SUPPLEMENTAL KEY EMPLOYEE RETIREMENT PLAN

 

                                                                    EXHIBIT 10.6

                                    AAR CORP.
                    SUPPLEMENTAL KEY EMPLOYEE RETIREMENT PLAN
                    -----------------------------------------

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

     Accordingly, AAR CORP. hereby adopts the Plan pursuant to the terms and
provisions set forth below:

                                    ARTICLE I
                                   DEFINITIONS

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

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

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

     1.3.   "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any regulations relating thereto.

     1.4.   "Committee" means the Retirement Committee responsible for the
administration of the Qualified Retirement Plan.

     1.5.   "Company" means AAR CORP., a Delaware corporation, or, to the extent
provided in Section 8.10 below, any successor corporation or other entity
resulting from a merger or consolidation into or with the Company or a transfer
or sale of substantially all of the assets of the Company.

     1.6.   "Executive Officer" means each of (a) the Chairman and Chief
Executive Officer, (b) the President and Chief Operating Officer, and (c) the
Vice President, General Counsel and Secretary of the Company holding office at
any time on or after the Plan effective date.  The Compensation Committee of the
Board, upon recommendation of management, shall have the discretion from time to
time to designate individuals occupying

other executive positions with the Company or an Affiliated Company as Executive
Officers for purposes of the Plan.

     1.7.   "Key Employee" means each employee of the company who may from time
to time be designated as such for purposes of the Plan by and in the discretion
of the Compensation Committee of the Board, upon recommendation of management.

     1.8.   "Normal Retirement Date" means the first day of the calendar month
coincident with or next following the date a Participant attains age 65.

     1.9.   "Participant" means any individual who has been designated an
Executive Officer, or Key Employee of the Company or an Affiliated Company for
purposes of the Plan.

     1.10.  "Plan" means the AAR CORP. Supplemental Key Employee Retirement
Plan.

     1.11.  "Plan Year" means the calendar year or any other 12 consecutive
month period that constitutes the fiscal year of the Qualified Profit Sharing
Plan.

     1.12.  "Qualified Company Account" means the account maintained for a
Participant under the Qualified Profit Sharing Account that is credited with
Qualified Company Contributions.

     1.13.  "Qualified Company Contribution" means the Company Contribution made
by the Company or an Affiliated Company for the benefit of a Participant under
and in accordance with the terms of the Qualified Profit Sharing Plan in any
Plan Year.

     1.14.  "Qualified Profit Sharing Account" means the account maintained for
a Participant under the Qualified Profit Sharing Plan that is credited with
Qualified Profit Sharing Contributions.

     1.15.  "Qualified Profit Sharing Contribution" means the Profit Sharing
Contribution made by the Company or an Affiliated Company for the benefit of a
Participant under and in accordance with the terms of the Qualified Profit
Sharing Plan.

     1.16.  "Qualified Profit Sharing Plan" means the AAR CORP. Employees'
Profit Sharing Plan established effective June 1, 1965, as amended from time to
time, and each successor or replacement plan.

     1.17.  "Qualified Retirement Benefit" means the aggregate benefit payable
to a Participant pursuant to the Qualified Retirement Plan, and all annuities
purchased with respect to the Participant under the Qualified Retirement Plan,
by reason of his termination of employment with the Company and all Affiliated
Companies for any reason other than death.

     1.18.  "Qualified Retirement Plan" means the AAR CORP. Retirement Plan
established effective August 1, 1988, as amended from time to time, and each
successor or replacement plan.

     1.19.  "Qualified Salary Deferral Account" means the account maintained for
a Participant under the Qualified Profit Sharing Plan that is credited with
Qualified Salary Deferral Contributions.

     1.20.  "Qualified Salary Deferral Contribution" means the Salary Deferral
Contribution made by the Company or an Affiliated Company for the benefit of a
Participant under and in accordance with the terms of the Qualified Profit
Sharing Plan in any Plan Year.

     1.21.  "Qualified Surviving Spouse Benefit" means the aggregate benefit
payable to the Surviving Spouse of a Participant pursuant to the Qualified
Retirement Plan, and all annuities purchased with respect to the Participant
under the Qualified Retirement Plan, in the event of the death of the
Participant at any time prior to the commencement of payment of his Qualified
Retirement Benefit.

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

     1.23.  "Supplemental Company Contribution" means the contribution made by
the Company for the benefit of a Participant pursuant to Section 4.3 of the Plan
in any Plan Year.

     1.24.  "Supplemental Profit Sharing Account" means the account maintained
by the Company for a Participant under the Plan that is credited with
Supplemental Profit Sharing Contributions.

     1.25.  "Supplemental Profit Sharing Contribution" means the contribution
made by the Company for the benefit of a Participant pursuant to Section 4.4 of
the Plan in any Plan Year.

     1.26.  "Supplemental Retirement Benefit" means the benefit payable to a
Participant pursuant to Section 3.1 or 3.2 of the Plan by reason of his
termination of employment with the Company and all Affiliated Companies for any
reason other than death.

     1.27.  "Supplemental Salary Deferral Agreement" means a written agreement
entered into by a Participant pursuant to the provisions of Section 4.2.

     1.28.  "Supplemental Salary Deferral Account" means the account maintained
by the Company for a Participant under the Plan that is credited with
Supplemental Salary Deferral Contributions.

     1.29.  "Supplemental Salary Deferral Contribution" means the contribution
made by the Company for the benefit of a Participant pursuant to Section 4.1 of
the Plan in any Plan Year.

     1.30.  "Supplemental Surviving Spouse Benefit" means the benefit payable to
a Surviving Spouse pursuant to Section 3.3 of the Plan.

     1.31.  "Surviving Spouse" means a person who is married to a Participant
throughout the one year period ending on the date of his death.

     1.32.  Except as otherwise provided in this Article I, all defined terms
used in the Plan that are defined in the Qualified Retirement Plan or in the
Qualified Profit Sharing Plan, as applicable, shall have the same meaning in the
Plan as is set forth in the definition in the Qualified Retirement Plan or the
Qualified Profit Sharing Plan.

     1.33.  Words in the masculine gender shall include the feminine and the
singular shall include the plural, and vice versa, unless qualified by the
context.  Any headings used herein are included for ease of reference only and
are not to be construed so as to alter the terms hereof.

                                   ARTICLE II
                                   ELIGIBILITY

     2.1.  CHAIRMAN AND CHIEF EXECUTIVE OFFICER.  The Chairman and Chief
Executive Officer shall be a Participant with respect to the Supplemental Salary
Deferral Contributions, the Supplemental Company Contributions and the
Supplemental Profit Sharing Contributions set forth in Article IV.

     2.2.  EXECUTIVE OFFICERS.  Each Executive Officer (other than the Chairman
and Chief Executive Officer) shall be a Participant in the Plan with respect to
the Supplemental Retirement Benefit and Supplemental Surviving Spouse Benefit
set forth in Sections 3.1 and 3.3, and the Supplemental Salary Deferral
Contributions, the Supplemental Company Contributions and the Supplemental
Profit Sharing Contributions set forth in Article IV.

     2.3.  KEY EMPLOYEES.  Each Key Employee shall be a Participant in the Plan
with respect to the Supplemental Retirement Benefit and the Supplemental
Surviving Spouse Benefit set forth in Sections 3.2 and 3.3, and the Supplemental
Salary Deferral Contributions, the Supplemental Company Contributions and the
Supplemental Profit Sharing Contributions set forth in Article IV.

                                   ARTICLE III
                       SUPPLEMENTAL RETIREMENT BENEFIT AND
                      SUPPLEMENTAL SURVIVING SPOUSE BENEFIT

     3.1.  EXECUTIVE OFFICERS.  Effective as of June 1, 1994, the Supplemental
Retirement Benefit of an Executive Officer who is a Participant as described in
Section 2.2, payable in the form of an annuity over the lifetime of the
Participant only, commencing on his Normal Retirement Date, shall be a monthly
amount equal to the difference between (a) and (b) below:

          (a)  The monthly amount of the Qualified Retirement Benefit to which
     the Participant would have been entitled under the Qualified Retirement
     Plan if (1) his Accrued Benefit earned under the Qualified Retirement Plan
     was based in part on 50% of Final Average Earnings, and (2) such Qualified
     Retirement Benefit was computed without giving effect to any limitations on
     benefits at any time imposed by any provision of the Code;

                                      LESS

          (b)  The monthly amount of the Qualified Retirement Benefit actually
     payable to the Participant under the Qualified Retirement Plan.

     The amounts described in (a) and (b) shall be computed as of the date of
termination of employment of the Participant with the Company and all Affiliated
Companies in the form of an annuity payable over the lifetime of the Participant
only, commencing on his Normal Retirement Date.

     3.2.  KEY EMPLOYEES.  Effective as of June 1, 1994, the Supplemental
Retirement Benefit of a Participant who is a Key Employee of the Company,
payable in the form of an annuity over the lifetime of the Participant only,
commencing on his Normal Retirement Date, shall be a monthly amount equal to the
difference between (a) and (b) below:

          (a)  The monthly amount of the Qualified Retirement Benefit to which
     the Participant would have been entitled under the Qualified Retirement
     Plan if such Qualified Retirement Benefit was computed without giving
     effect to any limitations on benefits imposed by any provision of the Code;

                                      LESS

          (b)  The monthly amount of the Qualified Retirement Benefit actually
     payable to the Participant under the Qualified Retirement Plan.

     The amounts described in (a) and (b) shall be computed on the date of
termination of employment of a Participant with the Company and all Affiliated
Companies in the form

of an annuity payable over the lifetime of the Participant only, commencing on
his Normal Retirement Date.

     3.3.  SUPPLEMENTAL SURVIVING SPOUSE BENEFITS.  Effective as of June 1,
1994, if a Participant described in Section 2.2 or 2.3 dies prior to
commencement of payment of his Qualified Retirement Benefit under circumstances
in which a Qualified Surviving Spouse Benefit is payable to his Surviving
Spouse, then a Supplemental Surviving Spouse Benefit is payable to his Surviving
Spouse as hereinafter provided.  The monthly amount of the Supplemental
Surviving Spouse Benefit payable to a Surviving Spouse shall be equal to the
difference between (a) and (b) below:

          (a)  The monthly amount of the Qualified Surviving Spouse Benefit to
     which the Surviving Spouse would have been entitled under the Qualified
     Retirement Plan if such Qualified Surviving Spouse Benefit were computed
     with respect to a Supplemental Retirement Benefit applicable to the
     Participant determined pursuant to either Section 3.1 or 3.2 above, as the
     case may be;

                                      LESS

          (b)  The monthly amount of the Qualified Surviving Spouse Benefit
     actually payable to the Surviving Spouse under the Qualified Retirement
     Plan.

     3.4.  FORM OF SUPPLEMENTAL RETIREMENT BENEFIT.  The Supplemental Retirement
Benefit payable to a Participant shall be paid in the same form under which the
Qualified Retirement Benefit is payable to the Participant.  The Participant's
election under the Qualified Retirement Plan of any optional form of payment of
his Qualified Retirement Benefit (with the valid consent of his Surviving Spouse
where required under the Qualified Retirement Plan) shall also be applicable to
the payment of his Supplemental Retirement Benefit.

     3.5.  COMMENCEMENT OF SUPPLEMENTAL RETIREMENT BENEFIT.  Payment of the
Supplemental Retirement Benefit to a Participant shall commence on the same date
as payment of the Qualified Retirement Benefit to the Participant commences.
Any election under the Qualified Retirement Plan made by the Participant with
respect to the commencement of payment of his Qualified Retirement Benefit shall
also be applicable with respect to the commencement of payment of his
Supplemental Retirement Benefit.

     3.6.  APPROVAL OF COMPANY.  Notwithstanding the provisions of Sections 3.4
and 3.5 above, an election made by the Participant under the Qualified
Retirement Plan with respect to the form of payment of his Qualified Retirement
Benefit (with the valid consent of his Surviving Spouse where required under the
Qualified Retirement Plan), or the date for commencement of payment thereof,
shall not be effective with respect to the form of payment or date for
commencement of payment of his Supplemental Retirement Benefit hereunder unless
such election is expressly approved in writing by the Company with respect to
his Supplemental Retirement Benefit.  If the Company shall not approve such
election

in writing, then the form of payment or date for commencement of payment of the
Participant's Supplemental Retirement Benefit shall be selected by the Company
in its sole discretion.

     3.7.  ACTUARIAL EQUIVALENT.  A Supplemental Retirement Benefit that is
payable in any form other than an annuity over the lifetime of the Participant
only, or that commences at any time prior to the Participant's Normal Retirement
Date, shall be the actuarial equivalent of the Supplemental Retirement Benefit
determined pursuant to Section 3.1 or 3.2 above, as applicable, based upon the
same actuarial adjustments and assumptions as those specified in the Qualified
Retirement Plan with respect to determination of the amount of the Qualified
Retirement Benefit or the date for commencement of payment thereunder.

     3.8.  FORM AND COMMENCEMENT OF SUPPLEMENTAL SURVIVING SPOUSE BENEFIT.  A
Supplemental Surviving Spouse Benefit shall be payable over the lifetime of the
Surviving Spouse only in monthly installments commencing on the date for
commencement of payment of the Qualified Surviving Spouse Benefit to the
Surviving Spouse and terminating on the date of the last payment of the
Qualified Surviving Spouse Benefit made before the Surviving Spouse's death.

                                   ARTICLE IV
                           SUPPLEMENTAL CONTRIBUTIONS

     4.1.  SUPPLEMENTAL SALARY DEFERRAL CONTRIBUTIONS.  The Supplemental Salary
Deferral Contribution to be made by the Company for the benefit of a Participant
for any Plan Year shall be an amount equal to the difference between (a) and (b)
below:

          (a)  The Qualified Salary Deferral Contribution that would have been
     withheld and deposited to the Qualified Salary Deferral Account of the
     Participant for the Plan Year, as determined by the Salary Deferral
     Agreement between the Participant and the Company or an Affiliated Company
     in effect for such Year pursuant to the terms of the Qualified Profit
     Sharing Plan, without giving effect to any limitations imposed by the Code
     on the Qualified Profit Sharing Plan;

                                      LESS

          (b)  The amount of the Qualified Salary Deferral Contribution actually
     allocated to the Qualified Salary Deferral Account of the Participant for
     the Plan Year.

          A Supplemental Salary Deferral Contribution made for the benefit of a
     Participant for any Plan Year shall be credited to a Supplemental Salary
     Deferral

     Account maintained under the Plan in the name of such Participant no later
     than 60 days after the last day of such Plan Year.

     4.2.  SUPPLEMENTAL SALARY DEFERRAL AGREEMENT.  As a condition to the
Company's obligation to make a Supplemental Salary Deferral Contribution for the
benefit of a Participant pursuant to Section 4.1, the Participant must execute a
Supplemental Salary Deferral Agreement in the form attached hereto.  The
Agreement for any Plan Year shall be made before the beginning of that Year and
shall remain in full force and effect for subsequent Plan Years unless revised
or revoked by a Participant by written instrument delivered to the Committee
prior to the beginning of the Plan Year in which such revision or revocation is
to be effective.

     4.3.  SUPPLEMENTAL COMPANY CONTRIBUTIONS.  The Supplemental Company
Contribution to be made by the Company for the benefit of a Participant for any
Plan Year shall be an amount equal to the difference between (a) and (b) below:

          (a)  The Qualified Company Contribution that would have been allocated
     to the Qualified Company Account of the Participant for the Plan Year
     without giving effect to any limitations imposed by the Code on the
     Qualified Profit Sharing Plan;

                                      LESS

          (b)  The amount of the Qualified Company Contribution actually
     allocated to the Qualified Company Account of the Participant for the Plan
     Year.

          A Supplemental Company Contribution made for the benefit of a
     Participant for any Plan Year shall be credited to a Supplemental Company
     Account maintained under the Plan in the name of such Participant no later
     than 60 days after the last day of such Plan Year.

     4.4.  SUPPLEMENTAL PROFIT SHARING CONTRIBUTIONS.  The Supplemental Profit
Sharing Contribution to be made by the Company for the benefit of a Participant
for any Plan Year shall be an amount equal to the difference between (a) and (b)
below:

          (a)  The Qualified Profit Sharing Contribution that would have been
     allocated to the Qualified Profit Sharing Account of the Participant for
     the Plan Year without giving effect to any limitations imposed by the Code
     on the Qualified Profit Sharing Plan;

                                      LESS

          (b)  The amount of the Qualified Profit Sharing Contribution actually
     allocated to the Qualified Profit Sharing Account of the Participant for
     the Plan Year.

          A Supplemental Profit Sharing Contribution made for the benefit of a
     Participant for any Plan Year shall be credited to a Supplemental Profit
     Sharing Account maintained under the Plan in the name of such Participant
     no later than 120 days after the last day of such Plan Year.

     4.5.  INVESTMENT OF SUPPLEMENTAL CONTRIBUTIONS.

          (a)  SUPPLEMENTAL SALARY DEFERRAL CONTRIBUTIONS.  Amounts credited
     hereunder to the Supplemental Salary Deferral Account of a Participant
     shall be treated as if they were actually invested in the Qualified Salary
     Deferral Account of the Participant and shall be subject to the same
     Participant investment elections, and credited with earnings, gains and
     losses, at the same time and in the same manner as is applicable to amounts
     invested in his Qualified Salary Deferral Account.  A change by a
     Participant in the investment election applicable to his subsequent
     Qualified Salary Deferral Contributions, or a direction to transfer amounts
     in his Qualified Salary Deferral Account among Investment Funds maintained
     under the Qualified Profit Sharing Plan, will also apply to his subsequent
     Supplemental Salary Deferral Contributions and to amounts credited to his
     Supplemental Salary Deferral Account, and will be effective at the same
     time that such change in election or direction to transfer is applicable
     under the Qualified Profit Sharing Plan.

          (b)  SUPPLEMENTAL COMPANY CONTRIBUTIONS.  All amounts credited to the
     Supplemental Company Account of a Participant shall be treated as if they
     were actually invested in the Qualified Company Account of the Participant,
     and shall be subject to the same Participant investment elections, and
     credited with earnings, gains and losses, at the same time and in the same
     manner as is applicable to amounts invested in his Qualified Company
     Account.  A change by a Participant in the investment election applicable
     to his subsequent  Qualified Company Contributions, or a direction to
     transfer amounts in his Qualified Company Account among Investment Funds
     maintained under the Qualified Profit Sharing Plan, will also apply to his
     subsequent Supplemental Company Contributions and to amounts credited to
     his Supplemental Company Account and will be effective at the same time
     that such change in election or direction to transfer is applicable under
     the Qualified Profit Sharing Plan.

          (c)  SUPPLEMENTAL PROFIT SHARING CONTRIBUTIONS.  All amounts credited
     to the Supplemental Profit Sharing Account of a Participant shall be
     treated as if they were actually invested in the Qualified Profit Sharing
     Account of the Participant, and shall be subject to the same Participant
     investment elections, and credited with earnings, gains and losses, at the
     same time and in the same manner as is applicable to amounts invested in
     his Qualified Profit Sharing Plan Account.  A change by a Participant in
     the investment election applicable to his subsequent Qualified Profit
     Sharing Contributions, or a direction to transfer amounts in his Qualified
     Profit Sharing Account among Investment Funds maintained under the
     Qualified Profit Sharing Plan, will also apply to his subsequent
     Supplemental Profit Sharing

     Contributions and to amounts credited to his Supplemental Profit Sharing
     Account and will be effective at the same time that such change in election
     or direction to transfer is applicable under the Qualified Profit Sharing
     Plan.

          (d)  INVESTMENTS.  Amounts credited to a Participant's Supplemental
     Salary Deferral Account, Supplemental Company Account and Supplemental
     Profit Sharing Account shall be invested by the Company in such investment
     vehicles as it shall select from time to time that will be similar to the
     Investment Funds maintained under the Qualified Profit Sharing Plan and in
     which the Participant's Qualified Salary Deferral Account, Qualified
     Company Account and Qualified Profit Sharing Account are invested.
     Investments pursuant to this paragraph in such similar investment vehicles
     shall be maintained in the name of the Company.

          (e)  STATEMENT OF ACCOUNTS.  A statement of accounts for each
     Participant, showing contributions, earnings, gains and losses, and current
     balances of the accounts provided for under this Article IV shall be
     provided to each Participant on not less than a quarterly basis.

     4.6.  DISTRIBUTIONS.

          (a)  TERMINATION OF EMPLOYMENT PRIOR TO DEATH.  Upon termination of a
     Participant's employment with the Company and all Affiliated Companies for
     any reason other than death, a Participant shall receive a distribution of
     all amounts credited to his Supplemental Salary Deferral Account, his
     Supplemental Company Account, and his Supplemental Profit Sharing Account,
     including gains and losses credited in accordance with Section 4.5.

          (b)  DISTRIBUTION DUE TO DEATH.  If a Participant dies before
     distribution to him of the full amount of his Supplemental Salary Deferral
     Account, his Supplemental Company Account and his Supplemental Profit
     Sharing Account, any remaining amount shall be distributed to his
     beneficiary designated under the Qualified Profit Sharing Plan.  If a
     Participant has not designated a beneficiary under the Qualified Profit
     Sharing Plan, or if no designated beneficiary is living on the date of
     distribution hereunder, amounts distributable pursuant to this paragraph
     shall be distributed to those persons or entities entitled to receive
     distributions of the Participant's accounts under the Qualified Profit
     Sharing Plan.

          (c)  HARDSHIP DISTRIBUTION.  A Participant shall be entitled to
     request a distribution from his Supplemental Salary Deferral Account, prior
     to his termination of employment with the Company and all Affiliated
     Companies, in order to satisfy a hardship as defined under the Qualified
     Profit Sharing Plan.  The amount of a hardship distribution, and the
     procedures for requesting and receiving such a distribution, shall satisfy
     the requirements set forth in the Qualified Profit Sharing Plan with
     respect to a hardship distribution from his Qualified Salary Deferral
     Account.  A request for a hardship distribution pursuant to this paragraph
     shall be

     made separate and apart from a request for a hardship distribution under
     the Qualified Profit Sharing Plan, and a request for a hardship
     distribution under the Qualified Profit Sharing Plan shall not
     automatically be deemed a request for a hardship distribution hereunder.

          (d)  TIME AND METHOD OF DISTRIBUTION.  All amounts distributable under
     this Article IV to a Participant, or to his beneficiary in the event of his
     death, shall be distributed in the same manner and at the same time as is
     applicable to the distribution of the Participant's accounts under the
     Qualified Profit Sharing Plan following his termination of employment with
     the Company and all Affiliated Companies for any reason including death.
     Notwithstanding the preceding sentence, an election made by a Participant
     under the Qualified Profit Sharing Plan with respect to the form of
     distribution of his accounts thereunder following termination of
     employment, or the date for commencement of payment thereof, shall not be
     effective with respect to the form of payment or date for commencement of
     payment of his accounts pursuant to this Article IV, unless such election
     is expressly approved in writing by the Company.  If the Company shall not
     approve such election in writing, the form of payment or date for
     commencement of payment under this Article shall be selected by the Company
     in its sole discretion.  If a Participant does not elect a time or form of
     distribution under this Article, such distribution shall be made at the
     same time and in the same method as is applicable to distributions made
     with respect to his accounts under the Qualified Profit Sharing Plan.  In
     no event may a Participant borrow amounts credited to the accounts
     maintained for him pursuant to this Article IV.

                                    ARTICLE V
                                   FORFEITURES

     5.1   FORFEITURE OF SUPPLEMENTAL RETIREMENT BENEFIT AND SUPPLEMENTAL
SURVIVING SPOUSE BENEFIT.  Notwithstanding any other provisions of the Plan, (i)
if the employment of a Participant with the Company and all Affiliated Companies
terminates due to Cause, or (ii) if a Participant during his employment with the
Company and all Affiliated Companies or at any time during the two year period
after the termination of such employment, violates the covenant not to compete
with the Company and its Affiliated Companies set forth in Section 5.3, all
rights of the Participant and his Surviving Spouse to a Supplemental Retirement
Benefit or a Supplemental Surviving Spouse Benefit, shall be forfeited and shall
be retained by the Company free of any and all claims of the Participant, his
Surviving Spouse or any other person claiming with respect to the Participant or
his Surviving Spouse.

     5.2   TERMINATION FOR CAUSE.  For purposes of this Section, a termination
for Cause shall mean termination of a Participant's employment by the Company or
any Affiliated Company because of (i) the Participant's conduct, involving
theft, embezzlement or fraud,

or (ii) the Participant's willful misconduct in the performance of his duties
that materially injures the Company or any Affiliated Company, as determined by
the Board.

     5.3   COVENANT NOT TO COMPETE.  A Participant shall not, during the term of
the Participant's employment with the Company and all Affiliated Companies, and
for a period of two years thereafter, without the Company's express written
consent, directly or indirectly, alone or as a member of a partnership, group,
or joint stock venture, or as an employee, officer, director or stockholder of
any corporation, or in any capacity (a) engage in any activity which is
competitive with any of the businesses conducted by the Company or its
Affiliated Companies from time to time or at any time during the Participant's
term of employment, provided that the foregoing provision shall not be deemed to
prohibit the Participant from purchasing for investment any securities or
interest in any publicly-owned organization which is competitive with the
business of the Company and its Affiliated Companies, so long as the
Participant's investment in such organization does not exceed the lesser of one
percent of its total outstanding equity securities or Two Hundred Fifty Thousand
Dollars ($250,000); (b) solicit in connection with any activity which is
competitive with any of the businesses of the Company and its Affiliated
Companies, any customers or suppliers of the Company and its Affiliated
Companies; (c) use the name "AAR" or any variant thereof; or (d) actively
solicit, directly or indirectly, any employee or induce any customer or supplier
of the Company or any of its Affiliated Companies to terminate or materially
change such relationship.

                                   ARTICLE VI
                           ADMINISTRATION OF THE PLAN

     6.1.  ADMINISTRATION BY THE COMMITTEE.  The Committee shall be responsible
for the general operation and administration of the Plan and for carrying out
the provisions thereof.

     6.2.  GENERAL POWERS OF ADMINISTRATION.  All provisions set forth in the
Qualified Retirement Plan with respect to the administrative powers and duties
of the Committee, expenses of administration, and procedures for filing claims,
shall also be applicable with respect to the Plan.  The Committee shall be
entitled to rely conclusively upon all tables, valuations, certificates,
opinions and reports furnished by any actuary, accountant, controller, counsel
or other person employed or engaged by the Committee with respect to the Plan.

                                   ARTICLE VII
                            AMENDMENT OR TERMINATION

     7.1.  AMENDMENT OR TERMINATION.  The Company intends the Plan to be
permanent but reserves the right to amend or terminate the Plan when, in the
sole opinion of the Company, such amendment or termination is advisable.  Any
such amendment or termination shall be made pursuant to a resolution of the
Board and shall be effective as of the date of such resolution or such later
date as the resolution may expressly state.

     7.2   EFFECT OF AMENDMENT OR TERMINATION.  No amendment or termination of
the Plan shall (i) directly or indirectly deprive any current or former
Participant or Surviving Spouse of all or any portion of any Supplemental
Retirement Benefit or Supplemental Surviving Spouse Benefit, the right to which
has accrued prior to the effective date of such amendment or termination, or
which would be payable if the Participant terminated employment for any reason,
including death, on such effective date, or (ii) directly or indirectly reduce
the balance of any Supplemental Salary Deferral Account, Supplemental Company
Account or Supplemental Profit Sharing Account held hereunder as of the
effective date of such amendment or termination.  Upon termination of the Plan,
distribution of Supplemental Retirement Benefits and Supplemental Surviving
Spouse Benefits, and of amounts in Supplemental Salary Deferral Accounts,
Supplemental Company Accounts and Supplemental Profit Sharing Accounts shall be
made to Participants, their Surviving Spouses or beneficiaries in the manner and
at the time described in Sections 3.4 through 3.8 and 4.6(d) of the Plan.  No
additional Supplemental Retirement Benefits or Supplemental Surviving Spouse
Benefits shall be earned after termination of the Plan, and no additional
credits of Supplemental Salary Reduction Contributions, Supplemental Company
Contributions or Supplemental Profit Sharing Contributions shall be made to the
accounts of Participants after termination of the Plan, but the Company shall
continue to credit gains and losses to accounts pursuant to Section 4.5 until
the balances of such accounts have been fully distributed to Participants or
their beneficiaries.

                                  ARTICLE VIII
                               GENERAL PROVISIONS

     8.1.  PARTICIPANTS' RIGHTS UNSECURED.  Except as set forth in Section 8.2,
the Plan at all times shall be entirely unfunded and no provision shall at any
time be made with respect to segregating any assets of the Company or an
Affiliated Company for payment of any benefits hereunder.  The right of a
Participant or his Surviving Spouse or beneficiary to receive a benefit
hereunder shall be an unsecured claim against the general assets of the Company,
and neither the Participant nor a Surviving Spouse or beneficiary shall have any
rights in or against any specific assets of the Company or any Affiliated
Company.  All amounts credited to Supplemental Salary Deferral Accounts,
Supplemental Company

Accounts and Supplemental Profit Sharing Accounts of Participants shall
constitute general assets of the Company.

     8.2.  TRUST AGREEMENT.  Notwithstanding the provisions of Section 8.1, the
Company, promptly after the Plan effective date, shall enter into a trust
agreement ("Trust Agreement") with a bank or trust company (with a combined
capital and surplus in excess of $100 million dollars), located in the
Continental United States, as trustee, whereby the Company shall agree to
contribute to a trust ("Trust") initially and annually thereafter, for the
purpose of accumulating assets actuarially sufficient to satisfy accrued
obligations to Participants and Surviving Spouses under Article III hereof, in
the event of a change in control of the Company.  The Trust Agreement shall
obligate the Company to make contributions sufficient to satisfy the obligations
to Participants, and Surviving Spouses under Article III hereof; provided,
however, that such initial contribution shall be made within [10] days after the
date the Board, in its discretion, deems a change in control of the Company
likely to occur.  The discretion of the Board shall be binding and conclusive
with respect to the likelihood of a change in control of the Company to occur.
For purposes of this Section 8.2, the definition of a change in control of the
Company shall be the same as that found in the AAR CORP. Amended Stock Option
and Incentive Plan, as amended and restated effective July 16, 1992.  Such Trust
Agreement shall be substantially in the form of the model trust agreement set
forth in Internal Revenue Service Revenue Procedure 92-64, or any subsequent
Internal Revenue Service Revenue Procedure, and shall include provisions
required in such model trust agreement that all assets of the Trust shall be
subject to the creditors of the Company in the event of insolvency.

     8.3.  GENERAL CONDITIONS.  Except as otherwise expressly provided herein,
all terms and conditions of the Qualified Retirement Plan applicable to a
Qualified Retirement Benefit, or a Qualified Surviving Spouse Benefit, shall
also be applicable to a Supplemental Retirement Benefit or a Supplemental
Surviving Spouse Benefit payable hereunder, and all terms and conditions of the
Qualified Profit Sharing Plan applicable to a Qualified Salary Deferral
Contribution, a Qualified Company Contribution or a Qualified Profit Sharing
Contribution shall also be applicable to a Supplemental Salary Deferral
Contribution, Supplemental Company Contribution or Supplemental Profit Sharing
Contribution to be made hereunder.  Any Qualified Retirement Benefit or
Qualified Surviving Spouse Benefit or any other benefit payable under the
Qualified Retirement Plan shall be paid solely in accordance with the terms and
conditions of the Qualified Retirement Plan, any Qualified Salary Deferral
Contribution, Qualified Company Contribution or Qualified Profit Sharing
Contribution, or any other contribution to be made under the Qualified Profit
Sharing Plan shall be made solely in accordance with the terms and conditions of
the Qualified Profit Sharing Plan, and nothing in this Plan shall operate or be
construed in any way to modify, amend or affect the terms and provisions of the
Qualified Retirement Plan or the Qualified Profit Sharing Plan.

     8.4.  NO GUARANTY OF BENEFITS.  Nothing contained in the Plan shall
constitute a guaranty by the Company, any Affiliated Company, or any other
person or entity that the assets of the Company or any Affiliated Company will
be sufficient to pay any benefit

hereunder.  No Participant, Surviving Spouse or beneficiary shall have any right
to receive a benefit or a distribution of contributions under the Plan except in
accordance with the terms of the Plan.

     8.5   NO ENLARGEMENT OF EMPLOYEE RIGHTS.  Establishment of the Plan shall
not be construed to give any Participant the right to be retained in the service
of the Company or any Affiliated Company.

     8.6.  SPENDTHRIFT PROVISION.  No interest of any person or entity in, or
right to receive a distribution under, the Plan shall be subject in any manner
to sale, transfer, assignment, pledge, attachment, garnishment, or other
alienation or encumbrance of any kind; nor may such interest or right to receive
a distribution be taken, either voluntarily or involuntarily for the
satisfaction of the debts of, or other obligations or claims against, such
person or entity, including claims for alimony, support, separate maintenance
and claims in bankruptcy proceedings.

     8.7   APPLICABLE LAW.  The Plan shall be construed and administered under
the laws of the State of Illinois except to the extent preempted by federal law.

     8.8.  SMALL BENEFITS.  If the actuarial value of any Supplemental
Retirement Benefit or Supplemental Surviving Spouse Benefit is less than $3,500,
the Company may pay the actuarial value of such Benefit to the Participant or
Surviving Spouse in a single lump sum in lieu of any further Benefit payments
hereunder.

     8.9.  INCAPACITY OF RECIPIENT.  If any person entitled to a payment under
the Plan is deemed by the Company to be incapable of personally receiving and
giving a valid receipt for such payment, then, unless and until claim therefor
shall have been made by a duly appointed guardian or other legal representative
of such person, the Company may provide for such payment or any part thereof to
be made to any other person or institution then contributing toward or providing
for the care and maintenance of such person.  Any such payment shall be a
payment for the account of such person and a complete discharge of any liability
of the Company and the Plan therefor.

     8.10.  CORPORATE SUCCESSORS.  The Plan shall be continued, following a
transfer or sale of assets of the Company, or following the merger or
consolidation of the Company into or with any other corporation or entity, by
the transferee, purchaser or successor entity, unless the Plan has been
terminated by the Company pursuant to the provisions of Article VII, prior to
the effective date of such transaction.

     8.11.  UNCLAIMED BENEFIT.  Each Participant, Surviving Spouse or
beneficiary shall keep the Company informed of his current address.  The Company
shall not be obligated to search for the whereabouts of any person.  If the
location of a Participant is not made known to the Company within three years
after the date on which payment of the Participant's benefits under the Plan,
may first be made, payment may be made as though the Participant had died at the
end of the three-year period.  If, within one additional year

after such three-year period has elapsed, or, within three years after the
actual death of a Participant, the Company is unable to locate any Surviving
Spouse or beneficiary of the Participant, then the Company shall have no further
obligation to pay any benefit hereunder to such Participant, Surviving Spouse or
beneficiary or any other person and such benefit shall be irrevocably forfeited.

     8.12.  LIMITATIONS ON LIABILITY.  Notwithstanding any of the preceding
provisions of the Plan, none of the Company, any Affiliated Company, any member
of the Committee, nor any individual acting as an employee or agent of the
Company, any Affiliated Company or the Committee, shall be liable to any
Participant, former Participant, Surviving Spouse or any other beneficiary or
other person for any claim, loss, liability or expense incurred by such
Participant, Surviving Spouse or other beneficiary or other person in connection
with the Plan.

     IN WITNESS WHEREOF, this Plan has been executed this _____ day of _______,
1994.

                                             AAR CORP.

                                             By________________________________
ATTEST:

_____________________________________

 

Basic Info X:

Name: SUPPLEMENTAL KEY EMPLOYEE RETIREMENT PLAN
Type: Retirement Plan
Date: Jan. 13, 1995
Company: AAR CORP
State: Delaware

Other info:

Date:

  • June 1 , 1965
  • August 1 , 1988
  • June 1 , 1994
  • July 16 , 1992

Organization:

  • Board of Directors of the Company
  • Compensation Committee of the Board
  • Qualified Company Contributions
  • Qualified Salary Deferral Contributions
  • Supplemental Profit Sharing Contributions
  • Qualified Retirement Benefit
  • Participant 's Normal Retirement Date
  • Salary Deferral Agreement
  • Supplemental Salary Deferral Account
  • Supplemental Salary Deferral Contributions
  • Two Hundred Fifty Thousand Dollars
  • Supplemental Company Accounts
  • Supplemental Salary Reduction Contributions
  • Supplemental Company Contributions
  • Supplemental Profit Sharing Accounts of Participants
  • Internal Revenue Service
  • Supplemental Retirement Benefit
  • State of Illinois
  • Supplemental Surviving Spouse Benefit

Location:

  • Delaware
  • United States

Money:

  • $ 250,000
  • $ 100 million dollars
  • $ 3,500

Percent:

  • 50 %
  • one percent