Document:

<PAGE>

                              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 11th
                  day of April, 2000, by and between AAR CORP., a Delaware
                  corporation ("Company"), and Timothy J. Romenesko
                  ("Employee").

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

WHEREAS, the Company and Employee entered into a Severance and Change in Control
Agreement dated February 24, 1995 ("Agreement"); and

WHEREAS, the Company and Employee amended and restated the Agreement as of the
8th day of April, 1997, and further amended the Agreement as of the 14th day of
July, 1998 ("Original Agreement"); and

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

WHEREAS, for their mutual convenience, the Company and Employee desire to
restate the Agreement, as so amended, in its entirety.

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

                                       1
<PAGE>

                  investments are made or which would detract from or interfere
                  or cause a conflict of interest with performance of Employee's
                  duties hereunder.

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

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

4.       CONFIDENTIAL INFORMATION, ASSIGNMENT OF INVENTIONS.

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

                                       2
<PAGE>

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

5.       NON-COMPETE; SEVERANCE.

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

                                       3
<PAGE>

                  the legal or equitable holder, solely for investment purposes,
                  of less than 5% of the capital stock of any publicly held
                  corporation which may be in direct or indirect competition
                  with the Company or any Affiliated Company.

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

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

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

                                       4
<PAGE>

                  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
                           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

                                       5
<PAGE>

                           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.

                  (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 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

                                       6
<PAGE>

                           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

                           (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

                                       7
<PAGE>

                           (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 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

                                       8
<PAGE>

                           Company may require the submission of such medical
                           evidence as to the condition of the Employee as it
                           may deem necessary in order to arrive at its
                           determination of the occurrence of a Disability, and
                           Employee will cooperate in providing any such
                           information. Employee will be provided with
                           reasonable opportunity to present additional medical
                           evidence as to the medical condition of Employee for
                           consideration prior to the Board making its
                           determination of the occurrence of a Disability.

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

                  (iv)     "Cause" means:

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

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

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

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

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

                                                     (2) any action taken by
                                    Employee in connection with Employee's
                                    duties hereunder, or any failure to act, if
                                    Employee acted or failed to act in good
                                    faith and in a manner Employee reasonably
                                    believed to be in and not opposed to the
                                    best interest of

                                       9
<PAGE>

                                    the Company and Employee had no reasonable
                                    cause to believe Employee's conduct was
                                    unlawful; or

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

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

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

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

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

                  (e)      The Company 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

                                       10
<PAGE>

         or more of its divisions or offices to any company not controlled,
         directly or indirectly, by the Company or may take any and all other
         steps which its Board of Directors, in its exclusive judgment, shall
         deem desirable, and Employee shall have no claim or recourse against
         the Company, its officers, directors or employees by reason of such
         action except for enforcement of the provisions of Sections 5 and 7 of
         this Agreement.

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

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

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

         (a)      If to the Company, to:

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

                  With a copy to:

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

         (b)      If to Employee, to:

                           Timothy J. Romenesko
                           515 Lake Shore Drive North
                           Barrington, IL   60010

         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
<PAGE>

11.      NON-ASSIGNMENT.

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

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

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

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

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

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

                                       12
<PAGE>

         provision of this Agreement to be performed by such other party shall
         be deemed a waiver of similar or dissimilar provisions or conditions at
         the same or at any prior or subsequent time.

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

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

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

Employer:

AAR CORP.

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

Title:  Vice President

Employee:

/s/ Timothy J. Romenesko
--------------------------------
Timothy J. Romenesko

                                       13<PAGE>

                                  COMPOSITE* OF

                                    AAR CORP.
                NONEMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN

                 AS AMENDED AND RESTATED EFFECTIVE APRIL 8, 1997

*includes Amendment No. 1

<PAGE>

                                    AAR CORP.
                NONEMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN

                 AS AMENDED AND RESTATED EFFECTIVE APRIL 8, 1997

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               PAGE
                                                                                                               ----
<S>                                                                                                           <C>
SECTION I - INTRODUCTION......................................................................................- 1 -

SECTION II - PLAN PARTICIPANTS................................................................................- 1 -

SECTION III - DEFERRAL ELECTIONS..............................................................................- 1 -

SECTION IV - PARTICIPANT ACCOUNTS.............................................................................- 4 -

SECTION V - DISTRIBUTION OF ACCOUNTS..........................................................................- 5 -

SECTION VI - ADMINISTRATION OF THE PLAN.......................................................................- 8 -

SECTION VII - AMENDMENT OR TERMINATION........................................................................- 10-

SECTION VIII - GENERAL PROVISIONS.............................................................................- 10-
</TABLE>

                                     - i -
<PAGE>

                                    AAR CORP.
                NONEMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN

                 AS AMENDED AND RESTATED EFFECTIVE APRIL 8, 1997

                            SECTION I - INTRODUCTION

         Effective January 1, 1996 AAR CORP. ("Company") established the
Nonemployee Directors' Deferred Compensation Plan ("Plan") for members of its
Board of Directors ("Board"), who are not employees of the Company or an
affiliate ("Nonemployee Directors"). The Plan is amended and restated, effective
April 8, 1997, as set forth below:

                         SECTION II - PLAN PARTICIPANTS

         Each Nonemployee Director shall become a Participant under the Plan by
filing the written Election Form described in Section III below with the Plan
Administrator appointed by the Compensation Committee of the Board ("Committee")
with respect to the Retainers and Meeting Fees payable to the Nonemployee
Director for his services as a member of the Board.

                        SECTION III - DEFERRAL ELECTIONS

         (a)      Each Participant shall make the following election with
respect to his Retainer:

                  (i)      The Participant may elect to defer receipt of his
         entire Retainer until the date on which his service on the Board
         terminates for any reason, and have the cash value of such Retainer
         credited to the Stock Unit Account established for him under the Plan
         and converted to Stock Units, pursuant to the provisions of paragraph
         (a) of Section IV below; or

                  (ii)     If an election is not made pursuant to clause (i)
         above, a Participant shall

<PAGE>

         receive distribution of a number of shares of common stock of AAR CORP.
         ("Common Stock") equal to the cash value of each quarterly payment of
         his Retainer divided by the Fair Market Value (as defined in paragraph
         (b) of Section VIII) of a share of Common Stock on the date on which
         such quarterly payment of such Retainer is payable. Such distribution
         shall be evidenced by a certificate representing the applicable number
         of shares of Common Stock, registered in the name of the Participant,
         and distributed to the Participant as soon as practicable after the
         date on which each quarterly payment of such Retainer is payable.

         (b)      Each Participant shall elect (i) to have his entire Meeting
Fee paid to him in cash as soon as practicable after the date on which such
Meeting Fee is otherwise payable, or (ii) to defer receipt of his entire Meeting
Fee until the date on which his service on the Board terminates for any reason,
and have the cash value of such Meeting Fee credited to the Cash Account
established for him under the Plan pursuant to the provisions of paragraph (b)
of Section IV below.

         (c)      Each election with respect to a Retainer and Meeting Fee for a
calendar year shall be set forth on an Election Form provided by the Plan
Administrator. Such Election Form shall be in writing and shall specify the
elections described above with respect to Retainers and Meeting Fees.

         (d)      An Election Form effective for a calendar year shall be
delivered to the Plan Administrator prior to the first day of such calendar
year. An Election Form shall remain in effect for subsequent calendar years
until a written notice to revise the Election Form is delivered to the Plan
Administrator on or before the first day of the calendar year in which the
revision is

                                     - 2 -
<PAGE>

to become effective. Except as provided in paragraph (e) below, an initial
Election Form or a revised Election Form shall only apply to a Retainer or
Meeting Fee otherwise payable to a Participant after the end of the calendar
year in which such initial or revised Election Form is delivered to the Plan
Administrator. Any Election Form delivered by a Participant shall be irrevocable
with respect to any Retainer or Meeting Fee covered by the elections set forth
therein. If an Election Form is not in effect for a Nonemployee Director for a
calendar year, he shall be deemed to have elected the options specified in
clause (i) of paragraphs (a) and (b) of this Section for such calendar year.

         (e)      Notwithstanding the preceding provisions of this Section:

                  (i)      An election by a Participant with respect to a
         Retainer or Meeting Fee payable on or after April 8, 1997 may be made
         pursuant to an Election Form delivered to the Plan Administrator prior
         to April 8, 1997; and

                  (ii)     An election made by a Participant in the calendar
         year in which he first becomes eligible to participate in the Plan may
         be made pursuant to an Election Form delivered to the Plan
         Administrator within 30 days after the date on which he initially
         becomes eligible to participate, and such Election Form shall be
         effective with respect to Retainers and Meeting Fees earned from and
         after the date such Election Form is delivered to the Plan
         Administrator.

         (f)      All Retainers and Meeting Fees deferred by a Participant
pursuant to the provisions of the Plan prior to April 8, 1997, shall be credited
to the Cash Account established for the Participant under the Plan.

                                     - 3 -
<PAGE>

                        SECTION IV - PARTICIPANT ACCOUNTS

         (a)      (i)      A Retainer of a Participant deferred pursuant to
clause (i) of paragraph (a) of Section III shall be credited as a dollar amount
to the Participant's Stock Unit Account as of the quarterly date on which each
quarterly payment of such Retainer otherwise would have been paid, and shall be
converted as of such date into Stock Units equivalent to Common Stock. Such
conversion shall be determined by dividing the dollar balance of the quarterly
payment of such Retainer by the Fair Market Value of a share of Common Stock on
such quarterly date. The number of Stock Units for full shares of Common Stock
so determined shall be credited to the Participant's Stock Unit Account and the
aggregate value thereof shall be charged to the cash balance of his Stock Unit
Account. Any cash balance remaining in the Participant's Stock Unit Account
after such conversion, together with other subsequent credits of deferred
Retainers thereto and credits thereto pursuant to clause (ii) next below, shall
be converted into Stock Units on the next quarterly conversion date.

                  (ii)     Additional credits shall be made to a Participant's
Stock Unit Account in dollar amounts equal to the cash dividends (or the fair
market value of dividends paid in property other than Common Stock) that the
Participant would have received had he been the owner on each record date of a
number of shares of Common Stock equal to the number of Stock Units in his Stock
Unit Account on such date. In the case of a dividend in Common Stock or a Common
Stock split, additional credits will be made to a Participant's Stock Unit
Account of a number of Stock Units equal to the number of full shares of Common
Stock that the Participant would have received had he been the owner on each
record date of a number of shares of Common Stock equal to the number of Stock
Units in his Stock Unit Account on such date. Any cash dividends

                                     - 4 -
<PAGE>

(or dividends paid in property other than Common Stock) shall be converted into
Stock Units at the next quarterly conversion date as set forth in clause (i) of
this paragraph.

         (b)      A Meeting Fee of a Participant deferred pursuant to clause
(ii) of paragraph (b) of Section III shall be credited to the Participant's Cash
Account as of the date it would otherwise have been paid. Until the entire
balance of a Cash Account has been paid to the Participant, or to the
beneficiaries of a deceased Participant, such balance shall be increased on the
last day of each calendar quarter to reflect accrued interest on such balance
based on the 10 year United States Treasury Bond rate at the end of the
applicable calendar quarter. The Committee may, from time to time, change
prospectively the interest rate applied with respect to Participants' Cash
Balance Accounts.

         (c)      Each Stock Unit Account and each Cash Account shall be
maintained on the books of the Company until full payment of the balance thereof
has been made to the applicable Participant (or the beneficiaries of a deceased
Participant). No funds shall be set aside or earmarked for any Account, which
shall be purely a bookkeeping device.

                      SECTION V - DISTRIBUTION OF ACCOUNTS

         (a)      The entire balance of a Participant's Stock Unit Account and
of his Cash Account shall be paid to him (or to his beneficiaries in the event
of his death) in a single lump sum as of the January 31 next following the date
the Participant's service on the Board terminates for any reason.

         (b)      The balance of a Participant's Stock Unit Account shall be
distributed in shares of Common Stock or in cash as designated by the
Participant (or his beneficiaries in the event of his

                                     - 5 -
<PAGE>

death) by written notice delivered to the Plan Administrator prior to the
applicable January 31 distribution date. If a timely designation is not received
by the Plan Administrator, distribution shall be made in cash or in Common Stock
as the Company shall decide. In the event of a distribution in Common Stock, a
certificate representing a number of shares of Common Stock equal to the number
of Stock Units in the Participant's Stock Unit Account, registered in the name
of the Participant (or his beneficiaries), and any remaining cash in the Stock
Unit Account, shall be distributed to the Participant (or his beneficiaries). In
the event of a cash distribution, the Participant (or his beneficiaries) shall
receive an amount in cash equal to the aggregate of (i) the number of Stock
Units in the Stock Unit Account multiplied by the Fair Market Value of a share
of Common Stock on the applicable January 31, and (ii) any remaining cash in the
Stock Unit Account.

         (c)      The balance of a Participant's Cash Account shall be
distributed to the Participant (or his beneficiaries) in cash on the applicable
January 31 distribution date.

         (d)      If a Participant's service on the Board shall terminate by
reason of his death, or if he shall die after becoming entitled to distribution
hereunder, but prior to receipt of his entire distribution, all cash or Common
Stock then distributable hereunder with respect to him shall be distributed to
such beneficiary or beneficiaries as such Participant shall have designated by
an instrument in writing last filed with the Committee prior to his death, or in
the absence of such designation or of any living beneficiary, to his spouse, or
if not then living, to his then living descendants, PER STIRPES, or if none is
then living, to the personal representative of his estate, in the same manner as
would have been distributed to the Participant had he continued to live.

         (e)      In the written discretion of the Plan Administrator, and at
the written request of a Participant, up to 100% of the balance in his Stock
Unit Account and in his Cash Account,

                                     - 6 -
<PAGE>

determined as of the last day of the calendar month prior to the date of
distribution, may be distributed to a Participant in a lump sum in the case of
an Unforeseeable Emergency, subject to the limitations set forth below. For
purposes of this paragraph an Unforeseeable Emergency is a severe financial
hardship of the Participant resulting from a sudden and unexpected illness or
accident of the Participant or of a dependent (as defined in Section 152(a) of
the Internal Revenue Code) of the Participant, loss of the Participant's
property due to casualty or other similar, extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant. The circumstances that will constitute an Unforeseeable Emergency
will depend upon the facts of each case, as determined by the Plan Administrator
in its discretion, but in any case payment may not be made to the extent that
such hardship is or may be relieved:

                  (i)      through reimbursement or compensation by insurance or
         otherwise;

                  (ii)     by liquidation of the Participant's assets to the
         extent the liquidation of such assets would not itself cause severe
         financial hardship; or

                  (iii)    by cessation of deferrals under the Plan.

Withdrawal of amounts because of an Unforeseeable Emergency shall be permitted
only to the extent reasonably needed to satisfy the Unforeseeable Emergency.

         (f)      Notwithstanding any other provisions of the Plan, the entire
balance of each Participant's Stock Unit Account and Cash Account shall be
distributed to such Participant on the earlier to occur of (1) within 10 days
after the date the Board, in its discretion, deems a Change in Control of the
Company likely to occur, and (2) the date a Change in Control actually occurs.
Distribution of each Participant's Cash Account shall be made in cash.
Distribution of each Participant's Stock Unit Account shall be made in shares of
Common Stock or in cash as

                                     - 7 -
<PAGE>

designated by the Participant (or his beneficiaries in the event of his death)
pursuant to the procedures set forth in paragraph (b) of this Section V;
provided that the references to "the applicable January 31" in paragraph (b)
shall be references to the date set forth in this paragraph for distribution of
the Participant's Stock Unit Account. For purposes of this paragraph (f), the
definition of a Change in Control of the Company shall be the same as that found
in the AAR CORP. Stock Benefit Plan, as amended and restated from time to time.

                     SECTION VI - ADMINISTRATION OF THE PLAN

         (a)      The Committee shall appoint one or more employees of the
Company to act as the Plan Administrator. The Plan Administrator shall be
responsible for the general operation and administration of the Plan, and shall
have such powers as are necessary to discharge its duties under the Plan,
including, without limitation, the following:

                  (i)      with the advice of the General Counsel of the
         Company, to construe and interpret the Plan, to decide all questions of
         eligibility, to determine the amount, manner and time of payment of any
         benefits hereunder, to prescribe rules and procedures to be followed by
         Participants and their beneficiaries under the Plan, and to otherwise
         to carry out the purposes of the Plan; and

                  (ii)     To appoint or employ individuals to assist in the
         administration of the Plan and any other agents deemed advisable.

The decisions of the Plan Administrator shall be binding and conclusive upon all
Participants, beneficiaries and other persons.

         (b)      Any Participant claiming a benefit, requesting an
interpretation or ruling, or

                                     - 8 -
<PAGE>

requesting information, under the Plan, shall present the request in writing to
the Plan Administrator, which shall respond in writing as soon as practicable.
If the claim or request is denied, the written notice of denial shall state the
following:

                  (i)      The reasons for denial, with specific reference to
         the Plan provisions upon which the denial is based;

                  (ii)     A description of any additional material or
         information required and an explanation of why it is necessary; and

                  (iii)    An explanation of the Plan's review procedure.

The initial notice of denial shall normally be given within 90 days after
receipt of the claim. If special circumstances require an extension of time, the
claimant shall be so notified and the time limit shall be 180 days. Any person
whose claim or request is denied, or who has not received a response within 30
days, may request review by notice in writing to the Plan Administrator. The
original decision shall be reviewed by the Plan Administrator, which may, but
shall not be required to, grant the claimant a hearing. On review, whether or
not there is a hearing, the claimant may have representation, examine pertinent
documents and submit issues and comments in writing. The decision on review
shall ordinarily be made within 60 days. If an extension of time is required for
a hearing or other special circumstances, the claimant shall be so notified and
the time limit shall be extended to 120 days. The decision on review shall be in
writing and shall state the reasons and the relevant Plan provisions. All
decisions on review shall be final and bind all parties concerned.

                                     - 9 -
<PAGE>

                     SECTION VII - AMENDMENT OR TERMINATION

         (a)      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.

         (b)      No amendment or termination of the Plan shall (i) directly or
indirectly deprive any current or former Participant or his beneficiaries of all
or any portion of his Accounts as determined as of the effective date of such
amendment or termination, or (ii) directly or indirectly reduce the balance of
any Account held hereunder as of the effective date of such amendment or
termination. Upon termination of the Plan, distribution of balances in all
Accounts shall be made to Participants or their beneficiaries in the manner and
at the time described in Section V as if each Participant's service on the Board
had then terminated. No additional deferred Retainers or Meeting Fees shall be
credited to the Accounts of Participants after termination of the Plan, but the
Company shall continue to credit earnings, gains and losses to Accounts pursuant
to Section IV until the balances of such Accounts have been fully distributed to
Participants or their beneficiaries.

                        SECTION VIII - GENERAL PROVISIONS

         (a)      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 for payment of any benefits hereunder. The right of a Participant or
his beneficiary to receive a benefit hereunder shall be an

                                     - 10 -
<PAGE>

unsecured claim against the general assets of the Company, and neither the
Participant nor a beneficiary shall have any rights in or against any specific
assets of the Company. All amounts credited to Accounts shall constitute general
assets of the Company.

         (b)      For all purposes of the Plan, the Fair Market Value of a share
of Common Stock as of a given date shall be the closing price per share of the
Common Stock on the New York Stock Exchange on such date, or if such date is not
a regular trading date on such Exchange, on the next following regular trading
date.

         (c)      Shares of Common Stock distributed under the Plan may be
treasury shares of the Company or shares purchased by the Company on the open
market. The Company shall reserve such number of shares of Common Stock as may
be issuable under the Plan.

         (d)      Nothing contained in the Plan shall constitute a guaranty by
the Company, the Committee, the Plan Administrator, or any other person or
entity, that the assets of the Company will be sufficient to pay any benefit
hereunder. No Participant or beneficiary shall have any right to receive a
distribution under the Plan except in accordance with the terms of the Plan.

         (e)      Establishment of the Plan shall not be construed to give any
Participant the right to be retained as a member of the Board.

         (f)      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.

                                     - 11 -
<PAGE>

         (g)      The Plan shall be construed and administered under the laws of
the State of Illinois, except to the extent preempted by federal law.

         (h)      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 that is 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,
the Committee, the Plan Administrator and the Plan therefor.

         (i)      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 Section VII prior to the effective date of such transaction.

         (j)      Each Participant or beneficiary shall keep the Plan
Administrator informed of his current address. The Plan Administrator shall not
be obligated to search for the whereabouts of any person. If the location of a
Participant is not made known to the Plan Administrator 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 Plan Administrator is unable to locate any beneficiary of the
Participant, then the Company shall have no further obligation to pay any

                                     - 12 -
<PAGE>

benefit hereunder to such Participant, or beneficiary or any other person and
such benefit shall be forfeited. If such Participant, or his beneficiary or any
other person, subsequently makes a valid claim for distribution of the amount
forfeited, such amount, without gains or earnings thereon, shall be distributed
to such Participant or his beneficiary or such other person pursuant to Section
V.

         (k)      Notwithstanding any of the preceding provisions of the Plan,
none of the Company, any member of the Committee, any Plan Administrator or any
individual acting as an employee or agent of the Company, the Committee or the
Plan Administrator, shall be liable to any Participant, former Participant, or
any beneficiary or other person for any claim, loss, liability or expense
incurred by such Participant, or beneficiary or other person in connection with
the Plan.

         (l)      The aggregate number of Stock Units that may be issuable under
the Plan and the number of Stock Units in each Stock Unit Account shall all be
appropriately adjusted as the Committee may determine for any increase or
decrease in the number of shares of issued Common Stock resulting from a
subdivision or consolidation of shares, whether through reorganization,
recapitalization, stock split-up, spin-off, stock distribution or combination of
shares or other increase or decrease in the number of such shares outstanding
effected without receipt of consideration by the Company. Adjustments under this
paragraph (l) shall be made in the sole discretion of the Committee, and its
decisions shall be binding and conclusive.

         (m)      Notwithstanding anything to the contrary contained in the
Plan, (a) if the Internal Revenue Service prevails in a claim by it that amounts
credited to a Participant's Account, and/or earnings thereon, constitute taxable
income to the Participant or his beneficiary for any taxable

                                     - 13 -
<PAGE>

year of his, prior to the taxable year in which such credits and/or earnings are
distributed to him or (b) legal counsel satisfactory to the Company, and the
applicable Participant or his beneficiary, renders an opinion that the Internal
Revenue Service would likely prevail in such a claim, the balance of such
Participant's Account shall be immediately distributed to the Participant or his
beneficiary. For purposes of this paragraph, the Internal Revenue Service shall
be deemed to have prevailed in a claim if such claim is upheld by a court of
final jurisdiction, or if the Company, or a Participant or beneficiary, based
upon an opinion of legal counsel satisfactory to the Company and the Participant
or his beneficiary, fails to appeal a decision of the Internal Revenue Service,
or a court of applicable jurisdiction, with respect to such claim, to an
appropriate Internal Revenue Service appeals authority or to a court of higher
jurisdiction, within the appropriate time period.

         (n)      The Company shall withhold from any deferred or nondeferred
Retainer or Meeting Fee, or any payments made pursuant to Section V, any amounts
required by applicable federal, state and local tax laws and regulations
thereunder. A Participant may pay any applicable taxes due with respect to any
shares of Common Stock distributed under the Plan in cash or in Common Stock,
either by having the Company withhold a portion of the shares of Common Stock
otherwise distributable, or by delivering to the Company shares of Common Stock
otherwise owned by the Participant.

         (o)      Any notice under the Plan shall be in writing, or by
electronic means, and shall be received when actually delivered, or mailed
postage paid as first class U.S. Mail. Notices shall be directed to the Company
at its principal business office at One AAR Place, 1100 North Wood Dale Road,
Wood Dale, Illinois 60191, to a Nonemployee Director at the address stated in
his

                                     - 14 -
<PAGE>

Election Form, and to a beneficiary entitled to benefits at the address stated
in the Participant's beneficiary designation, or to such other addresses any
party may specify by notice to the other parties.

         IN WITNESS WHEREOF, this amendment and restatement of the Plan has been
executed on behalf of the Company on this 9th day of April, 1997.

                                    AAR CORP.

                                    By: /s/ Ira A. Eichner
                                       -------------------------------------
                                       Ira A. Eichner, Chairman of the Board

                                     - 15 -

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00014-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00014-of-00352.parquet"}]]