Officer of UAL, Inc. and United Airlines, Inc., from which he retired after 34 years.
2002
Other current public company directorships: Federal Signal Corporation and John Bean Technologies Corporation.
Other public company directorships held in the past five years: First Chicago Bancorp.
Director Qualifications: The Board of Directors concluded that Mr. Goodwin should serve as a director of the Company based on his significant airline industry experience and expertise, including his leadership positions at UAL, Inc. and United Airlines, Inc., his management experience and his financial expertise, as well as his global consulting experience, and his service as a director of other public companies.

MARC J. WALFISH, 64: Since 2003, Founding Partner of Merit Capital Partners (a mezzanine investor company). From 1991 to 2003, partner at William Blair Mezzanine Capital Partners. From 1978 to 1991, various positions at Prudential Capital Corporation, most recently as Senior Vice President.

2003
Director Qualifications: The Board of Directors concluded that Mr. Walfish should serve as a director of the Company based on his experience and proven success in the finance industry, including as a founding partner of Merit Capital Partners, a mezzanine investor company, his knowledge of the capital markets and his expertise in corporate finance, strategic planning and risk management.

OUR CONTINUING DIRECTORS
Class III Directors whose terms expire at the ~~2014~~2017 annual meeting
~~Director~~
~~Since~~
PATRICK J. KELLY, ~~59:~~61: Since 1986, Managing Director of KMK & Associates, LLC (a private equity firm with interests in companies operating in the food, distribution, technology, financial services, real estate and energy industries).

2006
Director Qualifications: The Board of Directors concluded that Mr. Kelly should serve as a director of the Company based on his leadership and operational experience at various businesses, his background as a ~~long-term~~long- term chief executive officer and his business expertise gained through his experience at a private equity firm with a diversified portfolio of operating companies.

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PETER PACE, ~~68:~~70: General, U.S. Marine Corps (Retired). From 2005 to 2007, Chairman of the Joint Chiefs of Staff.

2012
~~Current~~Other current public company ~~directorships~~directorships:~~: Pike Electric Corp.,~~ Qualys, Inc. ~~and Textura Corporation.~~

Other public company directorships held in the past five years: Laserlock Technologies, Inc., Pike Electric Corp., Textura Corporation and Wi2Wi Corporation.

Director Qualifications: The Board of Directors concluded that General Pace should serve as a director of the Company based on his leadership and management skills and experience from over 40 years of service with the United States Marine Corps, culminating in his appointment as the 16^th Chairman of the Joint Chiefs of Staff (the most senior position in the United States Armed Forces), where he served from 2005 to 2007 as the principal military adviser to the President, the Secretary of Defense, the National Security Council and the Homeland Security ~~Council.~~Council, his understanding of the government and defense markets, and his current and prior service as a director of other public companies.

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Director
Since
TIMOTHY J. ROMENESKO, ~~57:~~59: Since August 2016, Vice Chairman and Chief Financial Officer of AAR CORP. From August 2015 to August 2016, Vice Chairman of AAR CORP. and Chief Operating Officer of the Expeditionary Services business group. From March 2015 to August 2015, President of AAR CORP. and Chief Operating Officer of the Expeditionary Services business group. From 2007 to March 2015, President and Chief Operating Officer of AAR CORP. From 1994 to 2007, Vice President, Chief Financial Officer and Treasurer of AAR CORP. ~~From 1991 to 1994, Corporate Controller of AAR CORP.~~

2007
Director Qualifications: The Board of Directors concluded that Mr. Romenesko should serve as a director of the Company based on his ~~current~~ leadership ~~position as President and Chief Operating Officer of~~positions with the Company, his experience in various accounting and financial capacities during his ~~33-year~~34-year career with the Company, and his knowledge of the ~~Company's~~ commercial aviation and government and defense ~~services~~ markets.

RONALD B. WOODARD, ~~71:~~73: Since ~~2003,~~2014, retired Chairman of MagnaDrive, Inc. (an industrial torque transfer equipment company, which he co-founded following his retirement from The Boeing Company after 32 ~~years)~~years of service). From 1995 to 1998, President of the Boeing Commercial Airplane Group. From 1991 to 1994, Vice President and General Manager of the Renton Division of Boeing Commercial Aircraft. From 1987 to 1991, President of ~~deHavilland~~de Havilland Aircraft. Prior to that, Vice President and General Manager of the Materiel Division of Boeing Commercial Aircraft, and various other management positions.

2004
~~Current public company directorship:~~ ~~Outerwall, Inc.~~

Other public company directorships held in the past five years: ~~Coinstar,~~Continental Airlines, Inc. and ~~Continental Airlines,~~Outerwall, Inc. (formerly Coinstar, Inc.).

Director Qualifications: The Board of Directors concluded that Mr. Woodard should serve as a director of the Company based on his management expertise and manufacturing experience as a senior officer of The Boeing Company, his knowledge of the commercial aviation industry and his experience as a director of other public companies, including Continental Airlines, Inc.

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~~OUR CONTINUING DIRECTORS~~
Class I Directors whose terms expire at the ~~2015~~2018 annual meeting

ANTHONY K. ANDERSON, ~~58:~~60: Since 2012, an independent business consultant. From 2006 to April 2012, Vice Chairperson and Managing Partner of Midwest Area at Ernst & Young LLP (a global accounting firm). Prior thereto, served in various management positions during a 35-year career with Ernst & Young LLP.

2012
~~Current~~Other current public company directorships: Avery Dennison Corp., and Exelon Corp. ~~and~~

Other public company directorships held in the past five years: First American Financial Corporation.

Director Qualifications: The Board of Directors concluded that Mr. Anderson should serve as a director of the Company based on his 35 years working with a global accounting firm, his accounting and financial knowledge, his leadership in developing management talent programs, his service as a director of other public companies, and his professional, civic and charitable service, including as a director of numerous not-for-profit organizations.

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Director
Since
MICHAEL R. BOYCE, ~~66: Since 2005,~~68: Chairman ~~and Chief Executive Officer~~of the Board of PQ Corporation (a specialty chemicals and catalyst company)~~. Since 1998,~~ and Chairman and Chief Executive Officer of The Peak Group (an operating and acquisition company). From 2005 to May 2015, Chairman and Chief Executive Officer of PQ Corporation. From 1990 to 1998, President and Chief Operating Officer of Harris Chemical Group, Inc. (a chemicals company).

2005
~~Current~~Other current public company ~~directorship:~~directorships: Stepan Company.

Director Qualifications: The Board of Directors concluded that Mr. Boyce should serve as a director of the Company based on his experience as Chairman and Chief Executive Officer of two leading global organizations, his insight into global manufacturing, supply and distribution practices and his international business ~~development skills.~~experience.

DAVID P. STORCH, ~~61:~~63: Since August 2015 and from 2005 to 2007, Chairman of the Board, President and Chief Executive Officer of AAR CORP. From ~~2005~~2007 to ~~2007,~~August 2015, Chairman of the Board ~~President~~ and Chief Executive Officer of AAR CORP. From 1996 to 2005, President and Chief Executive Officer of AAR CORP. From 1989 to 1996, President and Chief Operating Officer of AAR CORP. ~~From 1988 to 1989, Vice President of AAR CORP.~~

1989
~~Current~~Other current public company directorships: KapStone Paper and Packaging Corp. and Kemper Corporation.

Director Qualifications: The Board of Directors concluded that Mr. Storch should serve as a director of the Company based on his current position as Chairman of the Board, President and Chief Executive Officer of the Company, his leadership and management skills, his understanding of the Company's businesses gained during his ~~35-year~~37-year career with the Company, his knowledge of the commercial aviation and government and defense services ~~markets,~~industries, and his leadership role in transforming the Company into a leading international provider of ~~products and~~aviation services to the commercial aviation and government and defense ~~services markets, with front-end manufacturing and after-market support to domestic and international customers.~~markets.

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~~Class II Directors whose terms expire at the 2016 annual meeting~~

~~NORMAN R. BOBINS~~JENNIFER L. VOGEL,~~, 71:~~ 54: Since ~~2008, Non-Executive Chairman~~2012, co-founder and owner of ~~The PrivateBank~~InVista Advisors, an advisory firm focused on legal department effectiveness, leadership, compliance, crisis readiness and ~~Trust Company - Chicago (a financial services company)~~risk management. Prior thereto, from 2003 to 2010, Senior Vice President, General Counsel, Secretary and Chief ~~Executive~~Compliance Officer of Norman Bobins Consulting, LLC. From May 2007 until October 2007, Chairman of the Board of LaSalle Bank Corporation. From 2002 to 2007, President and Chief Executive Officer of LaSalle Bank Corporation. From 2006 to 2007, President and Chief Executive Officer of ABN AMRO North America. From 2002 to 2007, Senior Executive Vice President at ABN AMRO Bank N.V., the Dutch parent of LaSalle Bank Corporation.Continental Airlines.

~~2007~~2016
~~Current~~Other current public company directorships: ~~AGL Resources Inc., Aviv REIT, Inc., PrivateBancorp,~~American Science and Engineering, Inc. and ~~SIMS Metal Management Limited.~~Virgin America, Inc.

Other public company directorships held in the past five years: ~~Global Hyatt Corp. and Nicor Inc.~~Clearwire Corporation.

Director Qualifications: The Board of Directors concluded that ~~Mr. Bobins~~Ms. Vogel should serve as a director of the Company based on ~~his 44~~her experience as a highly successful corporate executive with over 25 years of ~~banking~~leadership experience ~~his financial and accounting knowledge, his service as a director of other public companies, and his civic involvement as a director of various not-for-profit organizations.~~

~~RONALD R. FOGLEMAN~~, 72: Since 1997, President and Chief Operating Officer of B Bar J Cattle & Consulting Company (a consulting company). From 1994 to 1997, General, Chief of Staff of the United States Air Force, Washington, D.C.

~~2001~~
~~Current public company directorship:~~ ~~Alliant Techsystems, Inc.~~

~~Director Qualifications:~~ The Board of Directors concluded that General Fogleman should serve as a director of the Company based on his leadership skills and record of accomplishment during a 34-year career with the United States Air Force, his business experience and business relationships gained through his senior management positions at two consulting organizations, his understanding of the government defense and services markets and his service as a director of other public companies. General Fogleman was elected as the Company's Lead Director in April 2013.

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~~JAMES E. GOODWIN~~, 70: Since 2009, Chairman of Federal Signal Corporation (a safety and security products manufacturer). From 2007 to 2008, Interim President and Chief Executive Officer of Federal Signal Corporation. From 2001 to 2007, an independent business consultant. From 1999 to 2001, Chairman and Chief Executive Officer of UAL, Inc. and United Airlines, Inc., from which he retired after 34 years. From 1998 to 1999, President and Chief Operating Officer of United Airlines, Inc. From 1992 to 1998, Senior Vice President of United Airlines, Inc.
~~2002~~
~~Current public company directorships:~~ ~~Federal Signal Corporation and John Bean Technologies Corporation.~~

~~Other public company directorship held~~ in the ~~past five years:~~ ~~First Chicago Bancorp.~~

~~Director Qualifications:~~ ~~The Board of Directors concluded that Mr. Goodwin should serve as a director of the Company based on his~~ airline ~~industry experience~~ and ~~expertise,~~energy industries, including ~~his~~her leadership positions ~~at UAL, Inc.~~with Continental Airlines and ~~United Airlines, Inc., his management~~on the board of Virgin America, her legal and board governance expertise, her experience in regulatory issues, mergers and ~~his financial expertise, as well as his global consulting~~acquisitions, ethics and compliance matters and her experience ~~and his service~~ as a director of other public companies.

~~MARC J. WALFISH~~, 62: Since 2003, Founding Partner of Merit Capital Partners (a mezzanine investor company). From 1991 to 2003, partner at William Blair Mezzanine Capital Partners. From 1978 to 1991, various positions at Prudential Capital Corporation, most recently as Senior Vice President.

~~2003~~
~~Director Qualifications:~~ The Board of Directors concluded that Mr. Walfish should serve as a director of the Company based on his experience in the finance industry, including as a founding partner of Merit Capital Partners, a mezzanine investor company, his knowledge of the capital markets and his expertise in corporate finance, strategic planning and risk management.

Our Board of Directors unanimously recommends that you vote "FOR" each director nominee.

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~~PROPOSAL 2 — ADVISORY RESOLUTION TO~~
~~APPROVE OUR FISCAL 2014 EXECUTIVE COMPENSATION~~
PROPOSAL 2 — ADVISORY RESOLUTION TO APPROVE OUR FISCAL 2016 EXECUTIVE COMPENSATION
We are asking our stockholders to approve the following advisory resolution ~~(commonly~~— commonly known as a say-on-pay ~~proposal)~~proposal — on the compensation awarded to our named executive officers for Fiscal ~~2014~~2016 as disclosed in this proxy statement:
"RESOLVED, that the stockholders of the Company approve, on an advisory basis, the compensation of the named executive officers for Fiscal ~~2014~~2016 as reported in this proxy statement pursuant to Item 402 of Regulation S-K under the Securities Exchange Act of 1934, including the Compensation Discussion and Analysis, compensation tables and narrative discussion."
We ~~encourage~~hold an annual vote on say-on-pay because we value the opinions of our stockholders on our executive compensation program. Our say-on-pay votes for the last two fiscal years — Fiscal 2015: 73% and Fiscal 2014: 96% – demonstrate that our stockholders have supported our Compensation Committee's decisions on executive compensation. Each year (but particularly in Fiscal 2016 after the lower say-on-pay vote in Fiscal 2015), our Compensation Committee takes a fresh look at the Company's executive compensation program, with an eye toward determining whether design or implementation modifications are warranted as a result of the say-on-pay vote, stockholder feedback, market practices, peer group changes, the financial performance of the Company and other relevant factors.
In Fiscal 2016, our Compensation Committee worked with senior management and Mercer (US) Inc. ("Mercer"), the Compensation Committee's independent compensation consultant, on the design of an executive compensation program that properly incentivizes the Company's executive officers in line with peer group companies and the best interests of the Company and its stockholders. The Compensation Committee's analysis embraced the following principles:
An appropriate mix of base salary, annual cash bonus opportunities and long-term stock-based compensation;
A greater use of performance-based compensation over fixed compensation;
A reliance on stock-based compensation as a significant portion of performance-based compensation;
The use of performance metrics that promote the achievement of short-term and long-term strategic and operational goals; and
Executive pay practices tied to ~~read~~robust risk and control features.
Please see the "Compensation Discussion and Analysis" ~~on pages 27-50 and the "Summary Compensation Table" and other compensation tables and related narrative starting on page 52~~section of this proxy ~~statement. These sections describe our~~statement on pages 30-46 for a detailed description of the Fiscal 2016 executive compensation ~~policies~~program approved by the Compensation Committee of the Board of Directors.
Fiscal 2016:    Performance-Based Compensation Versus Fixed Compensation
The table below shows the breakdown of performance-based compensation and ~~practices and provide detailed information about the~~fixed compensation ~~of our named executive officers.~~
~~As described under "Stockholder Outreach Program" in the "2014 Proxy Statement Summary" and "Compensation Discussion and Analysis," the Company conducted a stockholder outreach program in Fiscal 2014~~paid to ~~understand, consider and respond to stockholder concerns. With respect to executive compensation matters, the Company's key actions in Fiscal 2014 included the following:~~
•
~~Our new employment agreement with our Chairman and Chief Executive Officer~~ David P. Storch, ~~eliminated tax gross-ups, "single-trigger" vesting of stock awards, Mr. Storch's ability to terminate employment for any reason during the 25~~^th ~~month after a change in control and still receive severance, and other so-called "problematic pay practices" (as determined by ISS);~~

•
~~The award agreements under~~ the Company's ~~2013 stock plan also eliminated automatic "single-trigger" vesting of stock awards and imposed "double-trigger" vesting requiring a change in control and a termination of employment;~~

•
The Company reduced by 30% the performance-based cash bonuses determined under its Fiscal 2014 short-term incentive plan for the five named executive officers whose bonuses were based on Company-wide performance;

•
~~The Company reduced by 50% the Fiscal 2014 non-qualified deferred compensation contributions made to three named executive officers, including the Chairman and~~ Chief Executive Officer, and the ~~President and Chief Operating Officer (two~~ other named executive officers ~~received the minimum contribution and the sixth named executive officer does not participate in the plan); and~~

•
~~The Company also made further substantive changes to its~~for Fiscal 2015 executive compensation program, as described in the "Compensation Discussion and Analysis," including a significant reduction in the stock awards under the Fiscal 2015 long-term incentive plan and the introduction of a return on invested capital performance goal for performance-based restricted stock granted under its Fiscal 2015 long-term incentive plan.
2016 (other than John C. Fortson,

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who resigned as Vice President and Chief Financial Officer on September 28, 2015 and forfeited his performance-based compensation as a result):
NAMED EXECUTIVE OFFICER
PERFORMANCE-BASED
COMPENSATION FIXED COMPENSATION

Annual
Performance-Based
Cash Bonus       Performance-Based
Restricted Stock    Stock Options Base Salary Discretionary
Cash Bonus

David P. Storch
$1,014,800 $1,150,500 $1,150,500 $755,250 —

Timothy J. Romenesko
— $375,000 $375,000 $456,250 $507,400

John M. Holmes
$517,949 $375,000 $375,000 $456,250 $117,551

Michael J. Sharp
$370,462 $368,750 $131,250 $382,418 —

Robert J. Regan
$361,200 $312,000 $312,000 $390,396 —

Based on the above, the percentage of performance-based compensation versus the percentage of fixed compensation for each named executive officer for Fiscal 2016 is set forth below:
NAMED EXECUTIVE OFFICER TOTAL PERFORMANCE-BASED COMPENSATION TOTAL FIXED COMPENSATION

David P. Storch 81.4% 18.6%

Timothy J. Romenesko 43.8% 56.2%

John M. Holmes 68.8% 31.2%

Michael J. Sharp 69.5% 30.5%

Robert J. Regan 71.6% 28.4%

Our ~~Board of Directors recommends a vote"FOR"~~ ~~the Company's Fiscal 2014 say-on-pay proposal. The Board~~Compensation Committee believes that the executive compensation paid to ~~the~~our named executive officers in Fiscal 2016, in form and amount, was fair, appropriate and ~~appropriate~~ in ~~Fiscal 2014 and that~~the best interests of the Company ~~has responded appropriately to stockholder concerns in revising~~and its ~~executive compensation program.~~stockholders.
Our ~~stockholders, upon the recommendation of our~~ Board of Directors ~~previously voted~~unanimously recommends that ~~our say-on-pay proposal should be considered by stockholders at each annual meeting given the importance of the Company's executive compensation program. While the say-on-pay~~you vote is not binding on the Board of Directors, the Board reviews and considers the results of the say-on-pay vote (as it did in response to the Fiscal 2013 say-on-pay vote), the opinions of our stockholders and other relevant factors in making future decisions regarding the Company's executive compensation program. Our stockholders will vote next on the frequency of our say-on-pay proposal (i.e., whether to hold a say-on-pay vote annually, every two years or every three years) at our 2017 annual meeting of stockholders.
~~OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE~~"FOR
~~THE ADVISORY RESOLUTION TO APPROVE OUR FISCAL 2014 EXECUTIVE~~
~~COMPENSATION.~~" the advisory resolution to approve our Fiscal 2016 executive compensation.

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PROPOSAL 3 — APPROVAL OF AMENDMENTS TO THE AAR CORP. 2013 STOCK PLAN
The Company maintains the AAR CORP. 2013 Stock Plan (the "Plan"). The Plan is the Company's only active stock-based compensation plan, and it provides for discretionary grants of stock options, stock awards, stock unit awards and stock appreciation rights (SARs) to key employees and non-employee directors.
The purpose of the Plan is to encourage key employees and non-employee directors to increase their investment in the Company, to provide additional opportunities to share in the success of the Company and to align their interests with the interests of the Company's stockholders. These opportunities are intended to foster in key employees and non-employee directors a strong incentive to put forth maximum effort for the continued success and growth of the Company, to aid in retaining individuals who put forth such efforts and to assist in attracting the best available individuals in the future.
Requests for Approval
We are asking our stockholders to:
Approve an additional 2,850,000 shares of common stock for issuance under the Plan;
Re-approve the material terms of the Plan's performance goals to ensure continued deductibility under Section 162(m) of the Internal Revenue Code ("Section 162(m)"); and
Approve limitations on the awards granted, and the total compensation payable, to non-employee directors.
Each of these three requests (collectively referred to as "amendments" to the Plan) are described in detail below:
Share Increase.    The Board of Directors of the Company has approved an amendment to the Plan to increase the number of shares available under the Plan by 2,850,000, from 2,500,000 shares to 5,350,000 shares. This increase is subject to approval by the Company's stockholders. Fiscal 2017 stock grants made in July 2016 used up all available shares under the Plan. Although these stock option grants exceeded the remaining number of available shares by 184,784 shares, the stock options are not currently exercisable, and the shares subject to the stock options will not be issued until exercise. Pending exercise, the available number of shares will be increased by any add-backs of cancelled shares and additional shares approved by stockholders.
The purpose of this amendment is to ensure that the Company has the continued ability to make stock-based awards under the Plan. The Company believes that its future success depends in large part on its ability to attract, retain and motivate high-quality employees and non-employee directors, and that its ability to provide equity-based and performance-based awards is critical to achieving this success. The Company believes that it would be at a severe competitive disadvantage if it could not use these types of awards to recruit and compensate its employees and non-employee directors.
The Company views its use of stock-based awards as an essential part of the Company's compensation program and as an important element in achieving the program's goals. These awards help align pay with performance and allow the Company to better link the financial interests of employees and non-employee directors with stockholders. The Company also believes that equity compensation motivates employees and non-employee directors to create stockholder value because the value they realize from equity compensation is based on the performance of the Company's common stock.
Plan Restrictions. The Plan contains certain restrictions that further the Plan's objectives and reflect sound corporate governance principles that protect the interests of stockholders:
Shares that are used to pay the stock option exercise price or required tax withholding on any award may not be used for future grants under the Plan.
Shares repurchased by the Company with proceeds received from a stock option exercise may not be used for future grants under the Plan.
Stock awards under the Plan must have a vesting period of at least one year; provided, however, that up to 5% of the shares available under the Plan may be granted without regard to such minimum vesting requirement.

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Dividends on performance-based stock awards and dividend equivalents on performance-based stock unit awards are paid only to the extent the performance goals are met.
Stock options and SARs maynot be granted with an exercise price less than the fair market value of the underlying common stock on the date of grant, and the term is limited to ten years from the date of grant.
Repricing of stock options or SARs without stockholder approval is prohibited.
Awards do not automatically vest upon a change in control of the Company unless the Compensation Committee so provides in the award agreements (the award agreements under the Plan currently require a "double trigger" for vesting upon a change in control: the change in controland termination of employment).
The award agreements under the Plan provide that the Company has the ability to "claw back" stock compensation in the event of a restatement of the Company's financial statements.
The Company, through its Compensation Committee (the "Committee"), believes that it has prudently managed awards under the Plan, giving proper consideration to the dilutive impact of stock awards on stockholder equity. The Company expects its practice of repurchasing shares of its common stock will mitigate, at least in part, the impact of any dilution. In Fiscal 2016, the Company repurchased 814,078 shares at an average price of $22.91. The Company further expects share usage under the Plan to be generally consistent with share usage under the Plan to date, with the Plan shares likely to be awarded over the next two to three years at which time the Company once again would seek stockholder approval for the award of any additional shares under the Plan.
Historical Stock Option and Stock Award Information. Set forth below is certain historical information as of August 1, 2016 about stock options and stock awards granted under the Plan and its predecessor plan (the AAR CORP. Amended and Restated Stock Benefit Plan):
The number of granted but unexercised stock options: 2,749,488
The weighted average exercise price of the granted but unexercised stock options: $22.69
The weighted average remaining term of the granted but unexercised stock options: 6.7 years
The number of granted but unvested full share awards (stock awards and stock units payable in stock): 674,830
The number of shares available for future grants under the Plan and the predecessor plan: 0
Material Terms of the Plan's Performance Goals.    Section 162(m) generally precludes a publicly traded company from taking a tax deduction for compensation in excess of $1 million paid to certain executives. These executives are the company's chief executive officer and the three other highest paid executives, other than the chief financial officer, who are the named executive officers listed in the Summary Compensation Table of a company's annual proxy statement. This restriction is subject to an exception for "performance-based" compensation that meets certain requirements, including a requirement that the "material terms of the performance goals" applicable to these named executive officers must be disclosed to and approved by stockholders before any compensation is paid to them. Stockholders approved the Plan, including the material terms of the performance goals, at the 2013 annual meeting. Section 162(m) requires that if the targets under the performance goals can be changed, the material terms of the performance goals must be re-approved by stockholders at least every five years in order to retain qualification under Section 162(m).
Re-approval of the material terms of the performance goals will provide the Compensation Committee with the continued ability to make awards that qualify as "performance-based compensation" under Section 162(m). The material terms of the performance goals for purposes of Section 162(m) are:
The individuals eligible to receive compensation;
A description of the business criteria on which the performance goals are based; and
The maximum amount of compensation that can be paid to an individual under the performance goals.
Each of these material terms is described below.

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Individuals Eligible to Receive Compensation. The Committee administers the Plan. It has the authority to determine the key employees and non-employee directors to whom awards are to be granted under the Plan. All employees of the Company designated by the Committee and all non-employee directors of the Company are eligible to receive awards under the Plan.
Description of the Business Criteria on Which the Performance Goals Are Based. The Plan already contains a comprehensive list of business criteria that fit within the "performance-based compensation" exception under Section 162(m) from which the Compensation Committee may select a particular year's performance goals. The Board of Directors has approved an amendment to the Plan that specifically adds "working capital turns" to the listed business criteria.
The following is the list of business criteria, as may be selected and defined by the Committee: earnings per share or earnings per share growth; earnings before interest and taxes, or earnings before interest, taxes, depreciation and/or amortization; net income; share price; total stockholder return, return on assets; net asset turnover; inventory turnover; return on capital or return on invested capital; return on equity; cash flow; net or pre-tax income; profit margin; working capital turns; market share; expense management; revenue; revenue growth; stockholder equity; leverage ratio; investment rating; and debt coverage. Performance goals may be absolute in their terms or measured against or in relationship to the performance of other companies or indices selected by the Committee, and may be particular to one or more lines of business or subsidiaries or may be based on the performance of the Company and its subsidiaries as a whole. In addition, the Committee may adjust performance goals for any events that occur during a performance period, including significant acquisitions or dispositions of businesses or assets by the Company; litigation, judgments or settlements; changes in tax laws, accounting principles, or other laws or provisions affecting reported results; any reorganization and restructuring programs; extraordinary items; significant, non-recurring charges or credits; and fluctuations in foreign exchange rates.
Maximum Amount of Compensation. Subject to certain adjustments, (i) the maximum number of shares as to which a key employee may receive stock options and SARs in any calendar year is 800,000, and (ii) the maximum number of shares issuable as stock awards and stock unit awards intended to qualify as "performance-based" under Section 162(m) of the Internal Revenue Code to any single key employee in any calendar year is 300,000 (or in the event an award is settled in cash, an amount equal to the closing sales price of such shares (the "fair market value") on the date on which the award is settled).
Limitation on Awards Granted, and Total Compensation Payable, to Non-Employee Directors.    The Board of Directors of the Company approved an amendment to the Plan that provides that the fair market value of shares subject to awards granted to any non-employee director in any calendar year, together with cash compensation paid to such non-employee director in such calendar year, shall not exceed $500,000. The purpose of this amendment is to protect against a conflict of interest, given that the Board of Directors is responsible for fixing its own compensation.
Description of the Plan
The following is a summary of the Plan. It is qualified by reference to the full text of the Plan, which is attached asExhibit A to this proxy statement (with the proposed amendments to the Plan highlighted). Stockholders are encouraged to review the Plan, as proposed to be amended, carefully.
Administration.    The Plan is administered by the Committee, which is comprised of directors who satisfy the "non-employee director" definition under Rule 16b-3 of the Securities Exchange Act of 1934 and the "outside director" definition under Section 162(m) of the Internal Revenue Code. The Committee has full authority to select the individuals who will receive awards under the Plan, determine the form and amount of each of the awards to be granted and establish the terms and conditions of awards.
As permitted by the Plan, the Committee has delegated to the Chief Executive Officer (acting in his capacity as a director of the Company) authority to grant awards to key employees, other than himself, who are not officers subject to Section 16 of the Securities Exchange Act or who are or may become subject to Section 162(m) of the Internal Revenue Code. Such awards will be consistent with the terms and conditions set forth in the forms of award agreement approved by the Committee.
Number of Shares of Common Stock.    The number of shares of the Company's common stock that may be issued under the Plan is 2,500,000 shares (5,350,000 if the amendment is approved). Stock options and SARs reduce the number of available shares by one share for each share subject to the option or SAR, and stock awards and stock units settled in shares reduce the

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number of available shares by two shares for every one share delivered. Awards that can only be settled in cash do not reduce the number of shares available for issuance.
Shares issuable under the Plan may be authorized but unissued shares or treasury shares. If there is a lapse, forfeiture, expiration, termination or cancellation of any award for any reason, the shares subject to the award shall again be available for issuance under the Plan and added back in the same multiple as when they were awarded. By contrast, any shares subject to an award that are delivered to the Company by a participant, or withheld by the Company on behalf of a participant, as payment for an award or payment of withholding taxes due in connection with an award, or repurchased by the Company with proceeds received from a stock option exercise shallnot again be available for issuance, and all such shares shall count toward the number of shares issued under the Plan. The number of shares of common stock issuable under the Plan is subject to adjustment in the event of any reorganization, recapitalization, stock split, stock dividend or other distribution, merger, consolidation, split-up, spin-off, combination, subdivision, consolidation or exchange of shares, any change in the capital structure of the Company or any similar corporate transaction. In each case, the Committee has the discretion to make adjustments it deems necessary to preserve the intended benefits under the Plan.
Eligibility.    All employees of the Company designated as key employees for purposes of the Plan and all non-employee directors of the Company are eligible to receive awards under the Plan. As of August 31, 2016, approximately 100 key employees and all non-employee directors were eligible to participate in the Plan.
Awards to Participants.    The Plan provides for discretionary grants of stock options, stock awards, stock unit awards and SARs to participants. Each award made under the Plan will be evidenced by a written award agreement specifying the terms and conditions of the award as determined by the Committee in its sole discretion, consistent with the terms of the Plan.
Stock Options. The Committee may grant non-qualified stock options or incentive stock options to key employees and non-qualified stock options to non-employee directors. Each stock option represents the participant's right to purchase a share of common stock of the Company by paying the exercise price of the option. The Committee has the discretion to set the terms and conditions applicable to the options, including the number of shares subject to the option and the vesting schedule; provided that (i) the exercise price of each stock option will not be less than the closing sales price of the Company's common stock on the date on which the option is granted ("fair market value"), (ii) each option will expire ten years from the date of grant, and (iii) no option can be amended such that it would be considered a "repricing" without stockholder approval. It is intended that stock options qualify as "performance-based compensation" under Section 162(m) of the Internal Revenue Code and thus be fully deductible by the Company for federal income tax purposes, to the extent permitted by law.
In addition, an incentive stock option is subject to the following rules: (i) the aggregate fair market value (determined at the time the option is granted) of the shares of common stock with respect to which an incentive stock option is exercisable for the first time by a key employee during any calendar year (under all incentive stock option plans of the Company and its subsidiaries) cannot exceed $100,000, and if this limitation is exceeded, so much of the incentive stock option that does not exceed the $100,000 limit will be an incentive stock option and the remainder will be a non-qualified stock option; (ii) if an incentive stock option is granted to a key employee who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, the exercise price of the incentive stock option will be 110% of the closing price of the common stock on the date of grant and the incentive stock option will expire no later than five years from the date of grant; and (iii) no incentive stock option may be granted after 10 years from the date the Plan is adopted.
Stock Awards. The Committee may grant stock awards to participants. Stock awards consist of shares of common stock granted without any consideration from the participant. The number of shares awarded to each participant, and the restrictions, terms and conditions of the award, will be at the discretion of the Committee. Subject to the restrictions, a participant will be a stockholder with respect to the shares awarded to him or her and will have the rights of a stockholder with respect to the shares, including the right to vote the shares and receive dividends on the shares; provided that dividends otherwise payable on any performance-based stock award will be held by the Company and will be paid only when and to the extent the restrictions on such stock award lapse, and the Committee in its discretion can provide that the Company accumulate and hold the dividends on any other stock award until the restrictions on the shares lapse.
Stock Units. The Committee may grant stock unit awards to participants. Each stock unit entitles the participant to receive, on a specified date or event set forth in the award agreement, one share of common stock of the Company or cash equal to the fair market value of one share on such date or event, as provided in the award agreement. The number of stock units awarded

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to each participant, and the terms and conditions of the award, will be at the discretion of the Committee. A participant will not be a stockholder with respect to the stock units awarded to him prior to the date they are settled in shares of common stock. The Committee may provide that the participant will be paid an amount equal to the dividends that would have been paid had the stock units been actual shares; provided that dividend equivalents payable on performance-based stock units will be held by the Company and paid only when and to the extent the restrictions lapse, and the Committee in its discretion can provide that the Company accumulate and hold such amounts payable on any other stock units until the restrictions on the stock units lapse.
Stock Appreciation Rights. SARs may be awarded to key employees under the Plan. Each SAR entitles the key employee to receive the difference between the fair market value of the common stock on the date of exercise of the right and the exercise price thereof, multiplied by the number of shares with respect to which the right is being exercised. Upon exercise, the SAR will be paid in cash or in shares of common stock (based upon the fair market value on the date of exercise) or a combination thereof, as set forth in the award agreement. The Committee has the discretion to set the terms and conditions applicable to SARs, provided that (i) the exercise price of each SAR will not be less than the fair market value of the shares on the date the SAR is granted, (ii) each SAR will expire ten years from the date of grant, and (iii) no SAR can be amended such that it would be considered a "repricing" without stockholder approval. It is intended that SARs qualify as "performance-based compensation" under Section 162(m) of the Internal Revenue Code and thus be fully deductible by the Company for federal income tax purposes, to the extent permitted by law.
Performance-Based Awards. The Committee has the discretion to establish restrictions on any stock awards and stock unit awards to qualify the awards as "performance-based compensation" under Section 162(m) of the Internal Revenue Code so that they are fully deductible by the Company for federal income tax purposes. In such case, the Committee may establish performance goals for certain performance periods and targets for achievement of the performance goals, and the restrictions on the award will lapse if the performance goals and targets are achieved for the designated performance period. The performance goals will be based on one or more of the following criteria as described above.
Provisions Relating to a Change in Control of the Company.    The Plan gives the Committee the discretion to determine how Plan awards are treated upon a change in control. The current award agreements under the Plan, as approved by the Committee, contain a "double trigger" provision, which provides that upon a change in controland a subsequent termination of employment, outstanding awards become immediately vested and exercisable, all restrictions on awards lapse and any performance-based goals are deemed satisfied at the target level.
Amendment of Award Agreements; Amendment and Termination of the Plan; Term of the Plan.    The Committee may amend any award agreement at any time, provided that no amendment may adversely affect the right of any participant under any agreement in a material way without the written consent of the participant, unless such amendment is required by applicable law, regulation or stock exchange rule.
The Board may terminate, suspend or amend the Plan, in whole or in part, from time to time, without the approval of the stockholders, unless such approval is required by applicable law, regulation or stock exchange rule, and provided that no amendment may adversely affect the right of any participant under any outstanding award in a material way without the written consent of the participant, unless such amendment is required by applicable law, regulation or stock exchange rule.
Notwithstanding the foregoing, neither the Plan nor any outstanding award agreement can be amended in a way that results in the repricing of a stock option or SAR without prior stockholder approval. Repricing is broadly defined to include reducing the exercise price of a stock option or SAR or cancelling a stock option or SAR in exchange for cash, other stock options or SARs with a lower exercise price or other stock awards. An equitable adjustment to the awards to reflect changes in the capital structure of the Company or similar events does not constitute repricing for purposes of this prohibition.
No awards may be granted under the Plan on or after October 9, 2023.
Awards Granted Under the Plan
It is not possible at this time to determine all of the specific awards that will be made in future years under the Plan.

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As of August 1, 2016, a total of 1,166,767 stock options with exercise prices ranging from $24.00 to 26.62 have been granted under the Plan since it was first adopted. These grants were made to the named executive officers and other persons and groups as follows: David P. Storch: 378,810; Timothy J. Romenesko: 125,134; John M. Holmes: 125,134; Michael J. Sharp 17,547; Robert J. Regan: 101,711; John C. Fortson: 45,455; all current executive officers as a group: 793,791; all non-employee directors as a group: 0; each nominee for election as a director: 0; each associate of any executive officer, non-employee director or nominee: 0; each other person with 5% of such awarded shares: 0; and all non-executive officer employees as a group: 372,976. On August 23, 2016, the last reported sales price for the common stock on the New York Stock Exchange was $24.65 per share.
Summary of Federal Income Tax Consequences
The following is a summary of the federal income tax consequences of the Plan. It is based on the federal tax laws and regulations currently in effect and existing administrative rulings of the Internal Revenue Service. Participants may also be subject to state and local taxes in connection with the grant of awards under the Plan. Participants should consult with their individual tax advisers to determine the tax consequences associated with awards granted under the Plan. This information may not be applicable to employees of foreign subsidiaries or to employees who are not residents of the United States.
Non-Qualified Stock Options.    A participant will not recognize any income at the time the participant is granted a non-qualified stock option. On the date the participant exercises the non-qualified stock option, the participant will recognize ordinary income in an amount equal to the excess of the fair market value of the shares on the date of exercise over the exercise price. The participant will be responsible for remitting to the Company the withholding tax obligation that arises at the time the option is exercised. The Company generally will receive a tax deduction for the same amount of ordinary income recognized by the participant. When the participant sells these shares, any gain or loss recognized by the participant is treated as either short-term or long-term capital gain or loss depending on whether the participant has held the shares more than one year.
Incentive Stock Options.    A participant will not recognize any income at the time the participant is granted an incentive stock option. If the participant is issued shares pursuant to the exercise of an incentive stock option, and if the participant does not make a disqualifying disposition of the shares within one year after the date of exercise or within two years after the date of grant, the participant will not recognize any income, for federal income tax purposes, at the time of the exercise. When the participant sells the shares issued pursuant to the incentive stock option, the participant will be taxed, for federal income tax purposes, as a long-term capital gain on any amount recognized by the participant in excess of the exercise price, and any loss sustained by the participant will be a long-term capital loss. No deduction will be allowed to the Company for federal income tax purposes. If, however, the participant sells the shares before the expiration of the holding periods, the participant will recognize ordinary income on the difference between the exercise price and the fair market value at exercise, and the Company generally will receive a tax deduction in the same amount. Upon exercise of an incentive stock option, the excess of the fair market value over the exercise price is an item of tax preference to the participant for purposes of determining the alternative minimum tax.
In order to qualify as an incentive stock option, the option must be exercised within three months after the participant's termination of employment for any reason other than death or disability and within one year after termination of the participant's employment due to disability. If the option is not exercised within this time period, it will be treated as a non-qualified stock option and taxed accordingly.
Stock Awards and Stock Unit Awards.    If the participant receives a stock award, the participant generally will recognize ordinary income upon becoming entitled to transfer the shares at the end of any restriction period without forfeiture. A participant generally will recognize ordinary income when he receives shares or cash pursuant to the settlement of stock units, provided that if the shares are subject to any further restrictions on transfer, the participant will recognize ordinary income upon becoming entitled to transfer the shares at the end of the restriction period without forfeiture. The amount of income the participant recognizes will be equal to the fair market value of the shares on the day the restrictions lapse, or the amount of cash received. This amount will also be the participant's tax basis for the shares. The participant will be responsible for remitting to the Company the withholding tax obligation that arises at the time the ordinary income is recognized. In addition, the holding period begins on the day the restrictions lapse, or the date the shares are received if not subject to any restrictions, for purposes of determining whether the participant has long-term or short-term capital gain or loss on a subsequent sale of

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the shares. The Company generally will be entitled to a deduction with respect to the ordinary income recognized by the participant.
If a participant who receives a stock award subject to restrictions makes an election under Section 83(b) of the Internal Revenue Code within 30 days after the date of the grant, the participant will have ordinary income equal to the fair market value on the date of grant, and the participant will recognize no additional income until the participant subsequently sells the shares. The participant will be responsible for remitting to the Company the withholding tax obligation that arises at the time the ordinary income is recognized. When the participant sells the shares, the tax basis will be equal to the fair market value on the date of grant, and the holding period for capital gains purposes begins on the date of the grant. If the participant forfeits the shares subject to the Section 83(b) election, the participant will not be entitled to any deduction, refund, or loss for tax purposes (other than a capital loss with respect to the amount of ordinary income previously recognized by the participant), and the Company will have to include the amount that it previously deducted from its gross income in the taxable year of the forfeiture.
Stock Appreciation Rights.    A participant will not recognize any income at the time of the grant of an SAR. Upon exercise of the SAR, the participant will recognize ordinary income equal to the amount received upon exercise. The participant will be responsible for remitting to the Company the withholding tax obligation that arises at the time the ordinary income is recognized. The Company generally will be entitled to a deduction with respect to the ordinary income recognized by the participant.
Vote Required for Approval
Approval of the amendments to the Plan requires the affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the annual meeting.
The Board of Directors unanimously recommends a vote "FOR" the above-described amendments to the Plan.

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~~PROPOSAL 3 — RATIFICATION OF THE APPOINTMENT OF KPMG LLP~~
~~AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~
PROPOSAL 4 — RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2017
The Company's independent registered public accounting firm reports to, and is engaged at the direction of, the Audit Committee of the Company's Board of Directors.
The Audit Committee appointed KPMG LLP ("KPMG") as the Company's independent registered public accounting firm for Fiscal ~~2015, after consideration~~2017. The Company's independent registered public accounting firm is responsible for auditing the Company's financial statements and ~~determination~~the effectiveness of ~~KPMG's independence~~internal controls over financial reporting and for expressing opinions thereon.
The Audit Committee believes that the appointment of KPMG is in ~~light~~the best interests of ~~all services rendered to~~ the Company and its stockholders for the following primary reasons:
KPMG's independence from the Company;
The quality of KPMG's past performance as the Company's independent registered public accounting ~~firm.~~ firm;
KPMG's understanding of the Company's businesses, operations, accounting policies and practices and internal control over financial reporting;
KPMG's reputation in the industry and its experience in accounting matters for aerospace and defense companies;
The reasonableness of the fees paid by the Company to KPMG for its services; and
Market information on KPMG's audit quality and performance, including recent Public Company Accounting Oversight Board ("PCAOB") reports on KPMG.
The Board of Directors asks that stockholders ratify the appointment of KPMG as the Company's independent registered public accounting firm for Fiscal ~~2015.~~2017. Representatives of KPMG are expected to be present at the annual meeting, with the opportunity to make a statement if they so desire and to respond to appropriate questions offrom stockholders.

Independent Registered Public Accounting Firm Fees and Services
The following table sets forth the aggregate fees billed by KPMG to the Company for Fiscal ~~2013~~2015 and Fiscal ~~2014~~2016 for audit, audit-related and tax services provided by the Company's independent registered public accounting firm.

Description of Fees

Fiscal 2013 ($)

Fiscal 2014 ($)



Audit Fees
1,689,980 1,794,370

Audit-Related Fees¹ 136,375 136,000

Tax Fees² 373,317 387,109
Description of Fees
Fiscal 2015 Fiscal 2016

Audit Fees
$1,914,366 $1,854,803

Audit-Related Fees¹
$7,500 $330,000

Tax Fees²
$332,341 $448,566

¹
Fiscal ~~2013~~2015 audit-related fees were for ~~two comfort letters, purchase price allocation and related acquisition work, technical research and statutory audits of foreign subsidiaries.~~assistance with an SEC comment letter. Fiscal ~~2014 audit-related~~2016 fees were for ~~two consents on registration statement filings,~~assistance with an SEC comment letter and acquisition due diligence ~~assistance and SEC comment letter services.~~assistance.

²
Tax fees ~~include~~in Fiscal 2015 and Fiscal 2016 were for reviews of domestic and foreign income tax ~~return reviews.~~returns and VAT services.
Audit Committee pre-approval is required for any audit, audit-related, tax or other services to be provided by the independent registered public accounting firm.
~~OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE~~Our Board of Directors unanimously recommends that you vote "FOR
~~THE RATIFICATION OF THE APPOINTMENT OF KPMG AS OUR~~
~~INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2015.~~

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~~Audit Committee Report for Fiscal 2014~~
~~The Audit Committee reviews~~" the ~~Company's financial reporting process on behalf~~ratification of the ~~Board~~appointment of Directors. The Company's management is primarily responsible for the Company's financial statements and the quality and integrity of the reporting process and systems of internal control. The Company'sKPMG LLP as our independent registered public accounting firm ~~is responsible for auditing the Company's financial statements and the effectiveness of internal controls over financial reporting and for expressing opinions thereon.~~
~~In fulfilling its oversight responsibilities, the Audit Committee has reviewed and discussed the Company's audited financial statements~~ for Fiscal 2014 with the Company's management and representatives of the Company's independent registered public accounting firm, including a discussion of the reasonableness of significant judgments and accounting estimates, and clarity of disclosures in the financial statements. The Audit Committee also reviewed with management and the independent registered public accounting firm the preparation of the financial statements and related disclosures contained in the Company's earnings announcements and quarterly reports. Management has represented to the Audit Committee that the Company's financial statements were prepared in accordance with United States generally accepted accounting principles ("GAAP"), and the independent registered public accounting firm has expressed an opinion based on their audit that the financial statements are in conformance with GAAP in all material respects. The Audit Committee is not responsible for planning or conducting audits, or the determination that the Company's financial statements are complete and accurate and in accordance with GAAP. That is the responsibility of management and the independent registered public accounting firm.
The Audit Committee reviewed and discussed with the independent registered public accounting firm and management the overall scope and plans for the audit, the quality, adequacy and assessment of the effectiveness of internal controls over financial reporting, and the Internal Audit Department's management, organization, responsibilities, budget and staffing. The Audit Committee also met with the independent registered public accounting firm representatives without management present and discussed the results of their audits, their evaluation of the Company's internal controls over financial reporting, disclosure controls and the overall quality (not just acceptability) of the Company's accounting policies and financial reporting.
~~The Audit Committee also discussed with the representatives of the independent registered public accounting firm (i) the matters required to be discussed by~~~~Public Company Accounting Oversight Board Auditing Standard No. 16 ("Communications with Audit Committees")~~, and (ii) the independent registered public accounting firm's independence from the Company and its management, including the matters in the written disclosures and letter furnished to the Audit Committee by the independent registered public accounting firm and required by applicable requirements of the Public Company Accounting Oversight Board. The Audit Committee determined that the non-audit services provided to the Company by the independent registered public accounting firm are compatible with maintaining the independent registered public accounting firm's independence.2017.
In reliance on its review of the audited financial statements and the discussions referred to above and subject to the limitations on the role and responsibilities of the Audit Committee referred to above and in its charter, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-K for Fiscal 2014 for filing with the SEC.

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The Audit Committee also reviewed and assessed the adequacy of the Audit Committee charter and conducted an Audit Committee self-assessment in which it concluded that the Committee operates effectively and successfully carried out all of its charter responsibilities.
~~Respectfully submitted,~~
~~Audit Committee~~
~~James E. Goodwin, Chairman~~
~~Anthony K. Anderson~~
~~Norman R. Bobins~~
~~Patrick J. Kelly~~
~~Marc J. Walfish~~
~~Ronald B. Woodard~~

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CORPORATE GOVERNANCE

~~CORPORATE GOVERNANCE~~ General
~~The Company is committed to good~~We review our corporate ~~governance. We regularly review our~~governance policies and procedures ~~giving due consideration~~on an annual basis. We strive to ~~current developments~~emulate "best practices" and ~~"best practices."~~tailor them, where appropriate, to fit our specific needs. We believe that we comply with all applicable SEC and NYSE rules and ~~regulations, and we~~regulations. We also have adopted additional corporate governance practices that we believe are in the best interests of the Company and its stockholders.
Copies of the following corporate governance documents are available on the Company's website atwww.aarcorp.com under "Investor Relations/Corporate Governance":
Corporate Governance Guidelines, which include policies on:
•
~~Corporate Governance Guidelines~~Director qualification standards

•
Stock ownership and retention guidelines for directors and executive officers

•
Director retirement

•
Annual performance evaluations of the directors and the Chief Executive Officer
Categorical Standards for Determining Director Independence

•

Code of Business Ethics and Conduct

•

Audit Committee Charter

•

Compensation Committee Charter

•

Nominating and Governance Committee Charter

•

Executive Committee Charter

•
Conflict Minerals Policy
and Form SD Filings
These corporate governance documents are also available in print to any stockholder upon written request to the Secretary of the Company at the Company's address listed on the first page of this proxy statement.
Stockholder Engagement
We maintain a stockholder engagement program as a "best practice" under our corporate governance and executive compensation initiatives. The ~~Company maintains an Ethics Hotline through an independent third-party provider~~purposes of this program are to promote communication, increase transparency and, most importantly, better understand and address the perspectives of our stockholders. We believe that opportunities to receive ~~confidential complaints, information, suggestions or recommendations concerning the Company, its officers, directors, employees, policies, procedures, employment~~ and ~~business practices, accounting or audit matters, financial reporting or compliance~~consider stockholder feedback enhance our corporate governance and executive compensation practices.
In Fiscal 2016, our stockholder engagement program consisted of individual meetings and calls with ~~other Company policies or applicable regulatory or legal requirements. The Ethics Hotline is toll-free~~stockholders and ~~permits callers to identify themselves or remain anonymous~~presentations at ~~their election.~~various investor conferences. Through this program, we estimate that we communicated with stockholders owning approximately 75% of our outstanding shares.

Board Refreshment
We regularly consider the size, skills and diversity of our Board of Directors to assure that we maintain a proper balance between director stability and fresh perspectives in the boardroom. We recruit new directors who we believe will complement and diversify the experience, skills and perspectives of our existing directors. To that end, we were pleased to welcome Jennifer L. Vogel to our Board in January 2016. Ms. Vogel is an accomplished business executive with significant aviation experience. See "Proposal 1 — Election of Our Directors — Our Continuing Directors" for additional information about Ms. Vogel.

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Director Nominations and Qualifications
The Board of Directors, acting through its Nominating and Governance Committee, is responsible for identifying, evaluating and recommending candidates for director. The Nominating and Governance Committee obtains recommendations from management, other directors, business and community leaders and stockholders, and may retain the services of a consultant to assist in identifying candidates. The Nominating and Governance Committee considers all director candidates in the same manner, including director candidates recommended by stockholders, regardless of the source of the recommendation. In its evaluation of director candidates, the Nominating and Governance Committee considers the factors specified in the Company's Corporate Governance Guidelines, including:
•
A high level of integrity and professional and personal ethics and values consistent with those of the Company;

•
Professional background and relevant business and industry experience;

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•
Current employment, leadership experience and other board service;

•
Demonstrated business acumen or special technical skills or expertise (e.g., audit, financial, legal or aviation and ~~government/~~government and defense), particularly in areas where the Board currently lacks specific skills;

•
A commitment to enhancing stockholder value and serving the interests of all stockholders;

•
Independence (including within the meaning of the applicable NYSE rules) and freedom from any conflicts of interest that would interfere with a director's ability to discharge his duties;

•
Willingness and ability to make the commitment of time and attention necessary for effective Board ~~service;~~service

•
A balance of business, financial and other experience, expertise, capabilities and perspectives among sitting directors in the context of the current composition of the Board, operating requirements of the Company and long-term interests of stockholders; and

•
Other factors the Nominating and Governance Committee deems appropriate.
The Nominating and Governance Committee considers the racial, ethnic and gender diversity of the Board and director candidates, as well as the diversity of their knowledge, skills, experience, background and perspective, to assure that the Company maintains the benefit of a diverse, balanced and effective Board.
A full list of the qualifications of director candidates considered by the Committee is set forth in the Corporate Governance Guidelines on the Company's website atwww.aarcorp.com under "Investor Relations/Corporate Governance" and is available in print to any stockholder upon written request to the Secretary of the Company at the address listed on the first page of this proxy statement. The Nominating and Governance Committee regularly reviews these qualifications and the performance of individual directors and the Board as a whole.
Following its evaluation of director candidates, the Nominating and Governance Committee recommends its director nominees to the Board of Directors. Based on its review and consideration of the Committee's recommendation, the Board makes the final determination of director nominees to be elected by the Company's stockholders.
Stockholders may submit a proposed nomination to the Nominating and Governance Committee for consideration with respect to the ~~2015~~2017 annual meeting of stockholders by writing to the Secretary, AAR CORP., One AAR Place, 1100 North Wood Dale Road, Wood Dale, Illinois 60191. To be considered, proposed nominations must be received by the Secretary of the Company no later than April ~~11, 2015,~~19, 2017, must state the reasons for the proposed nomination and contain the information required under the Company's By-Laws, including the full name and address of each proposed nominee, as well as a brief biographical history setting forth past and present directorships, employment and occupations, information as to stock ownership, other arrangements regarding the common stock, and any other qualifications. Proposed nominations must also include a statement indicating that the proposed nominees have consented to being named in the proxy statement and to serve if elected.

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Director Independence
A majority of the members of the Board of Directors must be independent directors under the Company's Corporate Governance Guidelines and applicable SEC and NYSE rules. The Nominating and Governance Committee and the Board of Directors review each director annually and make a determination concerning independence after consideration of all known facts and circumstances. The Board has established categorical standards to assist it in determining director independence. The Company's "Categorical Standards for Determining Director Independence" include all of the elements of the applicable SEC and NYSE rules with respect to director independence, as well as those of the Company, and are available on the Company's website.
Based on these categorical standards, its review of all relevant facts and information available, and the recommendations of the Nominating and Governance Committee, the Board, at its meeting in July ~~2014,~~2016, affirmatively determined that no director has a material relationship with the Company that would impair the director's ability to exercise independent judgment and, accordingly, that each director is an independent director, except for David P. Storch ~~due to his status as Chairman of the Board and Chief Executive Officer of the Company,~~ and Timothy J. Romenesko ~~due to his status as President and Chief Operating Officer~~who are both employees of the Company. Under the NYSE rules, a director employed by the Company is not an independent director by definition.

Board Leadership and Lead Director
The Board of Directors determines the leadership structure for the Board and the Company in a manner that it believes best serves the interests of the Company's stockholders.
The Corporate Governance Guidelines ~~provides~~provide that the Board shall have a Lead Director elected annually by the independent directors. The Lead Director chairs all executive sessions of the independent directors and works closely with the Chief Executive Officer on Board agendas, schedules and meetings. Ronald R. Fogleman, Chair of the Nominating and Governance Committee, currently serves as the Board's Lead ~~Director.~~Director, having been re-elected by the independent directors at the Board's January 2016 meeting.
The Board has no fixed policy with respect to combining or separating the offices of Chairman of the Board and Chief Executive Officer. Currently, the Company's President and Chief Executive Officer, David P. Storch, is also Chairman of the Board. The Board continues to believe that having Mr. Storch as Chairman and Chief Executive Officer is the most effective and appropriate leadership structure for the Board and the Company at this time ~~for~~given his tenure with the ~~following principal reasons:~~
•
~~Mr. Storch is the second Chairman and Chief Executive Officer in the Company's 63-year history. This stability at the most senior executive position within the~~ Company, has had a strong and positive impact on the Company's culture and contributed to the Company's ability to respond to business cycles in the commercial aviation and government and defense services markets.

•
Mr. Storch has served the Company in senior management positions for 25 years (beginning in 1989 as President and Chief Operating Officer of the Company and continuing with his assumption of the Chief Executive Officer title in 1996 and his assumption of the Chairman of the Board title in 2005).

•
~~Mr. Storch's expertise and experience provides the Company with a unique skill-set, including:~~ his knowledge of the ~~commercial aviation and government and defense services~~

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~~markets; his shaping of the Company's culture; his understanding of the~~ Company's businesses employees and customers; and his leadership role in the Company's transformation from a supplier of aircraft parts and aftermarket services for commercial airlines into a leading international provider of products and services to the commercial aviation and government and defense services markets.
•
~~The Board of Directors provides substantial independent oversight of the conduct of the Company's business, including through the interaction and communication between the Lead Director~~ and the ~~Chief Executive Officer. The independent directors meet regularly~~markets in ~~executive sessions, including at every regularly scheduled Board meeting, after~~ which they compete, and the ~~Lead Director briefs Mr. Storch, as appropriate.~~

•
~~The Board~~Board's assessment of Directors conducts an annual evaluation of the Chairman and Chief Executive Officer that focuses on Mr. Storch's performance in carrying out the responsibilities of the two positions. In Fiscal 2014, the Board concluded that Mr. Storch's excellent performance as Chairman and Chief Executive Officer of the Company continued to serve the best interests of the Company's stockholders.
his performance.

Risk Management Oversight
The Board of Directors, directly and through its committees, ~~is responsible for overseeing~~oversees management's process for assessing and managing the Company's exposure to risks. ~~In that role, the~~The Board regularly reviews and responds to management's business strategies and initiatives, the Company's quarterly and annual financial results, and information relating to the Company's competitive position, customer base, and capital and liquidity position. The Board holds an annual strategy session with senior management devoted entirely to a review and consideration of the Company's businesses, markets, customers, competitors, and strategic initiatives and direction. This meeting includes an assessment of the key challenges and risks of the Company's businesses, and the opportunities for addressing and responding to these challenges and risks.
At its July 2016 meeting, the Board decided to increase its risk management oversight of the Company at the Board level by designating that two Board meetings per year will include review and consideration of the Company's risk profile and its risk mitigation strategies. These risk sessions will be led by Director Peter Pace and will focus in particular on cybersecurity risk and the activities of the Company's enterprise risk management committee. The Board considered but deferred for now the formation of a Board Risk Committee, instead deciding to maintain a comprehensive risk assessment structure at the full Board level.

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The following table outlines the risk oversight responsibilities of the Board committees, and the succeeding narrative elaborates on these responsibilities:
Committee Risk Oversight Responsibilities

Nominating and Governance Committee
•
Corporate governance
•
Board and committee membership
•
Succession planning
•
Board and CEO effectiveness

Compensation Committee
•
Cash incentive program
•
Stock-based compensation
•
Compensation policies and practices
•
Impact of performance-based compensation on risk-taking by management

Audit Committee
•
Financial reporting and investor disclosure
•
Accounting and auditing
•
Quality and adequacy of processes and internal controls
•
Oversight of enterprise risk management program

The Nominating and Governance Committee oversees and reports to the Board on corporate governance risks, including Board and committee membership, director independence and related party transactions. It is responsible for succession planning at the CEO and senior executive level and takes the lead on the evaluation of the performance of the Board and the Company's Chief Executive Officer.
The Compensation Committee oversees and reports to the Board on the Company's cash incentive programs and stock-based compensation to provide that they are appropriately structured to incentivize officers and key employees while avoiding unnecessary or excessive risk-taking.
The Audit Committee, on behalf of the Board, oversees the enterprise risk management committee, which is composed of Company employees and is responsible for identifying the principal risks to the Company, developing and implementing risk mitigation strategies, auditing the effectiveness of the risk mitigation strategies and reporting to the Audit Committee. The enterprise risk management committee meets regularly with the Audit Committee to review and discuss the Company's principal risks and outline its risk mitigation approach for addressing these risks. The Audit Committee ~~reports to the Board on~~also reviews and assesses management's processes for managing risks relating to accounting, financial reporting, investment, tax and legal compliance, risks identified by the Company's internal and external auditors, and matters raised through the Company's Ethics Hotline. The Compensation Committee oversees and reports to the Board on the Company's incentive compensation programs to provide that they are appropriately structured to incentivize officers and key employees while assuring appropriate risk. The Nominating and Governance Committee oversees and reports to the Board on corporate governance risks, including director independence and related party transactions.
The Board and its committees receive information from and have regular access to the individual members of management responsible for managing risk, including the Company's President and Chief Executive Officer, ~~President,~~Vice Chairman, Chief Financial Officer, ~~Group Vice Presidents,~~Chief Accounting Officer and Controller, General Counsel, Internal Auditor and ~~Internal Auditor.~~business group leaders. The directors meet each quarter with a broader group of the Company's employees at regularly scheduled Board dinners as an informal way of learning

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more about the Company's businesses and its employees. The Board also schedules at least one meeting per year at a Company facility other than the corporate headquarters to promote interaction with local management and employees and allow directors a first-hand opportunity to inspect the Company's business operations.

Executive Sessions
Independent directors of the Board meet in executive session without management as part of each regular Board meeting and otherwise when circumstances make it advisable or necessary. The Lead Director presides at the executive sessions of independent directors.

~~Communications with the Board of Directors~~
Stockholders and other interested parties may communicate with the Board, the Chairman of the Board, the Lead Director, independent directors as a group, or any individual director or Committee Chairman by mail addressed to:
~~AAR CORP.~~
~~Attention: Independent Directors, Lead Director or the name of the individual director~~
~~c/o Corporate Secretary~~
~~One AAR Place~~
~~1100 North Wood Dale Road~~
~~Wood Dale, Illinois 60191~~
The independent members of the Board of Directors have approved procedures for the processing, review and disposition of all communications sent by stockholders or other interested parties to the Board of Directors.

Corporate Governance Guidelines
The Board of Directors adopted Corporate Governance Guidelines to codify long-standing policies and procedures and to demonstrate its commitment to corporate governance best practices. These Guidelines, under the administration of the

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Nominating and Governance Committee of the Board of Directors, address director qualification standards, director responsibilities, director access to management and independent advisors, director compensation, management evaluation and succession, and the annual performance evaluation of the Board of Directors. These Guidelines are reviewed and approved annually by the Nominating and Governance Committee and the Board of Directors, most recently in July ~~2014.~~2016.

Ethics Hotline
The Company maintains an Ethics Hotline through an independent third-party provider to receive confidential complaints, information, suggestions or recommendations concerning the Company, its officers, directors, employees, policies, procedures, employment and business practices, accounting or audit matters, financial reporting or compliance with other Company policies or applicable regulatory or legal requirements. The Ethics Hotline is toll-free and permits callers to identify themselves or remain anonymous at their election.
Code of Business Ethics and Conduct
The Company's Code of Business Ethics and Conduct adopted by the Board of Directors applies to all directors, officers, and employees, including the ~~Chairman~~President and Chief Executive Officer, ~~the President and Chief Operating Officer, the~~Vice Chairman, Chief Financial Officer, ~~and the~~ Chief Accounting Officer and ~~Controller.~~Controller, General Counsel, Internal Auditor and business group leaders. The purpose of the Code of Business Ethics and Conduct is to promote the highest ethical standards in the Company's business practices and procedures, including the ethical handling of actual or apparent conflicts of interest; full, fair and timely disclosure; and compliance with applicable laws and governmental rules and regulations. Employees are encouraged to report to the Company any conduct that they believe in good faith to be in violation of the Code of Business Ethics and Conduct. We ~~will~~ post any amendments to the Code of Business Ethics and Conduct and any waivers from the Code granted by the Board to directors or executive officers on the Company's website, as required under SEC rules.

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Related Person Transaction Policy
The purpose of the Related Person Transaction Policy, as adopted by the Board of Directors, is to provide for the identification, review, and consideration of transactions between the Company or its subsidiaries and any related persons. "Related persons" means: the Company's directors; director nominees; executive officers; greater than five percent beneficial owners of the Company's voting securities; members of their immediate families; and any firm, corporation or other entity in which any of the foregoing persons is employed or is a partner, a principal, or in a similar position, or in which such person has a 10% or greater beneficial ownership interest.
Under the Policy, any related person transaction involving amounts in excess of $120,000 must be reviewed, considered, and approved by the Board of Directors directly or through the Nominating and Governance Committee. Review of a proposed related person transaction takes into consideration the purpose of, and the potential benefits to the Company from, the related person transaction, and the impact of the related person transaction on a director's independence in the event that the related person is a director or an immediate family member of a director. No member of the Board or the Nominating and Governance Committee may participate in any review, consideration, or approval of any related person transaction with respect to which such member or any of his or her immediate family members is the related person.
The Policy provides that the Company may undertake certain pre-approved related person transactions (e.g., transactions in which the related person's interest derives solely from his or her service as a director of another corporation or entity that is a party to the transaction) without further specific review, consideration and approval.
Norman R. Bobins is a director of the Company and the Non-Executive Chairman of the PrivateBank and Trust Company. The PrivateBank and Trust Company is a member of the lending group under our Credit Agreement. All loans under the Credit Agreement are made in the ordinary course of business, are made on substantially the same terms, including interest rates, as those prevailing at the time for comparable loans with persons not related to the lender, and do not involve more than the normal risk of collectability or present other unfavorable features.
Patrick J. Kelly is a director of the Company and the majority owner of Resource 1, a technology staffing company. In Fiscal 2016, the Company paid approximately $390,000 to Resource 1 for staffing services.

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The Company has a Board-approved Founder's Agreement with Ira A. Eichner, the Founder and former Chairman of the Board of the Company. The Founder's Agreement recognizes Mr. Eichner's extraordinary contributions to the ~~Company for over 56 years and the value to the Company of an ongoing relationship with Mr. Eichner.~~Company. Under the Founder's Agreement. Mr. Eichner receives a quarterly retainer of $25,000. Mr. Eichner ~~also participates in the Company's Non-Employee Directors' Retirement Plan until December 1, 2015 (see "—Director Compensation"). Mr. Eichner~~ is Mr. Storch's father-in-law.
Director Orientation and Continuing Education
We hold director orientation sessions with new directors to familiarize them with our businesses, business strategies and corporate policies and practices. Our goal is to assist our new directors in understanding the Company and developing the skills and knowledge that they need to serve the interests of our stockholders. We also make continuing education programs available to our directors to help them maintain and enhance their skills and knowledge in carrying out their ongoing responsibilities as directors.
Board and Committee Evaluations
Our Nominating and Governance Committee conducts an annual evaluation of the performance of the Board. Our Lead Director reports the evaluation results — which include an assessment of the Board's performance as well as the identification of specific areas for improvement — to the full Board. Each Board committee also conducts an annual evaluation of its performance and reports the results to the full Board.
Communications with the Board of Directors
Stockholders and other interested parties may communicate with the Board, the Chairman of the Board, the Lead Director, independent directors as a group, or any individual director or Committee Chairman by mail addressed to:
AAR CORP.
Attention: Independent Directors, Lead Director or the name of the individual director
c/o Corporate Secretary
One AAR Place
1100 North Wood Dale Road
Wood Dale, Illinois 60191
The independent members of the Board of Directors have approved procedures for the processing, review and disposition of all communications sent by stockholders or other interested parties to the Board of Directors.

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BOARD MATTERS
Board Committees
The Board has an Audit Committee, a Compensation Committee, a Nominating and Governance Committee, and an Executive Committee. The following table identifies the current members of each committee:

Director

Audit
Committee

Compensation
Committee

Nominating and
Governance
Committee

Executive
Committee

Anthony K. Anderson
X

Norman R. Bobins X X

~~Norman R. Bobins~~

X X
Michael R. Boyce
X X

Ronald R. Fogleman
X Chair X

James E. Goodwin
Chair X X

Patrick J. Kelly
X X

Peter Pace
X X X

Timothy J. Romenesko

David P. Storch Chair

Jennifer L. Vogel X X

~~David P. Storch~~

~~Chair~~
Marc J. Walfish
X X X

Ronald B. Woodard
X Chair

Audit Committee
Audit Committee Fiscal 2016 Report
Dear Fellow Stockholders:
The Audit Committee is comprised entirely of independent directors qualified to serve on the Audit Committee under applicable SEC and NYSE rules and the Company's Categorical Standards for Determining Director Independence. ~~Its members are James E. Goodwin (Chair), Anthony K. Anderson, Norman R. Bobins, Patrick J. Kelly, Marc J. Walfish and Ronald B. Woodard.~~ The Board of Directors has determined that each Audit Committee member is an "audit committee financial expert" within the meaning of applicable SEC rules.
The Audit Committee acts pursuant to a written charter adopted by the Board of Directors. The charter was last reviewed and approved by the Audit Committee and the Board of Directors at their July ~~2014~~2016 meetings. The full text of the Audit Committee charter appears on the Company's website and is available in print to any stockholder upon written request to the Secretary of the Company at the Company's address listed on the first page of this proxy statement.
The Audit ~~Committee~~Committee's primary responsibility is ~~primarily concerned with~~to assist the Board of Directors in fulfilling its duty to stockholders to oversee and review: the quality and integrity of the Company's financial statements ~~compliance with legal~~ and ~~regulatory requirements~~internal controls over financial reporting; the qualifications, independence and performance of the Company's independent registered public accounting firm; and the performance of the Company's ~~internal audit function and independent registered public accounting firm.~~ Internal Audit function.
The Audit Committee performs the specific functions described in its charter, including:
•
Approves and engages the independent registered public accounting firm that audits the Company's consolidated financial statements;

•
Pre-approves all non-audit and audit-related services furnished by the independent registered public accounting firm;

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•
Maintains communication between the Board and the independent registered public accounting firm;

•
Monitors the qualifications, independence and performance of the independent registered public accounting firm;

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•
Oversees and reviews the Company's financial reporting processes and practices;

•
Oversees and reviews the quality and adequacy of internal controls over financial reporting, disclosure controls and the organization and performance of the Company's internal audit department;

•
Reviews the scope and results of audits;

•
Oversees the Company's enterprise risk management committee; and

•
Meets with the independent registered public accounting firm representatives and internal audit department representatives without members of management present.
The Audit Committee held seven meetings during Fiscal ~~2014.~~2016. The Audit Committee meets outside the presence of management for portions of its meetings to hold separate discussions with KPMG, the Company's independent registered public accounting firm, the internal auditors and other representatives of the Company.
The Company's management has primary responsibility for the Company's financial statements and the quality and integrity of the reporting process and systems of internal control. KPMG is responsible for auditing the Company's financial statements and issuing a report on the conformity of those statements with generally accepted accounting principles ("GAAP") and a report on the effectiveness of the Company's internal controls over financial reporting.
In fulfilling its responsibilities, the Audit Committee reviewed and discussed with the Company's management and KPMG the Company's audited financial statements contained in the Company's Annual Report on Form 10-K filed with the SEC, including the critical accounting policies applied by the Company in preparing these financial statements. The Audit Committee also reviewed with management and KPMG the preparation of the financial statements and related disclosures contained in the Company's earnings announcements and Quarterly Reports on Form 10-Q.
The Audit Committee reviewed and discussed with management and KPMG the overall scope and plans for the audit, the quality, adequacy and assessment of the effectiveness of internal controls over financial reporting and the Internal Audit Department's management, organization, responsibilities, budget and staffing. The Audit Committee also met with KPMG without management present and discussed the results of its audits, its evaluation of the Company's internal controls over financial reporting, disclosure controls and the overall quality, not just the acceptability, of the Company's accounting principles, the reasonableness of significant accounting judgments and the clarity of disclosures in the financial statements.
The Audit Committee also reviewed and discussed with KPMG the matters required by PCAOB Auditing Standard No. 16 ("Communications with Audit Committees") and KPMG's independence from the Company and its management, including the matters in the written disclosures and letter furnished to the Audit Committee by KPMG and required by applicable requirements of the PCAOB.
The Audit Committee concluded that KPMG is independent from the Company and appointed KPMG as the Company's independent registered public accounting firm for Fiscal ~~2014 appears~~2017. The Audit Committee recommends that the stockholders of the Company ratify that appointment (see Proposal 4).
In reliance on ~~pages 13-14.~~its review of the audited financial statements and the discussions referred to above and subject to the limitations on the role and responsibilities of the Audit Committee referred to above and in its charter, the Audit Committee recommended to the Board of Directors, and the Board of Directors approved, that the audited financial statements be included in the Company's Annual Report on Form 10-K for Fiscal 2016 for filing with the SEC.
Respectfully submitted,
The Audit Committee of the Board of Directors of AAR CORP.
James E. Goodwin, Chair
Norman R. Bobins
Patrick J. Kelly
Peter Pace
Marc J. Walfish
Ronald B. Woodard

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Compensation Committee
The Compensation Committee is comprised entirely of independent directors ~~as defined~~qualified to serve on the Compensation Committee under applicable SEC and NYSE rules and the Company's Categorical Standards for Determining Director Independence. Its members are Ronald B. Woodard (Chair), Anthony K. Anderson, Norman R. Bobins, Michael R. Boyce, Ronald R. Fogleman, Peter Pace and ~~Peter Pace.~~Jennifer L. Vogel.
The Compensation Committee acts pursuant to a written charter adopted by the Board of Directors. The charter was reviewed and approved by the Compensation Committee and the Board of Directors at their July ~~2014~~2016 meetings. The full text of the Compensation Committee charter appears on the Company's website and is available in print to any stockholder upon written request to the Secretary of the Company at the Company's address listed on the first page of this proxy statement.
The Compensation Committee is primarily concerned with establishing, reviewing and approving Chief Executive Officer compensation, reviewing and approving other senior executive compensation and overseeing the Company's stock plans and any other compensation and employee benefit plans. The Compensation Committee performs the specific functions described in its charter, including:
•
Reviews and approves compensation policies and practices for all elected corporate officers, including named executive officers;

•
Sets the compensation of the Chief Executive Officer and, together with the full Board, evaluates the Chief Executive Officer's performance;

•
Administers the Company's annual cash incentive and long-term stock incentive programs for officers, the AAR CORP. 2013 Stock ~~Benefit~~ Plan, the AAR CORP. ~~2013~~ Stock Plan, and the AAR CORP. Section 162(m) Annual Cash Incentive Plan;

•
Recommends director compensation and benefits to the Board for approval; and

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•
Oversees administration of certain other employee benefit, director deferred compensation, savings and retirement plans.
The Compensation Committee held five meetings during Fiscal ~~2014.~~2016. The Compensation Committee Fiscal 2016 Report on Executive Compensation ~~for Fiscal 2014~~ appears on page ~~51.~~46. Information about the role of the Compensation Committee consultant and management in the executive compensation process is set forth under "Executive Compensation — Compensation Discussion and ~~Analysis" section on pages 46-47.~~Analysis."
Nominating and Governance Committee
The Nominating and Governance Committee is comprised entirely of independent directors ~~as defined~~qualified to serve on the Committee under applicable SEC and NYSE rules and the Company's Categorical Standards for Determining Director Independence. Its members are Ronald R. Fogleman (Chair), Michael R. Boyce, James E. Goodwin, Patrick J. Kelly, Peter Pace, Jennifer L. Vogel and Marc J. Walfish.
The Nominating and Governance Committee acts pursuant to a written charter adopted by the Board of Directors. The charter was reviewed and approved by the Nominating and Governance Committee and the Board of Directors at their July ~~2014~~2016 meetings. The full text of the Nominating and Governance Committee charter appears on the Company's website and is available in print to any stockholder upon written request to the Secretary of the Company at the Company's address listed on the first page of this proxy statement.
The Nominating and Governance Committee is responsible for both nominating and governance matters as described in its charter. The Nominating and Governance Committee performs the specific functions described in its charter, including:
•
Oversees the composition, structure and evaluation of the Board and its committees;

•
Reviews, considers, and acts upon related person transactions;

•
Develops and recommends Corporate Governance Guidelines for Board approval; and

•
Monitors and screens directors for independence and recommends to the Board qualified candidates for election as directors and to serve on Board committees.
The Nominating and Governance Committee held ~~three~~four meetings during Fiscal ~~2014.~~2016.

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Executive Committee
The Executive Committee is comprised of David P. Storch (Chair), James E. Goodwin, Ronald R. Fogleman and Marc J. Walfish. Messrs. Goodwin, Fogleman and Walfish are independent directors as defined by applicable SEC and NYSE rules. As Chairman, President and Chief Executive Officer of the Company, Mr. Storch does not qualify as an independent director under the NYSE and SEC rules.
The Executive Committee acts pursuant to a written charter adopted by the Board of Directors. The charter was reviewed and approved by the Board of Directors at its July ~~2014~~2016 meeting. The full text of the Executive Committee charter appears on the Company's website and is available in print to any stockholder upon written request to the Secretary of the Company at the Company's address listed on the first page of this proxy statement.
The Executive Committee is authorized to meet between meetings of the Board of Directors and exercise certain powers of the Board with respect to urgent matters or other matters referred to

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it by the Board for deliberation or action, subject to limitations imposed by the Committee's charter, the Board, applicable law and the Company's By-Laws.
The Executive Committee ~~did not meet~~held one meeting during Fiscal ~~2014.~~2016.

Board Meetings and Attendance
During Fiscal ~~2014,~~2016, the Board held ~~five meetings and acted by unanimous written consent on two occasions.~~four meetings. All directors attended at least 75% of the Board meetings and meetings of Board committees on which they served in Fiscal ~~2014.~~2016.
The Company's Corporate Governance Guidelines provide that directors are expected to attend all stockholder meetings. All members of the Company's Board of Directors serving at that time attended the Company's ~~2013~~2015 annual meeting of stockholders.

Director Compensation
The Board believes that compensation for any director who is not an officer or employee of the Company or any subsidiary should be a mix of cash and equity compensation. Directors who are officers or employees of the Company or any subsidiary receive no additional compensation for service on the Board or any of its committees.
The Board of Directors reviews director compensation annually to ensure that it is fair, appropriate and in line with its peer group companies. At its ~~January 2013~~April 2015 meeting, the Board reviewed the findings of a report by its independent compensation consultant analyzing director compensation information of the Company and its peer group companies. This report showed that the Company's cash compensation for directors was above the median of the Company's peer group, the Company's equity compensation was below the median and total compensation was slightly below the median of the peer group (see pages 35-37 for information relating to the Company's peer group). Based on this information, the Board, upon the recommendation of the Compensation Committee ~~made no changes to~~and following a presentation by Mercer, its ~~Fiscal 2014~~independent compensation consultant, approved the same director compensation ~~program.~~program for Fiscal 2016 that was in effect in Fiscal 2015.
The ~~following table identifies the elements of~~Fiscal 2016 director compensation program, as approved by the Board, consists of the compensation elements set forth in ~~effect during Fiscal 2014:~~the table below:

~~Compensation Element~~

~~Fiscal 2014 Non-Employee Director Compensation Program~~

Compensation Element
Fiscal 2016 Non-Employee Director
Compensation Program

Annual Retainer
$50,000

Lead Director Annual Retainer
$30,000

Committee Chair Annual Retainer
$10,000

Board and Committee Meeting Fees
$2,500 per meeting
($ ($1,250 for telephone meetings)

Annual Stock Award
5,000 shares of common stock
~~(vesting~~ (vesting after one year)

All retainers are paid quarterly, and meeting fees are paid promptly following each meeting attended. The annual stock award was approved at the Board's ~~January 2014 meeting~~April 2015 meetings with an effective date of June 1, ~~2014.~~ 2015 and a vesting date of June 1, 2016.
Each non-employee director may elect to defer receipt of the retainers and meeting fees pursuant to the Company's Non-Employee Directors' Deferred Compensation Plan (the "Director Plan"). Under the Director Plan, deferred retainer fees are converted into stock units equivalent to shares of common stock based on the then current stock price, and ~~deferred~~at distribution are paid out, at the participant's election, in cash or in shares of common stock. Deferred meeting fees are

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credited with interest quarterly based on the ~~10-Year~~10-year United States Treasury Bond ~~rate. Distributions of deferred retainer fees under the Director Plan~~rate and at distribution are paid out in ~~cash or in shares of common stock of equivalent value, at the participant's election, and distribution of deferred meeting fees are made in cash, in each case~~cash. Distribution occurs upon termination of service on the Board or on the happening of certain other events, as specified in the Director Plan.

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Each non-employee director, upon being elected a director, receives term life insurance coverage of $200,000 and is eligible (with spouse) to participate in a Company-paid, annual physical program. The Company also reimburses its non-employee directors for travel, lodging and related expenses that they incur in attending Board and committee meetings.

Director Compensation Table
~~General.~~Fiscal 2016 Director Compensation.    The following table sets forth all compensation paid to each non-employee director for Fiscal ~~2014:~~2016:

Name¹

Fees Earned
or Paid
in Cash ($)²

Stock
Awards
($)³

Option
Awards
($)⁴

Non-Equity
Incentive
Plan
Compensation
($)

Change in
Pension
Value and
Non-Qualified
Deferred
Compensation
Earnings ($)

All Other
Compensation
($)⁵

Total ($)

Anthony K. Anderson
86,250 103,400 0 0 0 $ 747 190,397

Norman R. Bobins
86,250 103,400 0 0 0 747 190,397

Michael R. Boyce
72,500 103,400 0 0 0 2,238 178,138

Ronald R. Fogleman
120,000 103,400 0 0 0 2,429 225,829

James E. Goodwin
92,500 103,400 0 0 0 7,247 203,147

Patrick J. Kelly
82,500 103,400 0 0 0 747 186,647

Peter Pace
78,750 103,400 0 0 0 4,596 186,746

Marc J. Walfish
80,000 103,400 0 0 0 2,331 185,731

Ronald B. Woodard
96,250 103,400 0 0 0 747 200,397

Name¹
Fees
Earned
or Paid
in Cash
($)² Stock
Awards
($)³ Option
Awards
($)⁴ Non-Equity
Incentive
Plan
Compensation
($) Change in
Pension
Value and
Non-Qualified
Deferred
Compensation
Earnings
($) All Other
Compensation
($)⁵ Total ($)

Anthony K. Anderson
87,500 147,700 — — — 5,828 241,028

Norman R. Bobins
83,750 147,700 — — — 878 232,328

Michael R. Boyce
81,250 147,700 — — — 10,298 239,248

Ronald R. Fogleman
122,500 147,700 — — — 2,557 272,757

James E. Goodwin
97,500 147,700 — — — 7,378 252,578

Patrick J. Kelly
85,000 147,700 — — — 878 233,578

Peter Pace
�� 81,250 147,700 — — — 878 229,828

Jennifer L. Vogel
38,332 48,659 — — — 177 87,168

Marc J. Walfish
87,500 147,700 — — — 878 236,078

Ronald B. Woodard
97,500 147,700 — — — 1,901 247,101

¹
Mr. Storch and Mr. Romenesko are not included in this table, because as employee directors of the Company, they receive no additional compensation for their service as directors. Their compensation from the Company is set forth in the Summary Compensation Table in this proxy statement. Ms. Vogel's amounts represent compensation paid to her from the date she joined the Board on January 11, 2016 through May 31, 2016.

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²
The following table provides a breakdown of director fees earned or paid in cash for Fiscal ~~2014:~~2016:

Name

Annual
Retainer ($)

Committee Chair
Retainer Fees ($)

Meeting Fees ($)

Lead Director Fee

Total ($)

Anthony K. Anderson
50,000 — 36,250 — 86,250

Norman R. Bobins
50,000 — 36,250 — 86,250

Michael R. Boyce
50,000 — 22,500 — 72,500

Ronald R. Fogleman
50,000 10,000 30,000 30,000 120,000

James E. Goodwin
50,000 10,000 32,500 — 92,500

Patrick J. Kelly
50,000 — 32,500 — 82,500

Peter Pace
50,000 — 28,750 — 78,750

Marc J. Walfish
50,000 — 30,000 — 80,000

Ronald B. Woodard
50,000 10,000 36,250 — 96,250

Name
Annual
Retainer
($) Committee Chair
Retainer Fees ($) Meeting Fees
($) Lead
Director
Fee ($) Total ($)

Anthony K. Anderson
50,000 — 37,500 — 87,500

Norman R. Bobins
50,000 — 33,750 — 83,750

Michael R. Boyce
50,000 — 31,250 — 81,250

Ronald R. Fogleman
50,000 10,000 32,500 30,000 122,500

James E. Goodwin
50,000 10,000 37,500 — 97,500

Patrick J. Kelly
50,000 — 35,000 — 85,000

Peter Pace
50,000 — 31,250 — 81,250

Jennifer L. Vogel
20,832 — 17,500 — 38,332

Marc J. Walfish
50,000 — 37,500 — 87,500

Ronald B. Woodard
50,000 10,000 37,500 — 97,500

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³
The amounts in this column reflect the aggregate grant date fair value of the Fiscal ~~2014~~2016 stock awards granted to each non-employee director computed in accordance with FASB ASC Topic 718. As of May 31, ~~2014,~~2016, each non-employee director held 5,000 unvested restricted ~~shares.~~shares (2,083 shares in the case of Ms. Vogel) that subsequently vested on June 1, 2016. On June ~~2, 2014,~~1, 2016, each non-employee director received a grant of 5,000 restricted shares that will vest on June ~~2, 2015.~~1, 2017.

⁴
No stock options were granted to non-employee directors in Fiscal ~~2014. The aggregate number of shares issuable pursuant to~~2016. No non-employee director held any stock options ~~held by each non-employee director~~ as of May 31, ~~2014 was as follows: Mr. Anderson, 0; Mr. Bobins, 0; Mr. Boyce, 0; General Fogleman, 3,500; Mr. Goodwin, 3,500; Mr. Kelly, 0; General Pace, 0; Mr. Walfish, 3,500; and Mr. Woodard, 0.~~2016.

⁵
This column includes reimbursed expenses in connection with spousal travel and/or travel and hotel expense in connection with the Company-paid director/spouse annual physical program as well as the cost of the annual physical program and the cost of term life insurance.
Fiscal ~~2015~~2017 Director Compensation.    At its April ~~2014~~2016 meeting, the Board of Directors, upon the recommendation of the Compensation Committee and following a presentation by Mercer, its independent compensation consultant, on director compensation trends and best practices, approved the same director compensation program infor Fiscal ~~2015~~2017 that was in effect for Fiscal 2016.
At its July 2016 meeting, the Board of Directors, upon the recommendation of the Compensation Committee, approved an amendment to the AAR CORP. 2013 Stock Plan that caps at $500,000 the total annual non-employee director compensation — consisting of cash compensation and stock compensation — that may be payable in ~~Fiscal 2014.~~any given year. This amendment is subject to stockholder approval. See "Proposal 3 — Approval of Amendments to the AAR CORP. 2013 Stock Plan — Requests for Approval — Limitation on Awards Granted, and Total Compensation Payable, to Non-Employee Directors."

Compensation Committee Interlocks and Insider Participation
Messrs. Anderson, Bobins, Boyce, and Woodard, General Fogleman, ~~and~~ General Pace and Ms. Vogel, all of whom are independent non-employee directors, are the current members of the Compensation Committee of the Board of Directors of the Company. During Fiscal ~~2014,~~2016, none of the executive officers of the Company served on the board of directors or compensation committee of any entity whose officers served either on the Board of Directors of the Company or on the Compensation Committee of the Board of Directors of the Company.

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~~EXECUTIVE COMPENSATION~~
EXECUTIVE COMPENSATION

Compensation Discussion and Analysis
This Compensation Discussion and Analysis ("CD&A") describes our Fiscal ~~2014~~2016 executive compensation program. It provides information about the goals, philosophy and ~~the~~ key elements of the program and explains the reasons behind the Compensation Committee's executive compensation ~~decisions.~~decisions in Fiscal 2016.
Our focus in this CD&A is the Fiscal ~~2014~~2016 compensation of the following "named executive officers" of the ~~Company:~~Company, together with their titles in Fiscal 2016:

Name

Title

David P. Storch Chairman of the Board, President and Chief Executive Officer

Timothy J. Romenesko ~~President and~~Vice Chairman; Chief Financial Officer (beginning August 1, 2016); Chief Operating Officer of Expeditionary Services (through July 31, 2016)

John ~~C. Fortson~~M. Holmes Vice ~~President,~~President; Chief ~~Financial~~Operating Officer ~~and Treasurer since July 25, 2013~~of Aviation Services

~~Randy~~Michael J. ~~Martinez~~Sharp ~~Group~~Former Vice President, ~~— Airlift~~Chief Financial Officer (from September 29, 2015 through July 31, 2016)

Robert J. Regan Vice President, General Counsel and Secretary

~~Michael J. Sharp~~John C. Fortson ~~Acting~~Former Vice President, Chief Financial Officer and Treasurer ~~through July 25, 2013 and Vice President, Controller and Chief Accounting Officer~~(through September 28, 2015)

I.      Executive Summary
This executive summary identifies the goals of our executive compensation program and explains our executive compensation philosophy. It also describes our Fiscal 2016 business performance highlights and our Fiscal 2016 executive compensation highlights, which together demonstrate commitment to pay for performance as a fundamental principle of our executive compensation program.
Goals and Philosophy of Our Executive Compensation Program
The primary goals of our executive compensation program are to:
•
Attract and retain talented executives capable of producing outstanding business results for the Company;

•

Motivate and reward executives by paying for performance in a manner that takes into account Company, business group and individual performance; and

•
Provide ~~for~~ compensation that strikes a proper balance between short-term and long-term compensation, and between cash and stock compensation, with an emphasis on stock compensation to align the interests of executives with the interests of the Company's stockholders.
Our executive compensation philosophy is to target "total direct compensation" — defined as base salaryplus annual cash bonusplus the value of annual stock-based awards — of our named executive officers at the market median (50^th percentile) of our peer group and to provide the opportunity for our named executive officers to reach the market 75^th percentile with exceptional performance. By recognizing and rewarding outstanding performance, our executive compensation program directly links the achievement of key business goals with the pay outcomes for our named executive officers.
Fiscal ~~2014~~2016 Business Performance Highlights
~~AAR CORP. (the "Company")~~The Company is a leading global provider of ~~diversified products and~~aviation services to ~~the worldwide~~commercial aviation and government and defense markets. ~~We delivered solid financial results for Fiscal 2014 despite reductions~~AAR combines a close-to-the-customer business model with a broad menu of capabilities to help customers operate more efficiently, lower costs and maintain high levels of safety, quality and service.
AAR operates in ~~demand from our government~~two business segments: Aviation Services and ~~defense customers owing principally to the drawdown of the U.S. military presence in Afghanistan.~~Expeditionary Services.

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OurAviation Services business segment consists of:
~~Our continued focus on~~Supply chain activities — aircraft and engine parts supply; inventory management; original equipment manufacturer parts distribution; component repair management; and aircraft and engine sales and leasing — that help our ~~core businesses — aviation services and technology products — together with ongoing efforts to manage~~customers reduce costs and ~~strengthen~~increase aircraft availability; and
Maintenance, repair, and overhaul ("MRO") services — aircraft maintenance and modifications; landing gear, wheel and brake services; component repair and engineering solutions — that enable our ~~balance sheet, contributed~~customers to operate safely and efficiently.
OurExpeditionary Services business segment includes aircraft and search and rescue services in support of vital defense, contingency and humanitarian aid operations in austere environments around the world. Expeditionary Services also includes mobility services that supply shelters, containers and pallets to support the movement of troops and supplies, as well as command and control systems and technical services.
Fiscal 2016 marked our continuing transition to a predominantly aviation services-oriented company following ~~performance highlights in~~our Fiscal ~~2014:~~2015 divestment of significant manufacturing operations, including our Telair Cargo Group. In Fiscal 2016:
•
We reported ~~record~~sales of $1,663 million, net income attributable to AAR of $47.7 million and total diluted earnings per share of ~~$1.83, compared~~$1.37;
We continued to ~~$1.38 per share in Fiscal 2013;~~maintain a strong balance sheet, with working capital of $544.1 million, net debt of $118.9 million and available liquidity of $413.3 million as of May 31, 2016;
We returned capital of $30.0 million to our stockholders through common stock repurchases and dividends; and
We secured important new contracts with our customers, including:
•
New power-by-the-hour program services with multiple international carriers;

•
~~We generated strong cash flow in Fiscal 2014, producing almost $140 million in cash flow from operations~~Prime contractor relationships providing logistics support to the U.S. Navy's C-40A and $113 million in free cash flow, which allowed us to reduce our net debt by $89 million, pay dividends totaling $11.8 million to our stockholders and invest further in our businesses to ensure future growth;Afghan Air Force C-130 fleets;

•
~~We expanded our product/service portfolio~~Expansion of parts distribution and ~~strengthened our strategic capabilities in Fiscal 2014~~aftermarket support with ~~the opening of a new airframe service center in Lake Charles, Louisiana, the acquisition of a niche commercial cargo loading systems business in Germany~~Eaton, Crane Aerospace and ~~the addition of a new supply chain hub in Brussels, Belgium;~~

•
Our stock price increased 21% in Fiscal 2014 to $24.30 per share from $20.06 per share, and 66% in Fiscal 2013 to $20.06 per share from $12.05 per share (our stock price on August 22, 2014 was $27.23 per share);UTC Aerospace Systems; and

•
~~We received several industry awards in recognition~~A 10-year contract with the U.K. Ministry of ~~our performance ("~~~~Best Airframe MRO Provider~~Defence providing search and rescue services in the ~~Americas~~~~," "~~~~Outstanding Component Repair Provider~~~~" and "~~~~Boeing Gold Performance Excellence Award~~~~"), and we were once again named as one of Forbes magazine's "~~~~100 Most Trustworthy Companies~~~~" in 2014.~~Falkland Islands.
For more information about our financial and operating performance in Fiscal ~~2014,~~2016, please see "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K filed with the SEC on July ~~17, 2014.~~13, 2016. For more information about our stock price performance, please see "Comparison of Cumulative Five-Year Total Return" in our Form 10-K.
Fiscal ~~2014~~2016 Executive Compensation Highlights
~~Stockholder Outreach Program~~
We conducted a formal stockholder outreach program in Fiscal 2014 following the say-on-pay vote at our 2013 annual meeting. The purpose of the program was to gain a better understanding of concerns relatedOur Compensation Committee made several important changes to our executive compensation program, and other matters of stockholder interest. Under the program, which was supplemental to our regular ongoing communications with stockholders, we reached out to stockholders owning approximately 75% of our outstanding shares. Participants in the outreach effort included at various times our Chairman and Chief Executive Officer, President and Chief Operating Officer, Chief Financial Officer and General Counsel. We also received feedbackbased principally on market-based information provided by its independent compensation consultant, input from ~~two~~several proxy advisory firms ~~Institutional Stockholder Services ("ISS")~~ and ~~Glass Lewis & Co., Inc. ("Glass Lewis").~~
~~Based on the information gained from~~feedback received through our stockholder ~~outreach program, we made significant substantive changes~~engagement efforts, each of which emphasized pay for performance.
Changes to Our Executive Compensation Program
Adjusted base salaries and reduced annual cash bonus targets to align them with our ~~executive~~market peers
Shifted variable compensation ~~policies~~to more stock and ~~practices. We believe that,~~less cash as a ~~result~~percentage of ~~these changes,~~total compensation to align with stockholders' interests and to encourage long-term value creation
Eliminated the use of the time-based restricted stock and moved to performance-based restricted stock and stock options as the preferred stock vehicles for executive officers
Updated our ~~executive~~stock ownership policy to reflect a greater emphasis on stock compensation ~~program is better designed to enhance stockholder value~~ and ~~attract and retain executive talent pivotal to the Company's success.~~retention

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Emphasis on Pay for Performance
~~Here are~~Pay-for-performance compensation (cash bonus plus the ~~highlights~~value of performance-based restricted stock and stock options) represented 81.4% of the ~~substantive changes made to~~total direct compensation of our ~~executive compensation program in Fiscal 2014:~~
•
~~New Employment Agreement with Our Chairman and Chief Executive Officer.~~  ~~Our new three-year employment agreement with our Chairman and~~ Chief Executive Officer, David P. Storch, ~~eliminates all tax gross-up provisions, no longer provides a window~~in Fiscal 2016, compared to fixed compensation (base salary) at 18.6% of ~~opportunity in~~his total direct compensation.
Pay-for-performance compensation (cash bonus plus the 25^th ~~month after a change in control to terminate employment for any reason~~value of performance-based restricted stock and ~~still receive severance, and imposes a "double trigger" on~~stock options) represented 64.8% of the ~~vesting~~total direct compensation of stock awards upon a change in control ("double trigger" meaning a change of control and a termination of employment). The agreement also provides that the Compensation Committee will determine all short-term and long-term incentive awards for Mr. Storch.

•
~~Changes to Our Short-Term Incentive Plan.~~  ~~For Fiscal 2014, the Compensation Committee, at management's recommendation, exercised negative discretion to reduce by 30% the performance-based cash bonuses paid to the five~~our non-CEO named executive officers ~~whose bonuses under the short-term incentive plan were based on Company-wide performance. In the case~~in Fiscal 2016, compared to fixed compensation (base salary) plus discretionary bonus at 35.2% of Mr. Storch, for example, his actual Fiscal 2014 cash bonus of $851,548 was 30% less than the bonus of $1,216,498 determined by formula under the plan. The other four named executive officers also received cash bonuses that were 30% lower than their bonuses determined by formula under the plan. For Fiscal 2014 and Fiscal 2015, the Company changed its performance goals to earnings per share and cash flow from operations (in place of free cash flow) and adopted a rigorous set of threshold, target and maximum measures designed to provide payouts that are commensurate with performance against the Company's peer group companies.

•
~~Changes to Our Long-Term Incentive Plan.~~  For Fiscal 2014, the Compensation Committee continued to impose significant time-vesting conditions on stock awards as a means of encouraging performance and promoting retention: performance-based restricted stock vests 33¹/3% each in years three, four and five after grant; time-based restricted stocks vests 50% each in years four and five after grant; and stock options vest ratably over a five-year period. In addition, for Fiscal 2015, the Compensation Committee granted significantly fewer shares consistent with the Company's burn rate commitment under the AAR CORP. 2013 Stock Plan (see below). It also altered the mix of stock awards to place greater emphasis on performance-based restricted stock. The Compensation Committee added return on invested capital, together with a three-year cumulative net income measure, as the performance goals for performance-based restricted stock under our Fiscal 2015 long-term incentive plan and adopted a rigorous set of threshold, target and maximum measures designed to provide payouts that are commensurate with performance against the Company's peer group companies.

•
~~Our 2013 Stock Plan.~~  Our 2013 stock plan has a limited number of shares (2.5 million) consistent with the Company's commitment to maintain an average annual burn rate over the next three fiscal years not to exceed 3.7%. Our 2013 stock plan does not allow for the recycling of shares (i.e., shares withheld to pay the option exercise price and taxes do not become available for use under the plan) and does not permit the repricing of stock options without stockholder approval. All award agreements under the 2013 stock plan provide for a "double trigger" on the vesting of stock awards upon a change in control.
total direct compensation.

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•
~~Changes to Our Non-Qualified Deferred Compensation Plan.~~  In Fiscal 2014, the Compensation Committee, at management's recommendation, reduced by 50% the portion of the annual non-qualified deferred compensation contributions earned by formula in Fiscal 2014 by the following named executive officers under the Supplemental Key Employee Retirement Plan ("SKERP") as a cost-savings measure designed to make the Company's program more consistent with market practice. In particular, the reduction in Mr. Storch's contribution took account of the existing balance in his non-qualified deferred compensation account.

Additional Supplemental Company Contribution

Named Executive Officer

Formula Amount

Actual Amount



David P. Storch
$ 495,115 $ 247,557


Timothy J. Romenesko
$ 187,513 $ 93,756


Robert J. Regan
$ 81,309 $ 40,655
~~Two other named executive officers received the minimum contribution and the sixth named executive officer does not participate in the SKERP.~~
~~Chief Executive Officer Compensation~~
•
~~New Employment Agreement.~~  We entered into a new three-year employment agreement with our Chairman and Chief Executive Officer David P. Storch. The agreement provides for the elimination of all tax gross-ups and Mr. Storch's ability to terminate employment for any reason during the 25^th month after a change in control and still receive severance. The agreement imposes a "double trigger" on the vesting of stock awards upon a change in control. The agreement also provides that the Compensation Committee will determine all short-term and long-term incentive awards for Mr. Storch as a part of its regular annual compensation-setting process.

•
~~Fiscal 2014 Compensation.~~  Mr. Storch received a 2% increase over his year-end base salary, a significantly reduced cash bonus (30% below the bonus determined by formula under the short-term incentive plan) and a 10% increase in the number of shares under his long-term incentive award, all as reflected in the table below (note that Fiscal 2013 actual base salary was the amount paid in Fiscal 2013, not the year-end base salary).

Fiscal 2013 ($)

Fiscal 2014 ($)

Compensation Element

Actual

Target

Per Formula

Actual


Base Salary 877,838 906,449 N/A 906,449


Annual Cash Incentive
1,350,685 1,133,061 1,216,498 851,548


Long-Term Incentive Compensation
1,314,720 2,964,720 N/A 2,964,720
•
~~CEO Compensation Mix in Fiscal 2014~~  Mr. Storch's Fiscal 2014 compensation was significantly weighted toward variable performance-based compensation. His performance-based restricted stock award, stock option award and performance-based cash bonus represented 66% of his total direct compensation in Fiscal 2014.

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~~Fiscal 2015 Executive Compensation Actions~~
Our Compensation Committee made significant changes to the Company's executive compensation program in Fiscal 2015 based on its consideration of the following factors: the macro-environment in which the Company operates its businesses; the Company's performance in Fiscal 2014 and its expected performance in Fiscal 2015; the executive compensation assessment prepared by its independent compensation consultant in July 2014; the Company's commitment to meeting the burn rate parameters under the AAR CORP. 2013 Stock Plan; stockholder concerns identified in our stockholder outreach program; and other relevant items. In sum, the Compensation Committee took the following Fiscal 2015 executive compensation actions:
•
~~Froze base salaries at their Fiscal 2014 levels;~~

•
~~Retained earnings per share and cash flow from operations as the performance goals under the Fiscal 2015 short-term incentive plan;~~

•
Granted a total of 288,206 shares to employees under the Fiscal 2015 long-term incentive plan (which equals 576,412 "equivalent shares" for purposes of the burn rate calculation given that the shares granted were performance-based and time-based restricted stock), as contrasted with a total of 1,154,631 shares granted to employees under the Fiscal 2014 long-term incentive plan (which equals 1,276,247 "equivalent shares" for purposes of the burn rate calculation as the shares granted included performance-based and time-based restricted stock as well as stock options) — thus, a 75% reduction in total shares and a 55% reduction in "equivalent shares";

•
Consistent with the above, granted stock awards with a dollar value of $1,695,200 to our Chairman and Chief Executive Officer in Fiscal 2015, compared to Fiscal 2014 stock awards of $2,964,720 — a 43% reduction in the dollar value of the stock awards;

•
Altered the mix of stock awards under the Fiscal 2015 long-term incentive plan to place greater emphasis on performance-based restricted stock (75% of total stock awards in Fiscal 2015 are performance-based restricted stock compared to 23% in Fiscal 2014); and

•
~~Approved return on invested capital and cumulative net income as the two performance goals for performance-based restricted stock under the Fiscal 2015 long-term incentive plan.~~

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I.II.     Principal ~~Compensation~~ Elements of Our Fiscal 2016 Executive Compensation Program
The table below ~~identifies~~describes and explains the purpose of the principal elements of ~~our~~the Fiscal ~~2014~~2016 executive compensation program ~~and the subsequent narrative provides a fuller description of each element.~~for our named executive officers:

~~Compensation Element~~

~~Form of Compensation~~

~~Performance Criteria~~

Compensation
Element
Form of
Compensation Performance
Period Performance
Measures Purpose of this
Compensation Element

Base salary
Cash N/A
•
Individual performance and contributions
•
Qualifications and responsibilities
•
Experience and tenure with the Company
•
Competitive salary considerations
•
Rewards individual performance and contributions consistent with an individual's position and responsibilities
•
Provides competitive compensation
•
Balances risk-taking concerns associated with performance-based compensation

Annual cash ~~compensation incentive~~
bonus Cash ~~•  Earnings per share~~
~~•  Cash flow from operations~~
~~•  Specific business unit goals~~1 year

~~Long-term stock incentive compensation~~ •
Earnings per share
•
Working capital turns
•
Business group goals

•
Provides short-term, cash-based incentive
•
Measures performance against key corporate goals

Stock options ~~•  Individual performance and contributions~~Stock

Up to 10 years
•
Stock price

•  ~~Time-based restricted stock~~
Provides long-term, stock-based incentive
•  ~~Individual performance and contributions~~
Aligns payout directly with stockholder value creation

•  Performance-based restricted stock ~~•  Cumulative net income over three years~~
~~•  Return on invested capital (implemented for Fiscal 2015)~~Stock
3 years
~~Retirement benefits~~•
Cumulative net income
•
Return on invested capital
~~Eligibility~~
•
Provides long-term, stock-based incentive
•
Ties payout to ~~participate in and receive Company contributions to our 401(k) plan (available to all employees) and, for certain officers, a supplemental deferred compensation plan~~
~~Not applicable~~achievement of key corporate goals

~~Perquisites~~
~~Various (see below)~~ ~~Not applicable~~
A.
~~Base Salary~~
The Company provides base salaries as a guaranteed minimum amount of compensation in consideration of day-to-day performance. Base salaries are 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 executive officers, including the Chief Executive Officer and the other named executive officers, and may adjust base salaries, typically at the beginning of a fiscal year, based upon consideration of:
•
~~The executive's current salary;~~

•
~~The executive's performance and contributions during the past fiscal year;~~

•
~~The executive's qualifications and responsibilities;~~

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

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•
~~The Company-wide merit pool increase in the base salaries for all employees;~~

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

•
~~The recommendation of the Chief Executive Officer, in the case of all executive officers other than himself.~~

B.
~~Annual Cash Incentive Compensation~~
The Compensation Committee believes that annual incentive opportunities, payable in cash, serve as an appropriate incentive for achievement of the Company's short-term (i.e., one-year) performance goals at either the corporate level or at the business group level. A cash-based incentive provides an opportunity that is consistent with market practice and allows the named executive officers to receive the value of their performance over the measurement period.
Within the first 90 days of each fiscal year, the Company establishes specific performance goals for its executive officers, including the named executive officers, that govern the payment of annual cash incentive awards for that fiscal year. The Company pays an annual cash bonus to each named executive officer, typically measured as a percentage of the executive officer's base salary, based on the extent to which the Company and the executive officer achieve applicable performance goals. Performance at a target level results in a target annual cash bonus, and performance above or below target results in payment of an annual cash bonus at a higher or lower percentage of base salary, respectively. Performance below a minimum threshold results in no annual cash bonus. In all cases, the Compensation Committee has the discretion to not award any annual cash bonuses in a given year. For named executive officers at the corporate level, the annual cash bonus in Fiscal 2014 was based on two performance goals: earnings per share and cash flow from operations. For named executive officers in charge of a business group, the annual cash bonus is based on the performance results of the business group, rather than the Company as a whole.
C.
~~Long-Term Stock Incentive Compensation~~
The Company uses stock compensation to provide long-term incentive opportunities for its named executive officers and certain other officers and key employees. The Company believes that the use of stock compensation rewards executives in a manner that aligns their interests with the interests of the Company's stockholders. Given the importance of this alignment, long-term stock-based compensation typically represents the most significant component of total compensation for the Company's executive officers. Long-term stock incentive compensation awards represent~~potential~~ ~~compensation at the time of grant; their value is realized by a named executive officer only if applicable performance and vesting conditions are satisfied.~~
Generally, when determining restricted stock and stock option grant opportunities, the Compensation Committee considers the executive's position and responsibilities in the Company, performance and contributions during the preceding year, capabilities and potential for future contributions to the Company, the number of restricted stock shares and options previously granted to the executive and, for senior management (including the named executive officers), their stock ownership relative to the Company's stock ownership guidelines and the Chief Executive Officer's recommendation. The particular mix of stock awards — whether performance-based restricted shares, time-based restricted shares or stock options — depends on

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~~various factors considered by~~III.   Fiscal 2016 Executive Compensation Decision-Making Process
Each year the Compensation Committee ~~including~~reviews the ~~number of shares available for award, the~~ Company's performance priorities and the participants involved. In addition, the value of stock grants in any year will vary depending on the Board's assessment of the Company's business and share price performance in the prior fiscal year.
D.
~~Retirement Benefits~~
~~The Company's named executive officers participate in three retirement plans: the Retirement Plan, the Retirement Savings Plan and the Supplemental Key Employee Retirement Plan (the "SKERP").~~
•
~~Retirement Plan.~~  Messrs. Storch, Romenesko and Sharp are the only named executive officers who participate in the tax-qualified Retirement Plan. Benefit accruals under the Retirement Plan ceased on June 1, 2005. At termination of employment, a participant is eligible to receive the amount credited to his account under the Retirement Plan, which consists of (i) an opening balance for those participants who participated in the Retirement Plan as of December 31, 1999 equal to the then present value of the benefit accrued as of such date, (ii) quarterly pay credits (through May 31, 2005) based on the participant's age and service, and (iii) quarterly interest credits until the account is distributed based on the 30-year Treasury securities rate.

•
~~Retirement Savings Plan.~~  The Retirement Savings Plan is a tax-qualified 401(k) plan that covers most of the Company's U.S. employees, including the named executive officers. An employee can elect to defer up to 75% of his compensation, up to a maximum of $17,500 in 2014, or $23,000 if age 50 or over. Contributions can be made on a pre-tax or after-tax basis, as elected by the participant. The Company provides a matching contribution equal to 20% of the first 5% of the participant's contributions, up to 1% of compensation; a profit-sharing contribution of up to 4% of compensation based on the participant's deferrals and the performance of the participant's operating unit; and a retirement benefit contribution of up to 4% of compensation based on the participant's age and service.

•
~~SKERP.~~  The SKERP is a non-qualified retirement plan that contains a defined benefit portion and a defined contribution portion. Benefit accruals under the defined benefit portion for all employees other than Messrs. Storch and Romenesko ceased as of October 1, 2001 and were distributed to the participants. The benefits accrued under the defined benefit portion as of May 31, 2006 for Messrs. Storch and Romenesko were converted to a lump sum and transferred to the defined contribution portion of the SKERP. The defined contribution portion of the SKERP is intended to provide eligible employees with the portion of their elective deferrals and the Company's matching and profit sharing contributions that could not be made under the Retirement Savings Plan due to Internal Revenue Code limitations on the amount of compensation that can be taken into account in determining contributions ($255,000 in 2013 and $260,000 in 2014). The Company also makes annual supplemental contributions of up to 22% of salary and bonus for Mr. Storch, up to 16% of salary and bonus for Mr. Romenesko, and up to 5% or 10% of salary and bonus for the other eligible named executive officers, principally to motivate these individuals to grow as business leaders and to improve their performance and thereby improve the Company's performance. These annual supplemental contributions do not vest until the named executive officers meet the definition of "retirement" under the SKERP. In Fiscal 2014, the Compensation Committee, at

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management's recommendation, reduced by 50% the annual supplemental contributions earned by formula by three named executive officers, including the Chairman and Chief Executive Officer and the President and Chief Operating Officer.
E.
~~Perquisites~~
The Company provides certain executive officers, including its named executive officers, with a limited number of perquisites, as identified in the footnote to the "Other Compensation" column of the Summary Compensation Table. The Company believes these perquisites are reasonable, competitive and consistent with the Company's overall executive compensation program. The Compensation Committee reviews on an annual basis the types and costs of perquisites provided by the Company to its executive officers.
~~II.  Fiscal 2014 Executive Compensation~~
~~Each year management and the Compensation Committee review the Company's existing~~ executive compensation program and the programs of other companies, including its peer group ~~companies and other companies known for compensation "best practices."~~companies. The ~~Company~~Compensation Committee seeks to confirm that each compensation element of ~~its compensation elements,~~the Company's program, as well as ~~its~~the compensation structure, is not only competitive within the Company's marketplace, but also fits the Company in light of its history, culture, performance and strategy. Particular attention is given to the Company's stock price performance to ensure proper alignment between executive compensation and stock price performance.
The Compensation Committee ~~took~~followed the ~~following key actions~~process below in setting and approving executive compensation in Fiscal ~~2014, each of which is described in detail below:~~2016.

~~Date~~

~~Compensation Committee Action~~

~~June 2013~~ ~~Approved Fiscal 2014 peer group for executive compensation~~
~~July 2013~~ ~~•  Approved Fiscal 2014 base salaries~~

~~•  Approved Fiscal 2014 short-term incentive plan~~

~~•  Approved Fiscal 2014 long-term incentive plan~~

~~•  Approved Fiscal 2014 target total direct compensation for named executive officers~~

~~July 2014~~ ~~Approved annual cash bonuses awarded under the Fiscal 2014 short-term incentive plan based upon Fiscal 2014 performance~~
A.
Fiscal ~~2014~~2016 Peer Group
~~Total~~The Compensation Committee believes that total compensation opportunities for the Company's key executives, including ~~each~~the named executive ~~officer, are intended to~~officers, should be competitive with those offered by other companies competing for talent in the Company's employment market.
In ~~June 2013,~~July 2015, the Compensation Committee reviewed its peer group for executive compensation purposes using the following criteria: company type (publicly traded on a major exchange); industry classification (using Standard and Poor's GICS codes); annual revenues (one-half to two times the Company's annual revenues); and business model (organizations that conducted business in the Company's two ~~operating segments —~~business segments: Aviation Services and ~~Technology~~

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~~Products)~~Expeditionary Services). The Compensation Committee's objective is to assemble a set of peer group companies to which relevant pay and performance comparisons may be made with the Company.
The Compensation Committee ~~acted on~~engaged Mercer to assist in determining the composition of the Company's Fiscal 2016 peer group for executive compensation purposes. Following consideration of Mercer's peer group report, the Board of Directors, upon the recommendation of ~~Mercer (US) Inc. ("Mercer"), its independent compensation consultant, and~~ the ~~Company's management to revise the Company's~~Compensation Committee, approved a Fiscal 2016 peer group ~~for Fiscal 2014 to consist~~consisting of the following 1819 companies, updown from 1720 peer companies in Fiscal ~~2013:~~2015:
~~Alliant Techsystems,~~Aerojet Rocketdyne Holdings, Inc. (formerly Gencorp Inc.) KLX Inc.
~~Kennametal~~Barnes Group, Inc.
~~Applied Industrial Technologies Inc.~~
~~Kratos Defense & Security Solutions, Inc.~~
~~B/E Aerospace, Inc.~~
Moog Inc.

~~Crane Co.~~
~~MSC Industrial Direct Co.,~~CACI International, Inc.
~~Cubic Corporation~~
Rockwell Collins, Inc.

~~Curtiss-Wright Corporation~~
Crane Co. ~~Spirit AeroSystems Holdings, Inc.~~Service Application International, Corp.

~~Esterline Technologies~~Cubic Corporation
Teledyne Technologies, Inc.

~~Hexcel Corporation~~
Curtiss-Wright Corp. TransDigm Group Inc.

~~Kaman~~Esterline Technologies Corporation
Triumph Group, Inc.
Heico Corp. Wesco Aircraft Holdings, Inc.
Hexcel Corporation Woodward, Inc.
Kaman Corporation
The ~~two~~five companies added to the Fiscal ~~2014~~2016 peer group were Barnes Group, Inc., CACI International, Inc., Heico Corp., KLX Inc. and Service Application International, Corp. The six companies dropped from the Fiscal 2015 peer group were Alliant ~~Techsystems,~~TechSystems, Inc. ~~and~~, Applied Technologies Inc., B/E Aerospace, Inc., Kratos Defense & Security Solutions, Inc., Orbital ATK Inc. and Spirit Aerosystems Holdings, Inc.
The ~~one company dropped from~~Board of Directors and the Compensation Committee generally aim to minimize year-to-year changes in the Company's peer group. However, Fiscal ~~2014~~2016 peer group ~~was Interline Brands, Inc., which was acquired and is no longer~~changes were deemed necessary to reflect the Company's transition to a ~~public company.~~predominantly aviation services-oriented business. The ~~Compensation Committee annually revisits the composition of the peer group~~changes also were designed to ensure that the Company's performance and executive compensation program are measured against those of comparably-sized companies (e.g., in terms of revenue, market capitalization and ~~situated companies. The mix of the Company's commercial and defense businesses presents a~~other financial measures). A continuing challenge in constructing athe Company's peer group ~~given~~is that many defense ~~contractors~~contractor competitors have ~~substantially~~significantly greater ~~resources~~revenues and higher market capitalizations than the Company.

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Fiscal 2016 Executive Compensation Assessment
Following the Compensation Committee's approval of the Fiscal ~~2014~~2016 peer group, Mercer provided the Compensation Committee with an executive compensation assessment analyzing the characteristics of the compensation design of high-performing companies (i.e., those companies that consistently outperform their market peers). Mercer focused on short-term and long-term incentive plans and then compared its findings with the Company's short-term and long-term incentive plans.
Mercer concluded that the design of the Company's short-term incentive plan was comparable to the plan designs of high-performing companies for the following key reasons:
The Company's short-term incentive plan used two financial metrics — earnings per share and working capital turns — to determine annual cash bonuses for its named executive officers.
The Company's payout levels were competitive, with maximum payouts generally capped at 200% of target.
Mercer also concluded that the design of the Company's long-term incentive plan was comparable to the plan designs of high-performing companies based on its use of two to three stock vehicles (stock options, performance-based restricted stock and time-based restricted stock), as well as its use of two performance metrics for performance-based restricted stock (cumulative net income and return on invested capital).
Mercer conducted an executive compensation assessment in July ~~2013,~~2015, at the direction of the Compensation Committee, to assist with Fiscal 2016 executive compensation decisions. Mercer's executive compensation assessment ~~included (i) a~~included:
A benchmarking analysis showing how the compensation paid to the Company's named executive officers compared to compensation paid to the named executive officers of the Company's peer group ~~companies~~companies; and ~~(ii) a~~
A comparison of the Company's Fiscal 2015 financial performance against the financial performance of its peer group companies.
The key findings and recommendations of the ~~Mercer'~~Mercer executive compensation assessment of the Company, ~~are set forth below:~~based on peer group information, were:
•
The ~~Company's~~ base salaries ~~are generally~~of the named executive officers were targeted at the 50^th ~~percentile of its peer group companies;~~market median in the aggregate (Mercer recommended minor adjustments in individual cases);

•
~~Actual~~Annual cash ~~compensation (base salary plus cash bonus) is slightly~~bonuses for the named executive officers at the target level were positioned above the market 75^th percentile in the aggregate (Mercer's recommendation was to reduce target bonuses to the market median and increase the maximum bonus opportunity to 250% of target);
Long-term incentives for the ~~Company's peer group companies;~~named executive officers were targeted between the market 25^th and 50^th percentiles in the aggregate (Mercer's recommendation were to increase target long-term incentives to the market median to emphasize the achievement of long-term goals, change the vesting period for stock awards to three-year cliff vesting and increase the maximum performance-based stock opportunity to 250% of target); and

•
~~Actual total~~Total direct compensation (base salaryplus annual cash bonusplus the ~~three-year average~~dollar value of annual stock ~~awards) falls between~~grants) for the 50^thnamed executive officers was appropriately positioned at the market median in the aggregate.
In addition to its review and 75^th ~~percentiles~~consideration of Mercer's executive compensation assessment and recommendations, the Compensation Committee reviewed and considered historical compensation data for the Company's executives. This data included summaries of cash and equity compensation received in past years by each executive. The Compensation Committee also reviewed the executives' total annual compensation, including cash and non-cash direct compensation, cumulative benefits and savings under retirement plans and equity compensation programs, perquisites and potential payments on termination of employment, whether on a change in control of the Company or otherwise. It reviewed the performance of the Company and the executives during the year, taking into account established goals, leadership qualities, operational performance, business responsibilities, career experience, and long-term potential to enhance stockholder value. The Compensation Committee reviewed internal pay comparisons among the Company's ~~peer group companies;~~
executives to ensure that the Company's executive compensation program reflects the executives' relative positions, responsibilities, and contributions to the Company.

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•
~~The Company had~~Recommendations of the highest one-year total stockholder return compared to its peer group companies; it outperformed its peer group on one-year free cash flow growth, was at the median for one-year net income growth and lagged its peer group in other one-year metrics (e.g., earnings per share growth, revenue growth and return on invested capital); andChief Executive Officer

•
The Company's three-year financial performance showed the Company outperforming its peer group in revenue growth and net income growth and trailing its peer group in other areas (e.g., earnings per share growth, return on invested capital and total stockholder return).
The Compensation Committee considered the ~~Mercer~~recommendations of the Chief Executive Officer in making Fiscal 2016 compensation decisions for all of the named executive officers other than the Chief Executive Officer. In making these recommendations, the Chief Executive Officer evaluated the performance of the executives during the prior year against pre-established performance goals. Some of the performance goals related to the financial performance of the Company or the executive's business group. Other performance goals were non-quantitative and related to leadership development, customer relationships, acquisition integration, diversity development, or similar Company initiatives. The Chief Executive Officer's recommendations reflected his assessment of an individual executive officer's contributions to the performance of the Company.
The Compensation Committee has the ultimate decision-making authority and responsibility for compensation ~~assessment,~~decisions affecting the Company's executives, including its named executive officers. The Chief Executive Officer does not play any role in any decision affecting his own compensation.
Stockholder Advisory Vote
The Compensation Committee carefully considers the results of the stockholder say-on-pay votes in designing the executive compensation ~~levels~~program and making executive compensation decisions for the Company's key executives. Holders of approximately 73% of the ~~peer group companies, in approving~~outstanding shares approved the Fiscal ~~2014 base salaries, target annual cash bonuses and target long-term incentive~~2015 compensation ofpaid to the Company's named executive officers. ~~In addition,~~This result was lower than the 96% say-on-pay vote in Fiscal 2014. The Compensation Committee believes that the lower say-on-pay vote result in Fiscal 2015 was the result of a negative recommendation from a single proxy advisory firm. As described under " — Fiscal 2016 Executive Compensation Decisions," the Compensation Committee ~~recognized that~~made changes to its Fiscal 2016 program in response to this negative recommendation and feedback received from other parties, including its stockholders.
* * * * * * * * *
The Compensation Committee considered all of the ~~Company has posted significant~~above items in making Fiscal 2016 executive compensation decisions as to base salaries, annual cash bonuses and stock ~~price increases in~~awards for the ~~last two fiscal years following a disappointing result in~~Company's named executive officers. Each of these Fiscal ~~2012, as shown below:~~2016 compensation elements is addressed below.
IV.   Fiscal 2016 Executive Compensation Decisions

Fiscal Year

Opening
Stock Price
on June 1 ($)

Closing
Stock Price
on May 31 ($)

Increase (Decrease) (%)


2014 20.06 24.30 21


2013
12.05 20.06 66


2012
25.78 12.05 (53 )
~~As a part of its approval process,~~Base Salaries
For Fiscal 2016, the Compensation Committee, took into account that the Company has a higher percentage of defense business than most of its peer group companies, and that defense businesses experienced more modest performance returns than commercial businesses in Fiscal 2014.
~~Based in part on its consideration of~~consistent with Mercer's executive compensation assessment, showing that the Company's performance was below its peers in certain respects, including three-year total stockholder return (due to Fiscal 2012 stock price performance), the Compensation Committee took the actions described in more detail below — namely, reduced Fiscal 2014 annual cash bonuses by 30%; reduced Fiscal 2015 stock awards by 43% for the Chairman and Chief Executive Officer and President and Chief Operating Officer and at least 25% for all other named executive officers; and froze Fiscal 2015 base salaries for all named executive officers.
B.
~~Fiscal 2014 Base Salaries~~
~~The Compensation Committee generally sets~~adjusted the base salaries of the ~~Company's~~ named executive officers ~~at or around~~to align them more closely with the 50^th percentile level of ~~salary levels of comparable positions at its~~the Company's peer group ~~companies.~~companies' base salaries. The ~~Company does not target~~Compensation Committee believes that base salaries ~~at any specific percentage of total~~— representing fixed compensation ~~when setting base salary; however, given the Company's emphasis on the link between pay and performance, base salaries are~~— should be a less significant percentage of total direct compensation ~~compared to~~than performance-based compensation. In the ~~Company's variable performance-based compensation.~~
~~The Compensation Committee,~~case of David P. Storch, the Chairman, President and CEO, his Fiscal 2016 base salary of $767,000 represented 18.6% of his total direct compensation and was a 15.4% reduction from his Fiscal 2015 base salary of $906,449. Mr. Storch's and Mr. Romenesko's base salary reductions in Fiscal 2016, taken at ~~management's recommendation, approved a 2% increase over~~their initiative, also reflect the relatively smaller size of the Company following the divestiture of significant manufacturing operations in late Fiscal ~~2013 year-end base salaries for the named executive officers.~~2015.

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The following table ~~below~~ shows actual Fiscal ~~2014~~2015 base salaries compared to target Fiscal ~~2013~~2016 base salaries for the named executive officers ~~(note that Fiscal 2013 base salaries were~~as set by the ~~amounts paid in Fiscal 2013, not the year-end base salaries):~~Compensation Committee:

Named Executive Officer

Fiscal 2013 ($)

Fiscal 2014 ($)



David P. Storch
877,838 906,449


Timothy J. Romenesko
483,513 499,272


John C. Fortson
N/A 400,000


Randy J. Martinez
349,070 360,447


Robert J. Regan
379,226 391,586


Michael J. Sharp
312,576 360,353
Named Executive Officer Fiscal 2015 ($) (Actual) Fiscal 2016 ($) (Target)*

David P. Storch 906,449 767,000

Timothy J. Romenesko 499,272 450,000

John M. Holmes 409,375 450,000

Michael J. Sharp 360,353    400,000**

Robert J. Regan 391,586 390,000

John C. Fortson 400,000 425,000

C.*
~~Annual Cash Bonuses Under~~See the ~~Fiscal 2014 Short-Term Incentive Plan~~
~~The Fiscal 2014 short-term incentive plan provides certain employees, including~~"Summary Compensation Table" for actual base salaries received by the named executive officers ~~with~~for Fiscal 2016. The difference between target Fiscal 2016 base salaries and actual Fiscal 2016 salaries reflects the ~~opportunity~~different effective dates of the actual Fiscal 2016 base salaries.

**
Originally targeted at $325,000 and subsequently adjusted to ~~earn an annual cash bonus. This plan works in collaboration with~~$400,000 upon Mr. Sharp's promotion to Chief Financial Officer on September 29, 2015.
Annual Cash Bonuses
Section 162(m) Annual Cash Incentive Plan.    The Compensation Committee previously approved the AAR CORP. Section 162(m) Annual Cash Incentive Plan, which ~~sets~~set a ceiling on the annual cash bonuses payable under the Company's short-term incentive ~~plan~~plans, including the Fiscal 2016 short-term incentive plan. The purpose of the Section 162(m) Annual Cash Incentive Plan is to enable the annual bonuses to qualify as "performance-based compensation" under Section 162(m) of the Internal Revenue ~~Code, as determined by the Compensation Committee.~~ Code.
The Section 162(m) Annual Cash Incentive Plan uses as its performance goal the Company's net income for a given fiscal year. It establishes a maximum award opportunity for each participant, expressed as a percentage of net ~~income (e.g., the~~income. The maximum annual ~~award is~~awards are 5% of net income for the Chief Executive Officer ~~3% for the President~~ and 2% for all ~~others), and then provides that~~other participating officers. These maximum awards are designed to cap the ~~Compensation Committee has the discretion to reduce these amounts so that the actual~~ bonuses ~~to be paid to participants will be~~ determined under the Company's annual short-term bonus plans. Accordingly, any bonus determined under the Fiscal ~~2014~~2016 short-term incentive ~~plan.~~plan below is subject to these caps. In ~~all years~~each year since the inception of the Section 162(m) Annual Cash Incentive Plan ~~including~~in Fiscal ~~2014,~~2010, the Compensation Committee has exercised negative discretion to reduce the annual cash bonuses of the named executive ~~officer.~~officers to the amounts determined under the Company's annual short-term bonus plans, as discussed below.
Fiscal ~~2014 Performance Goals.~~2016 Short-Term Incentive Plan.    The Compensation Committee, ~~approved,~~ after consideration of Mercer's executive compensation assessment, peer group information, other market data, ~~and~~ the ~~current~~ state of the business environment in which the Company operates ~~two performance goals under~~and the factors described above, approved the Fiscal ~~2014~~2016 short-term incentive plan for ~~corporate officers, including~~ Mr. Storch, Mr. ~~Romenesko, Mr. Fortson,~~Sharp, Mr. Regan and Mr. ~~Sharp:~~Fortson. Mr. Romenesko and Mr. Holmes participated, as described below, in separate performance incentive plans tied to the results of their business groups.
The Fiscal 2016 short-term incentive plan is a performance-based plan in which the Company measured its performance against two performance goals: earnings per share (weighted 80%) and ~~cash flow from operations~~working capital turns (weighted 20%) at the ~~targets~~threshold, target and maximum levels set forth in the table below:

Performance Goal

Target

Percentage Weighting



Earnings per share
$2.02 75 %


Cash flow from operations
$120 million 25 %

Performance Goal
Threshold Target Maximum

Earnings per share (80%)
$1.04 $1.30 $1.56

Working capital turns (20%)
2.4 3.0 3.6

Earnings per share has been used as a performance goal in past years, and cash flow from operations is a new performance goal this year. Previously the Company had used free cash flow, but the Compensation Committee determined that cash flow from operations is a better measure

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~~than free~~The Compensation Committee believes that these two performance goals are critical measures of the Company's financial success. Earnings per share demonstrates the Company's emphasis on delivering earnings to stockholders, and working capital turns measures the Company's effectiveness in using its working capital (current assets minus current liabilities) and, in particular, its use of its cash. The Compensation Committee used working capital turns in place of cash flow ~~for~~from operations in Fiscal 2016 because of the ~~Company because it shows how well~~emphasis placed upon working capital turns by the senior leadership of the Company. The Compensation Committee set the target goals based on the Company's ~~businesses are producing cash that will ultimately benefit stockholders, whether in the form of increased investment, stock repurchases or dividend payouts. The choice of~~financial plan, with earnings per share and ~~cash flow from operations performance goals reflects the Company's continuing emphasis on preserving and growing stockholder wealth and maintaining a strong balance sheet.~~
working capital turns determined in accordance with generally accepted accounting principles (subject to certain possible adjustments). The Compensation Committee ~~determined that for purposes~~lowered the threshold, target and maximum levels year over year to take account of ~~measuring attainment~~the smaller relative size of ~~these performance goals~~the Company following the Fiscal 2015 divestment of significant manufacturing operations and the reduced target bonus opportunities described below.
Based on Mercer's executive compensation assessment, the Compensation Committed reduced the target bonus opportunities of certain named executive officers in Fiscal ~~2014: (i) earnings per share means diluted earnings per share as disclosed by~~2016: Mr. Storch, to 100% of base salary from 125%; Mr. Regan, to 70% of base salary from 90.9%; and Mr. Fortson, to 70% from 90.9%. (Mr. Sharp's target bonus opportunity remained the ~~Company~~same at 70% of base salary in ~~its periodic reports filed~~recognition of his promotion to Chief Financial Officer.) These reductions, which likewise affected the threshold and maximum bonus opportunities, demonstrated the Compensation Committee's intention to align compensation with the SEC, as adjusted for special charges or unusual or infrequent items incurred during the performance period, and (ii) cash flow from operations means cash flow from operations as disclosed by the Company in its periodic reports filed with the SEC, as adjusted for working capital investments in certain original equipment manufacturers' programs, special charges or unusual or infrequent items incurred during the performance period.Company's market peers.
The Fiscal ~~2014~~2016 annual cash bonus opportunities at threshold, target and maximum levels ~~expressed as a percentage of base salary and in dollar amounts~~ for the named executive officers are set forth in the table below:

Threshold

Target

Maximum

Named Executive Officer

Percent of
Base Salary
(%)

($)

Percent of
Base Salary
(%)

($)

Percent of
Base Salary
(%)

($)

   David P. Storch 62.5 566,531 125.0 1,133,061 250.0 2,266,122
   Timothy J. Romenesko 56.8 283,677 113.6 567,354 227.2 1,134,708
   John C. Fortson 45.5 181,818 90.9 363,637 181.8 727,274
   Robert J. Regan 45.5 177,994 90.9 355,988 181.8 711,976
   Michael J. Sharp 38.4 138,204 76.7 276,407 153.4 552,814

Threshold Target Maximum

Named Executive Officer
Dollar
Amount
($) Percent of
Base Salary
(%) Dollar
Amount
($) Percent of
Base Salary
(%) Dollar
Amount
($) Percent of
Base Salary
(%)

David P. Storch
383,500 50% 767,000 100% 1,917,500 250%

Michael J. Sharp
140,000 35% 280,000 70% 700,000 250%

Robert J. Regan
136,500 35% 273,000 70% 682,500 250%

John C. Fortson
148,750 35% 297,500 70% 743,750 250%

~~For Messrs. Storch, Romenesko, Fortson, Regan and Sharp, an annual cash incentive award required: (i) at the threshold level, attainment of~~The Company's actual Fiscal 2016 earnings per share ~~of at least $1.62 (80% of the target of $2.02)~~ and ~~cash flow from operations of at least $90 million (75% of the target of $120 million); (ii) at~~working capital turns results compared to the target level ~~attainment of 100% of~~were:

Performance Goal
Target Actual

Earnings per share
$1.30 $1.37

Working capital turns
3.0 3.0

Based on the ~~performance goal targets (earnings per share of $2.02 and cash flow from operations of $120 million); and (iii) at the maximum level, attainment of at least 120% of the~~Company's above-target earnings per share ~~performance goal targets (earnings per share of at least $2.42)~~ and ~~at least 125% of~~working capital turns results in Fiscal 2016, the cash ~~flow from operations performance goal~~bonuses paid to Mr. Storch, Mr. Sharp and Mr. Regan under the Fiscal 2016 short-term incentive plan exceeded their target ~~(cash flow from operations of at least $150 million).~~annual bonuses (but were substantially less than the maximum bonuses), as shown in the table below:

Fiscal 2016 Short-Term
Incentive Plan

Named Executive Officer
Target Bonus Actual Bonus

David P. Storch
$767,000 $1,014,800

Michael J. Sharp
$280,000 $370,462

Robert J. Regan
$273,000 $361,200

John C. Fortson
$297,500 N/A*

*
Mr. ~~Martinez is Aviation Services Group Vice President — Airlift and in that capacity he participates in a separate bonus program tied~~Fortson resigned prior to the ~~performance~~end of ~~this business unit rather than to~~Fiscal 2016 and thus did not receive a Fiscal 2016 cash bonus.
Performance Incentive Plans.    The Compensation Committee, after consideration of Mercer's executive compensation assessment, peer group information, other market data and the ~~overall performance of the Company. Mr. Martinez's Fiscal 2014 performance goals were Airlift's pre-tax income (threshold of $21 million and a target of $26 million) and free~~other factors described above, approved separate annual cash flow (threshold of $49 million and a target of $61 million). Mr. Martinez's target bonus for Fiscal 2014 was $360,447 and his maximum bonus was $720,894. Mr. Martinez's bonus opportunity was designed to provide appropriate incentive for excellent performance in Airlift's pre-tax income and free cash flow performance.

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bonus plans for Mr. Romenesko and Mr. Holmes in Fiscal ~~2014 Actual Results.~~    ~~The Company's actual Fiscal 2014 results compared to the targets as follows:~~

Performance Goal

Target

Actual

Actual as
Percentage of Target


Earnings per share $2.02 $1.83 90.6 %


Cash flow from operations
$120 million $167.8 million 139.8 %
~~There were no adjustments made to earnings per share results of $1.83, and the cash flow from operations of $167.8 million reflects~~2016 (each, a $28 million adjustment for the Company's working capital investment in a customer program. Excluding this adjustment, cash flow from operations was $139.8 million or 116.5% above the target of $120 million.
~~Based~~Performance Incentive Plan ("PIP")) based on the ~~earnings per share and cash flow from operations results,~~performance of their business units rather than the ~~Fiscal 2014 cash bonuses payable to Messrs. Storch, Romenesko, Fortson, Regan and Sharp under the terms~~performance of the ~~Fiscal 2014~~Company as a whole. Mr. Romenesko, who participated in the corporate short-term incentive plan ~~would have represented 107%~~in prior fiscal years, was moved to a PIP in Fiscal 2016 in light of ~~their target annual cash bonuses. However, management instead recommended — and~~his position as Chief Operating Officer of Expeditionary Services.
Mr. Romenesko's PIP was based on the ~~Compensation Committee approved —~~ Fiscal ~~2014 cash bonuses equal to 75.2%~~2016 results of the ~~target bonus awards. This represented a 30% reduction for the named executive officers~~Expeditionary Services business group in the cash bonuses otherwise determined by Formula under the Fiscal 2014 short-term incentive plan. These bonus reductions applied only to the five named executive officers at the corporate level; Mr. Martinez, Group Vice President at the Company's Airlift subsidiary, received his entire earned bonus given the performance of his business unit in Fiscal 2014.
Despite the Company's above-target performance in Fiscal 2014, including its exceptional cash flow results, management and the Compensation Committee reduced Fiscal 2014 annual cash bonuses principally in response to the Company's challenging operational environment, which negatively affected Fiscal 2014 sales (down 4.8% from Fiscal 2013) and caused the Company to effect reductions in force at several businesses to align its staffing resources with business demand and corporate strategy.
The table below reflects the cash bonus reductions, which totaled $868,505 for the listed named executive officers, by showing, for each named executive officer, the target bonus, the bonus determined by the performance formula under the Fiscal 2014 short-term incentive plan and the actual cash bonus approved by the Compensation Committee at management's recommendation.

Fiscal 2014 Annual Cash Bonus

Named Executive Officer

Target Bonus
($)

Bonus Determined
Under the
Short-Term
Incentive Plan ($)

Actual Bonus
($)

Percentage
Reduction in Actual
Bonus Over Bonus
Determined Under
the Plan (%)


David P. Storch 1,133,061 1,216,498 851,548 30


Timothy J. Romenesko
567,354 609,133 426,393 30


John C. Fortson
363,637 390,415 273,290 30


Robert J. Regan
355,988 382,202 267,541 30


Michael J. Sharp
276,407 296,762 207,733 30

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~~Mr. Martinez received an annual cash bonus of $570,029 based upon Airlift's performance in Fiscal 2014, in which Airlift exceeded its~~two areas — pre-tax income and free cash flow, ~~targets.~~as shown below:
Performance Goal
Threshold Target

Pre-tax income
($7.5 million) $3.9 million

Free cash flow
$15.2 million $27.9 million

Mr. Romenesko was eligible for a maximum bonus of $675,000 under his PIP (separate and apart from any bonus payable for his services as Vice Chairman of the Company), as follows: $225,000 under the pre-tax income performance goal; $225,000 under the free cash flow performance goal; and $225,000 in the sole discretion of the Company's Chief Executive Officer based on the performance of Expeditionary Services. Based on the below-threshold performance of Expeditionary Services in Fiscal 2016, Mr. Romenesko did not receive a performance-based cash bonus under his PIP. However, in consideration of the significant services provided by Mr. Romenesko in his capacity as Vice Chairman of the Company, Mr. Romenesko received a discretionary Fiscal 2016 cash bonus of $507,400 (which would have been his bonus if he had participated, as in prior years, in the Company's short-term incentive plan).
Mr. Holmes's PIP was based on the Fiscal 2016 results of the Aviation Services business group in four areas — pre-tax income, free cash flow, return on average net invested capital and working capital turns, as shown below:

Performance Goal
Threshold Target

Pre-tax income
$38.2 million $47.7 million

Free cash flow
$63.5 million $79.4 million

Return on average net invested capital
8.28% 10.35%

Working capital turns
2.61 3.26

Mr. Holmes was eligible for a maximum bonus of $900,000 under his PIP, as follows: $540,000 under the pre-tax income performance goal; $180,000 under the free cash flow performance goal; $90,000 under the return on average net invested capital performance goal; and $90,000 under the net working capital turns performance goal. Based on the performance of Aviation Services in Fiscal 2016, Mr. Holmes received a performance-based cash bonus of $517,949 under his PIP. Mr. Holmes also received a discretionary Fiscal 2016 cash bonus of $117,551 in consideration of his additional services as a member of the Company's senior leadership team.
D.
Stock Awards ~~Under~~under the Fiscal ~~2014~~2016 Long-Term Incentive Plan
The Compensation Committee granted awards of performance-based ~~restricted stock, time-based~~ restricted stock and stock options to the named executive officers and certain other officers and key employees under the Fiscal ~~2014~~2016 long-term incentive plan. ~~For the named executive officers,~~
In Fiscal 2016, as in other years, the Compensation Committee ~~allocated~~determined the types and dollar value of the stock awards as follows: performance-based restricted stock — 23%; time-based restricted stock — 23%; and stock options — 54%. Mr. Martinez received only stock option awards in Fiscal 2014, consistent with the Company's general approach in providing Group Vice Presidents with relatively modest equity compensation awards and significant cash bonus opportunities.
~~The Compensation Committee determines the annual allocation~~amounts of stock awards ~~among~~to be granted. These determinations took into account:
The Fiscal 2016 executive compensation assessment presented by Mercer;
The Committee's emphasis on performance-based ~~restricted stock, time-based restricted stock and stock options based on a variety of factors, including: its preference for performance-based~~ awards; ~~the~~
The Company's burn rate ~~commitment~~experience under the AAR CORP. 2013 Stock Plan; ~~the~~
The number of participants in the ~~program; the positions~~stock plan;
The levels of responsibility, seniority and overall compensation ~~levels~~ of the participants; ~~the~~

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The Company's performance in the last fiscal year and its forecasted performance in the current fiscal year; ~~the~~
The Company's budget for compensation expense; and ~~the~~
The Company' stock price. ~~For~~
In Fiscal ~~2014,~~2016, the Compensation Committee ~~determined that setting performance-based~~allocated the stock awards ~~(performance-based~~in the following manner: performance-based restricted stock — 50%; and stock options — 50%. No shares of time-based restricted stock — a form of stock-based compensation not tied to any performance measure — were granted to any named executive officer in Fiscal 2016. The Committee's use of performance-based restricted stock and stock ~~options) at 77% and~~options (rather than time-based restricted ~~stock at 23% was the proper allocation.~~
The Fiscal 2014 stock awards represented a 10% increase over the number of shares awarded in Fiscal 2013. The Compensation Committee approved this increase to reward executives for the stock price increase in Fiscal 2013 (up to $20.06 per share from $12.05 per share) and to incentivize Fiscal 2014 performance. The increase also took account of the 40% reductionstock) provides appropriate incentives, in the ~~prior year's stock awards due~~Committee's view, for key performers to ~~concerns at that time about the stock price.~~meet and exceed pre-established financial measures.
Performance-Based Restricted Stock.    At its meeting on ~~July 15, 2013~~August 7, 2015 (and October 13, 2015, in the case of a second award to Mr. Sharp in connection with his promotion to Chief Financial Officer of the Company), the Compensation Committee approved the following grants of performance-based restricted stock to ~~Mr. Storch, Mr. Romenesko, Mr. Fortson, Mr. Regan and Mr. Sharp~~the named executive officers for Fiscal ~~2014,~~2016, subject to aperformance conditions over the three-year ~~cumulative net income~~ performance ~~condition~~period Fiscal 2016 through Fiscal 2018 and separate vesting requirements, each as described ~~below (dollar value based on the grant date fair value):~~below:

Performance-Based Restricted Stock

Named Executive Officer

Number of Shares

Dollar Value ($)

   David P. Storch 26,400 671,352
   Timothy J. Romenesko 13,200 335,676
   John C. Fortson 4,750 120,793
   Robert J. Regan 7,920 201,406
   Michael J. Sharp 3,168 80,562
Fiscal 2016 Performance-Based
Restricted Stock

Named Executive Officer
Number of Shares Dollar Value ($)

David P. Storch
43,219 1,150,500

Timothy J. Romenesko
14,087 375,000

John M. Holmes
14,087 375,000

Michael J. Sharp
15,591 368,750

Robert J. Regan
11,721 312,000

John C. Fortson
12,772 340,000

~~Shares~~The dollar value of the shares in the table above is based on the $26.62 closing price of the Common Stock on the August 7, 2015 date of grant (and, in the case of Mr. Sharp's second award, the $22.37 closing price of the Common Stock on October 13, 2015).
The Company's cumulative net income (weighted 75%) and return on invested capital (weighted 25%) are the two performance goals for the performance-based restricted stock ~~are subject to a performance condition and time-based vesting requirements. If~~under the Fiscal 2016 long-term incentive plan. The Compensation Committee believes cumulative net income and return on invested capital are appropriate measures because they capture critical elements of the Company's performance over the three-year period.
The table below shows the threshold, target and maximum levels (which were lower than Fiscal 2015 levels for the ~~three-year~~same reasons as described for the reduced levels under the short-term incentive plan above) set by the Compensation Committee for each of these performance goals:

Performance Goal
Threshold Target Maximum

Cumulative Net Income
$121.8 million $152.3 million $182.8 million

Three-Year Return on Invested Capital
4.38% 5.47% 6.56%

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performance period beginning June 1, 2013 and ending May 31, 2016 is less than $210.4 million (80% of target net income), the performance condition is not met and the shares are forfeited. Cumulative net income performance (i)Performance at athe threshold level ~~of $210.4 million (80% of target net income)~~ results in a 50% payout of ~~50% of~~ the shares, (ii) at a target level of $263 million results in a payment of 100% of the shares, (iii) at a maximum level of $315.6 million (120% of target net income) results in a payout of 200% of the shares, and (iv) at levels between threshold and target and target and maximum, the shares will be paid out on a straight-line basis, in each case subject to time-based vesting requirements. These performance measures are designed to be "stretch" measures, and it is not uncommon for shares of performance-based restricted ~~stock to be forfeited for failing to meet~~stock; performance at the ~~applicable~~target level results in a 100% payout; and performance ~~measures (e.g., approximately 25% of~~at or above the ~~shares of~~maximum level results in a 250% payout. Performance between the ~~Fiscal 2012 performance-based restricted stock award were forfeited as a result of~~threshold and target levels and between the ~~Company not meeting its cumulative net income performance~~ target ~~for the three-year period ending May 31, 2014).~~and maximum levels results in proportionate straight-line payouts. The Compensation Committee believes that the performance-based nature of these restricted stock awards ~~provide~~provides appropriate incentives to executives in line with the interests of the Company's stockholders.
If the performance ~~condition is~~goals for the three-year performance period through Fiscal 2018 are met, the shares ~~of performance-based restricted stock~~will vest 33¹/3%100% on ~~each of May 31, 2016, May 31, 2017, and May~~July 31, 2018. ~~The Compensation Committee believes that the use~~As a part of ~~a meaningful time vesting period encourages executives~~its changes to ~~build their careers with the Company and contributes to greater stability within~~ the Company's executive ~~leadership.~~compensation program, the Compensation Committee

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adopted three-year cliff vesting of the earned performance-based shares (compared to prior years' vesting in the third, fourth and fifth years after the performance-based shares were earned) in recognition of similar vesting periods used by its market peers, as well as the addition of a retention requirement under its revised Stock Ownership Guidelines. Performance-based shares of restricted stock, once vested, isare not subject to any further holding requirement beyond the Company's stock ownership guidelines.
The Compensation Committee recognized that the cumulative net income and return on invested capital performance measures are "absolute" (as opposed to "relative") measures. However, given that the threshold and targets levels under these measures were set at "stretch" levels, with a significant risk of full or partial forfeiture of shares (e.g., all or a significant portion of the performance-based shares granted to the named executive officers for the three-year performance periods ended May 31, 2014, May 31, 2015 and May 31, 2016 were forfeited), the Compensation Committee believed these measures were appropriate for this type of long-term stock award.
~~Time-Based Restricted Stock.~~Stock Options.    At its meeting on ~~July 15, 2013,~~August 7, 2015, the Compensation Committee approved the following grants of ~~time-based restricted~~ stock option awards for Fiscal ~~2014,~~2016, subject to time-based ~~vesting (dollar value based on the grant date fair value):~~vesting:

Time-Based Restricted Stock

Named Executive Officer

Number of Shares

Dollar Value ($)

   David P. Storch 26,400 671,352
   Timothy J. Romenesko 13,200 335,676
   John C. Fortson 4,750 120,793
   Robert J. Regan 7,920 201,406
   Michael J. Sharp 3,168 80,562
Fiscal 2016 Stock Options

Named Executive Officer
Number of Shares Dollar Value ($)

David P. Storch
153,810 1,150,500

Timothy J. Romenesko
50,134 375,000

John M. Holmes
50,134 375,000

Michael J. Sharp
17,547 131,250

Robert J. Regan
41,711 312,000

John C. Fortson
45,455 340,000

~~For Fiscal 2014,~~The dollar value of the ~~Compensation Committee decided to place less emphasis on time-based restricted stock (23% of total stock awards) in favor of greater emphasis on performance-based restricted stock and~~ stock options ~~(77%~~in the table above is based on a Black-Scholes valuation, using the $26.62 closing price of ~~total~~the Common Stock on the August 7, 2015 date of grant.
The stock ~~awards). The shares~~options vest 33¹/3% on each of ~~time-based restricted stock vest 50% on May~~July 31, 2016, July 31, 2017 and ~~50% May~~July 31, 2018. ~~Time-based restricted stock, once vested, is not subject to any further holding requirements beyond the Company's stock ownership guidelines.~~ The Compensation Committee believes that ~~time-based restricted~~ stock ~~serves~~option serve a valuable purpose in helping to retain executives and reward them for building a career with the Company.

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~~Stock Options.~~    ~~At its meeting on July 15, 2013, the~~ The Compensation Committee ~~approved~~reduced the ~~following grants of~~vesting period for stock options to ~~the Company's named executive officers for Fiscal 2014, subject to time-based vesting (dollar value based on a Black-Scholes valuation):~~

Stock Options

Named Executive Officer

Number

Dollar Value ($)

   David P. Storch 158,400 1,622,016
   Timothy J. Romenesko 79,200 811,008
   John C. Fortson 44,768 458,424
   Randy J. Martinez 27,500 281,600
   Robert J. Regan 47,520 486,605
   Michael J. Sharp 19,008 194,642
~~The stock options have an exercise price of $25.43 share (the closing stock price on the date of grant), vest 20% per year over a five-year period and expire 10~~three years from five years for the ~~date of grant. Shares issued upon~~same reasons supporting the ~~exercise of~~reduction in the vesting period for performance-based shares. Stock options, once vested, ~~stock options~~ are not subject to any further holding requirements beyond the Company's stock ownership guidelines. The Compensation Committee views stock options as performance-based incentives that align the interests of the Company's executives with the interests of the Company's stockholders given that stock options provide no value without an increase in the stock price over the option exercise price.
E.
Target Versus Actual Total Direct Compensation
The Compensation Committee reviewed and approved Fiscal ~~2014~~2016 target "total direct compensation" for the named executive officers, consisting of the three compensation ~~elements discussed above:~~elements: base salary, target annual cash incentive compensation and target long-term stock incentive compensation. Total direct compensation is the sum of base salary, annual cash incentive compensation and long-term stock incentive compensation.
The Compensation Committee historically benchmarks target total direct compensation for the Company's named executive officers in the range of the 50^th50th to 75^th75th percentile of total direct compensation levels of comparable positions at its peer group companies, with benchmarks above the 50^th50th percentile typically requiring performance above the 50^th50th percentile. In addition, the Compensation Committee considers the Company's prior year's financial results in setting target total direct compensation for the upcoming year. In setting target total compensation, the Compensation Committee seeks to promote its goals of motivating and rewarding executives and providing appropriate pay-for-performance incentives.

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The table below divides target total direct compensation into its component parts — base salary, target annual cash bonuses and target long-term incentive compensation — and shows each as a dollar amount and as a percentage of target total direct compensation, as set by the Compensation Committee at the beginning of Fiscal ~~2014~~2016 for each named executive officer. As shown, target total direct compensation is heavily weighted toward ~~variable~~ performance-based compensation (annual cash bonuses, performance-based restricted stock and ~~long-term incentive compensation)~~stock options), consistent with the

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Compensation Committee's view that compensation for the named executive officers should be tied to performance.

Fiscal 2014 Target Total Direct Compensation

Base
Salary

Target Annual Cash
Incentive

Target Long-Term
Incentive Compensation

Named Executive Officer

Dollar
Amount
($)

% of Total
Target Direct
Compensation

Dollar
Amount
($)

% of Total
Target Direct
Compensation

Dollar
Amount
($)

% of Total
Target Direct
Compensation

David P. Storch 906,449 18 1,133,061 23 2,964,720 59

Timothy J. Romenesko
499,272 20 567,354 22 1,482,360 58

John C. Fortson
400,000 27 363,637 25 700,010 48

Randy J. Martinez
360,447 36 360,447 36 281,600 28

Robert J. Regan
391,586 24 355,988 22 889,417 54

Michael J. Sharp
360,353 36 276,407 28 355,766 36

Fiscal 2016 Target Total Direct Compensation

Base Salary Target Annual Cash
Incentive Target Long-Term
Incentive Compensation Total

Named Executive Officer
Dollar
Amount
($) % of Total
Target Direct
Compensation Dollar
Amount
($) % of Total
Target Direct
Compensation Dollar
Amount
($) % of Total
Target Direct
Compensation Dollar
Amount
($)

David P. Storch
767,000 20% 767,000 20% 2,301,000 60% 3,835,000

Timothy J. Romenesko
450,000 27% 450,000 27% 750,000 46% 1,650,000

John M. Holmes
450,000 27% 450,000 27% 750,000 46% 1,650,000

Michael J. Sharp
400,000 34% 280,000 24% 500,000 42% 1,180,020

Robert J. Regan
390,000 30% 273,000 21% 624,000 49% 1,287,000

John C. Fortson
425,000 30% 297,000 21% 680,000 49% 1,402,000

~~Actual~~ ~~total direct compensation differs from~~The following table shows thetarget total direct compensation ~~by taking into account~~set for each named executive officer at the ~~actual annual cash bonus rather than the target annual cash bonus. As actual annual cash bonuses were less than target annual cash bonuses in~~beginning of Fiscal ~~2014,~~2016, compared to theactual total direct compensation received by each named executive officer for Fiscal 2016:

Fiscal 2016 Total Direct Compensation

Named Executive Officer
Target ($) Actual ($)

David P. Storch
3,835,000 4,071,050

Timothy J. Romenesko
1,650,000 1,713,650

John M. Holmes
1,650,000 1,841,750

Michael J. Sharp
1,180,020 1,252,880

Robert J. Regan
1,287,000 1,375,596

John C. Fortson
1,402,000 N/A

The difference between the target and actual total direct compensation amounts is principally due to the fact that Fiscal 2016 annual cash bonuses exceeded target bonuses.
V.     Fiscal 2017 Executive Compensation Actions
At its July 2016 meeting, the Compensation Committee maintained the principal design of the Company's executive compensation program with its emphasis on pay-for-performance compensation over fixed and discretionary compensation. To that end, the Compensation Committee took the following actions:
Approved a 3.0% base salary increase for each named executive officer ~~likewise was less~~(other than ~~his~~Mr. Storch);
~~target~~Approved an 8.9% base salary increase for Mr. Storch to $835,000, which places Mr. Storch at the 25^th percentile among CEOs of the Company's peer group companies;
~~total direct compensation~~
Maintained annual cash bonus targets at the Fiscal 2016 level and generally in ~~Fiscal 2014.~~line with the market median, and kept earnings per share and working capital turns as the performance measures for determining annual cash bonuses;
~~The following table shows target total direct compensation versus actual total direct compensation~~Continued the use of performance-based restricted stock (again using cumulative net income and return on invested capital as the relevant performance measures) and stock options for the named executive officers ~~for Fiscal 2014:~~

Fiscal 2014 Total Direct Compensation

Named Executive Officer

Target ($)

Actual ($)

   David P. Storch 5,004,230 4,722,717
   Timothy J. Romenesko 2,548,986 2,408,025
   John C. Fortson 1,463,647 1,373,300
   Randy J. Martinez 1,002,494 1,212,076
   Robert J. Regan 1,636,991 1,548,544
   Michael J. Sharp 992,526 923,852
~~III.  Fiscal 2015 Executive Compensation Actions~~
~~Our Compensation Committee met~~ in ~~July 2014~~lieu of any time-based restricted stock awards; and approved the following Fiscal 2015 executive compensation actions based on its consideration of performance results for Fiscal 2014, the executive compensation assessment prepared by its independent compensation consultant in July 2014, stockholder concerns identified in our stockholder outreach program and other relevant items:
•
~~Froze base salaries at their Fiscal 2014 levels;~~

•
~~Returned earnings per share and cash flow from operations as the performance goals under the Fiscal 2015 short-term incentive plan;~~

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•
~~Reduced significantly stock awards granted under the Fiscal 2015 long-term incentive plan compared to the stock awards granted under the Fiscal 2014 long-term incentive plan, as shown below:~~

Named Executive Officer

Fiscal 2014
($)

Fiscal 2015
($)

Percentage Difference
(%)


David P. Storch 2,964,720 1,695,200 43


Timothy J. Romenesko
1,482,360 847,600 43


John C. Fortson
700,010 521,600 25


Robert J. Regan
889,417 521,600 41


Michael J. Sharp
355,766 260,800 27


Randy J. Martinez
281,600 208,640 26
•
~~Altered the mix~~
Provided a one-time special grant of ~~stock awards under the Fiscal 2015 long-term incentive plan to place greater emphasis on performance-based restricted stock:~~

Percentage of Stock
Awards

Type of Long-Term Stock Award

Fiscal 2014

Fiscal 2015

   Performance-Based Restricted Stock 23 % 75 %
   Time-Based Restricted Stock 23 % 25 %
   Stock Options 54 % 0 %
•
~~Approved return on invested capital and cumulative net income as the two performance goals for~~ performance-based restricted stock ~~under~~valued at $2 million to John M. Holmes as a part of his employment agreement in recognition of his increasing role and responsibilities with the Company, his leadership as Chief Operating Officer of Aviation Services (the business group responsible for approximately 85% of the Company's revenues in Fiscal ~~2015 long-term incentive plan. The~~2016) and the important relationship between his performance and the future success of the Company.
Also, at its July 2016 meeting, the Board of Directors, upon the recommendation of the Compensation Committee, ~~determined~~approved a cap of $500,000 on total annual director compensation — consisting of cash compensation and stock compensation — that ~~it was appropriate~~may be payable to ~~add~~ a ~~second performance goal — return on invested capital — to cumulative net income, so as to assure that the Company's performance is measured~~non-employee director in ~~two separate ways that are critical to the Company's financial success.~~
any given year.
~~IV.~~VI.   Key Executive Compensation Policies and Practices
The following are key factors ~~affecting~~that also affect the executive compensation decisions made by the Compensation Committee for the Company's executives, including its named executive officers:
•
~~Stockholder Advisory Vote.~~  At the Company's 2013 annual meeting of stockholders, holders of approximately 68% of the outstanding shares approved the Fiscal 2013 compensation paid to the named executive officers. Although this stockholder vote on executive compensation was advisory, the Company carefully considered the results of this say-on-pay vote. In response to the say-on-pay vote, the Company conducted a formal stockholder outreach program to gain a better understanding of stockholder concerns related to its executive compensation policies and practices, corporate governance practices and other matters of stockholder interest. This proxy statement contains further information in the "2014 Proxy Statement Summary" and elsewhere in this CD&A about

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~~the Company's Fiscal 2014 stockholder outreach program, including the executive compensation actions taken by the Company in Fiscal 2014.~~
•
~~Role of the Compensation Committee.~~  The Compensation Committee is responsible for structuring and administering executive compensation. The Compensation Committee is comprised of six individuals, each of whom has been determined by the Board of Directors to be (i) an independent director of the Company under applicable SEC and NYSE rules and the Company's Categorical Standards for Determining Director Independence; (ii) a non-employee director for purposes of Rule 16b-3 of the Securities Exchange Act of 1934, as amended; and (iii) an outside director for purposes of Section 162(m) of the Internal Revenue Code.
The Compensation Committee reviews and considers historical compensation data for the Company's executives. This data includes summaries of cash and equity compensation received in past years by each executive. In addition, the Compensation Committee reviews the executives' total annual compensation, including cash and non-cash direct compensation, cumulative benefits and savings under retirement plans and equity compensation programs, perquisites and potential payments on termination of employment, whether on a change in control of the Company or otherwise. It reviews the performance of the Company and the executives during the year, taking into account established goals, leadership qualities, operational performance, business responsibilities, career experience, and long-term potential to enhance stockholder value. In addition to peer group compensation information and general industry compensation information, the Compensation Committee reviews internal pay comparisons among the Company's executives to ensure that the Company's executive compensation program reflects the executives' positions, responsibilities, and contributions to the Company.
•
~~Role of Independent Compensation Consultant.~~  The Compensation Committee has the authority under its charter to retain the services of outside advisors. The Compensation Committee has retained compensation consultants in the past to advise on the design and implementation of the various elements of the executive compensation program and the level of individual executive participation.
The Compensation Committee engaged Mercer as its independent compensation consultant to assist in determining the composition of the Company's Fiscal 2014 peer group for executive compensation purposes and the benchmarking of executive and director compensation for Fiscal 2014. Mercer also provided advice and information on other executive compensation matters, including executive pay philosophy and design, prevailing market practices, relevant legal and regulatory requirements, and peer-group data. The Company paid Mercer $227,672 in Fiscal 2014 for its consulting services to the Compensation Committee on executive compensation matters. In Fiscal 2014, Mercer also provided consulting services on the Company's domestic and international health and benefit plans `for which it received fees of $167,500, and other consulting fees for which it received fees of $140,300.
The Compensation Committee considered whether any conflicts of interest were created by its of Mercer to provide compensation consulting services in Fiscal 2014. Its consideration focused on the following factors: (i) services other than compensation consulting services provided to the Company by Mercer, (ii) total paid by the Company to Mercer for such other services ($307,800), including as a percentage of total revenue of

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Mercer (.005%), (iii) conflicts of interest policies and procedures of the Company and of Mercer, (iv) the lack of any relationships between Mercer and members of the Company's Board of Directors, (v) Company stock owned by Mercer and its employees and (vi) the lack of any relationships between Mercer and any of the Company's executive officers. Based on this assessment, the Compensation Committee concluded that no conflicts of interest existed with respect to Mercer.
•
~~Recommendations of the Chief Executive Officer.~~  The Company's Chief Executive Officer, David P. Storch, provides recommendations regarding compensation actions for all of the other named executive officers based upon the compensation parameters established by the Compensation Committee. In making these recommendations, the Chief Executive Officer evaluates the performance of the executives during the prior year against pre-established performance goals. Some of the performance goals relate to the financial performance of the Company or the executive's business group. Other performance goals are non-quantitative and relate to customer relationships, acquisition integration, diversity development, or similar Company initiatives. The Chief Executive Officer's recommendations reflect his assessment of an individual executive officer's contributions to the performance of the Company.
The Company's Human Resources Department assists the Chief Executive Officer by collecting and organizing relevant historical and current compensation information, including information received from the Compensation Committee's consultant, as well as peer group compensation information and industry trends. The Company's Vice President and Chief Human Resources Officer participates in all regularly scheduled Compensation Committee meetings.
The Chief Executive Officer and the Compensation Committee actively discuss compensation decisions for the Company's executives. However, the Compensation Committee has the ultimate decision-making authority and responsibility for compensation decisions affecting the Company's executives, including its named executive officers. The Chief Executive Officer does not play any role in any decision affecting his own compensation.
•
Stock Ownership ~~Guidelines.~~Guidelines
The Company has stock ownership guidelines requiring directors and executive officers to own and retain a ~~significant equity stake so as to align their interests with the interests~~meaningful amount of the Company's ~~stockholders. These~~stock. The Board revised these stock ownership guidelines ~~which were increased~~ in Fiscal ~~2013, provide as follows:~~
2016 to increase the ownership requirement for direct reports to the CEO and to clarify the stock retention requirement. The table below summarizes the stock ownership guidelines:

~~Ownership Requirement~~

Applicable Persons
Stock Ownership Requirement

Non-Employee Directors
20,000 shares (within four years of joining the Board)

Executive Officers

• Chairman and CEO
6 times base salary

~~• President and COO~~Direct Reports to CEO
32 times base salary

• Other Executive ~~Officer~~Officers
1 times base salary

~~These~~Executive officers not in compliance with these guidelines must retain at least 50% of the net after-tax profit shares from an option exercise or the vesting of restricted stock or performance-based stock. All named executive officers of the Company comply with the stock ownership ~~levels must be achieved within four years of becoming a director or executive officer and then maintained while in that position.~~ requirements.
Failure to meet these stock ownership levels or to show sustained progress may result in a reduction in future stock awards. ~~All current directors~~

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~~and executive officers comply with the stock ownership guidelines.~~ Stock values are measured as of each fiscal year-end, with unvested stock awards counted at 50% and stock options ~~not~~ counted at ~~all.~~0%.
•
Employment, ~~Agreements.~~Severance and Other Agreements
The Company ~~does not have an~~has employment ~~agreement~~agreements with ~~any executive officer other than~~ Mr. Storch, ~~its Chairman and~~the Company's Chief Executive ~~Officer. See "Compensation Arrangement with~~Officer, and Mr. Holmes, the Chief ~~Executive Officer"~~Operating Officer of the Aviation Services business group. See "Executive Compensation — Employment Agreements" for a description of ~~the terms of that~~these employment ~~agreement.~~agreements. The Company has severance and change in control agreements with ~~Messrs.~~Mr. Romenesko, ~~Fortson,~~the Company's Vice Chairman and Chief Financial Officer, and Mr. Regan, the Company's Vice President, General Counsel and ~~Sharp.~~Secretary. The Company also entered into an agreement with Mr. Sharp in connection with his retirement from the Company. See "Potential Payments upon a Termination of Employment or a Change in Control of the Company" on pages 57-64 for a description of ~~the terms of~~ these agreements. ~~In all cases, the~~
The rationale for ~~these~~the employment agreements and the severance and change in control agreements is to provide an appropriate measure of security and incentive to the executive officers in line with market ~~practice. Effective June 1, 2012,~~practice and the Company's goal of senior leadership stability.
The Company ~~determined that it will~~has no ~~longer provide~~ tax gross-up provisions in any ~~new~~ agreement with anits executive officers, except for one legacy agreement in the year 2000.

Table of ~~the Company.~~Contents

•
Equity Grant ~~Practices.~~Practices
The Compensation Committee meets from time to time to consider and act with respect to equity compensation awards for the Company's executive officers. ~~The~~As described, the Compensation Committee typically makes its equity compensation decisions at its July meeting. The Compensation Committee — or the Chief Executive Officer pursuant to authority delegated by the Compensation Committee — also may grant equity compensation awards to newly hired or newly promoted employees at other times during the year. In all cases, the grant equity date is the date on which the Compensation Committee acts to approve the award, unless the Compensation Committee establishes the grant date at a specified future date. Board and Compensation Committee meetings are generally scheduled a year in advance and without regard to anticipated earnings or other major announcements by the Company. The Company does not time the granting of its equity compensation awards to affect the value of its executive compensation.

•
Perquisites
We provide limited perquisites to our executive officers in support of our goal of attracting and retaining talented leaders. See footnotes to the "Other Compensation" column of the Summary Compensation Table on pages 47-48 for a description and valuation of these perquisites. The Compensation Committee believes these perquisites are reasonable, market-competitive and consistent with the Company's overall executive compensation program.
Retirement Benefits
The Company's named executive officers participate in one or more of the following retirement plans:
Retirement Plan: A tax-qualified defined benefit plan whose benefit accruals ceased in June 2005.
Retirement Savings Plan: A tax-qualified 401(k) savings plan available to all employees.
SKERP: A non-qualified retirement plan that makes up 401(k) benefits that would otherwise be lost as a result of U.S. Tax Code limits and provides additional employer contributions.
Change in Control Benefits
The Company provides certain change in control benefits to encourage the participating executives to consider the best interest of the Company without concern about their own personal financial well-being in the face of a potential change in control of the Company. See "Potential Payments Upon a Termination of Employment or a Change in Control of the Company" on pages 57-64 for additional information.
Risk Management ~~of Compensation Practices, including Incentive Compensation Recoupment, Anti-Hedging and Anti-Pledging Policies.~~
The Compensation Committee considered, with the assistance of Mercer, its independent compensation consultant, whether the Company's compensation policies and practices in Fiscal ~~2014~~2016 for its employees, including the named executive officers, were reasonably likely to have a material adverse effect on the Company. The Compensation Committee determined that there was no such material adverse effect and that the Company's compensation policies and practices do not encourage excessive or inappropriate risk-taking.
The Compensation Committee determined that the design and operation of the Company's executive compensation program were consistent with the Company's risk management strategies ~~based on~~for the following reasons:
—
The executive compensation program is designed to provide a proper balance between cash and equity compensation, fixed and variable compensation, and short-term and long-term compensation.

The Compensation Committee generally favors a heavier weighting of long-term compensation to encourage long-term value creation.
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—
~~The~~
Fiscal ~~2014 annual cash~~2016 short-term incentive plan awards — a form of ~~variable~~performance-based cash compensation — were based on two different performance metrics: earnings per share and ~~cash flow from operations.~~

—
~~The~~working capital turns, each of which provides benefits to the Company's stockholders. In any year, regardless of the Company's performance against these metrics, the Compensation Committee retains (and has exercised) the discretion to reduce any annual cash bonus for any ~~reason~~reason.

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The Company uses PIPs to provide annual incentive cash compensation opportunities for executives at its two principal business groups. The PIPs employ multiple business metrics — e.g., pre-tax income, free cash flow — to provide balanced incentives and ~~in fact, exercised this discretion to reduce by 30% the annual cash bonus awarded to each named executive officer other than Mr. Martinez.~~appropriate risk-taking.

—
The balance built into the short-term incentive plan and the PIPs is also reflected in long-term incentive compensation awards, which in Fiscal ~~2014~~2016 consisted of performance-based restricted stock and stock options, and did not include any time-based restricted stock ~~and performance-based restricted stock.~~for executive officers. Each of these long-term equity-based incentive awards contains ~~multi-year~~ vesting periods designed to promote employee growth, development and retention. They also are linked to the value of the Company's common stock, thus aligning management's interest with ~~those~~the interests of the Company's stockholders.

—
The performance goals for performance-based restricted stock under the long-term incentive plan — ~~cumulative net income in Fiscal 2014 and~~ cumulative net income and return on invested capital in Fiscal ~~2015~~2016 — are different from the performance goals used under the short-term incentive plan (earnings per share and working capital turns). In addition, the Fiscal 2016 long-term incentive plan has a three-year performance period compared to the one-year performance period under the Fiscal 2016 short-term incentive plan.

—
The Compensation Committee believes that these different performance periods allow the Company ~~has~~to pursue short-term and long-term goals in a complementary manner.
The Company's stock ownership guidelines ~~an incentive compensation recoupment policy,~~align the interests of directors and ~~an anti-hedging and anti-pledging policy as~~executive officers with the interests of stockholders, providing further ~~protections for~~assurance that decisions are made in the ~~Company.~~best interest of stockholders.

—
~~Finally, the~~
The Compensation Committee and senior management work together to ensure that the aggregate level of executive compensation fits within the Company's budget.
Independence of Compensation Consultant
The Compensation Committee considered the independence of Mercer, its compensation consultant, in Fiscal 2016. The Compensation Committee's consideration of Mercer's independence focused on the following factors: (i) the total dollar amount paid by the Company to Mercer for compensation consulting services ($232,900 in Fiscal 2016); (ii) services other than compensation consulting services (

e.g.,
•
maintenance and engineering consulting services) provided to the Company's airlift subsidiary by a company affiliated with Mercer; (iii) the total dollar amount paid by the Company for such other services ($735,000 in Fiscal 2016); (iv) conflicts of interest policies and procedures of the Company and of Mercer; (v) the fact that the Mercer employees providing compensation consulting services do not own any shares of the Company's common stock; (vi) the lack of any relationships between Mercer and members of the Company's Board of Directors; and (vii) the lack of any relationships between Mercer and any of the Company's executive officers. Based on this assessment, the Compensation Committee concluded that no conflicts of interest existed with respect to Mercer and that Mercer was independent of the Company.
Incentive Compensation Clawback Policy
The Company has an incentive compensation clawback policy. The policy provides for the recoupment of incentive compensation paid to a current or former executive officer of the Company where such person's misconduct contributed to an accounting restatement of the Company's financial statements.
The Company is aware of the proposed compensation clawback rules issued by the SEC in July 2015. The Company will revise its incentive compensation clawback policy to comply with the requirements of the SEC's final rules.
Anti-Hedging and Anti-Pledging Policies
The Company maintains a strong insider trading policy aimed at ensuring that its directors, officers and employees do not use confidential or material non-public information in connection with trading in Company securities or in the securities of other companies with which the Company does business. The purpose of the insider trading policy is to promote compliance with applicable securities laws governing insider trading.
An important part of the Company's insider trading policy is the prohibition on short sales, market put and call options, margining and hedging, pledging or hypothecation of the Company's securities. The Company discourages its directors,

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officers and employees from engaging in short-term speculative trading, and the prohibition on hedging and pledging securities is consistent with this perspective.
Deductibility of Executive ~~Compensation.~~Compensation
Internal Revenue Code Section 162(m) generally prevents any public company from claiming a deduction for compensation in excess of $1 million for certain executive officers (namely, the chief executive officer and the three most highly compensated officers other than the chief executive officer and the chief financial officer). This deduction limitation, however, does not apply to performance-based compensation that satisfies certain requirements under Section 162(m). The Compensation Committee has determined that it is in the best interests of the Company and its stockholders to structure compensation of executive officers so that compensation will not be subject to the deduction limit to the extent that it can reasonably do so in a manner that provides adequate incentives and allows the Company to attract and retain qualified executives. However, the Compensation Committee has previously, and may in the future, structure compensation arrangements that under certain circumstances may be subject to the deduction ~~limit.~~
~~Under the Company's Section 162(m) Annual Cash Incentive Plan, the annual cash bonuses qualified in Fiscal 2014 as performance-based compensation~~limit under Section 162(m). ~~Stock options and performance-based restricted stock grants awarded under the Stock Benefit Plan also qualified as performance-based~~

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~~compensation. Base salaries and time-based restricted stock grants do not qualify as performance-based compensation.~~
As required under the United States tax rules, the Company must obtain stockholder approval every five years of the material terms of the performance goals for qualifying performance-based compensation, except where a plan (such as the AAR CORP. 162(m) Annual Cash Incentive Plan) contains only a single performance goal. The Company received stockholder approval of the net income performance goal under the AAR CORP. 162(m) Annual Cash Incentive Plan at its 2010 annual meeting of stockholders and thus does not need any further stockholder approval unless and until it changes or adds to that performance goal. The Company also received stockholder approval of the performance goals under the Company's 2013 Stock Plan at its 2013 annual meeting of stockholders. ~~Accordingly, the~~The Company ~~must seek~~is seeking stockholder approval at this 2016 annual meeting of the performance goals relating to stock compensation ~~no later than its 2018 annual meeting~~as a part of ~~stockholders.~~

~~Table of Contents~~the amendments to the AAR CORP. 2013 Stock Plan.
Compensation Committee Fiscal 2016 Report on Executive Compensation ~~for Fiscal 2014~~
The Compensation Committee of the Board of Directors of the Company furnishes the following report to the stockholders of the Company in accordance with applicable SEC rules.
The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis set forth above with the Company's management. Based on that review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
Respectfully submitted,
Compensation Committee
Ronald B. Woodard, Chairman
Anthony K. Anderson
Norman R. Bobins
Michael R. Boyce
Ronald R. Fogleman
Peter Pace
Jennifer L. Vogel

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Summary Compensation Table¹
The following table sets forth compensation information for the Company's named executive officers for Fiscal ~~2014,~~2016, Fiscal ~~2013~~2015 and Fiscal ~~2012:~~2014:

Name and Principal Position

Year

Salary
($)²

Bonus
($)

Stock
Awards
($)³

Option
Awards
($)⁴

Non-Equity
Incentive
Plan
Compensation
($)⁵

Change in
Pension Value
and
Non-Qualified
Deferred
Compensation
Earnings ($)⁶

All Other
Compensation
($)⁷

Total ($)

DAVID P. STORCH 2014 906,449 0 1,342,704 1,622,016 851,548 55,793 525,062 5,303,572

Chairman of the Board and
2013 877,838 0 619,200 695,520 1,350,685 60,352 639,589 4,243,184

Chief Executive Officer
2012 867,000 0 2,664,745 578,460 850,000 50,454 826,195 5,836,854
TIMOTHY J. ROMENESKO 2014 499,272 0 671,352 811,008 426,393 39,367 202,405 2,649,797

President and Chief
2013 483,513 0 309,600 347,760 676,324 40,816 251,357 2,109,370

Operating Officer
2012 477,544 0 1,287,491 279,483 423,277 35,958 313,361 2,817,114
JOHN C. FORTSON⁸ 2014 400,000 0 241,586 458,424 273,290 0 37,856 1,411,156

Vice President, Chief Financial Officer and Treasurer

RANDY J. MARTINEZ⁹ 2014 360,447 0 0 281,600 570,029 0 34,533 1,246,609

Aviation Services,
2013 349,070 0 120,750 638,178 0 23,178 1,131,176

Group Vice President — Airlift

ROBERT J. REGAN 2014 391,586 0 402,812 486,605 267,541 0 100,311 1,648,855

Vice President, General Counsel
2013 379,226 0 185,760 208,656 424,362 0 114,848 1,312,852

and Secretary
2012 374,544 0 767,431 166,592 265,586 0 152,916 1,727,069
MICHAEL J. SHARP¹⁰ 2014 360,353 0 161,124 194,642 207,733 3,037 79,347 1,006,236

Former Acting Chief Financial
2013 312,576 0 74,304 83,462 322,185 2,905 48,677 844,109

Officer and Treasurer and Current

Vice President, Controller and Chief

Accounting Officer

Name and Principal Position
Year Salary
($)2 Bonus
($)3 Stock
Awards
($)4 Option
Awards
($)5 Non-Equity
Incentive
Plan
Compensation
($)6 Change in
Pension
Value and
Non-Qualified
Deferred
Compensation
Earnings
($)7 All Other
Compensation
($)8 Total ($)

David P. Storch
2016 755,250 — 1,150,500 1,150,500 1,014,800 35,727 603,414 4,710,191

    Chairman of the Board, President and
2015 906,449 — 1,695,200 — 2,158,713 34,177 474,286 5,268,825

    Chief Executive Officer
2014 906,449 — 1,342,704 1,622,016 851,548 55,793 525,062 5,303,572

Timothy J. Romenesko
2016 456,250 507,400 375,000 375,000 — 31,576 316,962 2,062,188

    Vice Chairman; Chief Financial
2015 499,272 — 847,600 — 1,727,250 30,207 198,397 3,302,726

    Officer (beginning August 1, 2016);
2014 499,272 — 671,352 811,008 426,393 39,367 202,405 2,649,797

    Chief Operating Officer of

    Expeditionary Services (through

    July 31, 2016)

John M. Holmes9
2016 456,250 117,551 375,000 375,000 517,949 633 96,707 1,939,090

    Vice President; Chief Operating
2015 409,375 — 208,640 — 548,000 606 103,917 1,270,538

    Officer of Aviation Services

Michael J. Sharp10
2016 382,418 — 368,750 131,250 370,462 3,319 98,212 1,354,411

    Former Vice President, Chief
2014 360,353 — 161,124 194,642 207,733 3,037 79,397 1,006,286

    Financial Officer (from

    September 29, 2015 through July 31, 2016)

Robert J. Regan
2016 390,396 — 312,000 312,000 361,200 — 111,380 1,486,976

    Vice President, General Counsel
2015 391,586 — 521,600 — 750,825 — 97,963 1,761,974

    and Secretary
2014 391,586 — 402,812 486,605 267,541 — 100,311 1,648,855

John C. Fortson11
2016 168,109 — 340,000 340,000 — — 33,032 881,141

    Former Vice President and
2015 400,000 — 521,600 — 1,220,356 — 90,629 2,232,585

    Chief Financial Officer
2014 400,000 — 241,586 458,424 273,290 — 37,856 1,411,156

    (through September 28, 2015)

¹
General. The Summary Compensation Table provides specific compensation information for the Company's named executive officers in accordance with SEC disclosure rules. Please read the "Compensation Discussion and Analysis" section of this proxy statement for a detailed explanation of the Company's ~~pay-for-performance~~ executive compensation program in Fiscal ~~2014.~~2016.

²
Salary. ~~We increased~~Base salaries for each named executive officer were adjusted in Fiscal ~~2014~~2016 to place them at or near the market median of the Company's peer group, with the exception of Mr. Storch whose Fiscal 2016 base ~~salaries 2% over Fiscal 2013 year-end base salaries, effective June 1, 2013.~~salary was below the market median.

3
³Bonus. The amounts in this column consists of (i) in the case of Mr. Romenesko, a discretionary bonus paid in Fiscal 2016 for services in his capacity of Vice Chairman of the Company, and (ii) in the case of Mr. Holmes, a discretionary bonus paid in Fiscal 2016 for his services as a member of the Company's senior leadership team.

4
Stock Awards. The amounts in this column for Fiscal ~~2014~~2016 reflect the grant date fair value of the performance-based restricted stock awards (based on the target level) granted on ~~July 15, 2013~~August 7, 2015 under the Fiscal ~~2014~~2016 long-term incentive plan, ~~and the time-based restricted stock awards granted on July 15, 2013 under the Fiscal 2014 long-term incentive plan, in each case~~ computed in accordance with FASB ASC Topic 718. Mr. Sharp's grant date fair value also includes a second grant of performance-based shares on October 12, 2015 in connection with his promotion to Chief Financial Officer. The grant date fair values of the awards, assuming the performance conditions are met at the maximum 250% level, are Mr. Storch: $2,876,250; Mr. Romenesko: $937,500; Mr. Holmes: $937,500; Mr. Sharp: $921,875; Mr. Regan: $780,000; and Mr. Fortson: $850,000. The Compensation Committee did not make any grants of time-based restricted stock awards to the named executive officers in Fiscal 2016. See Note 45 to the Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for Fiscal ~~2014~~2016 for an explanation of the assumptions made by the Company in the valuation of these awards. See "Compensation Discussion and Analysis — Fiscal 2014 Executive Compensation — Stock Awards Under the Fiscal 2014 Long-Term Incentive Plan" for the maximum potential value of the performance-based restricted stock awards granted on July 15, 2013.
~~Generally, the~~The grant date fair ~~value represents~~values generally represent the Company's ~~total~~accounting expense for the grants made to the named executive officers in ~~each of Fiscal 2014, Fiscal 2013 and Fiscal 2012. The above~~a given year.These amounts ~~reflect the aggregate accounting expense for these awards and~~ do not ~~correspond to~~represent the actual value that may be ~~recognized~~realized by the named executive officers ~~when the awards vest.~~because an award may be forfeited or may not vest or may vest at a lower or higher level. The "Compensation Discussion and Analysis" section of this proxy statement contains vesting and other information about ~~the~~awards of performance-based restricted stock ~~awards and the time-based restricted stock awards~~ granted in Fiscal ~~2014.~~2016.
⁴5
Option Awards. The amounts in this column for Fiscal 2016 and Fiscal 2014 reflect the grant date fair value of the stock option awards computed in accordance with FASB ASC Topic 718. The Compensation Committee did not grant any stock options to the named executive officers in Fiscal 2015. See Note 45 to the Consolidated Financial

~~Table of Contents~~
Statements contained in the Company's Annual Report on Form 10-K for Fiscal ~~2014~~2016 for an explanation of the assumptions made by the Company in the valuation of these awards. ~~Generally, the~~

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The grant date fair ~~value represents~~values represent the Company's ~~total~~accounting expense for the grants made to the named executive officers in ~~each of Fiscal 2014, Fiscal 2013 and Fiscal 2012. The above~~in a given year.These amounts ~~reflect the aggregate accounting expense for these awards and~~ do not ~~correspond to~~represent the actual value that may be ~~recognized~~realized by the named executive ~~officers.~~officers because an award may be forfeited or may not be exercised. The "Compensation Discussion and Analysis" section of this proxy statement contains vesting and other information about ~~the~~awards of stock ~~option awards~~options granted in Fiscal ~~2014.~~2016.
⁵6
Non-Equity Incentive Plan Compensation. ~~This~~The Fiscal 2016 amounts in this column ~~shows the annual~~consist of performance-based cash bonuses ~~paid to each named executive officer~~earned by Mr. Storch, Mr. Sharp and Mr. Regan under the Company's short-term incentive ~~plan for its executive officers, including~~plan. The Fiscal 2015 amounts in this column represents special performance bonuses earned by the named executive ~~officers. The "Compensation Discussion and Analysis" section~~officers (other than Mr. Holmes) under a transaction bonus program established in connection with the strategic restructuring of the Company. For Mr. Holmes, the amounts in this ~~proxy statement contains additional information about these annual~~column consist of performance-based cash ~~bonuses.~~bonuses earned under his PIP.

⁶7
Change in Pension Value and Non-Qualified Deferred Compensation Earnings. This column shows the increase in the portion of the SKERP benefit derived from the defined benefit formula and the increased pension value under the Retirement Plan. This column does not include any preferential or above-market earnings on deferred compensation as the Company does not pay such earnings on the deferred compensation of its named executive officers.

⁷8
All Other Compensation. The table below provides a breakdown, by type and amount, of the totals shown in the "All Other Compensation" column for each named executive officer in Fiscal ~~2014.~~2016. As required by the SEC rules, the Company values perquisites based on the aggregate incremental cost to the Company. In the case of the personal use of aircraft leased by the Company, the Company determines aggregate incremental cost based on average variable costs, including fuel, maintenance, weather-monitoring, on-board catering, and landing/ramp fees. The total variable costs are divided by the number of miles flown by the aircraft to derive an average variable cost per mile. The average variable cost per mile is then multiplied by the miles flown for personal use to derive the incremental variable cost to the Company. This method of calculating incremental cost excludes fixed costs that are incurred irrespective of personal use, such as pilots' salaries, other employees' salaries, purchase cost of the aircraft and non-trip related hangar expenses.

Named Executive Officer

Company
401(k)
Plan
Contributions
($)

Company
SKERP
Contributions
($)

Club
Dues
($)

Financial
Planning
($)

Personal
Use of
Aircraft
($)

Auto
Allowance ($)

Company-Paid
Split-Dollar Life
Insurance
Premium
($)

Executive
Physical
($)

Spouse
Travel
($)

Total
($)

David P. Storch
17,733 376,736 49,009 20,275 0 12,300 42,535 6,474 0 525,062

Timothy J. Romenesko
17,785 152,620 9,450 14,303 0 0 6,760 1,487 0 202,405

John C. Fortson
1,692 13,477 8,700 13,987 0 0 0 0 0 37,856

Randy J. Martinez
20,230 0 0 14,303 0 0 0 0 0 34,533

Robert J. Regan
15,227 70,781 0 14,303 0 0 0 0 0 100,311

Michael J. Sharp
15,206 53,839 8,100 0 0 0 2,202 0 0 79,347

Named Executive Officer
Company
401(k)
Plan
Contributions
($) Company
SKERP
Contributions
($) Club
Dues
($) Financial
Planning
($) Auto
Allowance
($) Company-Paid
Split-Dollar
Life
Insurance
Premium
($) Executive
Physical
($) Total
($)

David P. Storch
13,265 461,072 46,634 18,166 12,300 51,977 — 603,414

Timothy J. Romenesko
12,331 270,016 12,149 12,132 — 8,138 2,196 316,962

John M. Holmes
8,502 75,198 875 12,132 — — — 96,707

Michael J. Sharp
12,139 72,557 11,005 — — 2,511 — 98,212

Robert J. Regan
9,450 89,798 — 12,132 — — — 111,380

John C. Fortson
3,975 23,743 2,375 2,939 — — — 33,032

⁸9
Mr. ~~Fortson joined the Company in June 2013 and~~Holmes. Mr. Holmes became ~~Vice President, Chief Financial Officer and Treasurer on July 25, 2013.~~

⁹
~~Mr. Martinez was not~~ a named executive officer of the Company in Fiscal ~~2012.~~2015.

¹⁰
Mr. Sharp. Mr. Sharp served as Vice President and Chief Financial Officer from September 29, 2015, through July 31, 2016. Mr. Sharp was ~~Acting~~a named executive officer of the Company in Fiscal 2014 and Fiscal 2016, but not in Fiscal 2015.

11
Mr. Fortson. Mr. Fortson served as Vice President and Chief Financial Officer through September 28, 2015.

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Employment Agreement with David P. Storch
We have an employment agreement with David P. Storch, our Chairman, President and Chief Executive Officer, that runs through May 31, 2017. The table below outlines the principal terms of Mr. Storch's employment agreement.
Type of Benefit Description

Base salary Not less than $906,449 without Mr. Storch's consent

Annual cash bonus Target cash bonus opportunity of 100% of base salary and a maximum opportunity of 250% of base salary based on achievement of performance goals established by the Compensation Committee

Annual stock award As determined by the Compensation Committee

Perquisites Personal use by Mr. Storch of an aircraft chartered by the Company (subject to the Company's aircraft use policy), an annual automobile allowance, payment of country club dues, reimbursement of fees and expenses relating to membership in professional clubs or organizations, financial planning and tax preparation services and participation in an executive physical program(Mr. Storch did not have any personal use of aircraft in Fiscal 2016)

Termination / change in control benefits See "Potential Benefits Payable Upon Termination of Employment or a Change in Control of the Company — Employment Agreement of David P. Storch"

Employment Agreement with John M. Holmes
At its July 11, 2016 meeting, the Board of Directors, upon the recommendation of the Compensation Committee, approved an employment agreement with John M. Holmes, Vice President of the Company ~~from October 27, 2012 to July 25, 2013. He continues to serve as Vice President, Controller~~ and Chief ~~Accounting~~Operating Officer of the Aviation Services business group. The employment agreement, effective July 11, 2016, has a four-year term through May 31, 2020. The table below outlines the principal terms of Mr. Holmes's employment agreement.
Type of Benefit Description

Base salary Not less than $463,500 without Mr. Holmes's consent

Annual cash bonus Target cash bonus opportunity of 100% of base salary and a maximum opportunity of 250% of base salary based on achievement of performance goals established by the Compensation Committee

Annual stock award As determined by the Compensation Committee

Perquisites Personal use of country club dues, reimbursement of fees and expenses relating to membership in professional clubs or organizations, financial planning and tax preparation services and participation in an executive physical program

Termination / change in control benefits See "Potential Benefits Payable Upon Termination of Employment or a Change in Control of the Company — Employment Agreement with John Holmes"

The employment agreement also provides Mr. Holmes with a one-time award of shares of performance-based restricted stock with a grant date fair value on July 11, 2016 of $2 million. This award is subject to performance conditions based upon the pre-tax income and average return on invested capital performance of the Aviation Services business group over a three-year performance period. The award vests 50% at the end of year three and 50% at the end of year four, assuming the performance conditions have been satisfied. The purpose of this one-time award is to recognize Mr. Holmes's increasing role and responsibilities with the Company, his leadership as Chief Operating Officer of Aviation Services (the business group responsible for approximately 85% of the Company's revenues in Fiscal 2016) and the important relationship between Mr. Holmes's performance and the future success of the Company.
The Compensation Committee's intention is that this stock award will provide Mr. Holmes with a significant performance-based incentive to remain with the Company.

Table of Contents
~~New Employment Agreement with Our Chairman and Chief Executive Officer~~
In May 2014, the Company entered into a new employment agreement with Mr. Storch for a three-year term ending May 31, 2017. The new agreement automatically renews thereafter for one-year periods unless either party gives 90 days advance notice prior to the end of the one-year period. The new agreement retains many of the principal terms of the prior agreement, but Mr. Storch voluntarily forfeited certain protections that were included in prior employment agreements dating back to 1989. Specifically:
•
~~The agreement no longer provides a tax gross-up to cover any "280G" excise tax (and related income) that may be triggered following a change in control;~~

•
~~The agreement no longer provides any severance benefits if Mr. Storch terminates employment for any reason during the 25~~^th ~~month following a change in control;~~

•
The agreement no longer provides a tax gross-up on the portion of the severance payment that is based on the value of Company contributions made on behalf of Mr. Storch under the Company's retirement plans; and

•
The agreement no longer provides that equity awards will automatically vest upon change in control; rather, it imposes a "double trigger," meaning that future equity awards will vest only upon a change in control~~and~~ ~~a termination of employment.~~
~~The new agreement provides the following benefits to Mr. Storch:~~
•
~~A base salary of not less than $906,449 per year or such increased amount as the Compensation Committee may determine;~~

•
An annual cash bonus opportunity of up to 200% (or such higher percentage as the Compensation Committee determines) of base salary for performance against financial goals established by the Compensation Committee;

•
~~A long-term incentive compensation opportunity under the Company's stock plan as determined by the Compensation Committee;~~

•
Specified perquisites, including use by Mr. Storch of an aircraft chartered by the Company (subject to the Company's aircraft use policy), an annual automobile allowance, payment of country club dues, fees and certain charges, including reimbursement of dues, fees, charges and expenses relating to membership in professional clubs or organizations, financial planning and tax preparation services and participation in an executive physical program; and

•
Specified benefits payable upon a termination of employment or a change in control (see "Potential Payments Upon Termination of Employment or a Change in Control by the Company — Employment Agreement of David P. Storch").

~~Table of Contents~~
Fiscal ~~2014~~2016 Grants of Plan-Based Awards
The following table sets forth information for each named executive officer with respect to:
•
Estimated possible payouts under non-equity incentive plan award opportunities for Fiscal ~~2014;~~2016;

•
Estimated possible payouts under equity incentive plan award opportunities for Fiscal ~~2014;~~2016;

•
Other stock awards made in Fiscal ~~2014;~~2016; and

•
Stock options granted in Fiscal ~~2014.~~
2016.

Estimated Possible Payouts Under Non-Equity Incentive Plan Awards²

Estimated Possible Payouts Under Equity Incentive Plan Awards³

Named Executive Officer

Grant
Date¹

Threshold
($)

Target
($)

Maximum
($)

Threshold
(#)

Target
(#)

Maximum
(#)

All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)⁴

All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)⁵

Exercise or
Base Price
of Option
Awards
($/sh)

Grant Date
Fair Value
of Stock and
Option
Awards
($)⁶

David P. Storch
566,531 1,133,061 2,266,122

7/15/13 13,200 26,400 52,800 671,352

7/15/13 26,400 671,352

7/15/13 158,400 25.43 1,622,016

Timothy J. Romenesko
283,677 567,354 1,134,708

7/15/13 6,600 13,200 26,400 335,676

7/15/13 13,200 335,676

7/15/13 79,200 25.43 811,008

John C. Fortson
181,818 363,637 727,274

7/15/13 2,375 4,750 9,500 120,793

7/15/13 4,750 120,793

7/15/13 44,768 25.43 458,424

Randy J. Martinez⁷ — 360,447 720,894

7/15/13 27,500 25.43 281,600

Robert J. Regan
177,994 355,988 711,976

7/15/13 3,960 7,920 15,840 201,406

7/15/13 7,920 201,406

7/15/13 47,520 25.43 486,605

Michael J. Sharp
138,204 276,407 552,814

7/15/13 1,584 3,168 6,336 80,562

7/15/13 3,168 80,562

7/15/13 19,008 25.43 194,642

Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards2,7 Estimated Possible Payouts
Under Equity Incentive
Plan Awards3 All Other
Stock
Awards:
Number
of Shares All Other
Option
Awards:
Number of
Securities Exercise or
Base Price Grant Date
Fair Value
of Stock and

Named Executive Officer
Grant
Date1
Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#) of Stock
or Units
(#)4 Underlying
Options
(#)5 of Option
Awards
($/sh) Option
Awards
($)6

David P. Storch
383,500 767,000 1,917,500 — —

8/7/15 21,610 43,219 108,048 1,150,500

8/7/15 153,810 26.62 1,150,500

Timothy J. Romenesko7
— 450,000 675,000 — —

8/7/15 7,044 14,087 35,218 375,000

8/7/15 50,134 26.62 375,000

John M. Holmes7
— 450,000 900,000 — —

8/7/15 7,044 14,087 35,218 375,000

8/7/15 50,134 26.62 375,000

Michael J. Sharp8
140,000 280,000 700,000 — —

8/7/15 2,466 4,931 12,328 131,250

8/7/15 17,547 26.62 131,250

10/13/15 5,330 10,660 26,650 237,500

Robert J. Regan
136,500 273,000 682,500 — —

8/7/15 5,636 11,271 28,178 312,000

8/7/15 41,711 26.62 312,000

John C. Fortson9
148,750 297,500 743,750 — —

8/7/15 6,386 12,772 31,930 340,000

8/7/15 45,455 26.62 340,000
��
¹
The Compensation Committee approved the annual grant of performance-based restricted stock awards and time-based restricted stock awards ~~and stock options~~ under the Company's Fiscal ~~2014~~2016 long-term incentive plan at its meeting on ~~July 15, 2013.~~August 7, 2015.

²
Annual cash bonuses under the Company's Fiscal ~~2014~~2016 short-term incentive plan and PIPs were contingent based upon performance ~~for~~in Fiscal ~~2014,~~2016, which has now occurred. ~~Thus, the~~The information in these columns reflects the range of potential payouts at the time the performance goals were set by the Compensation Committee on ~~July 15, 2013. The amounts actually paid under the plan for Fiscal 2014 are set forth in the "Non-Equity Incentive Plan Compensation" column of the Summary Compensation Table. See the~~August 7, 2015.

~~Table of Contents~~
~~"Compensation Discussion and Analysis" section of this proxy statement for a description of the Fiscal 2014 short-term incentive plan.~~
³
The information in these columns shows the range of performance-based restricted stock grants that could be earned by the named executive officers under the Fiscal ~~2014~~2016 long-term incentive plan. The actual number of shares of performance-based restricted stock granted under the Fiscal ~~2014~~2016 long-term incentive plan is listed in the "Target" column above. See the "Compensation Discussion and Analysis" section of this proxy statement for a description of the performance-based restricted stock ~~program~~awards under the Fiscal ~~2014~~2016 long-term incentive plan.

⁴
There were no awards of time-based restricted stock to the Company's named executive officers under the Company's Fiscal 2016 long-term incentive plan.

5
This column shows the number of shares ~~of time-based restricted~~subject to stock options granted on ~~July 15, 2013~~August 7, 2015 to the named executive officers under the Company's Fiscal ~~2014~~2016 long-term incentive plan.

⁵
This column shows the number of shares of common stock that may be issued to the named executive officers upon the exercise of stock options granted by the Compensation Committee on July 15, 2013 under the Company's Fiscal 2014 long-term incentive plan.

⁶
The grant date fair ~~value~~values of the performance-based restricted stock awards ~~time-based restricted stock awards~~at the target level and stock ~~options was~~option awards were computed in accordance with FASB ASC Topic 718.

⁷
Mr. ~~Martinez participates~~Romenesko and Mr. Holmes participated in ~~an annual cash bonus plan~~PIPs based ~~principally~~ on the performance of ~~his~~their business ~~unit.~~units. See ~~the~~ "Compensation Discussion and Analysis — Fiscal ~~2014~~2016 Executive Compensation — Annual Cash ~~Incentives under Fiscal 2014 Short-Term~~Bonuses — Performance Incentive Plan" ~~section of this proxy statement~~ for additional information.

8
In consideration of his promotion to Chief Financial Officer of the Company on September 29, 2015, Mr. Sharp received the following adjustments to his Fiscal 2016 compensation: an increase in his base salary to $400,000; a target cash bonus of $280,000 (70% of his base salary); and an additional stock grant of 10,660 shares of performance-based restricted stock with a grant date fair value of $237,500.

9
Mr. Fortson did not receive a Fiscal 2016 cash bonus and all of his Fiscal 2016 performance-based restricted stock awards and stock option awards were forfeited upon his resignation from the Company on September 28, 2015.

Table of Contents

Outstanding Equity Awards at Fiscal ~~2014~~2016 Year-End
The following table sets forth information for each named executive officer with respect to:
•
Each stock option that remained outstanding as of May 31, ~~2014;~~2016; and

•
Each award of restricted stock that was not vested and remained outstanding as of May 31, ~~2014.~~
2016.

Option Awards¹

Restricted Stock Awards

Named Executive Officer

Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)

Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)

Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)

Option
Exercise
Price
($)

Option
Expiration
Date

Number of
Shares or Units
of Stock That
Have Not
Vested
(#)²

Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)³

Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units,
or Other Rights
That Have Not
Vested
(#)⁴

Equity Incentive
Plan Awards:
Market or Payout
Value of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested
($)³

David P. Storch
200,000 0 15.10 7/13/19 174,657 4,244,165 66,929 1,626,375

84,163 0 17.27 7/11/20

29,412 19,610 29.65 7/11/21

28,800 115,200 12.90 7/16/22

0 158,400 25.43 7/15/23


Timothy J. Romenesko
100,000 0 15.10 7/13/19 84,246 2,047,178 33,186 806,420

40,664 0 17.27 7/11/20

14,211 9,474 29.65 7/11/21

14,400 57,600 12.90 7/16/22

0 79,200 25.43 7/15/23


John C. Fortson
0 44,768 25.43 7/15/23 4,750 115,425 4,750 115,425


Randy J. Martinez
5,000 0 15.10 7/13/19 15,668 380,732 — —

20,000 0 17.27 7/11/20

10,000 0 27.80 1/18/21

5,000 20,000 12.90 7/16/22

0 27,500 25.43 7/15/23


Robert J. Regan
20,000 0 15.10 7/13/19 41,626 1,011,512 19,880 483,084

24,239 0 17.27 7/11/20

8,469 5,649 29.65 7/11/21

8,640 34,560 12.90 7/16/22

0 47,520 25.43 7/15/23


Michael J. Sharp
9,165 0 17.27 7/11/20 16,047 389,942 7,848 190,706

3,201 2,137 29.65 7/11/21

3,456 13,824 12.90 7/16/22

0 19,008 25.43 7/15/23
Option Awards1 Restricted Stock Awards

Named
Executive
Officer Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#) Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#) Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#) Option
Exercise
Price
($) Option
Expiration
Date Number
of
Shares or
Units
of Stock
That
Have Not
Vested
(#)2 Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)3 Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units,
or Other Rights
That Have Not
Vested
(#)4 Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares, Units
or
Other Rights
That Have Not
Vested
($)5

David P. Storch 49,022 — — 29.65 7/11/21 54,650 1,334,007 91,969 2,244,963

28,800 57,600 — 12.90 7/16/22

63,360 95,040 — 25.43 7/15/23

— 153,810 — 26.62 8/7/25

Timothy J. Romenesko 23,685 — — 29.65 7/11/21 27,325 667,003 38,462 938,857

14,400 28,800 — 12.90 7/16/22

31,680 47,520 — 25.43 7/15/23

— 50,134 — 26.62 8/7/25

John M. Holmes 4,000 — — 33.44 6/1/17 2,000 48,820 20,087 490,324

5,000 10,000 — 12.90 7/16/22

5,500 16,500 — 25.43 7/15/23

— 50,134 — 26.62 8/7/25

Michael J. Sharp 9,165 — — 17.27 7/11/20 7,108 173,506 23,091 563,651

5,338 — — 29.65 7/16/21

5,368 6,912 — 12.90 7/16/22

7,602 11,406 — 25.43 7/15/23

— 17,547 — 26.62 8/7/25

Robert J. Regan 20,000 — — 15.10 7/13/19 16,520 403,253 26,721 652,260

24,239 — — 17.27 7/11/20

14,118 — — 29.65 7/11/21

25,920 17,280 — 12.90 7/16/22

19,008 28,512 — 25.43 7/15/23

— 41,711 — 26.62 8/7/25

John C. Fortson — — — — — — — — —

¹
~~Stock options with expiration dates of 7/13/2019, 7/11/2020~~These columns show the number, dollar value, option exercise price and 1/18/2021 vest in equal annual installments over three years and stock options with expiration dates of 7/11/2021, 7/16/2022 and 7/15/2023 vest in equal annual installments over five years. Vesting continues upon the participant's termination of employment due to Retirement, Disability (each as defined in the Stock Benefit Plan) or death, as follows:

•
Retirement: Stock options to continue to vest in accordance with the vesting schedule and may be exercised until the expiration date. However, if death occurs before the award expires, the unvested stock options are forfeited. If death occurs within three months after Retirement, vested options can be exercised as described below in the "Death" provision. If death occurs after three months from Retirement, vested options can be exercised until the option expiration date.

~~Table of Contents~~
•
~~Disability: Stock options continue to vest and are exercisable until the earlier of: (i) one year after termination of employment and (ii) the~~ option expiration date ~~except that if death occurs before~~of stock options held by the ~~award expires, then unvested options are forfeited and vested options are~~named executive officers at the end of Fiscal 2016. The first column shows this information for exercisable ~~for the period described herein.~~

•
Death: If death occurs during employment, or within three months after termination of employment for reasons other than Cause, then unvested options are forfeited and vested options are exercisable until the earlier of (i) one year after death or (ii) the option expiration date.
Certain options listed were "reload" options, which have an exercise price equal to the NYSE closing price on the date the original option was exercised, but retain the original option expiration date. The Company no longer grants reloadstock options, and ~~all outstanding options have been amended to eliminate~~ the ~~reload provisions.~~
second column shows this information for unexercisable stock options.

²
This column shows the number of unvested shares of time-based restricted stock held by the named executive officers at the end of Fiscal 2016. The following schedule shows the vesting dates for ~~the~~these unvested ~~shares of time-based restricted stock of the named executive officers:~~shares:

Vesting Date

Mr. Storch

Mr. Romenesko

Mr. Fortson

Mr. Martinez

Mr. Regan

Mr. Sharp

5/31/15
52,001 25,124 — 6,668 14,976 5,664

6/1/15
60,000 28,000 — 4,000 8,000 3,000

5/31/16
24,256 11,922 — 5,000 7,130 2,775

5/31/17
25,200 12,600 2,375 — 7,560 3,024

5/31/18
13,200 6,600 2,375 — 3,960 1,584

Vesting Date

Mr. Storch

Mr. Romenesko

Mr. Holmes

Mr. Sharp

Mr. Regan

5/31/17 25,200 12,600 — 3,024 7,560

5/31/18 13,200 6,600 — 1,584 3,960

7/31/18 8,125 4,062 1,000 1,250 2,500

7/31/19 8,125 4,063 1,000 1,250 2,500

³
~~These columns show~~This column shows the market value of the unvested shares of time-based restricted ~~and performance-based restricted~~ stock ~~respectively,~~ held by the named executive officers based on a price of ~~$24.30~~$24.41 per share (the closing ~~market~~ price of the common stock on May ~~30, 2014,~~31, 2016).

Table of Contents
4
This column shows the ~~last business day~~number of unvested shares of performance-based restricted stock at the target level held by the named executive officers at the end of Fiscal ~~2014).~~

⁴
2016. The following schedule shows the vesting dates for these unvested shares:

Vesting Date

Mr. Storch

Mr. Romenesko

Mr. Holmes

Mr. Sharp

Mr. Regan

7/31/17 16,249 8,124 1,999 2,499 4,999

7/31/18 59,468 22,211 16,086 18,090 16,720

7/31/19 16,252 8,127 2,002 2,502 5,002

5
This column shows the market value of the unvested shares of performance-based restricted stock ofat the target level held by the named executive officers based on a price of $24.41 per share (the ~~shares with vesting dates~~closing price of ~~5/31/17 and 5/31/18 also remain subject to performance conditions):~~the common stock on May 31, 2016).
Vesting
The vesting rules for stock options, shares of time-based restricted stock and shares of performance-based restricted stock are described in the following table:

Vesting Date

Mr. Storch

Mr. Romenesko

Mr. Fortson

Mr. Martinez

Mr. Regan

Mr. Sharp



5/31/15
16,263 7,992 — — 4,779 1,859


5/31/16
25,064 12,392 1,583 — 7,419 2,915


5/31/17
16,802 8,402 1,583 — 5,042 2,018


5/31/18
8,800 4,400 1,584 — 2,640 1,056

Stock Options Time-Based
Restricted Stock1 Performance-Based
Restricted Stock

General Rule
331/3% in years 1, 2 and 3 100% cliff vesting in year 3 100% cliff vesting in year 3, assuming performance conditions are met
(Stock options granted prior to Fiscal 2016 vest 20% per year for five years)
(Stock granted prior to Fiscal 2016 vests 50% each in years 4 and 5)
(Stock granted prior to Fiscal 2016 vests 331/3% each in years 3, 4 and 5, assuming the performance conditions are met)

Retirement2
Stock options continue to vest in accordance with vesting schedule (except if death occurs before the option expiration date, unvested options are forfeited and vested options are exercisable for the period described below under "Death") Stock continues to vest in accordance with the vesting schedule Stock continues to vest in accordance with the vesting schedule

Disability
Stock options continue to vest until the earlier of (i) one year after termination of employment and (ii) the option expiration date (except that if death occurs before the option expiration date, unvested options are forfeited and vested options are exercisable for the period described below under "Death") Stock vests pro-rata based on the date of disability
(Stock granted prior to Fiscal 2016 vests 100% if disability occurs after the 4th anniversary of grant and vests 50% if disability occurs before the 4th anniversary of grant)
Stock vests pro-rata based on the date of Disability
(Stock granted prior to Fiscal 2016 continues to vest in accordance with the vesting schedule)

Death
Unvested stock options expire on the date of death and vested stock options continue to be exercisable until the earlier of one year after the date of death or the expiration date of the stock option, provided that if death occurs after three months of Retirement, the vested stock options are exercisable until the expiration date. Stock vests pro-rata based on the date of death
(Stock granted prior to Fiscal 2016 vests 100% if death occurs after the 4th anniversary of grant and vests 50% if death occurs before the 4th anniversary of grant)
Stock vests pro-rata based on the date of death
(Stock granted prior to Fiscal 2016 continues to vest in accordance with the vesting schedule)

1
Time-based restricted stock awards are made to employees who are not named executive officers.

2
Retirement is defined as voluntary retirement when an employee reaches age 65 or the employee reaches age 55 and the employee's age and the number of consecutive years of service is at least 75.

Table of Contents

Fiscal ~~2014~~2016 Option Exercises and Stock Vested
The following table sets forth information for each named executive officer concerning:
•
The exercise of options during Fiscal ~~2014;~~2016;

•
The dollar amount realized on exercise of the options;

•
The number of shares of restricted stock that vested during Fiscal ~~2014;~~2016; and

•
The value of those vested shares.

Option Awards

Stock Awards

Named Executive Officer

Number of Shares
Acquired on Exercise
(#)

Value Realized on
Exercise¹
($)

Number of Shares
Acquired on Vesting
(#)

Value Realized on
Vesting²
($)


David P. Storch 27,607 183,863 160,007 3,413,290


Timothy J. Romenesko
2,109 15,037 69,195 1,486,399


John C. Fortson
— — — —


Randy J. Martinez
— — 5,666 113,660


Robert J. Regan
— — 21,826 496,452


Michael J. Sharp
10,000 124,300 10,227 227,316
Option Awards Stock Awards

Named Executive Officer Number of Shares
Acquired on Exercise
(#) Value Realized on
Exercise¹
($) Number of Shares
Acquired on Vesting
(#) Value Realized on
Vesting²
($)

David P. Storch — — 92,521 2,566,238

Timothy J. Romenesko — — 43,915 1,215,605

John M. Holmes — — 13,000 358,370

Michael J. Sharp — — 6,675 178,327

Robert J. Regan — — 17,510 468,459

John C. Fortson — — — —

¹
This amount represents the difference between the closing market price of the common stock on the date of exercise and the exercise price, multiplied by the number of shares covered by the option.

²
These amounts represent the closing market price of the common stock on the date of vesting, multiplied by the number of shares that vested.

~~Table of Contents~~
Retirement Program Benefits
The Company provides defined benefit pension benefits under the SKERP and the Retirement Plan. The following table shows the years of service currently credited to each named executive officer under the applicable plan and the present value of the accumulated benefit payable under the applicable plan to each named executive officer at the earliest age an unreduced benefit is payable.
~~Fiscal 2014 Pension Benefits~~

Named Executive Officer

Plan Name

Number of
Years
Credited
Service
(#)¹

Present
Value of
Accumulated
Benefit
($)²

Payments
During
Fiscal 2014
($)

David P. Storch Retirement Plan 26.4 753,600 —

SKERP N/A 245,992 —


Timothy J. Romenesko
Retirement Plan 24.4 666,053 —

SKERP N/A 192,611 —


John C. Fortson³
Retirement Plan N/A N/A N/A

SKERP N/A N/A N/A


Randy J. Martinez³
Retirement Plan N/A N/A N/A

SKERP N/A N/A N/A


Robert J. Regan³
Retirement Plan N/A N/A N/A

SKERP N/A N/A N/A


Michael J. Sharp³
Retirement Plan 8.9 70,002 —

SKERP N/A N/A N/A
Fiscal 2016 Pension Benefits

Named Executive Officer Plan Name Number of
Years
Credited
Service
(#)¹ Present
Value of
Accumulated
Benefit
($)² Payments
During
Fiscal 2016
($)

David P. Storch Retirement Plan 26.4 823,504 —

SKERP N/A 280,686 —

Timothy J. Romenesko Retirement Plan 24.4 727,836 —

SKERP N/A 222,436 —

John M. Holmes³ Retirement Plan 3.7 14,597 —

SKERP N/A N/A N/A

Michael J. Sharp³ Retirement Plan 8.9 76,496 —

SKERP N/A N/A N/A

Robert J. Regan³ Retirement Plan N/A N/A N/A

SKERP N/A N/A N/A

John C. Fortson³ Retirement Plan N/A N/A N/A

SKERP N/A N/A N/A

¹
Number of Years of Credited Service as of May 31, 2005, the date the Retirement Plan was frozen.

Table of Contents
²
Amounts shown in this column are calculated as of ~~May 30, 2014,~~the last business day of Fiscal 2016, which is the measurement date for reporting purposes in the Company's Annual Report on Form 10-K for Fiscal ~~2014.~~2016. See Note 78 to the Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for an explanation of the assumptions made by the Company in determining the amounts reported in this column.

³
~~Messrs.~~Mr. Holmes, Mr. Sharp, Mr. Regan and Mr. Fortson ~~Martinez and Regan~~ do not participate in the defined benefit portion of the SKERP, ~~or in the Retirement Plan,~~ and Mr. ~~Sharp does~~Regan and Mr. Fortson do not participate in the ~~defined benefit portion of the SKERP.~~Retirement Plan.
SKERP — Defined Benefit Portion
The Company provides supplemental retirement benefits to certain executives and key employees under the SKERP. The SKERP, which is a non-qualified plan, contains a defined benefit portion and a defined contribution portion (discussed below). Only Mr. Storch and

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Mr. Romenesko participate in the defined benefit portion of the SKERP, the material terms and conditions of which include the following:
Benefit Accruals:    Under the defined benefit portion of the SKERP, benefits were accrued until October 1, 2001 pursuant to a formula that provides a monthly single life annuity at retirement at age 65 equal to: (i) ¹/12 of 60% (50% for Mr. Romenesko) of Final Average Earnings less (ii) the monthly benefit payable under the Company's Retirement Plan determined as of October 1, 2001. For purposes of this benefit formula, (i) "Final Average Earnings" is defined as¹/5 of a participant's Compensation during the five consecutive years within the last 10 years preceding termination of employment during which such Compensation was the highest, and (ii) "Compensation" is defined as the participant's income reported on Form W-2, including pre-tax contributions to the Retirement Savings Plan, reduced by the income attributable to restricted stock and stock options, reimbursements or other expense allowances and fringe benefits. Benefits accrued on and after October 1, 2001 under the defined benefit portion of the SKERP will accrue pursuant to a formula that provides a monthly single life annuity at retirement at age 65 equal to¹/12 of 60% (50% for Mr. Romenesko) of 25% of the percentage increase in the participant's base salary from September 30, 2001 to the date of the participant's termination of employment. The benefits accrued by Messrs. Storch and Romenesko as of May 31, 2006 have been transferred to the defined contribution portion of the SKERP and are held in an account established and maintained thereunder for each participant.
Benefits accrued under the defined benefit portion of the SKERP for all other participants ceased on October 1, 2001 and were distributed to them in a lump sum as soon as practicable thereafter.
Benefit Entitlement:    A participant is eligible to receive the benefit accrued under the SKERP following termination of employment when he reaches age 65. If a participant terminates employment after he reaches age 55 and his age plus years of service equal or exceed 62, benefits will be paid on the date of his termination or on a date no later than 15 years after termination of employment, as previously specified by the participant.
Form of Benefit Payment:    Each participant has previously elected to have the remainder of his retirement benefit paid in a lump sum. The assumptions set forth in the Company's Retirement Plan will be used to convert the retirement benefits from an annuity payment to a lump sum. The participant may change the time or form of payment in accordance with procedures set forth in the SKERP.
Forfeiture Events:    A participant will forfeit the retirement benefit if his employment is terminated due to theft, embezzlement, fraud or willful misconduct in the performance of his duties that materially injures the Company, or if during employment or the one-year period thereafter the participant violates the covenant not to compete contained in the SKERP. As a condition to receiving his retirement benefit, a participant must agree in writing to return his benefit, plus 8% interest, in the event of such forfeiture. The forfeiture provision does not apply if the participant's termination of employment causes benefits to be paid to him under Change in Control provisions of any agreement between the participant and the Company.

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Retirement Plan
The Company's Retirement Plan is a tax-qualified pension plan. Benefit accruals ceased under the Retirement Plan with respect to most participants, including the named executive officers, effective June 1, 2005. ~~Messrs.~~Mr. Regan and Mr. Fortson ~~Martinez and Regan~~ do not participate in the Retirement Plan because their dates of hire were after June 1, 2005. The material terms and conditions of the Retirement Plan as they pertain to Messrs. Storch, Romenesko, Holmes and Sharp are as follows:
Benefit Formula:    Until January 1, 2000, benefits were accrued pursuant to a formula that provides a monthly single life annuity at retirement at age 65 equal to 1¹/2% of the participant's Final Average Earnings reduced by the participant's Social

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Security offset determined under the Plan, multiplied by the participant's years of Credited Service (up to 20). Effective as of January 1, 2000, the Plan was converted to a cash balance type of plan, subject to a "grandfather" provision applicable to certain participants based on age and years of service. An account is maintained for each participant which consists of (i) an opening account balance equal to the then present value of the benefit accrued by the participant under the prior formula as of December 31, 1999, (ii) quarterly contributions made by the Company equal to a percentage of compensation based on the participant's age and years of Credited Service, and (iii) quarterly interest credits made by the Company equal to 25% of the 30-year Treasury securities interest rate for the second month preceding the beginning of each quarter. For purposes of the benefit formulae, "Final Average Earnings" and "Compensation" have the same definitions as used in the SKERP, as discussed above.
The benefits under the Retirement Plan generally ceased accruing on June 1, 2005, although the participants' cash balance accounts continue to be credited with interest until the benefits are distributed.
Vesting:    Participants are eligible to receive benefits from the Retirement Plan after completing five years of Vesting Service. The named executive officers who participate in the Retirement Plan are fully vested in their benefits.
Payment of Retirement Benefits:    Participants can elect to receive their benefits upon termination of employment or they can defer receipt of benefits until normal retirement age (age 65). Any vested participant can elect benefits at any time after termination of employment, with the benefit actuarially reduced to reflect payment prior to age 65. The Retirement Plan also provides for a Disability retirement benefit.
Forms of Benefit Payment:    The normal form of benefit payment for a married participant is a joint and 50% survivor annuity, and the normal form of benefit payment for an unmarried participant is a single life annuity. Participants, with spousal consent, if applicable, can waive the normal form of benefit payment and elect to have benefits paid in various annuity forms, which are the actuarial equivalent of the normal form, or in a lump sum.
Retirement Savings Plan:    In connection with ceasing benefits under the Retirement Plan, the Company amended its Retirement Savings Plan to provide additional benefits, as described below in the discussion following the Non-Qualified Deferred Compensation table.
Non-Qualified Deferred Compensation
The Company provides non-qualified deferred compensation benefits under the defined contribution portion of the SKERP. The following table below shows the contributions made by

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each named executive officer and by the Company in Fiscal ~~2014,~~2016, the earnings accrued on the named executive officer's account balance in Fiscal ~~2014,~~2016, and the account balance as of May 31, ~~2014. Mr. Martinez does not participate in the SKERP.~~2016.
~~Fiscal 2014 Non-Qualified Deferred Compensation~~

Named Executive Officer

Executive
Contributions
in Fiscal 2014
($)¹

Company
Contributions
in Fiscal 2014
($)²

Aggregate
Earnings
in Fiscal 2014
($)³

Aggregate
Withdrawal/
Distributions
($)

Aggregate
Balance at
May 31, 2014
($)⁴


David P. Storch 112,840 376,736 2,057,158 — 12,936,046


Timothy J. Romenesko
58,770 152,620 402,816 — 3,159,904


John C. Fortson
20,462 13,477 2,317 — 36,256


Robert J. Regan
43,048 70,781 152,996 — 1,027,588


Michael J. Sharp
15,805 53,839 74,799 — 512,437
Fiscal 2016 Non-Qualified Deferred Compensation

Named Executive Officer Executive
Contributions
in Fiscal 2016
($)¹ Company
Contributions
in Fiscal 2016
($)² Aggregate
Earnings
in Fiscal 2016
($)³ Aggregate
Withdrawal/
Distributions
($) Aggregate
Balance at
May 31, 2016
($)⁴

David P. Storch 42,888 461,072 (321,124) — 15,082,770

Timothy J. Romenesko 27,115 270,016 (43,260) — 3,954,845

John M. Holmes 50,241 75,198 (37,413) — 1,117,961

Michael J. Sharp 57,338 72,557 (3,282) — 780,619

Robert J. Regan 21,072 89,798 (53,203) — 1,295,073

John C. Fortson 8,564 23,734 (4,672) 217,473⁵ —

¹
The amount of contributions made by each named executive officer and reported in this column in respect of salary deferrals in Fiscal ~~2014~~2016 is included in each named executive officer's compensation reported in the Summary Compensation Table as "Salary." The amount of contributions reported in this column also reflects deferral of cash bonuses paid in Fiscal ~~2014~~2016 but earned and reported in the Summary Compensation Table for Fiscal ~~2013.~~2015.

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²
The amount of Company contributions reported in this column for each named executive officer is reported in the "All Other Compensation" column in the Summary Compensation Table. ~~For Mr. Storch, Mr. Romenesko and Mr. Regan, these amounts represented a 50% reduction in the amount of the Additional Supplemental Company Contributions earned by formula under the SKERP.~~

³
The investment earnings reported in this column for each named executive officer are not reported in the Summary Compensation Table.

⁴
The aggregate balance as of May 31, ~~2014~~2016 reported in this column for each named executive officer reflects amounts that have been previously reported as compensation in the Summary Compensation Table for Fiscal ~~2014~~2016 or prior years, except the following amounts of earnings included in the account balance: Mr. Storch, ~~$5,636,850;~~$6,754,101; Mr. Romenesko, ~~$1,037,328;~~$1,260,083; Mr. ~~Fortson, $2,317;~~Holmes, $340,576; Mr. Sharp, $232,416 and Mr. Regan, ~~$353,082; and Mr. Sharp, $182,745.~~$372,601. The aggregate balance as of May 31, ~~2014~~2016 also includes the following cumulative amounts transferred from the defined benefit portion of the SKERP: Mr. Storch, $1,712,865; and Mr. Romenesko, $272,876.

5
Upon his termination of employment, Mr. Fortson forfeited $60,396 unvested SKERP benefits and received a distribution of $157,077 on May 2, 2016.
SKERP — Defined Contribution Portion
The defined contribution portion of the SKERP covers certain executives and key employees and provides the portion of a participant's benefit that cannot be paid under the Retirement Savings Plan due to Internal Revenue Code limits, including the limit on the amount of compensation that can be taken into account in determining benefits ($~~255,000~~265,000 in ~~2013~~2015 and ~~$260,000 in 2014)~~2016). The material terms and conditions of the defined contribution portion of the SKERP include the following:
Contributions:    Each participant may make an election which satisfies Code Section 409A to contribute a portion of his base salary (up to 75%) for that calendar year that exceeds the Code's compensation limit and a portion of the bonus (up to 75%) paid to him for the Company's fiscal year beginning in such calendar year that exceeds the Code's compensation limit. The Company

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makes a matching contribution under the SKERP using the formula in the Retirement Savings Plan (i.e., 20% of the first 5% of the participant's contributions, up to 1% of compensation), as well as the portion of the Company's retirement benefit and profit sharing contributions that could not be made under the Savings Plan due to the Code's compensation limit. The Company also makes annual supplemental contributions to the accounts of the Chief Executive Officer ~~(22%~~(up to 22% of base salary and bonus), the ~~President (16%~~Vice Chairman (up to 16% of base salary and bonus) and other eligible officers ~~(5%~~(up to 5% or 10% of base salary and bonus). To receive a credit of this contribution, the eligible participant must be employed as of the day before the contribution is made to the SKERP (unless termination of employment is due to death or Disability). In Fiscal ~~2014, the annual supplemental contribution for~~2016, Messrs. Storch, Romenesko and Regan received annual supplemental contributions of 11%, 8% and 5%, respectively, which represented 50% less than the maximum amounts to which these individuals were ~~reduced, at management's recommendation, by 50% (Mr. Fortson~~entitled. Mr. Holmes and Mr. Sharp each received a 5% ~~contribution and Mr. Martinez does not participate in the SKERP).~~annual supplemental contribution.
Mr. Storch and Mr. Romenesko also have amounts held in a supplemental account that were transferred from the defined benefit portion of the SKERP, which represent the lump sum value of each participant's accrued benefit as of May 31, 2006 under the defined benefit portion. These amounts are now subject to the terms and conditions of the defined contribution portion of the SKERP.
Vesting:    A participant is fully vested in amounts attributable to his own deferral contributions, and vests in all Company contributions, except supplemental contributions, at a rate equal to 33¹/3% for each year of vesting service (subject to full vesting upon age 65, death or ~~Disability)~~disability). A participant vests in amounts attributable to Company supplemental contributions (i) made prior to October 17, 2007, upon the earlier of age 65, or age 57 with 15 years of service, and (ii) made after October 17, 2007, upon the earlier of age 65, or age 55 with the sum of age and years of service equal to at least 75.
Investments:    Each participant's plan accounts are credited with earnings and losses based on investment alternatives made available by the plan committee and selected by the participant from time to time. The investment options currently offered under the SKERP consist of 24 mutual funds including 10 "Life Cycle" fund choices. Participants may change investment elections at any time.
Distributions:    Distribution of a participant's accounts is generally made upon the participant's termination of employment or on a date no later than 15 years after termination of employment, as previously specified by the participant. Participants were to elect by December 31, 2005 whether their accounts are to be paid in a lump sum or installments not to exceed 15 years (a participant who failed to make an election will have his account paid in a lump sum). Notwithstanding the foregoing, (i) a participant may elect distribution of the portion of his accounts earned and vested as of December 31, 2004 (and earnings thereon) upon six month's advance written election or if such distribution is subject to a 10% forfeiture; (ii) a participant can change the time and form of payment of the portion of his accounts earned and vested after December 31, 2004 in

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accordance with procedures set forth in the plan; (iii) a participant can elect a distribution at any time in order to satisfy an unforeseeable hardship (as defined in the plan); and (iv) in the event of a potential Change in Control of the Company (as determined by the Board), the portion of the participant's accounts earned and vested as of December 31, 2004 (including earnings thereon) will be distributed in an immediate lump sum. Distributions to "key employees" as defined in Code Section 409A upon termination of employment will not be paid earlier than six months following such termination.

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Forfeiture Events:    A participant will forfeit the portion of his plan accounts attributable to Company supplemental contributions and to amounts transferred from the defined benefit portion of the SKERP, if applicable, if his employment is terminated due to theft, embezzlement or fraud or willful misconduct in the performance of his duties that materially injures the Company, or if during employment or the one-year period thereafter the participant violates the covenant not to compete contained in the SKERP. As a condition to receiving such amounts, a participant must agree in writing to return such amounts, plus 8% interest, in the event of such forfeiture. The forfeiture provision does not apply if the participant's termination of employment causes benefits to be paid to him under change in control provisions of any agreement between the participant and the Company.
Retirement Savings Plan
The Retirement Savings Plan is a tax-qualified retirement plan that covers most United States employees, including the named executive officers. The material terms and conditions of the Retirement Savings Plan as it pertains to non-union employees are as follows:
Contributions:    A participant can elect to defer 1% to 75% of compensation, up to a maximum of ~~$17,500~~$18,000 for ~~2014,~~2016, or ~~$23,000~~$24,000 if age 50 or older. Contributions can be made on a pre-tax or after-tax basis, as elected by the participant. Unless a participant elects otherwise: (i) participation for non-union employees hired on or after June 1, 2007 and prior to June 26, 2009 is automatic at a 3% deferral rate; and (ii) participation for non-union employees hired on or after June 26, 2009 is automatic at a 5% deferral rate, with automatic 1% annual increase. The Company provides a matching contribution, a profit sharing contribution and a retirement benefit contribution. The current matching contribution is made, as of each payroll period, in an amount equal to 20% of the first 5% of the participant's contributions, up to 1% of compensation, to the Plan for such payroll period. The profit sharing contribution is ~~made,~~based on the participant's contributions as of the end of ~~each~~the prior calendar year ~~and is based on the participant's contributions~~ and the economic performance of the participant's operating unit, and is equal to a percentage of the participant's compensation, up to 4%. ~~The retirement benefit~~A non-elective contribution ~~which is also made as of the end of each calendar year,~~ was added to the Plan, effective June 1, 2005, and is equal to a percentage of compensation, up to 4%, based on the participant's age and years of credited service. A participant must have earned one year of service to be eligible for ~~a retirement benefit~~the non-elective contribution, and generally must be employed on the last day of the calendar year to receive a profit sharing contribution. Compensation for purposes of determining contributions includes cash compensation shown as income on the participant's Form W-2, reduced by the participant's contributions to the plan and excluding the income attributable to restricted stock options, reimbursements or other expense allowances and fringe benefits and subject to the Code's compensation limit ($~~255,000~~265,000 for ~~2013~~2015 and ~~$260,000 for 2014)~~2016).
Investments:    Each participant's plan account is credited with earnings and losses based on investment alternatives made available by the plan committee and selected by the participant from time to time. The investment options currently offered under the plan consist of 24 mutual funds including 10 "Life Cycle" fund choices. Participants may change investment elections at any time.
Vesting:    Participants hired prior to July 1, 1999 are fully vested in their accounts under the plan. Participants hired on or after January 1, 1999 are fully vested in their own contribution accounts,

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and vest in the Company contribution accounts at a rate equal to 33¹/3% for each year of vesting service (subject to full vesting upon age 65, death or Disability).
Distributions:    Participants can elect distributions of the plan accounts upon termination of employment, in a lump sum, an eligible rollover distribution, or, if early or normal retirement has been attained, in installments not to exceed 15 years.
Potential Payments Upon a Termination of Employment or a Change in Control of the Company
The Company provides certain benefits to eligible employees upon certain types of termination of employment, including a termination of employment involving a Change in Control of the Company. These benefits are in addition to the benefits to which the employees would be entitled upon a termination of employment generally (i.e., vested retirement benefits accrued

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as of the date of termination, stock options and restricted stock that are otherwise vested as of the date of termination and the right to elect continued health coverage pursuant to COBRA). These benefits as they pertain to the named executive officers are as described and set forth in the tables beginning on page .63.
Employment Agreement ofwith David P. Storch
The ~~Company entered into a new~~Company's employment agreement with Mr. Storch ~~in Fiscal 2014 that~~ provides for the following severance benefits:
Termination of Employment — Prior to, or More than 24 Months After, a Change in Control:    If prior to or more than 24 months after a Change in Control, either the Company terminates his employment ~~without~~other than for Cause or Disability or Mr. Storch terminates his employment for Good Reason, Mr. Storch is entitled to: (i) continued payment of his base salary for 36 months, and (ii) a lump sum payment equal to three times the average of the cash incentive bonus paid to him for the preceding three fiscal years of the Company. Payments cease upon a breach of the confidentiality or non-compete provisions set forth in the agreement (the non-compete provisions remain in effect for the two-year period following any such termination of employment).
Termination of Employment — Within 24 Months Following a Change in Control:    If Mr. Storch's employment is terminated within 24 months following a Change in Control either by the Company other than for Cause or Disability or by Mr. Storch for Good Reason, he is entitled to:
•
An immediate lump sum payment equal to the sum of (A) any unpaid salary through the date of termination and any unpaid bonus earned for the preceding fiscal year, (B) a pro rata portion of the bonus that would have been paid to him had he remained employed until the end of the fiscal year and all performance goals were met at target level, and (C) three times his base salary and cash bonus for either the most recently completed fiscal year prior to the termination or the preceding fiscal year, whichever produces the higher amount;

•
Continued coverage for Mr. Storch and his spouse under the Company's welfare and fringe benefit plans for three years following termination of employment (he and his spouse can elect continued medical and dental coverage pursuant to COBRA at the end of such three-year period);

•
A lump sum payment of an amount equal to the lesser of (A) three times the amount of Company contributions made under the Retirement Savings Plan and the defined

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contribution portion of the SKERP for the calendar year preceding the year in which the termination occurs or (B) $1,526,405;
•
Reasonable legal fees incurred by Mr. Storch in enforcing the agreement; and

•
Outstanding awards under the 2013 Stock Plan will vest and performance goals will be deemed satisfied at the higher of target level or actual level (outstanding but unvested awards under the prior Stock ~~Benefit~~ Plan still vest on the Change in Control).
If any excise tax would be triggered, Mr. Storch can elect to either (i) receive the full amount of severance benefits and be responsible for paying the excise tax or (ii) receive severance benefits up to the maximum amount that can be paid without triggering the excise tax.
General.    Regardless of whether a Change of Control is involved:
•
If Mr. Storch's termination is due to Retirement, he has the right to enter into a consulting agreement for a period of not less than one year, which pays consulting fees equal to 50% of his then current base salary. In addition, Mr. Storch and his spouse are entitled to continued coverage under the Company's medical, dental, welfare and executive health programs for his (and his spouse's) lifetime (or until he obtains health coverage from a new employer);

•
If Mr. Storch's employment terminates due to Disability, he will receive payment pursuant to the Company's disability plans then in effect, and he will continue to receive coverage under the Company's medical, dental, and life insurance plans for three years following such termination (the employment agreement provides that payments under the Company's disability plans will be at a level no less favorable than that in effect on May 31, 2014); and

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•
If Mr. Storch's employment is terminated following the expiration of the initial three-year term of his agreement, he will be entitled to receive the same benefits as if he were terminated without Cause by the Company prior to a Change in Control.
In any event, payments under the employment agreement in connection with Mr. Storch's termination of employment that would be considered deferred compensation under Section 409A of the Internal Revenue Code will be delayed for six months following such termination to the extent necessary to comply with Section 409A.
For purposes of Mr. Storch's employment agreement:
"Change in Control" means the earliest of (i) a person's acquisition of more than 35% of the voting power of the Company's outstanding stock, (ii) a merger or consolidation of the Company that results in the holders of the voting stock immediately prior thereto holding less than 60% of the voting stock of the resulting or surviving entity, (iii) a sale of substantially all of the Company's assets other than to an entity at least 80% owned by the Company, or (iv) the election, without the consent of the incumbent Board, of a majority of the directors then in office.
"Cause" means Mr. Storch's (i) dishonesty, intentional breach of fiduciary duty, or intentional wrongdoing or malfeasance, (ii) disregard of a material, lawful and proper direction from the Board, or (iii) material breach of the employment agreement that is not cured within 30 days of receipt of notice from the Company.

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"Disability" means a physical or mental condition that has prevented Mr. Storch from substantially performing his duties under the employment agreement for a period of 180 days and that is expected to continue to render Mr. Storch unable to substantially perform his duties for the remaining term of the employment agreement on a full-time basis.
"Good Reason" means (i) the removal of Mr. Storch from the position of Chairman or Chief Executive Officer of the Company or any successor, (ii) a material reduction in the nature or scope of Mr. Storch's duties or responsibilities or in his compensation (including benefits), (iii) a material breach of the employment agreement by the Company that is not cured within 30 days of receipt of notice from Mr. Storch, or (iv) a relocation of his primary place of employment by 50 or more miles.
"Retirement" means Mr. Storch's voluntary termination of employment that does not result in severance payments under the employment agreement.
Employment Agreement with John M. Holmes
The Company entered into an employment agreement with Mr. Holmes in July 2016. The employment agreement provides for the following severance benefits:
Termination of Employment — Prior to, or More than 18 Months After, a Change in Control:    If prior to, or more than 18 months after, a Change in Control, either the Company terminates his employment other than for Cause or Mr. Holmes terminates his employment for Good Reason, Mr. Holmes is entitled to: (i) continued payment of his base salary for 24 months, and (ii) a lump sum payment equal to two times the average of the cash incentive bonus paid to him for the preceding two fiscal years of the Company. Payments cease upon a breach of the confidentiality or non-compete provisions set forth in the agreement (the non-compete provisions remain in effect for the eighteen-month period following any such termination of employment).
Termination of Employment — Within 18 Months Following a Change in Control:    If Mr. Holmes's employment is terminated within 18 months following a Change in Control either by the Company other than for Cause or Disability or by Mr. Holmes for Good Reason, he is entitled to:
An immediate lump sum payment equal to the sum of (A) any unpaid salary through the date of termination and any unpaid bonus earned for the preceding fiscal year, (B) a pro rata portion of the bonus that would have been paid to him had he remained employed until the end of the fiscal year and all performance goals were met at target level, and (C) two times his base salary and cash bonus for either the most recently completed fiscal year prior to the termination or the preceding fiscal year, whichever produces the higher amount;

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Continued coverage for Mr. Holmes and his spouse under the Company's welfare and fringe benefit plans for two years following termination of employment (he and his spouse can elect continued medical and dental coverage pursuant to COBRA at the end of such two-year period);
Reasonable legal fees incurred by Mr. Holmes in enforcing the agreement; and
Outstanding awards under the 2013 Stock Plan will vest and performance goals will be deemed satisfied at the higher of target level or actual level (outstanding but unvested awards under the prior Stock Plan still vest on the Change in Control).
Termination of Employment — Disability.    Regardless of whether a Change of Control is involved, if Mr. Holmes's employment terminates due to Disability, he will receive payment pursuant to the Company's disability plans then in effect, and he will continue to receive coverage under the Company's medical, dental, and life insurance plans for two years following such termination.
In any event, payments under the employment agreement in connection with Mr. Holmes's termination of employment that would be considered deferred compensation under Section 409A of the Internal Revenue Code will be delayed for six months following such termination to the extent necessary to comply with Section 409A.
The terms "Change in Control," "Cause," "Disability," and "Good Reason" generally have the same meanings given to them in Mr. Storch's employment agreement.
Severance and Change in Control Agreements
The Company has severance and change in control agreements with ~~Messrs.~~Mr. Romenesko ~~Fortson,~~and Mr. Regan. Mr. Fortson's severance and change in control agreement terminated upon his resignation on September 28, 2015, and Mr. Sharp's severance and change in control agreement terminated on July 27, 2016 when he entered into an agreement in connection with his retirement from the Company.
The severance and change in control agreements with Mr. Romenesko and Mr. Regan ~~and Sharp and with certain other key employees. The agreements as they pertain to these named executive officers~~ provide for the following benefits upon the following types of employment termination:
Termination of Employment — Prior to, or More than 18 Months After, a Change in Control:    If prior to, or more than 18 months after, a Change in Control of the Company, ~~has not occurred and~~ the executive's employment is terminated by the Company other than for Cause, he is entitled to (i) continued salary for 12 months or, if earlier, until he obtains comparable employment, (ii) any earned bonus not yet paid for the preceding fiscal year, and (iii) a pro-rata portion of the bonus that would have been paid to the executive had he remained employed until the end of the fiscal year in which the termination occurs. Any bonus will be paid in a lump sum on the later of the time bonuses are paid to other officers and the end of the severance period (with interest at the prime rate plus 1% from the earlier of such dates). If the executive terminates his employment, or if the Company terminates the executive's employment for Cause, the Company may, but is not required to, pay the above-described severance benefits. Severance payments will cease if the executive breaches the confidentiality or non-compete provisions in the agreement, which are in effect for the one-year severance period.
Termination of Employment — Within 18 Months Following a Change in Control:    If the executive's employment is terminated within 18 months following a Change in Control by the Company other than for 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 the 18^th month after a Change in Control, he is entitled to (i) an immediate lump sum payment equal to the sum of (A) any unpaid salary and bonus earned for the preceding fiscal year, (B) a pro rata portion of the bonus that would have been paid to the executive had he remained employed until the end of the fiscal year and as if all performance targets had been met (including the value of any restricted stock granted in lieu of bonus), and (C) two times (for Mr. Regan) or three times (for Mr. Romenesko) base salary and cash bonus (depending upon the executive involved) for either the most recently completed fiscal year prior to the termination or the preceding fiscal year, whichever produces the higher amount, (ii) continued coverage for the executive and his dependents under the Company's welfare and fringe benefit plans for two years (for Mr. Regan) or three years (for Mr. Romenesko) following termination of employment (the executive and his dependents can elect continued medical and dental coverage pursuant to COBRA at the end of such two- or three-year period), (iii) for Mr. Romenesko, ~~and Mr. Sharp,~~ an immediate

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lump sum payment equal to the actuarial equivalent of the additional benefits

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that would be earned under the Company's retirement plans with three additional years of service and a gross-up payment to cover any related income tax liability, (iv) Company-paid outplacement services for the earlier of 18 months or the attainment of new employment (up to a maximum Company expense of 3.5% of the amount paid to the executive pursuant to (i)(C) above), (v) reasonable legal fees incurred by the executive in enforcing the agreement, and (vi) for Mr. Romenesko, ~~and Mr. Sharp,~~ a gross-up payment to cover any excise and related tax liability arising under Section 280G of the Internal Revenue Code as a result of any payment or benefit arising under the agreement. The agreements' non-compete provisions do not apply in the case of a termination of employment following a Change in Control.
Termination of Employment — Disability:    If the executive's employment terminates due to Disability, the executive will receive payment pursuant to the Company's disability plans then in effect and will continue to receive coverage under the Company's medical, dental and life insurance plans for two or three years following such termination.
Acceleration of Equity Awards:    The severance and change in control agreements also provide that upon any Change in Control, all outstanding stock options and restricted stock will vest immediately.
For purposes of the severance and change in control agreements:
"Change in Control" means (i) a person's acquisition of more than 20% of the voting power of the Company's outstanding stock, (ii) a merger or consolidation of the Company that results in the holders of the voting stock immediately prior thereto holding less than 60% of the voting stock of the resulting or surviving entity, (iii) a sale of substantially all of the Company's assets other than to an entity at least 80% owned by the Company, or (iv) the election, without the consent of the incumbent Board, of the lesser of three directors or a majority of the directors then in office.
"Cause" means the executive's (i) dishonesty, intentional breach of fiduciary duty, or intentional wrongdoing, (ii) disregard of a material and proper direction from the Board, or (iii) material breach of the agreement that is not cured within 10 days of receipt of notice from the Company.
"Disability" means a physical or mental condition that has prevented the executive from substantially performing his duties under the agreement for a period of 180 days and that is expected to continue to render the executive unable to substantially perform his duties for the remaining term of the agreement on a full-time basis.
"Good Reason" means (i) a material reduction in the nature or scope of the executive's duties or responsibilities, or in his compensation (including benefits), (ii) if Mr. Storch is not the Chief Executive Officer at the time of termination, the executive's determination that as a result of a material change in employment circumstances he is unable to adequately carry out his duties, or (iii) a relocation of the executive's primary place of employment by more than 100 miles.
In any event, payments under the agreements in connection with termination of employment that would be considered deferred compensation under Section 409A of the Internal Revenue Code will be delayed for six months following such termination to the extent necessary to comply with Section 409A.
Agreement with Michael J. Sharp
The Company entered into an agreement with Mr. Sharp on July 27, 2016 in connection with his retirement from the Company. The agreement provides that Mr. Sharp will retire from the Company on the earlier of December 5, 2016 and the date that he begins full-time employment with a new employer, and that during this period prior to retirement, Mr. Sharp will provide transitional financial and accounting services to the Company. The agreement provides for severance pay in the form of salary continuation beginning after the employment period and continuing through December 5, 2017, subject to earlier termination under certain circumstances set forth in the agreement. The agreement also provides for payment of the cost of COBRA coverage during the severance period and career counseling and outplacement services with a firm of the Company's choosing at a cost not to exceed $10,000 and a pro-rata bonus for his employment from June 1, 2016 through July 31, 2016 based on actual Company performance (capped at the target level). The agreement confirms that Mr. Sharp will be retirement eligible for purposes of the Company's stock plans and the SKERP, and that Mr. Sharp will receive his SKERP contributions for the portion of the plan year from January 1, 2016 through the end of the employment period, including the additional supplemental Company contribution of 5% of cash compensation. The agreement obligates Mr. Sharp not to disclose the

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Company's confidential information and terminated his severance and change in control agreement with the Company effective July 27, 2016.
Split Dollar Insurance Agreements
The Company has entered into split dollar life insurance agreements with Mr. Storch, Mr. Romenesko and Mr. Sharp. Under the agreements, the employees own the policies, except for the cash value portion of the policies owned by the Company. The Company funds the annual insurance premiums for the policies during the term of the agreement subject to reimbursement from the cash value or death benefit proceeds of the policies. Upon a Change in Control of the Company (as defined for such executive above), the Company will prepay all premiums, plus any amounts necessary for the cash value and death benefits to be at the same level at the Change in Control date. If the executive's employment terminates after a Change in Control and benefits are paid under the severance and change in control agreements, the split dollar agreements will continue for the severance period.
Stock Plans
A named executive officer's termination of employment can result in enhanced benefits under the AAR CORP. Stock Benefit Plan and the AAR CORP. 2013 Stock Plan, depending on the reason for such termination:
Stock Options:    If termination is due to Retirement (as defined), options continue to vest in accordance with the vesting schedule and can be exercised until the expiration date, except that if death occurs before the award expires, then unvested stock options are forfeited. If death occurs within three months after Retirement, vested options can be exercised until the earlier of one year after death or the option expiration date, and if death occurs after three months from Retirement, vested options can be exercised until the option expiration date. If termination is due to Disability (as defined), options continue to vest and are exercisable until the earlier of one year after termination of employment and the option expiration date, except that if death occurs before the award expires, then unvested options are forfeited and vested options are exercisable for the period described herein. If death occurs during employment, or within three months after termination of employment for reasons other than Cause, then unvested options are forfeited and vested options are exercisable until the earlier of one year after death or the option expiration date.
Restricted Stock Awards:    IfIn the case of performance-based or time-based restricted stock awards, if termination is due to Retirement, ~~restricted stock~~Disability or death, the awards continue to vest in accordance with their vesting schedule. If termination is due to Disability or death on or before the third anniversary of the date of grant, then the difference between one-half of the total award shares and the number of shares already vested will vest as of such termination. If termination is due to Disability or death after the third anniversary of the date of grant, all awards shares will vest as of such termination.
The AAR CORP. Stock Benefit Plan has change in control provisions that apply to participants who do not have a severance and change in control agreement. Upon a Change in Control of the Company (as defined in the Stock ~~Benefit~~ Plan) that does not have prior written approval of the Board, all options and restricted stock awards will fully vest. Upon a Change in Control that has the approval of the Board, the Compensation Committee has the discretion to either provide for full vesting of options and restricted stock awards or grant replacement awards with respect to the successor company's stock.
Award agreements under the AAR CORP. 2013 Stock Plan do not provide for vesting upon a Change in Control (as defined) unless there is a termination of employment by the Company without Cause or by the participant for Good Reason within two years following the Change in Control.

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Tables of Potential Payments Upon a
Termination
of Employment or a Change in Control of the Company
The tables set forth below quantify the additional benefits described above that would be paid to each current named executive officer under the following termination of employment or change in control events, assuming a change in control or a termination of employment occurred on May ~~30, 2014~~31, 2016 (the last business day of Fiscal ~~2014)~~2016).

Equity Vesting — On or After a Change in Control

Named Executive Officer

Vesting of Restricted Stock ($)¹

Vesting of Stock Options ($)²


David P. Storch 5,870,540 1,313,280


Timothy J. Romenesko
2,853,598 656,640


John C. Fortson
230,850 —


Randy J. Martinez
380,732 228,000


Robert J. Regan
1,494,596 393,984


Michael J. Sharp
580,649 157,594

Equity Vesting — On or After a Change in Control

Named Executive Officer

Vesting of Restricted Stock
($)¹

Vesting of Stock Options
($)²

David P. Storch
3,578,970 662,976

Timothy J. Romenesko
1,605,861 331,488

John M. Holmes
539,144 115,100

Robert J. Regan
1,055,513 198,893

¹
Under the Company's stock plans and severance and change in control agreements, all restricted stock (both performance-based and time-based) generally vests upon a Change in Control of the Company ~~and~~or upon a qualifying termination of employment that occurs within two years following a Change in Control. See "—" — Stock Plans" above. The amounts shown reflect the number of shares that would have vested upon a Change in Control and termination of employment, if applicable, on May ~~30, 2014 (the last business day of Fiscal 2014),~~31, 2016, based on the number of shares multiplied by ~~$24.30,~~$24.41, the closing price of the common stock on May ~~30, 2014.~~31, 2016.

²
Under the Company's stock plans and severance and change in control agreements, all stock options generally vest upon a Change in Control of the Company ~~and~~or upon a qualifying termination of employment that occurs within two years following a Change in Control. See "—" — Stock Plans" above. The amounts shown reflect the number of option shares that would have vested upon a Change in Control and termination of employment, if applicable, multiplied by the difference (but not less than

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zero) between the option exercise price and ~~$24.30,~~$24.41, the closing price of the common stock on May ~~30, 2014 (the last business day of Fiscal 2014).~~
31, 2016.

Termination of Employment — Prior to a Change in Control

Other than Cause

Disability

Death


Named Executive Officer

Salary
($)¹

Bonus
($)²

Restricted
Stock
($)³

Stock
Options
($)⁴

Health and
Welfare
($)⁵

Health and
Welfare
($)⁶

Restricted
Stock
($)⁷

Stock
Options
($)⁸

Restricted
Stock
($)⁷



David P. Storch
2,719,346 3,052,233 5,870,540 1,313,280 305,074 36,506 3,819,510 328,320 3,819,510


Timothy J. Romenesko
499,272 426,393 2,853,598 656,640 — 41,829 1,842,001 164,160 1,842,001


John C. Fortson
400,000 273,290 230,850 — — 27,886 115,425 — 115,425


Randy J. Martinez
— — 380,732 228,000 — — 238,966 57,000 238,966


Robert J. Regan
391,586 267,541 1,494,596 393,984 — 27,886 889,210 98,496 889,210


Michael J. Sharp
360,353 207,733 580,649 157,594 — 41,829 343,687 39,398 343,687
Termination of Employment
Prior to, or More than 18 Months (24 Months for Mr. Storch) After, a Change in Control

Other than Cause Disability Death

Named Executive Officer
Salary
($)1 Bonus
($)2 Restricted
Stock
($)3 Stock
Options
($)4 Health and
Welfare
($)5 Health and
Welfare
($)6 Restricted
Stock
($)7 Stock
Options
($)8 Restricted
Stock
($)7

David P. Storch
2,301,000 1,866,348 3,578,970 662,976 368,084 45,758 1,672,201 331,488 1,672,201

Timothy J. Romenesko
450,000 507,400 1,605,861 331,488 — 50,336 790,195 165,744 790,195

John M. Holmes
900,000 1,065,949 539,144 115,100 — 33,557 110,372 57,550 110,372

Robert J. Regan
390,000 361,200 1,055,513 198,893 — 33,557 500,167 99,446 500,167

Michael J. Sharp9
400,000 46,667 737,158 79,557 17,758 — — — —

¹
Reflects continued salary for 36 months for Mr. Storch under his employment agreement, ~~and continued salary~~24 months for Mr. Holmes under his employment agreement, 12 months for ~~the four named executive officers with~~Mr. Romenesko and Mr. Regan under their severance and change in control ~~agreements.~~agreements and 12 months for Mr. Sharp under his July 27, 2016 agreement.

²
Reflects (i) in the case of Mr. Storch, three times the average of the non-equity incentive ~~plan~~ compensation ~~or bonus~~ paid to him for Fiscal ~~2012,~~2014, Fiscal ~~2013~~2015 and Fiscal ~~2014, and~~2016, (ii) in the case of Mr. Holmes, two times the ~~four named executive officers with severance and change in control agreements,~~average of the non-equity incentive ~~plan~~ compensation ~~bonus~~ paid to him for Fiscal ~~2014~~2015 and Fiscal 2016, (iii) in the case of Mr. Romenesko and Mr. Regan, the non-equity incentive compensation paid to them for Fiscal 2016 as shown in the Summary Compensation ~~Table.~~Table and (iv) in the case of Mr. Sharp, a pro-rata target bonus for June 1, 2016 through July 31, 2016 under his July 27, 2016 agreement.

³
The amounts in this column reflect the value of the continued vesting ~~of the~~ of the restricted stock pursuant to the Company's stock plans if termination is due to Retirement at May ~~30, 2014 (the last business day of Fiscal 2014),~~31, 2016, based on the number of shares, multiplied by ~~$24.30,~~$24.41, the closing price of the common stock on May ~~30, 2014.~~31, 2016. At May ~~30, 2014,~~31, 2016, only Mr. Storch and Mr. Romenesko were eligible for vesting upon termination due to Retirement. Mr. Sharp was eligible for vesting upon termination due to Retirement effective with his July 27, 2016 agreement.

⁴
The amounts in this column reflect the value of the continued vesting of options pursuant to the Company's stock plans if termination is due to Retirement at May ~~30, 2014 (the last business day of Fiscal 2014)~~31, 2016 based on the difference between the exercise price and ~~$24.30,~~$24.41, the closing price of the common stock on May ~~30, 2014.~~31, 2016. At May ~~30, 2014,~~31, 2016, only Mr. Storch and Mr. Romenesko were eligible for continued vesting upon termination due to Retirement. Mr. Sharp was eligible for vesting upon termination due to Retirement effective with his July 27, 2016 agreement.

⁵
Available if termination is due to Retirement under Mr. Storch's employment agreement ~~upon his Retirement.~~and Mr. Sharp's July 27, 2016 agreement.

⁶
Available if termination is due to Disability under the employment agreements for Mr. ~~Storch's employment agreement~~Storch and Mr. Holmes and the severance and change in control agreements for ~~the four named executive officers with severance~~Mr. Romenesko and ~~change in control agreements.~~Mr. Regan.

⁷
The amounts in these columns reflect the value of the restricted stock that would vest upon termination due to Disability or death at May ~~30, 2014 (the last business day of Fiscal 2014),~~31, 2016, based on the number of shares, multiplied by ~~$24.30,~~$24.41, the closing price of the common stock on May ~~30, 2014.~~31, 2016.

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⁸
The amounts in this column reflect the value of continued vesting of options pursuant to the Company's stock plans for one year following termination if termination is due to Disability at May ~~30, 2014,~~31, 2016, based

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on the difference between the exercise price and ~~$24.30,~~$24.41, the closing price of the common stock on May ~~30, 2014.~~
31, 2016.

9
Mr. Sharp is entitled to outplacement services up to $10,000 and will vest in his Fiscal 2016 SKERP benefits under his July 27, 2016 agreement.

Termination of Employment — Following a Change in Control¹


Named Executive Officer

Salary² ($)

Bonus³ ($)

Health and Welfare Continuation ($)

Additional Retirement Plan Credits⁴ ($)

Outplacement Services ($)

280G Gross-Up ($)

David P. Storch 2,719,346 4,903,603 36,506 1,183,269 — — ⁵


Timothy J. Romenesko
1,497,816 2,455,365 41,829 1,322,546 123,438 3,717,705


John C. Fortson
800,000 819,870 27,886 — 47,130 —


Robert J. Regan
783,172 1,116,265 27,886 — 57,116 —


Michael J. Sharp
1,081,059 1,174,288 41,829 365,645 71,666 1,453,115

Termination of Employment — Within 18 Months (24 Months for Mr. Storch) Following a Change in Control¹

Named Executive Officer
Salary²
($) Bonus³
($) Health and
Welfare
Continuation
($) Additional
Retirement Plan
Credits⁴ ($) Outplacement
Services ($) 280G
Gross-Up
($)

David P. Storch
2,301,000 4,059,200 45,758 1,490,382 — —⁵

Timothy J. Romenesko
1,350,000 2,029,600 50,336 1,077,075 100,527 —

John M. Holmes
900,000 1,613,949 33,557 — — —⁵

Robert J. Regan
780,000 1,083,600 33,557 — 52,584 —

¹
These benefits are in addition to the vesting of stock awards shown above in the table for "Equity Vesting — On or After a Change in Control."

²
Reflects three times salary for Mr. Storch ~~under his employment agreement~~and Mr. Romenesko and two ~~or three~~ times salary ~~(depending on the officer involved)~~ for ~~the four named executive officers with severance~~Mr. Holmes and ~~change in control agreements.~~Mr. Regan.

³
Reflects (i) in the case of Mr. Storch, the non-equity incentive plan compensation bonus paid to him for Fiscal ~~2014~~2016 as shown in the Summary Compensation Table, plus three times his non-equity incentive plan compensation bonus for either the most recently completed fiscal year prior to termination or the preceding fiscal year, whichever produces the higher amount, and (ii) in the case of the other named executive officers, the non-equity incentive compensation plan bonus paid to them for Fiscal ~~2014~~2016 as shown in the Summary Compensation Table, plus two or three times the non-equity incentive plan compensation bonus (depending on the officer involved) for either the most recently completed fiscal year prior to termination or the preceding fiscal year, whichever produces the higher amount.

⁴
Includes an income tax gross-up ~~payment.~~payment for Mr. Romenesko.

⁵
Mr. Storch ~~has~~and Mr. Holmes each have the right under ~~his~~their employment ~~agreement~~agreements to either (i) receive the full amount of severance benefits following a Change in Control and be responsible for paying the 280G excise tax or (ii) receive the severance benefits up to the maximum amount that can be paid without triggering the 280G excise tax. To receive benefits up to the maximum amount without triggering the excise tax, it is estimated that neither Mr. Storch nor Mr. Holmes would have to forfeit ~~approximately $4.2 million of~~any benefits.

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~~SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS~~
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
The following tables show the shares of common stock beneficially owned, the percent of shares outstanding if greater than 1% and the number of stock units held, all as of July 31, ~~2014,~~2016, by (i) each current director and director nominee for election to the Board, (ii) each executive officer named in the Summary Compensation Table, (iii) all directors and executive officers of the Company as a group, and (iv) each beneficial owner of more than five percent of the outstanding shares of common stock. Except as noted, the nature of beneficial ownership for shares shown in the tables is sole voting and sole investment power, and none of the shares shown in the tables is pledged by any of the persons listed.
Security Ownership of Management

Name

Shares Beneficially
Owned¹

Percent of Shares
Outstanding if
Greater than 1%

Stock Units²

Anthony K. Anderson
13,333 — 0

Norman R. Bobins
35,572 — 0

Michael R. Boyce³ 69,938 — 0

Ronald R. Fogleman
29,072 — 36,723

John C. Fortson
38,453 — —

James E. Goodwin
44,815 — 9,202

Patrick J. Kelly⁴ 51,620 — 0

Randy J. Martinez
79,232 — —

Peter Pace
20,048 — 0

Robert J. Regan
182,126 — —

Timothy J. Romenesko
472,896 1.19 % —

Michael J. Sharp
58,211 — —

David P. Storch⁵ 1,737,973 4.36 % —

Marc J. Walfish
72,157 — 28,110

Ronald B. Woodard
25,072 — 0

All directors and executive officers as a group
2,930,518 7.35 % 74,035
Name
Shares Beneficially
Owned¹ Percent of Shares
Outstanding if
Greater than 1% Stock Units²

Anthony K. Anderson
23,513 — —

Norman R. Bobins
45,572 — —

Michael R. Boyce³
79,957 — —

Ronald R. Fogleman
26,406 — 44,866

James E. Goodwin
54,815 — 9,451

John M. Holmes
155,030 — —

Patrick J. Kelly⁴
61,620 — —

Peter Pace
25,048 — —

Robert J. Regan
210,039 — —

Timothy J. Romenesko
379,460 1.1% —

Michael J. Sharp
61,853 — —

David P. Storch⁵
1,558,342 4.5% —

Jennifer L. Vogel
7,083 — —

Marc J. Walfish
102,157 — 33,338

Ronald B. Woodard
35,072 — —

All directors and executive officers as a group (16 persons)
2,825,967 8.23% 87,655

¹
Includes (a) unvested restricted shares held by directors and executive officers ~~as well as~~and (b) the following shares of the identified person that may be acquired within 60 days of July 31, ~~2014~~2016 through the exercise of stock options: ~~General Fogleman, 0 shares;~~ Mr. ~~Fortson, 8,953 shares; Mr. Goodwin, 0 shares; Mr. Martinez, 50,500~~Holmes, 14,500 shares; Mr. Regan, ~~79,492~~103,285 shares; Mr. Romenesko, ~~199,515~~69,765 shares; Mr. Sharp, ~~23,079;~~27,473; Mr. Storch, ~~402,855 shares; Mr. Walfish, 0 shares; Mr. Woodard, 0~~141,182 shares; and all directors and executive officers as a group, ~~764,394~~356,205 shares.

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²
Represents stock units held by directors who defer all or a portion of their director ~~compensation~~retainer fees under the Non-Employee Directors' Deferred Compensation Plan. Each stock unit represents the right to receive one share of common stock upon termination of service on the Board or the happening of certain other events, as specified in the Plan.

³
Includes 10,000 shares beneficially owned through Maverick Investors Limited Partnership, a family partnership of which Mr. Boyce is a general partner.

⁴
Includes 16,000 shares beneficially owned through KMK & Associates, LLC, of which Mr. Kelly is a one-third owner.

⁵
Includes: (a) 18,810 shares beneficially owned by Mr. Storch's wife, as to which Mr. Storch disclaims beneficial ownership; (b) 50,000 shares beneficially owned through DPS Asset Management LLC, a family investment vehicle of which Mr. Storch is President; (c) 2,025 shares under the Lorraine Storch Revocable Trust under which Mr. Storch is trustee and a beneficiary; (d) 250,000 shares owned through the Storch Family Dynasty Trust, under which Mr. Storch is trustee and a beneficiary; and (e) 100,793 shares beneficially owned through a limited power of attorney arrangement, as to which Mr. Storch disclaims beneficial ownership.

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Security Ownership of Certain Beneficial Owners

Name and Address of Beneficial Owner

Number of Shares

Percent of Class

BlackRock, Inc.¹
40 East 52nd Street
New York, NY 10022
3,914,897 9.9

Dimensional Fund Advisors LP²
Palisades West, Building One
6300 Bee Cave Road
Austin, TX 78746
3,361,841 8.49

Franklin Resources Inc.³
One Franklin Parkway
San Mateo, CA 94403
3,664,284 9.3

Vanguard Group, Inc.⁴
100 Vanguard Blvd.
Malvern, PA 19355
2,352,195 5.93

Name and Address of Beneficial Owner
Number of Shares Percent of Class

BlackRock, Inc.¹
55 East 52nd Street
New York, NY 10022
3,539,307 10.10%

Dimensional Fund Advisors LP²
Palisades West, Building One
6300 Bee Cave Road
Austin, TX 78746
3,297,199 9.41%

Franklin Resources Inc.³
One Franklin Parkway
San Mateo, CA 94403
4,302,107 12.30%

Vanguard Group, Inc.⁴
100 Vanguard Blvd.
Malvern, PA 19355
2,475,007 7.06%

¹
Based on a Schedule 13G ~~filing~~amendment dated 1/~~17/14,~~31/16 and filed on 2/8/16, BlackRock, Inc. disclosed beneficial ownership with respect to the shares as follows:
•
Sole voting power:
~~3,779,169~~3,433,695
•
Shared voting power:
0
•
Sole dispositive power:
~~3,914,897~~3,539,307
•
Shared dispositive power:
0
²
Based on a Schedule 13G ~~filing~~amendment dated 12/31/15 and filed on 2/~~1/14,~~9/16, Dimensional Fund Advisors LP disclosed beneficial ownership with respect to the shares as follows:
•
Sole voting power:
~~3,279,255~~3,174,793
•
Shared voting power:
0
•
Sole dispositive power:
~~3,361,841~~3,297,199
•
Shared dispositive power:
0

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³
Based on a Schedule 13G ~~filing~~amendment dated ~~2/5/14,~~12/31/15 and filed on 1/26/16, Franklin Resources, Inc. disclosed beneficial ownership with respect to the shares as follows:
•
Sole voting power:
Franklin Resources, Inc.
~~3,414,284~~0
Charles B. Johnson
0
Rupert H. Johnson
0
Franklin Advisory Services, LLC
3,836,507
•
Shared voting power:
0
•
Sole dispositive power:
Franklin Resources, Inc.
~~3,664,284~~0
Charles B. Johnson
0
Rupert H. Johnson
0
Franklin Advisory Services, LLC
4,302,103
•
Shared dispositive power:
0
⁴
Based on a Schedule 13G ~~filing~~amendment dated 12/31/15 and filed on 2/~~6/14,~~10/16, the Vanguard Group, Inc. disclosed beneficial ownership with respect to the shares as follows:
•
Sole voting power:
~~56,899~~43,969
•
Shared voting power:
03,500
•
Sole dispositive power:
~~2,279,796~~2,430,038
•
Shared dispositive power:
~~54,399~~44,969

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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and beneficial owners of more than 10% of the Company's stock, if any, to file reports of ownership and changes in ownership on Forms 3, 4, and 5 with the SEC and the NYSE, and to furnish copies of these forms to the Company. To the Company's knowledge, based solely upon a review of copies of SEC Forms 3, 4 and 5 and upon related written representations furnished to the Company with respect to Fiscal ~~2014,~~2016, the Company believes that all of the Company's officers and directors filed on a timely basis all reports required by Section 16(a) of the Securities Exchange Act of 1934 during Fiscal ~~2014.~~2016, except that due to Company error (i) Forms 4 relating to the acquisition of 926 and 595 stock units by General Fogleman and Mr. Walfish, respectively, were filed late and (ii) a Form 4 relating to the disposition of 1,127 shares used to pay the taxes upon the vesting of a time-based restricted stock award held by Mr. Sharp was filed one day late.

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~~EQUITY COMPENSATION PLAN INFORMATION~~
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of May 31, ~~2014~~2016 with respect to the Company's compensation plans under which equity securities of the Company are authorized for issuance (shares in thousands):



Number of
securities
to be issued upon
exercise of
outstanding
options, warrants
and rights
(a)

Weighted-average
exercise
price of outstanding
options, warrants
and rights
(b)

Number of securities
remaining available
for
future issuance under
equity compensation
plans
(excluding securities
reflected in column (a))
(c)


Equity compensation plans approved by securities holders 2,753 19.59 2,017


Equity compensation plans not approved by securities holders
— — —


Total
2,753 19.59 2,017
Number of securities
to be issued upon exercise of
outstanding
options, warrants and rights (a) Weighted-average
exercise
price of outstanding
options, warrants
and rights (b) Number of securities
remaining available
for future issuance under
equity compensation
plans (excluding securities
reflected in column (a)) (c)*

Equity compensation plans approved by securities holders
2,095 22.17 3,801

Equity compensation plans not approved by securities holders
— — —

    Total
2,095 22.17 3,801

*
Represents shares under the AAR CORP. 2013 Stock Plan and the AAR CORP. Amended and Restated Stock Benefit Plan. The Company may not grant any future stock awards under the AAR CORP. Amended and Restated Stock Benefit Plan.

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~~STOCKHOLDER PROPOSALS FOR OUR 2015 ANNUAL MEETING~~
STOCKHOLDER PROPOSALS FOR OUR 2017 ANNUAL MEETING
Any stockholder who, in accordance with SEC Rule 14a-8, wishes to present a proposal for consideration at the annual meeting of stockholders to be held in ~~2015~~2017 must submit such proposal to the Company, in writing, to be received by the Secretary of the Company, AAR CORP., One AAR Place, 1100 N. Wood Dale Road, Wood Dale, Illinois 60191, no later than May ~~4, 2015,~~2, 2017, in order for the proposal to be eligible for inclusion in the Company's proxy statement and form of proxy for that meeting. The proposal must comply with applicable SEC rules and the Company's By-Laws.
Under the Company's By-Laws, any stockholder who wishes to submit a matter (other than a stockholder proposal brought in accordance with SEC Rule 14a-8) for consideration at the ~~2015~~2017 annual meeting of stockholders, including any stockholder proposal or director nomination, that would not be included in the Company's proxy statement, must submit the matter to the Company, in writing, to be received by the Secretary of the Company no later than April ~~11, 2015.~~19, 2017. The notice of such matter must contain the information required by the By-Laws.
~~OTHER BUSINESS~~
OTHER BUSINESS
Management knows of no other matters ~~which~~that are to be brought before the annual meeting. However, if any other matter properly comes before the annual meeting, the named proxy holders will vote all proxies in their discretion and best judgment on such other matter.
By Order of the Board of Directors,

Robert J. Regan
Vice President, General Counsel and Secretary
August ~~29, 2014~~31, 2016
Upon the written request of any record holder or beneficial owner of common stock of AAR CORP., the Company will provide, without charge, a copy of its annual report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended May 31, ~~2014.~~2016. Requests should be made to Mr. Robert J. Regan, Vice President, General Counsel and Secretary, AAR CORP., One AAR Place, 1100 North Wood Dale Road, Wood Dale, Illinois 60191, (630) ~~227-2000.~~227 2000.

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EXHIBIT A

AAR CORP. 2013 STOCK PLAN,
AS PROPOSED TO BE AMENDED*
1.     Purpose
The purpose of the AAR CORP. 2013 Stock Plan is to encourage Key Employees and Non-Employee Directors of the Company to increase their investment in the Company and to provide additional opportunities to such persons to share in the success of the Company. These opportunities are intended to foster in Key Employees and Non-Employee Directors a strong incentive to put forth maximum effort for the continued success and growth of the Company, to aid in retaining individuals who put forth such efforts and to assist in attracting the best available individuals in the future.
2.     Definitions
For purposes of this Plan, the following terms shall have the meanings set forth below:
2.1
"Award" means an Option, a Stock Award, a Stock Unit, or an SAR.

2.2
"Award Agreement" means, as applicable, a Stock Option Agreement, Stock Award Agreement, Stock Unit Award Agreement, or SAR Agreement evidencing an Award granted under the Plan.

2.3
"Board" means the Board of Directors of the Company.

2.4
"Change in Control" means the earliest of:

(a)
any person (as such term is used in the 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;

(b)
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

(c)
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 directors constituting a majority of the number of directors of the Company then in office.

2.5
"Code" means the Internal Revenue Code of 1986, as amended from time to time.

2.6
"Committee" means the Board's Compensation Committee, or such other committee designated by the Board comprised of not less than two directors who are "non-employee directors" within the meaning of Rule 16b-3 under the Exchange Act and "outside directors" within the meaning of Section 162(m) of the Code and the regulations thereunder.

2.7
"Company" means AAR CORP., a Delaware corporation.

2.8
"Fair Market Value" means, as of any date, the closing price of a Share on the New York Stock Exchange on such date, or if no trading occurred on the New York Stock Exchange on such date, the trading day immediately preceding such date.
*
This document reflects the AAR CORP. 2013 Stock Plan as amended since its adoption in 2013, including the proposed amendments described in Proposal 3, which are highlighted in bold type.

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2.9
"Incentive Stock Option" or "ISO" means an Option meeting the requirements of Section 422 of the Code.

2.10
"Key Employee" means an employee of the Company or a Subsidiary selected to participate in the Plan in accordance with Section 3.2. A Key Employee may also include a person who is granted an Award (other than an Incentive Stock Option) in connection with the hiring of the person prior to the date the person becomes an employee of the Company or any Subsidiary, provided that such Award shall not vest prior to the commencement of employment.

2.11
"Non-Employee Director" means a member of the Board who is not an employee of the Company or a Subsidiary.

2.12
"Non-Qualified Stock Option" or "NSO" means an Option other than an Incentive Stock Option.

2.13
"Option" means the grant of a right to purchase Shares under Section 6 of the Plan and will be either an Incentive Stock Option or a Non-Qualified Stock Option.

2.14
"Participant" means a Key Employee or Non-Employee Director selected to receive an Award under the Plan.

2.15
"Plan" means the AAR CORP. 2013 Stock Plan as reflected in the provisions contained herein, and as it may be amended from time to time.

2.16
"Shares" means the shares of the Company's $1.00 par value common stock.

2.17
"Stock Award" means the grant of Shares under Section 7 of the Plan.

2.18
"Stock Unit" means the grant of a right to receive Shares or cash under Section 8 of the Plan.

2.19
"Stock Appreciation Right" or "SAR" means the grant of a right to receive Shares or cash under Section 9 of the Plan.

2.20
"Subsidiary" means an entity of which the Company is the direct or indirect beneficial owner of not less than 50% of all issued and outstanding equity interest.
3.     Administration
3.1The Committee.    The Plan shall be administered by the Committee.
3.2
Authority of the Committee.

(a)
The Committee shall have plenary authority, subject to the provisions of the Plan, to determine the Key Employees and Non-Employee Directors to whom Awards shall be granted, the time at which Awards shall be granted, the term of each Award, the number of Shares covered by it, the effect of participation by a Participant in other plans and any other terms or conditions of each such Award. The number of Shares and other terms and conditions of a particular Award need not be the same even as to Awards made at the same time. The Committee's actions in making Awards and fixing their size and other terms and conditions shall be conclusive on all persons.

(b)
The Committee shall have the sole responsibility for construing and interpreting the Plan, for establishing and amending such rules and regulations as it deems necessary or desirable for the proper administration of the Plan and for resolving all questions arising under the Plan. Any decision or action taken by the Committee arising out of or in connection with the construction, administration, interpretation and effect of the Plan and of its rules and regulations shall, to the extent permitted by law, be within its absolute discretion, except as otherwise specifically provided herein, and shall be conclusive and binding upon all Participants and any other person, whether that person is claiming under or through any Participant or otherwise.

(c)
The Board shall designate one of the members of the Committee as the Chairman of the Committee. The Committee shall hold its meetings at such times and places as it may determine. A majority of its members shall constitute a quorum, and all determinations of the Committee shall be made by a majority of its members. Any determination reduced to writing and signed by all members shall be fully as effective as if it had been made by a

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majority vote at a meeting duly called and held. The Committee may appoint a Secretary, who need not be a member of the Committee, and may make such rules and regulations for the conduct of its business as it shall deem advisable.
(d)
To the extent permitted by applicable law, regulation and rules of a stock exchange on which the Shares are listed or traded, the Committee may delegate to the Chief Executive Officer of the Company its authority to grant Awards to Key Employees other than himself, and to determine the terms and conditions thereof; provided that (i) such Awards shall not be granted to officers subject to Section 16 of the Exchange Act or officers who are or may become "covered employees" as defined in Section 162(m) of the Code, and (ii) the terms and conditions of such Awards shall not be inconsistent with the terms and conditions set forth in the forms of Award Agreement approved by the Committee pursuant to Article 5 of the Plan.

(e)
No member of the Committee or the Chief Executive Officer shall be liable, in the absence of bad faith, for any act or omission with respect to his or her service on the Committee, or in the case of the Chief Executive Officer with respect to his service performed in accordance with subsection 3.2(d) above. Such service shall constitute service as a director of the Company, so that the members of the Committee and the Chief Executive Officer shall be entitled to indemnification and reimbursement as directors of the Company pursuant to its By-Laws.

3.3
Performance-Based Awards.

(a)
The Committee may, in its discretion, provide that any Award granted under the Plan shall be subject to the attainment of performance goals, including those that qualify the Award as "performance-based compensation" within the meaning of Section 162(m) of the Code.

(b)
Performance goals may be based on one or more business criteria, including, but not limited to: earnings, earnings per share or earnings per share growth; earnings before interest and taxes, or earnings before interest, taxes, depreciation and/or amortization; Share price; total stockholder return, return on assets; net asset turnover; inventory turnover; return on capital or return on invested capital; return on equity; cash flow; net or pre-tax income; profit margin;working capital turns; market share; expense management; revenue; revenue growth; stockholder equity; leverage ratio; investment rating; and debt coverage. Performance goals may be absolute in their terms or measured against or in relationship to the performance of other companies or indices selected by the Committee, and may be particular to one or more lines of business or Subsidiaries or may be based on the performance of the Company and its Subsidiaries as a whole. In addition, the Committee may adjust performance goals for any events that occur during a performance period, including significant acquisitions or dispositions of businesses or assets by the Company; litigation, judgments or settlements; changes in tax laws, accounting principles, or other laws or provisions affecting reported results; any reorganization and restructuring programs; extraordinary items; significant, non-recurring charges or credits; and fluctuations in foreign exchange rates.

(c)
With respect to each performance period established by the Committee, the Committee shall establish such performance goals relating to one or more of the business criteria identified above, and shall establish targets for Participants for achievement of performance goals. The performance goals and performance targets established by the Committee may be identical for all Participants for a given performance period or, at the discretion of the Committee, may differ among Participants. Following the completion of each performance period, the Committee shall determine the extent to which performance goals for that performance period have been achieved, and the related performance-based restrictions shall lapse in accordance with the terms of the applicable Award Agreement.
4.     Shares Subject to the Plan
4.1
Total Number of Shares.

(a)
The total number of Shares that may be available for Awards under the Plan, including without limitation the total number of Shares that may be subject to ISOs under the Plan, from and after October 9, 2013, shall be 5,350,000 Shares (2,500,000 Shares prior to October 11, 2016 and an additional 2,850,000 Shares from and

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after October 11, 2016), adjusted in accordance with the provisions of Section 4.3 hereof. The Shares so issued may be Shares held in the treasury or Shares that are authorized but unissued, as elected by the Committee.
(b)
Stock Options and SAR Awards shall reduce the number of Shares available for Awards by one Share for every Share subject to the Stock Option or SAR Award; provided that SARs that may be settled only in cash shall not reduce the number of Shares available for Awards. Stock Awards and Stock Unit Awards settled in Shares shall reduce the number of Shares available for Awards by two Shares for each Share delivered.

(c)
Any Shares subject to an Award but that are not issued because of a lapse, expiration, cancellation or termination of any such Award, or that have been issued in connection with a Stock Award that is subsequently cancelled or forfeited, shall once again be available for issuance pursuant to subsequent Awards, added back in the same multiple as they were awarded pursuant to Section 4.1(b). The number of Shares delivered by the Participant or withheld by the Company on the Participant's behalf as full or partial payment of an Award, including the exercise price of an Option or of any required withholding taxes with respect to any Award, shall not again be available for issuance pursuant to subsequent Awards and shall count against the aggregate number of Shares that may be issued under the Plan. Any Shares purchased by the Company with proceeds from an Option exercise shall not again be available for issuance pursuant to subsequent Awards, shall count against the aggregate number of Shares that may be issued under the Plan and shall not increase the number of Shares available under the Plan.
4.2Shares Subject to Awards.    Of the Shares authorized for issuance under the Plan:
(a)
The maximum number of Shares with respect to which Options and SARs may be granted under the Plan to any Key Employee in any calendar year is 800,000.

(b)
The maximum number of Shares that may be used for Stock Awards and Stock Unit Awards that are intended to qualify as "performance-based" in accordance with Section 162(m) of the Code that may be granted to any Key Employee in any calendar year is 300,000, or, in the event the Award is settled in cash, an amount equal to the Fair Market Value of such number of Shares on the date on which the Award is settled.

(c)
The Fair Market Value of Shares that may be subject to Awards granted to any Non-Employee Director in any calendar year, together with the cash compensation paid to such Non-Employee Director in such calendar year, shall not exceed $500,000.
4.3Adjustment.    Any increase or decrease in the number of outstanding Shares of the Company occurring through stock splits, stock dividends, stock consolidations, spin-offs, other distributions of assets to stockholders, or assumptions or conversions of outstanding Awards due to an acquisition after the adoption of the Plan shall be reflected proportionately in an increase or decrease in the aggregate number of Shares then available for the grant of Awards under the Plan or becoming available through the lapse, expiration, cancellation or termination of Awards previously granted but unexercised, and in the number of Shares subject to Awards then outstanding; and a proportionate reduction or increase shall be made in the per Share exercise price of any outstanding Options or SARs. Any fractional Shares resulting from such adjustments shall be eliminated. If changes in capitalization other than those considered above shall occur, the Committee shall make such adjustment in the number or class of Shares as to which Awards may thereafter be granted, in the number and class of Shares remaining subject to Awards then outstanding and in the per Share exercise price as the Committee in its discretion may consider appropriate, and all such adjustments shall be conclusive upon all persons.
5.     Awards and Award Agreements
Subject to the terms of the Plan, the Committee from time to time may grant Awards to selected Participants. Each Award shall be evidenced by a written Award Agreement, which shall specify the terms and conditions of the Award. An Award Agreement shall contain a vesting schedule as determined in the sole discretion of the Compensation Committee; provided that Options and SARs shall not become exercisable until at least one year following the date of grant, and the restrictions on Stock Awards and Stock Units shall not lapse for at least one year following the date of grant; and provided further that notwithstanding the foregoing, no minimum vesting schedule shall apply to Awards that result in the issuance of up to an aggregate of 5% of the Shares reserved for issuance under Section 4 (285,000 Shares). An Award Agreement may, in the sole

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discretion of the Compensation Committee, contain a non-competition agreement, a confidentiality provision, provisions for forfeiture and such restrictions, conditions and other terms as the Committee shall determine in its sole discretion.
6.     Grants of Options
6.1Grants.    Subject to the terms of the Plan, the Committee may grant Options, which may be NSOs or ISOs if granted to Key Employees and must be NSOs if granted to Non-Employee Directors. Unless otherwise expressly provided at the time of the grant, Options granted to Key Employees will be NSOs.
6.2
Terms and Conditions of Options.

(a)
Each Option shall be evidenced by a written Option Agreement specifying the terms and conditions of the Option as the Committee may determine, including the type of Option granted, the Option exercise price, the terms for payment of the exercise price, the duration of the Option and the number of Shares to which the Option pertains; provided, however, that no Option shall be credited with any amounts equal to dividends or other distributions that a Participant would have received had the Participant held the Shares subject to an unexercised Option.

(b)
The per Share exercise price of each Option shall not be less than 100% of the Fair Market Value of a Share on the date the Option is granted.

(c)
Each Option shall become exercisable at the time, and for the number of Shares, fixed by the Committee in the Option Agreement, provided that the Committee, in its discretion, shall have the power at any time to accelerate the dates for exercise of any or all Options granted to a Non-Employee Director or a Key Employee under the Plan.

(d)
Each Option shall expire and all rights to purchase Shares thereunder shall cease on the date fixed by the Committee in the Option Agreement, which shall not be later than the tenth anniversary of the date on which the Option was granted, except as otherwise required under subsection 6.3 of the Plan.

6.3
Required Terms and Conditions of ISOs.
In addition to the foregoing, each ISO granted to a Key Employee shall be subject to the following rules:
(a)
The aggregate Fair Market Value (determined with respect to each ISO at the time such ISO is granted) of the Shares with respect to which ISOs are exercisable for the first time by an individual during any calendar year (under all incentive stock option plans of the Company and its Subsidiaries) shall not exceed $100,000. If the aggregate Fair Market Value (determined at the time of grant) of the Shares subject to an ISO which first becomes exercisable in any calendar year exceeds the limitation of this subsection, so much of the ISO that does not exceed the applicable dollar limit shall be an ISO, and the remainder shall be an NSO, but in all other respects, the original Option Agreement shall remain in full force and effect.

(b)
Notwithstanding anything herein to the contrary, if an ISO is granted to an individual who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of its parent or subsidiary corporation, within the meaning of Section 422(b)(6) of the Code, (i) the purchase price of each Share subject to the ISO shall be not less than 110% of the Fair Market Value of a Share on the date the ISO is granted, and (ii) the ISO shall expire and all rights to purchase Shares thereunder shall cease no later than the fifth anniversary of the date the Option is granted.

(c)
No ISOs shall be granted under the Plan after ten years from the earlier of the date the Plan is adopted or the date the Plan is approved by stockholders of the Company.

6.4
Exercise of Options.

(a)
A person entitled to exercise an Option may do so by delivery of a written notice in accordance with procedures established by the Committee specifying the number of Shares with respect to which the Option is being exercised and any other information the Committee may prescribe.

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(b)
Except as otherwise provided in the Plan or in any Option Agreement, the Participant shall pay the purchase price of the Shares upon exercise of any Option (i) in cash, (ii) in cash received from a broker-dealer to whom the Participant has submitted a notice together with instructions to deliver promptly to the Company the amount of sales proceeds from the sale of Shares subject to the Option to pay the exercise price, (iii) by delivering Shares having an aggregate Fair Market Value on the date of exercise equal to the Option exercise price, (iv) by directing the Company to withhold such number of Shares otherwise issuable upon exercise of such Option having an aggregate Fair Market Value on the date of exercise equal to the Option exercise price, (v) by such other medium of payment as the Committee, in its discretion, shall authorize at the time of grant, or (vi) by any combination of the foregoing. In the case of payment pursuant to (ii), (iii) or (iv) above, the Participant's election must be made on or prior to the date of exercise and must be irrevocable.

(c)
The Company shall issue, in the name of the Participant, stock certificates representing the total number of Shares issuable pursuant to the exercise of any Option as soon as reasonably practicable after such exercise, provided that any Shares purchased by a Participant through a broker-dealer pursuant to subsection (ii) above shall be delivered to such broker-dealer in accordance with applicable law.
7.     Stock Awards
7.1Grants of Stock Awards.    Subject to the terms of the Plan, the Committee may grant Stock Awards to Key Employees and Non-Employee Directors. The terms and conditions of any such Award shall be determined by the Committee at the time of grant.
7.2
Terms and Conditions of Stock Awards.

(a)
Each Stock Award shall be evidenced by a written Stock Award Agreement specifying the terms and conditions of the Award as the Committee may determine, including the number of Shares issuable under the Stock Award and the restrictions on transfer. Further, the Committee, in its discretion, shall have the power at any time to accelerate the dates the restrictions lapse on any or all of the Shares subject to the Stock Award.

(b)
Dividends paid on Stock Awards shall be subject to the following: (i) if the Stock Award is subject to performance-based restrictions as described in Section 3.3, the Company shall accumulate and hold such amounts, and (ii) if the Stock Award is subject only to time-based restrictions, the Committee shall have the discretion to cause the Company to accumulate and hold such amounts. To the extent dividends are held by the Company, the accumulated amounts shall be paid to the Participant only upon the lapse of the restrictions to which the Stock Award is subject, and any such amounts attributable to the portion of the Stock Award for which the restrictions do not lapse shall be forfeited.

(c)
Subject to the restrictions set forth herein and in the related Stock Award Agreement, upon grant of a Stock Award to a Participant, the Participant shall be a stockholder with respect to all the Shares subject to such Stock Award and shall have all the rights of a stockholder with respect to such Shares, including the right to vote such Shares and to receive dividends and other distributions paid with respect to such Shares. The Company shall issue the number of Shares granted under a Stock Award on an uncertificated basis, with the Participant's ownership of such Shares evidenced by book entry in the records of the Company's transfer agent. Following the lapse of all restrictions on the Stock Award, upon the Participant's request, the Company shall issue, in the name of the Participant, stock certificates representing the Shares subject to the Stock Award.
8.     Grants of Stock Units
8.1Grants.    Subject to the terms of the Plan, the Committee may grant Stock Units to Key Employees and Non-Employee Directors. Each Stock Unit shall entitle the Key Employee or Non-Employee Director to receive, on the date or upon the occurrence of an event (including the attainment of performance goals) as described in the Stock Unit Agreement, one Share or cash equal to the Fair Market Value of one Share on the date of such event, as provided in the Stock Unit Agreement. The terms and conditions of any such Award shall be determined by the Committee at the time of grant.

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8.2
Terms and Conditions of Stock Unit Awards.

(a)
Each Stock Unit Award shall be evidenced by a written Stock Unit Award Agreement specifying the terms and conditions of the Award as the Committee may determine, including the number of Shares issuable under the Stock Unit Award, the restrictions on transfer and the form of settlement. Further, the Committee, in its discretion, shall have the power at any time to accelerate the dates the restrictions lapse on any or all of the Stock Units.

(b)
A Participant shall have no rights of a stockholder, including voting or dividend or other distribution rights, with respect to any Stock Units prior to the date they are settled in Shares. A Stock Unit Agreement may provide that, until the Stock Units are settled in Shares or cash, the Participant shall receive, on each dividend or distribution payment date applicable to the Shares, an amount equal to the dividends or distributions that the Participant would have received had the Stock Units held by the Participant as of the related record date been actual Shares. Notwithstanding the preceding sentence, in the case of a Stock Unit Award that provides for the right to receive amounts related to dividends or distributions: (i) if such Stock Unit Award is subject to performance-based restrictions as described in Section 3.3, the Company shall accumulate and hold such amounts, and (ii) if such Stock Unit Award is subject only to time-based restrictions, the Committee shall have the discretion to cause the Company to accumulate and hold such amounts. To the extent such amounts are held by the Company, the accumulated amounts shall be paid to the Participant only upon the lapse of the restrictions to which the Stock Unit Award is subject, and any such amounts attributable to the portion of a Stock Unit Award for which the restrictions do not lapse shall be forfeited.

(c)
Upon settlement of Stock Units in Shares, the Company shall issue, in the name of the Participant, stock certificates representing a number of Shares equal to the number of Stock Units being settled.
9.     Grants of SARs
9.1Grants.    Subject to the terms of the Plan, the Committee may grant SARs to Key Employees. Upon exercise, an SAR entitles the Key Employee to receive from the Company the number of Shares having an aggregate Fair Market Value equal to the excess of the Fair Market Value of one Share as of the date on which the SAR is exercised over the exercise price, multiplied by the number of Shares with respect to which the SAR is being exercised. Cash shall be delivered in lieu of any fractional Shares. The Committee, in its discretion, shall be entitled to cause the Company to elect to settle any part or all of its obligations arising out of the exercise of an SAR by the payment of cash in lieu of all or part of the Shares it would otherwise be obligated to deliver in an amount equal to the Fair Market Value of such Shares on the date of exercise. The terms and conditions of any such Award shall be determined at the time of grant.
9.2
Terms and Conditions of SARs.

(a)
Each SAR shall be evidenced by a written SAR Agreement specifying the terms and conditions of the SAR as the Committee may determine, including the SAR exercise price, the duration of the SAR, the number of Shares to which the SAR pertains and the form of settlement. Further, the Committee, in its discretion, shall have the power at any time to accelerate the dates for exercise of any or all SARs.

(b)
The per Share exercise price of each SAR shall not be less than 100% of the Fair Market Value of a Share on the date the SAR is granted.

(c)
Each SAR shall expire and all rights thereunder shall cease on the date fixed by the Committee in the SAR Agreement, which shall not be later than the tenth anniversary of the date on which the SAR was granted.

(d)
A person entitled to exercise an SAR may do so by delivery of a written notice in accordance with procedures established by the Committee specifying the number of Shares with respect to which the SAR is being exercised and any other information the Committee may prescribe. As soon as reasonably practicable after the exercise of an SAR, the Company shall (i) issue, in the name of the Key Employee, stock certificates representing the total number of full Shares to which the Key Employee is entitled and cash in an amount equal to the Fair Market Value, as of the date of exercise, or any resulting fractional Share, and (ii) if the Committee causes the Company to elect to settle all or part

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of its obligations arising out of the exercise of the SAR in cash, deliver to the Key Employee an amount in cash equal to the Fair Market Value, as of the date of exercise, of the Shares it would otherwise be obligated to deliver.
10.   Non-Transferability of Awards
10.1    No Award or rights under any Award shall be transferable otherwise than by will or the laws of descent and distribution, and the rights and the benefits of any such Award may be exercised and received, respectively, during the lifetime of the Participant only by him or her.
10.2    Notwithstanding the provisions of the preceding paragraph, a Participant, at any time prior to his or her death, may assign all or any portion of an Option granted to him or her (other than an ISO) to (a) his or her spouse or lineal descendant, (b) the trustee of a trust for the primary benefit of his or her spouse or lineal descendant, (c) a partnership of which his or her spouse and lineal descendants are the only partners, or (d) a tax exempt organization as described in Section 501(c)(3) of the Code. In such event, the spouse, lineal descendant, trustee, partnership or tax exempt organization will be entitled to all of the rights of the Participant with respect to the assigned portion of such Option, and such portion of the Option will continue to be subject to all of the terms, conditions and restrictions applicable to the Option, as set forth herein, and in the related Option Agreement, immediately prior to the effective date of the assignment. Any such assignment will be permitted only if the Participant does not receive any consideration therefor, and the assignment is expressly approved by the Company. Any such assignment shall be evidenced by an appropriate written document executed by the Participant, and a copy thereof shall be delivered to the Company on or prior to the effective date of the assignment.
11.    Change in Control
In addition to the Committee's authority set forth in Section 3, upon a Change in Control of the Company, the Committee is authorized and has sole discretion as to any Award, either at the time such Award is granted hereunder or any time thereafter, to take any one or more of the following actions: (a) provide that (i) all outstanding Awards shall become fully vested and exercisable, and (ii) all restrictions applicable to all Awards shall terminate or lapse; (b) provide for the purchase of any outstanding Stock Option or SAR for an amount of cash equal to the difference between the exercise price and the then Fair Market Value of the Shares covered thereby; (c) make such adjustment to any such Award then outstanding as the Committee deems appropriate to reflect such Change in Control; and (d) cause any such Award then outstanding to be assumed by the acquiring or surviving entity after such Change in Control.
12.   Book Entry Form
Notwithstanding the foregoing provisions of the Plan, the Company, in lieu of issuing stock certificates pursuant to an Award, may reflect the issuance of Shares to a Participant on a non-certificated basis, with the ownership of such Shares by the Participant evidenced solely by book entry in the records of the Company's transfer agent; provided, however, that upon the written request of the Participant, the Company shall issue, in the name of the Participant, stock certificates representing such Shares.
13.   Taxes
In connection with any Award, the Company shall have the right to require the Participant to remit to the Company an amount sufficient to satisfy all minimum federal, state, local and foreign withholding tax requirements prior to the delivery by the Company of cash or any certificates for Shares. The Participant may elect to satisfy his or her tax withholding obligation by (a) cash payment, (b) directing the Company to withhold a portion of the Shares otherwise distributable to the Participant, (c) by transferring to the Company a certain number of Shares (either subject to such Award or previously owned) with an aggregate Fair Market Value equal to the amount required to be withheld, (d) in cash from a broker-dealer to whom the Participant has submitted a notice together with instructions to deliver promptly to the Company the amount of sales proceeds from the sale of Shares subject to the Award to pay the withholding taxes, or (e) by any combination thereof. In the case of payment pursuant to (b), (c) or (d) above, the Participant's election must be made on or prior to the date of exercise and must be irrevocable.

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14.   Postponement
The Committee may postpone any grant, exercise or settlement of an Award for such time as the Committee in its sole discretion may deem necessary in order to permit the Company (a) to effect, amend or maintain any necessary registration of the Plan or the Shares issuable pursuant to an Award under the Securities Act of 1933, as amended, or the securities laws of any applicable jurisdiction, (b) to permit any action to be taken in order to (i) list such Shares on a stock exchange if Shares are then listed on such exchange or (ii) comply with restrictions or regulations incident to the maintenance of a public market for the Shares, including any rules or regulations of any stock exchange on which the Shares are listed, or (c) to determine that such Shares and the Plan are exempt from such registration or that no action of the kind referred to in (b)(ii) needs to be taken; and the Company shall not be obligated by virtue of any terms and conditions of any Award or any provision of the Plan to sell or issue Shares in violation of the Securities Act of 1933 or the law of any government having jurisdiction thereof. Any such postponement shall not extend the term of an Award and neither the Company nor its directors or officers shall have any obligation or liability to a Participant, the Participant's successor, or any other person with respect to any Shares as to which the Award shall expire because of such postponement or as to which issuance under an Award is delayed.
15.   Stockholder Status
No person shall have any rights as a stockholder by virtue of the grant of an Award under the Plan except with respect to Shares actually issued to that person.
16.   Termination or Amendment of Plan and Award Agreements
16.1
Termination or Amendment of Plan.

(a)
The Board may at any time terminate, suspend, or modify the Plan without approval of stockholders unless such approval is required by applicable law, regulation, or rule of any stock exchange on which the Shares are listed. No termination, suspension, or modification of the Plan shall adversely affect in any material way any right of any Participant or any successor under an Award granted before the date of such termination, suspension or modification, without the written consent of the Participant or successor; provided that it shall be conclusively presumed that any adjustment for changes in capitalization as provided in Section 4.3 does not adversely affect any such right.

(b)
Any member of the Board who is an officer or employee of the Company shall be without vote on any proposed amendment to the Plan, or on any other matter which might affect that member's individual interest under the Plan.
16.2Amendment of Award Agreements.    The Committee shall have the authority to amend any Award Agreement at any time; provided however, that no such amendment shall adversely affect the right of any Participant or successor under any outstanding Award Agreement in any material way without the written consent of the Participant or successor, unless such amendment is required by applicable law, regulation or rule of any stock exchange on which the Shares are listed.
16.3Repricing of Stock Options and SARs.    Notwithstanding the foregoing, there shall be no amendment to the Plan or any Award Agreement that results in the repricing of Options or SARs without stockholder approval. For this purpose, repricing includes a reduction in the exercise price of the Option or SAR, the cancellation of an Option or SAR in exchange for cash, Options or SARs with an exercise price less than the exercise price of the cancelled Options or SARs, Stock Awards, Stock Units or any other consideration provided by the Company but does not include any adjustment described in Section 4.3.
17.   Tenure
Nothing contained in the Plan shall be construed as a contract of employment between the Company or a Subsidiary and any person, nor shall the Plan be deemed to give any person the right to be retained in the employ of the Company or a Subsidiary or as a Non-Employee Director of the Board, to limit the right of the Company or a Subsidiary to employ or discharge any person with or without cause, or to discipline any Key Employee.

Table of Contents
18.   Other Actions
Nothing in the Plan shall be construed to limit the authority of the Company to exercise its corporate rights and powers, including, by way of illustration and not by way of limitation, the right to grant options for proper corporate purposes otherwise than under the Plan to any employee or any other person, firm, corporation, association, or other entity, or to grant options to, or assume options of, any person in connection with the acquisition, by purchase, lease, merger, consolidation, or otherwise, of all or any part of the business and assets of any person, firm, corporation, association, or other entity.
19.   Loan Agreements
Each Award shall be subject to the condition that the Company shall not be obligated to issue or transfer its Shares or to pay an amount in cash to the Participant thereof on its exercise, or otherwise, if the Committee or the Board determines that such issuance, transfer, or payment would violate any covenant in any loan agreement or other contract to which the Company or a Subsidiary is a party.
20.  Governing Law
The Plan, and all Awards and agreements hereunder, shall be construed in accordance with and governed by the laws of the State of Illinois and, in the case of ISOs, Code Section 422 and regulations issued thereunder.
21.   Effective Date and Term of Plan
21.1Effective Date.    The Plan has been adopted by the Committee, and is effective, as of the date it is approved by the stockholders of the Company at the Company's annual meeting of stockholders held on October 9, 2013 and any adjournment or postponement thereof. In the event the Plan is not approved by stockholders of the Company at its 2013 annual meeting, the Plan shall have no effect.
21.2Term of Plan.    Notwithstanding anything to the contrary contained herein, no Awards shall be granted on or after the tenth anniversary of the Plan's effective date set forth in Section 21.1 above.

See the reverse side of this notice to obtain proxy materials and voting instructions. *** Exercise Your Right to Vote *** Important Notice Regarding the Availability of Proxy Materials for the ~~Shareholder~~Stockholder Meeting to Be Held on ~~October 08, 2014.~~<mtgdate>. You are receiving this communication because you hold shares in the above named company. This is not a ballot. You cannot use this notice to vote these shares. This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. You may view the proxy materials online at www.proxyvote.com or easily request a paper copy (see reverse side). We encourage you to access and review all of the important information contained in the proxy materials before voting. Meeting Information Meeting Type: <mtgtype> For holders as of: <recdate> Date: Time: <mtgtime> Location: ~~0000218643_1 R1.0.0.51160~~0000298914_1 R1.0.1.25 AAR CORP. AAR CORP. ONE AAR PLACE 1100 NORTH WOOD DALE ROAD WOOD DALE, IL 60191 Annual Meeting August ~~19, 2014~~16, 2016 October ~~08, 2014~~11, 2016 October ~~08, 2014~~11, 2016 9:00 AM CDT AAR CORP. One AAR Place 1100 North Wood Dale Road Wood Dale, IL 60191

Please Choose One of the Following Voting Methods Vote In Person: Many ~~shareholder~~stockholder meetings have attendance requirements including, but not limited to, the possession of an attendance ticket issued by the entity holding the meeting. Please check the meeting materials for any special requirements for meeting attendance. At the meeting, you will need to request a ballot to vote these shares. Vote By Internet: To vote now by Internet, go to www.proxyvote.com. Have the information that is printed in the box marked by the arrow available and follow the instructions. Vote By Mail: You can vote by mail by requesting a paper copy of the materials, which will include a proxy card. How To Vote . ~~XXXX XXXX XXXX~~ Before You Vote How to Access the Proxy Materials Proxy Materials Available to VIEW or RECEIVE: How to View Online: Have the information that is printed in the box marked by the arrow (located on the following page) and visit: www.proxyvote.com. How to Request and Receive a PAPER or E-MAIL Copy: If you want to receive a paper or e-mail copy of these documents, you must request one. There is NO charge for requesting a copy. Please choose one of the following methods to make your request: 1) BY INTERNET: www.proxyvote.com 2) BY TELEPHONE: 1-800-579-1639 3) BY E-MAIL*: sendmaterial@proxyvote.com * If requesting materials by e-mail, please send a blank e-mail with the information that is printed in the box marked by the arrow (located on the following page) in the subject line. . ~~XXXX XXXX XXXX~~ . ~~XXXX XXXX XXXX 0000218643_2 R1.0.0.51160~~0000298914_2 R1.0.1.25 1. Notice & Proxy Statement 2. Annual Report to Stockholders 3. Annual Report on Form 10-K Requests, instructions and other inquiries sent to this e-mail address will NOT be forwarded to your investment advisor. Please make the request as instructed above on or before September ~~24, 2014~~27, 2016 to facilitate timely delivery.

Voting items ~~0000218643_3 R1.0.0.51160~~0000298914_3 R1.0.1.25 The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees 01 ~~Patrick~~Norman R. Bobins 02 Ronald R. Fogleman 03 James E. Goodwin 04 Marc J. ~~Kelly 02 Peter Pace 03 Timothy J. Romenesko 04 Ronald B. Woodard~~Walfish The Board of Directors recommends you vote FOR proposals 2, 3 and 3.4. 2. Advisory vote to approve executive compensation. 3. Approval of amendments to the AAR CORP. 2013 Stock Plan. 4. Ratification of the appointment of KPMG LLP as the Company's independent registered public accounting firm for the fiscal year ending May 31, ~~2015.~~2017. NOTE: As to any other business as may properly come before the meeting or any adjournment or postponement thereof, this Proxy will be voted in the discretion of the proxies.

~~0000218643_4 R1.0.0.51160~~
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: Signature (Joint Owners) Signature [PLEASE SIGN WITHIN BOX] Date Date To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. 0 0 0 0 0 0 0 0 0 0 0000218644_1 R1.0.0.51160 For Withhold For All All All Except The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees 01 Patrick J. Kelly 02 Peter Pace 03 Timothy J. Romenesko 04 Ronald B. Woodard AAR CORP. ONE AAR PLACE 1100 NORTH WOOD DALE ROAD WOOD DALE, IL 60191 VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 10:59 P.M. Central Time the day before the meeting date. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our Company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 10:59 P.M. Central Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. The Board of Directors recommends you vote FOR proposals 2 and 3. For Against Abstain 2. Advisory vote to approve executive compensation. 3. Ratification of the appointment of KPMG LLP as the Company's independent registered public accounting firm for the fiscal year ending May 31, 2015. NOTE: As to any other business as may properly come before the meeting or any adjournment or postponement thereof, this Proxy will be voted in the discretion of the proxies. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer. For address change/comments, mark here. (see reverse for instructions)0000298914_4 R1.0.1.25

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: Signature (Joint Owners) Signature [PLEASE SIGN WITHIN BOX] Date Date To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. 0 0 0 0 0 0 0 0 0 0 0 0 0 0000298915_1 R1.0.1.25 For Withhold For All All All Except The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees 01 Norman R. Bobins 02 Ronald R. Fogleman 03 James E. Goodwin 04 Marc J. Walfish AAR CORP. ONE AAR PLACE 1100 NORTH WOOD DALE ROAD WOOD DALE, IL 60191 VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 10:59 P.M. Central Time the day before the meeting date. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our Company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 10:59 P.M. Central Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. The Board of Directors recommends you vote FOR proposals 2, 3 and 4. For Against Abstain 2. Advisory vote to approve executive compensation. 3. Approval of amendments to the AAR CORP. 2013 Stock Plan. 4. Ratification of the appointment of KPMG LLP as the Company's independent registered public accounting firm for the fiscal year ending May 31, 2017. NOTE: As to any other business as may properly come before the meeting or any adjournment or postponement thereof, this Proxy will be voted in the discretion of the proxies. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer. For address change/comments, mark here. (see reverse for instructions)

0000218644_2 R1.0.0.51160 Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Annual Report to Stockholders, Annual Report on Form 10-K is/are available at www.proxyvote.com . AAR CORP. This proxy is solicited by the Board of Directors Annual Meeting of Stockholders The undersigned hereby appoints DAVID P. STORCH and ROBERT J. REGAN, or either of them, with full power of substitution, as Proxies, and hereby authorizes them to represent the undersigned at the 2014 Annual Meeting of Stockholders of AAR CORP. to be held at 9:00 AM Central Time on October 8, 2014, at One AAR Place, 1100 North Wood Dale Road, Wood Dale, IL 60191, or any adjournment or postponement thereof, and to vote, as designated on the reverse side of this Proxy, all shares of AAR CORP. Common Stock that the undersigned is entitled to vote. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations on the reverse side. (If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.) Address change/comments: Continued and to be signed on reverse side
0000298915_2 R1.0.1.25 Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Annual Report to Stockholders, Annual Report on Form 10-K is/are available at www.proxyvote.com AAR CORP. This proxy is solicited by the Board of Directors Annual Meeting of Stockholders The undersigned hereby appoints DAVID P. STORCH and ROBERT J. REGAN, or either of them, with full power of substitution, as Proxies, and hereby authorizes them to represent the undersigned at the 2016 Annual Meeting of Stockholders of AAR CORP. to be held at 9:00 AM Central Time on October 11, 2016, at One AAR Place, 1100 North Wood Dale Road, Wood Dale, IL 60191, or any adjournment or postponement thereof, and to vote, as designated on the reverse side of this Proxy, all shares of AAR CORP. Common Stock that the undersigned is entitled to vote. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations on the reverse side. (If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.) Address change/comments: Continued and to be signed on reverse side


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AAR CORP.
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~~Date~~
	Date	~~Wednesday, October 8, 2014~~
~~Time~~	Tuesday, October 11, 2016

	Time		9:00 a.m., Chicago time
~~Place~~
	Place		AAR CORP. One AAR Place 1100 North Wood Dale Road Wood Dale, Illinois 60191
~~Purposes~~
	Purposes		AtYou will be asked at the annual meeting ~~you will be asked~~ to:
		• Elect four ~~Class III~~ directors; • Vote on an advisory resolution to approve our Fiscal ~~2014~~2016 executive compensation; •Approve amendments to the AAR CORP. 2013 Stock Plan Ratify the appointment of KPMG LLP as our independent registered public accounting ~~firm;~~firm for Fiscal 2017; and • Transact any other business that may properly come before the annual meeting or any adjournment or postponement of the annual meeting.
~~Record Date~~
	Record Date		You may vote your shares at the annual meeting if you were a stockholder on August ~~19, 2014.~~ 16, 2016.
~~Voting~~
	Voting		Your vote is important. We encourage you to vote your shares as soon as ~~possible~~possible. You may vote by proxy over the Internet, by telephone, or by completing and returning the enclosed proxy card in the postage-paid envelope provided. We also welcome you to attend the meeting and vote in person.

						Page


		Director Compensation Table				28

		Compensation Committee Interlocks and Insider Participation				29



		EXECUTIVE COMPENSATION				2730


		Compensation Discussion and Analysis				2730


		Compensation Committee Fiscal 2016 Report on Executive Compensation ~~for Fiscal 2014~~				5146


		Summary Compensation Table				5247


		Fiscal ~~2014~~2016 Grants of Plan-Based Awards				5550


		Outstanding Equity Awards at Fiscal ~~2014~~2016 Year-End				5751


		Fiscal ~~2014~~2016 Option Exercises and Stock Vested				5953


		Retirement Program Benefits				6053


		Fiscal ~~2014~~2016 Pension Benefits				6053


		Fiscal ~~2014~~2016 Non-Qualified Deferred Compensation				6355


		Potential Payments Upon a Termination of Employment or a Change in Control of the Company				6657


		Tables of Potential Payments Upon a Termination of Employment or a Change in Control of the Company				7163





		SECURITY OWNERSHIP OF OUR MANAGEMENT AND OTHERS				7465


		Security Ownership of Management				7465


		Security Ownership of Certain Beneficial Owners				7566


		Section 16(a) Beneficial Ownership Reporting Compliance				7667





		EQUITY COMPENSATION PLAN INFORMATION				7768





		STOCKHOLDER PROPOSALS FOR OUR ~~2015~~2017 ANNUAL MEETING				7869





		OTHER BUSINESS				7869



		EXHIBIT A: AAR CORP. 2013 STOCK PLAN, AS PROPOSED TO BE AMENDED				A-1



Time and Date		~~Wednesday,~~Tuesday, October ~~8, 2014~~11, 2016 at 9:00 a.m., Chicago time
~~Place~~
Place		AAR CORP. One AAR Place 1100 North Wood Dale Road Wood Dale, Illinois 60191

Record Date		Tuesday, August 16, 2016
	~~Tuesday, August 19, 2014~~
Voting		Stockholders of record as of the record date may vote byover the Internet at ~~www.proxy.vote.com;~~www.proxyvote.com; by telephone at 1-800-690-6903; by completing and returning their proxy card or voting information card; or in person at the annual meeting.


Notice of Annual Meeting of Stockholders to be Held on ~~Wednesday,~~Tuesday, October ~~8, 2014~~11, 2016

					Page


		~~2014~~ 2016 PROXY STATEMENT SUMMARY			iv





		QUESTIONS AND ANSWERS ABOUT OUR ANNUAL MEETING			1





		PROPOSAL 1 — ELECTION OF OUR DIRECTORS			54


		Information about Our Director Nominees and Our Continuing Directors			54





		PROPOSAL 2 — ADVISORY RESOLUTION TO APPROVE OUR FISCAL ~~2014~~2016 EXECUTIVE COMPENSATION			108





		PROPOSAL 3 — APPROVAL OF AMENDMENTS TO THE AAR CORP. 2013 STOCK PLAN			10



		PROPOSAL 4 — RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2017		12

~~Independent Registered Public Accounting Firm Fees and Services~~		1217

~~Audit Committee Report for Fiscal 2014~~		13





		CORPORATE GOVERNANCE			1518


		General			18

		Stockholder Engagement			18

		Board Refreshment			18

		Director Nominations and Qualifications			1519


		Director Independence			1720


		Board Leadership and Lead Director			1720


		Risk Management Oversight			1820


		Executive Sessions			1921


		Corporate Governance Guidelines			21

		Ethics Hotline			22

		Code of Business Ethics and Conduct			22

		Related Person Transaction Policy			22

		Director Orientation and Continuing Education			23

		Board and Committee Evaluations			23

		Communications with the Board of Directors			1923


~~Corporate Governance Guidelines~~			19


		~~Code of Business Ethics and Conduct~~ BOARD MATTERS			1924

~~Related Person Transaction Policy~~		20

	Board Committees			2124


		Audit Committee Fiscal 2016 Report			24

		Board Meetings and Attendance			2427


		Director Compensation			2427

~~Director Compensation Table~~		25

~~Compensation Committee Interlocks and Insider Participation~~		26

~~Stockholder Concern~~				~~AAR Action~~

~~Tax gross-ups~~				Eliminated all tax gross-ups in the new employment agreement of the Company's Chairman and Chief Executive Officer David P. Storch (we previously committed in 2012 not to provide tax gross-ups in any future executive compensation agreement)
~~"Single-trigger" vesting upon a change in control~~				Eliminated automatic "single-trigger" vesting and imposed "double-trigger" vesting (which requires a change in control and a termination of employment) in all award agreements under the Company's 2013 stock plan and in Mr. Storch's new employment agreement
~~Annual cash bonuses~~				~~Exercised negative discretion to reduce by 30% the performance-based cash bonuses paid to the five named executive officers whose bonuses under the~~ Fiscal ~~2014 short-term incentive plan were based on Company-wide performance~~
~~Variable performance-based compensation~~2016 Corporate Governance Highlights				Awarded performance-based compensation (consisting of cash bonuses, performance-based restricted stock and stock options) representing 66% of Fiscal 2014 total direct compensation for Mr. Storch and at least 50% for each of the other named executive officers
~~Return metric and burn rate under long-term incentive plan~~				Added return on invested capital, together with three-year cumulative net income, as the two performance goals for performance-based restricted stock under our Fiscal 2015 long-term incentive plan; also granted significantly fewer shares under the Fiscal 2015 long-term incentive plan consistent with our burn rate commitment under the AAR CORP. 2013 Stock Plan
~~CEO retirement contribution under the non-qualified deferred compensation plan~~				Reduced this contribution by 50% for Fiscal 2014 and amended the non-qualified deferred compensation plan to provide the Compensation Committee with the ability to exercise negative discretion with respect to contributions for all plan participants
~~Peer group composition~~				Made changes to our peer group in Fiscal 2014 (and again in Fiscal 2015) to assure that our peer group companies share similar revenue numbers and industry/business classifications (we gave less weight to market capitalization as a factor given that its fluctuations often result in dramatic year-to-year changes in peer groups)
~~Hedging and pledging of Company stock~~				~~Prohibited hedging and pledging of Company stock by our directors, officers and employees under our insider trading policy~~
~~Independence of Compensation Consultant~~				Determined affirmatively that Mercer (US) Inc. ("Mercer"), the compensation consultant to our Compensation Committee, meets the independence criteria established by the Securities and Exchange Commission ("SEC")
~~Stockholder rights plan~~				~~Reviewed by the Board in Fiscal 2014 with outside advisors; confirmed its appropriateness for the Company at this juncture and agreed to revisit the plan closer in time to its expiration date in 2017~~
~~Protections in CEO's employment agreement~~				~~See "New Employment Agreement with Our Chairman and Chief Executive Officer" on page 54 for a summary of the protections voluntarily forfeited by Mr. Storch and other terms and provisions~~



	Fiscal 2013 ($)	Fiscal 2014 ($)
Compensation Element	Actual	Target	Per Formula	Actual
Base Salary	877,838	906,449	N/A	906,449
Annual Cash Incentive	1,350,685	1,133,061	1,216,498	851,548
Long Term Incentive Compensation	1,314,720	2,964,720	N/A	2,964,720


	Corporate Governance Information		As of August ~~29, 2014~~31, 2016

Number of ~~Directors~~ directors		1112

Number of ~~Independent Directors~~ independent directors		910

Average ~~Age~~age of ~~Directors~~ directors		6566

Average ~~Tenure~~tenure of ~~Directors~~ directors		1011 years

Director ~~Retirement Age~~ retirement age		7275 on nomination date

Lead ~~Director~~ director		Yes

Stock ~~Ownership Guidelines~~ ownership and retention guidelines		Yes

Annual ~~Stock Grant~~stock grant to ~~Non Employee Directors~~ non-employee directors		Yes

Independent ~~Directors~~directors — ~~Executive Sessions~~ executive sessions		Yes

Independent ~~Compensation Consultant~~ compensation consultant		Yes

Annual ~~Board~~board and ~~Committee Self Evaluations~~ committee self-evaluations		Yes

~~Code of Business Ethics~~Director orientation and ~~Conduct~~ continuing education programs		Yes

~~Ethics Hotline Policy~~ All Directors are "audit committee financial experts"		Yes

~~Related Person Transaction Policy~~ Code of business ethics and conduct		Yes

~~Disclosure Committee for Financial Reporting~~ Ethics hotline policy		Yes

~~Annual Advisory Stockholder Approval of Executive Compensation~~ Related person transaction policy		Yes

Disclosure committee for financial reporting		Yes

Annual advisory stockholder approval of executive compensation		Yes

Stockholder engagement program		Yes


	Required Vote	Effect of "Withhold" Votes, Abstentions and Broker Non-Votes

Proposal 1 — Election of Four Directors	Affirmative vote of a plurality of the shares of common stock present and entitled to vote (the four nominees who receive the greatest number of votes will be elected directors of the Company).	"Withhold" votes and broker non-votes will have no effect on the voting for this matter.

Proposal 2 — Advisory Resolution to Approve Fiscal 2016 Executive Compensation	Affirmative vote of a majority of the shares of common stock present and entitled to vote.	Abstentions will have the effect of a vote "against" and broker non-votes will have no effect on the voting for this matter.

Proposal 3 — Approval of Amendments to the AAR CORP. 2013 Stock Plan	Affirmative vote of a majority of the shares of common stock present and entitled to vote.	Abstentions will have the effect of a vote "against" and broker non-votes will have no effect on the voting for this matter.

Proposal 4 — Ratification of the Appointment of KPMG LLP	Affirmative vote of a majority of the shares of common stock present and entitled to vote.	Abstentions will have the effect of a vote "against"; there will be no broker non-votes for this matter.



	~~Required Vote~~	~~Effect of "Withhold" Votes,~~ ~~Abstentions and Broker Non-Votes~~
~~Proposal 1 —~~ ~~Election of Class III Directors~~	~~Affirmative vote of a plurality of the shares of common stock present and entitled to vote (the three nominees who receive the greatest number of votes will be elected directors of the Company).~~	~~"Withhold" votes and broker non-votes will have no effect on the voting for the election of directors."~~
~~Proposal 2 —~~ ~~Advisory Resolution to Approve Fiscal 2014 Executive Compensation~~	~~Affirmative vote of a majority of the shares of common stock present and entitled to vote.~~	~~Abstentions will have the effect of a vote "against" and broker non-votes will have no effect on the voting for this matter.~~
~~Proposal 3 —~~ ~~Ratification of the Appointment of KPMG LLP~~	~~Affirmative vote of a majority of the shares of common stock present and entitled to vote.~~	~~Abstentions will have the effect of a vote "against"; there will be no broker non-votes for this matter.~~

		Director Since

*Class II Directors whose terms expire at the 2016 annual meeting*
NORMAN R. BOBINS, 73: Since 2008, Non-Executive Chairman of The PrivateBank and Trust Company – Chicago (a financial services company) and Chief Executive Officer of Norman Bobins Consulting, LLC (a financial consulting company). From May 2007 until October 2007, Chairman of the Board of LaSalle Bank Corporation. From 2002 to 2007, President and Chief Executive Officer of LaSalle Bank Corporation.			2007
Other current public company directorships: Omega Healthcare Investors, Inc. and PrivateBancorp, Inc.
Other public company directorships held in the past five years: AGL Resources Inc., Aviv REIT, Inc., Nicor Inc. and SIMS Metal Management Limited.
Director Qualifications: The Board of Directors concluded that Mr. Bobins should serve as a director of the Company based on his 45 years of banking experience, his financial and accounting knowledge, his service as a director of other public companies, and his civic involvement and business acumen as a director of numerous not-for-profit organizations.
RONALD R. FOGLEMAN, 74: Since 2009, Non-Executive Chairman of Orbital ATK, Inc. (an aerospace and defense technologies company). Since 1997, President and Chief Operating Officer of B Bar J Cattle & Consulting Company (a consulting company). From 1994 to 1997, General, Chief of Staff of the United States Air Force, Washington, D.C.			2001
Other current public company directorships: Orbital ATK Inc.
Other public company directorships held in the past five years: Alliant Techsystems, Inc.
Director Qualifications: The Board of Directors concluded that General Fogleman should serve as a director of the Company based on his leadership ability and record of accomplishment during a 34-year career with the United States Air Force, his business experience and business relationships gained during and subsequent to his military service, his understanding of the government and defense markets, and his service as a director of other public companies. General Fogleman currently serves as the Company's Lead Director.

		Director Since

JAMES E. GOODWIN, 72: Since April 2016, Lead Director of Federal Signal Corporation (a safety and security products manufacturer). From 2009 to April 2016, Chairman of Federal Signal Corporation. From 2007 to 2008, Interim President and Chief Executive Officer of Federal Signal Corporation. From 2001 to 2007, an independent business consultant. From 1999 to 2001, Chairman and Chief Executive Officer of UAL, Inc. and United Airlines, Inc., from which he retired after 34 years.			2002
Other current public company directorships: Federal Signal Corporation and John Bean Technologies Corporation.
Other public company directorships held in the past five years: First Chicago Bancorp.
Director Qualifications: The Board of Directors concluded that Mr. Goodwin should serve as a director of the Company based on his significant airline industry experience and expertise, including his leadership positions at UAL, Inc. and United Airlines, Inc., his management experience and his financial expertise, as well as his global consulting experience, and his service as a director of other public companies.
MARC J. WALFISH, 64: Since 2003, Founding Partner of Merit Capital Partners (a mezzanine investor company). From 1991 to 2003, partner at William Blair Mezzanine Capital Partners. From 1978 to 1991, various positions at Prudential Capital Corporation, most recently as Senior Vice President.			2003
Director Qualifications: The Board of Directors concluded that Mr. Walfish should serve as a director of the Company based on his experience and proven success in the finance industry, including as a founding partner of Merit Capital Partners, a mezzanine investor company, his knowledge of the capital markets and his expertise in corporate finance, strategic planning and risk management.


*Class III Directors whose terms expire at the ~~2014~~2017 annual meeting*	~~Director~~ ~~Since~~
PATRICK J. KELLY, ~~59:~~61: Since 1986, Managing Director of KMK & Associates, LLC (a private equity firm with interests in companies operating in the food, distribution, technology, financial services, real estate and energy industries).		2006
Director Qualifications: The Board of Directors concluded that Mr. Kelly should serve as a director of the Company based on his leadership and operational experience at various businesses, his background as a ~~long-term~~long- term chief executive officer and his business expertise gained through his experience at a private equity firm with a diversified portfolio of operating companies.


PETER PACE, ~~68:~~70: General, U.S. Marine Corps (Retired). From 2005 to 2007, Chairman of the Joint Chiefs of Staff.			2012
~~Current~~Other current public company ~~directorships~~directorships:~~: Pike Electric Corp.,~~ Qualys, Inc. ~~and Textura Corporation.~~
Other public company directorships held in the past five years: Laserlock Technologies, Inc., Pike Electric Corp., Textura Corporation and Wi2Wi Corporation.
Director Qualifications: The Board of Directors concluded that General Pace should serve as a director of the Company based on his leadership and management skills and experience from over 40 years of service with the United States Marine Corps, culminating in his appointment as the 16^th Chairman of the Joint Chiefs of Staff (the most senior position in the United States Armed Forces), where he served from 2005 to 2007 as the principal military adviser to the President, the Secretary of Defense, the National Security Council and the Homeland Security ~~Council.~~Council, his understanding of the government and defense markets, and his current and prior service as a director of other public companies.

		Director Since

TIMOTHY J. ROMENESKO, ~~57:~~59: Since August 2016, Vice Chairman and Chief Financial Officer of AAR CORP. From August 2015 to August 2016, Vice Chairman of AAR CORP. and Chief Operating Officer of the Expeditionary Services business group. From March 2015 to August 2015, President of AAR CORP. and Chief Operating Officer of the Expeditionary Services business group. From 2007 to March 2015, President and Chief Operating Officer of AAR CORP. From 1994 to 2007, Vice President, Chief Financial Officer and Treasurer of AAR CORP. ~~From 1991 to 1994, Corporate Controller of AAR CORP.~~			2007
Director Qualifications: The Board of Directors concluded that Mr. Romenesko should serve as a director of the Company based on his ~~current~~ leadership ~~position as President and Chief Operating Officer of~~positions with the Company, his experience in various accounting and financial capacities during his ~~33-year~~34-year career with the Company, and his knowledge of the ~~Company's~~ commercial aviation and government and defense ~~services~~ markets.
RONALD B. WOODARD, ~~71:~~73: Since ~~2003,~~2014, retired Chairman of MagnaDrive, Inc. (an industrial torque transfer equipment company, which he co-founded following his retirement from The Boeing Company after 32 ~~years)~~years of service). From 1995 to 1998, President of the Boeing Commercial Airplane Group. From 1991 to 1994, Vice President and General Manager of the Renton Division of Boeing Commercial Aircraft. From 1987 to 1991, President of ~~deHavilland~~de Havilland Aircraft. Prior to that, Vice President and General Manager of the Materiel Division of Boeing Commercial Aircraft, and various other management positions.			2004
~~Current public company directorship:~~ ~~Outerwall, Inc.~~
Other public company directorships held in the past five years: ~~Coinstar,~~Continental Airlines, Inc. and ~~Continental Airlines,~~Outerwall, Inc. (formerly Coinstar, Inc.).
Director Qualifications: The Board of Directors concluded that Mr. Woodard should serve as a director of the Company based on his management expertise and manufacturing experience as a senior officer of The Boeing Company, his knowledge of the commercial aviation industry and his experience as a director of other public companies, including Continental Airlines, Inc.


*Class I Directors whose terms expire at the ~~2015~~2018 annual meeting*
ANTHONY K. ANDERSON, ~~58:~~60: Since 2012, an independent business consultant. From 2006 to April 2012, Vice Chairperson and Managing Partner of Midwest Area at Ernst & Young LLP (a global accounting firm). Prior thereto, served in various management positions during a 35-year career with Ernst & Young LLP.			2012
~~Current~~Other current public company directorships: Avery Dennison Corp., and Exelon Corp. ~~and~~
Other public company directorships held in the past five years: First American Financial Corporation.
Director Qualifications: The Board of Directors concluded that Mr. Anderson should serve as a director of the Company based on his 35 years working with a global accounting firm, his accounting and financial knowledge, his leadership in developing management talent programs, his service as a director of other public companies, and his professional, civic and charitable service, including as a director of numerous not-for-profit organizations.

		Director Since

MICHAEL R. BOYCE, ~~66: Since 2005,~~68: Chairman ~~and Chief Executive Officer~~of the Board of PQ Corporation (a specialty chemicals and catalyst company)~~. Since 1998,~~ and Chairman and Chief Executive Officer of The Peak Group (an operating and acquisition company). From 2005 to May 2015, Chairman and Chief Executive Officer of PQ Corporation. From 1990 to 1998, President and Chief Operating Officer of Harris Chemical Group, Inc. (a chemicals company).			2005
~~Current~~Other current public company ~~directorship:~~directorships: Stepan Company.
Director Qualifications: The Board of Directors concluded that Mr. Boyce should serve as a director of the Company based on his experience as Chairman and Chief Executive Officer of two leading global organizations, his insight into global manufacturing, supply and distribution practices and his international business ~~development skills.~~experience.
DAVID P. STORCH, ~~61:~~63: Since August 2015 and from 2005 to 2007, Chairman of the Board, President and Chief Executive Officer of AAR CORP. From ~~2005~~2007 to ~~2007,~~August 2015, Chairman of the Board ~~President~~ and Chief Executive Officer of AAR CORP. From 1996 to 2005, President and Chief Executive Officer of AAR CORP. From 1989 to 1996, President and Chief Operating Officer of AAR CORP. ~~From 1988 to 1989, Vice President of AAR CORP.~~			1989
~~Current~~Other current public company directorships: KapStone Paper and Packaging Corp. and Kemper Corporation.
Director Qualifications: The Board of Directors concluded that Mr. Storch should serve as a director of the Company based on his current position as Chairman of the Board, President and Chief Executive Officer of the Company, his leadership and management skills, his understanding of the Company's businesses gained during his ~~35-year~~37-year career with the Company, his knowledge of the commercial aviation and government and defense services ~~markets,~~industries, and his leadership role in transforming the Company into a leading international provider of ~~products and~~aviation services to the commercial aviation and government and defense ~~services markets, with front-end manufacturing and after-market support to domestic and international customers.~~markets.

*~~Class II Directors whose terms expire at the 2016 annual meeting~~*

~~NORMAN R. BOBINS~~JENNIFER L. VOGEL,~~, 71:~~ 54: Since ~~2008, Non-Executive Chairman~~2012, co-founder and owner of ~~The PrivateBank~~InVista Advisors, an advisory firm focused on legal department effectiveness, leadership, compliance, crisis readiness and ~~Trust Company - Chicago (a financial services company)~~risk management. Prior thereto, from 2003 to 2010, Senior Vice President, General Counsel, Secretary and Chief ~~Executive~~Compliance Officer of Norman Bobins Consulting, LLC. From May 2007 until October 2007, Chairman of the Board of LaSalle Bank Corporation. From 2002 to 2007, President and Chief Executive Officer of LaSalle Bank Corporation. From 2006 to 2007, President and Chief Executive Officer of ABN AMRO North America. From 2002 to 2007, Senior Executive Vice President at ABN AMRO Bank N.V., the Dutch parent of LaSalle Bank Corporation.Continental Airlines.			~~2007~~2016
~~Current~~Other current public company directorships: ~~AGL Resources Inc., Aviv REIT, Inc., PrivateBancorp,~~American Science and Engineering, Inc. and ~~SIMS Metal Management Limited.~~Virgin America, Inc.
Other public company directorships held in the past five years: ~~Global Hyatt Corp. and Nicor Inc.~~Clearwire Corporation.
Director Qualifications: The Board of Directors concluded that ~~Mr. Bobins~~Ms. Vogel should serve as a director of the Company based on ~~his 44~~her experience as a highly successful corporate executive with over 25 years of ~~banking~~leadership experience ~~his financial and accounting knowledge, his service as a director of other public companies, and his civic involvement as a director of various not-for-profit organizations.~~
~~RONALD R. FOGLEMAN~~, 72: Since 1997, President and Chief Operating Officer of B Bar J Cattle & Consulting Company (a consulting company). From 1994 to 1997, General, Chief of Staff of the United States Air Force, Washington, D.C.			~~2001~~
~~Current public company directorship:~~ ~~Alliant Techsystems, Inc.~~
~~Director Qualifications:~~ The Board of Directors concluded that General Fogleman should serve as a director of the Company based on his leadership skills and record of accomplishment during a 34-year career with the United States Air Force, his business experience and business relationships gained through his senior management positions at two consulting organizations, his understanding of the government defense and services markets and his service as a director of other public companies. General Fogleman was elected as the Company's Lead Director in April 2013.


~~JAMES E. GOODWIN~~, 70: Since 2009, Chairman of Federal Signal Corporation (a safety and security products manufacturer). From 2007 to 2008, Interim President and Chief Executive Officer of Federal Signal Corporation. From 2001 to 2007, an independent business consultant. From 1999 to 2001, Chairman and Chief Executive Officer of UAL, Inc. and United Airlines, Inc., from which he retired after 34 years. From 1998 to 1999, President and Chief Operating Officer of United Airlines, Inc. From 1992 to 1998, Senior Vice President of United Airlines, Inc.			~~2002~~
~~Current public company directorships:~~ ~~Federal Signal Corporation and John Bean Technologies Corporation.~~
~~Other public company directorship held~~ in the ~~past five years:~~ ~~First Chicago Bancorp.~~
~~Director Qualifications:~~ ~~The Board of Directors concluded that Mr. Goodwin should serve as a director of the Company based on his~~ airline ~~industry experience~~ and ~~expertise,~~energy industries, including ~~his~~her leadership positions ~~at UAL, Inc.~~with Continental Airlines and ~~United Airlines, Inc., his management~~on the board of Virgin America, her legal and board governance expertise, her experience in regulatory issues, mergers and ~~his financial expertise, as well as his global consulting~~acquisitions, ethics and compliance matters and her experience ~~and his service~~ as a director of other public companies.
~~MARC J. WALFISH~~, 62: Since 2003, Founding Partner of Merit Capital Partners (a mezzanine investor company). From 1991 to 2003, partner at William Blair Mezzanine Capital Partners. From 1978 to 1991, various positions at Prudential Capital Corporation, most recently as Senior Vice President.			~~2003~~
~~Director Qualifications:~~ The Board of Directors concluded that Mr. Walfish should serve as a director of the Company based on his experience in the finance industry, including as a founding partner of Merit Capital Partners, a mezzanine investor company, his knowledge of the capital markets and his expertise in corporate finance, strategic planning and risk management.


NAMED EXECUTIVE OFFICER	PERFORMANCE-BASED COMPENSATION			FIXED COMPENSATION

	Annual Performance-Based Cash Bonus	Performance-Based Restricted Stock	Stock Options	Base Salary	Discretionary Cash Bonus

David P. Storch	$1,014,800	$1,150,500	$1,150,500	$755,250	—

Timothy J. Romenesko	—	$375,000	$375,000	$456,250	$507,400

John M. Holmes	$517,949	$375,000	$375,000	$456,250	$117,551

Michael J. Sharp	$370,462	$368,750	$131,250	$382,418	—

Robert J. Regan	$361,200	$312,000	$312,000	$390,396	—


NAMED EXECUTIVE OFFICER	TOTAL PERFORMANCE-BASED COMPENSATION	TOTAL FIXED COMPENSATION

David P. Storch	81.4%	18.6%

Timothy J. Romenesko	43.8%	56.2%

John M. Holmes	68.8%	31.2%

Michael J. Sharp	69.5%	30.5%

Robert J. Regan	71.6%	28.4%



Description of Fees	Fiscal 2013 ($)		Fiscal 2014 ($)
Audit Fees		1,689,980		1,794,370
Audit-Related Fees¹		136,375		136,000
Tax Fees²		373,317		387,109


Description of Fees	Fiscal 2015	Fiscal 2016

Audit Fees	$1,914,366	$1,854,803

Audit-Related Fees¹	$7,500	$330,000

Tax Fees²	$332,341	$448,566


Committee				Risk Oversight Responsibilities

Nominating and Governance Committee				• Corporate governance • Board and committee membership • Succession planning • Board and CEO effectiveness

Compensation Committee				• Cash incentive program • Stock-based compensation • Compensation policies and practices • Impact of performance-based compensation on risk-taking by management

Audit Committee				• Financial reporting and investor disclosure • Accounting and auditing • Quality and adequacy of processes and internal controls • Oversight of enterprise risk management program



		Director				Audit Committee				Compensation Committee	Nominating and Governance Committee	Executive Committee


Anthony K. Anderson					X

Norman R. Bobins			X		X
~~Norman R. Bobins~~
	X			X
Michael R. Boyce					X		X

Ronald R. Fogleman					X		Chair		X

James E. Goodwin			Chair				X		X

Patrick J. Kelly			X				X

Peter Pace			X		X		X

Timothy J. Romenesko

David P. Storch									Chair

Jennifer L. Vogel					X		X
~~David P. Storch~~
								~~Chair~~
Marc J. Walfish			X				X		X

Ronald B. Woodard			X		Chair



		~~Compensation Element~~				~~Fiscal 2014 Non-Employee Director Compensation Program~~
		Compensation Element				Fiscal 2016 Non-Employee Director Compensation Program

		Annual Retainer				$50,000

		Lead Director Annual Retainer				$30,000

		Committee Chair Annual Retainer				$10,000

		Board and Committee Meeting Fees				$2,500 per meeting ($ ($1,250 for telephone meetings)

		Annual Stock Award				5,000 shares of common stock ~~(vesting~~ (vesting after one year)



Name¹	Fees Earned or Paid in Cash ($)²		Stock Awards ($)³		Option Awards ($)⁴		Non-Equity Incentive Plan Compensation ($)		Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($)		All Other Compensation ($)⁵		Total ($)
Anthony K. Anderson		86,250		103,400		0		0		0	$	747		190,397
Norman R. Bobins		86,250		103,400		0		0		0		747		190,397
Michael R. Boyce		72,500		103,400		0		0		0		2,238		178,138
Ronald R. Fogleman		120,000		103,400		0		0		0		2,429		225,829
James E. Goodwin		92,500		103,400		0		0		0		7,247		203,147
Patrick J. Kelly		82,500		103,400		0		0		0		747		186,647
Peter Pace		78,750		103,400		0		0		0		4,596		186,746
Marc J. Walfish		80,000		103,400		0		0		0		2,331		185,731
Ronald B. Woodard		96,250		103,400		0		0		0		747		200,397


Name¹		Fees Earned or Paid in Cash ($)²	Stock Awards ($)³	Option Awards ($)⁴	Non-Equity Incentive Plan Compensation ($)	Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($)	All Other Compensation ($)⁵	Total ($)

Anthony K. Anderson		87,500	147,700	—	—	—	5,828	241,028

Norman R. Bobins		83,750	147,700	—	—	—	878	232,328

Michael R. Boyce		81,250	147,700	—	—	—	10,298	239,248

Ronald R. Fogleman		122,500	147,700	—	—	—	2,557	272,757

James E. Goodwin		97,500	147,700	—	—	—	7,378	252,578

Patrick J. Kelly		85,000	147,700	—	—	—	878	233,578

Peter Pace	��	81,250	147,700	—	—	—	878	229,828

Jennifer L. Vogel		38,332	48,659	—	—	—	177	87,168

Marc J. Walfish		87,500	147,700	—	—	—	878	236,078

Ronald B. Woodard		97,500	147,700	—	—	—	1,901	247,101



Name	Annual Retainer ($)		Committee Chair Retainer Fees ($)		Meeting Fees ($)		Lead Director Fee		Total ($)
Anthony K. Anderson		50,000		—		36,250		—		86,250
Norman R. Bobins		50,000		—		36,250		—		86,250
Michael R. Boyce		50,000		—		22,500		—		72,500
Ronald R. Fogleman		50,000		10,000		30,000		30,000		120,000
James E. Goodwin		50,000		10,000		32,500		—		92,500
Patrick J. Kelly		50,000		—		32,500		—		82,500
Peter Pace		50,000		—		28,750		—		78,750
Marc J. Walfish		50,000		—		30,000		—		80,000
Ronald B. Woodard		50,000		10,000		36,250		—		96,250


Name	Annual Retainer ($)	Committee Chair Retainer Fees ($)	Meeting Fees ($)	Lead Director Fee ($)	Total ($)

Anthony K. Anderson	50,000	—	37,500	—	87,500

Norman R. Bobins	50,000	—	33,750	—	83,750

Michael R. Boyce	50,000	—	31,250	—	81,250

Ronald R. Fogleman	50,000	10,000	32,500	30,000	122,500

James E. Goodwin	50,000	10,000	37,500	—	97,500

Patrick J. Kelly	50,000	—	35,000	—	85,000

Peter Pace	50,000	—	31,250	—	81,250

Jennifer L. Vogel	20,832	—	17,500	—	38,332

Marc J. Walfish	50,000	—	37,500	—	87,500

Ronald B. Woodard	50,000	10,000	37,500	—	97,500



	Name		Title

David P. Storch		Chairman of the Board, President and Chief Executive Officer

Timothy J. Romenesko		~~President and~~Vice Chairman; Chief Financial Officer (beginning August 1, 2016); Chief Operating Officer of Expeditionary Services (through July 31, 2016)

John ~~C. Fortson~~M. Holmes		Vice ~~President,~~President; Chief ~~Financial~~Operating Officer ~~and Treasurer since July 25, 2013~~of Aviation Services

~~Randy~~Michael J. ~~Martinez~~Sharp		~~Group~~Former Vice President, ~~— Airlift~~Chief Financial Officer (from September 29, 2015 through July 31, 2016)

Robert J. Regan		Vice President, General Counsel and Secretary

~~Michael J. Sharp~~John C. Fortson		~~Acting~~Former Vice President, Chief Financial Officer and Treasurer ~~through July 25, 2013 and Vice President, Controller and Chief Accounting Officer~~(through September 28, 2015)



	Additional Supplemental Company Contribution
Named Executive Officer	Formula Amount		Actual Amount
David P. Storch	$	495,115	$	247,557
Timothy J. Romenesko	$	187,513	$	93,756
Robert J. Regan	$	81,309	$	40,655



	~~Compensation Element~~		~~Form of Compensation~~			~~Performance Criteria~~
	Compensation Element		Form of Compensation			Performance Period			Performance Measures	Purpose of this Compensation Element

	Base salary		Cash			N/A			• Individual performance and contributions • Qualifications and responsibilities • Experience and tenure with the Company • Competitive salary considerations	• Rewards individual performance and contributions consistent with an individual's position and responsibilities • Provides competitive compensation • Balances risk-taking concerns associated with performance-based compensation

	Annual cash ~~compensation incentive~~ bonus		Cash			~~• Earnings per share~~ ~~• Cash flow from operations~~ ~~• Specific business unit goals~~1 year
	~~Long-term stock incentive compensation~~ • Earnings per share • Working capital turns • Business group goals		• Provides short-term, cash-based incentive • Measures performance against key corporate goals

	Stock options		~~• Individual performance and contributions~~Stock
	Up to 10 years
• Stock price				• ~~Time-based restricted stock~~			Provides long-term, stock-based incentive • ~~Individual performance and contributions~~
	Aligns payout directly with stockholder value creation

		• Performance-based restricted stock			~~• Cumulative net income over three years~~ ~~• Return on invested capital (implemented for Fiscal 2015)~~Stock
3 years		~~Retirement benefits~~• Cumulative net income • Return on invested capital			~~Eligibility~~ • Provides long-term, stock-based incentive • Ties payout to ~~participate in and receive Company contributions to our 401(k) plan (available to all employees) and, for certain officers, a supplemental deferred compensation plan~~			~~Not applicable~~achievement of key corporate goals
	~~Perquisites~~		~~Various (see below)~~			~~Not applicable~~