Exhibit 4.8


 


THIRD AMENDMENT TO

CREDIT AGREEMENT


 


THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (“Third
Amendment”) is made as of the 29th day of March, 2005 by and among AAR CORP., a
Delaware corporation, (“AAR”), AAR Distribution, Inc., an Illinois corporation
(“Distribution”), AAR Parts Trading, Inc., an Illinois Corporation (“Parts
Trading”), AAR Manufacturing, Inc., an Illinois corporation (“Manufacturing”),
AAR Engine Services, Inc., an Illinois corporation (“Engine Services”) and AAR
Allen Services, Inc., an Illinois corporation (“Allen Service”) and together
with AAR, Distribution, Parts Trading, Manufacturing and Engine Services,
individually a “Borrow” and collectively “Borrowers”, the financial
institutions, party hereto, each as a “Lender” and Merrill Lynch Capital a
division of Merrill Lynch Business Financial Services Inc., individually as a
Lender and as Agent.


 


W  I  T  N  E  S
S  E  T H:


 


WHEREAS, Borrowers, Agent and Lenders entered into a
certain Credit Agreement dated as of May 29, 2003 as amended by a certain
First Amendment to Credit Agreement dated as of January 23, 2004 by and among
Borrowers, Agent and Lenders and by a certain Second Amendment to Credit
Agreement dated as of August 24, 2004 by and among Borrowers, Agent and Lenders
(said Credit Agreement, as so amended, is hereinafter referred to as the “Credit
Agreement”); and


 


WHEREAS, Borrowers desire to amend and modify certain
provisions of the Credit Agreement and, subject to the terms hereof, Agent and
Lenders are willing to agree to such amendments and modifications;


 


NOW THEREFORE, in consideration of the premises, the
mutual covenants and agreements herein contained, and any extension of credit
heretofore, now or hereafter made by Agent and Lenders to Borrowers, the
parties hereto hereby agree as follows:


 


1.             Definitions.  All capitalized terms used herein without
definition shall have the meaning given to them in the Loan Agreement.


 


2.             Additional and Amended
Definitions.  The following
definitions of “Commitment Expiry Date,” “LIBOR Margins” and “Prime Rate Margin”
are hereby deleted and the following are inserted in their stead:


 


“Commitment
Expiry Date” means the earliest of (i) June 1, 2007, (ii) the date on which a “Termination
Date” shall have occurred under the Receivables Purchase Agreement and (iii) as
of any date, the remaining period between such date and the “Facility
Termination Date” (as defined in the Receivables Purchase Agreement) is 60 days
or less, unless as of any date referred to in clauses (ii) or (iii), Borrowers
have demonstrated to Required Lenders’ reasonable satisfaction that Borrowers
shall, after such Termination Event or Facility Termination Date, have adequate
liquidity ($20,000,000 of projected Availability and Cash Equivalents) to
operate their business,


 





















 


that Borrowers have obtained replacement financing for the Debt
outstanding under the Securitization Documents or that Borrowers have
identified Person(s) who are reasonably likely to provide such replacement
financing, have presented to Agent a term sheet outlining the terms and
conditions of such replacement financing and that it is commercially reasonable
to expect such replacement financing to close.


 


*      *      *


 


“LIBOR Margin”
means two and one-half percent (21⁄2%) per annum with respect to the Revolving
Loans and other Obligations.


 


*      *      *


 


“Prime Rate
Margin” means one and one-quarter percent (11⁄4%) with respect to the Revolving
Loans and other Obligations.


 


3.             Restricted Distributions.  Section 5.3 of the Credit Agreement is hereby
deleted and the following is inserted in its stead:


 


“Section 5.3           Restricted Distributions.  Borrowers will not, and will not permit any
Subsidiary to, directly or indirectly, declare, order, pay, make or set apart
any sum for any Restricted Distribution; provided that
the foregoing shall not restrict or prohibit any Subsidiary from making
dividends or distributions and shall not restrict or prohibit dividends or
distributions to AAR or purchases of shares of (or options to purchase shares
of) equity interests in AAR or options therefor (a) on the open market for use
in its employee incentive equity program, (b) from employees of any Borrower or
any Subsidiary upon their death, termination or retirement or (c) on the open
market pursuant to a stock buy-back program approved by AAR’s Board of
Directors so long as (x) before and after giving effect to any such dividend or
distribution for such purpose, (i) no Event of Default shall have occurred and
be continuing and (ii) Borrowers are in compliance on a pro forma basis with
the covenants set forth in Article 7 recomputed for the most recently ended
quarter for which information is available and are in compliance with all other
terms and conditions of this Agreement, (y) such purchases or payments
described in clause (a) above after the date hereof do not exceed $2,000,000 in
any Fiscal Year and do not exceed $6,000,000 in the aggregate, (z) such
purchases or payments described in clause (b) above after the date hereof do
not exceed $1,000,000 in any Fiscal Year and do not exceed $3,000,000 in the
aggregate, (aa) such purchases or payments described in clause (c) above after
the date hereof do not exceed $10,000,000 in any Fiscal Year and do not
exceed $15,000,000 in the aggregate and (bb) after giving effect to any such
purchase or payment described in clause (c) above, the sum of average
Availability and Cash Equivalents, computed on a proforma or projected basis
after giving effect to any such purchase or payment for the 60 days immediately
prior to the date of any such purchase or payment and for the 180 days
immediately after the date of any such purchase or payment, equals or exceeds
$30,000,000 (changed language underscored).”


 


4.             Effectiveness.  This Third Amendment shall become effective
upon the satisfaction of each of the following conditions:


 


2





















 


(a)           Agent, Lenders and Borrowers shall
have executed and delivered to each other this Third Amendment.


 


5.             Execution in Counterparts.  This Third Amendment may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.


 


6.             Continuing Effect.  Except as otherwise specifically set out
herein, the provisions of the Credit Agreement shall remain in full force and
effect.


 


(Signature Page Follows)


 


3





















 


(Signature Page to Third Amendment to Credit
Agreement)


 


IN WITNESS WHEREOF, this Third Amendment has been duly
executed as of the day and year specified at the beginning hereof.


 


 


	
  AAR CORP.

  AAR DISTRIBUTION, INC.

  AAR PARTS TRADING, INC.

  AAR MANUFACTURING, INC.

  AAR ENGINE SERVICES, INC.

  AAR ALLEN SERVICES, INC.

  	
   

  	
  MERRILL LYNCH CAPITAL, A

  DIVISION OF MERRILL LYNCH

  BUSINESS FINANCIAL SERVICES INC.,

  as Agent and Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Timothy J.
  Romenesko

  	
   

  	
   

  	
  By:

  	
  /s/ Mark Gertzof

  	
   

  
	
  Name: Timothy J.
  Romenesko

  	
   

  	
  Name: Mark Gertzof

  
	
  Title:   Vice
  President

  	
   

  	
  Title: Director

  
							



 


4