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                              AMENDED AND RESTATED
                    SEVERANCE AND CHANGE IN CONTROL AGREEMENT


            This Amended and Restated Severance and Change in Control
            Agreement ("Agreement") made and entered into as of the 1st
            day of August, 2000, by and between AAR CORP., a Delaware
            corporation ("Company"), and Michael J. Sharp ("Employee").


WHEREAS, the Company currently employs Employee as an employee at will in the
capacity of Vice President, Controller and Chief Accounting Officer; and

WHEREAS, Employee desires the Company to pay Employee certain severance payments
upon a Change in Control of AAR CORP. and upon termination of employment prior
to a Change in Control; and

WHEREAS, the Company is willing to pay Employee severance payments under certain
circumstances if Employee agrees to confidentiality, non-compete and certain
other covenants.

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

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

2.   DUTIES. During the continuation of Employee's employment, Employee shall:

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

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

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

3.   BENEFITS. Employee shall be entitled to participate, according to the
     eligibility provisions of each, in such welfare plans (including but not
     limited to medical, dental, life, accident and disability insurance
     programs), vacation, retirement plans and other fringe benefits as may be
     in effect from time to time and available to other officers of the Company
     during Employee's employment term. Employee shall also be entitled to
     participate in such additional executive fringe benefits as may be
     authorized from time to time by the President and Chief Executive Officer
     of the Company. Employee shall be eligible to participate in the Company's
     Supplemental Key Employee Retirement Plan as an key employee participant.

4.   CONFIDENTIAL INFORMATION, ASSIGNMENT OF INVENTIONS.

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


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          and is the sole and exclusive property of the Affiliated Companies and
          shall be deemed confidential information for the purposes of this
          paragraph.

     (b)  Employee hereby assigns to the Company all rights that Employee may
          have as author, designer, inventor or otherwise as creator of any
          written or graphic material, design, invention, improvement, or any
          other idea or thing whatever that Employee may write, draw, design,
          conceive, perfect, or reduce to practice during employment with the
          Company or within 120 days after termination of such employment,
          whether done during or outside of normal work hours, and whether done
          alone or in conjunction with others ("Intellectual Property"),
          provided, however, that Employee reserves all rights in anything done
          or developed entirely by Employee on Employee's own personal time and
          without the use of any Company equipment, supplies, facilities or
          information, or the participation of any other Company employee,
          unless it relates to the Company's business or reasonably anticipated
          business, or grows out of any work performed by Employee for the
          Company. Employee will promptly disclose all such Intellectual
          Property developed by Employee to the Company, and fully cooperate at
          the Company's request and expense in any efforts by the Company or its
          assignees to secure protection for such Intellectual Property by way
          of domestic or foreign patent, copyright, trademark or service mark
          registration or otherwise, including executing specific assignments or
          such other documents or taking such further action as may be
          considered necessary to vest title in Company or its assignees and
          obtain patents or copyrights in any and all countries.

5.   NON-COMPETE; SEVERANCE.

     (a)  Employee agrees that during Employee's continuation of employment with
          the Company and for one (1) year thereafter so long as the Company
          makes severance payments to Employee pursuant to subsections 5(b) or
          5(c) below, Employee shall not, without the express written consent of
          the Company, either alone or as a consultant to, or partner, employee,
          officer, director, or stockholder of any organization, entity or
          business, (i) take or convert for Employee's personal gain or benefit
          or for the benefit of any third party, any business opportunities
          which may be of interest to the Company or any Affiliated Company
          which Employee becomes aware of during the term of his employment;
          (ii) engage in direct or indirect competition with the Company or any
          Affiliated Company within 100 miles of any location within the United
          States of America or any other country where the Company or any
          Affiliated Company does business from time to time during the term
          hereof; (iii) solicit in connection with any activity which is
          competitive with any of the businesses of the Company or any


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          Affiliated Company, any customers of the Company or any Affiliated
          Company; (iv) solicit for employment any sales, marketing or
          management employee of Company or any Affiliated Company or induce or
          attempt to induce any customer or supplier of the Company or any
          Affiliated Company to terminate or materially change such
          relationship. Company and Employee acknowledge the reasonableness of
          the foregoing covenants not to compete and non-solicitation, including
          but not limited to the geographic area and duration of time which are
          a part hereof, and further, that the restrictions stated in this
          Section 5 are reasonably necessary for the protection of Employer's
          legitimate proprietary interests. This covenant not to compete may be
          enforced with respect to any geographic area in which the Company or
          any Affiliated Company does business during the term hereof. Nothing
          herein shall prohibit Employee from being the legal or equitable
          holder, solely for investment purposes, of less than 5% of the capital
          stock of any publicly held corporation which may be in direct or
          indirect competition with the Company or any Affiliated Company.

     (b)  The Company will pay Employee, upon termination of Employee's
          employment by the Company prior to a Change in Control (as defined in
          7(c)(i) below) for any reason other than Cause (as defined in 7(c)(iv)
          below), severance each month for 12 months, in an amount (subject to
          applicable withholding) equal to 1/12 of Employee's base salary; and,
          further, if the Company pays discretionary bonuses to its officers for
          the fiscal year in which Employee's employment is terminated, Employee
          will be paid a bonus in a lump sum at the time any such bonuses are
          paid to other officers or at such time as the Severance Period is
          complete, whichever is later (with interest at prime rate plus one
          percentage point from the earlier of such dates), (1) for the
          completed fiscal year preceding termination if such bonus has not been
          paid prior to termination, and (2) for the fiscal year in which
          employment is terminated, prorata for the period prior to termination
          of employment based on Employee's performance during such period;
          provided, however, that (i) all such monthly payment obligations shall
          terminate immediately upon Employee obtaining full time employment in
          a comparable position in terms of salary level, and (ii) all such
          payment obligations shall terminate or lapse immediately upon any
          breach by Employee of Section 4 or 5(a) of this Agreement or if
          Employee shall commence any action or proceeding in any court or
          before any regulatory agency arising out of or in connection with
          termination of Employee's employment.

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

     (d)  Employee may terminate this Severance and Change in Control Agreement
          effective immediately upon notice thereof in writing to Company at any
          time while still employed within a sixty (60) calendar day period
          immediately following the effective date of any reduction by Company
          in (i) Employee's level of responsibility


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          or position from that held by Employee as Vice President, Controller
          and Chief Accounting Officer on the effective date of this Agreement,
          or (ii) Employee's level of compensation, including retirement
          benefits in effect immediately prior to any such change.

     (e)  If at any time, any clause or portion of this Section 5 shall be
          deemed invalid or unenforceable by the laws of the jurisdiction in
          which it is to be enforced by reason of being vague or unreasonable as
          to duration, geographic scope, nature of activities restricted, or for
          any other reason, this provision shall be considered divisible as to
          such portions and the foregoing restrictions set forth in 5(a) shall
          become and be immediately amended to include only such duration, scope
          or restriction and such event as shall be deemed reasonable and
          enforceable by the court or other body having jurisdiction to enforce
          this Agreement; and the parties hereto agree that the restrictions, as
          so amended, shall be valid and binding as though the invalid or
          unenforceable portion had not been involved herein.

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

6.       TERMINATION OF EMPLOYMENT.

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

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

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

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


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               Employee's reasonable expenses and pay Employee a reasonable per
               diem or hourly stipend.

7.   CHANGE IN CONTROL.

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

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

          (2)  The Company shall promptly pay to Employee in a lump sum, a cash
               payment in an amount equal to three times Employee's total
               compensation (base salary plus annual cash bonus) for either the
               fiscal year of the Company most recently ended prior to the date
               of termination, or the preceding fiscal year, whichever is the
               highest total compensation, subject to applicable withholding.
               Employee may elect to take payment of any amounts on a schedule
               of Employee's own choosing; provided that such schedule shall be
               completed no later than three years from the date of Employee's
               termination of employment.


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

          (4)  Employee shall receive an additional retirement benefit, over and
               above that which Employee would normally be entitled to under the
               Company's retirement plans or programs applicable to Employee,
               equal to the


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               actuarial equivalent of the additional amount that Employee would
               have earned under such retirement plans or programs had Employee
               accumulated three additional continuous years of service. Such
               amount shall be paid to Employee in a cash lump sum payment on
               the earlier to occur of Employee's termination of employment
               following a Change in Control or Employee's Retirement Date,
               together with a gross-up bonus in an amount equal to any federal,
               state and local income taxes and excise taxes (including FICA and
               any similar taxes) payable by Employee on such lump sum payment
               and such gross-up bonus.

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

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

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

     (c)  For purposes of this Agreement

          (i) "Change in Control" means the earliest of:

               (1)  any person (as such term is used in Section 13(d) of the
                    Securities Exchange Act of 1934, as amended ("Exchange
                    Act"), has acquired (other than directly from the Company)
                    beneficial ownership (as that term is defined in Rule 13d-3
                    under the Exchange Act), of more than 20% of the outstanding
                    capital stock of the Company entitled to vote for the
                    election of directors; or


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               (2)  the effective time of (i) a merger or consolidation or other
                    business combination of the Company with one or more other
                    corporations as a result of which the holders of the
                    outstanding voting stock of the Company immediately prior to
                    such business combination hold less than 60% of the voting
                    stock of the surviving or resulting corporation, or (ii) a
                    transfer of substantially all of the assets of the Company
                    other than to an entity of which the Company owns at least
                    80% of the voting stock; or

               (3)  the election over any period of time to the Board of
                    Directors of the Company without the recommendation or
                    approval of the incumbent Board of Directors of the Company,
                    of the lesser of (i) three directors, or (ii) directors
                    constituting a majority of the number of directors of the
                    Company then in office.

          (ii) "Good Reason" means:

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

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

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

          (iii) "Disability" means:

               (1)  a physical or mental condition which has prevented Employee
                    from substantially performing Employee's assigned duties for
                    a period of


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

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

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

          (iv) "Cause" means:

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

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

               (3)  Employee materially breaches the Agreement and such breach
                    by its nature, is incapable of being cured, or such breach
                    remains uncured


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                    for more than 10 days following receipt by Employee of
                    written notice from the Company specifying the nature of the
                    breach and demanding the cure thereof. For purposes of this
                    clause (3), a material breach of the Agreement that involves
                    inattention by Employee to Employee's duties under the
                    Agreement shall be deemed a breach capable of cure.

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

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

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

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

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

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

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


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

          (e)  The Company shall promptly pay Employee a gross-up bonus in an
               amount equal to (i) all excise taxes payable under Section 280G
               of the Internal Revenue Code on any amounts constituting "golden
               parachute" payments, plus (ii) any federal, state, and local
               income taxes and excise taxes (including FICA) payable by
               Employee on such gross-up bonus in order to put Employee in the
               same position Employee would have been in if the excise tax
               provision (Section 280G) did not apply.

          (f)  The Company will continue to provide SKERP retirement benefits to
               Employee and Employee's spouse at no less than the level they are
               receiving or entitled to receive under the SKERP as it was in
               effect immediately prior to the Change in Control.

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

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

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

10.  NOTICES. Any notice or other instrument or thing required or permitted to
     be given, served or delivered to any of the parties hereto shall be
     delivered personally or deposited in the


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     United States mail, with proper postage prepaid, telegram, teletype, cable
     or facsimile transmission to the addresses listed below:

     (a)  If to the Company, to:

                    AAR CORP.
                    1100 N. Wood Dale Road
                    Wood Dale, Illinois   60191
                    Attention:  Chairman

          With a copy to:

                    AAR CORP.
                    1100 N. Wood Dale Road
                    Wood Dale, Illinois   60191
                    Attention:  General Counsel

     (b)  If to Employee, to:

                    Michael J. Sharp
                    814 S. Aldine
                    Park Ridge, IL 60068

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

11.  NON-ASSIGNMENT.

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


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

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

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

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

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

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

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


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<Page>

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

Employer:

AAR CORP.


By: /s/ Howard A. Pulsifer
   ---------------------------

Title:  Vice President

Employee:

/s/ Michael J. Sharp
------------------------------
Michael J. Sharp


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