Categorical Standards For Determining Director Independence

(Last approved July 13, 2021)

It is the policy and practice of AAR CORP. (the “Company”) that the directors of the Company, when carrying out their duties, must exercise their independent judgment in good faith and in the best interests of the Company and its stockholders as a whole.

In addition, it is the policy of the Company that a majority of its directors, and all directors serving on the Audit Committee, Compensation Committee, Nominating and Governance Committee and Aviation Safety and Training Committee shall be “independent,” as determined by the Board in accordance with the independence standards of the New York Stock Exchange (“NYSE”).

At least once each year, the Board shall review the “independence” of each director and any nominee for director and make a determination whether the director or nominee has any material relationship with the Company (either directly or indirectly as a partner, shareholder, or officer of an organization that has a relationship with the Company).

To assist it in determining a director’s “independence,” the Board has adopted the following categorical standards for determining director “independence” status with respect to service as a director* :

1. For purposes of these categorical standards, the “Company” includes each of the Company’s subsidiaries and “immediate family member” means a person’s spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law, and anyone (other than domestic employees) who shares the person’s home; provided, that any such persons who no longer have any such relationship as a result of legal separation or divorce, or death or incapacitation, shall not be considered immediate family members.
2. No director shall be independent if he/she does not meet the independent standards adopted from time to time by the NYSE. Specifically, a director will not be “independent” if:

• the director is or was within the last three years an employee of the Company, or an immediate family member of such director is or was within the last three years an executive officer of the Company; or
• the director or an immediate family member of the director receives or received more than $120,000 in direct compensation from the Company in any twelve-month period within the last three years, other than director and committee fees, and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent on continued service); provided, however, that compensation received by an immediate family member of a director for service as an employee (other than an executive officer) of the Company need not be considered in determining independence; or
• (a) the director or an immediate family member is a current partner of a firm that is the Company’s internal or external auditor; (b) the director is a current employee of such firm; (c) thedirector has an immediate family member who is a current employee of such firm and who personally works on the Company’s audit; or (d) the director or an immediate family member was, within the last three years, a partner or employee of such firm and personally worked on the Company’s audit during that time; or
• the director or an immediate family member of the director is or was within the last three years an executive officer of another company on whose compensation committee any of the Company’s present executive officers at the same time serves or served; or 
• the director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or 2% of the other company’s consolidated gross revenues (payments to and payments from are compared against the benchmarks separately).

3. In determining director independence, the Board will give consideration to all known relevant facts and circumstances.

4. Notwithstanding the foregoing, if a director or his/her immediate family member has another significant relationship with the Company that is not described in Section 2, or, at any time, is the subject of a written request by any director to the Chairman of the Nominating and Governance Committee requesting a review of another director’s independent status and stating the reasons therefor, then the Board of Directors will determine whether that director’s relationship is a “material relationship.”.

5. Members of the Audit Committee must satisfy the enhanced “independence” criteria under applicable rules of the Securities and Exchange Commission and the New York Stock Exchange from time to time. In particular, the following enhanced “independence” qualifying criteria shall apply with respect to directors selected for service on the Audit Committee:

• Director may not have accepted any direct or indirect consulting, advisory or other compensatory fee from the Company other than amounts received as compensation for membership on the Board or Board committees or fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the Company (provided that such compensation is not contingent in any way on continued service).
• Director may not be an “affiliated person,” i.e., a person who directly or indirectly controls, is controlled by or is under common control with, the Company (typically, one who is an executive officer or who owns more than 10% of the Company’s securities is considered an “affiliated person”).

6. Members of the Compensation Committee must satisfy the enhanced “independence” criteria under applicable rules of the Securities and Exchange Commission and the New York Stock Exchange from time to time. In particular, in determining director independence with respect to directors selected for service on the Compensation Committee, the Board will give consideration to all factors specifically relevant to determining whether a director has a relationship to the Company which is material to that director’s ability to be independent from management in connection with the duties of a Compensation Committee member, including, but not limited to:

• The source of compensation of such director, including any consulting, advisory or other compensatory fee paid by the Company to such director, considering whether the director receives compensation from any person or entity that would impair his/her ability to make independent judgments about the Company's executive compensation; and
• Whether such director is affiliated with the Company, a subsidiary of the Company or an affiliateof a subsidiary of the Company, considering whether the affiliate relationship places the director under the direct or indirect control of the Company or its senior management, or creates a direct relationship between the director and members of senior management, in each case of a nature that would impair his/her ability to make independent judgments about the Company's executive compensation.