424(b)(2)
                                                      File No. 333-52853

                            PROSPECTUS SUPPLEMENT
                     (TO PROSPECTUS DATED MAY 29, 1998)

                              5,010,345 SHARES

                                  AAR CORP.

                                COMMON STOCK

        We are offering 5,010,345 shares of our common stock, par value
   $1.00 per share.  The purchase price of our common stock is $7.25 per
   share, for a total offering price of $36,325,000.  We expect to
   receive net proceeds of approximately $6.89 per share and total net
   proceeds of $34,508,750, after deducting a placement fee and before
   offering expenses.

        Our common stock is listed on the New York Stock Exchange under
   the symbol "AIR."  On February 15, 2002, the last reported sale price
   of our common stock on the New York Stock Exchange was $7.41 per
   share.

        You should consider carefully the risks that we have described in
   "Risk Factors" beginning on page S-4 of this prospectus supplement
   before deciding whether to invest in our common stock.

        We have engaged on a reasonable best efforts basis William Blair
   & Company, L.L.C. as our exclusive placement agent for this offering.
   We have agreed to pay William Blair a placement fee equal to five
   percent (5%) of the total offering proceeds.

        NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
   SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES
   OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS
   IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
   CRIMINAL OFFENSE.

        The date of this prospectus supplement is February 15, 2002.







                              TABLE OF CONTENTS
                            Prospectus Supplement

                                                                     Page

   ABOUT THIS PROSPECTUS SUPPLEMENT  . . . . . . . . . . . . . . . .  S-3
   RISK FACTORS  . . . . . . . . . . . . . . . . . . . . . . . . . .  S-4
   FORWARD-LOOKING STATEMENTS  . . . . . . . . . . . . . . . . . . .  S-9
   AAR CORP. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  S-9
   USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . S-11
   CAPITALIZATION  . . . . . . . . . . . . . . . . . . . . . . . . . S-12
   PLAN OF DISTRIBUTION  . . . . . . . . . . . . . . . . . . . . . . S-12
   INCORPORATION OF CERTAIN INFORMATION BY REFERENCE . . . . . . . . S-13

                                 Prospectus

   AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . .  3
   INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . .  3
   THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4
   USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . .  6
   RATIO OF EARNINGS TO FIXED CHARGES  . . . . . . . . . . . . . . . .  6
   DESCRIPTION OF COMMON STOCK . . . . . . . . . . . . . . . . . . . .  7
   DESCRIPTION OF PREFERRED STOCK  . . . . . . . . . . . . . . . . . . 11
   DESCRIPTION OF DEPOSITORY SHARES  . . . . . . . . . . . . . . . . . 15
   DESCRIPTION OF DEBT SECURITIES  . . . . . . . . . . . . . . . . . . 18
   DESCRIPTION OF WARRANTS . . . . . . . . . . . . . . . . . . . . . . 26
   PLAN OF DISTRIBUTION  . . . . . . . . . . . . . . . . . . . . . . . 27
   LEGAL OPINIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . 29
   EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
























                                     S-2







                      ABOUT THIS PROSPECTUS SUPPLEMENT

        In this prospectus supplement and the accompanying prospectus,
   the terms "AAR," "we," "us," "our" and the "Company" refer to AAR
   CORP.

        We provide information to you about our common stock in two
   separate documents: (a) the accompanying prospectus, dated May 29,
   1998, which provides general information and (b) this prospectus
   supplement, which describes the specific details regarding this
   offering.  If information in this prospectus supplement is
   inconsistent with the accompanying prospectus, you should rely on this
   prospectus supplement.

        You should also read and consider the information in the
   documents we have referred you to in "INCORPORATION OF CERTAIN
   INFORMATION BY REFERENCE" on page S-13 of this prospectus supplement.
   The information incorporated by reference is considered to be part of
   this prospectus supplement, and information that we file later with
   the SEC will automatically update and supersede this incorporated
   information.

        You should rely only on the information contained in this
   prospectus supplement, the accompanying prospectus and the information
   we incorporate by reference into these documents.  We have not, and
   the placement agent has not, authorized any other person to provide
   you with any information or to make any representations not contained
   in this prospectus supplement or the accompanying prospectus. If
   anyone provides you with different or inconsistent information, you
   should not rely on it. We are not, and the placement agent is not,
   making an offer of any securities other than our common stock.  You
   should assume that the information appearing in this prospectus
   supplement and the accompanying prospectus, as well as the information
   incorporated by reference, is accurate as of the date on the front
   cover of those documents only or, in the case of a subsequently filed
   document that is incorporated by reference, the date of filing of that
   document.

        The distribution of this prospectus supplement and the
   accompanying prospectus, and the offering of our common stock, may be
   restricted by law in certain jurisdictions. You should inform yourself
   about, and observe, these restrictions. This prospectus supplement and
   the accompanying prospectus do not constitute, and may not be used in
   connection with, an offer or solicitation by anyone in any
   jurisdiction in which the offer or solicitation is not authorized, or
   in which the person making the offer or solicitation is not qualified
   to do so, or to any person to whom it is unlawful to make the offer or
   solicitation.





                                     S-3







                                RISK FACTORS

   Before purchasing our common stock, you should carefully consider the
   risks discussed in this section and other information in this
   prospectus supplement, the accompanying prospectus and the information
   incorporated by reference.  Additional risks not presently known to us
   or that we currently deem immaterial may also adversely affect our
   business.  If any of the following risks actually occur, our business
   could be materially and adversely affected and the trading price of
   our common stock could decline.

   WE MAY BE FURTHER AFFECTED BY CONTINUING PROBLEMS IN THE AVIATION
   INDUSTRY.

   As a provider of products and services to the aviation industry, we
   are greatly affected by the overall economic condition of that
   industry.  The aviation industry is historically cyclical.  Early in
   calendar year 2001, the commercial aviation industry began to
   experience the negative effects of a worldwide economic downturn.  The
   September 11, 2001 terrorist attacks exacerbated that condition,
   resulting in a significant decline in air travel.

   The downturn in the aviation industry, particularly since September
   11, 2001, has adversely affected our business and our operating
   results.  For the quarter ended November 30, 2001, we incurred a net
   loss of $2,798,000 before consideration of asset impairment and other
   special charges.  Giving effect to after-tax charges of $51,686,000
   primarily related to a reduction in the carrying value of certain
   inventories and equipment leases, as well as an increase in our
   allowance for bad debts, our total net loss for the quarter ended
   November 30, 2001 was $54,484,000.  Our future operating results and
   financial condition may continue to be adversely impacted by ongoing
   problems affecting the aviation industry in the following ways:

        *    a deterioration in the financial condition  of some of our
             existing and potential customers;

        *    reductions in the need for, or the deferral of, aircraft
             maintenance and repair services and spare parts support;

        *    acceleration of the retirement of older generation aircraft,
             resulting in lower prices for spare parts and services for
             those aircraft; and

        *    reductions in demand for used aircraft and engines.

   We cannot assure you that the economic and other factors currently
   affecting the aviation industry will not continue to have an adverse
   impact on our business and our operating results.

   OUR CUSTOMERS MAY NOT BE ABLE TO MEET THEIR FINANCIAL OBLIGATIONS TO
   US.

                                     S-4







   A number of our existing and prospective customers, including domestic
   and foreign commercial airlines, regional and commuter airlines,
   business aircraft operators, aviation original equipment
   manufacturers, aircraft leasing companies, and independent aviation
   support companies, have suffered from the problems adversely affecting
   the aviation industry.  As a result, certain of these customers may
   pose credit risks to us.  Our inability to collect receivables from
   one or more important customers could adversely affect our financial
   position and results of operations for a particular period.

   OUR GOVERNMENT CONTRACTS MAY NOT CONTINUE AT PRESENT SALES LEVELS.

   Our sales to the U.S. Government, its agencies and its contractors
   were approximately $139,072,000 (15.9% of total sales), $132,048,000
   (12.9% of total sales) and $98,954,000 (9.4% of total sales) in fiscal
   years 2001, 2000 and 1999, respectively.  Because these sales are
   subject to competitive bidding and government funding, no assurance
   can be given that sales under our government contracts will continue
   at levels previously experienced.  The majority of our government
   contracts are for aviation products and services used for ongoing
   routine military logistic support activities.  Our contracts with the
   U.S. Government and its agencies and contractors are typically firm
   agreements to provide aviation products and services at a fixed price
   and have a term of one year or less, frequently subject to extension
   for one or more additional periods of one year at the option of the
   U.S. Government.

   WE ARE DEPENDENT UPON FINANCING TO MANAGE OUR BUSINESS AND TO EXECUTE
   OUR BUSINESS STRATEGY.

   Our ability to manage our business and to execute our business
   strategy is dependent, in part, on the continuing availability of debt
   and equity capital.  Our business strategy includes:

        *    increasing and developing new maintenance, repair, and
             overhaul capabilities;

        *    acquiring new businesses and product lines;

        *    acquiring inventories to support newer generation aircraft
             and engines; and

        *    capitalizing on near-term market opportunities.

   Access to the debt and equity capital markets may be limited in light
   of general economic conditions, the state of the aviation industry,
   and our recent performance.  We cannot assure you that debt and equity
   capital will continue to be available to us on favorable terms, or at
   all. Our inability to obtain financing on favorable terms may
   adversely affect our financial condition and results of operations,
   and our ability to manage our business and execute our business
   strategy.

                                     S-5







   WE ARE SUBJECT TO SIGNIFICANT GOVERNMENT REGULATION.

   The aviation industry is highly regulated by the Federal Aviation
   Administration ("FAA") in the United States and the equivalent
   regulatory agencies in other countries.  Before we sell any of our
   products that are to be installed in an aircraft, such as engines,
   engine parts and components, airframe and accessory parts and
   components, they must meet certain standards of airworthiness
   established by the FAA or the equivalent regulatory agencies in other
   countries.  We also operate repair stations that are licensed by the
   FAA and in some cases the equivalent regulatory agencies in other
   countries.  Specific regulations vary from country to country,
   although regulatory requirements in other countries are generally
   satisfied by compliance with FAA requirements.  Although we believe we
   comply with all applicable regulatory standards, these standards may
   change in the future, requiring our inventory to be modified or
   scrapped.  There can be no assurance that new and more stringent
   government regulations will not be adopted in the future or that any
   such new regulations, if enacted, would not have an adverse impact on
   us.  If material authorizations or approvals were revoked or suspended
   by the FAA and in some cases the equivalent regulatory agencies in
   other countries, our operations would be adversely affected.

   WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY.

   The aviation industry and the markets for our products and services
   are extremely competitive, and we face competition from a number of
   sources. Our competitors include aircraft manufacturers, aircraft
   parts manufacturers, aircraft and engine leasing companies, airline
   and aircraft service companies, other companies providing maintenance,
   repair and overhaul services, and other aircraft spare parts
   distributors and redistributors.

   Certain of our competitors are currently experiencing financial
   difficulties, and some or all of them may respond to their financial
   difficulties by reducing prices on their products and services to
   increase or retain market share. Any material deterioration in our
   financial condition is likely to affect our ability to compete with
   price-cutting by our competitors.  Some of our competitors have
   substantially greater financial and other resources than we have. We
   cannot assure you that competitive pressures will not materially
   adversely affect our business, financial condition or results of
   operations.

   OUR INDUSTRY IS SUSCEPTIBLE TO PRODUCT LIABILITY CLAIMS.

   Our business exposes us to possible claims for property damage and
   personal injury or death which may result if an engine, engine part or
   component, airframe part or accessory or any other aviation product
   which we have sold, manufactured or repaired fails or if an aircraft
   in which our products are installed crashes and the cause cannot be
   determined.  We carry substantial liability insurance in amounts that

                                     S-6







   we believe are adequate for our risk exposure and commensurate with
   industry norms.  However, we cannot assure you that claims will not
   arise in the future or that our insurance coverage will be adequate to
   protect us in all circumstances. Additionally, we cannot assure you
   that we will be able to maintain adequate insurance coverages in the
   future at an acceptable cost.  Since the September 11, 2001 terrorist
   attacks, insurance premiums have risen significantly and may increase
   further.  Any product liability claim not covered by adequate
   insurance could materially adversely affect our business, financial
   condition or results of operations.

   THE MARKET VALUE FOR OUR AVIATION PRODUCTS FLUCTUATES.

   The market value for aviation products is dependent upon a number of
   factors, including system-wide capacity in the commercial aviation
   industry.  The terrorist attacks of September 11, 2001, which occurred
   in an already weakened commercial aviation environment, caused
   commercial airlines to delay the delivery of new aircraft, to park
   existing aircraft indefinitely and to accelerate the scheduled
   retirement plans for older generation aircraft.  These actions, among
   others, reduced commercial airlines' capacity by approximately 20%.
   Based on this and other factors, we reduced the value of, and provided
   loss accruals for, certain of our inventories and equipment leases
   that support principally older generation aircraft by $75,000,000
   during the quarter ended November 30, 2001.  Since system capacity in
   the commercial aviation system is volatile, we can give no assurance
   that future write-downs of our inventories and equipment leases will
   not occur.

   WE MAY NOT BE ABLE TO INTEGRATE ACQUIRED BUSINESSES SUCCESSFULLY.

   The process of integrating an acquired business into our operations
   may result in ongoing operating difficulties and expenditures, may
   absorb significant management attention that would otherwise be
   available for the ongoing development of our business and may result
   in charges against income. In addition, future acquisitions may result
   in potentially dilutive issuances of equity securities, incurrences of
   debt or contingent liabilities and earnings charges for the write-down
   of goodwill, any of which could materially adversely affect our
   operating results and financial condition.

   OUR STOCK PRICE MAY BE VOLATILE AND COULD EXPERIENCE SUBSTANTIAL
   DECLINES.

   The market price of our common stock has historically experienced and
   may continue to experience volatility. The market price is likely to
   be affected by:

        *    fluctuations in the volume of trading;

        *    changes in general conditions in the economy or the
             financial markets;

                                     S-7







        *    variations in our quarterly operating results;

        *    changes in financial estimates by management and securities
             analysts;

        *    other developments affecting us, our industry, customers or
             competitors; and

        *    the operating and stock price performance of companies that
             investors deem comparable to us.

   The volatility of the stock market also has affected the market prices
   of securities issued by many companies and, at times, for reasons
   unrelated to their operating performance. Therefore, we cannot predict
   the market price for our common stock after this offering.

   PROVISIONS IN OUR CHARTER AND BYLAWS COULD MAKE IT DIFFICULT FOR
   STOCKHOLDERS TO EFFECT A CHANGE IN CONTROL.

   Our certificate of incorporation and bylaws may affect significantly
   the ability of our stockholders to make changes to our board of
   directors or the ability of holders of a substantial amount of our
   common stock to acquire control of, or to remove, the incumbent board,
   and might discourage transactions that involve an actual or threatened
   change of control of AAR.  These provisions:

        *    provide for a classified board of directors of which
             approximately one third of the directors are elected each
             year;

        *    allow the authorized number of directors to be changed only
             by a resolution of the board of directors;

        *    prohibit stockholder action by written consent;

        *    limit who may call stockholder meetings;

        *    require the affirmative vote of at least 80% of voting
             shares not held by interested stockholders (that is,
             stockholders who own 10% or more of our common stock) for
             any merger, sale and certain other business transactions
             with an interested stockholder not approved by our board;

        *    provide that directors may be removed only for cause and
             only by the affirmative vote of holders of at least 80% of
             the total voting power of all shares entitled to vote in an
             election of directors;

        *    require the affirmative vote of at least 80% of the total
             voting power of all shares entitled to vote in an election
             of directors or a majority of our board to amend, alter or
             repeal our by-laws; and

                                     S-8







        *    authorize the issuance of 250,000 shares of preferred stock
             with such designations, rights and preferences as may be
             determined by our board.

   In addition, in July 1997, our board declared a distribution of a
   common stock purchase right for each outstanding share of common
   stock.  The rights are transferred only with our common stock and are
   not exercisable until a person acquires or announces an intention to
   acquire 15% or more of our outstanding common stock.  The rights,
   which expire August 6, 2007, will, if exercised, cause substantial
   dilution to a person or a group that attempts to acquire control of
   AAR on terms not approved by our board.

                         FORWARD-LOOKING STATEMENTS

             This prospectus supplement, the accompanying prospectus and
   the documents incorporated by reference by them contain certain
   statements relating to future results, which are forward-looking
   statements as that term is defined in the Private Securities
   Litigation Reform Act of 1995. These forward-looking statements are
   based on the beliefs of our management, as well as assumptions and
   estimates based on information currently available to us, and are
   subject to certain risks and uncertainties that could cause actual
   results to differ materially from historical results or those
   anticipated, depending on a variety of factors, including those
   factors discussed under the section entitled "Risk Factors."  Should
   one or more of those risks or uncertainties materialize adversely, or
   should underlying assumptions or estimates prove incorrect, actual
   results may vary materially from those described. Those events and
   uncertainties are difficult or impossible to predict accurately and
   many are beyond our control.

                                  AAR CORP.

        AAR CORP. was organized in 1955 as the successor to a business
   founded in 1951 and was reincorporated in Delaware in 1966.  We are a
   leading independent provider of value-added products and services to
   the worldwide aviation industry.

        We report our activities in four business segments: (i) Inventory
   and Logistic Services, (ii) Maintenance, Repair and Overhaul, (iii)
   Manufacturing and (iv) Aircraft and Engine Sales and Leasing.

        Our Inventory and Logistic Services segment activities include
   the purchase and sale of a wide variety of new, overhauled and
   repaired engine parts and components and airframe parts and components
   for the aviation aftermarket.  We also provide customized inventory
   supply and management programs for engine and airframe parts and
   components in support of customer maintenance activities.  We are an
   authorized distributor for more than 150 leading aviation and
   aerospace product manufacturers.  We acquire aviation products for our
   Inventory and Logistic Services segment from domestic and foreign

                                     S-9







   airlines, independent aviation service companies, aircraft leasing
   companies and original equipment manufacturers.

        Our Maintenance, Repair and Overhaul segment activities include
   the overhaul, repair and exchange of a wide variety of airframe and
   engine parts and components for our commercial, and military
   customers.  Our repair and overhaul capabilities include most
   commercial aircraft landing gear, a wide variety of avionics,
   instruments, electrical, electronic, fuel, hydraulic and pneumatic
   components and a broad range of internal airframe components.  We also
   operate an aircraft maintenance facility providing maintenance,
   modification, special equipment installation, painting services and
   aircraft terminal services for various models of commercial, military,
   regional, business and general aviation aircraft.  We also operate an
   aircraft storage facility.  Our repair and overhaul of parts and
   components also supports our inventory management activities within
   our Inventory and Logistic Services segment.  We have 11 FAA-licensed
   repair stations in the U.S. and two in Europe to perform airframe and
   engine component overhaul services.  We also provide turbine engine
   overhaul and parts supply services to industrial gas and steam turbine
   operators.  During the second quarter of fiscal 2001, we purchased
   substantially all of the net assets of Hermetic Aircraft
   International, an aircraft component support company providing repair
   and distribution services to the North American aftermarket primarily
   on behalf of European aircraft component manufacturers.

        Our Manufacturing segment activities include the design,
   manufacture and installation of in-plane cargo loading and handling
   systems for commercial and military aircraft and helicopters.  We also
   design and manufacture advanced composite materials for commercial,
   business and military aircraft.  In addition, we manufacture and
   repair a wide array of containers, pallets and shelters in support of
   military and humanitarian tactical deployment activities.

        Our Aircraft and Engine Sales and Leasing segment activities
   include the sale or lease of used commercial jet aircraft and the sale
   or lease of a wide variety of new, overhauled and repaired engines.

        For each of our segments, we furnish aviation products and
   services primarily through our own employees. The principal customers
   for our products and services in the Inventory and Logistic Services
   and Maintenance, Repair and Overhaul segments are domestic and foreign
   commercial airlines, regional and commuter airlines, business and
   general aviation operators, aviation original equipment manufacturers,
   aircraft leasing companies, domestic and foreign military
   organizations and independent aviation support companies.  In the
   Manufacturing segment, our principal customers include domestic and
   foreign commercial airlines, aviation original equipment manufacturers
   and domestic and foreign military organizations.  The principal
   customers in our Aircraft and Engine Sales and Leasing segment include
   domestic and foreign commercial airlines, aircraft and leasing
   companies and domestic military organizations.  Sales of aviation

                                    S-10







   products and services to commercial airlines are generally affected by
   such factors as the number, type and average age of aircraft in
   service, the levels of aircraft utilization (e.g., frequency of
   schedules), the number of airline operators and the level of sales of
   new and used aircraft.

        Competition in the worldwide aviation/aerospace industry is based
   on quality, ability to provide a broad range of products and services,
   speed of delivery and price. Competitors in both aircraft and engine
   parts supply businesses include the original equipment manufacturers,
   commercial airlines, and other independent suppliers of parts and
   services. In certain of our leasing and commercial jet aircraft and
   engine sales activities, we face competition from financial
   institutions, syndicators, commercial and specialized leasing
   companies and other entities that provide financing.  We also compete
   with various repair and overhaul organizations, which include the
   service arms of original equipment manufacturers, the maintenance
   departments or divisions of large commercial airlines (some of which
   also offer maintenance services to third parties) and independent
   organizations.  Our pallet, container and shelter manufacturing
   activities compete with several modest-sized private companies, and
   our cargo systems competitors include a number of divisions of large
   corporations. Although certain of our competitors have substantially
   greater financial and other resources than us, we believe that we have
   maintained a satisfactory competitive position through our
   responsiveness to customer needs, our attention to quality and our
   unique combination of market expertise, technical capabilities and
   financial strength.

        At December 31, 2001, backlog believed to be firm was
   approximately $115,000,000 compared to $74,100,000 at May 31, 2001.
   Approximately $84,000,000 of this backlog is expected to be filled
   within the next 12 months. The increase in our backlog is due primarily
   to increased orders in our Manufacturing and Maintenance, Repair and
   Overhaul segments.

        Certain of our aviation-related activities and products are
   subject to licensing, certification and other requirements imposed by
   the FAA and other regulatory agencies, both domestic and foreign.  We
   believe that we possess all licenses and certifications that are
   material to the conduct of our business.

        At December 31, 2001, we employed approximately 2,350 persons
   worldwide.

                               USE OF PROCEEDS

        We expect the net proceeds from the sale of shares of our common
   stock being offered by this prospectus supplement to be approximately
   $34,333,750 after deducting the placement fee and offering expenses.
   We intend to use substantially all of the net proceeds for working
   capital and general corporate purposes.



                                    S-11







                               CAPITALIZATION

        The following table sets forth our capitalization as of November
   30, 2001, both actual and adjusted to give effect to the sale of
   shares of our common stock being offered by this prospectus
   supplement, after deducting the placement fee and offering expenses,
   and the application of the estimated net proceeds as described in the
   section entitled "Use of Proceeds."

   
   
                                                                                           NOVEMBER 30, 2001
                                                                                           -----------------
                                                                                     ACTUAL                 ADJUSTED
                                                                                     ------                 --------
                                                                                             (in thousands)
                                                                                                      
       Short-term borrowings, including current maturities of long-term
         debt...........................................................              $71,162                 $ 71,162

       Long-term debt...................................................              189,733                  189,733
                                                                                     --------                 --------
       Total debt.......................................................             $260,895                 $260,895

       Stockholder's equity:

         Preferred stock, $1.00 par value,
           authorized 250 shares; none issued...........................                   --                       --

         Common stock, $1.00 par value, authorized
           100,000 shares; issued 29,407 (33,554 as adjusted)...........             $ 29,407                 $ 33,554

       Capital surplus..................................................             $149,035                 $165,440

       Retained earnings................................................             $162,888                 $162,888

       Treasury stock 2,531 (1,668 as adjusted).........................             $(40,431)                $(26,649)

       Unearned restricted stock awards.................................             $ (1,610)                $ (1,610)

       Accumulated other comprehensive income
         (loss) --
         Cumulative translation adjustments.............................             $(11,893)                $(11,893)
         Minimum pension liability......................................             $ (3,052)                $ (3,052)
                                                                                     --------                 --------
       Total stockholders' equity.......................................             $284,344                 $318,678

       Total capitalization.............................................             $545,239                 $579,573
     
                            PLAN OF DISTRIBUTION

        We have engaged on a reasonable best efforts basis William Blair
   & Company, L.L.C. ("William Blair") as our exclusive placement agent for
   this offering.  William Blair is not obligated to purchase any shares of
   our common stock.  William Blair has advised us that it will not purchase
   any shares of our common stock for its own account.

        In consideration for acting as placement agent for this offering
   and for providing other financial advisory services, we have agreed to

                                    S-12







   pay William Blair a placement fee equal to five percent (5%) of the
   total offering proceeds from the sale of shares of our common stock or
   $1,816,250.  We have also agreed to reimburse William Blair for any
   reasonable expenses incurred by it in connection with this offering.

        We have agreed to indemnify William Blair, its stockholders,
   directors, officers, employees, agents affiliates and controlling
   persons from and against any and all claims, damages, liabilities, or
   expenses, and all actions in respect thereof arising under the
   Securities Act.

        The expenses directly related to this offering, not including the
   placement fee, are estimated to be approximately $175,000 and will be
   paid by us.  Expenses of the offering, exclusive of the placement fee,
   include legal fees, printing expenses, transfer agent fees, exchange
   listing fees and miscellaneous fees.

        We entered into stock purchase agreements, effective February 15,
   2002, with investors identified by William Blair, whereby the
   investors agreed to purchase 5,010,345 shares of our common stock for
   a total offering price of $36,325,000.

        William Blair and its affiliates have in the past and may in the
   future perform financial services for us, for which they have received
   customary fees.

              INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

        The SEC allows us to incorporate by reference the information we
   file with them, which means that we can disclose important information
   to you by referring to those documents. The information incorporated
   by reference is considered to be part of this prospectus supplement,
   and the information that we file at a later date with the SEC will
   automatically update and supersede this information. We incorporate by
   reference the documents listed below as well as any future filings we
   make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
   Securities Exchange Act of 1934:

             (a)  Our annual report on Form 10-K for the fiscal year
   ended May 31, 2001, filed with the SEC on August 27, 2001;

             (b)  Our quarterly report on Form 10-Q for the quarter ended
   August 31, 2001, filed with the SEC on October 15, 2001; and

             (c)  Our quarterly report on Form 10-Q for the quarter ended
   November 30, 2001, filed with the SEC on January 14, 2002.


                                    S-13







        You may request a copy of these filings, at no cost, by writing
   or telephoning us at the following address:

                  AAR CORP.
                  One AAR Place
                  1100 North Wood Dale Road
                  Wood Dale, Illinois  60191
                  (630) 227-2000

















































                                    S-14







                                 PROSPECTUS

                                  AAR CORP.

                                $200,000,000

                       COMMON STOCK, PREFERRED STOCK,
               DEPOSITARY SHARES, DEBT SECURITIES AND WARRANTS

        AAR CORP. ("the Company") may offer from time to time (i) common
   stock, par value $1.00 per share ("Common Stock"), (ii) one or more
   series of Preferred Stock, par value $1.00 per share ("Preferred
   Stock"), which may be evidenced by Depositary Shares (as defined
   herein), (iii) one or more series of debt securities ("Debt
   Securities"), consisting of debentures, notes and/or other unsecured
   evidences of indebtedness, and (iv) warrants to purchase Debt
   Securities, Preferred Stock, Common Stock or Depositary Shares
   ("Warrants", and together with the Common Stock, Preferred Stock,
   Depositary Shares and Debt Securities, "Securities"), at an aggregate
   initial offering price not to exceed $200,000,000 (or its equivalent
   in another currency or currency unit based on the exchange rate at the
   time of sale) in amounts, at prices and on terms to be determined at
   the time of offering.  Securities may be offered, separately or
   together, in separate series, in amounts, at prices and on terms to be
   set forth in one or more supplements to this Prospectus (each a
   "Prospectus Supplement").

        The specific terms of the Securities in respect to which this
   Prospectus is being delivered will be set forth in the applicable
   Prospectus Supplement and will include, where applicable (i) in the
   case of Common Stock, the number of shares; (ii) in the case of
   Preferred Stock, the specific serial designation, the number of
   shares, any dividend, redemption, liquidation, conversion, exchange,
   sinking fund, voting and other rights, if any, and whether interests
   in such Preferred Stock will be evidenced by Depositary Shares and, if
   so, the identity of the Depositary; (iii) in the case of Debt
   Securities, whether they are Senior or Subordinated Debt Securities
   and subordination terms, if any, the specific designation, aggregate
   principal amount, the currency or currency unit in which payments are
   to be made, denominations, maturity, premium, if any, rate (which may
   be fixed or variable) and time of payment of interest, if any, terms
   for redemption at the option of the Company or the holder, if any,
   terms for sinking fund payments, if any, conversion or exchange
   rights, if any; and (iv) in the case of Warrants, the duration,
   offering price, exercise price and detachability of such Warrants, as
   well as a description of the Common Stock, Preferred Stock, Depositary
   Shares or Debt Securities issuable upon such exercise.  Unless
   otherwise specified in the applicable Prospectus Supplement,
   Securities other than Common Stock will be issued in permanent global
   form and Common Stock will be issued through the Company's transfer
   agent and registrar.

        The Common Stock is listed on the New York Stock Exchange, Inc.
   (the "NYSE") and the Chicago Stock Exchange under the symbol "AIR".







   Any Common Stock offered will be listed, subject to notice of
   issuance, on such exchanges.  The applicable Prospectus Supplement
   will also contain information, where applicable, as to any other
   listing on a securities exchange of Securities covered by such
   Prospectus Supplement.

        The Company may sell Securities to or through one or more
   underwriters, and also may sell Securities directly to other
   purchasers or through agents.  The applicable Prospectus Supplement
   will set forth the names of any underwriters or agents involved in the
   sale of the Securities in respect of which this Prospectus is being
   delivered, the number or principal amounts, if any, to be purchased by
   underwriters and the compensation, if any, of such underwriters or
   agents.  See "Plan of Distribution."  No Securities may be sold
   without delivery of the applicable Prospectus Supplement describing
   the method and terms of the offering of such series of Securities.

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

   THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
   SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
   NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
   COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
   ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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

                THE DATE OF THIS PROSPECTUS IS MAY 29, 1998.


























                                      2







                            AVAILABLE INFORMATION

        The Company is subject to the informational requirements of the
   Securities Exchange Act of 1934, as amended (together with the rules
   and regulations thereunder, the "Exchange Act"), and in accordance
   therewith, files reports, proxy statements and other information with
   the Securities and Exchange Commission (the "Commission).  Reports,
   proxy statements and other information filed by the Company can be
   inspected and copied at the public reference facilities maintained by
   the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and
   at the Commission's Regional Offices in New York (7 World Trade
   Center, 13th Floor, New York, New York 10048) and Chicago (Citicorp
   Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661)
   and copies of such materials can be obtained from the Public Reference
   Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
   20549, at prescribed rates.  Such material is also available from the
   Commission through the internet at http://www.sec.gov.  The Common
   Stock is listed on the NYSE and the Chicago Stock Exchange.  Reports,
   proxy statements and other information relating to the Company can
   also be inspected and copied at the offices of the NYSE, 20 Broad
   Street, New York, New York 10005.

        The Company has filed with the Commission a registration
   statement on Form S-3 (the "Registration Statement") (of which this
   Prospectus is a part) under the Securities Act of 1933, as amended
   (together with the rules and regulations thereunder, the "Securities
   Act") with respect to the Securities.  This Prospectus does not
   contain all of the information set forth in the Registration
   Statement, certain portions of which have been omitted as permitted by
   the rules and regulations of the Commission.  Statements contained in
   this Prospectus as to the contents of any contract or other documents
   are not necessarily complete, and in each instance reference is made
   to the copy of such contract or other document filed as an exhibit to
   the Registration Statement, each such statement being qualified in all
   respects by such reference and the exhibits and schedules thereto.
   For further information regarding the Company and the Securities,
   reference is hereby made to the Registration Statement and such
   exhibits and schedules which may be obtained from the Commission at
   its principal office in Washington, D.C. upon payment of the fees
   prescribed by the Commission.

               INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

        The following documents filed by the Company with the Commission
   (File No. 1-6263) pursuant to the Exchange Act are hereby incorporated
   by reference in this Prospectus:

   1.   The Company's Annual Report on Form 10-K for the fiscal year
   ended May 31, 1997;




                                      3







   2.   The Company's Quarterly Reports on Form 10-Q for the fiscal
   quarters ended August 31, 1997, November 30, 1997 and February 28,
   1998;

   3.   The Company's Current Reports on Form 8-K dated July 8, 1997,
   December 4, 1997, December 10, 1997, and December 11, 1997; and

   4.   The descriptions of the Common Stock and the Common Stock
   Purchase Rights included in the Company's Registration Statements on
   Form 8-A filed July 29, 1987 and July 8, 1998, respectively, and filed
   with the Commission pursuant to Section 12(d) of the Exchange Act,
   including any amendments or reports filed for the purpose of updating
   such descriptions.

   All documents filed by the Company pursuant to Section 13(a), 13(c),
   14 or 15(d) of the Exchange Act subsequent to the date hereof and
   prior to the termination of the offering of any Securities are hereby
   incorporated by reference into this Prospectus and shall be deemed a
   part hereof from the date of filing of such documents.

   Any statement contained herein, in any supplement hereto or in a
   document incorporated or deemed to be incorporated by reference herein
   shall be deemed to be modified or superseded for purposes of the
   Registration Statement and this Prospectus to the extent that a
   statement contained herein, in any supplement hereto or in any
   subsequently filed document which also is or is deemed to be
   incorporated by reference herein modifies or supersedes such
   statement.  Any such statement so modified or superseded shall not be
   deemed, except as so modified or superseded, to constitute a part of
   the Registration Statement, this Prospectus or any supplement hereto.

   Copies of all documents which are incorporated herein by reference
   (not including the exhibits to such documents, unless such exhibits
   are specifically incorporated by reference in such documents) will be
   provided without charge to each person, including any beneficial
   owner, to whom this Prospectus is delivered upon written or oral
   request.  Requests should be directed to AAR CORP., 1100 North Wood
   Dale Road, Wood Dale, Illinois 60191, (630) 227-2000, Attn: Corporate
   Secretary.

                                 THE COMPANY

   GENERAL

        The Company is a worldwide leader in supplying aftermarket
   products and services to the global aerospace/aviation industry.  It
   provides aircraft, engines and engine parts; airframe and accessories
   products; overhaul, repair and maintenance services and Company-
   manufactured products to customers in all segments of this industry,
   including the world's largest commercial airlines, air cargo,
   business, and general aviation operators, original equipment
   manufacturers, domestic and foreign military and government agencies,

                                      4







   aircraft leasing companies, and maintenance service providers.  The
   Company's principal executive offices are located at 1100 N. Wood Dale
   Road, Wood Dale, Illinois 60191, and the Company's telephone number is
   630/227-2000.

        The Company reports its activities in one business segment:
   Aviation Services. The following table sets forth net sales and the
   Company's classes of similar products and services within this segment
   for the last three fiscal years:

   
   

     Net Sales                                                  Year Ended May 31
                                                  ----------------------------------------------------
                                                                 (000's omitted)
                                                                                     
                                                            1997              1996             1995
                                                            -------          --------          -------

     Aircraft and Engines                                  $263,074          $182,229         $171,181
     Airframe and Accessories                               221,433           202,883          166,830
     Manufacturing                                          104,821           119,878          113,384
                                                           --------           --------         -------
                                                           $589,328           $504,990        $451,395

   

     AIRCRAFT AND ENGINES

        The Company's Aircraft and Engines activities include (i) the
   purchase, sale, lease and lease financing of new and used commercial
   jet aircraft, (ii) the purchase, sale and lease of a wide variety of
   new, overhauled and repaired engines and engine parts for the aviation
   aftermarket, and (iii) the overhaul, repair and exchange of a wide
   range of engine parts and components and other engine support services
   for its commercial and military customers.  The Company provides
   customized inventory supply and management programs for certain engine
   parts and components in support of customer maintenance activities.
   The Company's primary sources of engine parts for its Aircraft and
   Engine activities are domestic and foreign airlines, independent
   aviation service companies, aircraft leasing companies and original
   equipment manufacturers.

   AIRFRAME AND ACCESSORIES

        The Company's Airframe and Accessories activities consist of (i)
   the purchase, sale and lease of new, overhauled and repaired airframe
   parts and accessories for the aviation aftermarket, and (ii) a wide
   variety of airframe and accessory parts and components overhaul,
   repair and exchange services for its commercial, military and general
   aviation customers.  The Company provides customized inventory supply
   and management programs for certain airframe parts and components in
   support of customer maintenance activities.  The Company's primary
   sources of airframe parts for its Airframe and Accessories activities
   are domestic and foreign airlines, independent aviation service

                                      5







   companies and aircraft leasing companies; the Company is also an
   authorized distributor for leading aerospace/aviation product
   manufacturers.

   MANUFACTURING

        The Company's Manufacturing activities include (i) the
   manufacture and repair of a wide array of containers, pallets and
   shelters in support of military and humanitarian rapid development
   activities, (ii) the design, manufacture and installation of in-plane
   cargo loading and handling systems for commercial and military
   aircraft and helicopters, (iii) the design and manufacture of a line
   of specialized protective transport cases that are used to transport
   sensitive and calibrated tools and instruments, and a variety of
   vacuum storage containers that protect machinery and equipment during
   long-term storage, (iv) the design and manufacture of advanced
   composite materials for commercial, business and military aircraft and
   (v) the design and manufacture of a complete line of self-propelled
   floor sweepers and scrubbers for a variety of industrial and
   commercial uses, including both ride-on and walk-behind lines, powered
   by gasoline, diesel fuel or battery.

                               USE OF PROCEEDS

        Unless otherwise indicated in an accompanying Prospectus
   Supplement, the Company intends to use the net proceeds from the sale
   of Securities for general corporate purposes.

                     RATIO OF EARNINGS TO FIXED CHARGES

        The following is the Company's ratio of earnings to fixed charges
   for the periods indicated:

   
   

                               Nine Months
                                  Ended
                               February 28,                      Year Ended May 31,
                               1998    1997             1997     1996    1995     1994    1993
                              ------  ------           ------   ------  ------   ------  ------
                                                                    
     Ratio of earnings to
     fixed charges             4.3:1   3.4:1            3.5:1    2.8:1   2.1:1    2.1:1   0.8:1
   

              For the purposes of calculating the ratio of earnings to fixed
   charges, earnings consist of income before income taxes, adjusted for
   fixed charges.  Fixed charges consist of interest, whether expensed or
   capitalized, amortization of debt expense and one-third of minimum
   rental payments under operating leases (estimated by management to be
   the interest factor of such rentals).  In 1993, earnings, as defined,
   were inadequate to cover fixed charges by $1,917,000.





                                      6







                         DESCRIPTION OF COMMON STOCK

   GENERAL

        The following is a description of certain terms of the Common
   Stock.  This description does not purport to be complete and is
   subject to and qualified in its entirety by reference to the
   provisions of the Company's Restated Certificate of Incorporation
   relating to the Common Stock.

        The authorized common stock of the Company consists of 80,000,000
   shares of Common Stock, $1.00 par value per share.  As of March 31,
   1998, there were 27,688,317 shares of Common Stock outstanding.

        Holders of Common Stock are entitled to one vote for each share
   held on all matters submitted to a vote of stockholders and do not
   have cumulative voting rights.  Holders of a majority of the shares of
   Common Stock entitled to vote in any election of directors may elect
   all of the directors standing for election. Upon the liquidation,
   dissolution or winding up of the Company, the holders of Common Stock
   are entitled to receive ratably the net assets of the Company
   available after the payment of all debts and other liabilities.
   Holders of Common Stock have no preemptive, subscription, redemption
   or conversion rights.  The outstanding shares of Common Stock are
   fully paid and non-assessable.

        The rights, preferences and privileges of holders of Common Stock
   are subject to, and may be adversely affected by, the rights of the
   holders of shares of any series of preferred stock which the Company
   may designate and issue in the future.

   DIVIDENDS

        Holders of Common Stock are entitled to receive ratably such
   dividends, if any, as may be declared by the Board of Directors
   applicable to Common Stock out of funds legally available therefor.
   Declaration of future dividends by the Board of Directors will depend
   on general business conditions encountered by the Company, earnings,
   financial condition and capital requirements of the Company and such
   other factors as the Board of Directors may deem relevant.

        Certain of the Company's debt agreements contain provisions
   restricting the payment of dividends or repurchase of its shares.
   Under the most restrictive of these provisions, the Company may not
   pay dividends (other than stock dividends) or acquire its capital
   stock if after giving effect thereto the aggregate amounts paid on or
   after June 1, 1995 exceed the sum of (i) $20,000,000 plus (ii) 50% of
   consolidated net income of the Company after June 1, 1994.  Certain
   restrictions on the declaration or payment of dividends on Common
   Stock and the repurchase of Common Stock shares by the Company apply
   if there are any shares of preferred stock outstanding.


                                      7







   CERTAIN CHARTER AND BY-LAW PROVISIONS

        GENERAL.  The Company has implemented certain measures designed
   to enhance the Board of Directors' ability to protect stockholders
   against, among other things, unsolicited attempts to acquire a
   significant interest in the Company or to influence the Company's
   management (whether through open market purchases, tender offers or
   otherwise) that do not offer an adequate price to all stockholders or
   that the Board of Directors otherwise considers not in the best
   interests of the Company and its stockholders.

        Certain provisions in the Restated Certificate of Incorporation
   of the Company may have a significant impact on the stockholders'
   ability to change the composition of the incumbent Board of Directors
   or the ability of a substantial holder of the Common Stock to acquire
   control of, or to remove, the incumbent Board of Directors, and might
   discourage certain types of transactions that involve an actual or
   threatened change of control of the Company.

        The provisions of the Restated Certificate of Incorporation are
   intended to encourage persons seeking to acquire control of the
   Company to initiate such an acquisition through arm's-length
   negotiations with the Company's management and Board of Directors.
   These provisions could have the effect of discouraging a third party
   from making a tender offer to or otherwise attempting to obtain
   control of the Company, even though such an attempt might be
   beneficial to the Company and its stockholders.  At the same time,
   these provisions help ensure that the Board of Directors, if
   confronted by an unsolicited proposal from a third party who has
   recently acquired a block of Common Stock, will have sufficient time
   to review the proposal and alternatives to it and to seek better
   proposals for its stockholders, employees, suppliers, customers and
   others.  These provisions are discussed below.

        INDEMNIFICATION.  Pursuant to the provisions of the Delaware
   General Corporation Law (the "Delaware GCL"), the Company has adopted
   provisions in its Restated Certificate of Incorporation which require
   the Company to indemnify its officers and directors to the fullest
   extent permitted by law, and eliminate the personal liability of its
   directors to the Company or its stockholders for monetary damages for
   breach of their duty of due care except (i) for any breach of the duty
   of loyalty; (ii) for acts or omissions not in good faith or which
   involve intentional misconduct or knowing violations of law; (iii) for
   liability under Section 174 of the Delaware GCL (relating to certain
   unlawful dividends, stock repurchases or stock redemptions); or (iv)
   for any transaction from which the director derived any improper
   personal benefit.  These provisions do not eliminate a director's duty
   of care.  Moreover, the provisions do not apply to claims against a
   director for violation of certain laws, including Federal securities
   laws.  The Company believes that these provisions assist the Company
   in attracting and retaining qualified individuals to serve as
   directors and officers.

                                      8







        PREFERRED STOCK.  The Company's Restated Certificate of
   Incorporation includes a provision which allows the Board of
   Directors, without stockholder approval, to issue up to 250,000 shares
   of preferred stock with voting, liquidation and conversion rights that
   could be superior to and adversely affect the voting power of holders
   of Common Stock.  The issuance of preferred stock could have the
   effect of delaying, deferring or preventing a change in control of the
   Company.

        CLASSIFIED BOARD OF DIRECTORS.  The Company's Restated
   Certificate of Incorporation provides that the Board of Directors of
   the Company shall be divided into three classes of directors serving
   staggered three-year terms.  The classification of directors has the
   effect of making it more difficult for stockholders to change the
   composition of the Board of Directors in a relatively short period of
   time.

        VOTING RESTRICTION ON CERTAIN BUSINESS COMBINATIONS.  An
   affirmative vote of the holders of at least 80% of the outstanding
   shares of capital stock of the Company entitled to vote generally in
   the election of directors is required with respect to the adoption or
   approval of certain business combinations, including mergers,
   consolidations, asset and securities sales, plans of liquidation or
   dissolution and certain reclassifications, involving any related party
   (as defined below).

        A related party is defined in the Company's Restated Certificate
   of Incorporation to mean the beneficial owner, directly or indirectly,
   of not less than 10% of the voting stock of the Company.

        The 80% affirmative voting requirement is not applicable to
   business combinations approved by (i) a majority of the Board of
   Directors of the Company prior to the acquisition by the related party
   of 10% of the then outstanding voting stock or (ii) a majority of
   those members of the Board of Directors who are not related party
   directors.

        SPECIAL STOCKHOLDERS' MEETINGS.  The Restated Certificate of
   Incorporation and By-Laws allow only the Chairman of the Board of
   Directors or majority of the Board of Directors then in office to call
   a special meeting of the stockholders.

        NO ACTION BY STOCKHOLDER CONSENT.  The Company's Restated
   Certificate of Incorporation prohibits action that is required or
   permitted to be taken at any annual or special meeting of stockholders
   of the Company from being taken by the written consent of stockholders
   without a meeting.

        SUPERMAJORITY VOTING.  The classified Board, special meeting and
   stockholder consent, as well as certain other provisions, of the
   Restated Certificate of Incorporation may be altered, amended, or
   repealed only if the holders of 80% or more of the outstanding shares

                                      9







   of voting stock entitled to vote in the election of directors vote in
   favor of such action.  The By-Laws of the Company may be amended,
   altered, changed or replaced by the affirmative vote of the holders of
   at least 80% or more of the outstanding shares of voting stock
   entitled to vote in the election of directors or by a majority of
   Board of Directors then in office.

   DELAWARE ANTI-TAKEOVER LAW

        The Company is a Delaware corporation that is subject to Section
   203 of the Delaware GCL ("Section 203").  Under Section 203 certain
   "business combinations" between a Delaware corporation, whose stock
   generally is publicly traded or held of record by more than 2,000
   stockholders, and an "interested stockholder" are prohibited for a
   three-year period following the date that such stockholder became an
   interested stockholder, unless (i) the corporation has elected in its
   certificate of incorporation not to be governed by Section 203 (the
   Company has not made such election), (ii) the business combination was
   approved by the board of directors of the corporation before the other
   party to the business combination became an interested stockholder,
   (iii) upon consummation of the transaction that made it an interested
   stockholder, the interested stockholder owned at least 85% of the
   voting stock of the corporation outstanding at the commencement of the
   transaction (excluding voting stock owned by directors who are also
   officers or held in employee benefit plans in which the employees do
   not have a confidential right to tender or vote stock held by the
   plan) or (iv) the business combination is approved by the board of
   directors of the corporation and ratified by two-thirds of the voting
   stock which the interested stockholder did not own.  The three-year
   prohibition also does not apply to certain business combinations
   proposed by an interested stockholder following the announcement or
   notification of certain extraordinary transactions involving the
   corporation and a person who had not been an interested stockholder
   during the previous three years or who became an interested
   stockholder with the approval of a majority of the corporation's
   directors.  The term "business combination" is defined generally to
   include mergers or consolidations between a Delaware corporation and
   an interested stockholder, transactions with an interested stockholder
   involving the assets or stock of the corporation or its majority-owned
   subsidiaries, and transactions which increase an interested
   stockholder's percentage ownership of stock.  The term "interested
   stockholder" is defined generally as those stockholders who become
   beneficial owners of 15% or more of a Delaware corporation's voting
   stock, together with the affiliates or associates of that stockholder.

   RIGHTS AGREEMENT

        Pursuant to a Rights Agreement adopted in 1997, each outstanding
   share of the Company's Common Stock carries with it a right to
   purchase one additional share at a price of $83.33 (subject to anti-
   dilution adjustments).  The rights become exercisable (and separate
   from the shares) when certain specified events occur, including the

                                     10







   acquisition of 15% or more of the Common Stock by a person or group
   (an "Acquiring Person") or the commencement of a tender or exchange
   offer for 15% or more of the Common Stock.  The rights replace Common
   Stock purchase rights initially distributed to holders of the
   Company's Common Stock in 1987 and which expired by their own terms in
   1997.

        In the event that an Acquiring Person acquires 15% or more of the
   Common Stock, or if the Company is the surviving corporation in a
   merger involving an Acquiring Person, or if the Acquiring Person
   engages in certain types of self-dealing transactions, each right
   entitles the holder to purchase for the then current exercise price
   that number of shares of Common Stock having a market value of two
   times the exercise price, subject to certain exceptions.  Similarly,
   if the Company is acquired in a merger or other business combination
   or 50% of more of its assets or earning power is sold, each right
   entitles the holder to purchase at the then current exercise price
   that number of shares of common stock of the surviving corporation
   having a market value of two times the exercise price.  The rights,
   which do not entitle the holder thereof to vote or to receive
   dividends, expire on August 6, 2007 and may be redeemed by the Company
   for $.01 per right under certain circumstances.

                       DESCRIPTION OF PREFERRED STOCK

   GENERAL

        The following is a description of certain general terms and
   provisions applicable to Preferred Stock as a class.  The particular
   terms of any series of Preferred Stock will be described in the
   applicable Prospectus Supplement.  This description does not purport
   to be complete and is subject to and qualified in its entirety by the
   provisions of the Company's Restated Certificate of Incorporation and
   a certificate of designation relating to each series of Preferred
   Stock (each, a "Certificate of Designation"), which will be filed as
   an exhibit to or incorporated by reference in the Registration
   Statement of which this Prospectus is a part at or prior to the time
   of issuance of such series of Preferred Stock.

        The Company's Restated Certificate of Incorporation authorizes
   the issuance of 250,000 shares of Preferred Stock, par value $1.00 per
   share.  No shares of Preferred Stock are currently outstanding.

        Under the Company's Restated Certificate of Incorporation, the
   Preferred Stock may be issued from time to time in one or more series
   with such serial designation and (i) may have such voting powers, full
   or limited, or may be without voting powers; (ii) may be subject to
   redemption at such time or times and such prices; (iii) may be
   entitled to receive dividends (which may be cumulative or
   noncumulative) at such rates, on such conditions, and at such times,
   and payable in preference to, or in such relation to, the dividends
   payable on any other class or classes of stock; (iv) may be entitled

                                     11







   to such rights upon the dissolution of, or upon any distribution of
   the assets of, the Company; (v) may be made convertible into, or
   exchangeable for, shares of any other class or classes of stock of the
   Company at such price or prices or at such other rates of exchange and
   with such adjustments; and (vi) shall have such other preferences and
   relative, participating, optional or other special rights, and
   qualifications, limitations or restrictions thereof, all as stated in
   a Certificate of Designation adopted by the Board of Directors of the
   Company.

        The Prospectus Supplement relating to the particular Preferred
   Stock offered thereby (the "Offered Preferred Stock") will describe
   the following terms of the Offered Preferred Stock:  (i) the
   designation and stated value per share of the Offered Preferred Stock
   and the number of shares offered; (ii) the amount of liquidation
   preference per share of the Offered Preferred Stock; (iii) the initial
   public offering price at which the Offered Preferred Stock will be
   issued; (iv) the dividend rate (or method of calculation), the dates
   on which dividends shall be payable and the dates from which dividends
   shall commence to cumulate, if any; (v) any redemption or sinking fund
   provisions; (vi) any conversion or exchange rights; (vii) whether the
   Company has elected to offer Depositary Shares as described below
   under "Description of Depositary Shares"; and (viii) any additional
   voting, dividend, liquidation, redemption, sinking fund and other
   rights, preferences, privileges, limitations and restrictions.

        The Preferred Stock will have the dividend, liquidation,
   redemption and voting rights set forth below unless otherwise provided
   in the applicable Prospectus Supplement.

        The Preferred Stock will be, upon issuance against full payment
   therefor, fully paid and nonassessable.  The holders of Preferred
   Stock will not have any preemptive rights.  The applicable Prospectus
   Supplement will contain a description of certain United States Federal
   income tax consequences relating to the purchase and ownership of the
   Offered Preferred Stock.

   RANK

        With respect to dividend rights and rights upon the liquidation,
   dissolution or winding up of the Company, each share of Preferred
   Stock will rank on a parity with each other share of Preferred Stock,
   irrespective of series, and will rank prior to the Common Stock and
   any other class or series of capital stock of the Company hereafter
   authorized over which the Preferred Stock has preference or priority
   in the payment of dividends or in the distribution of assets on any
   liquidation, dissolution or winding up of the Company.

        The Preferred Stock will be junior to all outstanding debt of the
   Company.  Each series of Preferred Stock will be subject to creation
   of preferred stock ranking senior to, on a parity with or junior to


                                     12







   such Preferred Stock to the extent not expressly prohibited by the
   Company's Restated Certificate of Incorporation.

   DIVIDENDS

        Holders of shares of Preferred Stock will be entitled to receive,
   when, as and if declared by the Board of Directors out of funds of the
   Company legally available for payment, cash dividends, payable at such
   dates and at such rates per share per annum as set forth in the
   applicable Prospectus Supplement.  Such rate may be fixed or variable
   or both.  Each declared dividend will be payable to holders of record
   as they appear at the close of business on the stock books of the
   Company (or, if applicable, on the records of the Depositary (as
   hereinafter defined) referred to below under "Description of
   Depositary Shares") on such record dates, not more than 60 calendar
   days preceding the payment dates thereof, as are determined by the
   Board of Directors (each of such dates, a "Record Date").

        Such dividends may be cumulative or noncumulative, as provided in
   the applicable Prospectus Supplement.  If dividends on a series of
   Preferred Stock are noncumulative and if the Board of Directors fails
   to declare a dividend in respect of a dividend period with respect to
   such series, then holders of such Preferred Stock will have no right
   to receive a dividend in respect of such dividend period, and the
   Company will have no obligation to pay the dividend for such period,
   whether or not dividends are declared payable on any future dividend
   payment date.

        No full dividend will be declared or paid or set apart for
   payment on the Preferred Stock of any series for any dividend period
   unless full cumulative dividends have been or contemporaneously are
   declared and paid or declared and a sum sufficient for the payment
   thereof set apart for such payment on all the outstanding shares of
   Preferred Stock for all dividend periods terminating on or prior to
   the end of such dividend period.  When dividends are not paid in full
   as aforesaid on all shares of Preferred Stock, as the case may be, any
   dividend payments (including accruals, if any) on the Preferred Stock
   will be paid to the holders of the shares of the Preferred Stock
   ratably in proportion to the respective sums which such holders would
   receive if all dividends thereon accrued to the date of payment were
   declared and paid in full.  Accruals of dividends will not bear
   interest.  So long as any shares of Preferred Stock are outstanding,
   in no event will any dividends, whatsoever, whether in cash or
   property, be paid or declared, nor will any distribution be made, on
   any class of stock ranking subordinate to the Preferred Stock nor will
   any shares of stock ranking subordinate to the Preferred Stock be
   purchased, redeemed or otherwise acquired for consideration by the
   Company or any subsidiary of the Company, unless all dividends on the
   Preferred Stock for all past quarterly dividend periods will have been
   paid or declared and a sum sufficient for the payment thereof set
   apart.  The foregoing provisions will not, however, apply to a
   dividend payable solely in shares of any stock ranking subordinate to

                                     13







   the Preferred Stock or to the acquisition of shares of any stock
   ranking subordinate to the Preferred Stock in exchange solely for
   shares of any other stock ranking subordinate to the Preferred Stock.

   LIQUIDATION

        In the event of a liquidation, dissolution or winding up of the
   Company, the holders of the Offered Preferred Stock will be entitled,
   subject to the rights of creditors, but before any distribution or
   payment to the holders of Common Stock or any other security ranking
   junior to the Offered Preferred Stock, to receive an amount per share
   determined by the Board of Directors and set forth in the applicable
   Prospectus Supplement plus accrued and unpaid dividends to the
   distribution or payment date (whether or not earned or declared).
   However, neither the merger, nor the sale, lease or conveyance of all
   or substantially all of the assets of the Company will be deemed a
   liquidation, dissolution or winding up of the Company for purposes of
   this provision.  In the event that the assets available for
   distribution with respect to the Preferred Stock are not sufficient to
   satisfy the full liquidation rights of all the outstanding Preferred
   Stock, then such assets will be distributed to the holders of such
   Preferred Stock ratably in proportion to the full amounts to which
   they would otherwise be respectively entitled.  After payment of the
   full amount of the liquidation preference, the holders of Preferred
   Stock will not be entitled to any further participation in any
   distribution of assets by the Company.

   VOTING RIGHTS

        Except as required by law, the Preferred Stock will not be
   entitled to any voting rights unless provided for in the applicable
   Certificate of Designations and set forth in the applicable Prospectus
   Supplement.  As more fully described under "Description of Depositary
   Shares" below, if the Company elects to issue Depositary Shares, each
   representing a fraction of a share of a series of the Preferred Stock,
   each such Depositary Share will, in effect, be entitled to such
   fraction of a vote per Depositary Share.

   NO OTHER RIGHTS

        The shares of a series of Preferred Stock will not have any
   preferences, voting powers or relative, participating, optional or
   other special rights except as set forth above or in the applicable
   Prospectus Supplement, the Restated Certificate of Incorporation and
   the applicable Certificate of Designation or as otherwise required by
   law.

   TRANSFER AGENT AND REGISTRAR

        The transfer agent and registrar for the Offered Preferred Stock
   will be described in the applicable Prospectus Supplement.


                                     14







                      DESCRIPTION OF DEPOSITARY SHARES

        The following is a description of certain general terms and
   provisions of the Depositary Shares.  The particular terms of any
   series of Depositary Shares will be described in the applicable
   Prospectus Supplement.  If so indicated in a Prospectus Supplement,
   the terms of any such series may differ from the terms set forth
   below.  The summary of terms of the Deposit Agreement (as defined
   below) and of the Depositary Shares and Depositary Receipts (as
   defined below) contained in this Prospectus does not purport to be
   complete and is subject to, and qualified in its entirety by,
   reference to the forms of the Deposit Agreement and Depositary
   Receipts which will be filed with the Commission at or prior to the
   time of the offering of such Depositary Shares.

   GENERAL

        The Company may, at its option, elect to offer fractional
   interests in shares of Preferred Stock rather than shares of Preferred
   Stock.  In the event such option is exercised, the Company will
   provide for the issuance by a Depositary to the public of receipts for
   Depositary Shares ("Depositary Receipts"), each of which will
   represent a fractional interest.

        The shares of any series of the Preferred Stock underlying the
   Depositary Shares will be deposited under a separate Deposit Agreement
   (the "Deposit Agreement") between the Company and a bank or trust
   company selected by the Company having its principal office in the
   United States and having a combined capital and surplus of at least
   $50,000,000 (the "Depositary").  The Prospectus Supplement relating to
   a series of Depositary Shares will set forth the name and address of
   the Depositary.  Subject to the terms of the Deposit Agreement, each
   owner of a Depositary Share will be entitled, in proportion to the
   applicable fractional interest in a share of Preferred Stock
   underlying such Depositary Shares, to all the rights and preferences
   of the Preferred Stock underlying such Depositary Share (including
   dividend, voting, redemption, conversion and liquidation rights).

        The Depositary Shares will be evidenced by Depositary Receipts
   issued pursuant to the Deposit Agreement.

        Pending the preparation of definitive engraved Depositary
   Receipts, the Depositary may, upon the written order of the Company,
   issue temporary Depositary Receipts substantially identical to (and
   entitling the holders thereof to all the rights pertaining to) the
   definitive Depositary Receipts but not in definitive form.  Definitive
   Depositary Receipts will be prepared thereafter without unreasonable
   delay, and temporary Depositary Receipts will be exchangeable for
   definitive Depositary Receipts at the Company's expense.

        Upon surrender of Depositary Receipts at the office of the
   Depositary and upon payment of the charges provided in the Deposit

                                     15







   Agreement and subject to the terms thereof, a holder of Depositary
   Shares is entitled to have the Depositary deliver to such holder the
   whole shares of Preferred Stock underlying the Depositary Shares
   evidenced by the surrendered Depositary Receipts.

   DIVIDENDS AND OTHER DISTRIBUTIONS

        The Depositary will distribute all cash dividends or other cash
   distributions received in respect of the applicable Preferred Stock to
   the record holders of Depositary Shares relating to such Preferred
   Stock in proportion to the numbers of such Depositary Shares owned by
   such holders on the relevant record date.  The Depositary shall
   distribute only such amount, however, as can be distributed without
   attributing to any holder of Depositary Shares a fraction of one cent,
   and any balance not so distributed shall be added to and treated as
   part of the next sum received by the Depositary for distribution to
   record holders of Depositary Shares.

        In the event of a distribution other than in cash, the Depositary
   will distribute property received by it to the record holders of
   Depositary Shares entitled thereto, unless the Depositary determines
   that it is not feasible to make such distribution, in which case the
   Depositary may, with the approval of the Company, sell such property
   and distribute the net proceeds from such sale to such holders.

        The Deposit Agreement will also contain provisions relating to
   the manner in which any subscription or similar rights offered by the
   Company to holders of the Preferred Stock shall be made available to
   holders of Depositary Shares.

   REDEMPTION OF DEPOSITARY SHARES

        If a series of the Preferred Stock underlying the Depositary
   Shares is subject to redemption, the Depositary Shares will be
   redeemed from the proceeds received by the Depositary resulting from
   the redemption, in whole or in part, of such series of the Preferred
   Stock held by the Depositary.  The Depositary shall mail notice of
   redemption not less than 30 and not more than 60 days prior to the
   date fixed for redemption to the record holders of the Depositary
   Shares to be so redeemed at their respective addresses appearing in
   the Depositary's books.  The redemption price per Depositary Share
   will be equal to the applicable fraction of the redemption price per
   share payable with respect to such series of the Preferred Stock.
   Whenever the Company redeems shares of Preferred Stock held by the
   Depositary, the Depositary will redeem as of the same redemption date
   the number of Depositary Shares relating to shares of Preferred Stock
   so redeemed.  If less than all of the Depositary Shares are to be
   redeemed, the Depositary Shares to be redeemed will be selected by lot
   or pro rata as may be determined by the Depositary.

        After the date fixed for redemption, the Depositary Shares so
   called for redemption will no longer be deemed to be outstanding and

                                     16







   all rights of the holders of the Depositary Shares will cease, except
   the right to receive the moneys payable upon such redemption and any
   money or other property to which the holders of such Depositary Shares
   were entitled upon such redemption upon surrender to the Depositary of
   the Depositary Receipts evidencing such Depositary Shares.

   VOTING THE PREFERRED STOCK

        Upon receipt of notice of any meeting at which the holders of the
   Preferred Stock are entitled to vote, the Depositary will mail the
   information contained in such notice of meeting to the record holders
   of the Depositary Shares relating to such Preferred Stock.  Each
   record holder of such Depositary Shares on the record date (which will
   be the same date as the record date for such Preferred Stock) will be
   entitled to instruct the Depositary as to the exercise of the voting
   rights pertaining to the number of shares of Preferred Stock
   underlying such Depositary Shares in accordance with such
   instructions, and the Company will agree to take all action which may
   be deemed necessary by the Depositary in order to enable the
   Depositary to do so.  The Depositary will abstain from voting shares
   of Preferred Stock to the extent it does not receive specific
   instructions from the holders of Depositary Shares relating to such
   Preferred Stock.

   AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT

        The form of Depositary Receipt evidencing the Depositary Shares
   and any provision of the Deposit Agreement may at any time be amended
   by agreement between the Company and the Depositary.  However, any
   amendment which materially and adversely alters the rights of the
   existing holders of Depositary Shares will not be effective unless
   such amendment has been approved by the record holders of at least a
   majority of the Depositary Shares then outstanding.  The Deposit
   Agreement may be terminated by the Company or the Depositary only if
   (i) all outstanding Depositary Shares relating thereto have been
   redeemed or (ii) there has been a final distribution in respect of the
   Preferred Stock of the relevant series in connection with any
   liquidation, dissolution or winding up of the Company and such
   distribution has been distributed to the holders of the related
   Depositary Shares.

   CHARGES OF DEPOSITARY

        The Company will pay all transfer and other taxes and
   governmental charges arising solely from the existence of the
   depositary arrangements.  The Company will pay charges of the
   Depositary in connection with the initial deposit of the Preferred
   Stock and any redemption of the Preferred Stock.  Holders of
   Depositary Shares will pay other transfer and other taxes and
   governmental charges and such other charges as are expressly provided
   in the Deposit Agreement to be for their accounts.


                                     17







   MISCELLANEOUS

        The Depositary will forward to the holders of Depositary Shares
   all reports and communications from the Company which are delivered to
   the Depositary and which the Company is required to furnish to the
   holders of the applicable Preferred Stock.

        Neither the Depositary nor the Company will be liable if it is
   prevented or delayed by law or any circumstance beyond its control in
   performing its obligations under the Deposit Agreement.  The
   obligations of the Company and the Depositary under the Deposit
   Agreement will be limited to performance in good faith of their duties
   thereunder and they will not be obligated to prosecute or defend any
   legal proceeding in respect of any Depositary Shares or Preferred
   Stock unless satisfactory indemnity is furnished.  They may rely upon
   written advice of counsel or accountants, or information provided by
   persons presenting Preferred Stock for deposit, holders of Depositary
   Shares or other persons believed to be competent and on documents
   believed to be genuine.

   RESIGNATION AND REMOVAL OF DEPOSITARY

        The Depositary may resign at any time by delivering to the
   Company notice of its election to do so, and the Company may at any
   time remove the Depositary, any such resignation or removal to take
   effect upon the appointment of a successor Depositary and its
   acceptance of such appointment.  Such successor Depositary must be
   appointed within 60 days after delivery of the notice of resignation
   or removal and must be a bank or trust company having its principal
   office in the United States and having a combined capital and surplus
   of at least $50,000,000.

                       DESCRIPTION OF DEBT SECURITIES

        The following description of the Debt Securities sets forth
   certain general terms and provisions of the Debt Securities to which
   any Prospectus Supplement may relate.  The particular terms of the
   Debt Securities offered by any Prospectus Supplement (the "Debt
   Securities") will be described in the Prospectus Supplement relating
   to such Debt Securities.

        Senior Debt Securities ("Senior Debt Securities") are to be
   issued under an indenture dated as of October 15, 1989 between the
   Company and U.S. Bank Trust National Association (formerly known as
   First Trust, National Association, as successor in interest to
   Continental Bank, National Association), as Trustee, as supplemented
   and amended by the First Supplemental Indenture dated as of August 26,
   1991, and the Second Supplemental Indenture dated as of December 10,
   1997 (collectively, the "Indenture").  Subordinated Debt Securities
   ("Subordinated Debt Securities," and together with the Senior Debt
   Securities, "Debt Securities") are to be issued under a new indenture
   or a supplement to the Indenture ("Subordinated Indenture").  A copy

                                     18







   of the Indenture has been included as an exhibit to the Registration
   Statement.  The following summary of certain provisions of the Debt
   Securities and the Indentures does not purport to be complete and is
   subject to, and is qualified in its entirety by reference to, all the
   provisions of the Indenture, which are incorporated by reference
   herein.  Capitalized terms used herein have the respective meanings
   set forth in the Indenture, and references to sections are to sections
   of the Indenture.

        As of the date of this Prospectus, the Company has outstanding
   under the Indenture $65,000,000 aggregate principal amount of its
   9.50% Notes due November 1, 2001, $50,000,000 aggregate principal
   amount of its 7.25% Notes due October 15, 2003 and $60,000,000
   aggregate principal amount of its 6.875% Notes due December 15, 2007.

   GENERAL

        The Indenture provides that Debt Securities may be issued
   thereunder, without limit as to aggregate principal amount, in one or
   more series by the Company from time to time upon satisfaction of
   certain conditions precedent.  The Company may, from time to time, fix
   the terms of such Debt Securities, including: (i) the title of the
   Debt Securities; (ii) any limit upon the aggregate principal amount of
   the Debt Securities; (iii) the date or dates on which the principal of
   the Debt Securities is payable; (iv) the rate or rates (which may be
   fixed or variable) per annum at which the Debt Securities will bear
   interest, if any, the date or dates from which such interest will
   accrue, the Interest Payment Dates on which such interest will be
   payable and the Regular Record Date for the interest payable on any
   Interest Payment Date; (v) the place or places where the principal of
   and premium, if any, and interest on the Debt Securities will be
   payable; (vi) the period or periods within which, the price or prices
   at which and the terms and conditions upon which the Debt Securities
   will, pursuant to any mandatory sinking fund provisions, or may,
   pursuant to any optional sinking fund provisions, be redeemed in whole
   or in part by the Company; (vii) the period or periods within which,
   the price or prices at which and the terms and conditions upon which
   the Debt Securities may be repaid, in whole or in part, at the option
   of the Holder thereof; (viii) if other than denominations of $1,000
   and any integral multiple thereof, the denominations in which the Debt
   Securities may be repaid, in whole or in part, at the option of the
   Holder thereof; (viii) if other than denominations of $1,000 and any
   integral multiple thereof, the denominations in which the Debt
   Securities shall be issuable; (ix) if the Debt Securities are Original
   Issue Document Securities, the portion of principal of such Debt
   Securities that shall be payable upon declaration of acceleration of
   the Maturity thereof; and (x) any other terms of the Debt Securities.
   Reference is made to the Prospectus Supplement for the terms of the
   Offered Debt Securities being offered thereby. (Section 301)

        The Debt Securities will be issued only in fully registered form
   without coupons, in denominations set forth in the Prospectus

                                     19







   Supplement.  No service charge will be made for any registration of
   transfer or exchange of such Debt Securities, but the Company may
   require payment of a sum sufficient to cover any tax or other
   governmental charges that may be imposed in connection therewith.

        Any principal, premium and interest will be payable, the transfer
   of the Debt Securities will be registrable, and Debt Securities will
   be exchangeable at the office or agency designated for such purpose in
   the Prospectus Supplement.  Payment of interest may be made at the
   option of the Company by check mailed to the address of the person
   entitled thereto as shown on the Security Register.

        The Debt Securities will be unsecured and will rank pari passu
   with all other unsecured and unsubordinated indebtedness of the
   Company, except Subordinated Debt Securities will, to the extent set
   forth in the Subordinated Indenture, be subordinated in right of
   payment to the prior payment in full of all Senior Debt Securities.

        Debt Securities may be issued under the Indenture as Original
   Issue Discount Securities to be offered and sold at a substantial
   discount from the principal amount thereof.  If the Offered Debt
   Securities are Original Issue Discount Securities, special federal
   income tax, accounting and other considerations applicable thereto
   will be described in the Prospectus Supplement relating thereto.
   "Original Issue Discount Security" means any Debt Security which
   provides for an amount less than the principal amount thereof to be
   due and payable upon a declaration of acceleration of Maturity thereof
   upon the occurrence of an Event of Default and the continuation
   thereof.

   BOOK-ENTRY DEBT SECURITIES

        The Debt Securities of a series may be issued in whole or in part
   in the form of one or more global securities that will be deposited
   with, or on behalf of, a Depositary ("Global Security Depositary") or
   its nominee identified in the applicable Prospectus Supplement.  In
   such a case, one or more global securities will be issued in a
   denomination or aggregate denominations equal to the portion of the
   aggregate principal amount of outstanding Debt Securities of the
   series to be represented by such global security or securities.
   Unless and until it is exchanged in whole or in part for Debt
   Securities in registered form, a global security may not be registered
   for transfer or exchange except as a whole by the Global Security
   Depositary for such global security to a nominee of such Depositary or
   by a nominee of such Depositary to such Depositary or another nominee
   of such Depositary or by such Depositary or any nominee to a successor
   Depositary or a nominee of such successor Depositary and except in the
   circumstances described in the applicable Prospectus Supplement.

        The specific terms of the depositary arrangement with respect to
   any portion of a series of Debt Securities to be represented by a
   global security will be described in the applicable Prospectus

                                     20







   Supplement.  However, the Company expects that the following
   provisions will apply to depositary arrangements.

        Unless otherwise specified in the applicable Prospectus
   Supplement, Debt Securities which are to be represented by a global
   security to be deposited with or on behalf of a Global Security
   Depositary will be represented by a global security registered in the
   name of such Depositary or its nominee.  Upon the issuance of such
   global security, and the deposit of such global security with or on
   behalf of the Global Security Depositary for such global security,
   such Depositary will credit, on its book-entry registration and
   transfer system, the respective principal amounts of the Debt
   Securities represented by such global security to the accounts of
   institutions that have accounts with such Depositary or its nominee
   ("participants").  The accounts to be credited will be designated by
   the underwriters or agents of such Debt Securities or by the Company,
   if such Debt Securities are offered and sold directly by the Company.
   Ownership of beneficial interests in such global security will be
   limited to participants or persons that may hold interests through
   participants.  Ownership of beneficial interests by participants in
   such global security will be shown on, and the transfer of that
   ownership interest will be effected only through, records maintained
   by the Global Security Depositary or its nominee for such global
   security.  Ownership of beneficial interests in such global security
   by persons that hold through participants will be shown on, and the
   transfer of that ownership interest within such participant will be
   effected only through, records maintained by such participant.  The
   laws of some jurisdictions require that certain purchasers of
   securities take physical delivery of such securities in certificated
   form.  The foregoing limitations and such laws may impair the ability
   to transfer beneficial interests in such global securities.

        So long as the Global Security Depositary for a global security,
   or its nominee, is the registered owner of such global security, such
   Depositary or such nominee, as the case may be, will be considered the
   sole owner or Holder of the Debt Securities represented by such global
   security for all purposes under the Indenture.  Unless otherwise
   specified in the applicable Prospectus Supplement, owners of
   beneficial interests in such global security will not be entitled to
   have Debt Securities of the series represented by such global security
   registered in their names, will not receive or be entitled to receive
   physical delivery of Debt Securities of such series in certificated
   form and will not be considered the Holders thereof for any purposes
   under the Indenture.  Accordingly, each person owning a beneficial
   interest in such global security must rely on the procedures of the
   Global Security Depositary and, if such person is not a participant,
   on the procedures of the participant through which such person owns
   its interest, to exercise any rights of a Holder under the Indenture.
   The Company understands that under existing industry practices, if the
   Company requests any action of holders or an owner of a beneficial
   interest in such global security desires to give any notice or take
   any action a Holder is entitled to give or take under the Indenture,

                                     21







   the Global Security Depositary would authorize the participants to
   give such notice or take such action, and participants would authorize
   beneficial owners owning through such participants to give such notice
   or take such action or would otherwise act upon the instructions of
   beneficial owners owning through them.

        Principal of and any premium and interest on a global security
   will be payable in the manner described in the applicable Prospectus
   Supplement.

   CERTAIN DEFINITIONS

        The term "Subsidiary" is defined as a corporation a majority of
   the outstanding voting stock of which is owned, directly or
   indirectly, by the Company and/or one or more Subsidiaries of the
   Company.  The term "Restricted Subsidiary" is defined as any
   Subsidiary of the Company except (a) a Subsidiary which neither
   transacts any substantial portion of its business nor regularly
   maintains any substantial portion of its fixed assets within the
   United States and/or Canada, or which is engaged primarily in
   financing the operations of the Company or its Subsidiaries outside
   the United States and Canada and (b) AAR Financial Services Corp. and
   any Subsidiary of the Company created or acquired after the date of
   the Indenture the primary business of which consists of financing
   operations in connection with leasing and conditional sales
   transactions on behalf of the Company and the Subsidiaries of the
   Company, or which is otherwise primarily engaged in the business of a
   finance company.  The term "Principal Property" is defined to include
   any single manufacturing, production, distribution or service
   facility, plant or warehouse owned or leased by the Company or any
   Restricted Subsidiary (excluding all related land but including
   fixtures, machinery and equipment) which is located within the United
   States or Canada and the gross book value (without deduction of any
   depreciation reserves) of which on the date as of which the
   determination is being made exceeds 1% of Consolidated Net Tangible
   Assets, other than any such facility, plant or warehouse or portion
   thereof which, in the opinion of the Board of Directors, is not of
   material importance to the total business conducted by the Company and
   its subsidiaries as an entirety.  As of the date hereof, approximately
   ten of the Company's properties would be Principal Properties.  The
   term "Attributable Debt" is defined to mean the total net amount of
   rent required to be paid during the remaining term of certain leases,
   discounted at the weighted average rate per annum borne by the Debt
   Securities compounded semi-annually.  The term "Consolidated Net
   Tangible Assets" is defined as the aggregate amount of assets (less
   applicable reserves and other properly deductible items) after
   deducting therefrom (a) all current liabilities (excluding any thereof
   constituting Funded Debt by reason of their being renewable or
   extendible) and (b) all goodwill, trade names, trademarks, patents,
   unamortized debt discount and expense and other like intangibles, all
   as set forth on the most recent consolidated balance sheet of the


                                     22







   Company and its consolidated and computed in accordance with generally
   accepted accounting principles.  (Section 101)

   RESTRICTIONS ON SECURED DEBT

        If the Company or any Restricted Subsidiary shall incur, issue,
   assume or guarantee any Debt secured by a Mortgage on any Principal
   Property or by a Mortgage on any shares of stock or Debt of any
   Restricted Subsidiary, the Company will secure or cause such
   Restricted Subsidiary to secure the Debt Securities, equally and
   ratably with (or prior to) such Secured Debt, unless after giving
   effect thereto the aggregate amount of all such Debt so secured,
   together with all Attributable Debt in respect of sale and leaseback
   transactions involving Principal Properties (see "Restrictions on
   Sales and Leasebacks" below), would not exceed 10% of Consolidated Net
   Tangible Assets.  This restriction will not apply to, and there will
   be excluded from secured Debt in any computation under such
   restriction, Debt secured by (a) Mortgages on property of, or on any
   shares of stock or Debt of, any corporation existing at the time such
   corporation becomes a Restricted Subsidiary, (b) Mortgages on
   property, shares of stock or Debt existing at the time of acquisition
   thereof (including acquisition through merger or consolidation), (c)
   Mortgages on property, shares of stock or Debt hereafter acquired (or,
   in the case of property, constructed) by the Company or any Restricted
   Subsidiary and created prior to, at the time of, or within 120 days
   after acquisition (or, in the case of property, the completion of
   construction and commencement of commercial operation, whichever is
   later) to secure or provide for the purchase price (or, in the case of
   property, construction price) thereof, (d) Mortgages in favor of the
   Company or a Restricted Subsidiary, (e) Mortgages in favor of the
   United States or any State thereof, or Canada or any Province thereof,
   or any instrumentality of any thereof to secure progress, advance or
   other payments pursuant to any contract or provision of any statute,
   and (f) any extension, renewal or replacement of any Mortgage referred
   to in the foregoing clauses (a) through (e), inclusive.  (Section
   1007)

   RESTRICTIONS ON CERTAIN UNSECURED DEBT

        The Debt (other than Secured Debt referenced under "Restrictions
   on Secured Debt" above) of all consolidated Restricted Subsidiaries
   may not exceed 15% of the Consolidated Net Tangible Assets of the
   Company.  (Section 1011)

   MERGER AND CONSOLIDATION

        The Company may not consolidate with or merge into any other
   corporation or convey, transfer or lease its properties and assets
   substantially as an entirety to any Person, or permit any Person to
   consolidate with or merge into the Company or convey, transfer or
   lease its properties and assets substantially as an entirety to the
   Company, unless (i) either the Company shall be the continuing

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   corporation or the successor or purchasing Person shall be a domestic
   corporation and shall expressly assume the payment of the principal of
   and premium, if any, and interest, if any, on the Debt Securities and
   the performance of every covenant of the Indenture binding upon the
   Company, (ii) immediately after such transaction no Event of Default,
   and no event which, after notice or lapse of time or both, would
   become an Event of Default, shall have happened and be continuing,
   (iii) if, as a result of the transaction, properties or assets of the
   Company would become subject to an encumbrance not permitted by the
   Indenture, the Company or such successor corporation or Person shall
   take steps necessary to secure the Debt Securities equally and ratably
   with (or prior to) all indebtedness secured by such encumbrance and
   (iv) the Company has delivered to the Trustee an Officer's Certificate
   and an Opinion of Counsel stating that such transaction complies with
   the Indenture.  (Section 801)

   RESTRICTIONS ON SALES AND LEASEBACKS

        Neither the Company nor any Restricted Subsidiary may enter into
   any sale and leaseback transaction involving any Principal Property,
   completion of construction and commencement of commercial operation of
   which has occurred more than 120 days prior thereto, unless (a) the
   Company or such Restricted Subsidiary could mortgage such property
   pursuant to the restrictions on secured Debt described above in an
   amount equal to the Attributable Debt with respect to the sale and
   leaseback transaction without equally and ratably securing the Debt
   Securities or (b) the Company, within 120 days, applies to the
   retirement of its Funded Debt an amount equal to the greater of (i)
   the net proceeds of the sale of the Principal Property so leased
   pursuant to such arrangement or (ii) the fair value of the Principal
   Property so leased (subject to credits for certain voluntary
   retirements of Funded Debt and Debt Securities).  This restriction
   will not apply to any sale and lease-back transaction (a) between the
   Company and a Restricted Subsidiary or between Restricted Subsidiaries
   or (b) involving a lease for a period of less than three years.
   (Section 1008)

   MODIFICATION AND WAIVER

        Modification and amendment of the Indenture may be effected by
   the Company and the Trustee with the consent of the Holders of not
   less than 66-% in principal amount of the Outstanding Debt Securities
   of each series affected thereby, provided that no such modification or
   amendment may, without the consent of the Holder of each Outstanding
   Security affected thereby, (a) change the Stated Maturity of any
   installment of principal of, or interest on, any Debt Security or
   change the redemption price; (b) reduce the principal amount of, or
   interest on, any Debt Security; (c) change the place or currency of
   any payment of principal or interest on any Debt Security; (d) impair
   the right to institute suit for the enforcement of any payment on or
   with respect to any Debt Security; (e) reduce the percentage in
   principal amount of Outstanding Debt Securities of any series, the

                                     24







   consent of whose Holders is required to modify or amend the Indenture;
   or (f) modify the foregoing requirements or reduce to less than a
   majority the percentage of Outstanding Debt Securities necessary to
   waive any past default.  Except with respect to certain fundamental
   provisions, the Holders of not less than a majority in principal
   amount of Outstanding Debt Securities of any series may, with respect
   to such series, waive past defaults under the Indenture and waive
   compliance by the Company with certain provisions of the Indenture.
   (Sections 902, 513)

   EVENTS OF DEFAULT

        Under the Indenture, the following will be Events of Default with
   respect to any series of Debt Securities:  (a) default in the payment
   of any interest upon any Debt Security of that series when due,
   continued for 30 days; (b) default in the payment of any principal or
   premium, if any, on any Debt Security of that series when due; (c)
   default in the deposit of any sinking fund payment, when due, in
   respect of any Debt Security of that series; (d) default in the
   performance, or breach, of any other covenant or warranty of the
   Company contained in the Indenture or in the Debt Securities of such
   series, continued for 60 days after written notice as provided in the
   Indenture; (e) acceleration of any indebtedness for money borrowed in
   an aggregate principal amount exceeding $10,000,000 by the Company
   under the terms of the instrument under which such indebtedness is
   issued or secured, if such acceleration is not annulled, or such
   indebtedness is not discharged, within 10 days after written notice as
   provided in the Indenture; (f) certain events in bankruptcy,
   insolvency or reorganization; and (g) any other Event of Default with
   respect to Debt Securities of that series.  The Trustee or the Holders
   of 25% in principal amount of the Outstanding Debt Securities of that
   series may declare the principal amount of all Outstanding Debt
   Securities of that series due and payable immediately if any Event of
   Default with respect to Debt Securities of such series shall occur and
   be continuing at the time of declaration.  At any time after
   declaration of acceleration has been made with respect to Debt
   Securities of any series but before a judgment or decree for payment
   of money due has been obtained by the Trustee, the Holders of a
   majority in principal amount of Outstanding Debt Securities of that
   series may rescind any declaration of acceleration and its
   consequences, if all payments due (other than those due as a result of
   acceleration) have been made and all Events of Default have been cured
   or waived.  Any Event of Default with respect to Debt Securities of
   any series may be waived by the Holders of a majority in principal
   amount of all Outstanding Debt Securities of that series, except a
   default (i) in the payment of principal or premium, if any, or
   interest on any Debt Security of that series or (ii) in respect of a
   covenant or provision which cannot be modified or amended without the
   consent of the Holder of each Outstanding Debt Security of such series
   affected.  (Sections 501, 502, 513)



                                     25







        The Holders of a majority in principal amount of the Outstanding
   Debt Securities of a series may direct the time, method and place of
   conducting any proceeding for any remedy available to the Trustee or
   exercising any trust or power conferred on the Trustee with respect to
   Debt Securities of such series, provided that such direction shall not
   be in conflict with any rule of law or the Indenture.  Before
   proceeding to exercise any right or power under the Indenture at the
   direction of such Holders, the Trustee shall be entitled to receive
   from such Holders reasonable indemnity against the costs, expenses and
   liabilities which might be incurred by it in complying with any such
   direction.  (Sections 512, 507)

        The Company is required to furnish to the Trustee annually a
   statement as to the fulfillment by the Company of all of its
   obligations under the Indenture.

   REGARDING THE TRUSTEE

        U.S. Bank Trust National Association (formerly known as First
   Trust, National Association, as successor in interest to Continental
   Bank, National Association) is currently the trustee with respect to
   the Company's 9.50% Notes due November 1, 2001, 7.25% Notes due
   October 15, 2003, and 6.875% Notes due December 15, 2007 outstanding
   under the Indenture.

                           DESCRIPTION OF WARRANTS

   GENERAL

        The Company may issue Warrants, including Warrants to purchase
   Debt Securities ("Debt Warrants"), as well as other types of Warrants
   ("Other Warrants").  Warrants may be issued independently or together
   with any securities and may be attached to or separate from such
   Securities.  Each series of Warrants will be issued under a separate
   warrant agreement (each a "Warrant Agreement") to be entered into
   between the Company and a warrant agent ("Warrant Agent").  The
   Warrant Agent will act solely as an agent of the Company in connection
   with the Warrants of such series and will not assume any obligation or
   relationship of agency or trust for or with any holders or beneficial
   owners of Warrants.  The summary of terms of the Debt Warrants and the
   Other Warrants contained in this Prospectus does not purport to be
   complete and is subject to, and qualified in its entirety by reference
   to, the form of the Warrant Agreement which has been or will be filed
   with the Commission at or prior to the time of the offering of such
   Warrants.

   DEBT WARRANTS

        The Prospectus Supplement relating to particular Debt Warrants
   offered thereby will describe the following terms of such Debt
   Warrants:  (i) the title of such Debt Warrants; (ii) the aggregate
   number of such Debt Warrants; (iii) the price or prices at which such

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   Debt Warrants will be issued; (iv) the currency or currencies,
   including composite currencies, in which the price of such Debt
   Warrants may be payable; (v) the designation, aggregate principal
   amount and term of the Debt Securities purchasable upon exercise of
   such Debt Warrants; (vi) if applicable, the designation and terms of
   the Debt Securities with which such Debt Warrants are issued and the
   number of such Debt Warrants issued with each such Debt Security;
   (vii) the currency or currencies, including composite currencies, in
   which the principal of or any premium or interest on the Debt
   Securities purchasable upon exercise of such Debt Warrant will be
   payable; (viii) if applicable, the date on and after which such Debt
   Warrants and the related Debt Securities will be separately
   transferable; (ix) the price at which and currency or currencies,
   including composite currencies, in which the Debt Securities
   purchasable upon exercise of such Debt Warrants may be purchased; (x)
   the date on which the right to exercise such Debt Warrants shall
   commence and the date on which such right shall expire; (xi) if
   applicable, the minimum or maximum amount of such Debt Warrants which
   may be exercised at any one time; (xii) information with respect to
   book-entry procedures, if any; (xiii) if applicable, a discussion of
   certain United States Federal income tax considerations; and (xiv) any
   other terms of such Debt Warrants, including terms, procedures and
   limitations relating to the exchange and exercise of such Debt
   Warrants.

   OTHER WARRANTS

        The Prospectus Supplement relating to particular Other Warrants
   offered thereby will describe the following terms of such Other
   Warrants:  (i) the title of such Other Warrants; (ii) the securities
   (which may include Preferred Stock, Depositary Shares or Common Stock)
   for which such Other Warrants are exercisable; (iii) the price or
   prices at which such Other Warrants will be issued; (iv) the currency
   or currencies, including composite currencies, in which the price of
   such Other Warrants may be payable; (v) if applicable, the designation
   and terms of the Debt Securities, Preferred Stock or Depositary Shares
   with which such Other Warrants are issued and the number of such Other
   Warrants issued with each such Debt Security, share of Preferred Stock
   or Depositary Share; (vi) if applicable, the date on and after which
   such Other Warrants and the related Debt Securities, Preferred Stock
   or Depositary Shares will be separately transferable; (vii) if
   applicable, a discussion of certain United States Federal income tax
   considerations; and (viii) any other terms of such Other Warrants,
   including terms, procedures and limitations relating to the exchange
   and exercise of such Other Warrants.

                            PLAN OF DISTRIBUTION

        The Company may sell Securities to or through underwriters and
   also may sell Securities directly to other purchasers or through
   agents.  Any such underwriter(s) or agent(s) included in the offer and


                                     27







   sale of Securities will be named in the applicable Prospectus
   Supplement.

        The distribution of the Securities may be effected from time to
   time in one or more transactions at a fixed price or prices, which may
   be changed, or at market prices prevailing at the time of sale, at
   prices related to such prevailing market prices or at negotiated
   prices.

        In connection with the sale of Securities, underwriters may
   receive compensation from the Company or from purchasers of Securities
   for whom they act as agents in the form of discounts, concessions or
   commissions.  Underwriters may sell Securities to or through dealers,
   and such dealers may receive compensation in the form of discounts,
   concessions or commissions from the underwriters and/or commissions
   from the purchasers for whom they may act as agents.  Underwriters,
   dealers and agents that participate in the distribution of Securities
   may be deemed to be underwriters, and any discounts or commissions
   received by them from the Company and any profit on the resale of
   Securities by them may be deemed to be underwriting discounts and
   commissions, under the Securities Act.

        A Prospectus Supplement will set forth the terms of Securities
   offered hereby, including the name or names of any underwriters, the
   purchase price of Securities, and proceeds to the Company from the
   sale, any underwriting discounts and other items constituting
   underwriters' compensation, any public offering price, any discounts
   or concessions allowed or reallowed or paid to dealers, and any
   securities exchange or market on which Securities may be listed.  Only
   underwriters so named in such Prospectus Supplement are deemed to be
   underwriters in connection with Securities offered thereby.

        Under agreements which may be entered into by the Company,
   underwriters and agents who participate in the distribution of
   Securities may be entitled to indemnification by the Company against
   certain liabilities, including liabilities under the Securities Act.

        If so indicated in the Prospectus Supplement, the Company will
   authorize underwriters or other persons acting as the Company's agents
   to solicit offers by certain institutions to purchase Securities from
   the Company pursuant to contracts providing for payment and delivery
   on a future date.  Institutions with which such contracts may be made
   include commercial and savings banks, insurance companies, pension
   funds, investment companies, educational and charitable institutions
   and others, but in all cases such institutions must be approved by the
   Company.  The obligations of any purchaser under any such contract
   will be subject to the condition that the purchase of the Securities
   shall not at the time of delivery be prohibited under the laws of the
   jurisdiction to which such purchaser is subject.  The underwriters and
   such other agents will not have any responsibility in respect of the
   validity or performance of such contracts.


                                     28







                               LEGAL OPINIONS

        The validity of any Securities will be passed upon for the
   Company by Schiff Hardin & Waite, Chicago, Illinois, and for the
   Underwriters by counsel selected by the Underwriters and acceptable to
   the Company.



                                   EXPERTS

        The consolidated financial statements of the Company incorporated
   by reference in this Prospectus, and elsewhere in the registration
   statement, have been audited by KPMG Peat Marwick LLP, independent
   certified public accountants, as indicated in their reports with
   respect thereto and are included or incorporated by reference herein
   in reliance on the authority of such firm as experts in auditing and
   accounting.



































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