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                            REVOLVING LOAN AGREEMENT

         This REVOLVING LOAN AGREEMENT dated as of April 11, 2001 (the
"Agreement"), is entered into by and between AAR CORP., a Delaware corporation
(the "Borrower"), whose address is 1100 North Wood Dale Road, Wood Dale,
Illinois 60191 and LASALLE BANK NATIONAL ASSOCIATION, a national banking
association (the "Bank"), whose address is 135 South LaSalle Street, Chicago,
Illinois 60603.

         In consideration of the mutual agreements hereinafter set forth, the
Borrower and the Bank hereby agree as follows:

1.       DEFINITIONS.

         1.1      DEFINED TERMS. For the purposes of this Agreement, the
following capitalized words and phrases shall have the meanings set forth below.

                  "ACCOUNT" shall have the meaning set forth in Section 12.1.

                  "ACCOUNTS RECEIVABLE" shall have the meaning set forth in
         Section 8.4.

                  "ACQUISITION" means any transaction, or any series of related
         transactions, consummated on or after the date of this Agreement, by
         which the Borrower or any of its Subsidiaries (i) acquires any going
         business or all or substantially all of the assets of any firm,
         corporation or division thereof, whether through purchase of assets,
         merger or otherwise or (ii) directly or indirectly acquires (in one
         transaction or as the most recent transaction in a series of
         transactions) at least a majority (in number of votes) of the
         securities of a corporation which have ordinary voting power for the
         election of directors (other than securities having such power only by
         reason of the happening of a contingency) or a majority (by percentage
         or voting power) of the outstanding partnership interests of a
         partnership.

                  "AFFILIATE" of any Person means any other Person directly or
         indirectly controlling, controlled by or under common control with such
         Person. A Person shall be deemed to control another Person if the
         controlling Person owns 10% or more of any class of voting securities
         (or other ownership interests) of the controlled Person or possesses,
         directly or indirectly, the power to direct or cause the direction of
         the management or policies of the controlled Person, whether through
         ownership of stock, by contract or otherwise.

                  "BUSINESS DAY" shall mean any day other than a Saturday,
         Sunday or a legal holiday on which banks are authorized or required to
         be closed for the conduct of commercial banking business in Chicago,
         Illinois.

                  "BORROWER'S UNSECURED LENDERS" shall mean any lender extending
         credit to Borrower on an unsecured basis under similar revolving loan
         facilities, including, but not

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         limited to, Bank One, Bank of America, N.A. The Northern Trust Company
         and any other lenders who may replace these lenders or be added to
         these facilities from time to time.

                  "CAPITAL LEASE" shall mean, as to any person or entity, a
         lease of any interest in any kind of property or asset, whether real,
         personal or mixed, or tangible or intangible, by such person or entity
         as lessee that is, or should be, in accordance with Financial
         Accounting Standards Board Statement No. 13, as amended from time to
         time, or, if such Statement is not then in effect, such statement of
         GAAP as may be applicable, recorded as a "capital lease" on the balance
         sheet of the Borrower prepared in accordance with GAAP.

                  "CAPITALIZED LEASE OBLIGATIONS" of a person means the amount
         of the obligations of such person under Capitalized Leases which would
         be shown as a liability on a balance sheet of such person prepared in
         accordance with GAAP.

                  "CHANGE IN CONTROL" means (i) the acquisition by any person,
         or two or more persons acting in concert, of beneficial ownership
         (within the meaning of Rule 13d-3 of the Securities and Exchange
         Commission under the Securities Exchange Act of 1934, as amended) of
         20% or more of the outstanding shares of voting stock of the Borrower
         or (ii) a majority of the directors on the Borrower's Board of
         Directors shall cease to be directors of the Borrower during an twelve
         month period.

                  "CODE" shall mean the United States Bankruptcy Code, as now
         existing or hereafter amended.

                  "CONSOLIDATED ASSETS" means the total consolidated assets of
         the Borrower and its Subsidiaries determined in accordance with GAAP.

                  "CONSOLIDATED CURRENT ASSETS" means the total consolidated
         current assets of the Borrower and its Subsidiaries determined in
         accordance with GAAP.

                  "CONSOLIDATED CURRENT LIABILITIES" means the total
         consolidated current liabilities of the Borrower and its Subsidiaries
         determined in accordance with GAAP.

                  "CONSOLIDATED EARNINGS AVAILABLE FOR FIXED CHARGES" means, for
         any period, the sum of (i) Consolidated Net Income (excluding gains and
         losses from the sale of assets other than in the ordinary course of
         business and income or losses derived from discontinued operations),
         PLUS to the extent deducted in determining Consolidated Net Income (ii)
         all provisions for any federal, state, or other income taxes made by
         the Borrower and its Subsidiaries during such period, PLUS (iii)
         Consolidated Fixed Charges during such period, and PLUS (iv) deferred
         financing costs for such period.

                  "CONSOLIDATED FIXED CHARGES" means, without duplication, for
         any period, the sum of (i) current maturities for such period, (ii)
         interest expense on indebtedness (excluding capitalized leases) for
         such period, PLUS (iii) total rental expense under all

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         leases other than capitalized leases, and PLUS (iv) imputed interest
         expense under capitalized leases for the Borrower and its Subsidiaries
         for such period.

                  "CONSOLIDATED FUNDED DEBT" means all Indebtedness having a
         final maturity of more than one year plus unsecured Indebtedness to the
         Bank.. Consolidated Funded Debt shall not include payments due within
         one year from the date as of which a calculation of Consolidated Funded
         Debt is made.

                  "CONSOLIDATED LIABILITIES" means the total consolidated
         liabilities of the Borrower and its Subsidiaries determined in
         accordance with GAAP.

                  "CONSOLIDATED NET INCOME" shall mean, for any period, the net
         income (or loss) of the Borrower and its Subsidiaries on a consolidated
         basis for such period taken as a single accounting period determined in
         accordance with GAAP; PROVIDED, that there shall be excluded (i) the
         income (or loss) of any Affiliate of the Borrower or other Person(other
         than a Subsidiary of the Borrower) in which any Person (other than the
         Borrower or any of its Subsidiaries) has a joint interest, except to
         the extent of the amount of dividends or other distributions actually
         paid to the Borrower, or any of its Subsidiaries by such Affiliate or
         other Person during such period, (ii) the income (or loss) of any
         Person accrued prior to the date it becomes a Subsidiary of the
         Borrower or is merged into or consolidated with the Borrower or any of
         its Subsidiaries or that Person's assets are acquired by the Borrower
         or any of its Subsidiaries, and (iii) the income of any Subsidiary of
         the Borrower to the extent that the declaration or payment of dividends
         or similar distributions by that Subsidiary of that income is not at
         the time permitted by operation of the terms of its charter or any
         agreement, instrument, judgment, decree, order, statute, rule or
         governmental regulation applicable to that Subsidiary.

                  "CONSOLIDATED NET WORTH" means, as of any date of
         determination, the consolidated stockholders' equity of the Borrower
         and its Subsidiaries determined in accordance with GAAP.

                  "CONSOLIDATED SECURED LIABILITIES" means the aggregate amount
         of Consolidated Liabilities which are secured by any Lien (other than
         Liens permitted pursuant to any of clauses (a), (d), (e), (f), (h) and
         (k) of Section 8.6) on any property of the Borrower or any of its
         Subsidiaries.

                  "CONSOLIDATED TANGIBLE NET WORTH" means, as of any date of
         determination, the sum of (a) Consolidated Net Worth, less consolidated
         Intangible Assets of the Borrower and its Subsidiaries, plus (b)
         Subordinated Debt. For purposes of this definition "Intangible Assets"
         means the amount (to the extent reflected in determining such
         Consolidated Net Worth ) of (i) all write-ups (other than write-ups
         resulting from foreign currency translations and write-ups of assets of
         a going concern business made within twelve months after the
         acquisition of such business) in the book value of any asset owned by
         the Borrower or a Consolidated Subsidiary subsequent to May 31, 2000,
         and (ii) all unamortized debt discount and expense, unamortized
         deferred charges, goodwill, patents, trademarks, service marks, trade
         names, copyrights, organization or development

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         expenses, costs in excess of underlying assets of acquired companies,
         covenants to not compete, and other intangible items, for purposes of
         this clause (ii), in each case, to the extent such items are disclosed
         as separate line items on the Borrower's financial statements required
         under Section 9.7.

                  "CONSOLIDATED TOTAL CAPITALIZATION" means the sum of (i) the
         remainder of (a) Consolidated Tangible Net Worth, minus (b)
         Subordinated Debt, plus (ii) Consolidated Funded Debt.

                  "CONTINGENT OBLIGATION" of a Person means any agreement,
         undertaking or arrangement by which such Person assumes, guarantees,
         endorses, contingently agrees to purchase or provide funds for the
         payment of, or otherwise becomes or is contingently liable upon, the
         obligation or liability of any other Person, or agrees to maintain the
         net worth or working capital or other financial condition of any other
         Person, or otherwise assures any creditor of such other Person against
         loss, including, without limitation, a comfort letter, operating
         agreement, take-or-pay contract or application for a letter of credit
         or similar instrument; provided, however, that Contingent Obligations
         shall not include (i) Contingent Obligations resulting from endorsement
         of negotiable instruments for deposit or collection or similar
         transactions in the ordinary course of the Borrower's and each
         Subsidiary's business, (ii) Contingent Obligations by the Borrower of
         any Subsidiary's Indebtedness (including, for the avoidance of doubt,
         obligations arising out of overdraft and similar cash management
         facilities) permitted to exist pursuant to this Agreement and any
         Subsidiary's obligations for Rentals permitted by Section 8.7, (iii)
         any obligations in connection with the Receivables Securitization.

                  "CONTROLLED GROUP" means all members of a controlled group of
         corporations and all trades or businesses (whether or not incorporated)
         under common control which, together with the Borrower or any of its
         Subsidiaries, are treated as a single employer under Section 414 of the
         Internal Revenue Code.

                  "DEFAULT RATE" shall mean a floating per annum rate of
         interest equal to the Prime Rate plus two percent (2.00%).

                  "DOMESTIC SUBSIDIARY" means any Subsidiary of the Borrower
         organized under the laws of any State of the United States of America
         or the District of Columbia, all or substantially all of whose assets
         are located, and whose business is conducted, in one or more of any
         such States or District.

                  "ENVIRONMENTAL LAWS" shall mean all federal, state, district,
         local and foreign laws, rules, regulations, ordinances, and consent
         decrees relating to health, safety, hazardous substances, pollution and
         environmental matters, as now or at any time hereafter in effect,
         applicable to the Borrower's business or facilities owned or operated
         by the Borrower, including laws relating to emissions, discharges,
         releases or threatened releases of pollutants, contamination,
         chemicals, or hazardous, toxic or dangerous substances, materials or
         wastes in the environment (including, without limitation, ambient air,
         surface water, land surface or subsurface strata) or otherwise relating
         to the

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         generation, manufacture, processing, distribution, use, treatment,
         storage, disposal, transport or handling of Hazardous Materials.

                  "ERISA" means the United States Employee Retirement Income
         Security Act of 1974, as amended.

                  "EVENT OF DEFAULT" shall mean any of the events or conditions
         set forth in Section 11 hereof.

                  "FACILITY FEE" means a facility fee on the Commitment in an
         amount equal to (a) 0.175% per annum when the Borrower has an
         Investment Grade Rating or (b) 0.25% per annum when the Borrower does
         not have an Investment Grade Rating.

                  "FIXED CHARGE COVERAGE RATIO" means, for any period, the ratio
         of (a) Consolidated Earnings Available for Fixed Charges to (b)
         Consolidated Fixed Charges for such period.

                  "FOREIGN ACCOUNTS" means Accounts with respect to which the
         obligor is a Person which is (i) organized under the laws of a
         jurisdiction other than the United States of America, any State of the
         United States of America or the District of Columbia, in the case of a
         Person which is not a natural person, or (ii) a citizen of a country
         other than the United States of America, in the case of a natural
         person.

                  "FOREIGN SUBSIDIARY" means any Subsidiary of the Borrower,
         which is not a Domestic Subsidiary.

                  "GAAP" shall mean generally accepted accounting principles,
         using the accrual basis of accounting and consistently applied.

                  "HAZARDOUS MATERIALS" shall mean any hazardous, toxic or
         dangerous substance, materials and wastes, including, without
         limitation, hydrocarbons (including naturally occurring or man-made
         petroleum and hydrocarbons), flammable explosives, asbestos, urea
         formaldehyde insulation, radioactive materials, biological substances,
         polychlorinated biphenyls, pesticides, herbicides and any other kind
         and/or type of pollutants or contaminants (including, without
         limitation, materials which include hazardous constituents), sewage,
         sludge, industrial slag, solvents and/or any other similar substances,
         materials or wastes that are or become regulated under any
         Environmental Law (including without limitation, any that are or become
         classified as hazardous or toxic under any Environmental Law).

                  "INDEBTEDNESS" shall mean as determined in accordance with
         GAAP (i) obligations for borrowed money other than those incurred on a
         non-recourse basis, (ii) obligations representing the deferred purchase
         price of property or services (other than accounts payable and other
         accrued liabilities arising in the ordinary course of such Person's
         business payable on terms customary in the trade), (iii) obligations,
         whether or not assumed, secured by Liens (other than Liens permitted
         pursuant to any of clauses (a),

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         (d), (e), (f), (h) and (k) of Section 8.6) or payable out of the
         proceeds or production from property now or hereafter owned or acquired
         (iv) obligations which are evidenced by notes, acceptances, or other
         instruments, (v) Capitalized Lease Obligations and (vi) net liabilities
         under currency or interest rate swap, exchange or cap agreements;
         provided, however, that Indebtedness shall not include obligations in
         connection with operating leases and leveraged leases.

                  "INTEREST PERIOD" shall mean, with regard to any LIBOR Loan,
         successive two week, one, two, three or six month periods as selected
         from time to time by the Borrower by notice given to the Bank not less
         than three Business Days prior to the first day of each respective
         Interest Period; provided, however, that (i) each such Interest Period
         occurring after the initial Interest Period of any LIBOR Loan shall
         commence on the day on which the preceding Interest Period for such
         LIBOR Loan expires, (ii) whenever the last day of any Interest Period
         would otherwise occur on a day other than a Business Day, the last day
         of such Interest Period shall be extended to occur on the next
         succeeding Business Day, provided, however, that if such extension
         would cause the last day of such Interest period to occur in the next
         following calendar month, then the last day of such Interest Period
         shall occur on the immediately preceding Business Day; (iii) whenever
         the first day of any Interest Period occurs on a day of a month for
         which there is no numerically corresponding day in the calendar month
         in which such Interest Period terminates, such Interest Period shall
         end on the last Business Day of such calendar month; and (iv)the final
         Interest Period must be such that this expiration occurs on or before
         the Maturity Date.

                  "INTEREST RATE" shall mean the Borrower's option of,

                           (i) LIBOR for the relevant Interest Period (rounded
                  upward if necessary, to the nearest 1/16 of 1.00%) plus (1)
                  .40% at all times when the Borrower has an Investment Grade
                  Rating; and (2) 1.00% at all times when the Borrower does not
                  have an Investment Grade Rating. The LIBOR Rate shall be fixed
                  for each Interest Period; or

                           (ii) the Prime Rate plus zero % at all times when the
                   Borrower has in Investment Grade Rating and 0.50% at all
                   times when the Borrower does not have an Investment Grade
                   Rating.

                  Provided, however, that in no event shall the Interest Rate be
                  less than the highest rate charged at any time by the
                  Borrower's Unsecured Lenders.

                  "INTERNAL REVENUE CODE" means the United States Internal
         Revenue Code of 1986, as amended from time to time.

                  "INVESTMENT" of a person means any loan, advance (other than
         commission, travel and similar advances to its officers, employees,
         agents and representatives made in the ordinary course of business),
         extension of credit (other than accounts receivable arising in

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         the ordinary course of business), deposit account or contribution of
         capital by such person to any other person or any investment in, or
         purchase or other acquisition of, the stock, partnership interests,
         notes, debentures or other securities of any other person made by such
         person.

                  "INVESTMENT GRADE RATING" means, the context of the Borrower
         having an Investment Grade Rating, that the Borrower's senior unsecured
         long term debt is rated both (a) BBB- or better by Standard & Poor's
         Ratings Services, a division of the McGraw Hill Companies, Inc. and (b)
         Baa3 or better by Moody's Investor Service, Inc.

                  "LIABILITIES" shall mean at all times all liabilities of the
         Borrower that would be shown as such on a balance sheet of the Borrower
         prepared in accordance with GAAP.

                  "LIBOR" shall mean a rate of interest equal to the per annum
         rate of interest at which United States dollar deposits in an amount
         comparable to the amount of the relevant LIBOR Loan and for a period
         equal to the relevant Interest Period are offered generally to the Bank
         (rounded upward if necessary, to the nearest 1/16 of 1.00%) in the
         London Interbank Eurodollar market at 11:00 a.m. (London time) two
         Business Days prior to the commencement of each Interest Period, or as
         LIBOR is otherwise determined by the Bank in its sole and absolute
         discretion, such rate to remain fixed for such Interest Period. The
         Bank's determination of LIBOR shall be conclusive, absent manifest
         error.

                  "LIBOR LOAN" or "LIBOR LOANS" shall mean that portion, and
         collectively those portions, of the aggregate outstanding principal
         balance of the Revolving Loans that will bear interest at the LIBOR
         Rate, of which at any time and from time to time, the Borrower may
         identify no more than five advances of the Revolving Loans which will
         bear interest at the LIBOR Rate, of which each particular LIBOR Loan
         must be in the amount of $1,000,000 or a higher integral multiple of
         $500,000.

                  "LIEN" shall mean any mortgage, pledge, hypothecation,
         judgment lien or similar legal process, title retention lien, or other
         lien or security interest, including, without limitation, the interest
         of a vendor under any conditional sale or other title retention
         agreement and the interest of a lessor under a lease of any interest in
         any kind of property or asset, whether real, personal or mixed, or
         tangible or intangible, by such person or entity as lessee that is, or
         should be, a Capital Lease on the balance sheet of the Borrower
         prepared in accordance with GAAP.

                  "LOANS" shall mean, collectively, all Revolving Loans made by
         the Bank to the Borrower under and pursuant to this Agreement.

                  "LOAN DOCUMENTS" shall have the meaning set forth in Section
         3.1.

                  "MATERIAL ADVERSE EFFECT" means a material adverse effect on
         (i) the business, properties, financial condition, or results of
         operations on the Borrower and its Subsidiaries taken as a whole, (ii)
         the ability of the Borrower to perform its Obligations

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         under this Agreement, or (iii) the validity or enforceability of this
         Agreement or the rights or remedies of the Bank thereunder.

                  "MATURITY DATE" shall mean April 10, 2002.

                  "MULTIEMPLOYER PLAN" means a Plan maintained pursuant to a
         collective bargaining agreement or any other arrangement to which the
         Borrower or any member of the Controlled Group is a party to which more
         than one employer is obligated to make contributions.

                  "NOTE" shall mean the Revolving Note.

                  "OBLIGATIONS" shall mean the Loans, as evidenced by the Note,
         all interest accrued thereon, any accrued and unpaid fees and all
         expenses, reimbursements, indemnities and other obligations of the
         Borrower to the Bank arising under the Loan Documents.

                  "PBGC" means the Pension Benefit Guaranty Corporation, or any
         successor thereto.

                  "PLAN" means an employee pension benefit plan which is covered
         by Title IV of ERISA or subject to the minimum funding standards under
         Section 412 of the Internal Revenue Code, as to which the Borrower or
         any member of the Controlled Group may have any liability.

                  "PRIME RATE" shall mean the floating per annum rate of
         interest which at any time, and from time to time, shall be most
         recently announced by the Bank as its Prime Rate, which is not intended
         to be the Bank's lowest or most favorable rate of interest at any one
         time. The effective date of any change in the Prime Rate shall for
         purposes hereof be the date the Prime Rate is changed by the Bank. The
         Bank shall not be obligated to give notice of any change in the Prime
         Rate.

                  "REGULATORY CHANGE" means any change in law or any
         governmental or quasi-governmental rule, regulation, policy, guideline
         or directive, to which the Bank must comply.

                  "RENTALS" of a person means the aggregate fixed amounts
         payable by such person under any lease or real or personal property
         having an original term (including any required renewals or any
         renewals at the option of the lessor or lessee) on one year or more,
         but does not include any amounts payable under Capitalized Leases of
         such person.

                  "REPORTABLE EVENT" means a reportable event as defined in
         Section 4043 of ERISA and the regulations issued under such section,
         with respect to a Plan, excluding, however, such events as to which the
         PBGC by regulation waived the requirement of Section 4043(a) of ERISA
         that it be notified within 30 days of the occurrence of such event,
         provide, however, that a failure to meet the minimum funding standard
         of Section 412 of the Internal Revenue Code and of Section 302 of ERISA
         shall be a Reportable

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         Event regardless of the issuance of any such waiver of the notice
         requirement in accordance with either Section 4043(a) of ERISA or
         Section 412(d) of the Internal Revenue Code.

                  "RESTRICTED PAYMENTS" means collectively, all dividends (cash,
         stock, asset or otherwise) and all payments on any class of securities
         (specifically including all Subordinated Debt, but excluding any other
         debt securities) issued by the Borrower or any Subsidiary, whether such
         securities are now, or may hereafter be, authorized or outstanding and
         any payment by the Borrower or any Subsidiary on account of the
         purchase, redemption or retirement of any class of securities
         (specifically including all Subordinated Debt, but excluding all other
         debt securities) issued by it, and any distribution in respect to any
         of the foregoing, whether directly or indirectly.

                  "REVOLVING LOAN" or "REVOLVING LOANS" shall mean,
         respectively, each direct advance and the aggregate of all such direct
         advances, made by the Bank to the Borrower under and pursuant to this
         Agreement, as set forth in Section 2.1 of this Agreement.

                  "REVOLVING LOAN COMMITMENT" shall mean Twenty Five Million and
         00/100 Dollars ($25,000,000.00).

                  "REVOLVING NOTE" shall have the meanings set forth in Section
         4 hereof.

                   "SINGLE EMPLOYER PLAN" means a Plan maintained by the
         Borrower of any member of the Controlled Group for employees of the
         Borrower or any member of the Controlled Group.

                  "SUBORDINATED DEBT" means indebtedness of the Borrower or any
         Subsidiary evidenced by instruments containing provisions by which the
         payment of such indebtedness is postponed and subordinated to the
         payment of the Revolving Note, which subordination provisions and the
         provisions for payment shall be in form and substance satisfactory to
         the Bank as evidenced by its prior written consent thereto.

                  "SUBSIDIARY" and "SUBSIDIARIES" shall mean, respectively, each
         and all such corporations, partnerships, limited partnerships, limited
         liability companies, limited liability partnerships or other entities
         of which or in which the Borrower owns directly or indirectly more than
         fifty percent (50.00%) of (i) the combined voting power of all classes
         of stock having general voting power under ordinary circumstances to
         elect a majority of the board of directors of such entity if a
         corporation, (ii) the management authority and capital interest or
         profits interest of such entity, if a partnership, limited partnership,
         limited liability company, limited liability partnership, joint venture
         or similar entity, or (iii) the beneficial interest of such entity, if
         a trust, association or other unincorporated organization.

                  "UCC" shall mean the Uniform Commercial Code in effect in
         Illinois from time to time.

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                  "UNFUNDED LIABILITIES" means the aggregate unfunded value of
         accumulated benefits under all Single Employer Plans, all determined in
         accordance with GAAP as of the then most recent valuation date for such
         Plans.

         1.2 ACCOUNTING TERMS. Any accounting terms used in this Agreement which
are not specifically defined herein shall have the meanings customarily given
them in accordance with GAAP. Calculations and determinations of financial and
accounting terms used and not otherwise specifically defined hereunder and the
preparation of financial statements to be furnished to the Bank pursuant hereto
shall be made and prepared, both as to classification of items and as to amount,
in accordance with GAAP as used in the preparation of the financial statements
of the Borrower on the date of this Agreement. If any changes in accounting
principles or practices from those used in the preparation of the financial
statements are hereafter occasioned by the promulgation of rules, regulations,
pronouncements and opinions by or required by the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or any
successor thereto or agencies with similar functions), which results in a
material change in the method of accounting in the financial statements required
to be furnished to the Bank hereunder or in the calculation of financial
covenants, standards or terms contained in this Agreement, the parties hereto
agree to enter into good faith negotiations to amend such provisions so as
equitably to reflect such changes to the end that the criteria for evaluating
the financial condition and performance of the Borrower will be the same after
such changes as they were before such changes; and if the parties fail to agree
on the amendment of such provisions, the Borrower will furnish financial
statements in accordance with such changes but shall provide calculations for
all financial covenants, perform all financial covenants and otherwise observe
all financial standards and terms in accordance with applicable accounting
principles and practices in effect immediately prior to such changes.
Calculations with respect to financial covenants required to be stated in
accordance with applicable accounting principles and practices in effect
immediately prior to such changes shall be reviewed and certified by the
Borrower's accountants.

         1.3 OTHER TERMS DEFINED IN UCC. All other capitalized words and phrases
used herein and not otherwise specifically defined shall have the respective
meanings assigned to such terms as in the UCC in effect from time to time.

         1.4 OTHER DEFINITIONAL PROVISIONS; CONSTRUCTION. Whenever the context
so requires, the neuter gender includes the masculine and feminine, the single
number includes the plural, and vice versa, and in particular the word
"Borrower" shall be so construed. The words "hereof", "herein" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
references to Article, Section, Subsection, Annex, Schedule, Exhibit and like
references are references to this Agreement unless otherwise specified. An Event
of Default shall "continue" or be "continuing" until such Event of Default has
been cured to the reasonable satisfaction of the Bank or waived in accordance
with Section 13.3 hereof. References in this Agreement to any party shall
include such party's successors and permitted assigns. References to any
"Section" shall be a reference to such Section of this Agreement unless
otherwise stated. To the extent any of the provisions of the other Loan
Documents are inconsistent with the terms of this Loan Agreement, the provisions
of this Loan Agreement shall govern.

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2.       COMMITMENT OF THE BANK.

         2.1      REVOLVING LOANS.

                  (a) REVOLVING LOAN COMMITMENT. Subject to the terms and
         conditions of this Agreement and the other Loan Documents, and in
         reliance upon the representations and warranties of the Borrower set
         forth herein and in the other Loan Documents, the Bank agrees to make
         such Revolving Loans at such times as the Borrower may from time to
         time request until, but not including, the Maturity Date, and in such
         amounts as the Borrower may from time to time request, provided,
         however, that the aggregate principal balance of all Revolving Loans
         outstanding at any time shall not exceed the Revolving Loan Commitment.
         Revolving Loans made by the Bank may be repaid and, subject to the
         terms and conditions hereof, borrowed again up to, but not including
         the Maturity Date unless the Revolving Loans are otherwise terminated
         or extended as provided in this Agreement. The Revolving Loans shall be
         used by the Borrower for general corporate needs of the Borrower.

                  (b) REVOLVING LOAN INTEREST AND PAYMENTS. Except as otherwise
         provided in this Section 2.1(b), the principal amount of the Revolving
         Loans outstanding from time to time shall bear interest at the Interest
         Rate. Accrued and unpaid interest on the unpaid principal balance of
         all Revolving Loans outstanding from time to time which are Prime
         Loans, shall be due and payable monthly, in arrears, commencing on May
         1, 2001 and continuing on the first day of each calendar month
         thereafter, and on the Maturity Date. Accrued and unpaid interest on
         the unpaid principal balance of all Revolving Loans outstanding from
         time to time which are LIBOR Loans shall be payable LIBOR on the last
         Business Day of each Interest Period, commencing on the first such date
         to occur after the date hereof, on the date of any principal repayment
         of a LIBOR Loan and on the Maturity Date; provided however, that
         interest on six month LIBOR borrowings shall be payable quarterly. Any
         amount of principal or interest on the Revolving Loans which is not
         paid when due, whether at stated maturity, by acceleration or
         otherwise, shall bear interest payable on demand at the Default Rate.

                  (c)      REVOLVING LOAN PRINCIPAL REPAYMENTS.

                           (i) MANDATORY PRINCIPAL PREPAYMENTS. All Revolving
                  Loans hereunder shall be repaid by the Borrower on the
                  Maturity Date, unless payable sooner pursuant to the
                  provisions of this Agreement. In the event the aggregate
                  outstanding principal balance of all Revolving Loans hereunder
                  at any time exceed the Revolving Loan Commitment, the Borrower
                  shall, without notice or demand of any kind, immediately make
                  such repayments of the Revolving Loans or take such other
                  actions as shall be necessary to eliminate such excess.

                           (ii) OPTIONAL PREPAYMENTS. The Borrower may from time
                  to time prepay the Revolving Loans, in whole or in part,
                  without any prepayment penalty whatsoever.

                                       11
<Page>

         2.2      ADDITIONAL LIBOR LOAN PROVISIONS.

                  (a) LIBOR LOAN PREPAYMENTS. Notwithstanding anything to the
         contrary contained herein, the principal balance of any LIBOR Loan may
         not be prepaid in whole or in part at any time. If, for any reason, a
         LIBOR Loan is paid prior to the last Business Day of any Interest
         Period, the Borrower agrees to indemnify the Bank against any loss
         (including any loss on redeployment of the funds repaid), cost or
         expense incurred by the Bank as a result of such prepayment.

                  (b) LIBOR UNAVAILABILITY. If the Bank determines in good faith
         (which determination shall be conclusive, absent manifest error) prior
         to the commencement of any Interest Period that (i) United States
         dollar deposits of sufficient amount and maturity for funding any LIBOR
         Loan are not available to the Bank in the London Interbank Eurodollar
         market in the ordinary course of business, or (ii) by reason of
         circumstances affecting the London Interbank Eurodollar market,
         adequate and fair means do not exist for ascertaining the rate of
         interest to be applicable to the relevant LIBOR Loan, the Bank shall
         promptly notify the Borrower thereof and, so long as the foregoing
         conditions continue, a Revolving Loan may not be advanced as a LIBOR
         Loan thereafter. In addition, at the Borrower's option, each existing
         LIBOR Loan shall be immediately (i) converted to a Prime Loan on the
         last Business Day of the then existing Interest Period, or (ii) due and
         payable on the last Business Day of the then existing Interest Period,
         without further demand, presentment, protest or notice of any kind, all
         of which are hereby waived by the Borrower.

                  (c) REGULATORY CHANGE. In addition, if, after the date hereof,
         a Regulatory Change shall, in the reasonable determination of the Bank,
         make it unlawful for the Bank to make or maintain the LIBOR Loans, then
         the Bank shall promptly notify the Borrower and Revolving Loans may not
         be advanced as a LIBOR Loan thereafter. In addition, at the Borrower's
         option, each existing LIBOR Loan shall be immediately (i) converted to
         a Prime Loan on the last Business Day of the then existing Interest
         Period or on such earlier date as required by law, or (ii) due and
         payable on the last Business Day of the then existing Interest Period
         or on such earlier date as required by law, all without further demand,
         presentment, protest or notice of any kind, all of which are hereby
         waived by the Borrower.

                  (d) LIBOR LOAN INDEMNITY. If any Regulatory Change shall (a)
         impose, modify or deem applicable any assessment, reserve, special
         deposit or similar requirement against assets held by, or deposits in
         or for the account of or loans by, or any other acquisition of funds or
         disbursements by, the Bank; (b) subject the Bank or any LIBOR Loan to
         any tax, duty, charge, stamp tax or fee or change the basis of taxation
         of payments to the Bank of principal or interest due from the Borrower
         to the Bank hereunder (other than a change in the taxation of the
         overall net income of the Bank); or (c) impose on the Bank any other
         condition regarding such LIBOR Loan or the Bank's funding thereof, and
         the Bank shall reasonably determine (which determination shall be
         conclusive, absent manifest error) that the result of the foregoing is
         to increase the cost to

                                       12
<Page>

         the Bank of making or maintaining such LIBOR Loan or to reduce the
         amount of principal or interest received by the Bank hereunder, then
         the Borrower shall pay to the Bank, within 15 days of demand by the
         Bank, such additional amounts as the Bank shall, from time to time,
         determine are sufficient to compensate and indemnify the Bank for that
         portion of such increased cost or reduced amount attributable to
         making, funding and maintaining such LIBOR Loan.

         2.3 INTEREST AND FEE COMPUTATION; COLLECTION OF FUNDS. Except as
otherwise set forth herein, all interest and fees shall be calculated on the
basis of a year consisting of 360 days and shall be paid for the actual number
of days elapsed. Principal payments submitted in funds not immediately available
shall continue to bear interest until collected. If any payment to be made by
the Borrower hereunder or under the Note shall become due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall be included in computing any interest in respect of
such payment.

         2.4 FEES. The Borrower further agrees to pay to the Bank the Facility
Fee for the period from the date hereof to and including the Maturity Date. The
Facility Fee shall be payable quarterly in advance on the date hereof and on
each Payment Date thereafter. The obligations of the Borrower under this Section
2.4 shall survive the payment of the Advances and the termination of this
Agreement.

3.       CONDITIONS OF BORROWING.

         Notwithstanding any other provision of this Agreement, the Bank shall
not be required to disburse or make all or any portion of the Loans if any of
the following conditions shall have occurred.

         3.1 LOAN DOCUMENTS. The Borrower shall have failed to execute and
deliver to the Bank any of the following Loan Documents (collectively, the "Loan
Documents"), all of which must be satisfactory to the Bank and the Bank's
counsel in form, substance and execution:

                  (a) Revolving Loan Agreement. Two copies of this Agreement
         clearly executed by the Borrower.

                  (b) Revolving Note. A Revolving Note duly executed by the
         Borrower in the form of Exhibit A.

                  (c) A copy, certified as of the date hereof by the secretary
         or assistant secretary of the Borrower, of its board of directors'
         resolutions (and resolutions of other bodies, if any are deemed
         necessary by counsel for the Bank) authorizing the execution of the
         Loan Documents.

                  (d) An incumbency certificate dated the date hereof, executed
         by the secretary or assistant secretary of the Borrower, which shall
         identify by name and title and bear the signature of the officers of
         the Borrower authorized to sign the Loan Documents and to

                                       13
<Page>

         make borrowings hereunder, upon which certificate the Bank shall be
         entitled to rely until informed of any change in writing by the
         Borrower.

                  (e) A certificate signed by the chief financial officer of the
         Borrower stating that on the closing date no Default or Unmatured
         Default has occurred and is continuing.

                  (f) A written opinion dated the date hereof of the Borrower's
         counsel, addressed to the Bank.

                  (g) A certified copy of articles of incorporation.

                  (h) A certified copy of a good standing certificate.

                  (i) Such other documents as the Bank or its counsel may have
         reasonably requested.

         3.2 EVENT OF DEFAULT. Any Event of Default, or any event which, with
notice or lapse of time, or both would constitute an Event of Default, shall
have occurred and be continuing.

         3.3 ADVERSE EFFECT. There exists no Material Adverse Effect.

         3.4 LITIGATION. Any litigation or governmental proceeding shall have
been instituted against the Borrower or any of its Subsidiaries which in the
discretion of the Bank, reasonably exercised, has a Material Adverse Effect on
the financial condition or continued operation of the Borrower and its
Subsidiaries taken as a whole.

         3.5 REPRESENTATIONS AND WARRANTIES. Any representation or warranty of
the Borrower contained herein or in any Loan Document shall be untrue or
incorrect in any material way as of the date of any Loan as though made on such
date, except to the extent such representation or warranty expressly relates to
an earlier date.

4.       NOTES EVIDENCING LOANS.

         The Revolving Loans shall be evidenced by a single Revolving Note
(together with any and all renewal, extension, modification or replacement notes
executed by the Borrower and delivered to the Bank and given in substitution
therefor, the "Revolving Note") dated as of the date hereof in the form of
EXHIBIT "A" attached hereto, duly executed by the Borrower and payable to the
order of the Bank. At the time of the initial disbursement of a Revolving Loan
and at each time an additional Revolving Loan shall be requested hereunder or a
repayment made in whole or in part thereon, an appropriate notation thereof
shall be made on the books and records of the Bank. All amounts recorded shall
be, absent demonstrable error, conclusive and binding evidence of (i) the
principal amount of the Revolving Loans advanced hereunder (ii) any unpaid
interest owing on the Revolving Loans, and (iii) all amounts repaid on the
Revolving Loans. The failure to record any such amount or any error in recording
such amounts shall not, however, limit or otherwise affect the obligations of
the Borrower under the Revolving Note to repay the principal amount of the
Revolving Loans, together with all interest accruing thereon.

                                       14
<Page>

5.       MANNER OF BORROWING.

         Each Revolving Loan shall be made available to the Borrower upon its
written request in the form of EXHIBIT B, from any person whose authority to so
act has not been revoked by the Borrower in writing previously received by the
Bank. Each Revolving Loan may be advanced either as a Prime Loan or a LIBOR
Loan, provided, however, that at any time and from time to time, the Borrower
may identify no more than five (5) Revolving Loans, which may be LIBOR Loans. A
request for a Prime Loan must be received by no later than 12:00 p.m. Chicago,
Illinois time, on the day it is to be funded. A request for a LIBOR Loan must be
(i) received by no later than 12:00 p.m. Chicago, Illinois time, two days before
the day it is to be funded, and (ii) in an amount equal to One Million and
00/100 Dollars ($1,000,000.00) or a higher integral multiple of Five Hundred
Thousand and 00/100 Dollars ($500,000.00). If for any reason the Borrower shall
fail to select timely an Interest Period for an existing LIBOR Loan, then such
LIBOR Loan shall be immediately converted to a Prime Loan on the last Business
Day of the then existing Interest Period, all without demand, presentment,
protest or notice of any kind, all of which are hereby waived by the Borrower.
The proceeds of each Prime Loan or LIBOR Loan shall be made available at the
office of the Bank by credit to the account of the Borrower or by other means
requested by the Borrower and acceptable to the Bank.

         The Bank is authorized to rely on the telephonic, telecopy (including
facsimile copy) or telegraphic loan requests which the Bank believes in its good
faith judgment to emanate from a properly authorized representative of the
Borrower, whether or not that is in fact the case. The Borrower does hereby
irrevocably confirm, ratify and approve all such forms of loan requests referred
to in the aforementioned sentence and advances by the Bank in reasonable
reliance thereon and does hereby indemnify the Bank against losses and expenses
(including court costs, attorneys' and paralegals' fees) and shall hold the Bank
harmless with respect thereto.

6.       INTENTIONALLY OMITTED.

7.       REPRESENTATIONS AND WARRANTIES.

         To induce the Bank to make the Loans, the Borrower makes the following
representations and warranties to the Bank, each of which shall be true and
correct as of the date of the execution and delivery of this Agreement, and
which shall survive the execution and delivery of this Agreement:

         7.1 ORGANIZATION. The Borrower is duly organized, existing and in good
standing under the laws of the State of Delaware and it has full and adequate
power to carry on and conduct its business as presently conducted, and it is
duly licensed or qualified in all foreign jurisdictions wherein the failure to
qualify would have a Material Adverse Effect , and each Subsidiary of the
Borrower is duly organized, existing and in good standing under the laws of the
state wherein such Subsidiary was organized or formed, with full and adequate
power to carry on and conduct its business as presently conducted, and is duly
licensed or qualified in all foreign jurisdictions wherein the failure to
qualify would have a Material Adverse Effect.

                                       15
<Page>

         7.2 AUTHORIZATION; VALIDITY. The Borrower has full right, power and
authority to enter into this Agreement, to make the borrowings and execute and
deliver the Loan Documents as provided herein and to perform all of its duties
and obligations under this Agreement and the Loan Documents. The execution and
delivery of this Agreement and the Loan Documents will not, nor will the
observance or performance of any of the matters and things herein or therein set
forth, violate or contravene any provision of law to which the Borrower is
subject. All necessary and appropriate action has been taken on the part of the
Borrower to authorize the execution and delivery of this Agreement and the Loan
Documents. This Agreement and the Loan Documents are valid and binding
agreements and contracts of the Borrower enforceable against the Borrower in
accordance with their respective terms, except as enforceability may be limited
by bankruptcy, insolvency, equity or similar laws affecting the enforcement of
creditors rights generally.

         7.3 COMPLIANCE WITH LAWS. The nature and transaction of the business
and operations of the Borrower, and the use of its properties and assets,
including, but not limited to, any real estate owned or occupied by the Borrower
or its Subsidiaries, do not and during the term of the Loans shall not, violate
or conflict with any applicable law, statute, ordinance, rule, regulation or
order of any kind or nature binding on the Borrower or any of its Subsidiaries,
including, without limitation, the provisions of the Fair Labor Standards Act or
any zoning, land use, building, noise abatement, occupational health and safety
or other laws, any building permit or any condition, grant, easement, covenant,
condition or restriction, whether recorded or not binding on the Borrower or any
or its Subsidiaries except where the failure to comply would not be reasonably
expected to have a Material Adverse Effect.

         7.4 ENVIRONMENTAL LAWS AND HAZARDOUS SUBSTANCES. Neither the Borrower
or any Subsidiary has received any notice to the effect that its operations are
not in material compliance with any applicable Environmental Laws or the subject
of any federal or state investigation evaluating whether any remedial action is
needed to respond to a release of Hazardous Materials into the environment which
non-compliance or remedial action could reasonably be expected to have a
Material Adverse Effect.

         7.5 ABSENCE OF BREACH. The execution, delivery and performance of this
Agreement, the Loan Documents and any other documents or instruments to be
executed and delivered by the Borrower in connection with the Loans shall not:
(i) violate any provisions of law or any applicable regulation, order, writ,
injunction or decree of any court or governmental authority binding on the
Borrower, or (ii) violate or result in any breach or default of any of the
terms, covenants, conditions, or provisions of any indenture, mortgage, deed of
trust, other instrument, agreement or contract of any kind to which the
Borrower, is a party or by which the Borrower, or any of its property or assets
may be bound.

         7.6 FINANCIAL STATEMENTS. All financial statements submitted to the
Bank have been prepared in accordance with GAAP on a basis, except as otherwise
noted therein, consistent with the previous fiscal year and fairly present the
financial condition of the Borrower and the consolidated results of the
operations for the Borrower and its Subsidiaries as of such date and for the
periods indicated. Since the November 30, 2000 financial statement submitted by
the

                                       16
<Page>

Borrower to the Bank, there has been no Material Adverse Effect in the
financial condition or in the assets or liabilities of the Borrower and its
Subsidiaries taken as a whole.

         7.7 LITIGATION . There is no litigation or governmental proceeding
pending, or to the knowledge of the Borrower, threatened, against the Borrower,
which, if adversely determined, would result in any Material Adverse Effect in
the financial condition or properties, business or operations of the Borrower.
The Borrower has filed or will file all applicable material income or other
material tax returns and has paid or will pay all material income or other
material taxes when due. There is no material controversy or objection pending,
or to the knowledge of the Borrower, threatened in respect of any material tax
returns of the Borrower.

         7.8 EVENT OF DEFAULT. No Event of Default has occurred and is
continuing, and no event has occurred and is continuing which, with the lapse of
time, the giving of notice, or both, would constitute such an Event of Default
under this Agreement or any of the Loan Documents and the Borrower and/or
Subsidiaries are not in default (without regard to grace or cure periods) under
any contract or agreement to which it is a party, the effect of which default
shall materially adversely affect the performance by the Borrower of its
obligations pursuant to and as contemplated by the terms and provisions of this
Agreement.

         7.9 ERISA OBLIGATIONS. The Borrower and its Subsidiaries have promptly
paid and discharged all obligations and liabilities arising under the Employee
Retirement Income Security Act of 1974 ("ERISA") of a character which if unpaid
or unperformed might result in the imposition of a Lien against any of its
properties or assets.

         7.10     ADVERSE CIRCUMSTANCES.  There is no Material Averse Effect.

         7.11 LENDING RELATIONSHIP. The Borrower acknowledges and agrees that
the relationship hereby created with the Bank is and has been conducted on an
open and arm's length basis in which no fiduciary relationship exists and that
the Borrower has not relied and is not relying on any such fiduciary
relationship in executing this Agreement and in consummating the Loans. The Bank
represents that it will receive the Note payable to its order as evidence of a
bank loan.

         7.12     INTENTIONALLY OMITTED.

         7.13 COMPLIANCE WITH REGULATION U. No portion of the proceeds of the
Loans shall be used by the Borrower, or its Subsidiaries, either directly or
indirectly, for the purpose of purchasing or carrying any margin stock, within
the meaning of Regulation U as adopted by the Board of Governors of the Federal
Reserve System.

         7.14 COMPLETE INFORMATION. This Agreement and all financial statements,
schedules, certificates, confirmations, agreements, contracts, and other
materials submitted to the Bank in connection with or in furtherance of this
Agreement by or on behalf of the Borrower fully and fairly state the matters
with which they purport to deal, and neither misstate any material fact nor,
separately or in the aggregate, fail to state any material fact necessary to
make the statements made not misleading.

                                       17
<Page>

         7.15 PLACE OF BUSINESS. The principal place of business of the Borrower
is 1100 North Wood Dale Road, Wood Dale, Illinois 60191 and the Borrower shall
promptly notify the Bank of any change in such location.

         7.16 PLACE OF INCORPORATION. The place of incorporation of the Borrower
is the State of Delaware and the Borrower shall promptly notify the Bank of any
change in such location.

8.       NEGATIVE COVENANTS.

         8.1 RESTRICTED PAYMENTS. The Borrower will not, nor will it permit any
Subsidiary to, declare or make any Restricted Payments, which together with all
Restricted Payments made on or after May 31, 1995 would exceed an amount equal
to the sum of (i) $20,000,000 plus (ii) 50% of Consolidated Net Income for the
period commencing June 1, 1994 and extending to and including the last day of
the fiscal year of the Borrower immediately preceding the date on which such
Restricted Payment was made, said period to be taken as one accounting period,
except that:

                  (a) The Borrower may declare and pay dividends payable solely
         in stock of the Borrower of the same class as that on which such
         dividend is paid.

                  (b) The Borrower may purchase, redeem or otherwise acquire or
         retire any class of its stock out of the proceeds of, or in exchange
         for, a substantially concurrent issue and sale of such stock in
         addition to that now issued and outstanding; provided that Borrower is
         in compliance with all affirmative, negative and financial covenants
         herein.

                  (c) Any Subsidiary may declare and pay dividends to the
         Borrower.

         8.2 MERGER. The Borrower will not, nor will it permit any Subsidiary
to, merge or consolidate with or into any other Person, except that:

                  (a) Any Domestic Subsidiary may merge or consolidate with the
         Borrower (providing the Borrower shall be the continuing or surviving
         corporation).

                  (b) Any Domestic Subsidiary may merge or consolidate with any
         other Domestic Subsidiary, which is a Wholly Owned Subsidiary.

                  (c) Any Foreign Subsidiary may merge or consolidate with any
         other Subsidiary, which is a Wholly Owned Subsidiary (provided that if
         a Domestic Subsidiary is involved, such Domestic Subsidiary shall be
         the continuing or surviving corporation).

         8.3 SALE OF ASSETS. The Borrower will not, nor will it permit any
Subsidiary to, sell, lease, transfer, assign or otherwise dispose of (including,
for the avoidance of doubt, in connection with a sale leaseback transaction),
any of its assets (including, for the avoidance of doubt, the capital stock of
Subsidiaries, but excluding (i) inventory sold in the ordinary course of the
Borrower's or any Subsidiary's business, (ii) property formerly used in the
Borrower's or any

                                       18
<Page>

Subsidiary's business which is worn out or obsolete, (iii) assets of any
Domestic Subsidiary transferred to the Borrower or to another Domestic
Subsidiary which is a Wholly-Owned Subsidiary, (iv) assets of any Foreign
Subsidiary transferred to the Borrower or to another Subsidiary which is a
Wholly-Owned Subsidiary, (v) assets permitted to be sold or otherwise
transferred pursuant to Section 8.4 and (vi) promissory note ("Payment Note")
received as partial or full payment for assets sold if, after giving effect
thereto, the sum of all such assets transferred, assigned or otherwise disposed
of during the twelve-month period ending with (and including) the month of such
disposition either (a) represents more than 10% of Consolidated Assets
determined as of the date of (and after giving effect to ) such disposition or
(b) were responsible for more than 10% of the consolidated net sales or of the
consolidated net income of the Borrower and its Subsidiaries during such
twelve-month period.

         8.4 SALE OF ACCOUNTS RECEIVABLE. Anything in Section 8.3 to the
contrary notwithstanding, the Borrower will not, nor will it permit any
Subsidiary to, sell, with or without recourse, transfer, assign, encumber or
otherwise dispose of any of its note or accounts receivable, leases or chattel
paper (collectively referred to in this Section as "Accounts Receivable") to any
Person, except that:

                  (a) The Borrower or any Subsidiary may sell or otherwise
         dispose of any of its Accounts Receivable to the Borrower or any
         Subsidiary on terms and conditions, which are in compliance with
         Section 8.9.

                  (b) The Borrower or any Subsidiary may enter into any
         arrangement with another Person pursuant to which such Person collects
         the Accounts Receivable of the Borrower or such Subsidiary on behalf of
         the Borrower or such Subsidiary, so long as such arrangement does not
         provide for any transfer of title to, or any other interest in, such
         Accounts Receivable to such Person.

                  (c) The Borrower or any Subsidiary may sell or otherwise
         dispose of its Foreign Accounts to any Person for the purposes of
         collection, provided that the aggregate face amount of all such Foreign
         Accounts so transferred by the Borrower and its Subsidiaries during any
         fiscal year of the Borrower shall not exceed an amount equal to 20% of
         the gross Accounts Receivable of the Borrower and its Subsidiaries as
         of the last day of the Borrower's immediately preceding fiscal year and
         determined from the Borrower's consolidated balance sheet delivered
         pursuant to Section 9.7(a).

                  (d) The Borrower or any Subsidiary may sell or otherwise
         dispose of its interest in notes or accounts receivable on a limited
         recourse basis, provided that such transfer qualifies as a sale under
         GAAP and that the amount of such financing does not exceed $50,000,000
         at any one time outstanding (the "Receivables Securitization").

                  (e) The Borrower or any Subsidiary may sell or otherwise
         dispose of a Payment Note.

         8.5 INVESTMENTS AND ACQUISITIONS. The Borrower will not, nor will it
permit any Subsidiary to, make or suffer to exist any Investments (including
without limitation, loans and

                                       19
<Page>

advances to, and other Investments in, Subsidiaries), or commitments therefor,
or to create any Subsidiary or to become or remain a partner in any partnership
or joint venture, or to make any Acquisition of any Person, except:

                  (a) Short-term obligations of, or fully guaranteed by, the
         United States of America.

                  (b) Commercial paper rated A-1 or better by Standard and
         Poor's Ratings Services, a division of McGraw Hill Companies, Inc. or
         P-1 or better by Moody's Investors Service, Inc.

                  (c) Demand deposit accounts maintained in the ordinary course
         of business.

                  (d) Certificates of deposit issued by and time deposits with
         commercial banks (whether domestic or foreign) having capital and
         surplus in excess of $100,000,000.

                  (e) Existing Investments in Subsidiaries and other Investments
         in existence on the date hereof.

                  (f) Loans by the Borrower to its Domestic Subsidiaries.

                  (g) Equity Investment by the Borrower or any of its
         Subsidiaries, AAR Financial Services Corp. in leveraged leases of
         aircraft, aircraft engines and related products, including investments
         in partnerships and/or joint ventures related thereto not to exceed
         $50,000,000.00.

                  (h) Loans by the Borrower and its Subsidiaries to their
         respective officers and key employees in an aggregate amount not to
         exceed $4,000,000 at any one-time outstanding.

                  (i) Investments in any institutional money market fund (i)
         rated A-1 or better by Standard and Poor's Ratings Services, a division
         of McGraw Hill Companies, Inc., (ii) rated P-1 by Moody's Investors
         Service, Inc. or (iii) that invests in High Quality Money Market
         Instruments. For purposes of this Agreement, "High Quality Money Market
         Instruments" are (i) U.S. dollar-denominated instruments that have a
         remaining maturity of 397 days or less and (ii) issued by an issuer
         that is rated in one of the two highest rating categories for
         short-term debt by any two nationally recognized statistical rating
         organizations ("NRSROs") or, if only one NRSRO has issued a rating, by
         that NRSRO, or if unrated, the investment advisor determines the issuer
         is of comparable quality.

                  (j) Investments evidenced by Payment Notes.

                  (k) Any Acquisition that after giving effect thereto does not
         cause the sum of (i) Consolidated Funded Debt, plus (ii) the aggregate
         amount of Contingent Obligations of the Borrower and its Subsidiaries
         to exceed 55% of Consolidated Total Capitalization.

                                       20
<Page>

                  (l) Investments (including without limitation Investments in
         funds (insured or uninsured) managed by banks federally chartered by
         the United States of America and having stockholders' equity in excess
         of $150,000,000) in addition to those permitted under clauses (a)
         through (k) of this Section, provided that after giving effect thereto
         the aggregate amount of all such Investments for the Borrower and all
         Subsidiaries during the term of this Agreement shall not exceed the
         greater of (i) $6,000,000 or (ii) 20% of Consolidated Tangible Net
         Worth as of the last day of the Borrower's fiscal year immediately
         preceding the date on which any such Investment is made.

                  In determining the amount of Investments permitted under this
         Section, Investments shall always be taken at the original cost
         thereof, regardless of any subsequent appreciation or depreciation
         therein, and loans and advances shall be taken at the principal amount
         thereof then remaining unpaid from time to time.

         8.6 LIENS. The Borrower will not, nor will it permit any Subsidiary to,
create, incur, or suffer to exist any Lien in, of or on the property of the
Borrower or any of its Subsidiaries, except:

                  (a) Liens for taxes, assessments or governmental charges or
         levies on its property if the same shall not at the time be delinquent
         or thereafter can be paid without penalty, or are being contested in
         good faith and by appropriate proceedings and for which adequate
         reserves in accordance with GAAP shall have been set aside on its
         books.

                  (b) Deposits or pledges to secure performance of bids,
         tenders, contracts (other than contracts for the repayment of
         Indebtedness), leases, public or statutory obligations, surety or
         appeal bonds, or other deposits or pledges for purposes of like general
         nature in the ordinary course of the Borrower's business or any
         Subsidiary's business.

                  (c) Liens incurred by the Borrower or any Subsidiary in
         connection with the acquisition of property provided such Liens shall
         attach only to the property acquired in the transactions in which such
         Liens were created or assumed and shall secure only the Indebtedness
         incurred to finance the cost of acquiring such property.

                  (d) Liens arising out of pledges or deposits under workers'
         compensation laws, unemployment insurance, old age pensions, or other
         social security or retirement benefits, or similar legislation.

                  (e) Liens incidental to the conduct of business or the
         ownership of properties and assets, including, those imposed by law,
         such as carrier's, warehousemen's and mechanics' liens and other
         similar liens arising in the ordinary course of business which secure
         payment of obligations not more than 60 days past due or which are
         being contested in good faith by appropriate proceedings and for which
         adequate reserves shall have been set aside on its books in accordance
         with GAAP, or other Liens incurred in the ordinary course of business
         and not in connection with borrowed money.

                                       21
<Page>

                  (f) Utility easements, other easements, leases, sub-leases,
         rights-of-way, building restrictions and such other encumbrances or
         charges against real property as are of a nature generally existing
         with respect to properties of a similar character and which do not in
         any material way affect the marketability of the same or interfere with
         the use thereof in the business of the Borrower or the Subsidiaries.

                  (g) Liens existing on the date hereof.

                  (h) Liens which secure only Indebtedness of any Domestic
         Subsidiary to the Borrower or another Domestic Subsidiary.

                  (i) Subject to Section 8.5(c), Liens on property the purchase
         of which is being financed by the Borrower or any Domestic Subsidiary,
         as the case may be, by letters of credit (or similar instruments)
         issued for the account of the Borrower or any Domestic Subsidiary, as
         the case may be, provided such Liens secure only the letter of credit
         (or similar instrument) which is being used to finance the purchase of
         such property and provided further such Liens attach only to such
         property.

                  (j) Liens incurred by the Borrower in connection with the real
         estate located in Wood Dale, Illinois, known as the Corporate
         Headquarters of the Borrower securing debt not to exceed Twenty Five
         Million Dollars ($25,000,000.00).

                  (k) Liens incurred by the Borrower and its Subsidiaries in
         connection with the Receivable Securitization not to exceed Fifty
         Million Dollars ($50,000,000.00) at any one-time outstanding.

         8.7 RENTALS. The Borrower will not, nor will it permit any Subsidiary
to, create, incur or suffer to exist any obligation for Rentals if, as a
consequence thereof, obligations for Rentals created, incurred or suffered to
existing any one fiscal year shall be in an aggregate consolidated amount for
the Borrower and its Subsidiaries in excess of 10% of Consolidated Revenues (as
defined below) as at the end of the Borrower's fiscal year immediately preceding
the date on which such obligation is entered into, on a non-cumulative basis
from year to year. It is expressly agreed and understood that, for the purpose
of this Section, any contract between the Borrower or any Domestic Subsidiary
and the vendor of aircraft fuel shall not be considered a lease and any payments
made under any such contract by the Borrower or any Domestic Subsidiary to such
vendor shall not be considered a lease payment. "Consolidated Revenues" shall
mean the amount of "net revenues" as shown on the Borrower's consolidated income
statement.

         8.8 RETIREMENT AND MODIFICATION OF SUBORDINATED INDEBTEDNESS. The
Borrower will not, nor will it permit any Subsidiary to, purchase, acquire,
redeem or retire, or make any payment on account of principal of, any
Subordinated Debt except at the stated maturity thereof or as required by
mandatory prepayment provisions or sinking fund provisions relating thereto. The
Borrower will not, nor will it permit any Subsidiary to, alter, amend, modify,
rescind, terminate or waive, or permit any breach or event of default to exist
under, any note or note evidencing such Subordinated Debt.

                                       22
<Page>

         8.9 AFFILIATES. The Borrower will not, and will not permit any
Subsidiary to, enter into any transaction (including, without limitation, the
purchase or sale of any property or service), with, or make any payment or
transfer to, any Affiliate except in the ordinary course of business and
pursuant to the reasonable requirements of the Borrower's or such Subsidiary's
business and upon fair and reasonable terms not less favorable to the Borrower
or such Subsidiary than the Borrower or such Subsidiary would obtain in a
comparable arms-length transaction. The transactions entered into in connection
with the Receivables Securitization shall be deemed to be arms-length
transactions.

         8.10 MODIFICATION OF ORGANIZATIONAL DOCUMENTS. Not permit the
Certificate or Articles of Incorporation, By-Laws or other organizational
documents of the Borrower to be amended or modified in any way that might
reasonably be expected to materially adversely affect the interests of the Bank.

9.       AFFIRMATIVE COVENANTS.

         9.1 COMPLIANCE WITH BANK REGULATORY REQUIREMENTS. Upon demand by the
Bank, the Borrower shall reimburse the Bank for the Bank's additional costs
and/or reductions in the amount of principal or interest received or receivable
by the Bank if at any time after the date of this Agreement any law, treaty or
regulation or any change in any law, treaty or regulation or the interpretation
thereof by any governmental authority charged with the administration thereof or
any central bank or other fiscal, monetary or other authority having
jurisdiction over the Bank or the Loans, whether or not having the force of law,
shall impose, modify or deem applicable any reserve (except reserve requirements
taken into account in calculating the Interest Rate) and/or special deposit
requirement against or in respect of assets held by or deposits in or for the
account of the Loans by the Bank or impose on the Bank any other condition with
respect to this Agreement or the Loans, the result of which is to either
increase the cost to the Bank of making or maintaining the Loans or to reduce
the amount of principal or interest received or receivable by the Bank with
respect to such Loans. Said additional costs and/or reductions will be those
which directly result from the imposition of such requirement or condition on
the making or maintaining of such Loans. All Loans shall be deemed to be match
funded for the purposes of the Bank's determination in the previous sentence.
Notwithstanding the foregoing, the Borrower shall not be required to pay any
such additional costs, which could be avoided by the Bank with the exercise of
reasonable conduct and diligence.

         9.2 CONDUCT OF BUSINESS. The Borrower will, and will cause each
Subsidiary to, carry on and conduct its business in substantially the same
manner and in substantially the same fields of enterprise as it is presently
conducted and to do all things necessary to remain duly incorporated, validly
existing and in good standing as a domestic or foreign corporation, as the case
may be, in its jurisdiction of incorporation and main all requisite authority to
conduct its business in each jurisdiction in which its business is conducted;
provided, that nothing contained in this Section 9.2 shall prohibit (a) any
Subsidiary from entering into a merger or consolidation otherwise permitted by
SECTION 8.2 or (b) the liquidation of any Subsidiary substantially all of whose
assets have been transferred to the Borrower or another Subsidiary in compliance
with SECTION 8.3.

                                       23
<Page>

         9.3 INSURANCE. The Borrower will, and will cause each Subsidiary to,
maintain with financially sound and reputable insurance companies insurance on
all their property in such amounts and covering such risks as is consistent with
sound business practice, and the Borrower will furnish to Bank upon request full
information as to the insurance carried.

         9.4 TAX LIABILITIES. The Borrower and its Subsidiaries will at all
times pay and discharge all property and other taxes, assessments and
governmental charges upon, and all claims (including claims for labor, materials
and supplies) against the Borrower, and its Subsidiaries, or any of their
respective properties, before the same shall become delinquent and before
penalties accrue thereon, unless and to the extent that the same are being
contested in good faith by appropriate proceedings, or would not have a Material
Adverse Effect.

         9.5 ERISA LIABILITIES. The Borrower and its Subsidiaries shall at all
times promptly pay and discharge all ERISA obligations and liabilities of a
character which if unpaid or unperformed might result in the imposition of a
Lien against any of its properties or assets and will promptly notify the Bank
of (i) the occurrence of any Reportable Event which might result in the
termination by the PBGC of any Plan covering any officers or employees of the
Borrower, any benefits of which are, or are required to be, guaranteed by PBGC,
(ii) receipt of any notice from PBGC of its intention to seek termination of the
Plan or appointment of a trustee therefor, and (iii) its intention to terminate
or withdraw from the Plan. Neither the Borrower nor any Subsidiary shall
terminate any such Plan or withdraw therefrom unless it shall be in compliance
with all of the terms and conditions of this Agreement after giving effect to
any liability to PBGC resulting from such termination or withdrawal.

         9.6 FINANCIAL STATEMENTS. The Borrower shall at all times maintain a
standard and modern system of accounting, on the accrual basis of accounting and
in all respects in accordance with GAAP, and shall furnish to the Bank or its
authorized representatives such information regarding the business affairs,
operations and financial condition of the Borrower and its Subsidiaries,
including, but not limited to:

                  (a) as soon as available, and in any event, within 90 days
         after the close of each of its fiscal years, a copy of the annual
         audited financial statements of the Borrower and its Subsidiaries, on a
         consolidated and consolidating basis, including balance sheet,
         statement of income and retained earnings, statement of cash flows for
         the fiscal year then ended and such other information (including
         nonfinancial information) as the Bank may reasonably request, in
         reasonable detail, prepared and certified by an independent certified
         public accountant acceptable to the Bank, containing an unqualified
         opinion; and
                  (b) as soon as available, and in any event, within 45 days
         following the end of each fiscal quarter, a copy of the unaudited
         financial statements of the Borrower and its Subsidiaries, on a
         consolidated and consolidating basis, regarding such fiscal quarter,
         including balance sheet, statement of income and retained earnings,
         statement of cash flows for the fiscal quarter then ended and the
         fiscal year to date and such other information (including nonfinancial
         information) as the Bank may request, in reasonable detail, prepared
         and certified as accurate by the Borrower; and

                                       24
<Page>

                  (c) At the request of the Lender, within 90 days after the
         close of each fiscal year of the Borrower, for each active Subsidiary,
         an unaudited balance sheet as at the close of such fiscal year and an
         unaudited profit and loss statement for such fiscal year, all certified
         by the Borrower's chief financial officer or Treasurer.

                  (d) At the request of the Lender, within 60 days after the
         close of the first three quarterly periods of each of its fiscal years,
         for each active Subsidiary, an unaudited balance sheet as at the close
         of each such period and an unaudited profit and loss statement for the
         period from the beginning of such fiscal year to the end of such
         quarter, all certified by the Borrower's chief financial officer or
         Treasurer.

                  (e) Within 270 days after the close of each fiscal year, a
         statement of the Unfunded Liabilities of each Single Employer Plan,
         certified as correct by an actuary enrolled under ERISA, except that
         the Borrower shall not be required to deliver such statement for any
         such fiscal year to the extent that such information is specifically
         set forth in the audit report for such fiscal year delivered to the
         Lender pursuant to clause (a) of this Section 9.7.

                  (f) As soon as possible and in any event within 10 days after
         the Borrower knows that any Reportable Event has occurred with respect
         to any Plan, a statement, signed by the chief financial officer or
         Treasurer of the Borrower, describing said Reportable Event and the
         action which the Borrower proposes to take with respect thereto.

         The Borrower represents and warrants to the Bank that the financial
statements delivered to the Bank at or prior to the execution and delivery of
this Agreement and to be delivered at all times thereafter fairly present the
financial condition of the Borrower and its Subsidiaries. The Bank shall have
the right at all times during business hours to inspect the books and records of
the Borrower and its Subsidiaries and make extracts therefrom. The Borrower
agrees to advise the Bank immediately of any Material Adverse Effect in the
financial condition, the operations or any other status of the Borrower or any
of its Subsidiaries.

         9.7 SUPPLEMENTAL FINANCIAL STATEMENTS. The Borrower shall immediately
upon receipt thereof, provide to the Bank copies of interim and supplemental
reports if any, submitted to the Borrower or any of its Subsidiaries by
independent accountants in connection with any interim audit or review of the
books of the Borrower or any of its Subsidiaries.

         9.8 COVENANT/QUARTER COMPLIANCE REPORT. The Borrower shall, within 45
days after the end of each fiscal quarter commencing with the fiscal quarter end
February 28, 2001, deliver to the Bank a computation in such detail as the Bank
shall specify, showing compliance by the Borrower with the financial covenants
set forth in Section 10, and certified to as accurate by the Borrower by
execution and delivery to the Bank of a Compliance Certificate satisfactory to
the Bank.

                                       25
<Page>

         9.9 OTHER REPORTS. The Borrower shall, within such period of time as
the Bank may specify, deliver to the Bank such other information (including
non-financial information) as the Bank may reasonably request.

         9.10 NOTICE OF PROCEEDINGS. The Borrower shall, promptly after
knowledge thereof shall have come to the attention of any officer of the
Borrower, give written notice to the Bank of all threatened or pending actions,
suits, and proceedings before any court or governmental department, commission,
board or other administrative agency which, if adversely determined would
reasonably be expected to have a Material Adverse Effect on the business,
property or operations of the Borrower and any of its Subsidiaries.

         9.11 NOTICE OF DEFAULT. The Borrower shall, within 10 days of its
knowledge, give notice to the Bank in writing of the occurrence of an Event of
Default.

         9.12 SEC REPORTS AND REPORTS TO SHAREHOLDERS. The Borrower shall
deliver to the Bank, promptly upon the filing or sending thereof, copies of all
regular, periodic or special reports of the Borrower or any Subsidiary filed
with the Securities and Exchange Commission ("SEC"); copies of all registration
statements of the Borrower or any Subsidiary filed with the SEC; and copies of
all proxy statements or other communications made to security holders generally.
In addition after an Event of Default, Borrower shall deliver to the Bank
promptly upon receipt thereof, copies of any reports received from the SEC.

         9.13 OTHER DOCUMENTS. The Borrower shall deliver to Bank, promptly upon
receipt thereof, copies of all documents entered into between Borrower and
Borrower's Unsecured Lenders, including but not limited to any and all
amendments, modifications, extensions, waivers, forbearance agreements,
instruments and all documents required to be delivered in accordance with all
said documents.

10.      FINANCIAL COVENANTS.

         10.1 WORKING CAPITAL. The Borrower will maintain at all times a ratio
of Consolidated Current Assets to Consolidated Current Liabilities of at least
1.50 to 1.00.

         10.2 CONSOLIDATED TANGIBLE NET WORTH. The Borrower will maintain at all
times Consolidated Tangible Net Worth in an amount not less than the sum of (a)
$240,000,000 plus (b) the net cash proceeds received by the Borrower from the
sale of any of its capital stock on or after May 31, 2000 plus (c) an amount
equal to the aggregate of one-third of Consolidated Net Income earned during
each of its fiscal years beginning with its fiscal year commencing June 1, 2000,
said fiscal year to be taken as one accounting period.

         10.3 CONSOLIDATED SECURED LIABILITIES. The Borrower will maintain at
all times Consolidated Secured Liabilities in an amount not in excess of
$20,000,000 in addition to the permitted liens under Section 8.6. For purposes
of calculating Consolidated Secured Liabilities hereunder the obligations of the
Borrower less than $10,000,000, secured by the real estate located in Wood Dale,
Illinois, known as the Corporate Headquarters of the Borrower, shall be
excluded.

                                       26
<Page>

         10.4 LIMITATION OF FUNDED DEBT. The Borrower will not permit the sum of
(i) Consolidated Funded Debt plus (ii) the aggregate amount of Contingent
Obligations of the Borrower and its Subsidiaries to exceed 60% of Consolidated
Total Capitalization; PROVIDED, however, that the Borrower will not permit the
sum of (i) Consolidated Funded Debt, plus (ii) the aggregate amount of
Contingent Obligations of the Borrower and its Subsidiaries to exceed 55% of
Consolidated Total Capitalization, in the event that the Borrower or any
Subsidiary has made any Acquisition under Section 8.5(k) of this Agreement.

         10.5 FIXED CHARGE COVERAGE RATIO. At such time as the Borrower is
obligated to maintain a Fixed Charge Coverage Ratio for the Unsecured Lenders,
the Borrower will also maintain a Fixed Charge Coverage Ratio of not less than
1.20:1:00 as of the last day of each fiscal quarter of the Borrower. The Fixed
Charge Coverage Ratio shall be determined based on four of the previous five
fiscal quarters of the Borrower that occurred immediately prior to the
calculation date, at the Borrower's option.

         10.6 OTHER FINANCIAL COVENANTS. The Borrower agrees that the foregoing
covenants shall be automatically modified to reflect the modification of any
similar financial covenant set forth in the documents between the Borrower and
Borrower' Unsecured Lenders, the effect of which is to cause said financial
covenants to be more restrictive than the financial covenants set forth herein.

11.      EVENTS OF DEFAULT.

         The Borrower, without notice or demand of any kind, shall be in default
under this Agreement upon the occurrence of any of the following events (each an
"Event of Default").

         11.1 NONPAYMENT OF OBLIGATIONS. Any amount due and owing on the Note or
any of the Obligations, whether by its terms or as otherwise provided herein, is
not paid.

         11.2 MISREPRESENTATION. Any written warranty, representation,
certificate or statement in this Agreement, the Loan Documents shall be false in
any material respect on the date when made.

         11.3 NONPERFORMANCE. Any failure to perform or default in the
performance of any covenant, condition or agreement contained in this Agreement
and, if capable of being cured, such failure to perform or default in
performance continues for a period of thirty (30) days after the Borrower
receives notice or knowledge from the Bank of such failure to perform or default
in performance.

         11.4 DEFAULT UNDER LOAN DOCUMENTS. A default under any of the other
Loan Documents, all of which covenants, conditions and agreements contained
therein are hereby incorporated in this Agreement by express reference, and such
failure to perform or default in performance continues beyond any applicable
grace or cure period, shall be and constitute an Event of Default under this
Agreement and any other of the Obligations.

                                       27
<Page>

         11.5     CHANGE IN CONTROL.  A Change in Control shall occur.

         11.6 DEFAULT UNDER OTHER AGREEMENTS. Failure of the Borrower or any of
its Subsidiaries to pay any Indebtedness (other than the Obligations) in an
aggregate principal amount of Two Million Dollars ($2,000,000.00), when due; or
the failure by the Borrower or any of its Subsidiaries to perform any term,
provision or condition contained in any agreement or agreements under which any
Indebtedness (other than the Obligations) in an aggregate principal amount of
Two Million Dollars ($2,000,000.00) was created or is governed, or any other
event shall occur or condition exist, the effect of which is to cause, or to
permit the holder or holders of such Indebtedness in an aggregate principal
amount of Two Million Dollars ($2,000,000.00) to cause, such Indebtedness to
become due prior to its stated maturity; or any Indebtedness of the Borrower or
any of its Subsidiaries (other than the Obligations) in an aggregate principal
amount of Two Million Dollars ($2,000,000.00), shall be declared to be due and
payable or required to be prepaid (other than by a regularly scheduled payment)
prior to the stated maturity thereof; or the Borrower or any of its Subsidiaries
shall not pay, or admit in writing its inability to pay, its debts generally as
they become due in an aggregate principal amount of Two Million Dollars
($2,000,000.00).

         11.7 BANKRUPTCY. The Borrower or any of its Domestic Subsidiaries shall
(i) have an order for relief entered with respect to its under the Federal
bankruptcy laws as now or hereafter in effect, (ii) make an assignment for the
benefit of creditors, (iii) apply for, seek, consent to, or acquiesce in, the
appointment of a receiver, custodian, trustee, examiner, liquidator or similar
official for it or any substantial part of its property, (iv) institute any
proceeding seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, winding up, liquidation, reorganization, arrangement, adjustment or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors or fail to file an answer or other
pleading denying the material allegations of any such proceeding filed against
it, (v) take any corporate action to authorize or effect any of the foregoing
actions set forth in this Section 11.7 or (vi) fail to contest in good faith any
appointment or proceeding described in Section 11.8.

         11.8 RECEIVERSHIP. Without the application, approval or consent of the
Borrower or any of its Domestic Subsidiaries, a receiver, trustee, examiner,
liquidator or similar official shall be appointed for the Borrower or any of its
Domestic Subsidiaries or any substantial part of its property, or a proceeding
described in Section 11.7(iv) shall be instituted against the Borrower or any of
its Domestic Subsidiaries and such appointment continues undischarged or such
proceeding continues undismisssed or unstayed for a period of 30 consecutive
days.

         11.9 ASSIGNMENT FOR CREDITORS. Any Foreign Subsidiary shall have taken
or instituted or permitted to be taken or instituted any action or proceeding,
or any such action or proceeding is instituted against such Foreign Subsidiary,
whereby a substantial amount of its property shall or may be assigned or in any
manner transferred or delivered to any receive, assignee, liquidator or other
Person, whether appointed by such Foreign Subsidiary or by a court or by any
governmental authority or any law, whereby such property shall or may be
distributed among the creditors of such Foreign Subsidiary, provided the
aggregate claims of all such creditors against such Foreign Subsidiary or
against all such Foreign Subsidiaries shall exceed $2,000,000 and such action or
proceeding remains undismissed or unstayed on appeal for a period of 90 days; or

                                       28
<Page>

any governmental authority having jurisdiction shall have taken or instituted
any action or proceeding for the dissolution or disestablishment of any Foreign
Subsidiary or for the suspension of its operations, provided the assets of any
such Foreign Subsidiary or the aggregate assets of all such Foreign Subsidiaries
shall exceed $2,000,000 and such action or proceeding remains undismissed or
unstayed on appeal for a period of 90 days; or all of the property of any
Foreign Subsidiary shall have been condemned, seized or appropriated, provided
the net assets of any such Foreign Subsidiary or the aggregate net assets of all
such Foreign Subsidiaries resulting from or the total of all claims against any
Foreign Subsidiary or all Foreign Subsidiaries resulting from any action or
proceeding described in this Section 11.9 and the amount of assets or net
assets, as the case may be, of any Foreign Subsidiary or all Foreign
Subsidiaries which are subject to any action, proceeding, condemnation, seizure
or appropriation described in this Section 11.9 shall exceed $2,000,000.

         11.10 CONDEMNATION. Any court, governmental or governmental agency
shall condemn, seize or otherwise appropriate, or take custody or control of all
or any substantial portion of the property of the Borrower or any of its
Subsidiaries.

         11.11 JUDGMENTS. The Borrower or any of its Subsidiaries shall fail
within 30 days to pay, bond or otherwise discharge any judgment or order for the
payment of money in excess of $2,000,000, which is not stayed on appeal or
otherwise being appropriately contested in good faith.

         11.12 ERISA. The Unfunded Liabilities of all Single Employer Plans
shall exceed in the aggregate $10,000,000; or any Reportable Event shall occur
in connection with any Plan; or the Borrower or any other member of the
Controlled Group shall have been notified by the sponsor of a Multiemployer Plan
that it has incurred withdrawal liability to such Multiemployer Plan in an
amount which, when aggregated with all Unfunded Liabilities of all Single
Employer Plans and all other amounts required to be paid to Multiemployer Plans
by the Borrower or any other member of the Controlled Group as withdrawal
liability, exceeds $10,000,000.

         11.13 VIOLATION OF LAW. Any court, governmental or governmental agency
shall find or hold, or formally notify the Borrower or any Subsidiary, that the
Borrower or any Subsidiary (i) has violated any Environmental Law, or (ii) bears
responsibility for any removal or remedial or similar action in connection with
the release of the Borrower or any other person of any Hazardous Materials into
the environment, or is otherwise liable in any manner in connection with any
such release; and such finding, holding or notification could reasonably be
expected (taking into account the expected outcome of any legal appeals
available to the Borrower or such Subsidiary, as well as the likelihood and
extent of contribution from any other persons who may be jointly and severally
liable with the Borrower or such Subsidiary) to have a Material Adverse Effect
on the ability of the Borrower to perform its obligations under the Loan
Documents.

12.      REMEDIES.

         Upon the occurrence of an Event of Default, the Bank shall have all
rights, powers and remedies set forth in the Loan Documents, in any written
agreement or instrument (other than this Agreement or the Loan Documents)
relating to any of the Obligations, or as otherwise

                                       29
<Page>

provided at law or in equity. Without limiting the generality of the foregoing,
the Bank may, at its option upon the occurrence of an Event of Default, declare
its commitments to the Borrower to be terminated and all Obligations to be
immediately due and payable, provided, however, that upon the occurrence of an
Event of Default under Section 11.9, "Assignment for Creditors", or Section
11.7, "Bankruptcy", all commitments of the Bank to the Borrower shall be
immediately terminated and all Obligations shall be automatically due and
payable, all without demand, notice or further action of any kind required on
the part of the Bank. The Borrower hereby waives any and all presentment,
demand, notice of dishonor, protest, and all other notices and demands in
connection with the enforcement of Bank's rights under the Loan Documents,
notwithstanding anything contained herein or in the Loan Documents to the
contrary. In addition to the foregoing:

         12.1 OFFSET RIGHTS. In addition to, and without limitation of, any
rights of the Bank under applicable law, so long as any Event of Default has
occurred and is continuing, any indebtedness from the Bank to Borrower
(including account balances, whether provisional or final and whether or not
collected or available, hereinafter called "Accounts") may be offset and applied
toward the payment of the Obligations then due and owing to the Bank.

         12.2 ADDITIONAL REMEDIES.  The Bank shall have the right and power to:

                  (a) extend, renew or modify for one or more periods (whether
         or not longer than the original period) the Note, any other of the
         Obligations, any obligation of any nature of any other obligor with
         respect to the Note or any of the Obligations;

                  (b) grant releases, compromises or indulgences with respect to
         the Note, any of the Obligations, any extension or renewal of any of
         the Obligations, any security therefor, or to any other obligor with
         respect to the Note or any of the Obligations;

                  (c) transfer the whole or any part of securities which may
         constitute Accounts into the name of the Bank or the Bank's nominee ,
         and any corporation, association, or any of the managers or trustees of
         any trust issuing any of said securities, or any transfer agent, shall
         not be bound to inquire, in the event that the Bank or said nominee
         makes any further transfer of said securities, or any portion thereof,
         as to whether the Bank or such nominee has the right to make such
         further transfer, and shall not be liable for transferring the same;

                  (d) make an election with respect to the Accounts or any other
         from time to time collateral for any of the Obligations under Section
         1111 of the Code or take action under Section 364 or any other section
         of the Code; provided, however, that any such action of the Bank as set
         forth herein shall not, in any manner whatsoever, impair or affect the
         liability of the Borrower hereunder, nor prejudice, waive, nor be
         construed to impair, affect, prejudice or waive the Bank's rights and
         remedies at law, in equity or by statute, nor release, discharge, nor
         be construed to release or discharge, the Borrower, any guarantor or
         other person, firm, corporation or other entity liable to the Bank for
         the Obligations; and

                                       30
<Page>

                  (e) at any time, and from time to time, accept additions to,
         releases, reductions, exchanges or substitution of the Accounts s,
         without in any way altering, impairing, diminishing or affecting the
         provisions of this Agreement, the Loan Documents, or any of the other
         Obligations, or the Bank's rights hereunder, under the Note or under
         any of the other Obligations.

The Borrower hereby ratifies and confirms whatever the Bank may do with respect
to the Accounts, and agrees that the Bank shall not be liable for any error of
judgment or mistakes of fact or law with respect to actions taken in connection
with the Accounts absent manifest error.

         12.3 INTENTIONALLY OMITTED.

         12.4 APPLICATION OF PROCEEDS. The Bank will within 3 Business Days
after receipt of cash or solvent credits from collection of items of payment,
proceeds of Accounts or any other source, apply the whole or any part thereof
against the Obligations secured hereby. The Bank shall further have the
exclusive right to determine how, when and what application of such payments and
such credits shall be made on the Obligations, and such determination shall be
conclusive upon the Borrower. Any proceeds of any disposition by the Bank of all
or any part of the Accounts may be first applied by the Bank to the payment of
expenses incurred by the Bank in connection with the Accounts, including
attorneys' fees and legal expenses as provided for in Section 13 hereof.

         12.5 NO WAIVER. No Event of Default shall be waived by the Bank except
in writing. No failure or delay on the part of the Bank in exercising any right,
power or remedy hereunder shall operate as a waiver of the exercise of the same
or any other right at any other time; nor shall any single or partial exercise
of any such right, power or remedy preclude any other or further exercise
thereof or the exercise of any other right, power or remedy hereunder. There
shall be no obligation on the part of the Bank to exercise any remedy available
to the Bank in any order. The remedies provided for herein are cumulative and
not exclusive of any remedies provided at law or in equity. The Borrower agrees
that in the event that the Borrower fails to perform, observe or discharge any
of its Obligations or liabilities under this Agreement or any other agreements
with the Bank, no remedy of law will provide adequate relief to the Bank, and
further agrees that the Bank shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages.

13       MISCELLANEOUS.

         13.1 OBLIGATIONS ABSOLUTE. None of the following shall affect the
Obligations of the Borrower to the Bank under this Agreement or the Bank's
rights with respect to any from time to time collateral for the Obligations:

                  (a) acceptance or retention by the Bank of other property or
         any interest in property as security for the Obligations;

                                       31
<Page>

                  (b) release by the Bank of any guarantors of the Obligations
         or of all or any part of any from time to time collateral for the
         Obligations or of any party liable with respect to the Obligations;

                  (c) release, extension, renewal, modification or substitution
         by the Bank of the Note, or any note evidencing any of the Obligations,
         or the compromise of the liability of any guarantor of the Obligations;
         or

                  (d) failure of the Bank to resort to any other security or to
         pursue the Borrower or any other obligor liable for any of the
         Obligations before resorting to remedies against any from time to time
         collateral for the Obligations.

         13.2 ENTIRE AGREEMENT. This Agreement (i) is valid, binding and
enforceable against the Borrower and the Bank in accordance with its provisions
and no conditions exist as to its legal effectiveness; (ii) constitutes the
entire agreement between the parties; and (iii) is the final expression of the
intentions of the Borrower and the Bank. No promises, either expressed or
implied, exist between the Borrower and the Bank, unless contained herein. This
Agreement supersedes all negotiations, representations, warranties, commitments,
offers, contracts (of any kind or nature, whether oral or written) prior to or
contemporaneous with the execution hereof.

         13.3 AMENDMENTS; WAIVERS. No amendment, modification, termination,
discharge or waiver of any provision of this Agreement or of the Loan Documents,
or consent to any departure by the Borrower therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Bank, and then
such waiver or consent shall be effective only for the specific purpose for
which given.

         13.4 WAIVER OF JURY TRIAL. THE BANK AND THE BORROWER, AFTER CONSULTING
OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE IRREVOCABLY, THE RIGHT TO TRIAL BY JURY WITH
RESPECT TO ANY LEGAL PROCEEDING BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT, THE NOTE OR ANY OF THE OTHER OBLIGATIONS, ANY
FROM TIME TO TIME COLLATERAL FOR THE OBLIGATIONS, OR ANY OTHER AGREEMENT
EXECUTED OR CONTEMPLATED TO BE EXECUTED IN CONJUNCTION WITH THIS AGREEMENT, OR
ANY COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE BANK AND THE BORROWER
ARE ADVERSE PARTIES. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK
GRANTING ANY FINANCIAL ACCOMMODATION TO THE BORROWER.

         13.5 LITIGATION. TO INDUCE THE BANK TO MAKE THE LOANS, THE BORROWER AND
THE BANK IRREVOCABLY AGREES THAT ALL ACTIONS ARISING, DIRECTLY OR INDIRECTLY, AS
A RESULT OR CONSEQUENCE OF THIS AGREEMENT, OR THE NOTE, SHALL BE INSTITUTED AND
LITIGATED ONLY IN COURTS HAVING THEIR SITUS IN THE CITY OF CHICAGO, ILLINOIS.
THE BORROWER AND THE BANK HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION AND
VENUE OF ANY STATE OR FEDERAL COURT HAVING ITS

                                       32
<Page>

SITUS IN SAID CITY, AND WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS. THE
BORROWER AND THE BANK HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, DIRECTED TO THE BORROWER OR THE BANK AS SET FORTH HEREIN IN
THE MANNER PROVIDED BY APPLICABLE STATUTE, LAW, RULE OF COURT OR OTHERWISE.

         13.6 ASSIGNABILITY. The Bank may at any time assign the Bank's rights
in this Agreement, the Note, the Obligations, or any part thereof. In addition,
the Bank may at any time sell one or more participations in the Loans. The
Borrower may not sell or assign this Agreement, or any portion thereof, either
voluntarily or by operation of law, without the prior written consent of the
Bank. This Agreement shall be binding upon the Bank and the Borrower and their
respective legal representatives and successors. All references herein to the
Borrower shall be deemed to include any successors, whether immediate or remote.

         13.7 CONFIDENTIALITY. The Borrower and the Bank hereby agree and
acknowledge that any and all information relating to the Borrower which is (i)
furnished by the Borrower to the Bank (or to any affiliate of the Bank), and
(ii) non-public, confidential or proprietary in nature, shall be kept
confidential by the Bank or such affiliate in accordance with applicable law,
provided, however, that such information and other credit information relating
to the Borrower may be distributed by the Bank or such affiliate to the Bank's
or such affiliate's directors, officers, employees, attorneys, affiliates,
auditors and regulators, who have a need to know, and upon the order of a court
or other governmental agency having jurisdiction over the Bank or such
affiliate, to any other party. The Borrower and the Bank further agree that this
provision shall survive the termination of this Agreement.

         13.8 BINDING EFFECT. This Agreement shall become effective upon
execution by the Borrower and the Bank. If this Agreement is not dated or
contains any blanks when executed by the Borrower, the Bank is hereby
authorized, without notice to the Borrower, to date this Agreement as of the
date when it was executed by the Borrower, and to complete any such blanks
according to the terms upon which this Agreement is executed.

         13.9 GOVERNING LAW. This Agreement, the Loan Documents and the Note
shall be delivered and accepted in and shall be deemed to be contracts made
under and governed by the internal laws of the State of Illinois (but giving
effect to federal laws applicable to national banks), and for all purposes shall
be construed in accordance with the laws of such State, without giving effect to
the choice of law provisions of such State.

         13.10 ENFORCEABILITY. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by,
unenforceable or invalid under any jurisdiction, such provision shall as to such
jurisdiction, be severable and be ineffective to the extent of such prohibition
or invalidity, without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.

                                       33
<Page>

         13.11 SURVIVAL OF BORROWER REPRESENTATIONS. All covenants, agreements,
representations and warranties made by the Borrower herein shall,
notwithstanding any investigation by the Bank, be deemed material and relied
upon by the Bank and shall survive the making and execution of this Agreement
and the Loan Documents and the issuance of the Note, and shall be deemed to be
continuing representations and warranties until such time as the Borrower has
fulfilled all of its Obligations to the Bank, and the Bank has been paid in
full. The Bank, in extending financial accommodations to the Borrower, is
expressly acting and relying on the aforesaid representations and warranties.

         13.12 EXTENSIONS OF BANK'S COMMITMENT AND NOTE. This Agreement shall
secure and govern the terms of any extensions or renewals of the Bank's
commitment hereunder and the Note pursuant to the execution of any modification,
extension or renewal note executed by the Borrower and accepted by the Bank in
its sole and absolute discretion in substitution for the Note.

         13.13 TIME OF ESSENCE. Time is of the essence in making payments of all
amounts due the Bank under this Agreement and in the performance and observance
by the Borrower of each covenant, agreement, provision and term of this
Agreement.

         13.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which taken together shall constitute one and the same instrument.

         13.15 FACSIMILE SIGNATURES. The Bank is hereby authorized to rely upon
and accept as an original any Loan Documents or other communication which is
sent to the Bank by facsimile, telegraphic or other electronic transmission
(each, a "Communication") which the Bank in good faith believes has been signed
by Borrower and has been delivered to the Bank by a properly authorized
representative of the Borrower, whether or not that is in fact the case.
Notwithstanding the foregoing, the Bank shall not be obligated to accept any
such Communication as an original and may in any instance require that an
original document be submitted to the Bank in lieu of, or in addition to, any
such Communication.

         13.16 NOTICES. Except as otherwise provided herein, the Borrower waives
all notices and demands in connection with the enforcement of the Bank's rights
hereunder. All notices, requests, demands and other communications provided for
hereunder shall be in writing, sent by certified or registered mail, postage
prepaid, by facsimile, telegram or delivered in person, and addressed as
follows:

                  If to the Borrower:   AAR CORP.
                                        1100 Wood Dale Road
                                        Wood Dale, Illinois  60191
                                        Attention:    Timothy J. Romenesko
                                                      Vice President and
                                                      Chief Financial Officer

                                       34
<Page>

                  If to the Bank:       LaSalle Bank National Association
                                        135 South LaSalle Street
                                        Chicago, Illinois  60603
                                        Attention:    Scott Carbon

or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party complying as to delivery with the terms
of this subsection. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances.

         13.17 EXPENSES; INDEMNIFICATION. The Borrower shall reimburse the Bank
for any and all reasonable costs and out-of-pocket expenses (including
attorneys' fees and time charges of attorneys for the Bank, which attorneys may
be employees of the Bank) paid or incurred by the Bank in connection with the
preparation, negotiation, execution ,delivery, review, amendment, modification,
and administration of the Loan Documents. The Borrower also agrees to reimburse
the Bank for any and all reasonable costs and out-of-pocket expenses (including
attorneys' fees and time charges of attorneys for the Bank, which attorneys may
be employees of the Bank) paid or incurred by the Bank in connection with the
collection and enforcement of the Loan Documents. The Borrower further agrees to
indemnify the Bank, its directors, officers and employees against all losses,
claims, damages, penalties, judgments, liabilities and expenses (including,
without limitation, all expenses of litigation or preparation therefor whether
or not the Bank is a party thereto) which any of them may pay or incur arising
out of any term or condition contained in this Agreement or the other Loan
Documents, or the direct or indirect application or proposed application of the
proceeds of any Advance hereunder, except to the extent any of the foregoing
arising solely from the gross negligence or willful misconduct of the party
requesting indemnification. The obligations of the Borrower under this Section
shall survive the termination of this Agreement.

         IN WITNESS WHEREOF, the Borrower and the Bank have executed this
Revolving Loan Agreement as of the date first above written.

                                        AAR CORP

                                        By: /s/ Timothy J. Romenesko
                                           -------------------------------------

                                        Name: Timothy J. Romenesko
                                             -----------------------------------

                                        Title: Vice President and Chief
                                              ----------------------------------
                                               Financial Officer
                                              ----------------------------------

                                        Agreed and accepted:

                                        LASALLE BANK NATIONAL ASSOCIATION

                                       35
<Page>

                                        By: /s/ Bruce S. Linger
                                           -------------------------------------

                                        Name: Bruce S. Linger
                                             -----------------------------------

                                        Title: Senior Vice President
                                              ----------------------------------

                                       36
<Page>

                                   EXHIBIT "A"

                                 REVOLVING NOTE

                                                             No. _______________
$25,000,000.00                                        Date: as of April __, 2001
Chicago, Illinois                                       Due Date: April __, 2002

         FOR VALUE RECEIVED, AAR CORP., a Delaware corporation (the "Borrower"),
whose address is 1100 North Wood Dale Road, Wood Dale, Illinois 60191, promises
to pay to the order of LASALLE BANK NATIONAL ASSOCIATION, a national banking
association (hereinafter, together with any holder hereof, called the "Bank"),
at its office at 135 South LaSalle Street, Chicago, Illinois 60603, on or before
April __, 2002 (the "Maturity Date"), the lesser of (i) the principal sum of
TWENTY-FIVE MILLION and 00/100 DOLLARS ($25,000,000.00), or (ii) the aggregate
principal amount of all Loans outstanding under and pursuant to that certain
Revolving Loan Agreement dated as of April __, 2001 between the Borrower and the
Bank, as amended from time to time (as amended, supplemented or modified from
time to time, the "Loan Agreement"), and made available by the Bank to the
Borrower at the maturity or maturities and in the amount or amounts stated on
the records of the Bank, together with interest (computed on the actual number
of days elapsed on the basis of a 360 day year) as herein after provided on the
aggregate principal amount of all Revolving Loans outstanding from time to time
hereunder from the date hereof through and including the Maturity Date.
Capitalized words and phrases not otherwise defined herein shall have the
meanings assigned thereto in the Loan Agreement.

         The unpaid principal amount hereof shall bear interest as provided for
in the Loan Agreement. Interest after maturity (whether by reason of
acceleration or otherwise) on the unpaid principal balance of this Revolving
Note (the "Note") and all accrued and unpaid interest hereon, shall accrue at a
floating per annum rate of interest equal to the Default Rate and shall be
payable on demand from the Bank.

         All Loans shall be repaid by the Borrower on the Maturity Date, unless
payable sooner pursuant to the provisions of the Loan Agreement. In the event
the aggregate outstanding principal balance of all Loans exceeds the Revolving
Loan Commitment, the Borrower shall, without notice or demand of any kind,
immediately make such repayments of the Revolving Loans or take such other
actions as shall be necessary to eliminate such excess.

         Principal and interest shall be paid to the Bank at its address set
forth above, or at such other place as the holder of this Note shall designate
in writing to the Borrower.

         This Note evidences the Revolving Loans and other indebtedness incurred
by the Borrower under and pursuant to the Loan Agreement, to which reference is
hereby made for a statement of the terms and conditions under which the Maturity
Date or any payment hereon may be accelerated. The holder of this Note is
entitled to all of the benefits and security provided for in the Loan Agreement.

                                       37
<Page>

         Except for such notices as may be required under the terms of the Loan
Agreement, the Borrower waives presentment, demand, notice, protest, and all
other demands, or notices, in connection with the delivery, acceptance,
performance, default, or enforcement of this Note, and assents to any extension
or postponement of the time of payment or any other indulgence.

         THE BANK AND THE BORROWER EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE IRREVOCABLY, THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL
PROCEEDING BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LOAN
AGREEMENT, THIS NOTE OR ANY OF THE OBLIGATIONS, THE COLLATERAL, OR ANY OTHER
AGREEMENT EXECUTED OR CONTEMPLATED TO BE EXECUTED IN CONJUNCTION WITH THE LOAN
AGREEMENT, OR ANY COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE BANK AND
THE BORROWER ARE ADVERSE PARTIES. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
THE BANK GRANTING ANY FINANCIAL ACCOMMODATION TO THE BORROWER.

         TO INDUCE THE BANK TO MAKE THE LOANS, THE BORROWER AND THE BANK
IRREVOCABLY AGREES THAT ALL ACTIONS ARISING, DIRECTLY OR INDIRECTLY, AS A RESULT
OR CONSEQUENCE OF THE LOAN AGREEMENT, OR THIS NOTE, SHALL BE INSTITUTED AND
LITIGATED ONLY IN COURTS HAVING SITUS IN THE CITY OF CHICAGO, ILLINOIS. THE
BORROWER AND THE BANK HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION AND VENUE OF
ANY STATE OR FEDERAL COURT HAVING ITS SITUS IN SAID CITY AND WAIVES ANY
OBJECTION BASED ON FORUM NON CONVENIENS. THE BORROWER AND THE BANK HEREBY WAIVE
PERSONAL SERVICE OF ANY AND ALL PROCESS AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO THE
BORROWER OR THE BANK IN THE MANNER PROVIDED BY APPLICABLE STATUTE, LAW, RULE OF
COURT OR OTHERWISE.

         The Revolving Loans evidenced hereby have been made and/or issued and
this Note has been delivered at the Bank's main office. This Note shall be
governed and construed in accordance with the laws of the State of Illinois, in
which state it shall be performed, and shall be binding upon the Borrower, and
its legal representatives, successors, and assigns. Wherever possible, each
provision of the Loan Agreement and this Note shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of the Loan Agreement or this Note shall be prohibited by or be invalid under
such law, such provision shall be severable, and be ineffective to the extent of
such prohibition or invalidity, without invalidating the remaining provisions of
the Loan Agreement or this Note.

         As used herein, all provisions shall include the masculine, feminine,
neuter, singular and plural thereof, wherever the context and facts require such
construction and in particular the word "Borrower" shall be so construed.

                                       38
<Page>

         IN WITNESS WHEREOF, the Borrower has executed this Revolving Note as of
the date set forth above.

                                        AAR CORP.

                                        By:
                                           -------------------------------------
                                        Its:
                                            ------------------------------------

                                        Attention:    Timothy J. Romenesko
                                                      1100 North Wood Dale Road
                                                      Wood Dale, Illinois  60191

                                       39
<Page>

                                   EXHIBIT "B"

                                BORROWING NOTICE

                                                           _______________, 2001

To:      LaSalle Bank National Association

Re:      Borrowing Notice

Ladies and Gentlemen:

         We make reference to that certain Revolving Loan Agreement dated as of
April __, 2001, between AAR Corp. and LaSalle Bank National Association, as it
may from time to time be amended, modified, renewed or extended (the "Loan
Agreement"). All capitalized terms used herein shall have the meanings
attributed to them in the Loan Agreement.

         The Borrower hereby gives irrevocable notice pursuant to Section 5 of
the Loan Agreement for the following Advance(s):

Borrowing Date:   _______________, 2001(1)

Principal Amount(2)            Type of Advance(3)            Interest Period(4)
-------------------            ------------------            ------------------

                                    Sincerely yours,

                                    AAR CORP.

                                    By:
                                           -------------------------------------
                                    Title:
                                           -------------------------------------

--------
(1)    Borrowing Date must be a Business Day prior to or on the Maturity Date.
(2)    Subject to the minimum amount requirements set forth in Section 5.
(3)    Specify Prime or LIBOR.
(4)    Applicable to LIBOR only. See definition of Interest Period and Section 5
      (Restrictions on Interest Periods).

                                       40<Page>

================================================================================

                                   AAR CORP.

                                  $75,000,000

         $20,000,000 7.98% Series 2001-A1 Senior Notes due May 15, 2008
                                      and
         $55,000,000 8.39% Series 2001-A2 Senior Notes due May 15, 2011

                                ----------------

                            NOTE PURCHASE AGREEMENT

                                ----------------

                            DATED AS OF MAY 1, 2001

================================================================================

<Page>

                               TABLE OF CONTENTS

SECTION                             HEADING                                 PAGE

SECTION 1.      AUTHORIZATION OF NOTES.........................................1

SECTION 2.      SALE AND PURCHASE OF NOTES ....................................1

  Section 2.1.  Series 2001-A Notes............................................1
  Section 2.2.  Additional Series of Notes.....................................2

SECTION 3.      CLOSING........................................................2

SECTION 4.      CONDITIONS TO CLOSING..........................................3

  Section 4.1.  Representations and Warranties.................................3
  Section 4.2.  Performance; No Default........................................3
  Section 4.3.  Compliance Certificates........................................3
  Section 4.4.  Opinions of Counsel............................................4
  Section 4.5.  Purchase Permitted by Applicable Law, Etc......................4
  Section 4.6.  Related Transactions...........................................4
  Section 4.7.  Payment of Special Counsel Fees................................4
  Section 4.8.  Private Placement Number.......................................4
  Section 4.9.  Changes in Corporate Structure.................................4
  Section 4.10. Proceedings and Documents......................................4
  Section 4.11. Conditions to Issuance of Additional Notes.....................5

SECTION 5.      REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................5

  Section 5.1.  Organization; Power and Authority..............................5
  Section 5.2.  Authorization, Etc.............................................5
  Section 5.3.  Disclosure.....................................................6
  Section 5.4.  Organization and Ownership of Shares of Subsidiaries;
                 Affiliates....................................................6
  Section 5.5.  Financial Statements...........................................7
  Section 5.6.  Compliance with Laws, Other Instruments, Etc ..................7
  Section 5.7.  Governmental Authorizations, Etc...............................7
  Section 5.8.  Litigation; Observance of Statutes and Orders..................7
  Section 5.9.  Taxes..........................................................7
  Section 5.10. Title to Property; Leases .....................................8
  Section 5.11. Licenses, Permits, Etc.........................................8
  Section 5.12. Compliance with ERISA..........................................8
  Section 5.13. Private Offering by the Company................................9
  Section 5.14. Use of Proceeds; Margin Regulations............................9
  Section 5.15. Existing Debt; Future Liens...................................10
  Section 5.16. Foreign Assets Control Regulations, Etc ......................10
  Section 5.17. Status under Certain Statutes.................................10

                                       -i-

<Page>

  Section 5.18. Environmental Matters ........................................10

SECTION 6.      REPRESENTATIONS OF EACH PURCHASER.............................11

  Section 6.1.  Purchase for Investment.......................................11
  Section 6.2.  Source of Funds...............................................11

SECTION 7.      INFORMATION AS TO COMPANY.....................................13

  Section 7.1.  Financial and Business Information............................13
  Section 7.2.  Officer's Certificate.........................................15
  Section 7.3.  Inspection....................................................16

SECTION 8.      PREPAYMENT OF THE NOTES.......................................16

  Section 8.1.  No Scheduled Prepayments of the Series 2001-A Notes...........16
  Section 8.2.  Optional Prepayments with Make-Whole Amount...................16
  Section 8.3.  Allocation of Partial Prepayments.............................17
  Section 8.4.  Maturity; Surrender, Etc......................................17
  Section 8.5.  Purchase of Notes.............................................17
  Section 8.6.  Make-Whole Amount for Series 2001-A Notes.....................18
  Section 8.7.  Change in Control.............................................19

SECTION 9.      AFFIRMATIVE COVENANTS.........................................21

  Section 9.1.  Compliance with Law...........................................21
  Section 9.2.  Insurance.....................................................22
  Section 9.3.  Maintenance of Properties.....................................22
  Section 9.4.  Payment of Taxes..............................................22
  Section 9.5.  Corporate Existence, Etc......................................22

SECTION 10.     NEGATIVE COVENANTS ...........................................22

  Section 10.1. Consolidated Adjusted Net Worth...............................22
  Section 10.2. Current Ratio.................................................23
  Section 10.3. Limitations on Debt...........................................23
  Section 10.4. Liens.........................................................23
  Section 10.5. Sale of Assets. etc...........................................26
  Section 10.6. Merger, Consolidation, etc....................................26
  Section 10.7. Line of Business..............................................27
  Section 10.8. Transactions with Affiliates..................................27
  Section 10.9. Designation of Restricted and Unrestricted Subsidiaries.......27

SECTION 11.     EVENTS OF DEFAULT.............................................28

SECTION 12.     REMEDIES ON DEFAULT, ETC......................................30

  Section 12.1. Acceleration..................................................30
  Section 12.2. Other Remedies................................................31

                                      -ii-

<Page>

  Section 12.3. Rescission ...................................................31
  Section 12.4. No Waivers or Election of Remedies, Expenses, Etc ............31

SECTION 13.     REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES ................31

  Section 13.1. Registration of Notes.........................................31
  Section 13.2. Transfer and Exchange of Notes................................32
  Section 13.3. Replacement of Notes..........................................32

SECTION 14.     PAYMENTS ON NOTES.............................................32

  Section 14.1. Place of Payment..............................................32
  Section 14.2. Home Office Payment...........................................33

SECTION 15.     EXPENSES, ETC.................................................33

  Section 15.1. Transaction Expenses .........................................33
  Section 15.2. Survival......................................................33

SECTION 16.     SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT..34

SECTION 17.     AMENDMENT AND WAIVER..........................................34

  Section 17.1. Requirements..................................................34
  Section 17.2. Solicitation of Holders of Notes .............................34
  Section 17.3. Binding Effect, Etc ..........................................35
  Section 17.4. Notes Held by Company, Etc....................................35

SECTION 18.     NOTICES.......................................................35

SECTION 19.     REPRODUCTION OF DOCUMENTS.....................................36

SECTION 20.     CONFIDENTIAL INFORMATION......................................36

SECTION 21.     SUBSTITUTION OF PURCHASER ....................................37

SECTION 22.     MISCELLANEOUS.................................................37

  Section 22.1. Successors and Assigns........................................38
  Section 22.2. Payments Due on Non-Business Days.............................38
  Section 22.3. Severability..................................................38
  Section 22.4. Construction..................................................38
  Section 22.5. Counterparts..................................................38
  Section 22.6. Governing Law ................................................38

                                      -iv-

<Page>

SCHEDULE A     -- INFORMATION RELATING TO COMMITMENTS AND PURCHASERS

SCHEDULE B     -- DEFINED TERMS

SCHEDULE 5.4   -- Subsidiaries of the Company and Ownership of Subsidiary Stock

SCHEDULE 5.5   -- Financial Statements

SCHEDULE 5.15  -- Existing Indebtedness

EXHIBIT 1-A    -- Form of 7.98% Series 2001-A1 Senior Note due May 15, 2008

EXHIBIT 1-B    -- Form of 8.39% Series 2001-A2 Senior Note due May 15, 2011

EXHIBIT 4.4(a) -- Form of Opinion of Special Counsel for the Company

EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel for the Purchasers

EXHIBIT S      -- Form of Supplement

                                      -v-
<Page>

                                   AAR CORP.
                           1100 NORTH WOOD DALE ROAD
                           WOOD DALE, ILLINOIS 60191

         $20,000,000 7.98% Series 2001-A1 Senior Notes due May 15, 2008
                                      and
         $55,000,000 8.39% Series 2001-A2 Senior Notes due May 15, 2011

                                                                     Dated as of
                                                                     May 1, 2001

TO THE PURCHASERS LISTED IN
     THE ATTACHED SCHEDULE A:

Ladies and Gentlemen:

         AAR CORP., a Delaware corporation (the "Company"), agrees with the
Purchasers listed in the attached Schedule A to this Note Purchase Agreement
(this "Agreement") as follows:

SECTION 1. AUTHORIZATION OF NOTES.

         The Company will authorize the issue and sale of (i) $20,000,000
aggregate principal amount of its 7.98% Series 2001-A1 Senior Notes due May 15,
2008 (the "TRANCHE A1 NOTES"), and (ii) $55,000,000 aggregate principal amount
of its 8.39% Series 2001-A2 Senior Notes due May 15, 2011 (the "TRANCHE A2
NOTES" and together with the Tranche A1 Notes, the "SERIES 2001-A NOTES"). The
Series 2001-A Notes together with each Series of Additional Notes which may from
time to time be issued pursuant to the provisions of Section 2.2 are
collectively referred to as the "NOTES" (such term shall also include any such
notes issued in substitution therefor pursuant to Section 13 of this Agreement).
The Tranche A1 Notes and the Tranche A2 Notes shall be substantially in the
forms set out in Exhibits 1-A and 1-B, respectively, with such changes
therefrom, if any, as may be approved by the Purchasers and the Company. Certain
capitalized terms used in this Agreement are defined in Schedule B; references
to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule
or an Exhibit attached to this Agreement.

SECTION 2. SALE AND PURCHASE OF NOTES.

         SECTION 2.1. SERIES 2001-A NOTES. Subject to the terms and conditions
of this Agreement, the Company will issue and sell to each Purchaser and each
Purchaser will purchase from the Company, at the Closing provided for in Section
3, Series 2001-A Notes in the principal amount and of the Tranche specified
opposite such Purchaser's name in Schedule A at the purchase price of 100% of
the principal amount thereof. The obligations of each Purchaser hereunder are
several and not joint obligations and each Purchaser shall have no obligation
and no liability to any Person for the performance or nonperformance by any
other Purchaser hereunder.

<Page>

AAR Corp.                                               Note Purchase Agreement

         SECTION 2.2. ADDITIONAL SERIES OF NOTES. The Company may, from time to
time, in its sole discretion but subject to the terms hereof, issue and sell one
or more additional Series of its unsecured promissory notes under the provisions
of this Agreement pursuant to a supplement (a "SUPPLEMENT") substantially in
the form of Exhibit S. Each additional Series of Notes (the "ADDITIONAL NOTES")
issued pursuant to a Supplement shall be subject to the following terms and
conditions:

                  (i) each Series of Additional Notes, when so issued, shall be
         differentiated from all previous Series by sequential alphabetical
         designation inscribed thereon;

                  (ii) Additional Notes of the same Series may consist of more
         than one different and separate Tranches and may differ with respect to
         outstanding principal amounts, maturity dates, interest rates and
         premiums, if any, and price and terms of redemption or payment prior to
         maturity, but all such different and separate tranches of the same
         Series shall vote as a single class and constitute one Series;

                  (iii) each Series of Additional Notes shall be dated the date
         of issue, bear interest at such rate or rates, mature on such date or
         dates, be subject to such mandatory and optional prepayment on the
         dates and at the premiums, if any, have such additional or different
         conditions precedent to closing, such representations and warranties
         and such additional covenants as shall be specified in the Supplement
         under which such Additional Notes are issued and upon execution of any
         such Supplement, this Agreement shall be amended to reflect such
         additional covenants without further action on the part of the holders
         of the Notes outstanding under this Agreement, PROVIDED, that any such
         additional covenants shall inure to the benefit of all holders of Notes
         so long as any Additional Notes issued pursuant to such Supplement
         remain outstanding;

                  (iv) each Series of Additional Notes issued under this
         Agreement shall be in substantially the form of Exhibit 1 to Exhibit S
         hereto with such variations, omissions and insertions as are necessary
         or permitted hereunder;

                  (v) the minimum principal amount of any Note issued under a
         Supplement shall be $100,000, except as may be necessary to evidence
         the outstanding amount of any Note originally issued in a denomination
         of $100,000 or more;

                  (vi) all Additional Notes shall constitute Senior Debt of the
         Company and shall rank PARI PASSU with all other outstanding Notes; and

                  (vii) no Additional Notes shall be issued hereunder if at the
         time of issuance thereof and after giving effect to the application of
         the proceeds thereof, any Default or Event of Default shall have
         occurred and be continuing.

SECTION 3. CLOSING.

         The sale and purchase of the Series 2001-A Notes to be purchased by
each Purchaser shall occur at the offices of Chapman and Cutler, 111 West Monroe
Street, Chicago, Illinois 60603, at

                                      -2-

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10:00 a.m. Chicago time, at a closing (the "Closing") on June 7, 2001 or on such
other Business Day thereafter on or prior to June 30, 2001 as may be agreed upon
by the Company and the Purchasers. At the Closing the Company will deliver to
each Purchaser the Series 2001-A Notes of the Tranche to be purchased by such
Purchaser in the form of a single Series 2001-A Note of such Tranche (or such
greater number of Series 2001-A Notes of such Tranche in denominations of at
least $100,000 as such Purchaser may request) dated the date of the Closing and
registered in such Purchaser's name (or in the name of such Purchaser's
nominee), against delivery by such Purchaser to the Company or its order of
immediately available funds in the amount of the purchase price therefor by wire
transfer of immediately available funds for the account of the Company to
account number 58-04493, ABA No. 071000013 at Bank One, Chicago, Illinois 60670.
If at the Closing the Company shall fail to tender such Notes to any Purchaser
as provided above in this Section 3, or any of the conditions specified in
Section 4 shall not have been fulfilled to any Purchaser's satisfaction, such
Purchaser shall, at such Purchaser's election, be relieved of all further
obligations under this Agreement, without thereby waiving any rights such
Purchaser may have by reason of such failure or such nonfulfillment.

SECTION 4. CONDITIONS TO CLOSING.

         The obligation of each Purchaser to purchase and pay for the Series
2001-A Notes to be sold to such Purchaser at the Closing is subject to the
fulfillment to such Purchaser's satisfaction, prior to or at the Closing, of the
following conditions:

         SECTION 4.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company in this Agreement shall be correct when made and at
the time of the Closing.

         SECTION 4.2. PERFORMANCE; NO DEFAULT. The Company shall have performed
and complied with all agreements and conditions contained in this Agreement
required to be performed or complied with by it prior to or at the Closing, and,
after giving effect to the issue and sale of the Series 2001-A Notes (and the
application of the proceeds thereof as contemplated by Section 5.14), no Default
or Event of Default shall have occurred and be continuing. Neither the Company
nor any Restricted Subsidiary shall have entered into any transaction since
April 16, 2001, the date of the Memorandum, that would have been prohibited by
Sections 10.4, 10.5, 10.6, 10.7 or 10.8 hereof had such Sections applied since
such date.

        SECTION 4.3. COMPLIANCE CERTIFICATES.

                  (a) OFFICER'S CERTIFICATE. The Company shall have delivered to
         such Purchaser an Officer's Certificate, dated the date of the Closing,
         certifying that the conditions specified in Sections 4.1, 4.2 and 4.9
         have been fulfilled.

                  (b) SECRETARY'S CERTIFICATE. The Company shall have delivered
         to such Purchaser a certificate certifying as to the resolutions
         attached thereto and other corporate proceedings relating to the
         authorization, execution and delivery of the Series 2001-A Notes and
         this Agreement.

                                      -3-

<Page>

         SECTION 4.4. OPINIONS OF COUNSEL. Such Purchaser shall have received
opinions in form and substance satisfactory to such Purchaser, dated the date of
the Closing (a) from Donald J. Vilim, Esq., Senior Counsel of the Company, and
Schiff Hardin & Waite, counsel for the Company, covering the matters set forth
in Exhibit 4.4(a) and covering such other matters incident to the transactions
contemplated hereby as such Purchaser or the Purchasers' special counsel may
reasonably request (and the Company hereby instructs its counsel to deliver such
opinion to such Purchaser) and (b) from Chapman and Cutler, the Purchasers'
special counsel in connection with such transactions, substantially in the form
set forth in Exhibit 4.4(b) and covering such other matters incident to such
transactions as such Purchaser may reasonably request.

         SECTION 4.5. PURCHASE PERMITTED BY APPLICABLE LAW, ETC. On the date of
the Closing each purchase of Series 2001-A Notes shall (a) be permitted by the
laws and regulations of each jurisdiction to which each Purchaser is subject,
without recourse to provisions (such as Section 1405(a)(8) of the New York
Insurance Law) permitting limited investments by insurance companies without
restriction as to the character of the particular investment, (b) not violate
any applicable law or regulation (including, without limitation, Regulation T, U
or X of the Board of Governors of the Federal Reserve System) and (c) not
subject any Purchaser to any tax, penalty or liability under or pursuant to any
applicable law or regulation, which law or regulation was not in effect on the
date hereof. If requested by any Purchaser, such Purchaser shall have received
an Officer's Certificate certifying as to such matters of fact as such Purchaser
may reasonably specify to enable such Purchaser to determine whether such
purchase is so permitted.

         SECTION 4.6. RELATED TRANSACTIONS. The Company shall have consummated
the sale of the entire principal amount of the Series 2001-A Notes scheduled to
be sold on the date of Closing pursuant to this Agreement.

         SECTION 4.7. PAYMENT OF SPECIAL COUNSEL FEES. Without limiting the
provisions of Section 15.1, the Company shall have paid on or before the
Closing, the fees, charges and disbursements of the Purchasers' special counsel
referred to in Section 4.4 to the extent reflected in a statement of such
counsel rendered to the Company at least one Business Day prior to the Closing.

         SECTION 4.8. PRIVATE PLACEMENT NUMBER. A Private Placement Number
issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the
Securities Valuation Office of the National Association of Insurance
Commissioners) shall have been obtained for each Tranche of the Series 2001-A
Notes.

         SECTION 4.9. CHANGES IN CORPORATE STRUCTURE. The Company shall not have
changed its jurisdiction of incorporation or been a party to any merger or
consolidation and shall not have succeeded to all or any substantial part of the
liabilities of any other entity, at any time following the date of the most
recent financial statements referred to in Schedule 5.5.

         SECTION 4.10. PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and instruments incident to such transactions shall be
satisfactory to such Purchaser and such Purchaser's special counsel, and such
Purchaser and such Purchaser's special counsel shall have

                                      -4-

<Page>

received all such counterpart originals or certified or other copies of such
documents as such Purchaser or such Purchaser's special counsel may reasonably
request.

         SECTION 4.11. CONDITIONS TO ISSUANCE OF ADDITIONAL NOTES. The
obligations of the Additional Purchasers to purchase any Additional Notes shall
be subject to the following conditions precedent, in addition to the conditions
specified in the Supplement pursuant to which such Additional Notes may be
issued:

                  (a) COMPLIANCE CERTIFICATE. A duly authorized Senior Financial
         Officer shall execute and deliver to each Additional Purchaser and each
         holder of Notes an Officer's Certificate dated the date of issue of
         such Series of Additional Notes stating that such officer has reviewed
         the provisions of this Agreement (including any Supplements hereto) and
         setting forth the information and computations (in sufficient detail)
         required in order to establish whether the Company is in compliance
         with the requirements of Section 10.3 on such date.

                  (b) EXECUTION AND DELIVERY OF SUPPLEMENT. The Company and each
         such Additional Purchaser shall execute and deliver a Supplement
         substantially in the form of Exhibit S hereto.

                  (c) REPRESENTATIONS OF ADDITIONAL PURCHASERS. Each Additional
         Purchaser shall have confirmed in the Supplement that the
         representations set forth in Section 6 are true with respect to such
         Additional Purchaser on and as of the date of issue of the Additional
         Notes.

SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

         The Company represents and warrants to each Purchaser that:

         SECTION 5.1. ORGANIZATION; POWER AND AUTHORITY. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and is duly qualified as a foreign
corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
has the corporate power and authority to own or hold under lease the properties
it purports to own or hold under lease, to transact the business it transacts
and proposes to transact, to execute and deliver this Agreement and the Notes
and to perform the provisions hereof and thereof.

         SECTION 5.2. AUTHORIZATION, ETC. This Agreement and the Notes have been
duly authorized by all necessary corporate action on the part of the Company,
and this Agreement constitutes, and upon execution and delivery thereof each
Note will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (ii) general

                                      -5-

<Page>

principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

         SECTION 5.3. DISCLOSURE. The Company, through its agent, Banc of
America Securities LLC, has delivered to each Purchaser a copy of a Private
Placement Memorandum, dated April 16, 2001 (the "MEMORANDUM"), relating to the
transactions contemplated hereby. The Memorandum fairly describes, in all
material respects, the general nature of the business and principal properties
of the Company and its Subsidiaries. The documents, certificates or other
writings delivered to the Purchasers by or on behalf of the Company in
connection with the transactions contemplated hereby and the financial
statements listed in Schedule 5.5, taken as a whole, do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading in light of the circumstances under
which they were made. Except as disclosed in the financial statements listed in
Schedule 5.5, since May 31, 2000, there has been no change in the financial
condition, operations, business, properties or prospects of the Company or any
of its Subsidiaries except changes that individually or in the aggregate could
not reasonably be expected to have a Material Adverse Effect. There is no fact
Known to the Company that could reasonably be expected to have a Material
Adverse Effect.

         SECTION 5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES;
AFFILIATES. (a) Schedule 5.4 contains (except as noted therein) complete and
correct lists (i) of the Company's Restricted and Unrestricted Subsidiaries,
showing, as to each Subsidiary, the correct name thereof, the jurisdiction of
its organization, and the percentage of shares of each class of its capital
stock or similar equity interests outstanding owned by the Company and each
other Subsidiary, (ii) of the Company's Affiliates, other than Subsidiaries,
(iii) of the Company's directors and senior officers and (iv) Investments
permitted pursuant to paragraph (d) of the definition of "Restricted
Investments".

         (b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company
and its Subsidiaries have been validly issued, are fully paid and nonassessable
and are owned by the Company or another Subsidiary free and clear of any Lien
(except as otherwise disclosed in Schedule 5.4).

         (c) Each Subsidiary identified in Schedule 5.4 is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each such Subsidiary has the corporate or other power and
authority to own or hold under lease the properties it purports to own or hold
under lease and to transact the business it transacts and proposes to transact.

         (d) No Subsidiary is a party to, or otherwise subject to, any legal
restriction or any agreement (other than this Agreement and customary
limitations imposed by corporate law statutes) restricting the ability of such
Subsidiary to pay dividends out of profits or make any other similar
distributions of profits to the Company or any of its Subsidiaries that owns
outstanding shares of capital stock or similar equity interests of such
Subsidiary.

                                      -6-

<Page>

         SECTION 5.5. FINANCIAL STATEMENTS. The Company has delivered to each
Purchaser copies of the financial statements of the Company and its Subsidiaries
listed on Schedule 5.5. All of said financial statements (including in each case
the related schedules and notes) fairly present in all material respects the
consolidated financial position of the Company and its Subsidiaries as of the
respective dates specified in such financial statements and the consolidated
results of their operations and cash flows for the respective periods so
specified and have been prepared in accordance with GAAP consistently applied
throughout the periods involved except as set forth in the notes thereto
(subject, in the case of any interim financial statements, to normal year-end
adjustments).

         SECTION 5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The
execution, delivery and performance by the Company of this Agreement and the
Notes will not (a) contravene, result in any breach of, or constitute a default
under, or result in the creation of any Lien in respect of any property of the
Company or any Restricted Subsidiary under, any indenture, mortgage, deed of
trust, loan, purchase or credit agreement, lease, corporate charter or by-laws,
or other Material agreement or instrument to which the Company or any Restricted
Subsidiary is bound or by which the Company or any Restricted Subsidiary or any
of their respective properties may be bound or affected, (b) conflict with or
result in a breach of any of the terms, conditions or provisions of any order,
judgment, decree, or ruling of any court, arbitrator or Governmental Authority
applicable to the Company or any Restricted Subsidiary or (c) violate any
provision of any statute or other rule or regulation of any Governmental
Authority applicable to the Company or any Restricted Subsidiary.

         SECTION 5.7. GOVERNMENTAL AUTHORIZATIONS, ETC. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by the Company of this Agreement or the Notes.

         SECTION 5.8. LITIGATION; OBSERVANCE OF STATUTES AND ORDERS. (a) There
are no actions, suits or proceedings pending or, to the Knowledge of the
Company, threatened against or affecting the Company or any Subsidiary or any
property of the Company or any Subsidiary in any court or before any arbitrator
of any kind or before or by any Governmental Authority that, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect.

         (b) Neither the Company nor any Subsidiary is in default under any term
of any agreement or instrument to which it is a party or by which it is bound,
or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance, rule
or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.

         SECTION 5.9. TAXES. The Company and its Subsidiaries have filed all tax
returns that are required to have been filed in any jurisdiction, and have paid
all taxes shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent, except for any returns or taxes and assessments (a)
the filing or amount of which is not individually or in the aggregate Material
or (b) the amount, applicability

                                      -7-

<Page>

or validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the Company or a Subsidiary, as the case
may be, has established adequate reserves in accordance with GAAP. The Company
knows of no basis for any other tax or assessment that could reasonably be
expected to have a Material Adverse Effect. The charges, accruals and reserves
on the books of the Company and its Subsidiaries in respect of Federal, state or
other taxes for all fiscal periods are adequate. The Federal income tax
liabilities of the Company and its Subsidiaries have been determined by the
Internal Revenue Service and paid for all fiscal years up to and including the
fiscal year ended May 31, 1997.

         SECTION 5.10. TITLE TO PROPERTY; LEASES. The Company and its Restricted
Subsidiaries have good and sufficient title to their respective properties that
they own or purport to own and that individually or in the aggregate are
Material, including all such properties reflected in the most recent audited
balance sheet referred to in Section 5.5 or purported to have been acquired by
the Company or any Restricted Subsidiary after said date (except as sold or
otherwise disposed of in the ordinary course of business), in each case free and
clear of Liens prohibited by this Agreement. All leases that individually or in
the aggregate are Material are valid and subsisting and are in full force and
effect in all Material respects. The property of Unrestricted Subsidiaries is
not material individually or in the aggregate in relationship to the property of
the Company and its Subsidiaries on a consolidated basis, and the aggregate cash
flow attributable to Unrestricted Subsidiaries is not material in relationship
to the cash flow of the Company and its Subsidiaries on a consolidated basis.

         SECTION 5.11. LICENSES, PERMITS, ETC.

                  (a) the Company and its Restricted Subsidiaries own or possess
         all licenses, permits, franchises, authorizations, patents, copyrights,
         service marks, trademarks and trade names, or rights thereto, that
         individually or in the aggregate are Material, without Known conflict
         with the rights of others except for those conflicts, that,
         individually or in the aggregate, could not have a Material Adverse
         Effect;

                  (b) to the best Knowledge of the Company, no product of the
         Company or any of its Restricted Subsidiaries infringes in any Material
         respect any license, permit, franchise, authorization, patent,
         copyright, service mark, trademark, trade name or other right owned by
         any other Person; and

                  (c) to the best Knowledge of the Company, there is no Material
         violation by any Person of any right of the Company or any of its
         Restricted Subsidiaries with respect to any patent, copyright, service
         mark, trademark, trade name or other right owned or used by the Company
         or any of its Restricted Subsidiaries.

         SECTION 5.12. COMPLIANCE WITH ERISA. (a) The Company and each ERISA
Affiliate have operated and administered each Plan in compliance with all
applicable laws except for such instances of noncompliance as have not resulted
in and could not reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any ERISA Affiliate has incurred any liability pursuant
to Title I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans (as defined in Section 3 of ERISA), and no
event, transaction or

                                      -8-

<Page>

condition has occurred or exists that could reasonably be expected to result in
the incurrence of any such liability by the Company or any ERISA Affiliate, or
in the imposition of any Lien on any of the rights, properties or assets of the
Company or any ERISA Affiliate, in either case pursuant to Title I or IV of
ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or
412 of the Code, other than such liabilities or Liens as could not be
individually or in the aggregate Material.

         (b) The present value of the aggregate benefit liabilities under each
of the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities. The Company has no present intent to
terminate any Plan, and, accordingly, each Plan is evaluated as a continuing
Plan. The term "BENEFIT LIABILITIES" has the meaning specified in Section 4001
of ERISA and the terms "CURRENT VALUE" and "PRESENT VALUE" have the meanings
specified in Section 3 of ERISA.

         (c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
Section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.

         (d) Except as set forth in Note 6 to the Company's financial statements
for its fiscal year ended May 31, 2000, the expected post-retirement benefit
obligation (determined as of the last day of the Company's most recently ended
fiscal year in accordance with Financial Accounting Standards Board Statement
No. 106, without regard to liabilities attributable to continuation coverage
mandated by Section 4980B of the Code) of the Company and its Subsidiaries is
not Material.

         (e) The execution and delivery of this Agreement and the issuance and
sale of the Notes hereunder will not involve any transaction that is subject to
the prohibitions of Section 406 of ERISA or in connection with which a tax could
be imposed pursuant to Section 4975(c)(1)(A)-(D) of the Code. The representation
by the Company in the first sentence of this Section 5.12(e) is made in reliance
upon and subject to the accuracy of each Purchaser's representation in Section
6.2 as to the sources of the funds to be used to pay the purchase price of the
Notes to be purchased by such Purchaser.

         SECTION 5.13. PRIVATE OFFERING BY THE COMPANY. Neither the Company nor
anyone acting on its behalf has, in the six months preceding Closing, offered
the Series 2001-A Notes or any similar securities for sale to, or solicited any
offer to buy any of the same from, or otherwise approached or negotiated in
respect thereof with, any Person other than not more than 62 Institutional
Investors (including the Purchasers), each of which has been offered the Series
2001-A Notes at a private sale for investment. Neither the Company nor anyone
acting on its behalf has taken, or will take, any action that would subject the
issuance or sale of the Notes to the registration requirements of Section 5 of
the Securities Act.

         SECTION 5.14. USE OF PROCEEDS; MARGIN REGULATIONS. The Company will
apply the proceeds of the sale of the Notes to repay existing indebtedness of
the Company and its Restricted

                                      -9-

<Page>

Subsidiaries and to other general corporate purposes. No part of the proceeds
from the sale of the Notes hereunder will be used, directly or indirectly, for
the purpose of buying or carrying any margin stock within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System (12 CFR
221), or for the purpose of buying or carrying or trading in any securities
under such circumstances as to involve the Company in a violation of Regulation
X of said Board (12 CFR 224) or to involve any broker or dealer in a violation
of Regulation T of said Board (12 CFR 220). The Company does not presently have,
and has no present intention to acquire, legal or beneficial ownership of any
margin stock. As used in this Section, the terms "MARGIN STOCK" and "PURPOSE OF
BUYING OR CARRYING" shall have the meanings assigned to them in said Regulation
U.

         SECTION 5.15. EXISTING DEBT; FUTURE LIENS. (a) Schedule 5.15 sets forth
a complete and correct list of all outstanding Debt of the Company and its
Restricted Subsidiaries as of February 28, 2001, since which date there has been
no Material change in the amounts, interest rates, sinking funds, installment
payments or maturities of the Debt of the Company or its Restricted
Subsidiaries. Neither the Company nor any Restricted Subsidiary is in default
and no waiver of default is currently in effect, in the payment of any principal
or interest on any Debt of the Company or such Restricted Subsidiary, the
outstanding aggregate principal amount of which exceeds $5,000,000, and no event
or condition exists with respect to any Debt of the Company or any Restricted
Subsidiary, the outstanding aggregate principal amount of which exceeds
$5,000,000, that would permit (or that with notice or the lapse of time, or
both, would permit) one or more Persons to cause such Debt to become due and
payable before its stated maturity or before its regularly scheduled dates of
payment.

         (b) Except as disclosed in Schedule 5.15, neither the Company nor any
Restricted Subsidiary has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property, whether
now owned or hereafter acquired, to be subject to a Lien not permitted by
Section 10.4.

         SECTION 5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC. Neither the sale
of the Notes by the Company hereunder nor its use of the proceeds thereof will
violate the Trading with the Enemy Act, as amended, or any of the foreign assets
control regulations of the United States Treasury Department (31 CFR, Subtitle
B, Chapter V, as amended) or any enabling legislation or executive order
relating thereto.

         SECTION 5.17. STATUS UNDER CERTAIN STATUTES. Neither the Company nor
any Subsidiary is an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended, or is subject
to regulation under the Public Utility Holding Company Act of 1935, as amended,
the ICC Termination Act of 1995, as amended, or the Federal Power Act, as
amended.

         SECTION 5.18. ENVIRONMENTAL MATTERS. Neither the Company nor any
Restricted Subsidiary has Knowledge of any liability or has received any notice
of any liability, and no proceeding has been instituted raising any liability
against the Company or any of its Restricted Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Laws,

                                      -10-

<Page>

except, in each case, such as could not reasonably be expected to result in a
Material Adverse Effect individually or in the aggregate. Except as otherwise
disclosed to you in writing:

                  (a) neither the Company nor any Restricted Subsidiary has
         Knowledge of any facts which would give rise to any liability, public
         or private, for violation of Environmental Laws or damage to the
         environment emanating from, occurring on or in any way related to real
         properties now or formerly owned, leased or operated by any of them or
         to other assets or their use, except, in each case, such as could not
         reasonably be expected to result in a Material Adverse Effect;

                  (b) neither the Company nor any of its Restricted Subsidiaries
         has stored any Hazardous Materials on real properties now or formerly
         owned, leased or operated by any of them or has disposed of any
         Hazardous Materials in a manner contrary to any Environmental Laws in
         each case in any manner that could reasonably be expected to result in
         a Material Adverse Effect; and

                  (c) all buildings on all real properties now owned, leased or
         operated by the Company or any of its Restricted Subsidiaries are in
         compliance with applicable Environmental Laws, except where failure to
         comply could not reasonably be expected to result in a Material Adverse
         Effect.

SECTION 6. REPRESENTATIONS OF EACH PURCHASER.

         SECTION 6.1. PURCHASE FOR INVESTMENT. Each Purchaser represents that it
has received a copy of the Memorandum and that it is purchasing the Series
2001-A Notes for its own account or for one or more separate accounts maintained
by it or for the account of one or more pension or trust funds and not with a
view to the distribution thereof, provided that the disposition of such
Purchaser's or such pension or trust funds' property shall at all times be
within such Purchaser's or such pension or trust funds' control. Each Purchaser
understands that the Series 2001-A Notes have not been registered under the
Securities Act and may be resold only if registered pursuant to the provisions
of the Securities Act or if an exemption from registration is available, except
under circumstances where neither such registration nor such an exemption is
required by law, and that the Company is not required to register the Series
2001-A Notes.

         SECTION 6.2. SOURCE OF FUNDS. Each Purchaser represents that at least
one of the following statements is an accurate representation as to each source
of funds (a "SOURCE") to be used by it to pay the purchase price of the Series
2001-A Notes to be purchased by it hereunder:

                  (a) the Source is an "insurance company general account"
         within the meaning of Department of Labor Prohibited Transaction
         Exemption ("PTE") 95-60 (issued July 12, 1995) and there is no employee
         benefit plan, treating as a single plan, all plans maintained by the
         same employer or employee organization, with respect to which the
         amount of the general account reserves and liabilities for all
         contracts held by or on behalf of such plan, exceeds ten percent (10%)
         of the total reserves and liabilities of such general account
         (exclusive of separate account liabilities) plus surplus, as set forth
         in the NAIC Annual Statement for such Purchaser most recently filed
         with such Purchaser's state of domicile; or

                                      -11-

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                  (b) the Source is either (i) an insurance company pooled
         separate account, within the meaning of PTE 90-1 (issued January 29,
         1990), or (ii) a bank collective investment fund, within the meaning of
         the PTE 91-38 (issued July 12, 1991) and, except as such Purchaser has
         disclosed to the Company in writing pursuant to this paragraph (b), no
         employee benefit plan or group of plans maintained by the same employer
         or employee organization beneficially owns more than 10% of all assets
         allocated to such pooled separate account or collective investment
         fund; or

                  (c) the Source constitutes assets of an "investment fund"
         (within the meaning of Part V of the QPAM Exemption) managed by a
         "qualified professional asset manager" or "QPAM" (within the meaning of
         Part V of the QPAM Exemption), no employee benefit plan's assets that
         are included in such investment fund, when combined with the assets of
         all other employee benefit plans established or maintained by the same
         employer or by an affiliate (within the meaning of Section V(c)(1) of
         the QPAM Exemption) of such employer or by the same employee
         organization and managed by such QPAM, exceed 20% of the total client
         assets managed by such QPAM, the conditions of Part I(c) and (g) of the
         QPAM Exemption are satisfied, neither the QPAM nor a person controlling
         or controlled by the QPAM (applying the definition of "control" in
         Section V(e) of the QPAM Exemption) owns a 5% or more interest in the
         Company and (i) the identity of such QPAM and (ii) the names of all
         employee benefit plans whose assets are included in such investment
         fund have been disclosed to the Company in writing pursuant to this
         paragraph (c); or

                  (d) the Source is a governmental plan; or

                  (e) the Source is one or more employee benefit plans, or a
         separate account or trust fund comprised of one or more employee
         benefit plans, each of which has been identified to the Company in
         writing pursuant to this paragraph (e); or

                  (f) the Source does not include assets of any employee benefit
         plan, other than a plan exempt from the coverage of ERISA; or

                  (g) the Source is an insurance company separate account
         maintained solely in connection with the fixed contractual obligations
         of the insurance company under which the amounts payable, or credited,
         to any employee benefit plan (or its related trust) and to any
         participant or beneficiary of such plan (including any annuitant) are
         not affected in any manner by the investment performance of the
         separate account.

If any Purchaser or any Additional Purchaser or any subsequent transferee of the
Notes indicates that such Purchaser or any Additional Purchaser or such
transferee is relying on any representation contained in paragraph (b), (c) or
(e) above, the Company shall deliver on the date of issuance of such Notes and
on the date of any applicable transfer a certificate, which shall (if true)
either state that (i) it is neither a party in interest nor a "disqualified
person" (as defined in Section 4975(e)(2) of the Code), with respect to any plan
identified pursuant to paragraphs (b) or (e) above, or (ii) with respect to any
plan, identified pursuant to paragraph (c) above, neither it nor any "affiliate"
(as defined in Section V(c) of the QPAM Exemption) has at such time, and during
the immediately preceding one year, exercised the authority to appoint or
terminate said QPAM as

                                      -12-

<Page>

manager of any plan identified in writing pursuant to paragraph (c) above or to
negotiate the terms of said QPAM's management agreement on behalf of any such
identified plan. As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN",
"GOVERNMENTAL PLAN", "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have the
respective meanings assigned to such terms in Section 3 of ERISA.

SECTION 7. INFORMATION AS TO COMPANY.

         SECTION 7.1. FINANCIAL AND BUSINESS INFORMATION. The Company shall
deliver to each holder of Notes that is an Institutional Investor:

                  (a) QUARTERLY STATEMENTS -- within 60 days after the end of
         each quarterly fiscal period in each fiscal year of the Company (other
         than the last quarterly fiscal period of each such fiscal year),
         duplicate copies of,

                           (i) an unaudited consolidated balance sheet of the
                  Company and its Subsidiaries as at the end of such quarter,
                  and

                           (ii) unaudited consolidated statements of income,
                  changes in shareholders' equity and cash flows of the Company
                  and its Subsidiaries, for such quarter and (in the case of the
                  second and third quarters) for the portion of the fiscal year
                  ending with such quarter,

         setting forth in each case in comparative form the figures for the
         corresponding periods in the previous fiscal year, all in reasonable
         detail, prepared in accordance with GAAP applicable to quarterly
         financial statements generally, and certified by a Senior Financial
         Officer as fairly presenting, in all material respects, the financial
         position of the companies being reported on and their results of
         operations and cash flows, subject to changes resulting from normal,
         recurring year-end adjustments, PROVIDED that delivery within the time
         period specified above of copies of the Company's Quarterly Report on
         Form 10-Q prepared in compliance with the requirements therefor and
         filed with the Securities and Exchange Commission shall be deemed to
         satisfy the requirements of this Section 7.1(a);

                  (b) ANNUAL STATEMENTS -- within 105 days after the end of each
         fiscal year of the Company, duplicate copies of,

                           (i) a consolidated balance sheet of the Company and
                  its Subsidiaries, as at the end of such year, and

                           (ii) consolidated statements of income, changes in
                  shareholders' equity and cash flows of the Company and its
                  Subsidiaries, for such year,

         setting forth in each case in comparative form the figures for the
         previous fiscal year, all in reasonable detail, prepared in accordance
         with GAAP, and accompanied by an opinion thereon of independent
         certified public accountants of recognized national standing, which
         opinion shall state that such financial statements present fairly, in
         all material respects, the

                                      -13-

<Page>

         financial position of the companies being reported upon and their
         results of operations and cash flows and have been prepared in
         conformity with GAAP, and that the examination of such accountants in
         connection with such financial statements has been made in accordance
         with generally accepted auditing standards, and that such audit
         provides a reasonable basis for such opinion in the circumstances,
         PROVIDED that the delivery within the time period specified above of
         the Company's Annual Report on Form 10-K for such fiscal year (together
         with the Company's annual report to shareholders, if any, prepared
         pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance
         with the requirements therefor and filed with the Securities and
         Exchange Commission shall be deemed to satisfy the requirements of this
         Section 7.1(b);

                  (c) SEC AND OTHER REPORTS -- promptly upon their becoming
         available, one copy of (i) each financial statement, report, notice or
         proxy statement sent by the Company or any Subsidiary to public
         securities holders generally, and (ii) each regular or periodic report,
         each registration statement (without exhibits except as expressly
         requested by such holder), and each prospectus and all amendments
         thereto filed by the Company or any Subsidiary with the Securities and
         Exchange Commission and of all press releases and other statements made
         available generally by the Company or any Subsidiary to the public
         concerning developments that are Material (but excluding trade and
         commercial announcements);

                  (d) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- within five
         Business Days after a Responsible Officer becoming aware of the
         existence of any Default or Event of Default or that any Person has
         given any notice or taken any action with respect to a claimed default
         hereunder or that any Person has given any notice or taken any action
         with respect to a claimed default of the type referred to in Section
         11(f), a written notice specifying the nature and period of existence
         thereof and what action the Company is taking or proposes to take with
         respect thereto;

                  (e) ERISA MATTERS -- within five Business Days after a
         Responsible Officer becoming aware of any of the following, a written
         notice setting forth the nature thereof and the action, if any, that
         the Company or an ERISA Affiliate proposes to take with respect
         thereto:

                           (i) with respect to any Plan, any reportable event,
                  as defined in section 4043(b) of ERISA and the regulations
                  thereunder, for which notice thereof has not been waived
                  pursuant to such regulations as in effect on the date hereof;
                  or

                           (ii) the taking by the PBGC of steps to institute, or
                  the threatening by the PBGC of the institution of, proceedings
                  under section 4042 of ERISA for the termination of, or the
                  appointment of a trustee to administer, any Plan, or the
                  receipt by the Company or any ERISA Affiliate of a notice from
                  a Multiemployer Plan that such action has been taken by the
                  PBGC with respect to such Multiemployer Plan; or

                                      -14-

<Page>

                           (iii) any event, transaction or condition that could
                  result in the incurrence of any liability by the Company or
                  any ERISA Affiliate pursuant to Title I or IV of ERISA or the
                  penalty or excise tax provisions of the Code relating to
                  employee benefit plans, or in the imposition of any Lien on
                  any of the rights, properties or assets of the Company or any
                  ERISA Affiliate pursuant to Title I or IV of ERISA or such
                  penalty or excise tax provisions, if such liability or Lien,
                  taken together with any other such liabilities or Liens then
                  existing, could reasonably be expected to have a Material
                  Adverse Effect;

                  (f) NOTICES FROM GOVERNMENTAL AUTHORITY -- within 30 Business
         Days of receipt thereof, copies of any notice to the Company or any
         Subsidiary from any Federal or state Governmental Authority relating to
         any order, ruling, statute or other law or regulation that could
         reasonably be expected to have a Material Adverse Effect;

                  (g) SUPPLEMENTS -- within 10 Business Days after the execution
         and delivery of any Supplement, a copy thereof;

                  (h) REQUESTED INFORMATION -- with reasonable promptness, such
         other data and information relating to the business, operations,
         affairs, financial condition, assets or properties of the Company or
         any of its Restricted Subsidiaries or relating to the ability of the
         Company to perform its obligations hereunder and under the Notes as
         from time to time may be reasonably requested by any such holder of
         Notes that is an Institutional Investor; and

                  (i) UNRESTRICTED SUBSIDIARIES -- In the event that one or more
         Unrestricted Subsidiaries shall either (i) account for more than 10% of
         the total consolidated assets of the Company and its Subsidiaries, or
         (ii) account for more than 10% of the consolidated sales of the Company
         and its Subsidiaries, determined in each case in accordance with GAAP,
         then, within the respective periods provided in Sections 7.1(a) and
         (b), above, the Company shall deliver to each holder of Notes that is
         an Institutional Investor, financial statements of the character and
         for the dates and periods as in said Sections 7.1(a) and (b) covering
         all Unrestricted Subsidiaries (on a combined basis), together with a
         consolidating statement reflecting eliminations or adjustments required
         to reconcile the financial statements of such Unrestricted Subsidiaries
         to the financial statements delivered pursuant to Sections 7.1(a) and
         (b).

         SECTION 7.2. OFFICER'S CERTIFICATE. Each set of financial statements
delivered to a holder of Notes that is an Institutional Investor pursuant to
Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a certificate of
a Senior Financial Officer setting forth:

                  (a) COVENANT COMPLIANCE -- the information (including detailed
         calculations) required in order to establish whether the Company was in
         compliance with the requirements of Section 10.1 through Section 10.6
         hereof, inclusive, during the quarterly or annual period covered by the
         statements then being furnished (including with respect to each such
         Section, where applicable, the calculations of the maximum or minimum
         amount,

                                      -15-

<Page>

         ratio or percentage, as the case may be, permissible under the terms of
         such Sections, and the calculation of the amount, ratio or percentage
         then in existence); and

                  (b) EVENT OF DEFAULT -- a statement that such officer has
         reviewed the relevant terms hereof and has made, or caused to be made,
         under his or her supervision, a review of the transactions and
         conditions of the Company and its Subsidiaries from the beginning of
         the quarterly or annual period covered by the statements then being
         furnished to the date of the certificate and that such officer has no
         Knowledge of the existence during such period of any condition or event
         that constitutes a Default or an Event of Default or, if any such
         condition or event existed or exists (including, without limitation,
         any such event or condition resulting from the failure of the Company
         or any Subsidiary to comply with any Environmental Law), specifying the
         nature and period of existence thereof and what action the Company
         shall have taken or proposes to take with respect thereto.

         SECTION 7.3. INSPECTION. The Company shall permit each holder of Notes
that is an Institutional Investor:

                  (a) NO DEFAULT -- if no Default or Event of Default then
         exists, at the expense of such holder and upon reasonable prior notice
         to the Company, to visit the principal executive office of the Company,
         to discuss the affairs, finances and accounts of the Company and its
         Restricted Subsidiaries with the Company's officers, and (with the
         consent of the Company, which consent will not be unreasonably
         withheld) its independent public accountants, and (with the consent of
         the Company, which consent will not be unreasonably withheld) to visit
         the other offices and properties of the Company and each Restricted
         Subsidiary, all at such reasonable times and as often as may be
         reasonably requested in writing; and

                  (b) DEFAULT -- if a Default or Event of Default then exists,
         at the expense of the Company, to visit and inspect any of the offices
         or properties of the Company or any Restricted Subsidiary, to examine
         all their respective books of account, records, reports and other
         papers, to make copies and extracts therefrom, and to discuss their
         respective affairs, finances and accounts with their respective
         officers and independent public accountants (and by this provision the
         Company authorizes said accountants to discuss the affairs, finances
         and accounts of the Company and its Subsidiaries), all at such times
         and as often as may be requested.

SECTION 8. PREPAYMENT OF THE NOTES.

         SECTION 8.1. NO SCHEDULED PREPAYMENTS OF THE SERIES 2001-A NOTES. The
entire principal amount of each Tranche of the Series 2001-A Notes is payable at
their respective maturity dates.

         SECTION 8.2. OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT. The Company
may, at its option, upon notice as provided below, prepay at any time all, or
from time to time any part of, the Notes of any Series, in an amount not less
than $5,000,000 in the case of a partial prepayment, at 100% of the principal
amount so prepaid, together with interest accrued thereon to the date of such
prepayment, plus the Make-Whole Amount determined for the prepayment date with
respect to

                                      -16-

<Page>

such principal amount of each Note of the applicable Series then outstanding.
The Company will give each holder of Notes of the Series to be prepaid written
notice of each optional prepayment under this Section 8.2 not less than 30 days
and not more than 60 days prior to the date fixed for such prepayment. Each such
notice shall specify such date, the aggregate principal amount of the Notes and
each Series of Notes to be prepaid on such date, the principal amount of each
Note held by such holder to be prepaid (determined in accordance with Section
8.3), and the interest to be paid on the prepayment date with respect to such
principal amount being prepaid, and shall be accompanied by a certificate of a
Senior Financial Officer as to the estimated Make-Whole Amount due in connection
with such prepayment (calculated as if the date of such notice were the date of
the prepayment), setting forth the details of such computation. Two Business
Days prior to such prepayment, the Company shall deliver to each holder of Notes
of the Series to be prepaid a certificate of a Senior Financial Officer
specifying the calculation of such Make-Whole Amount as of the specified
prepayment date.

         SECTION 8.3. ALLOCATION OF PARTIAL PREPAYMENTS. In the case of each
partial prepayment of the Notes pursuant to the provisions of Section 8.2, the
principal amount of the Notes of the Series to be prepaid shall be allocated
among all of the Notes of such Series at the time outstanding in proportion, as
nearly as practicable, to the respective unpaid principal amounts thereof. All
regularly scheduled partial prepayments made with respect to each Tranche of any
Additional Series of Notes pursuant to any Supplement shall be allocated as
provided therein.

         SECTION 8.4. MATURITY; SURRENDER, ETC. In the case of each prepayment
of Notes pursuant to this Section 8, the principal amount of each Note to be
prepaid shall mature and become due and payable on the date fixed for such
prepayment, together with interest on such principal amount accrued to such date
and the applicable Make-Whole Amount, if any. From and after such date, unless
the Company shall fail to pay such principal amount when so due and payable,
together with the interest and Make-Whole Amount, if any, as aforesaid, interest
on such principal amount shall cease to accrue. Any Note paid or prepaid in full
shall be surrendered to the Company and cancelled and shall not be reissued, and
no Note shall be issued in lieu of any prepaid principal amount of any Note.

         SECTION 8.5. PURCHASE OF NOTES. The Company will not and will not
permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly
or indirectly, any of the outstanding Notes except (a) upon the payment or
prepayment of the Notes in accordance with the terms of this Agreement
(including any Supplement hereto) and the Notes or (b) pursuant to an offer to
purchase made by the Company or an Affiliate pro rata to the holders of all
Notes at the time outstanding upon the same terms and conditions. Any such offer
shall provide each holder with sufficient information to enable it to make an
informed decision with respect to such offer, and shall remain open for at least
20 Business Days. If the holders of more than 10% of the principal amount of the
Notes then outstanding accept such offer, the Company shall promptly notify the
remaining holders of such fact and the expiration date for the acceptance by
holders of Notes of such offer shall be extended by the number of days necessary
to give each such remaining holder at least 10 Business Days from its receipt of
such notice to accept such offer. The Company will promptly cancel all Notes
acquired by it or any Affiliate pursuant to any payment, prepayment or purchase
of Notes pursuant to any provision of this Agreement and no Notes may be issued
in substitution or exchange for any such Notes.

                                      -17-

<Page>

         SECTION 8.6. MAKE-WHOLE AMOUNT FOR SERIES 2001-A NOTES. The term
"MAKE-WHOLE AMOUNT" means, with respect to any Series 2001-A Note, an amount
equal to the excess, if any, of the Discounted Value of the Remaining Scheduled
Payments with respect to the Called Principal of such Note over the amount of
such Called Principal, PROVIDED that the Make-Whole Amount may in no event be
less than zero. For the purposes of determining the Make-Whole Amount, the
following terms have the following meanings:

                  "CALLED PRINCIPAL" means, with respect to any Series 2001-A
         Note, the principal of such Note that is to be prepaid pursuant to
         Section 8.2 or 8.7 or has become or is declared to be immediately due
         and payable pursuant to Section 12.1, as the context requires.

                  "DISCOUNTED VALUE" means, with respect to the Called Principal
         of any Series 2001-A Note, the amount obtained by discounting all
         Remaining Scheduled Payments with respect to such Called Principal from
         their respective scheduled due dates to the Settlement Date with
         respect to such Called Principal, in accordance with accepted financial
         practice and at a discount factor (applied on the same periodic basis
         as that on which interest on the Series 2001-A Notes is payable) equal
         to the Reinvestment Yield with respect to such Called Principal.

                  "REINVESTMENT YIELD" means, with respect to the Called
         Principal of any Note, the sum of 0.5% plus the yield to maturity
         implied by (i) the yields reported, as of 10:00 A.M. (New York City
         time) on the second Business Day preceding the Settlement Date with
         respect to such Called Principal, on the display designated as "PX-1"
         on the Bloomberg Financial Market Screen (or such other display as may
         replace "PX-1" on the Bloomberg Financial Market Screen) for actively
         traded U.S. Treasury securities having a maturity equal to the
         Remaining Average Life of such Called Principal as of such Settlement
         Date, or (ii) if such yields are not reported as of such time or the
         yields reported as of such time are not ascertainable, the Treasury
         Constant Maturity Series Yields reported, for the latest day for which
         such yields have been so reported as of the second Business Day
         preceding the Settlement Date with respect to such Called Principal, in
         Federal Reserve Statistical Release H.15 (519) (or any comparable
         successor publication) for actively traded U.S. Treasury securities
         having a constant maturity equal to the Remaining Average Life of such
         Called Principal as of such Settlement Date. Such implied yield will be
         determined, if necessary, by (a) converting U.S. Treasury bill
         quotations to bond-equivalent yields in accordance with accepted
         financial practice and (b) interpolating linearly between (1) the
         actively traded U.S. Treasury security with the maturity closest to and
         greater than the Remaining Average Life and (2) the actively traded
         U.S. Treasury security with the maturity closest to and less than the
         Remaining Average Life.

                  "REMAINING AVERAGE LIFE" means, with respect to any Called
         Principal, the number of years (calculated to the nearest one-twelfth
         year) obtained by dividing (i) such Called Principal into (ii) the sum
         of the products obtained by multiplying (a) the principal component of
         each Remaining Scheduled Payment with respect to such Called Principal
         by (b) the number of years (calculated to the nearest one-twelfth year)
         that will elapse between the Settlement Date with respect to such
         Called Principal and the scheduled due date of such Remaining Scheduled
         Payment.

                                      -18-

<Page>

                  "REMAINING SCHEDULED PAYMENTS" means, with respect to the
         Called Principal of any Series 2001-A Note, all payments of such Called
         Principal and interest thereon that would be due after the Settlement
         Date with respect to such Called Principal if no payment of such Called
         Principal were made prior to its scheduled due date, PROVIDED that if
         such Settlement Date is not a date on which interest payments are due
         to be made under the terms of the Series 2001-A Notes, then the amount
         of the next succeeding scheduled interest payment will be reduced by
         the amount of interest accrued to such Settlement Date and required to
         be paid on such Settlement Date pursuant to Section 8.2, 8.7 or 12.1.

                  "SETTLEMENT DATE" means, with respect to the Called Principal
         of any Series 2001-A Note, the date on which such Called Principal is
         to be prepaid pursuant to Section 8.2 or 8.7 or has become or is
         declared to be immediately due and payable pursuant to Section 12.1, as
         the context requires.

         SECTION 8.7. CHANGE IN CONTROL.

         (a) NOTICE OF CHANGE IN CONTROL OR CONTROL EVENT. The Company will,
within fifteen Business Days after it obtains Knowledge of the occurrence of any
Change in Control or Control Event, give written notice of such Change in
Control or Control Event to each holder of Notes unless notice in respect of
such Change in Control (or the Change in Control contemplated by such Control
Event) shall have been given pursuant to subparagraph (b) of this Section 8.7.
If a Change in Control has occurred, such notice shall contain and constitute an
offer to prepay Notes as described in subparagraph (c) of this Section 8.7 and
shall be accompanied by the certificate described in subparagraph (g) of this
Section 8.7.

         (b) CONDITION TO COMPANY ACTION. The Company will not take any action
that consummates a Change in Control unless (i) at least 30 days prior to such
action it shall have given to each holder of Notes written notice containing and
constituting an offer to prepay Notes as described in subparagraph (c) of this
Section 8.7, accompanied by the certificate described in subparagraph (g) of
this Section 8.7, and (ii) (unless such offer shall have been rescinded in
accordance with subparagraph (f) of this Section 8.7) contemporaneously with
such action, it prepays all Notes required to be prepaid in accordance with this
Section 8.7.

         (c) OFFER TO PREPAY NOTES. The offer to prepay Notes contemplated by
subparagraphs (a) and (b) of this Section 8.7 shall be an offer to prepay, in
accordance with and subject to this Section 8.7, all, but not less than all, the
Notes held by each holder (in this case only, "holder" in respect of any Note
registered in the name of a nominee for a disclosed beneficial owner shall mean
such beneficial owner) on a date specified in such offer (the "PROPOSED
PREPAYMENT DATE"). If such Proposed Prepayment Date is in connection with an
offer contemplated by subparagraph (a) of this Section 8.7, such date shall be
not less than 30 days and not more than 60 days after the date of such offer (if
the Proposed Prepayment Date shall not be specified in such offer, the Proposed
Prepayment Date shall be the 30th day after the date of such offer).

         (d) REJECTION. A holder of Notes may reject the offer to prepay made
pursuant to this Section 8.7 by causing a notice of such rejection to be
delivered to the Company at least 15 days prior to the Proposed Prepayment Date.
A failure by a holder of Notes to respond to an offer to

                                      -19-

<Page>

prepay made pursuant to this Section 8.7 shall be deemed to constitute an
acceptance of such offer by such holder.

         (e) PREPAYMENT. Prepayment of the Notes to be prepaid pursuant to this
Section 8.7 shall be the unpaid principal amount of such Notes, plus the
Make-Whole Amount determined for the date of prepayment with respect to such
principal amount, together with interest on such Notes accrued and unpaid to the
date of prepayment. The prepayment shall be made on the Proposed Prepayment Date
except as provided in subparagraph (f) of this Section 8.7.

         (f) DEFERRAL OR RESCISSION OF PREPAYMENT. (i) The obligation of the
Company to prepay Notes pursuant to the offers required by subparagraph (b) and
accepted in accordance with subparagraph (d) of this Section 8.7 is subject to
the occurrence of the Change in Control in respect of which such offers and
acceptances shall have been made. In the event that such Change in Control does
not occur on or before the Proposed Prepayment Date in respect thereof, the
prepayment shall be deferred until, and shall be made on the date on which, such
Change in Control occurs. The Company shall keep each holder of Notes reasonably
and timely informed of (i) any such deferral of the date of prepayment, (ii) the
date on which such Change in Control and the prepayment are expected to occur,
and (iii) any determination by the Company that efforts to effect such Change in
Control have ceased or been abandoned (in which case the offers and acceptances
made pursuant to this Section 8.7 in respect of such Change in Control shall be
deemed rescinded).

         (ii) The obligation of the Company to prepay Notes pursuant to the
offers required by subparagraph (b) and accepted in accordance with subparagraph
(d) of this Section 8.7 shall be deemed to have been rescinded in the event
that, on or before the Proposed Prepayment Date, the Holders have received
satisfactory evidence that the Notes have been accorded a rating of Investment
Grade or better by both Rating Agencies, after giving effect on a pro forma
basis to the consummation of the Change in Control and all other events and
transactions that are conditions to the Change in Control or are to occur in
connection therewith.

         (g) OFFICER'S CERTIFICATE. Each offer to prepay the Notes pursuant to
this Section 8.7 shall be accompanied by a certificate, executed by a Senior
Financial Officer of the Company and dated the date of such offer, specifying:
(i) the Proposed Prepayment Date; (ii) that such offer is made pursuant to this
Section 8.7; (iii) the principal amount of each Note offered to be prepaid; (iv)
the estimated Make-Whole Amount due in connection with such prepayment
(calculated as if the date of such notice were the date of the prepayment),
setting forth the details of such computation; (v) the interest that would be
due on each Note offered to be prepaid, accrued to the Proposed Prepayment Date;
and (vi) in reasonable detail, the nature and date or proposed date of the
Change in Control. Two Business Days prior to such prepayment, the Company shall
deliver to each holder of Notes which has accepted or is deemed to have accepted
the Company's offer to prepay the Notes a certificate of a Senior Financial
Officer specifying the calculation of such Make-Whole Amount as of the specified
prepayment date.

         (h) "CHANGE IN CONTROL" DEFINED. "Change in Control" means the
occurrence of any one or more of the following events:

                                      -20-

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                  (i) any person (as such term is used in Section 13(d) of the
         Exchange Act) acquires beneficial ownership (as that term is defined in
         Rule 13d-3 under the Exchange Act), of more than 50% of the outstanding
         capital stock of the Company entitled to vote for the election of
         directors;

                  (ii) either (x) a merger or consolidation or other business
         combination of the Company with one or more other corporations as a
         result of which the beneficial owners of the outstanding voting stock
         of the Company immediately prior to such business combination
         beneficially own (either by remaining outstanding or by being converted
         into voting securities of the surviving or resulting corporation or any
         parent thereof) less than 60% of the outstanding voting stock of the
         Company or the surviving or resulting corporation or any parent thereof
         immediately after such merger or consolidation or business combination,
         or (y) 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

                  (iii) 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 (x) three
         directors, or (y) directors constituting a majority of the number of
         directors of the Company then in office.

         (i) "CONTROL EVENT" DEFINED. "CONTROL EVENT" means:

                  (i) the execution of any definitive written agreement which,
         when fully performed by the parties thereto, would result in a Change
         in Control, or

                  (ii) the making of any written offer by any person (as such
         term is used in section 13(d) and section 14(d)(2) of the Exchange Act
         as in effect on the date of the Closing) or related persons
         constituting a group (as such term is used in Rule 13d-5 under the
         Exchange Act as in effect on the date of the Closing) to the holders of
         the common stock of the Company, which offer, if accepted by the
         requisite number of holders, would result in a Change in Control.

SECTION 9. AFFIRMATIVE COVENANTS.

         The Company covenants that so long as any of the Notes are outstanding:

         SECTION 9.1. COMPLIANCE WITH LAW. The Company will, and will cause each
of its Subsidiaries to, comply with all laws, ordinances or governmental rules
or regulations to which each of them is subject, including, without limitation,
Environmental Laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective properties or to the conduct of
their respective businesses, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

                                      -21-

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         SECTION 9.2. INSURANCE. The Company will, and will cause each of its
Restricted Subsidiaries to, maintain, with financially sound and reputable
insurers, insurance with respect to their respective properties and businesses
against such casualties and contingencies, of such types, on such terms and in
such amounts (including deductibles, co-insurance and self-insurance, if
adequate reserves are maintained with respect thereto) as is customary in the
case of entities of established reputations engaged in the same or a similar
business and similarly situated.

         SECTION 9.3. MAINTENANCE OF PROPERTIES. The Company will, and will
cause each of its Restricted Subsidiaries to, maintain and keep, or cause to be
maintained and kept, their respective properties in good repair, working order
and condition (other than ordinary wear and tear), so that the business carried
on in connection therewith may be properly conducted at all times, provided that
this Section shall not prevent the Company or any Restricted Subsidiary from
discontinuing the operation and the maintenance of any of its properties if such
discontinuance is desirable in the conduct of its business and the Company has
concluded that such discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

         SECTION 9.4. PAYMENT OF TAXES. The Company will, and will cause each of
its Subsidiaries to, file all tax returns required to be filed in any
jurisdiction and to pay and discharge all taxes shown to be due and payable on
such returns and all other taxes, assessments, governmental charges, or levies
imposed on them or any of their properties, assets, income or franchises, to the
extent such taxes and assessments have become due and payable and before they
have become delinquent and all claims for which sums have become due and payable
that have or might become a Lien on properties or assets of the Company or any
Subsidiary, provided that neither the Company nor any Subsidiary need pay any
such tax or assessment or claims if (i) the amount, applicability or validity
thereof is contested by the Company or such Subsidiary on a timely basis in good
faith and in appropriate proceedings, and the Company or a Subsidiary has
established adequate reserves therefor in accordance with GAAP on the books of
the Company or such Subsidiary or (ii) the non-filing or nonpayment of all such
taxes and assessments in the aggregate could not reasonably be expected to have
a Material Adverse Effect.

         SECTION 9.5. CORPORATE EXISTENCE, ETC. Subject to Sections 10.5 and
10.6, the Company will at all times preserve and keep in full force and effect
its corporate existence, and will at all times preserve and keep in full force
and effect the corporate existence of each of its Restricted Subsidiaries
(unless merged into the Company or a Wholly-Owned Restricted Subsidiary) and all
rights and franchises of the Company and its Restricted Subsidiaries unless, in
the good faith judgment of the Company, the termination of or failure to
preserve and keep in full force and effect such corporate existence, right or
franchise could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.

SECTION 10. NEGATIVE COVENANTS.

         The Company covenants that so long as any of the Notes are outstanding:

         SECTION 10.1. CONSOLIDATED ADJUSTED NET WORTH. The Company will not, at
any time, permit Consolidated Adjusted Net Worth to be less than the sum of (a)
$230,000,000, plus (b) an aggregate amount equal to 25% of its Consolidated Net
Income (but without reduction for any loss

                                      -22-

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in any completed fiscal year or any fiscal quarter which is not part of a
completed fiscal year since February 28, 2000) for each completed fiscal quarter
beginning with the fiscal quarter ending May 31, 2001, plus (c) an aggregate
amount equal to 50% of the Net Proceeds of Capital Stock for the period
commencing with March 1, 2001 and ending with the date of determination.

         SECTION 10.2. CURRENT RATIO. The Company will not, at any time, permit
the ratio of Consolidated Current Assets to Consolidated Current Liabilities to
be less than 1.5 to 1.

         SECTION  10.3.   LIMITATIONS ON DEBT.

         (a) MAINTENANCE OF CONSOLIDATED DEBT. The Company will not at any time
permit Consolidated Debt to exceed 60% of Consolidated Total Capitalization as
of the then most recently ended fiscal quarter of the Company.

         (b) MAINTENANCE OF PRIORITY DEBT. The Company will not at any time
permit Priority Debt to exceed 10% of Consolidated Net Worth as of the then most
recently ended fiscal quarter of the Company.

         SECTION 10.4. LIENS. The Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly create, incur, assume or
permit to exist (upon the happening of a contingency or otherwise) any Lien on
or with respect to any property or asset (including, without limitation, any
document or instrument in respect of goods or accounts receivable) of the
Company or any such Restricted Subsidiary, whether now owned or held or
hereafter acquired, or any income or profits therefrom or assign or otherwise
convey any right to receive income or profits (unless it makes, or causes to be
made, effective provision whereby the Notes will be equally and ratably secured
with any and all other obligations thereby secured, such security to be pursuant
to an agreement reasonably satisfactory to the Required Holders and, in any such
case, the Notes shall have the benefit, to the fullest extent that, and with
such priority as, the holders of the Notes may be entitled under applicable law,
of an equitable Lien on such property), except:

                  (a) Liens for taxes, assessments or other governmental charges
         which are not yet due and payable or the payment of which is not at the
         time required by Section 9.4;

                  (b) statutory Liens of landlords and Liens of carriers,
         warehousemen, mechanics, materialmen and other similar Liens, in each
         case, incurred in the ordinary course of business and not in connection
         with borrowed money for sums not yet due and payable or the payment of
         which is being contested in good faith by appropriate proceedings ;

                  (c) Liens (other than any Lien imposed by ERISA) incurred or
         deposits made in the ordinary course of business (i) in connection with
         workers' compensation, unemployment insurance and other types of social
         security or retirement benefits, or (ii) to secure (or to obtain
         letters of credit that secure) the performance of tenders, statutory
         obligations, surety bonds, appeal bonds, bids, leases (other than
         Capital Leases), performance bonds, purchase, construction or sales
         contracts and other similar obligations,

                                      -23-

<Page>

         in each case not incurred or made in connection with the borrowing of
         money, the obtaining of advances or credit or the payment of the
         deferred purchase price of property;

                  (d) Liens securing Nonrecourse Debt incurred by the Company or
         any Restricted Subsidiary (or any Person in which the Company or any
         Restricted Subsidiary shall be the beneficial owner), PROVIDED that
         such Lien is restricted to aircraft and engines and the lease thereof
         to a Person other than the Company or a Restricted Subsidiary;

                  (e) any attachment or judgment Lien, unless the judgment it
         secures shall not, within 60 days after the entry thereof, have been
         discharged or execution thereof stayed pending appeal, or shall not
         have been discharged within 60 days after the expiration of any such
         stay or could not reasonably be expected to have a Material Adverse
         Effect;

                  (f) Liens on property or assets of the Company or any of its
         Restricted Subsidiaries securing Debt owing to the Company or to
         another Restricted Subsidiary;

                  (g) Liens existing on the date of this Agreement and securing
         the Debt of the Company and its Restricted Subsidiaries referred to in
         items 4, 5, 6, 10 and 11 of Schedule 5.15;

                  (h) leases or subleases (including aircraft or engine leases)
         granted to others, easements, rights-of-way, restrictions and other
         similar charges, encumbrances or survey exceptions, in each case
         incidental to, and not interfering with, the ordinary conduct of the
         business of the Company or any of its Restricted Subsidiaries, provided
         that such Liens do not, in the aggregate, Materially detract from the
         value of such property;

                  (i) the interest of the lessor of any property subject to a
         lease (other than a Capitalized Lease) of such property under which the
         Company or any Restricted Subsidiary is lessee, whether or not such
         interest is protected by a precautionary filing;

                  (j) any Lien existing on property of a Person immediately
         prior to its being consolidated with or merged into the Company or a
         Restricted Subsidiary or its becoming a Restricted Subsidiary, or any
         Lien existing on any property acquired by the Company or any Restricted
         Subsidiary at the time such property is so acquired (whether or not the
         Debt secured thereby shall have been assumed), provided that (i) no
         such Lien shall have been created or assumed in contemplation of such
         consolidation or merger or such Person's becoming a Restricted
         Subsidiary or such acquisition of property, and (ii) each such Lien
         shall extend solely to the item or items of property so acquired and,
         if required by the terms of the instrument originally creating such
         Lien, other property which is an improvement to or is acquired for
         specific use in connection with such acquired property;

                  (k) any Lien created to secure all or any part of the purchase
         price, or to secure Debt incurred or assumed to pay all or any part of
         the purchase price or cost of construction, of property (or any
         improvement thereon) acquired or constructed by the Company or a
         Restricted Subsidiary after the date of the Closing, PROVIDED that

                                      -24-

<Page>

                           (i) any such Lien shall extend solely to the item or
                  items of such property (or improvement thereon) so acquired or
                  constructed and, if required by the terms of the instrument
                  originally creating such Lien, other property (or improvement
                  thereon) which is an improvement to or is acquired for
                  specific use in connection with such acquired or constructed
                  property (or improvement thereon) or which is real property
                  being improved by such acquired or constructed property (or
                  improvement thereon),

                           (ii) the principal amount of the Debt secured by any
                  such Lien shall at no time exceed an amount equal to the
                  lesser of (A) the cost to the Company or such Restricted
                  Subsidiary of the property (or improvement thereon) so
                  acquired or constructed and (B) the Fair Market Value (as
                  determined in good faith by a Senior Financial Officer of the
                  Company) of such property (or improvement thereon) at the time
                  of such acquisition or construction,

                           (iii) in the case of Inventory, the net book value,
                  net of applicable reserves, of all Inventory subject to such
                  Liens shall not at any time exceed 20% of the aggregate net
                  book value, net of applicable reserves, of all Inventory of
                  the Company and its Restricted Subsidiaries, and

                           (iv) any such Lien shall be created contemporaneously
                  with, or within 365 days after, the acquisition or
                  construction of such property;

                  (l) any Lien renewing, extending or refunding any Lien
         permitted by paragraphs (g), (j) and (k) of this Section 10.4, PROVIDED
         that (i) the principal amount of Debt secured by such Lien immediately
         prior to such extension, renewal or refunding is not increased or the
         maturity thereof reduced, (ii) such Lien is not extended to any other
         property, and (iii) immediately after such extension, renewal or
         refunding no Default or Event of Default would exist;

                  (m) Liens securing indebtedness incurred to finance the
         acquisition and improvement of the real property in Wood Dale,
         Illinois, used or to be used as the corporate headquarters of the
         Company, PROVIDED that (i) the aggregate principal amount of
         indebtedness secured by such Liens shall not exceed $25,000,000 at any
         time outstanding and (ii) any such Lien shall extend solely to the item
         or items of such property (or improvement thereon) so acquired or
         constructed and, if required by the terms of the instrument originally
         creating such Lien, other property (or improvement thereon) which is an
         improvement to or is acquired for specific use in connection with such
         acquired or constructed property (or improvement thereon) or which is
         real property being improved by such acquired or constructed property
         (or improvement thereon);

                  (n) Liens on notes or accounts receivable sold by the Company
         or any Restricted Subsidiary, PROVIDED that (i) such sale constitutes a
         "true sale" under GAAP, (ii) recourse to the Company and its Restricted
         Subsidiaries in connection with such sale shall be limited to the
         retained portion of the notes or accounts receivable and (iii) the

                                      -25-

<Page>

         unpaid principal amount of indebtedness secured by such Liens shall not
         exceed $50,000,000 at any time outstanding;

                  (o) Liens on property of the Company or any Restricted
         Subsidiary securing synthetic lease financing programs PROVIDED that
         the aggregate unpaid principal amount of such financings does not at
         any time exceed $79,000,000; and

                  (p) other Liens not otherwise permitted by paragraphs (a)
         through (o) of this Section, PROVIDED that the aggregate amount of
         Priority Debt of the Company shall not at any time exceed 10% of
         Consolidated Net Worth.

         SECTION 10.5. SALE OF ASSETS, ETC. Except as permitted under Section
10.6 the Company will not, and will not permit any of its Restricted
Subsidiaries to, make any Asset Disposition unless:

                  (a) in the good faith opinion of the Company, the Asset
         Disposition is in exchange for consideration having a Fair Market Value
         at least equal to that of the property exchanged and is in the best
         interest of the Company or such Restricted Subsidiary; and

                  (b) immediately after giving effect to the Asset Disposition,
         no Default or Event of Default would exist; and

                  (c) immediately after giving effect to the Asset Disposition,
         the Disposition Value of all property that was the subject of any Asset
         Disposition occurring in the then current fiscal year of the Company
         would not exceed 10% of Consolidated Assets as of the end of the then
         most recently ended fiscal year of the Company.

If the Net Proceeds Amount for any Transfer is applied to a Debt Prepayment
Application or a Property Reinvestment Application within 365 days after such
Transfer, then such Transfer, only for the purpose of determining compliance
with subsection (c) of this Section as of a date on or after the Net Proceeds
Amount is so applied, shall be deemed not to be an Asset Disposition.

         SECTION 10.6. MERGER, CONSOLIDATION, ETC. The Company will not, and
will not permit any of its Restricted Subsidiaries to, consolidate with or merge
with any other corporation or convey, transfer or lease substantially all of its
assets in a single transaction or series of transactions to any Person (except
that a Restricted Subsidiary of the Company may (x) consolidate with or merge
with, or convey, transfer or lease substantially all of its assets in a single
transaction or series of transactions to, the Company or another Restricted
Subsidiary of the Company or any other Person that will, after giving effect to
the consummation of such transaction or series of transactions, constitute a
Restricted Subsidiary and (y) convey, transfer or lease all of its assets in
compliance with the provisions of Section 10.5), PROVIDED that the foregoing
restriction does not apply to the consolidation or merger of the Company with,
or the conveyance, transfer or lease of substantially all of the assets of the
Company in a single transaction or series of transactions to, any Person so long
as:

                                      -26-

<Page>

                  (a) the successor formed by such consolidation or the survivor
         of such merger or the Person that acquires by conveyance, transfer or
         lease substantially all of the assets of the Company as an entirety, as
         the case may be (the "SUCCESSOR CORPORATION"), shall be a solvent
         corporation organized and existing under the laws of the United States
         of America, any State thereof or the District of Columbia;

                  (b) if the Company is not the Successor Corporation, such
         corporation shall have executed and delivered to each holder of Notes
         its assumption of the due and punctual performance and observance of
         each covenant and condition of this Agreement and the Notes (pursuant
         to such agreements and instruments as shall be reasonably satisfactory
         to the Required Holders), and the Company shall have caused to be
         delivered to each holder of Notes an opinion of nationally recognized
         independent counsel, or other independent counsel reasonably
         satisfactory to the Required Holders, to the effect that all agreements
         or instruments effecting such assumption are enforceable in accordance
         with their terms and comply with the terms hereof; and

                  (c) immediately after giving effect to such transaction no
         Default or Event of Default would exist.

No such conveyance, transfer or lease of substantially all of the assets of the
Company shall have the effect of releasing the Company or any Successor
Corporation from its liability under this Agreement or the Notes.

         SECTION 10.7 LINE OF BUSINESS. The Company will not, and will not
permit any of its Restricted Subsidiaries to, engage in any business if, as a
result, the general nature of the business in which the Company and its
Restricted Subsidiaries, taken as a whole, would then be engaged would be
substantially changed from the general nature of the business in which the
Company and its Restricted Subsidiaries, taken as a whole, are engaged on the
date of this Agreement as described in the Memorandum.

         SECTION 10.8. TRANSACTIONS WITH AFFILIATES. The Company will not and
will not permit any Restricted Subsidiary to enter into directly or indirectly
any Material transaction or Material group of related transactions (including
without limitation the purchase, lease, sale or exchange of properties of any
kind or the rendering of any service) with any Affiliate (other than the Company
or another Restricted Subsidiary), except in the ordinary course and pursuant to
the reasonable requirements of the Company's or such Restricted Subsidiary's
business and upon fair and reasonable terms no less favorable to the Company or
such Restricted Subsidiary than would be obtainable in a comparable arm's-length
transaction with a Person not an Affiliate.

         SECTION 10.9. DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES.
(a) The Board of Directors of the Company may designate any Unrestricted
Subsidiary as a Restricted Subsidiary and may designate any Restricted
Subsidiary as an Unrestricted Subsidiary, PROVIDED that (i) at such time and
immediately after giving effect thereto no Default or Event of Default shall
have occurred and be continuing, and (ii) the designation of such Subsidiary as
Restricted or Unrestricted shall not be changed pursuant to this Section 10.9 on
more than two occasions. The Company shall give written notice of such action to
each holder of a Note within 10 days after the

                                      -27-

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designation of any Subsidiary as Restricted or Unrestricted. Any Subsidiary
acquired or created by the Company after the date of this Agreement will be a
Restricted Subsidiary unless such Subsidiary shall be designated an Unrestricted
Subsidiary in accordance with this Section 10.9.

         (b) The Company acknowledges and agrees that if, after the date hereof,
any Person becomes a Restricted Subsidiary, all Debt, leases and other
obligations and all Liens and Investments of such Person existing as of the date
such Person becomes a Restricted Subsidiary shall be deemed, for all purposes of
this Agreement, to have been incurred, entered into, made or created at the same
time such Person so becomes a Restricted Subsidiary.

SECTION 11. EVENTS OF DEFAULT.

         An "EVENT OF DEFAULT" shall exist if any of the following conditions or
events shall occur and be continuing:

                  (a) the Company defaults in the payment of any principal or
         Make-Whole Amount, if any, on any Note when the same becomes due and
         payable, whether at maturity or at a date fixed for prepayment or by
         declaration or otherwise; or

                  (b) the Company defaults in the payment of any interest on any
         Note for more than five Business Days after the same becomes due and
         payable; or

                  (c) the Company defaults in the performance of or compliance
         with any term contained in Section 7.1(d), Section 10.1, Section 10.2,
         Section 10.3, Section 10.5 or Section 10.6; or

                  (d) the Company defaults in the performance of or compliance
         with any term contained herein or in any Supplement (other than those
         referred to in paragraphs (a), (b) and (c) of this Section 11) and such
         default is not remedied within 30 days after the earlier of (i) a
         Responsible Officer obtaining Knowledge of such default and (ii) the
         Company receiving written notice of such default from any holder of a
         Note (any such written notice to be identified as a "notice of default"
         and to refer specifically to this paragraph (d) of Section 11); or

                  (e) any representation or warranty made in writing by or on
         behalf of the Company or by any officer of the Company in this
         Agreement or any Supplement or in any writing furnished in connection
         with the transactions contemplated hereby proves to have been false or
         incorrect in any Material respect on the date as of which made; or

                  (f) (i) the Company or any Significant Subsidiary is in
         default (as principal or as guarantor or other surety) in one or more
         payments of any combination aggregating $100,000 or more of any
         principal of or premium or make-whole amount or interest on any
         Recourse Debt that is outstanding in an aggregate principal amount
         equal to or greater than 5% of Consolidated Net Worth beyond any period
         of grace provided with respect thereto, or (ii) the Company or any
         Significant Subsidiary is in default in the performance of or
         compliance with any term of any evidence of any Recourse Debt in an
         aggregate

                                      -28-

<Page>

         outstanding principal amount equal to or greater than 5% of
         Consolidated Net Worth or of any mortgage, indenture or other agreement
         relating thereto or any other condition exists, and as a consequence of
         such default or condition such Recourse Debt has become, or has been
         declared (or one or more Persons are entitled to declare such Recourse
         Debt to be), due and payable before its stated maturity or before its
         regularly scheduled dates of payment, or (iii) as a consequence of the
         occurrence or continuation of any event or condition (other than the
         passage of time or the right of the holder of Recourse Debt to convert
         such Recourse Debt into equity interests), (x) the Company or any
         Significant Subsidiary has become obligated to purchase or repay Debt
         before its regular maturity or before its regularly scheduled dates of
         payment in an aggregate outstanding principal amount equal to or
         greater than 5% of Consolidated Net Worth, or (y) one or more Persons
         have the right to require the Company or any Significant Subsidiary so
         to purchase or repay such Recourse Debt; or

                  (g) the Company or any Significant Subsidiary (i) is generally
         not paying, or admits in writing its inability to pay, its debts as
         they become due, (ii) files, or consents by answer or otherwise to the
         filing against it of, a petition for relief or reorganization or
         arrangement or any other petition in bankruptcy, for liquidation or to
         take advantage of any bankruptcy, insolvency, reorganization,
         moratorium or other similar law of any jurisdiction, (iii) makes an
         assignment for the benefit of its creditors, (iv) consents to the
         appointment of a custodian, receiver, trustee or other officer with
         similar powers with respect to it or with respect to any substantial
         part of its property, (v) is adjudicated as insolvent or to be
         liquidated, or (vi) takes corporate action for the purpose of any of
         the foregoing; or

                  (h) a court or governmental authority of competent
         jurisdiction enters an order appointing, without consent by the Company
         or any of its Significant Subsidiaries, a custodian, receiver, trustee
         or other officer with similar powers with respect to it or with respect
         to any substantial part of its property, or constituting an order for
         relief or approving a petition for relief or reorganization or any
         other petition in bankruptcy or for liquidation or to take advantage of
         any bankruptcy or insolvency law of any jurisdiction, or ordering the
         dissolution, winding-up or liquidation of the Company or any of its
         Significant Subsidiaries, or any such petition shall be filed against
         the Company or any of its Significant Subsidiaries and such petition
         shall not be dismissed within 60 days; or

                  (i) a final judgment or judgments for the payment of money in
         an amount equal to or greater than 5% of Consolidated Net Worth in the
         aggregate outstanding at any time are rendered against one or more of
         the Company and its Significant Subsidiaries and which judgments are
         not, within 60 days after entry thereof, bonded, discharged or stayed
         pending appeal, or are not discharged within 60 days after the
         expiration of such stay; or

                  (j) If (i) any Plan shall fail to satisfy the minimum funding
         standards of ERISA or the Code for any plan year or part thereof or a
         waiver of such standards or extension of any amortization period is
         sought or granted under Section 412 of the Code, (ii) a notice of
         intent to terminate any Plan shall have been or is reasonably expected
         to be filed with the PBGC or the PBGC shall have instituted proceedings
         under Section 4042 of

                                      -29-

<Page>

         ERISA to terminate or appoint a trustee to administer any Plan or the
         PBGC shall have notified the Company or any ERISA Affiliate that a Plan
         may become a subject of any such proceedings, (iii) the aggregate
         "amount of unfunded benefit liabilities" (within the meaning of Section
         4001(a)(18) of ERISA) under all Plans, determined in accordance with
         Title IV of ERISA, shall equal or exceed an amount equal to 5% of
         Consolidated Net Worth, (iv) the Company or any ERISA Affiliate shall
         have incurred or is reasonably expected to incur any liability pursuant
         to Title I or IV of ERISA or the penalty or excise tax provisions of
         the Code relating to employee benefit plans, (v) the Company or any
         ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the
         Company or any Subsidiary establishes or amends any employee welfare
         benefit plan that provides post-employment welfare benefits in a manner
         that would increase the liability of the Company or any Subsidiary
         thereunder; and any such event or events described in clauses (i)
         through (vi) above, either individually or together with any other such
         event or events, could reasonably be expected to have a Material
         Adverse Effect.

As used in Section 11(j), the terms "EMPLOYEE BENEFIT PLAN" and "EMPLOYEE
WELFARE BENEFIT PLAN" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.

SECTION 12. REMEDIES ON DEFAULT, ETC.

         SECTION 12.1. ACCELERATION. (a) If an Event of Default with respect to
the Company described in paragraph (g) or (h) of Section 11 has occurred, all
the Notes of every Series then outstanding shall automatically become
immediately due and payable.

         (b) If any other Event of Default has occurred and is continuing, any
holder or holders of more than 50% in principal amount of the Notes of any
Series at the time outstanding may at any time at its or their option, by notice
or notices to the Company, declare all the Notes of such Series then outstanding
to be immediately due and payable.

         (c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing with respect to any Series of Notes,
any holder or holders of Notes at the time outstanding affected by such Event of
Default may at any time, at its or their option, by notice or notices to the
Company, declare all the Notes of such Series held by it or them to be
immediately due and payable.

         Upon any Note's becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Note will forthwith mature and the
entire unpaid principal amount of such Note, plus (i) all accrued and unpaid
interest thereon and (ii) the Make-Whole Amount determined in respect of such
principal amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.

                                      -30-

<Page>

         SECTION 12.2. OTHER REMEDIES. If any Default or Event of Default has
occurred and is continuing, and irrespective of whether any Notes have become or
have been declared immediately due and payable under Section 12.1, the holder of
any Note at the time outstanding may proceed to protect and enforce the rights
of such holder by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein or in any Note, or for an injunction against a violation of any of the
terms hereof or thereof, or in aid of the exercise of any power granted hereby
or thereby or by law or otherwise.

         SECTION 12.3. RESCISSION. At any time after any Notes of any Series
have been declared due and payable pursuant to clause (b) or (c) of Section
12.1, the holders of not less than 50% in principal amount of the Notes of such
Series then outstanding, by written notice to the Company, may rescind and annul
any such declaration and its consequences as to such Series if (a) the Company
has paid all overdue interest on the Notes of such Series, all principal of and
Make-Whole Amount, if any, on any Notes of such Series that are due and payable
and are unpaid other than by reason of such declaration, and all interest on
such overdue principal and Make-Whole Amount, if any, and (to the extent
permitted by applicable law) any overdue interest in respect of the Notes of
such Series, at the Default Rate, (b) all Events of Default and Defaults, other
than non-payment of amounts that have become due solely by reason of such
declaration, have been cured or have been waived pursuant to Section 17, and (c)
no judgment or decree has been entered for the payment of any monies due
pursuant hereto or to any Notes. No rescission and annulment under this Section
12.3 will extend to or affect any subsequent Event of Default or Default or
impair any right consequent thereon.

         SECTION 12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC. No
course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any holder thereof shall
be exclusive of any other right, power or remedy referred to herein or therein
or now or hereafter available at law, in equity, by statute or otherwise.
Without limiting the obligations of the Company under Section 15, the Company
will pay to the holder of each Note on demand such further amount as shall be
sufficient to cover all costs and expenses of such holder incurred in any
enforcement or collection under this Section 12, including, without limitation,
reasonable attorneys' fees, expenses and disbursements.

SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

         SECTION 13.1. REGISTRATION OF NOTES. The Company shall keep at its
principal executive office a register for the registration and registration of
transfers of Notes, maintained separately by Series and Tranche. The name and
address of each holder of one or more Notes, each transfer thereof and the name
and address of each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer, the Person in
whose name any Note shall be registered shall be deemed and treated as the owner
and holder thereof for all purposes hereof, and the Company shall not be
affected by any notice or knowledge to the contrary. The Company shall give to
any holder of a Note that is an Institutional Investor promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.

                                      -31-

<Page>

         SECTION 13.2. TRANSFER AND EXCHANGE OF NOTES. Upon surrender of any
Note at the principal executive office of the Company for registration of
transfer or exchange (and in the case of a surrender for registration of
transfer, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of such Note or its attorney duly authorized
in writing and accompanied by the address for notices of each transferee of such
Note or part thereof), the Company shall execute and deliver, at the Company's
expense (except as provided below), one or more new Notes (as requested by the
holder thereof) of an identical Series (and of an identical Tranche if such
Series has separate Tranches) in exchange therefor, in an aggregate principal
amount equal to the unpaid principal amount of the surrendered Note. Each such
new Note shall be payable to such Person as such holder may request and shall be
substantially in the form of the Note of such Series and Tranche originally
issued hereunder or pursuant to any Supplement. Each such new Note shall be
dated and bear interest from the date to which interest shall have been paid on
the surrendered Note or dated the date of the surrendered Note if no interest
shall have been paid thereon. The Company may require payment of a sum
sufficient to cover any stamp tax or governmental charge imposed in respect of
any such transfer of Notes. Notes shall not be transferred in denominations of
less than $250,000, PROVIDED that if necessary to enable the registration of
transfer by a holder of its entire holding of Notes in a Series or Tranche, one
Note may be in a denomination of less than $250,000. Any transferee, by its
acceptance of a Note registered in its name (or the name of its nominee), shall
be deemed to have made the representation set forth in Section 6.2, PROVIDED
that such holder may (in reliance upon information provided by the Company,
which shall not be unreasonably withheld) make a representation to the effect
that the purchase by such holder of any Note will not constitute a non-exempt
prohibited transaction under Section 406(a) of ERISA.

         SECTION 13.3. REPLACEMENT OF NOTES. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note (which evidence shall be, in the case of
an Institutional Investor, notice from such Institutional Investor of such
ownership and such loss, theft, destruction or mutilation), and

                  (a) in the case of loss, theft or destruction, of indemnity
         reasonably satisfactory to it (PROVIDED that if the holder of such Note
         is, or is a nominee for, an original Purchaser or another holder of a
         Note with a minimum net worth of at least $1,000,000, such Person's own
         unsecured agreement of indemnity shall be deemed to be satisfactory),
         or

                  (b) in the case of mutilation, upon surrender and cancellation
         thereof,

the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note of an identical Series (and of an identical Tranche if such Series has
separate Tranches), dated and bearing interest from the date to which interest
shall have been paid on such lost, stolen, destroyed or mutilated Note or dated
the date of such lost, stolen, destroyed or mutilated Note if no interest shall
have been paid thereon.

SECTION 14. PAYMENTS ON NOTES.

         SECTION 14.1. PLACE OF PAYMENT. Subject to Section 14.2, payments of
principal, Make-Whole Amount, if any, and interest becoming due and payable on
the Notes shall be made in

                                      -32-

<Page>

Chicago, Illinois at the principal office of Bank of America in such
jurisdiction. The Company may at any time, by notice to each holder of a Note,
change the place of payment of the Notes so long as such place of payment shall
be either the principal office of the Company in such jurisdiction or the
principal office of a bank or trust company in such jurisdiction.

         SECTION 14.2. HOME OFFICE PAYMENT. So long as any Purchaser or such
Purchaser's nominee shall be the holder of any Note, and notwithstanding
anything contained in Section 14.1 or in such Note to the contrary, the Company
will pay all sums becoming due on such Note for principal, Make-Whole Amount, if
any, and interest by the method and at the address specified for such purpose
for such Purchaser on Schedule A hereto or Schedule A attached to any
Supplement, or by such other method or at such other address as such Purchaser
shall have from time to time specified to the Company in writing for such
purpose, without the presentation or surrender of such Note or the making of any
notation thereon, except that upon written request of the Company made
concurrently with or reasonably promptly after payment or prepayment in full of
any Note, such Purchaser shall surrender such Note for cancellation, reasonably
promptly after any such request, to the Company at its principal executive
office or at the place of payment most recently designated by the Company
pursuant to Section 14.1. Prior to any sale or other disposition of any Note
held by any Purchaser or such Purchaser's nominee such Purchaser will, at its
election, either endorse thereon the amount of principal paid thereon and the
last date to which interest has been paid thereon or surrender such Note to the
Company in exchange for a new Note or Notes pursuant to Section 13.2. The
Company will afford the benefits of this Section 14.2 to any Institutional
Investor that is the direct or indirect transferee of any Note.

SECTION 15. EXPENSES, ETC.

         SECTION 15.1. TRANSACTION EXPENSES. Whether or not the transactions
contemplated hereby are consummated, the Company will pay all reasonable costs
and expenses (including reasonable attorneys' fees of one special counsel)
incurred by the Purchasers and each other holder of a Note in connection with
such transactions and in connection with any amendments, waivers or consents
under or in respect of this Agreement (including any Supplement) or the Notes
(whether or not such amendment, waiver or consent becomes effective), including,
without limitation: (a) the costs and expenses incurred in enforcing or
defending (or determining whether or how to enforce or defend) any rights under
this Agreement (including any Supplement) or the Notes or in responding to any
subpoena or other legal process or informal investigative demand issued in
connection with this Agreement (including any Supplement) or the Notes, or by
reason of being a holder of any Note, and (b) the costs and expenses, including
financial advisors' fees, incurred in connection with the insolvency or
bankruptcy of the Company or any Subsidiary or in connection with any work-out
or restructuring of the transactions contemplated hereby and by the Notes. The
Company will pay, and will save each Purchaser and each other holder of a Note
harmless from, all claims in respect of any fees, costs or expenses if any, of
brokers and finders (other than those retained by the Purchasers).

         SECTION 15.2. SURVIVAL. The obligations of the Company under this
Section 15 will survive the payment or transfer of any Note, the enforcement,
amendment or waiver of any provision of this Agreement, any Supplement or the
Notes, and the termination of this Agreement or any Supplement.

                                      -33-

<Page>

SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT .

         All representations and warranties contained herein or in any
Supplement shall survive the execution and delivery of this Agreement, such
Supplement and the Notes, the purchase or transfer by any Purchaser or any
Additional Purchaser of any Note or portion thereof or interest therein and may
be relied upon by any subsequent holder of a Note, regardless of any
investigation made at any time by or on behalf of any Purchaser or any
Additional Purchaser or any other holder of a Note. All statements contained in
any certificate or other instrument delivered by or on behalf of the Company
pursuant to this Agreement or any Supplement shall be deemed representations and
warranties of the Company under this Agreement. Subject to the preceding
sentence, this Agreement (including every Supplement) and the Notes embody the
entire agreement and understanding between the Purchasers and the Additional
Purchasers and the Company and supersede all prior agreements and understandings
relating to the subject matter hereof.

SECTION 17. AMENDMENT AND WAIVER.

         SECTION 17.1. REQUIREMENTS. (a) This Agreement (including any
Supplement) and the Notes may be amended, and the observance of any term hereof
or of the Notes may be waived (either retroactively or prospectively), with (and
only with) the written consent of the Company and the holders of Notes holding
more than 50% in aggregate principal amount of the Notes of all Series at the
time outstanding, except that (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it
is used therein), will be effective as to any Purchaser unless consented to by
such Purchaser in writing, and (b) no such amendment or waiver may, without the
written consent of the all of the holders of Notes of any Tranche at the time
outstanding affected thereby, (i) subject to the provisions of Section 12
relating to acceleration or rescission, change the amount or time of any
prepayment or payment of principal of, or reduce the rate or change the time of
payment or method of computation of interest or of the Make-Whole Amount on, the
Notes of such Tranche, (ii) change the percentage of the principal amount of the
Notes of such Tranche, the holders of such Tranche which are required to consent
to any such amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b),
12, 17 or 20.

         (b) SUPPLEMENTS. Notwithstanding anything to the contrary contained
herein, the Company may enter into any Supplement providing for the issuance of
one or more Series of Additional Notes consistent with Sections 2.2 and 4.11
hereof without obtaining the consent of any holder of any other Series of Notes.

         SECTION 17.2. SOLICITATION OF HOLDERS OF NOTES.

         (a) SOLICITATION. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof, any Supplement or of the Notes. The Company will deliver executed or
true and correct copies of each amendment, waiver or consent effected pursuant
to the provisions of this Section 17 to each holder of outstanding Notes
promptly following the date on which it is executed and delivered by, or
receives the consent or approval of, the requisite holders of Notes.

                                      -34-

<Page>

         (b) PAYMENT. The Company will not directly or indirectly pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes of any waiver or amendment of any of the terms and provisions hereof or
any Supplement unless such remuneration is concurrently paid, or security is
concurrently granted, on the same terms, ratably to each holder of Notes then
outstanding even if such holder did not consent to such waiver or amendment.

         SECTION 17.3. BINDING EFFECT, ETC. Any amendment or waiver consented to
as provided in this Section 17 applies equally to all holders of Notes and is
binding upon them and upon each future holder of any Note and upon the Company
without regard to whether such Note has been marked to indicate such amendment
or waiver. No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or waived
or impair any right consequent thereon. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note. As used herein, the term "this Agreement" and references thereto shall
mean this Agreement as it may from time to time be amended or supplemented.

         SECTION 17.4. NOTES HELD BY COMPANY, ETC. Solely for the purpose of
determining whether the holders of the requisite percentage of the aggregate
principal amount of Notes then outstanding approved or consented to any
amendment, waiver or consent to be given under this Agreement or the Notes, or
have directed the taking of any action provided herein or in the Notes to be
taken upon the direction of the holders of a specified percentage of the
aggregate principal amount of Notes of such Tranche or Series then outstanding,
Notes of such Tranche or Series directly or indirectly owned by the Company or
any of its Affiliates shall be deemed not to be outstanding.

SECTION 18. NOTICES.

         All notices and communications provided for hereunder shall be in
writing and sent (a) by telefacsimile if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:

                  (i) if to a Purchaser or such Purchaser's nominee, to such
         Purchaser or such Purchaser's nominee at the address specified for such
         communications in Schedule A to this Agreement or any Supplement, or at
         such other address as such Purchaser or such Purchaser's nominee shall
         have specified to the Company in writing,

                  (ii) if to any other holder of any Note, to such holder at
         such address as such other holder shall have specified to the Company
         in writing, or

                                      -35-

<Page>

                  (iii) if to the Company, to the Company at its address set
         forth at the beginning hereof to the attention of Chief Financial
         Officer, or at such other address as the Company shall have specified
         to the holder of each Note in writing.

Notices under this Section 18 will be deemed given only when actually received.

SECTION 19. REPRODUCTION OF DOCUMENTS.

         This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by each Purchaser at the Closing (except the
Notes themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to each Purchaser, may be
reproduced by such Purchaser by any photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process and such Purchaser
may destroy any original document so reproduced. The Company agrees and
stipulates that, to the extent permitted by applicable law, any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by such Purchaser in the
regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence. This
Section 19 shall not prohibit the Company or any other holder of Notes from
contesting any such reproduction to the same extent that it could contest the
original, or from introducing evidence to demonstrate the inaccuracy of any such
reproduction.

SECTION 20. CONFIDENTIAL INFORMATION.

         For the purposes of this Section 20, "CONFIDENTIAL INFORMATION" means
information delivered to any Purchaser by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is confidential or proprietary in nature and
that was clearly marked or labeled or otherwise adequately identified when
received by such Purchaser as being confidential information of the Company or
such Subsidiary, PROVIDED that such term does not include information that
(a) was publicly known or otherwise known to such Purchaser prior to the time
of such disclosure, (b) subsequently becomes publicly known through no act or
omission by such Purchaser or any Person acting on such Purchaser's behalf,
(c) otherwise becomes known to such Purchaser from any Person not subject to a
confidentiality obligation or in violation thereof other than through disclosure
by the Company or any Subsidiary or (d) constitutes financial statements
delivered to such Purchaser under Section 7.1 that are otherwise publicly
available. Each Purchaser will maintain the confidentiality of such Confidential
Information in accordance with procedures adopted by such Purchaser in good
faith to protect confidential information of third parties delivered to such
Purchaser, PROVIDED that such Purchaser may deliver or disclose Confidential
Information to (i) such Purchaser's directors, trustees, officers, employees,
agents, attorneys and affiliates (to the extent such disclosure reasonably
relates to the administration of the investment represented by such Purchaser's
Notes), (ii) such Purchaser's financial advisors and other professional advisors
who agree to hold confidential the Confidential Information substantially in
accordance with the terms of this Section 20, (iii) any other holder of any
Note, (iv) any Institutional Investor to which such Purchaser sells or offers to
sell such Note or any part thereof or any participation

                                      -36-

<Page>

therein (if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section 20), (v)
any Person from which such Purchaser offers to purchase any security of the
Company (if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section 20), (vi)
any federal or state regulatory authority having jurisdiction over such
Purchaser, (vii) the National Association of Insurance Commissioners or any
similar organization, or any nationally recognized rating agency that requires
access to information about such Purchaser's investment portfolio, or (viii) any
other Person to which such delivery or disclosure may be necessary or
appropriate (w) to effect compliance with any law, Rule, regulation or order
applicable to such Purchaser, (x) in response to any subpoena or other legal
process, (y) in connection with any litigation to which such Purchaser is a
party or (z) if an Event of Default has occurred and is continuing, to the
extent such Purchaser may reasonably determine such delivery and disclosure to
be necessary or appropriate in the enforcement or for the protection of the
rights and remedies under such Purchaser's Notes and this Agreement. Each holder
of a Note, by its acceptance of a Note, will be deemed to have agreed to be
bound by and to be entitled to the benefits of this Section 20 as though it were
a party to this Agreement. On reasonable request by the Company in connection
with the delivery to any holder of a Note of information required to be
delivered to such holder under this Agreement or requested by such holder (other
than a holder that is a party to this Agreement or its nominee), such holder
will enter into an agreement with the Company embodying the provisions of this
Section 20.

SECTION 21. SUBSTITUTION OF PURCHASER.

         Each Purchaser shall have the right to substitute any one of such
Purchaser's Affiliates as the purchaser of the Notes that such Purchaser has
agreed to purchase hereunder, by written notice to the Company, which notice
shall be signed by both such Purchaser and such Purchaser's Affiliate, shall
contain such Affiliate's agreement to be bound by this Agreement and shall
contain a confirmation by such Affiliate of the accuracy with respect to it of
the representations set forth in Section 6. Upon receipt of such notice,
wherever the word "Purchaser" is used in this Agreement (other than in this
Section 21), such word shall be deemed to refer to such Affiliate in lieu of
such Purchaser. In the event that such Affiliate is so substituted as a
purchaser hereunder and such Affiliate thereafter transfers to such Purchaser
all of the Notes then held by such Affiliate, upon receipt by the Company of
notice of such transfer, wherever the word "Purchaser" is used in this Agreement
(other than in this Section 21), such word shall no longer be deemed to refer to
such Affiliate, but shall refer to such Purchaser, and such Purchaser shall have
all the rights of an original holder of the Notes under this Agreement.

SECTION 22. MISCELLANEOUS.

         SECTION 22.1. SUCCESSORS AND ASSIGNS. All covenants and other
agreements contained in this Agreement (including all covenants and other
agreements contained in any Supplement) by or on behalf of any of the parties
hereto bind and inure to the benefit of their respective successors and assigns
(including, without limitation, any subsequent holder of a Note) whether so
expressed or not.

                                      -37-

<Page>

         SECTION 22.2. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of principal
of or Make-Whole Amount or interest on any Note that is due on a date other than
a Business Day shall be made on the next succeeding Business Day without
including the additional days elapsed in the computation of the interest payable
on such next succeeding Business Day.

         SECTION 22.3. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.

         SECTION 22.4. CONSTRUCTION. Each covenant contained herein shall be
construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.

         SECTION 22.5. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies hereof, each signed by less than all, but together signed by
all, of the parties hereto.

         SECTION 22.6. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the law of the State of Illinois excluding choice-of-law principles of the law
of such State that would require the application of the laws of a jurisdiction
other than such State.

                                   * * * * *

                                      -38-

<Page>

The execution hereof by the Purchasers shall constitute a contract among the
Company and the Purchasers for the uses and purposes hereinabove set forth. This
Agreement may be executed in any number of counterparts, each executed
counterpart constituting an original but all together only one agreement.

                                        Very truly yours,

                                        AAR CORP.

                                        By /s/ Timothy J. Romenesko
                                           ------------------------------------
                                           Name: Timothy J. Romenesko
                                                -------------------------------
                                           Title: Vice President and Chief
                                                 ------------------------------
                                                  Financial Officer
                                                 ------------------------------

                                      -39-

<Page>

Accepted as of May 1, 2001              JOHN HANCOCK LIFE INSURANCE COMPANY

                                        By /s/ Paul E. Harris
                                          -------------------------------------
                                          Name: Paul E. Harris
                                          Title: Director

                                        SIGNATURE 5 L.P.

                                        By: John Hancock Life Insurance Company,
                                            as Portfolio Advisor

                                        By /s/ Paul E. Harris
                                          -------------------------------------
                                          Name: Paul E. Harris
                                          Title: Authorized Signatory

                                        JOHN HANCOCK VARIABLE LIFE INSURANCE
                                          COMPANY

                                        By /s/ Paul E. Harris
                                          -------------------------------------
                                          Name: Paul E. Harris
                                          Title: Authorized Signatory

                                        INVESTORS PARTNER LIFE INSURANCE
                                        COMPANY

                                        By /s/ Paul E. Harris
                                          -------------------------------------
                                          Name: Paul E. Harris
                                          Title: Authorized Signatory

                                      -40-
<Page>

                                        MINNESOTA LIFE INSURANCE COMPANY

                                        By: Advantus Capital Management, Inc.

                                            By /s/ Al Steinkopf
                                              ---------------------------------
                                              Name: Allen Steinkopf
                                              Title: Vice President

                                        INTER-STATE ASSURANCE COMPANY/LIFE &
                                          CAPITAL

                                        By: Advantus Capital Management, Inc.

                                            By /s/ Al Steinkopf
                                              ---------------------------------
                                              Name: Allen Steinkopf
                                              Title: Vice President

                                        FARM BUREAU LIFE INSURANCE COMPANY OF
                                          MICHIGAN

                                        By: Advantus Capital Management, Inc.

                                            By /s/ Al Steinkopf
                                              ---------------------------------
                                              Name: Allen Steinkopf
                                              Title: Vice President

                                        MTL INSURANCE COMPANY

                                        By: Advantus Capital Management, Inc.

                                            By /s/ Al Steinkopf
                                              ---------------------------------
                                              Name: Allen Steinkopf
                                              Title: Vice President

                                      -41-
<Page>

                                        AMERICAN REPUBLIC INSURANCE COMPANY

                                        By: Advantus Capital Management, Inc.

                                            By /s/ Sean M. O'Connell
                                              ---------------------------------
                                              Name: Sean M. O'Connell
                                              Title: Vice President

                                        UNITY MUTUAL LIFE INSURANCE COMPANY-
                                        ANNUITY PORTFOLIO

                                        By: Advantus Capital Management, Inc.

                                            By /s/ Sean M. O'Connell
                                              ---------------------------------
                                              Name: Sean M. O'Connell
                                              Title: Vice President

                                        FARM BUREAU MUTUAL INSURANCE
                                          COMPANY OF MICHIGAN

                                        By: Advantus Capital Management, Inc.

                                            By /s/ Sean M. O'Connell
                                              ---------------------------------
                                              Name: Sean M. O'Connell
                                              Title: Vice President

                                        GREAT WESTERN INSURANCE COMPANY

                                        By: Advantus Capital Management, Inc.

                                            By /s/ Sean M. O'Connell
                                              ---------------------------------
                                              Name: Sean M. O'Connell
                                              Title: Vice President

                                      -42-
<Page>

                                        NATIONWIDE LIFE INSURANCE COMPANY

                                        By /s/ Mark W. Poeppelman
                                          -------------------------------------
                                          Name: Mark W. Poeppelman
                                          Title: Associate Vice President

                                        NATIONWIDE LIFE AND ANNUITY INSURANCE
                                          COMPANY

                                        By /s/ Mark W. Poeppelman
                                          -------------------------------------
                                          Name: Mark W. Poeppelman
                                          Title: Associate Vice President

                                      -43-

<Page>

                                        AMERICAN FAMILY LIFE INSURANCE
                                          COMPANY

                                        By /s/ Phillip Hannifan
                                          -------------------------------------
                                          Name: Phillip Hannifan
                                          Title: Investment Director

                                      -44-
<Page>

                                        THE OHIO NATIONAL LIFE INSURANCE
                                          COMPANY

                                        By /s/ Michael A. Boedeker
                                          -------------------------------------
                                          Name: Michael A. Boedeker
                                          Title: Senior Vice President,
                                                 Investments

                                      -45-
<Page>

               INFORMATION RELATING TO COMMITMENTS AND PURCHASERS

               PURCHASER                                   COMMITMENT

<Table>
<Caption>
                                                        TRANCHE A1    TRANCHE A2
<S>                                                    <C>           <C>
JOHN HANCOCK LIFE INSURANCE COMPANY                                  $17,500,000

JOHN HANCOCK LIFE INSURANCE COMPANY                                    3,500,000

SIGNATURE 5 L.P.                                                       2,000,000

JOHN HANCOCK VARIABLE LIFE INSURANCE
  COMPANY                                                              1,750,000

INVESTORS PARTNER LIFE INSURANCE COMPANY                                 250,000

MINNESOTA LIFE INSURANCE COMPANY                                       7,500,000

INTER-STATE ASSURANCE COMPANY/LIFE &
  CAPITAL                                                              3,000,000

FARM BUREAU LIFE INSURANCE COMPANY OF
  MICHIGAN                                                             3,000,000

MTL INSURANCE COMPANY                                                  2,000,000

AMERICAN REPUBLIC INSURANCE COMPANY                                    1,500,000

UNITY MUTUAL LIFE INSURANCE COMPANY-ANNUITY
  PORTFOLIO                                                            1,000,000

FARM BUREAU MUTUAL INSURANCE COMPANY OF
  MICHIGAN                                                             1,000,000

GREAT WESTERN INSURANCE COMPANY                                        1,000,000

NATIONWIDE LIFE INSURANCE COMPANY                      $12,000,000

NATIONWIDE LIFE AND ANNUITY INSURANCE
  COMPANY                                                3,000,000

AMERICAN FAMILY LIFE INSURANCE COMPANY                   5,000,000     5,000,000

THE OHIO NATIONAL LIFE INSURANCE COMPANY                               5,000,000
                                                       -----------   -----------

TOTALS                                                 $20,000,000   $55,000,000
</Table>

                                   SCHEDULE A
                          (to Note Purchase Agreement)

<Page>

                       NAMES AND ADDRESSES OF PURCHASERS

JOHN HANCOCK LIFE INSURANCE COMPANY
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117

Payments

All payments on account of the Notes or other obligations in accordance with the
provisions thereof shall be made by bank wire transfer of immediately available
funds for credit, not later than 12 noon, Boston time, to:

        Fleet Boston
        ABA #011000390
        Boston, Massachusetts 02110
        Account of: John Hancock Life Insurance Company
                    Private Placement Collection Account
        Account Number 541-55417
        On Order of: [Name of Issuer and PPN Number]
        [Full name, interest rate and maturity date of the Notes or other
         obligations]

Notices

Contemporaneous with the above wire transfer, advice setting forth (1)
the full name, interest rate and maturity date of the Notes or other
obligations; (2) allocation of payment between principal and interest and any
special payment; and (3) name and address of Bank (or Trustee) from which wire
transfer was sent, shall be faxed and mailed to:

        John Hancock Life Insurance Company
        200 Clarendon Street
        Boston, Massachusetts 02117
        Attention: Investment Accounting Division, B-3
        Fax: (617) 572-0628

All notices with respect to prepayments, both scheduled and unscheduled, whether
partial or in full, and notice of maturity shall also be faxed and mailed as set
forth immediately above.

All other communications which shall include, but not be limited to, financial
statements and certificates of compliance with financial covenants, shall be
faxed and mailed to:

                                      A-2

<Page>

        John Hancock Life Insurance Company
        200 Clarendon Street
        Boston, Massachusetts 02117
        Attention: Bond and Corporate Finance Group, T-57
        Fax: (617) 572-1605

A copy of any notices relating to change in issuer's name, address or principal
place of business or location of collateral and a copy of any legal opinions
shall be faxed and mailed to:

        John Hancock Life Insurance Company
        200 Clarendon Street
        Boston, Massachusetts 02117
        Attention: Investment Law Division, T-30
        Fax: (617) 572-9269

Name in which Notes are to be issued: John Hancock Life Insurance Company

Taxpayer I.D. Number: 04-1414660

                                      A-3

<Page>

                       NAMES AND ADDRESSES OF PURCHASERS

SIGNATURE 5 L.P.
c/o John Hancock Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117

Payments

All payments on account of the Notes or other obligations in accordance with the
provisions thereof shall be made by bank wire transfer of immediately available
funds for credit, not later than 12 noon, Boston time, to:

        HARE & CO.
        c/o The Bank of New York
        ABA #021-000-018
        BNF: IOC566
        FFC: Account Number 77634
        On Order of: [Name of Issuer and PPN Number]
        [Full name, interest rate and maturity date of the Notes or other
         obligations]

Notices

Contemporaneous with the above wire transfer, advice setting forth (1)
the full name, interest rate and maturity date of the Notes or other
obligations; (2) allocation of payment between principal and interest and any
special payment; and (3) name and address of Bank (or Trustee) from which wire
transfer was sent, shall be faxed and mailed to:

        Investors Bank & Trust Company
        200 Clarendon Street
        Boston, Massachusetts 02116
        Attention: Mike DeVelis
        Fax: (617) 927-8302

        and

        HARE & CO.
        c/o The Bank of New York
        P. O. Box 19266
        Newark, New Jersey 07195

All notices with respect to prepayments, both scheduled and unscheduled, whether
partial or in full, and notice of maturity shall also be faxed and mailed as set
forth immediately above.

                                      A-4

<Page>

All other communications which shall include, but not be limited to, financial
statements and certificates of compliance with financial covenants, shall be
faxed and mailed to:

        John Hancock Life Insurance Company
        200 Clarendon Street
        Boston, Massachusetts 02117
        Attention: Bond and Corporate Finance Group, T-57
        Fax: (617) 572-1605

A copy of any notices relating to change in issuer's name, address or principal
place of business or location of collateral and a copy of any legal opinions
shall be faxed and mailed to:

        John Hancock Life Insurance Company
        200 Clarendon Street
        Boston, Massachusetts 02117
        Attention: Investment Law Division, T-30
        Fax: (617) 572-9269

Name in which Notes are to be issued: HARE & CO.

Taxpayer I.D. Number: Not Applicable

                                      A-5

<Page>

                       NAMES AND ADDRESSES OF PURCHASERS

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117

Payments

All payments on account of the Notes or other obligations in accordance with the
provisions thereof shall be made by bank wire transfer of immediately available
funds for credit, not later than 12 noon, Boston time, to:

        Fleet Boston
        ABA #011000390
        Boston, Massachusetts 02110
        Account of: John Hancock Life Insurance Company
                    Private Placement Collection Account
        Account Number 541-55417
        On Order of: [Name of Issuer and PPN Number]
        [Full name, interest rate and maturity date of the Notes or other
         obligations]

Notices

Contemporaneous with the above wire transfer, advice setting forth (1)
the full name, interest rate and maturity date of the Notes or other
obligations; (2) allocation of payment between principal and interest and any
special payment; and (3) name and address of Bank (or Trustee) from which wire
transfer was sent, shall be faxed and mailed to:

        John Hancock Variable Life Insurance Company
        200 Clarendon Street
        Boston, Massachusetts 02117
        Attention: Investment Accounting Division, B-3
        Fax: (617) 572-0628

All notices with respect to prepayments, both scheduled and unscheduled, whether
partial or in full, and notice of maturity shall also be faxed and mailed as set
forth immediately above.

All other communications which shall include, but not be limited to, financial
statements and certificates of compliance with financial covenants, shall be
faxed and mailed to:

                                      A-6

<Page>

        John Hancock Life Insurance Company
        200 Clarendon Street
        Boston, Massachusetts 02117
        Attention: Bond and Corporate Finance Group, T-57
        Fax: (617) 572-1605

A copy of any notices relating to change in issuer's name, address or principal
place of business or location of collateral and a copy of any legal opinions
shall be faxed and mailed to:

        John Hancock Life Insurance Company
        200 Clarendon Street
        Boston, Massachusetts 02117
        Attention: Investment Law Division, T-30
        Fax: (617) 572-9269

Name in which Notes are to be issued: John Hancock Variable Life Insurance
                                      Company

Taxpayer I.D. Number: 04-2664016

                                      A-7

<Page>

                       NAMES AND ADDRESSES OF PURCHASERS

INVESTORS PARTNER LIFE INSURANCE COMPANY
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117

Payments

All payments on account of the Notes or other obligations in accordance with the
provisions thereof shall be made by bank wire transfer of immediately available
funds for credit, not later than 12 noon, Boston time, to:

        Fleet Boston
        ABA #011000390
        Boston, Massachusetts 02110
        Account of: John Hancock Life Insurance Company
                    Private Placement Collection Account
        Account Number 541-55417
        On Order of: [Name of Issuer and PPN Number]
        [Full name, interest rate and maturity date of the Notes or other
         obligations]

Notices

Contemporaneous with the above wire transfer, advice setting forth (1) the full
name, interest rate and maturity date of the Notes or other obligations; (2)
allocation of payment between principal and interest and any special payment;
and (3) name and address of Bank (or Trustee) from which wire transfer was sent,
shall be faxed and mailed to:

        Investors Partner Life Insurance Company
        200 Clarendon Street
        Boston, Massachusetts 02117
        Attention: Investment Accounting Division, B-3
        Fax: (617) 572-0628

All notices with respect to prepayments, both scheduled and unscheduled, whether
partial or in full, and notice of maturity shall also be faxed and mailed as set
forth immediately above.

All other communications which shall include, but not be limited to, financial
statements and certificates of compliance with financial covenants, shall be
faxed and mailed to:

                                      A-8

<Page>

        John Hancock Life Insurance Company
        200 Clarendon Street
        Boston, Massachusetts 02117
        Attention: Bond and Corporate Finance Group, T-57
        Fax: (617) 572-1605

A copy of any notices relating to change in issuer's name, address or principal
place of business or location of collateral and a copy of any legal opinions
shall be faxed and mailed to:

        John Hancock Life Insurance Company
        200 Clarendon Street
        Boston, Massachusetts 02117
        Attention: Investment Law Division, T-30
        Fax: (617) 572-9269

Name in which Notes are to be issued: Investors Partner Life Insurance Company

Taxpayer I.D. Number: 13-3072894

                                      A-9

<Page>

                       NAMES AND ADDRESSES OF PURCHASERS

MINNESOTA LIFE INSURANCE COMPANY
400 Robert Street North
St. Paul, Minnesota 55101
Attention: Advantus Capital Management, Inc.
Telefacsimile: (651) 223-5959

Payments

All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "AAR
Corp., 8.39% Series 2001-A2 Senior Notes due 2011, PPN 000361 A@4, principal,
premium or interest") to:

        U.S. Bank Trust N.A.
        Minneapolis, Minnesota
        ABA #091000022
        BNF Minnesota Life Insurance Company
        Account Number 1801-10-00600-4

Notices

All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.

Name of Nominee in which Notes are to be issued: None

Taxpayer I.D. Number: 41-0417830

                                      A-10

<Page>

                       NAMES AND ADDRESSES OF PURCHASERS

INTER-STATE ASSURANCE COMPANY/LIFE & CAPITAL
c/o Advantus Capital Management, Inc.
400 Robert Street North
St. Paul, Minnesota 55101
Attention: Client Administrator

Payments

All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "AAR
Corp., 8.39% Series 2001-A2 Senior Notes due 2011, PPN 000361 A@ 4, principal,
premium or interest") to:

        Deutsche Bank
        New York, New York
        ABA #021-001-033
        Account 99-911-145
        Ref: Inter-State Assurance Company/Life & Capital
        Account Number 98954

Notices

All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.

Name of Nominee in which Notes are to be issued: Salkeld & Co.

Taxpayer I.D. Number: 42-0329210

                                      A-11

<Page>

                       NAMES AND ADDRESSES OF PURCHASERS

FARM BUREAU LIFE INSURANCE COMPANY OF MICHIGAN
c/o Advantus Capital Management, Inc.
400 Robert Street North
St. Paul, Minnesota 55101
Attention: Client Administrator

Payments

All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "AAR
Corp., 8.39% Series 2001-A2 Senior Notes due 2011, PPN 000361 A@ 4, principal,
premium or interest") to:

        Comerica Bank
        Detroit, Michigan
        ABA #072-000-096

        For credit to: Trust Operation--Fixed Income
        Unit Cost Center 98530
        Account Number 21585-98530

        For further credit to: Farm Bureau Life Insurance Company of Michigan
        Account Number: 011000312124

Notices

All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.

Name of Nominee in which Notes are to be issued: None

Taxpayer I.D. Number: 38-6053670

                                      A-12
<Page>

                       NAMES AND ADDRESSES OF PURCHASERS

MTL INSURANCE COMPANY
c/o Advantus Capital Management, Inc.
400 Robert Street North
St. Paul, Minnesota 55101
Attention: Client Administrator

Payments

All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "AAR
Corp., 8.39% Series 2001-A2 Senior Notes due 2011, PPN 000361 A@ 4, principal,
premium or interest") to:

        The Northern Chgo/Trust
        ABA #071-000-152

        for credit to: Account Number 5186041000
        for further credit to: MTL Insurance Company
        Account Number 26-00621
        Attention: Income Collections

Notices

All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.

Name of Nominee in which Notes are to be issued: ELL & Co.

Taxpayer I.D. Number: 36-1516780

                                      A-13

<Page>

                       NAMES AND ADDRESSES OF PURCHASERS

AMERICAN REPUBLIC INSURANCE COMPANY
c/o Advantus Capital Management Inc.
400 Robert Street North
St. Paul, Minnesota 55101
Attention: Client Administrator

Payments

All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "AAR
Corp., 8.39% Series 2001-A2 Senior Notes due 2011, PPN 000361 A@ 4, principal,
premium or interest") to:

        Wells Fargo Bank, N.A.
        ABA #091000019
        BNFA=0000840245 (include all 10 digits)
        BNF=Trust Clearing Account
        FFC Attn: Income Collections, a/c #20983400
        (add additional information such as cusip and P&I)

        Fur further credit to: American Republic Insurance Co.
        Account Number: 20983400

Notices

All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.

Name of Nominee in which Notes are to be issued: Wells Fargo Bank N.A. as
custodian for American Republic Insurance Company

Taxpayer I.D. Number: 42-0113630

                                      A-14

<Page>

                        NAMES AND ADDRESSES OF PURCHASERS

UNITY MUTUAL LIFE INSURANCE COMPANY-ANNUITY PORTFOLIO
c/o Advantus Capital Management, Inc.
400 Robert Street North
St. Paul, Minnesota 55101
Attention: Client Administrator

Payments

All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "AAR
Corp., 8.39% Series 2001-A2 Senior Notes due 2011, PPN 000361 A@ 4, principal,
premium or interest") to:

        Chase NYC
        ABA #021-000-021

        For credit to: Chase Rochester
        DDA #0000400044
        Attention: Ms. Roni Norkus (716) 258-7784

        For further credit to: Unity Mutual Life Insurance Company
        Annuity Portfolio
        Advantus - 611002310

Notices

All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.

Name of Nominee in which Notes are to be issued: Trulin & Co.

Taxpayer I.D. Number: 15-0475585

                                      A-15

<Page>

                       NAMES AND ADDRESSES OF PURCHASERS

FARM BUREAU MUTUAL INSURANCE COMPANY OF MICHIGAN
c/o Advantus Capital Management, Inc.
400 Robert Street North
St. Paul, Minnesota 55101
Attention: Client Administrator

Payments

All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "AAR
Corp., 8.39% Series 2001-A2 Senior Notes due 2011, PPN 000361 A@ 4, principal,
premium or interest") to:

        Comerica Bank
        Detroit, Michigan
        ABA #072-000-096

        For credit to: Trust Operation-- Fixed Income
        Unit Cost Center 98530
        Account Number 21585-98530

        For further credit to: Farm Bureau Mutual Insurance Company of Michigan
        Account Number: 011000312132

Notices

All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.

Name of Nominee in which Notes are to be issued: None

Taxpayer I.D. Number: 38-1316179

                                      A-16

<Page>

                       NAMES AND ADDRESSES OF PURCHASERS

GREAT WESTERN INSURANCE COMPANY
c/o Advantus Capital Management, Inc.
400 Robert Street North
St. Paul, Minnesota 55101
Attention: Christine Rule

Payments

All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "AAR
Corp., 8.39% Series 2001-A2 Senior Notes due 2011, PPN 000361 A@ 4, principal,
premium or interest") to:

        Northern Trust Intl Banking
        ABA #026-001-122
        For credit to: Merrill Lynch
                       Account #106476-20010
        For further credit to: ML Acct #70G-13700

Notices

All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.

Name of Nominee in which Notes are to be issued: Merrill Lynch for Great Western
Insurance Company

Taxpayer I.D. Number: 87-0395954

                                      A-17

<Page>

                       NAMES AND ADDRESSES OF PURCHASERS

NATIONWIDE LIFE INSURANCE COMPANY
One Nationwide Plaza (1-33-07)
Columbus, Ohio  43215-2220
Attention: Corporate Fixed-Income Securities

Payments

All notices of payment on or in respect of the Notes and written confirmation of
each such payment to:

        The Bank of New York
        ABA #021-000-018
        BNF: IOC566
        F/A/O Nationwide Life Insurance Company
        Attention: P&I Department
        PPN #000361 A* 6
        Security Description: AAR Corp., 7.98% Series 2001-A1 Senior Note
                              due 2008

All notices of payment on or in respect of the Notes and written confirmation of
each such payment to:

        Nationwide Life Insurance Company
        c/o The Bank of New York
        P. O. Box 19266
        Newark, New Jersey 07195
        Attention: P&I Department

        With a copy to:

        Nationwide Life Insurance Company
        One Nationwide Plaza (1-32-05)
        Columbus, Ohio 43215-2220
        Attention: Investment Accounting

All notices and communications other than those in respect to payments to be
addressed as first provided above.

Name of Nominee in which Notes are to be issued: None

Taxpayer I.D. Number: 31-4156830

                                      A-18

<Page>

                       NAMES AND ADDRESSES OF PURCHASERS

NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attention: Corporate Fixed-Income Securities

Payments

All notices of payment on or in respect of the Notes and written confirmation of
each such payment to:

        The Bank of New York
        ABA #021-000-018
        BNF: IOC566
        F/A/O Nationwide Life and Annuity Insurance Company
        Attention: P&I Department
        PPN #000361 A* 6
        Security Description: AAR Corp., 7.98% Series 2001-A1 Senior Note
                              due 2008

Notices

All notices of payment on or in respect of the Notes and written confirmation of
each such payment to:

        Nationwide Life and Annuity Insurance Company
        c/o The Bank of New York
        P. O. Box 19266
        Newark, New Jersey 07195
        Attention: P&I Department

        With a copy to:

        Nationwide Life and Annuity Insurance Company
        One Nationwide Plaza (1-32-05)
        Columbus, Ohio 43215-2220
        Attention: Investment Accounting

All notices and communications other than those in respect to payments to be
addressed as first provided above.

Name of Nominee in which Notes are to be issued: None

Taxpayer I.D. Number: 31-1000740

                                      A-19

<Page>

                       NAMES AND ADDRESSES OF PURCHASERS

AMERICAN FAMILY LIFE INSURANCE COMPANY
6000 American Parkway
Madison, Wisconsin 53783-0001
Attention: Investment Division - Private Placements

Payments

All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds. Each such wire transfer shall set
forth the name of the Company, the full title (including the coupon rate and
final maturity date) of the Notes, and the due date and application among
principal and interest of the payment being made. Payment shall be made to:

        Firstar Bank Milwaukee, N.A.
        Account of Firstar Trust Company
        ABA #075000022
        For Credit to Account #112-950-027
        For the following Trust Accounts:

<Table>
<Caption>

        PRINCIPAL AMOUNT   SERIES AND         ACCOUNT               TRUST ACCOUNT
            OF NOTES         TRANCHE            NAME                    NUMBER

<S>     <C>                <C>         <C>                          <C>
           $3,000,000        2001-A1   Universal Life Portfolio     #000018012510
           $2,000,000        2001-A1   Annuities Portfolio          #000018012800
           $5,000,000        2001-A2   AFLIC-Traditional Portfolio  #000018012500
</Table>

        Attention: Donna Glidden (414) 765-6709
        Credit for PPN #000361 A* 6 in the case of the 2001-A1 Notes and PPN
        #000361 A@ 4 in the case of the 2001-A2 Note

Notices

All notices and communications, including notices with respect to payments and
written confirmation of each such payment as well as quarterly and annual
financial statements, to be addressed as first provided above.

Name of Nominee in which Notes are to be issued: BAND & Co.

Taxpayer I.D. Number: 39-6040365

                                      A-20

<Page>

                       NAMES AND ADDRESSES OF PURCHASERS

THE OHIO NATIONAL LIFE INSURANCE COMPANY
P. O. Box 237
Cincinnati, Ohio 45201
Attention: Investment Department
Telefacsimile: (513) 794-4506
OVERNIGHT DELIVERY ADDRESS:
One Financial Way
Cincinnati, Ohio 45242

Payments

All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "AAR
Corp., 8.39% Series 2001-A2 Senior Notes due 2011, PPN 000361 A@ 4, principal,
premium or interest") to:

        Firstar Bank, N.A.
        ABA #042-000013
        Fifth and Walnut Streets
        Cincinnati, Ohio 45202

        for credit to: The Ohio National Life Insurance Company
        Account Number 910-275-7

Notices

All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.

Name of Nominee in which Notes are to be issued: None

Taxpayer I.D. Number: 31-0397080

                                      A-21

<Page>

                                 DEFINED TERMS

         As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:

         "ADDITIONAL NOTES" is defined in Section 2.2.

         "ADDITIONAL PURCHASERS" means purchasers of Additional Notes.

         "AFFILIATE" means, at any time, and with respect to any Person, (a) any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests. As used in this
definition, "CONTROL" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an "AFFILIATE"
is a reference to an Affiliate of the Company.

         "ASSET DISPOSITION" means any Transfer except:

                  (a) any

                           (i) Transfer from a Restricted Subsidiary to the
                  Company or a Wholly-Owned Restricted Subsidiary;

                           (ii) Transfer from the Company to a Wholly-Owned
                  Restricted Subsidiary;

                           (iii) Transfer from the Company to a Restricted
                  Subsidiary (other than a Wholly-Owned Restricted Subsidiary)
                  or from a Restricted Subsidiary to another Restricted
                  Subsidiary (other than a Wholly-Owned Restricted Subsidiary),
                  which in either case is for Fair Market Value, and

                           (iv) Transfer of property from the Company or any
                  Restricted Subsidiary in connection with a Sale-and-Leaseback
                  Transaction entered into within 365 days after the initial
                  acquisition or construction of such property by the Company or
                  any Restricted Subsidiary,

         so long as immediately before and immediately after the consummation of
         any such Transfer and after giving effect thereto, no Default or Event
         of Default exists; and

                  (b) any Transfer made in the ordinary course of business and
         involving only property that is either (i) inventory held for rent or
         sale or (ii) equipment, fixtures, supplies

                                   SCHEDULE B
                          (to Note Purchase Agreement)

<Page>

         or materials no longer required in the operation of the business of the
         Company or any of its Restricted Subsidiaries or that is obsolete.

         "BUSINESS DAY" means (a) for the purposes of Section 8.6 only, any day
other than a Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed, and (b) for the purposes of any
other provision of this Agreement, any day other than a Saturday, a Sunday or a
day on which commercial banks in Chicago, Illinois, are required or authorized
to be closed.

         "CAPITAL LEASE" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.

         "CAPITAL LEASE OBLIGATION" means, with respect to any Person and a
Capital Lease, the amount of the obligation of such Person as the lessee under
such Capital Lease which would, in accordance with GAAP, appear as a liability
on a balance sheet of such Person.

         "CHANGE IN CONTROL" has the meaning set forth in Section 8.7.

         "CLOSING" is defined in Section 3.

         "CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.

         "COMPANY" means AAR Corp., a Delaware corporation.

         "CONFIDENTIAL INFORMATION" is defined in Section 20.

         "CONSOLIDATED ADJUSTED NET WORTH" means, at any time,

                  (a) the sum of (i) Consolidated Net Worth, plus (ii)
         Subordinated Debt as of such time, MINUS

                  (b) the sum of (i) the amount by which the book value of all
         Restricted Investments of the Company and its Restricted Subsidiaries
         exceeds 20% of Consolidated Net Worth, plus (ii) Consolidated
         Intangible Assets as of such time.

         "CONSOLIDATED ASSETS" means, at any time, the total assets of the
Company and its Restricted Subsidiaries which would be shown as assets on a
consolidated balance sheet of the Company and its Restricted Subsidiaries as of
such time prepared in accordance with GAAP, after eliminating all amounts
properly attributable to minority interests, if any, in the stock and surplus of
Restricted Subsidiaries.

         "CONSOLIDATED CURRENT ASSETS" means, at any time, the total assets of
the Company and its Restricted Subsidiaries which would be shown as current
assets on a balance sheet of the Company and its Restricted Subsidiaries
prepared in accordance with GAAP at such time.

                                      B-2

<Page>

         "CONSOLIDATED CURRENT LIABILITIES" means, at any time, the total
liabilities of the Company and its Restricted Subsidiaries which would be shown
as current liabilities on a balance sheet of the Company and its Restricted
Subsidiaries prepared in accordance with GAAP at such time.

         "CONSOLIDATED DEBT" means, as of any date of determination, the total
of all Debt of the Company and its Restricted Subsidiaries outstanding on such
date, after eliminating all offsetting debits and credits between the Company
and its Restricted Subsidiaries and all other items required to be eliminated in
the course of the preparation of consolidated financial statements of the
Company and its Restricted Subsidiaries in accordance with GAAP.

         "CONSOLIDATED INTANGIBLE ASSETS" means, at any time, the sum of

                  (a) the net book value of all assets, after deducting any
         reserves applicable thereto, which would be treated as intangible
         assets of the Company and its Restricted Subsidiaries under GAAP,
         including, without limitation, good will, trademarks, trade names,
         service marks, brand names, copyrights, patents and unamortized debt
         discount and expense, organizational expenses and the excess of the
         equity in any Restricted Subsidiary over the cost of the investment in
         such Restricted Subsidiary, PLUS

                  (b) any increase in the amount of Consolidated Net Worth
         attributable to a write-up in the book value of any assets on the books
         of the Company and its Restricted Subsidiaries resulting from a
         revaluation thereof subsequent to February 28, 2001 (other than
         write-ups resulting from foreign currency translations and write-ups of
         assets of a going concern business made within 12 months after the
         acquisition of such business).

         "CONSOLIDATED NET INCOME" means, with reference to any period, the net
income (or loss) of the Company and its Restricted Subsidiaries for such period
(taken as a cumulative whole), as determined in accordance with GAAP, after
eliminating all offsetting debits and credits between the Company and its
Restricted Subsidiaries and all other items required to be eliminated in the
course of the preparation of consolidated financial statements of the Company
and its Restricted Subsidiaries in accordance with GAAP.

         "CONSOLIDATED NET WORTH" means, at any time,

                  (a) the sum of (i) the par value (or value stated on the books
         of the corporation) of the capital stock (but excluding treasury stock
         and capital stock subscribed and unissued) of the Company and its
         Restricted Subsidiaries plus (ii) the amount of the paid-in capital and
         retained earnings of the Company and its Restricted Subsidiaries, in
         each case as such amounts would be shown on a consolidated balance
         sheet of the Company and its Restricted Subsidiaries as of such time
         prepared in accordance with GAAP, MINUS

                  (b) to the extent included in clause (a), all amounts properly
         attributable to minority interests, if any, in the stock and surplus of
         Restricted Subsidiaries.

         "CONSOLIDATED TOTAL CAPITALIZATION" means, at any time, the sum of the
remainder of Consolidated Adjusted Net Worth and Consolidated Debt minus
Subordinated Debt at such time.

                                      B-3

<Page>

         "DEBT" means, with respect to any Person, without duplication,

                  (a) its liabilities for borrowed money determined in
         accordance with GAAP;

                  (b) its liabilities for the deferred purchase price of
         property acquired by such Person (excluding accounts payable and other
         accrued liabilities arising in the ordinary course of business but
         including, without limitation, all liabilities created or arising under
         any conditional sale or other title retention agreement with respect to
         any such property);

                  (c) its Capital Lease Obligations;

                  (d) all liabilities for borrowed money (other than Nonrecourse
         Debt) secured by any Lien with respect to any property owned by such
         Person (whether or not it has assumed or otherwise become liable for
         such liabilities); and

                  (e) any Guaranty of such Person with respect to liabilities of
         a type described in any of clauses (a) through (d) hereof.

Debt of any Person shall include all obligations of such
Person of the character described in clauses (a) through (e) to the extent such
Person remains legally liable in respect thereof notwithstanding that any such
obligation is deemed to be extinguished under GAAP. For further certainty,
obligations of the Company and its Restricted Subsidiaries as lessee in respect
of operating leases (including "leveraged leases" and "synthetic leases" that
are accounted for as operating leases) under GAAP shall not constitute "Debt".

         "DEBT PREPAYMENT APPLICATION" means, with respect to any Transfer of
property, the application by the Company or its Restricted Subsidiaries of cash
in an amount equal to the Net Proceeds Amount with respect to such Transfer to
pay Debt of the Company (other than (i) Subordinated Debt and (ii) Debt owing to
the Company, any of its Subsidiaries or any Affiliate).

         "DEFAULT" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.

         "DEFAULT RATE" means that rate of interest that is 2% per annum above
the rate of interest stated in clause (a) of the first paragraph of any Tranche
of Notes.

         "DISPOSITION VALUE" means, at any time, with respect to any property

                  (a) in the case of property that does not constitute
         Restricted Subsidiary Stock, the book value thereof, valued at the time
         of such disposition in good faith by the Company, and

                  (b) in the case of property that constitutes Restricted
         Subsidiary Stock, an amount equal to that percentage of book value of
         the assets of the Restricted Subsidiary that issued such stock as is
         equal to the percentage that the book value of such Restricted

                                      B-4

<Page>

         Subsidiary Stock represents of the book value of all of the outstanding
         capital stock of such Restricted Subsidiary (assuming, in making such
         calculations, that all Securities convertible into such capital stock
         are so converted and giving full effect to all transactions that would
         occur or be required in connection with such conversion) determined at
         the time of the disposition thereof, in good faith by the Company.

         "ENVIRONMENTAL LAWS" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to Hazardous Materials, air emissions and
discharges to waste or public systems.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.

         "ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under Section 414 of the Code.

         "EVENT OF DEFAULT" is defined in Section 11.

         "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

         "FAIR MARKET VALUE" means, at any time and with respect to any
property, the sale value of such property that would be realized in an
arm's-length sale at such time between an informed and willing buyer and an
informed and willing seller (neither being under a compulsion to buy or sell).

         "GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.

         "GOVERNMENTAL AUTHORITY" means

                  (a) the government of

                           (i) the United States of America or any State or
                  other political subdivision thereof, or

                           (ii) any jurisdiction in which the Company or any
                  Subsidiary conducts all or any part of its business, or which
                  asserts jurisdiction over any properties of the Company or any
                  Subsidiary, or

                  (b) any entity exercising executive, legislative, judicial,
         regulatory or administrative functions of, or pertaining to, any such
         government.

         "GUARANTY" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person

                                      B-5
<Page>

guaranteeing or in effect guaranteeing any Debt, dividend or other obligation of
any other Person in any manner, whether directly or indirectly, including
(without limitation) obligations incurred through an agreement, contingent or
otherwise, by such Person:

                  (a) to purchase such Debt or obligation or any property
         constituting security therefor;

                  (b) to advance or supply funds (i) for the purchase or payment
         of such Debt or obligation, or (ii) to maintain any working capital or
         other balance sheet condition or any income statement condition of any
         other Person or otherwise to advance or make available funds for the
         purchase or payment of such Debt or obligation;

                  (c) to lease properties or to purchase properties or services
         primarily for the purpose of assuring the owner of such Debt or
         obligation of the ability of any other Person to make payment of the
         Debt or obligation; or

                  (d) otherwise to assure the owner of such Debt or obligation
         against loss in respect thereof.

In any computation of the Debt or other liabilities of the obligor under any
Guaranty, the Debt or other obligations that are the subject of such Guaranty
shall be assumed to be direct obligations of such obligor.

         "HAZARDOUS MATERIAL" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).

         "HOLDER" means, with respect to any Note, the Person in whose name such
Note is registered in the register maintained by the Company pursuant to Section
13.1.

         "INSTITUTIONAL INVESTOR" means (a) any original purchaser of a Note,
(b) any holder of a Note holding more than $2,000,000 of the aggregate principal
amount of the Notes then outstanding, and (c) any bank, trust company, savings
and loan association or other financial institution, any pension plan, any
investment company, any insurance company, any broker or dealer, or any other
similar financial institution or entity, regardless of legal form.

         "INVENTORY" means equipment and parts held by the Company or its
Restricted Subsidiaries and available for sale or for short-term leasing,
whether or not at the time subject to a lease.

         "INVESTMENT" means any investment, made in cash or by delivery of
property, by the Company or any of its Restricted Subsidiaries (i) in any
Person, whether by acquisition of stock, indebtedness or other obligation or
Security, or by loan, Guaranty, advance, capital contribution or otherwise, or
(ii) in any property.

                                      B-6

<Page>

         "INVESTMENT GRADE" means a rating of the Notes of Baa3 or better by
Moody's and BBB-or better by S&P.

         "KNOWLEDGE" or "KNOWN" means knowledge of any officer of the Company.

         "LIEN" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).

         "MAKE-WHOLE AMOUNT" shall have the meaning (i) set forth in Section 8.6
with respect to any Series 2001-A Note and (ii) set forth in the applicable
Supplement with respect to any other Series of Notes.

         "MATERIAL" means material in relation to the business, operations,
affairs, financial condition, assets, properties or prospects of the Company and
its Restricted Subsidiaries taken as a whole.

         "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Restricted Subsidiaries taken as a whole, or (b) the ability of
the Company to perform its obligations under this Agreement (including any
Supplement) and the Notes, or (c) the validity or enforceability of this
Agreement (including any Supplement) or the Notes.

         "MEMORANDUM" is defined in Section 5.3.

         "MOODY'S" means Moody's Investors Service, Inc.

         "MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan" (as
such term is defined in Section 4001(a)(3) of ERISA).

         "NET PROCEEDS AMOUNT" means, with respect to any Transfer of any
Property by any Person, an amount equal to the DIFFERENCE of

                  (a) the aggregate amount of the consideration (valued at the
         Fair Market Value of such consideration at the time of the consummation
         of such Transfer) received by such Person in respect of such Transfer,
         MINUS

                  (b) all ordinary and reasonable out-of-pocket costs and
         expenses actually incurred by such Person in connection with such
         Transfer.

         "NET PROCEEDS OF CAPITAL STOCK" means, with respect to any period, cash
proceeds (net of all costs and out-of-pocket expenses in connection therewith,
including, without limitation, placement, underwriting and brokerage fees and
expenses), received by the Company during such

                                      B-7

<Page>

period, from the sale of all capital stock (other than Redeemable capital stock)
of the Company, including in such net proceeds:

                  (a) the net amount paid upon issuance and exercise during such
         period of any right to acquire any capital stock, or paid during such
         period to convert a convertible debt Security to capital stock (but
         excluding any amount paid to the Company upon issuance of such
         convertible debt Security); and

                  (b) any amount paid to the Company upon issuance of any
         convertible debt Security issued after February 28, 2001 and thereafter
         converted to capital stock during such period.

         "NONRECOURSE DEBT" means any Debt of any Person which, by the terms
thereof, does not represent a claim against any general assets or revenues of
such Person other than the specific assets that are subject to a Lien securing
such Debt.

         "NOTES" is defined in Section 1.

         "OFFICER'S CERTIFICATE" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.

         "PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.

         "PERSON" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.

         "PLAN" means an "employee benefit plan" (as defined in Section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.

         "PRIORITY DEBT" means without duplication the sum of (a) all Debt of
the Company secured by Liens other than those permitted by paragraphs (a)
through (o), both inclusive, of Section 10.4, and (b) all Debt of Restricted
Subsidiaries other than (i) Debt owed to the Company or other Restricted
Subsidiaries and (ii) Debt outstanding at the time such Person became a
Subsidiary.

         "PROPERTY" or "PROPERTIES" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.

         "PROPERTY REINVESTMENT APPLICATION" means, with respect to any Transfer
of property, the application of an amount equal to the Net Proceeds Amount with
respect to such Transfer to

                                      B-8

<Page>

acquire, develop or maintain assets used in the ordinary course of the Company's
or Restricted Subsidiaries' business.

         "QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.

         "RATING AGENCY" means Moody's, S&P or any successor to either Moody's
or S&P.

         "RECOURSE DEBT" of a Person means all Debt of such Person other than
Nonrecourse Debt.

         "REDEEMABLE" means, with respect to the capital stock of any Person,
each share of such Person's capital stock that is:

                  (a) redeemable, payable or required to be purchased or
         otherwise retired or extinguished, or convertible into Debt of such
         Person (i) at a fixed or determinable date, whether by operation of
         sinking fund or otherwise, (ii) at the option of any Person other than
         such Person, or (iii) upon the occurrence of a condition not solely
         within the control of such Person; or

                  (b) convertible into other Redeemable capital stock.

         "REQUIRED HOLDERS" means, at any time, the holders of more than 50% in
principal amount of the Notes of all Series at the time outstanding (exclusive
of Notes then owned by the Company or any of its Affiliates).

         "RESPONSIBLE OFFICER" means any Senior Financial Officer and any other
officer of the Company with primary responsibility for the administration of the
relevant portion of this Agreement.

         "RESTRICTED INVESTMENTS" means all Investments except the following:

                  (a) property to be used in the ordinary course of business of
         the Company and its Restricted Subsidiaries;

                  (b) assets (including promissory notes) arising from the sale
         of goods and services in the ordinary course of business of the Company
         and its Restricted Subsidiaries;

                  (c) Investments in one or more Restricted Subsidiaries or any
         Person that concurrently with such Investment becomes a Restricted
         Subsidiary;

                  (d) Investments existing on the date of the Closing and
         disclosed in Schedule 5.4;

                  (e) Investments in United States Governmental Securities,
         PROVIDED that such obligations mature within 365 days from the date of
         acquisition thereof;

                                      B-9

<Page>

                  (f) Investments in certificates of deposit or banker's
         acceptances issued by an Acceptable Bank, PROVIDED that such
         obligations mature within 365 days from the date of acquisition
         thereof;

                  (g) Investments in commercial paper given the highest rating
         by a credit rating agency of recognized national standing and maturing
         not more than 270 days from the date of creation thereof;

                  (h) Investments in Repurchase Agreements;

                  (i) Investments in tax-exempt obligations of any state of the
         United States of America, or any municipality of any such state, in
         each case rated "AA" or better by S&P, "Aa2" or better by Moody's or an
         equivalent rating by any other credit rating agency of recognized
         national standing, PROVIDED that such obligations mature within 365
         days from the date of acquisition thereof;

                  (j) loans by the Company and its Restricted Subsidiaries to
         their respective officers and key employees in an aggregate amount not
         to exceed $4,000,000 at any time outstanding;

                  (k) treasury stock; and

                  (l) Investments in the common stock of investment companies
         subject to regulation under the Investment Company Act, or so-called
         "money market funds", whose investments are restricted to those
         described in paragraphs (e), (f), (g), (h) and (i), both inclusive,
         above.

As of any date of determination, each Restricted Investment shall be valued at
the greater of:

                  (x) the amount at which such Restricted Investment is shown on
         the books of the Company or any of its Restricted Subsidiaries (or zero
         if such Restricted Investment is not shown on any such books); and

                  (y) either

                           (i) in the case of any Guaranty of the obligation of
                  any Person, the amount which the Company or any of its
                  Restricted Subsidiaries has paid on account of such obligation
                  less any recoupment by the Company or such Restricted
                  Subsidiary of any such payments, or

                           (ii) in the case of any other Restricted Investment,
                  the excess of (x) the greater of (A) the amount originally
                  entered on the books of the Company or any of its Restricted
                  Subsidiaries with respect thereto and (B) the cost thereof to
                  the Company or its Restricted Subsidiary over (y) any return
                  of capital (after income taxes applicable thereto) upon such
                  Restricted Investment through the sale or other liquidation
                  thereof or part thereof or otherwise.

                                      B-10

<Page>

         As used in this definition of "Restricted Investments":

                 "ACCEPTABLE BANK" means Bank of America and any other bank or
         trust company (i) which is organized under the laws of the United
         States of America or any State thereof, and (ii) whose long-term
         unsecured debt obligations (or the long-term unsecured debt obligations
         of the bank holding company owning all of the capital stock of such
         bank or trust company) shall have been given a rating of "A" or better
         by S&P, "A2" or better by Moody's or an equivalent rating by any other
         credit rating agency of recognized national standing.

                 "ACCEPTABLE BROKER-DEALER" means any Person other than a
         natural person (i) which is registered as a broker or dealer pursuant
         to the Exchange Act and (ii) whose long-term unsecured debt obligations
         shall have been given a rating of "A" or better by S&P, "A2" or better
         by Moody's or an equivalent rating by any other credit rating agency of
         recognized national standing.

                 "REPURCHASE AGREEMENT" means any written agreement

                            (a) that provides for (i) the transfer of one or
                 more United States Governmental Securities in an aggregate
                 principal amount at least equal to the amount of the Transfer
                 Price (defined below) to the Company or any of its Restricted
                 Subsidiaries from an Acceptable Bank or an Acceptable
                 Broker-Dealer against a transfer of funds (the "TRANSFER
                 PRICE") by the Company or such Restricted Subsidiary to such
                 Acceptable Bank or Acceptable Broker-Dealer, and (ii) a
                 simultaneous agreement by the Company or such Restricted
                 Subsidiary, in connection with such transfer of funds, to
                 transfer to such Acceptable Bank or Acceptable Broker-Dealer
                 the same or substantially similar United States Governmental
                 Securities for a price not less than the Transfer Price plus
                 a reasonable return thereon at a date certain not later than
                 365 days after such transfer of funds,

                            (b) in respect of which the Company or such
                 Restricted Subsidiary shall have the right, whether by contract
                 or pursuant to applicable law, to liquidate such agreement upon
                 the occurrence of any default thereunder, and

                            (c) in connection with which the Company or such
                 Restricted Subsidiary, or an agent thereof, shall have taken
                 all action required by applicable law or regulations to perfect
                 a Lien in such United States Governmental Securities.

                 "UNITED STATES GOVERNMENTAL SECURITY" means any direct
         obligation of, or obligation guaranteed by, the United States of
         America, or any agency controlled or supervised by or acting as an
         instrumentality of the United States of America pursuant to authority
         granted by the Congress of the United States of America, so long as
         such obligation or guarantee shall have the benefit of the full faith
         and credit of the United States of America which shall have been
         pledged pursuant to authority granted by the Congress of the United
         States of America.

                                      B-11

<Page>

                 "RESTRICTED SUBSIDIARY" means any Subsidiary which (i) at least
         a majority of the voting securities of such Subsidiary are owned by the
         Company and/or one or more Wholly-Owned Restricted Subsidiaries, and
         (ii) has not been designated as an Unrestricted Subsidiary by the
         Company as reflected in Schedule 5.4 or by written notice given to the
         holders of all Notes in accordance with Section 10.9.

                 "RESTRICTED SUBSIDIARY STOCK" means, with respect to any
         Person, the stock (or any options or warrants to purchase stock or
         other Securities exchangeable for or convertible into stock) of any
         Restricted Subsidiary of such Person.

                 "SALE-AND-LEASEBACK TRANSACTION" means a transaction or series
         of transactions pursuant to which the Company or any Restricted
         Subsidiary shall sell or transfer to any Person (other than the Company
         or a Restricted Subsidiary) any property, whether now owned or
         hereafter acquired, and, as part of the same transaction or series of
         transactions, the Company or any Restricted Subsidiary shall rent or
         lease as lessee or similarly acquire the right to possession or use of,
         such property or one or more properties which it intends to use for the
         same purpose or purposes as such property.

                 "S&P" means Standard & Poor's Ratings Group, a division of
         McGraw Hill, Inc.

                 "SECURITIES ACT" means the Securities Act of 1933, as amended
         from time to time.

                 "SECURITY" has the meaning set forth in section 2(1) of the
         Securities Act of 1933, as amended.

                 "SENIOR FINANCIAL OFFICER" means the chief financial officer,
         principal accounting officer, treasurer or comptroller of the Company.

                 "SERIES" means all of the Notes of all Tranches issued pursuant
         to the original Note Agreement or, as the case may be, any Supplement.

                 "SIGNIFICANT SUBSIDIARY" means at any time any Restricted
         Subsidiary which accounts for more than (i) 10% of the Consolidated
         Assets of the Company and its Restricted Subsidiaries or (ii) 10% of
         consolidated revenue of the Company and its Restricted Subsidiaries.

                 "SUBORDINATED DEBT" means any Debt of the Company that is
         (i) junior and subordinate in right of payment to the Notes of all
         Series pursuant to subordination provisions that have been approved in
         writing by the Required Holders and (ii) has a final maturity no
         earlier than any of the Notes and a weighted average life to maturity
         (determined in accordance with standard financial practice) that is no
         shorter than any of the Notes.

                 "SUBSIDIARY" means, as to any Person, any corporation,
         association or other business entity in which such Person or one or
         more of its Subsidiaries or such Person and one or more of its
         Subsidiaries owns sufficient equity or voting interests to enable it
         or them (as a group) ordinarily, in the absence of contingencies, to
         elect a majority of the directors (or Persons performing similar
         functions) of such entity, and any partnership or joint venture if more
         than a 50% interest in the

                                      B-12

<Page>

         profits or capital thereof is owned by such Person or one or more of
         its Subsidiaries or such Person and one or more of its Subsidiaries
         (unless such partnership can and does ordinarily take major business
         actions without the prior approval of such Person or one or more of its
         Subsidiaries). Unless the context otherwise clearly requires, any
         reference to a "Subsidiary" is a reference to a Subsidiary of the
         Company.

                 "SUCCESSOR CORPORATION" has the meaning set forth in
         Section 10.6.

                 "TRANCHE" means all Notes of any Series having the same
         ranking, maturity, interest rate and schedule for mandatory
         prepayments.

                 "TRANSFER" means, with respect to any Person, any transaction
         in which such Person sells, conveys, transfers or leases (as lessor)
         any of its property, including, without limitation, Restricted
         Subsidiary Stock. For purposes of determining the application of the
         Net Proceeds Amount in respect of any Transfer, the Company may
         designate any Transfer as one or more separate Transfers each yielding
         a separate Net Proceeds Amount. In any such case, the Disposition Value
         of any property subject to each such separate Transfer shall be
         determined by ratably allocating the aggregate Disposition Value of all
         property subject to all such separate Transfers to each such separate
         Transfer on a proportionate basis.

                 "UNRESTRICTED SUBSIDIARY" means AAR Financial Services Corp.
         and AAR International Financial Services, LLC and any other Subsidiary
         which is so designated pursuant to Section 10.9.

                 "WHOLLY-OWNED RESTRICTED SUBSIDIARY" means any Restricted
         Subsidiary of the Company all of the equity interests (except
         directors' qualifying shares) and voting interests of which are owned
         by any one or more of the Company and the Company's other Wholly-Owned
         Restricted Subsidiaries.

                                      B-13

<Page>

                          SUBSIDIARIES OF THE COMPANY
                       AND OWNERSHIP OF SUBSIDIARY STOCK

<Table>
<Caption>
                                                  RESTRICTED/     JURISDICTION             % SHARES
           ENTITY                               UNRESTRICTED/   OF ORGANIZATION          OUTSTANDING AND
                                                  AFFILIATE                                   OWNED

<S>                                             <C>             <C>                     <C>
AAR CORP.                                        Restricted         Delaware                     100%
d/b/a AAR Aviation                               Restricted
d/b/a AAR Marketing Services Company             Restricted

AAR AIRCRAFT & ENGINE GROUP, INC.                Restricted         Illinois                     100%
d/b/a AAR Aircraft Turbine Center                Restricted
d/b/a AAR Aircraft Sales & Leasing               Restricted
d/b/a AAR Engine Sales & Leasing                 Restricted
d/b/a AAR Allen Aircraft                         Restricted

AAR ENGINE SERVICES, INC.                        Restricted         Illinois                     100%
d/b/a AAR Engine Component Services              Restricted
d/b/a AAR Energy Services                        Restricted

AAR AIRFRAME & ACCESSORIES GROUP, INC.           Restricted         Illinois                     100%
d/b/a AAR Distribution                           Restricted
d/b/a AAR Expendables                            Restricted
d/b/a AAR Defense Systems                        Restricted
d/b/a AAR Air Sales                              Restricted
d/b/a AAR Oklahoma                               Restricted
d/b/a AAR Aircraft Services                      Restricted

AAR ALLEN SERVICES, INC.                         Restricted         Illinois                     100%
d/b/a AAR Landing Gear Services                  Restricted
d/b/a AAR Aircraft Component Services            Restricted
d/b/a AAR Hermetic                               Restricted
d/b/a AAR Tempco                                 Restricted
d/b/a Mars Aircraft Radio                        Restricted

AAR CORP. CHARITABLE FOUNDATION                  Restricted         Illinois            N/A - Not for Profit

AAR DO BRASIL LTDA.                              Restricted          Brazil                       99%
                                                                                                  1%

AAR FINANCIAL SERVICES CORP.                     Unrestricted       Illinois                     100%

AAR INTERNATIONAL FINANCIAL SERVICES, L.L.C.     Unrestricted       Illinois                      10%
                                                                                                  90%

AAR INTERNATIONAL, INC.                          Restricted         Illinois                     100%
d/b/a AAR Distribution International             Restricted
d/b/a AAR Aircraft Component Services            Restricted

AAR IRELAND LIMITED                              Restricted         Ireland                      100%

AAR MANUFACTURING GROUP, INC.                    Restricted         Illinois                     100%
d/b/a AAR Manufacturing                          Restricted
d/b/a AAR-ATICS                                  Restricted
d/b/a AAR Cargo Systems                          Restricted
d/b/a AAR Cadillac Manufacturing                 Restricted
d/b/a AAR Composites                             Restricted
d/b/a AAR Craig Systems                          Restricted
d/b/a AAR Skydyne                                Restricted

AAR POWERBOSS, INC.                              Restricted         Illinois                     100%
d/b/a AAR PowerBoss                              Restricted

AAR RECEIVABLES CORPORATION                      Restricted         Illinois                     100%

AAR TRANSNATIONAL CORPORATION                    Restricted     U.S. Virgin Islands              100%

<Page>

TECHNISCH HANDELSKANTOOR LLOYD B.V.              Restricted        Netherlands                   100%

ALLEN AIRMOTIVE PROPERTIES B.V.                  Restricted        Netherlands                   100%

AAR/SSB I, LLC                                    Affiliate         Illinois                      50%
                                                                                                  50%

AAR/SSB II, LLC                                   Affiliate         Illinois                      50%
                                                                                                  50%

ARICRAFT NO. 1, LLC                               Affiliate         Illinois                      50%
                                                                                                  50%

AIRCRAFT NO. 2, LLC                               Affiliate         Illinois                      50%
                                                                                                  50%
</Table>

<Table>
<Caption>
                                                                 OWNER
ENTITY                                               (INDICATE OFFICER OR DIRECTOR)

<S>                                             <C>

AAR CORP.                                                     Publicly Held
d/b/a AAR Aviation
d/b/a AAR Marketing Services Company

AAR AIRCRAFT & ENGINE GROUP, INC.                               AAR Corp.
d/b/a AAR Aircraft Turbine Center
d/b/a AAR Aircraft Sales & Leasing
d/b/a AAR Engine Sales & Leasing
d/b/a AAR Allen Aircraft

AAR ENGINE SERVICES, INC.                           AAR Aircraft & Engine Group, Inc.
d/b/a AAR Engine Component Services
d/b/a AAR Energy Services

AAR AIRFRAME & ACCESSORIES GROUP, INC.                          AAR Corp.
d/b/a AAR Distribution
d/b/a AAR Expendables
d/b/a AAR Defense Systems
d/b/a AAR Air Sales
d/b/a AAR Oklahoma
d/b/a AAR Aircraft Services

AAR ALLEN SERVICES, INC.                         AAR Airframe & Accessories Group, Inc.
d/b/a AAR Landing Gear Services
d/b/a AAR Aircraft Component Services
d/b/a AAR Hermetic
d/b/a AAR Tempco
d/b/a Mars Aircraft Radio

AAR CORP. CHARITABLE FOUNDATION                                 AAR Corp.

AAR DO BRASIL LTDA.                                      AAR International, Inc.
                                                                AAR Corp.

AAR FINANCIAL SERVICES CORP.                                    AAR Corp.

AAR INTERNATIONAL FINANCIAL SERVICES, L.L.C.             AAR International, Inc.
                                                      AAR Financial Services Corp.

AAR INTERNATIONAL, INC.                                         AAR Corp.
d/b/a AAR Distribution International
d/b/a AAR Aircraft Component Services

AAR IRELAND LIMITED                                      AAR International, Inc.

AAR MANUFACTURING GROUP, INC.                                   AAR Corp.
d/b/a AAR Manufacturing
d/b/a AAR-ATICS
d/b/a AAR Cargo Systems
d/b/a AAR Cadillac Manufacturing
d/b/a AAR Composites
d/b/a AAR Craig Systems
d/b/a AAR Skydyne

AAR POWERBOSS, INC.                                   AAR Manufacturing Group, Inc.
d/b/a AAR PowerBoss

AAR RECEIVABLES CORPORATION                                     AAR Corp.

AAR TRANSNATIONAL CORPORATION                                   AAR Corp.

<Page>

TECHNISCH HANDELSKANTOOR LLOYD B.V.                             AAR Corp.

ALLEN AIRMOTIVE PROPERTIES B.V.                    Technisch Handelskantoor Lloyd B.V.

AAR/SSB I, LLC                                  AAR International Financial Services, LLC
                                                    State Street Bank & Trust Company

AAR/SSB II, LLC                                 AAR International Financial Services, LLC
                                                    State Street Bank & Trust Company

ARICRAFT NO. 1, LLC                                      AAR International, Inc.
                                                            Crane 737-200, LLC

AIRCRAFT NO. 2, LLC                                      AAR International, Inc.
                                                            Crane 737-200, LLC
</Table>

                                  SCHEDULE 5.4
                          (to Note Purchase Agreement)

                                      5.4-2

<Page>
                                   AAR CORP.

OFFICERS

<Table>
<S>                          <C>
David P. Storch              President & CEO
Philip C. Slapke             Vice President, Aircraft and Engine Sales & Leasing
Peter K. Chapman             Vice President, Marketing & Business Development
Joseph M. Guillion           Vice President, Strategic Planning & Acquisitions
A. Lee Hall                  Vice President, Special Projects
Douglas S. Hara              Vice President, Purchasing & Facilities
Michael K. Carr              Vice President, Tax and Assistant Treasurer
James J. Clark               Vice President, Component Services
J. Steven McConnell          Vice President, Parts Trading
Robert McQuade               Vice President, Human Resources
David E. Prusiecki           Vice President, Defense Programs
James N. Vincent             Vice President, Aircraft Turbine Center
Timothy Romenesko            Vice President, Chief Financial Officer & Treasurer
Michael J. Sharp             Vice President, Chief Accounting Officer & Controller
Howard A. Pulsifer           Vice President, General Counsel & Secretary
Timothy O. Skelly            Assistant Secretary
Donald J. Vilim              Assistant Secretary
</Table>

BOARD MEMBERS

                        A. Robert Abboud
                        Howard B. Bernick
                        James G. Brocksmith, Jr.
                        Ira A. Eichner
                        Edgar D. Jannotta
                        Joel D. Spungin
                        Lee B. Stern
                        David P. Storch
                        Richard D. Tabery

                                     5.4-3

<Page>

                     AAR CORP. AND RESTRICTED SUBSIDIARIES
                                  INVESTMENTS
(in thousands)
                                        February 28, 2001

<Table>
        <S>                                  <C>
        Restricted Securities                 5,936

        Investment in Joint Ventures          6,467
                                              -----
        TOTAL                                12,403
                                             ======
</Table>

                                     5.4-4
<Page>

                              FINANCIAL STATEMENTS

1.      AAR Corp. Form 10-K for the annual period ended May 31, 2000.

2.      AAR Corp. Form 10-Q for the quarterly period ended August 31, 2000

3.      AAR Corp. Form 10-Q for the quarterly period ended November 30, 2000

4.      AAR Corp. Form 10-Q for the quarterly period ended February 28, 2001

                                  SCHEDULE 5.5
                          (to Note Purchase Agreement)
<Page>

                     AAR CORP. AND RESTRICTED SUBSIDIARIES
                        EXISTING INDEBTEDNESS AND LIENS

<Table>
<Caption>
                                                                                        (in thousands)
EXISTING INDEBTEDNESS                                                                  February 28, 2001

<S>                                                                                    <C>
1.   Notes payable due November 1, 2001 with interest of 9.5%
     payable semi-annually on May 1 and November 1 (Public Debt)                            65,000

2.   Notes payable due October 15, 2003, with interest of 7.25%
     payable semi-annually on April 15 and October 15 (Public Debt)                         50,000

3.   Notes payable due December 15, 2007 with interest of 6.875%
     payable semi-annually on June 15 and December 15 (Public Debt)                         60,000

4.   Industrial revenue bonds due in quarterly installments to 2011
     with weighted average interest of approximately 4.60%
     (secured by trust indentures on property, plant and equipment)                          2,008

5.   Industrial revenue bonds due in installments to 2002 with
     weighted average interest of approximately 7.47%
     (secured by trust indentures on property, plant and equipment)                             42

6.   Industrial revenue bonds due in monthly installments to 2019 with
     Interest of 5.65% (secured by trust indentures on property, plant and
     equipment)                                                                              2,121

7.   Note payable due in annual installments to October 2003 with
     interest of 6.5%                                                                        1,358

8.   Note payable due June 2001                                                             13,242

9.   Short term debt                                                                        36,000

TOTAL                                                                                      229,771
                                                                                           =======

LIENS

10.  Receivables securitization program                                                     18,984

11.  Factored receivables with recourse (secured by specific accounts)                      14,489

TOTAL                                                                                       33,473
                                                                                            ======
</Table>

                                SCHEDULE 5.15
                         (to Note Purchase Agreement)

<Page>

                                 [FORM OF NOTE]

                                    AAR CORP.

                7.98% SERIES 2001-A1 SENIOR NOTE DUE MAY 15, 2008

No. A1-[____]                                                             [Date]
 $[__________]                                                   PPN 000361 A* 6

      FOR VALUE RECEIVED, the undersigned, AAR CORP. (herein called the
"COMPANY"), a corporation organized and existing under the laws of the State of
Delaware, hereby promises to pay to [_____________________] or registered
assigns, the principal sum of [______________] DOLLARS on May 15, 2008 with
interest (computed on the basis of a 360-day year of twelve 30-day months) (a)
on the unpaid balance thereof at the rate of 7.98% per annum from the date
hereof, payable semiannually, on the first day of June and December in each
year, commencing with the first day of June or December next succeeding the date
hereof, until the principal hereof shall have become due and payable, and (b) to
the extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as defined in the Note Purchase Agreement
referred to below), payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand), at 9.98% per annum.

      Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office of Bank of America in Chicago, Illinois, or at
such other place as the Company shall have designated by written notice to the
holder of this Note as provided in the Note Purchase Agreement referred to
below.

      This Note is one of a Series of Senior Notes (herein called the "NOTES")
issued pursuant to separate Note Purchase Agreement, dated as of May 1, 2001 (as
from time to time amended, supplemented or modified, the "NOTE PURCHASE
AGREEMENT"), between the Company and the respective Purchasers named therein and
is entitled to the benefits thereof. Each holder of this Note will be deemed, by
its acceptance hereof, (i) to have agreed to the confidentiality provisions set
forth in Section 20 of the Note Purchase Agreement and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreement.

      This Note is a registered Note and, as provided in the Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.

                                  EXHIBIT 1-A
                            (to Note Purchase Agreement)

<Page>

AAR Corp.                                                Note Purchase Agreement

      The Company will make required prepayments of principal on the dates and
in the amounts specified in the Note Purchase Agreement. This Note is also
subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreement, but not
otherwise.

      If an Event of Default, as defined in the Note Purchase Agreement, occurs
and is continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner, at the price (including any applicable
Make-Whole Amount) and with the effect provided in the Note Purchase Agreement.

      This Note shall be construed and enforced in accordance with, and the
rights of the issuer and holder hereof shall be governed by, the law of the
State of Illinois excluding choice-of-law principles of the law of such State
that would require the application of the laws of a jurisdiction other than such
State.

                                       AAR CORP.

                                       By ____________________________________
                                       Name:__________________________________
                                       Title: ________________________________

                                     E-1-A-2

<Page>

                                 [FORM OF NOTE]

                                    AAR CORP.

                8.39% SERIES 2001-A2 SENIOR NOTE DUE MAY 15, 2011

No. A2-[____]
                                                                          [Date]
 $[__________]                                                   PPN 000361 A@ 4

      FOR VALUE RECEIVED, the undersigned, AAR CORP. (herein called the
"COMPANY"), a corporation organized and existing under the laws of the State of
Delaware, hereby promises to pay to [_____________________] or registered
assigns, the principal sum of [______________] DOLLARS on May 15, 2011 with
interest (computed on the basis of a 360-day year of twelve 30-day months) (a)
on the unpaid balance thereof at the rate of 8.39% per annum from the date
hereof, payable semiannually, on the first day of June and December in each
year, commencing with the first day of June or December next succeeding the date
hereof, until the principal hereof shall have become due and payable, and (b) to
the extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as defined in the Note Purchase Agreement
referred to below), payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand), at 10.39% per annum.

      Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office of Bank of America in Chicago, Illinois, or at
such other place as the Company shall have designated by written notice to the
holder of this Note as provided in the Note Purchase Agreement referred to
below.

      This Note is one of a Series of Senior Notes (herein called the "NOTES")
issued pursuant to separate Note Purchase Agreement, dated as of May 1, 2001 (as
from time to time amended, supplemented or modified, the "NOTE PURCHASE
AGREEMENT"), between the Company and the respective Purchasers named therein and
is entitled to the benefits thereof. Each holder of this Note will be deemed, by
its acceptance hereof, (i) to have agreed to the confidentiality provisions set
forth in Section 20 of the Note Purchase Agreement and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreement.

      This Note is a registered Note and, as provided in the Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.

                                   EXHIBIT 1-B
                          (to Note Purchase Agreement)

<Page>

AAR Corp.                                                Note Purchase Agreement

      The Company will make required prepayments of principal on the dates and
in the amounts specified in the Note Purchase Agreement. This Note is also
subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreement, but not
otherwise.

      If an Event of Default, as defined in the Note Purchase Agreement, occurs
and is continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner, at the price (including any applicable
Make-Whole Amount) and with the effect provided in the Note Purchase Agreement.

      This Note shall be construed and enforced in accordance with, and the
rights of the issuer and holder hereof shall be governed by, the law of the
State of Illinois excluding choice-of-law principles of the law of such State
that would require the application of the laws of a jurisdiction other than such
State.

                                       AAR CORP.

                                       By  ___________________________________
                                       Name:   _______________________________
                                       Title: ________________________________

                                     E-1-B-2

<Page>

                       FORM OF OPINION OF SPECIAL COUNSEL
                                 TO THE COMPANY

      The closing opinion of Schiff Hardin & Waite, special counsel to the
Company, which is called for by Section 4.4 of the Note Purchase Agreement,
shall be dated the date of Closing and addressed to the Purchasers, shall be
satisfactory in scope and form to each Purchaser and shall be to the effect
that:

       1. To such counsel's knowledge, after due inquiry, no consent or approval
of any nature or form, or filing with, any Governmental Authority of the States
of Delaware or Illinois or the United States of America, is necessary in
connection with the execution and delivery of the Note Purchase Agreement or the
Series 2001-A Notes.

       2. The issuance and sale of the Series 2001-A Notes and the execution,
delivery and performance by the Company of the Note Purchase Agreement do not
violate the Articles of Incorporation or By-laws of the Company.

       3. The issuance, sale and delivery of the Series 2001-A Notes under the
circumstances contemplated by the Note Purchase Agreement do not, under existing
law, require the registration of the Series 2001-A Notes under the Securities
Act of 1933, as amended, or the qualification of an indenture under the Trust
Indenture Act of 1939, as amended.

       4. Neither the issuance of the Series 2001-A Notes nor the application of
the proceeds of the sale of the Series 2001-A Notes will violate or result in a
violation of Section 7 of the Securities Exchange Act of 1934, as amended, or
any regulation issued pursuant thereto, including, without limitation,
Regulation U, T or X of the Board of Governors of the Federal Reserve System.

       5. The Company is not an "investment company" or a company "controlled"
by an "investment company", within the meaning of the Investment Company Act of
1940, as amended.

      The opinion of Schiff Hardin & Waite shall cover such other matters
relating to the sale of the Series 2001-A Notes as each Purchaser may reasonably
request. With respect to matters of fact on which such opinion is based, such
counsel shall be entitled to rely on appropriate certificates of public
officials and other officers of the Company.

                               EXHIBIT 4.4(a)
                       (to Note Purchase Agreement)

<Page>
                        FORM OF OPINION OF SENIOR COUNSEL
                                 TO THE COMPANY

      The closing opinion of Donald J. Vilim, Esq., Senior Counsel to the
Company, which is called for by Section 4.4 of the Note Purchase Agreement,
shall be dated the date of Closing and addressed to the Purchasers, shall be
satisfactory in scope and form to each Purchaser and shall be to the effect
that:

       1. The Company is a corporation, duly incorporated, validly existing and
in good standing under the laws of its jurisdiction of incorporation, has the
corporate power and the corporate authority to execute and perform the Note
Purchase Agreement and to issue the Series 2001-A Notes and, to such counsel's
knowledge, each Subsidiary is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation. The
Company has the full corporate power and the corporate authority to conduct the
activities in which it is now engaged. The Company and each Subsidiary are duly
licensed or qualified and is in good standing as a foreign corporation in each
jurisdiction in which the character of the properties owned or leased by it or
the nature of the business transacted by it makes such licensing or
qualification necessary except in jurisdictions where the failure to be so
qualified or licensed would not have a Material Adverse Effect.

       2. All of the issued and outstanding shares of capital stock of each such
Subsidiary have been duly issued, are fully paid and non-assessable and are
owned by the Company, by one or more Subsidiaries, or by the Company and one or
more Subsidiaries.

       3. The Note Purchase Agreement has been duly authorized by all necessary
corporate action on the part of the Company, has been duly executed and
delivered by the Company and constitutes the legal, valid and binding contract
of the Company enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance and similar laws affecting creditors' rights
generally, and general principles of equity (regardless of whether the
application of such principles is considered in a proceeding in equity or at
law).

       4. The Series 2001-A Notes have been duly authorized by all necessary
corporate action on the part of the Company, have been duly executed and
delivered by the Company and constitute the legal, valid and binding obligations
of the Company enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent conveyance and similar laws affecting
creditors' rights generally, and general principles of equity (regardless of
whether the application of such principles is considered in a proceeding in
equity or at law).

       5. The issuance and sale of the Series 2001-A Notes and the execution,
delivery and performance by the Company of the Note Purchase Agreement will not
violate or result in any breach of any of the provisions of or constitute a
default under or result in the creation or imposition of any Lien upon any of
the property of the Company pursuant to the provisions of any agreement or other
instrument which has been filed as an exhibit to AAR's Annual Report on Form
10-K for the period ended May 31, 2000 or any subsequent Quarterly Report on
Form 10-Q filed with the Securities and Exchange Commission prior to the date
hereof.

                               EXHIBIT 4.4(a)
                       (to Note Purchase Agreement)

<Page>

AAR Corp.                                                Note Purchase Agreement

       6. There are no actions, suits or proceedings pending or, to the
knowledge of such counsel after due inquiry, threatened against or affecting the
Company or any Subsidiary before any Governmental Authority or arbitration board
or tribunal which, if adversely determined, would have a Material Adverse
Effect. To the knowledge of such counsel, neither the Company nor any Subsidiary
is in default with respect to any court or governmental authority, or
arbitration board or tribunal.

      The opinion of Senior Counsel to the Company shall cover such other
matters relating to the sale of the Series 2001-A Notes as each Purchaser may
reasonably request. With respect to matters of fact on which such opinion is
based, such counsel shall be entitled to rely on appropriate certificates of
public officials and other officers of the Company.

                                EXHIBIT 4.4(a)-2

<Page>

                       FORM OF OPINION OF SPECIAL COUNSEL
                                TO THE PURCHASERS

      The closing opinion of Chapman and Cutler, special counsel to the
Purchasers, called for by Section 4.4 of the Note Purchase Agreement, shall be
dated the date of Closing and addressed to each Purchaser, shall be satisfactory
in form and substance to each Purchaser and shall be to the effect that:

       1. The Company is a corporation, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has the corporate power
and the corporate authority to execute and deliver the Note Purchase Agreement
and to issue the Series 2001-A Notes.

       2. The Note Purchase Agreement has been duly authorized by all necessary
corporate action on the part of the Company, has been duly executed and
delivered by the Company and constitutes the legal, valid and binding contract
of the Company enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance and similar laws affecting creditors' rights
generally, and general principles of equity (regardless of whether the
application of such principles is considered in a proceeding in equity or at
law).

       3. The Series 2001-A Notes have been duly authorized by all necessary
corporate action on the part of the Company, and the Series 2001-A Notes being
delivered on the date hereof have been duly executed and delivered by the
Company and constitute the legal, valid and binding obligations of the Company
enforceable in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent conveyance and similar laws affecting creditors' rights generally,
and general principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).

       4. The issuance, sale and delivery of the Series 2001-A Notes under the
circumstances contemplated by the Note Purchase Agreement do not, under existing
law, require the registration of the Series 2001-A Notes under the Securities
Act of 1933, as amended, or the qualification of an indenture under the Trust
Indenture Act of 1939, as amended.

      The opinion of Chapman and Cutler shall also state that the opinion of
Schiff Hardin & Waite, special counsel to the Company, and the opinion of Donald
J. Vilim, Esq., Senior Counsel to the Company, are satisfactory in scope and
form to Chapman and Cutler and that, in their opinion, the Purchasers are
justified in relying thereon. With respect to matters of fact upon which such
opinion is based, Chapman and Cutler may rely on appropriate certificates of
public officials and officers of the Company and upon representations of the
Company and the Purchasers delivered in connection with the issuance and sale of
the Series 2001-A Notes.

      In rendering the opinion set forth in paragraph 1 above, Chapman and
Cutler may rely, as to matters referred to in paragraph 1, solely upon an
examination of the Certificate of Incorporation certified by, and a certificate
of good standing of the Company from, the Secretary of State of the State of
Delaware, the Bylaws of the Company and the general business corporation law of
the State of Delaware. The opinion of Chapman and Cutler is limited to the laws
of the State of Illinois, the general business corporation law of the State of
Delaware and the Federal laws of the United States.

                                  EXHIBIT 4.4(b)
                          (to Note Purchase Agreement)

<Page>

================================================================================

                                    AAR CORP.

                 [NUMBER] SUPPLEMENT TO NOTE PURCHASE AGREEMENT

                       Dated as of ______________________

                 Re: $_________________% Series __ Senior Notes
                            Due _____________________

================================================================================

                                    EXHIBIT S
                          (to Note Purchase Agreement)

<Page>

                                    AAR CORP.
                         1100 NORTH WOOD DALE ROAD WOOD
                              DALE, ILLINOIS 60191

                                                                     Dated as of
                                                     ____________________,  20__

To the Purchaser(s) named in
Schedule A hereto

Ladies and Gentlemen:

      This [Number] Supplement to Note Purchase Agreement (the "SUPPLEMENT") is
between AAR CORP., a _________ corporation (the "COMPANY"), and the
institutional investors named on Schedule A attached hereto (the "PURCHASERS").

      Reference is hereby made to that certain Note Purchase Agreement dated as
of May 1, 2001 (the "NOTE PURCHASE AGREEMENT") between the Company and the
purchasers listed on Schedule A thereto. All capitalized terms not otherwise
defined herein shall have the same meaning as specified in the Note Purchase
Agreement. Reference is further made to Section 4.11 of the Note Purchase
Agreement which requires that, prior to the delivery of any Additional Notes,
the Company and each Additional Purchaser shall execute and deliver a
Supplement.

      The Company hereby agrees with the Purchaser(s) as follows:

      1. The Company has authorized the issue and sale of $__________ aggregate
principal amount of its _____% Series ___ Senior Notes due _________, ____ (the
"SERIES ___ NOTES"). The Series ___ Notes, together with the Series 2001-A Notes
[and the Series __ Notes] initially issued pursuant to the Note Purchase
Agreement and each Series of Additional Notes which may from time to time
hereafter be issued pursuant to the provisions of Section 2.2 of the Note
Purchase Agreement, are collectively referred to as the "Notes" (such term shall
also include any such notes issued in substitution therefor pursuant to Section
13 of the Note Purchase Agreement). The Series ___ Notes shall be substantially
in the form set out in Exhibit 1 hereto with such changes therefrom, if any, as
may be approved by the Purchaser(s) and the Company.

      2. Subject to the terms and conditions hereof and as set forth in the Note
Purchase Agreement and on the basis of the representations and warranties
hereinafter set forth, the Company agrees to issue and sell to each Purchaser,
and each Purchaser agrees to purchase from the Company, Series __ Notes in the
principal amount set forth opposite such Purchaser's name on Schedule A hereto
at a price of 100% of the principal amount thereof on the closing date hereafter
mentioned.

      3. The sale and purchase of the Series __ Notes to be purchased by each
Purchaser shall occur at the offices of [Chapman and Cutler, 111 West Monroe
Street, Chicago, Illinois

<Page>

60603,] at 11:00 A.M. Chicago time, at a closing (the "CLOSING") on ______, ____
or on such other Business Day thereafter on or prior to _______, ____ as may be
agreed upon by the Company and the Purchasers. At the Closing, the Company will
deliver to each Purchaser the Series __ Notes to be purchased by such Purchaser
in the form of a single Series __ Note (or such greater number of Series __
Notes in denominations of at least $100,000 as such Purchaser may request) dated
the date of the Closing and registered in such Purchaser's name (or in the name
of such Purchaser's nominee), against delivery by such Purchaser to the Company
or its order of immediately available funds in the amount of the purchase price
therefor by wire transfer of immediately available funds for the account of the
Company to account number [__________________________] at ____________ Bank,
[INSERT BANK ADDRESS, ABA NUMBER FOR WIRE TRANSFERS, AND ANY OTHER RELEVANT WIRE
TRANSFER information]. If, at the Closing, the Company shall fail to tender such
Series __ Notes to any Purchaser as provided above in this Section 3, or any of
the conditions specified in Section 4 shall not have been fulfilled to any
Purchaser's satisfaction, such Purchaser shall, at such Purchaser's election, be
relieved of all further obligations under this Agreement, without thereby
waiving any rights such Purchaser may have by reason of such failure or such
nonfulfillment.

      4. The obligation of each Purchaser to purchase and pay for the Series __
Notes to be sold to such Purchaser at the Closing is subject to the fulfillment
to such Purchaser's satisfaction, prior to the Closing, of the conditions set
forth in Section 4 of the Note Purchase Agreement with respect to the Series __
Notes to be purchased at the Closing, and to the following additional
conditions:

             (a) Except as supplemented, amended or superceded by the
      representations and warranties set forth in Exhibit A hereto, each of the
      representations and warranties of the Company set forth in Section 5 of
      the Note Purchase Agreement shall be correct as of the date of Closing and
      the Company shall have delivered to each Purchaser an Officer's
      Certificate, dated the date of the Closing certifying that such condition
      has been fulfilled.

             (b) Contemporaneously with the Closing, the Company shall sell to
      each Purchaser, and each Purchaser shall purchase, the Series __ Notes to
      be purchased by such Purchaser at the Closing as specified in Schedule A.

      5. [Here insert special provisions for Series A Notes including prepayment
provisions applicable to Series __ Notes (including Make-Whole Amount) and
closing conditions applicable to Series ___ Notes].

      6. Each Purchaser represents and warrants that the representations and
warranties set forth in Section 6 of the Note Purchase Agreement are true and
correct on the date hereof with respect to the purchase of the Series __ Notes
by such Purchaser.

      7. The Company and each Purchaser agree to be bound by and comply with the
terms and provisions of the Note Purchase Agreement as fully and completely as
if such Purchaser were an original signatory to the Note Purchase Agreement.

                                       -2-

<Page>

      The execution hereof shall constitute a contract between the Company and
the Purchaser(s) for the uses and purposes hereinabove set forth, and this
agreement may be executed in any number of counterparts, each executed
counterpart constituting an original but all together only one agreement.

                                       AAR CORP.

                                       By_____________________________________
                                         Name:________________________________
                                         Title:_______________________________

Accepted as of __________, _____

                                        [VARIATION]

                                       By_____________________________________
                                         Name:________________________________
                                         Title:_______________________________

                                       -3-

<Page>

                   INFORMATION RELATING TO PURCHASERS

                                                                 PRINCIPAL
NAME AND ADDRESS OF PURCHASER                                AMOUNT OF SERIES
                                                               __ NOTES TO BE
                                                                 PURCHASED

 [NAME OF PURCHASER]                                         $

(1)    All payments by wire transfer
       of immediately available funds to:

       with sufficient information to identify the
       source and application of such funds.

(2)    All notices of payments and written
       confirmations of such wire transfers:

(3)    All other communications:

                                   SCHEDULE A
                                 (to Supplement)

<Page>

                      SUPPLEMENTAL REPRESENTATIONS

      The Company represents and warrants to each Purchaser that except as
hereinafter set forth in this Exhibit A, each of the representations and
warranties set forth in Section 5 of the Note Purchase Agreement is true and
correct as of the date hereof with respect to the Series __ Notes with the same
force and effect as if each reference to "Series ____ Notes" set forth therein
was modified to refer the "Series __ Notes" and each reference to "this
Agreement" therein was modified to refer to the Note Purchase Agreement as
supplemented by the _______ Supplement. The Section references hereinafter set
forth correspond to the similar sections of the Note Purchase Agreement which
are supplemented hereby:

    SECTION 5.3. DISCLOSURE. The Company, through its agent, Banc of America
Securities LLC, has delivered to each Purchaser a copy of a Private Placement
Memorandum, dated ____________ (the "MEMORANDUM"), relating to the transactions
contemplated by the ______ Supplement. The Note Purchase Agreement, the
Memorandum, the documents, certificates or other writings delivered to each
Purchaser by or on behalf of the Company in connection with the transactions
contemplated by the Note Purchase Agreement and the _______ Supplement and the
financial statements listed in Schedule 5.5 to the _____ Supplement, taken as a
whole, do not contain any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not misleading in
light of the circumstances under which they were made. Since ____________, there
has been no change in the financial condition, operations, business, properties
or prospects of the Company or any Restricted Subsidiary except changes that
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect.

    SECTION 5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF RESTRICTED
SUBSIDIARIES. (a) Schedule 5.4 to the ______ Supplement contains (except as
noted therein) complete and correct lists of the Company's Restricted and
Unrestricted Subsidiaries, and showing, as to each Subsidiary, the correct name
thereof, the jurisdiction of its organization, and the percentage of shares of
each class of its capital stock or similar equity interests outstanding owned by
the Company and each other Subsidiary.

   SECTION 5.13. PRIVATE OFFERING BY THE COMPANY. Neither the Company nor anyone
acting on its behalf has offered the Series ___ Notes or any similar securities
for sale to, or solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof with, any Person other than the
Purchasers and not more than [_] other Institutional Investors, each of which
has been offered the Series __ Notes at a private sale for investment. Neither
the Company nor anyone acting on its behalf has taken, or will take, any action
that would subject the issuance or sale of the Notes to the registration
requirements of Section 5 of the Securities Act.

   SECTION 5.14. USE OF PROCEEDS; MARGIN REGULATIONS. The Company will apply the
proceeds of the sale of the Series __ Notes to ______________________________
and for general corporate purposes. No part of the proceeds from the sale of the
Series __ Notes pursuant to the _____ Supplement will be used, directly or
indirectly, for the purpose of buying or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
(12 CFR 222), or for the purpose of buying or carrying or trading in any
securities under such circumstances as to involve the Company in a violation of
Regulation X of
                                    EXHIBIT A
                                 (to Supplement)

<Page>

said Board (12 CFR 224) or to involve any broker or dealer in a violation of
Regulation T of said Board (12 CFR 220). As used in this Section, the terms
"margin stock" and "purpose of buying or carrying" shall have the meanings
assigned to them in said Regulation U.

   SECTION 5.15. EXISTING DEBT; FUTURE LIENS. (a) Schedule 5.15 to the _________
Supplement sets forth a complete and correct list of all outstanding Debt of the
Company and its Restricted Subsidiaries as of _____________, since which date
there has been no Material change in the amounts, interest rates, sinking funds,
installment payments or maturities of the Debt of the Company or its Restricted
Subsidiaries. Neither the Company nor any Restricted Subsidiary is in default
and no waiver of default is currently in effect, in the payment of any principal
or interest on any Debt of the Company or such Restricted Subsidiary and no
event or condition exists with respect to any Debt of the Company or any
Restricted Subsidiary that would permit (or that with notice or the lapse of
time, or both, would permit) one or more Persons to cause such Debt to become
due and payable before its stated maturity or before its regularly scheduled
dates of payment.

[Add any additional Sections as appropriate at the time the Series ___ Notes
are issued]

                                       -2-

<Page>

                            [FORM OF SERIES __ NOTE]

                                    AAR CORP.

                  ___% SERIES __ SENIOR NOTE DUE ______________

No. [_________]                                                           [Date]
$[____________]                                               PPN[_____________]

      FOR VALUE RECEIVED, the undersigned, AAR CORP. (herein called the
"COMPANY"), a corporation organized and existing under the laws of the State of
____________, hereby promises to pay to [________________], or registered
assigns, the principal sum of [________________] DOLLARS on _______________,
with interest (computed on the basis of a 360-day year of twelve 30-day months)
(a) on the unpaid balance thereof at the rate of ____% per annum from the date
hereof, payable semiannually, on the _____ day of ______ and ______ in each
year, commencing on the first of such dates after the date hereof, until the
principal hereof shall have become due and payable, and (b) to the extent
permitted by law on any overdue payment (including any overdue prepayment) of
principal, any overdue payment of interest and any overdue payment of any
Make-Whole Amount (as defined in the Note Purchase Agreement referred to below),
payable semiannually as aforesaid (or, at the option of the registered holder
hereof, on demand), at a rate per annum from time to time equal to the greater
of (i) [coupon + 2%]% or (ii) 2% over the rate of interest publicly announced by
_________________ from time to time in ____________________ as its "base" or
"prime" rate.

      Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at ______________________, in ______________________, or at such other
place as the Company shall have designated by written notice to the holder of
this Note as provided in the Note Purchase Agreement referred to below.

      This Note is one of a Series of Senior Notes (the "NOTES") issued pursuant
to a Supplement to the Note Purchase Agreement dated as of May 1, 2001 (as from
time to time amended, supplemented or modified, the "NOTE PURCHASE AGREEMENT"),
between the Company, the Purchasers named therein and Additional Purchasers of
Notes from time to time issued pursuant to any Supplement to the Note Purchase
Agreement. This Note and the holder hereof are entitled equally and ratably with
the holders of all other Notes of all Series from time to time outstanding under
the Note Purchase Agreement to all the benefits provided for thereby or referred
to therein. Each holder of this Note will be deemed, by its acceptance hereof,
to have made the representation set forth in Section 6.2 of the Note Purchase
Agreement, PROVIDED that such holder may (in reliance upon information provided
by the Company, which shall not be unreasonably withheld) make a representation
to the effect that the purchase by such holder of any Note will not constitute a
non-exempt prohibited transaction under Section 406(a) of ERISA.

<Page>

      This Note is registered with the Company and, as provided in the Note
Purchase Agreement, upon surrender of this Note for registration of transfer,
duly endorsed, or accompanied by a written instrument of transfer duly executed,
by the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note of an identical Series for a like principal amount will be
issued to, and registered in the name of, the transferee. Prior to due
presentment for registration of transfer, the Company may treat the person in
whose name this Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company will not be
affected by any notice to the contrary.

      [The Company will make required prepayments of principal on the dates and
in the amounts specified in the Note Purchase Agreement.] [This Note is not
subject to regularly scheduled prepayments of principal.] This Note is [also]
subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreement, but not
otherwise.

      If an Event of Default, as defined in the Note Purchase Agreement, occurs
and is continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner, at the price (including any applicable
Make-Whole Amount) and with the effect provided in the Note Purchase Agreement.

      This Note shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the law of the State of __________
excluding choice-of-law principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.

                                       AAR CORP.

                                       By_______________________________________
                                            Name:_______________________________
                                            Title:______________________________

                                       -2-

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