Document:

AMENDED
AND RESTATED

CONSULTING AGREEMENT

 

THIS AMENDED AND RESTATED CONSULTING AGREEMENT (this “Agreement”)
is entered into as of February 1, 2008 (the “Effective
Date”), by and between Vyyo Inc.,
a Delaware corporation having its principal place of business at 6625 The
Corners Parkway, Suite 100, Norcross, Georgia 30092 (collectively with its
subsidiaries and affiliates, the “Company”),
and James A. Chiddix, an individual  (“Consultant”) (collectively the “Parties” and individually a “Party”).

 

1.             Services.

 

                a.             Scope of
Services.  During the Term (as
defined below) of this Agreement, Consultant shall provide services to the
Company as described on Exhibit A
for on average 40 hours each calendar month (the “Services”).  The parties
acknowledge that Consultant shall have the discretion to determine the timing
of when Services will be performed, but Consultant’s exercise of such
discretion shall take into account the Company’s needs.  The parties further acknowledge that
Consultant shall be entitled to take vacations for reasonable periods from
time-to-time. Consultant shall perform the Services in a careful, professional
and workmanlike manner and to the best of Consultant’s ability.  The parties may mutually agree to adjust the
scope of the Services and Consultant agrees to use its reasonable efforts to
accommodate any such change in the scope of the Services.  If in the performance of his Services
hereunder, Consultant is spending over the course of six months on average more
than 40 hours per week, the parties shall mutually agree to discuss in good
faith and modify the compensatory terms of this Agreement.  This Agreement governs the terms and
conditions of Consultant’s Services to the Company as set forth in this
Agreement and does not affect, and is otherwise unrelated to, Consultant’s
membership on the Company’s Board of Directors, if applicable.

 

                b.             Loyalty.  Without limiting the other terms of this
Agreement, Consultant agrees that Consultant will not use any of the Company’s
proprietary information provided under this Agreement or in connection with the
provision of Services, to compete with the Company or its products.  In addition, Consultant agrees that at all
times during the term of this Agreement he shall act in the best interests of
the Company.

 

2.             Independent
Contractor.  It is understood and agreed, and it is the
intention of the Parties, that Consultant is an independent contractor, and not
the employee, agent, joint venturer or partner of the Company for any purposes
whatsoever.  Consultant is not entitled
to participate in any plans, arrangements or distributions pertaining to any
employee benefits of the Company’s employees.   
Consultant shall be entirely and solely responsible for his acts while
engaged in the performance of Services hereunder, and shall have no right,
power or authority to create any obligation, express or implied, on behalf of
the Company.

 

 

 

3.             Compensation.

 

a.             Fees.  During the Term, the Company shall pay
Consultant Seven Thousand Five Hundred Dollars ($7,500) per month, in
accordance with the Company’s normal payroll practices.

 

b.             Stock Option Grant.  The Company shall grant Consultant an option
to purchase 250,000 shares of the Company’s Common Stock at the fair market
value of the Company’s Common Stock on the date of grant (the “Stock Option”).  The
Stock Option will be governed by the Company’s Third Amended and Restated 2000
Employee and Consultant Equity Incentive Plan and Consultant’s individual
option agreement.  Unless accelerated as
provided in Section 4 (“Acceleration Benefits”) below or in Section 5(c) (“Effect
of  Termination”) below, the Stock Option
will vest in equal monthly installments over 48 months, beginning on April 20,
2007, subject to continued consultancy. 
If there is any conflict between this Agreement and the terms of the
option agreement, the terms of this Agreement will control.

 

c.             Expenses.  Consultant shall use his best
business judgment when incurring expenses and shall respond in good faith to
any future request by the Company that Consultant obtain prior approval of such
expenses where the circumstances dictate. 
Consultant shall be reimbursed for all reasonable and necessary expenses
incurred in performing the Services. Reimbursable expenses shall be invoiced to
the Company on a monthly basis, together with all supporting documentation
required by the Company.  All such
expenses shall be billed at Consultant’s actual out-of-pocket cost, without
surcharge.  The Company shall reimburse
such expenses within 30 days of its receipt of Consultant’s invoice and
sufficient documentation.

 

d.             Taxes.  Consultant shall be responsible for the
payment of all applicable taxes, including, but not limited to, federal income
tax, employment taxes and any other taxes and shall indemnify the Company for
the same.  In the event the Company is
required, or deems it appropriate, to withhold applicable taxes, Consultant
shall receive payment net of such withheld taxes.

 

                4.             Acceleration Benefits.

 

                                a.             Financing
Event.  If the Company is a
party to a Financing Event (defined below), and the Company’s Board of
Directors or Audit Committee, as applicable, determines that Consultant
contributed in a material way to the Financing Event, then the following number
of Stock Options will vest:  (i) if
the closing of the Financing Event occurs on or before March 31, 2007,
then 60,000 of the outstanding and unvested Stock Options will vest
immediately; or (ii) if the closing of the Financing Event occurs on or
before December 31, 2007, then 30,000 of the outstanding and unvested
Stock Options will vest immediately.  If
vesting of the Stock Options is accelerated pursuant to this Section, the
remaining unvested Stock Options shall be redistributed pro-rata in equal
monthly installments over the 48-month vesting period set forth in Section 3(b).  For purposes of this Section, a “Financing Event” shall mean the receipt by the Company of
$15 million in one or more related transactions of equity or debt, or a
combination of equity or debt.  For
purposes of this Section, Consultant will be considered to have contributed to
a Financing Event “in a material way”

 

2

 

if, in the Board
of Directors’ or Audit Committee’s determination, the Financing Event occurs as
a result of his direct and active provision of the Services listed on Exhibit A.

 

                                b.             Spectrum
Overlay.  If the Company’s
Spectrum Overlay product is approved by Time Warner Inc. (“Time Warner”)
or Comcast Corporation (“Comcast”) and
sales of the Spectrum Overlay product to either such customer generates $10
million in booked revenue on or before December 31, 2008 (the “Required Revenue”), and if the Company’s Board of Directors
or Audit Committee, as applicable, determines that Consultant contributed in a
material way to the completion of such orders from either Time Warner or
Comcast, as the case may be, then (i) 30,000 of the outstanding and
unvested Stock Options will vest immediately upon the Company’s receipt of the
Required Revenue from either Time Warner or Comcast, as the case may be, and (ii) the
remaining number of outstanding and unvested Stock Options (other than the
number of Stock Options that may vest monthly through December 31, 2008)
will vest immediately upon the Company’s subsequent receipt of the Required
Revenue from either Time Warner or Comcast, as the case may be.  For purposes of this Section, Consultant will
be considered to have contributed to the booking of Required Revenue “in a
material way” if, in the Board of Directors’ or Audit Committee’s determination,
the approval and sales of our products to such customers occur as a result of
his direct and active provision of the Services listed on Exhibit A.

 

For the avoidance of doubt and as an example only, if the Company
closes a Financing Event on May 31, 2007 (at which time 30,000 of the
outstanding and unvested Stock Options will immediately vest) and also books
the Required Revenue from Time Warner in December 2007 prior to booking
the Required Revenue from Comcast, then an additional 30,000 of the outstanding
and unvested Stock Options will immediately vest upon booking of the Required
Revenue from Time Warner.  As of December 20,
2007, an aggregate of 112,080 of the outstanding and unvested Stock Options
will have vested (30,000 Stock Options related to a Financing Event, 30,000
Stock Options related to booking of Required Revenue from Time Warner and
52,080 Stock Options that vest monthly (5,208 per month for 10 months)).  If the Company subsequently books the
Required Revenue from Comcast in 2008, then 75,424 of the outstanding and
unvested Stock Options will vest immediately upon booking of the Required
Revenue from Comcast, with the remaining 62,496 Stock Options (5,208 per month
for 12 months) vesting on an equal monthly basis through December [x],
2008.  In all cases, the preceding
example assumes that Consultant has contributed in a material way to the events
referenced.

 

                                c.             Change of
Control.  If the Company
enters into a definitive agreement on or before December 31, 2008 which
would result in a Change of Control (defined below) of the Company, then all of
Consultant’s outstanding and unvested Stock Options granted under this
Agreement will vest immediately as of the closing of the Change of
Control.  For purposes of this Section, a
“Change of Control” means (i) a
sale of all or substantially all of the Company’s assets; (ii) any merger,
consolidation or other business combination transaction of the Company with or
into another corporation, entity or person, other than a transaction in which
the holders of at least a majority of the shares of the Company’s voting
capital stock outstanding immediately prior to such transaction continue to
hold (either by such shares remaining outstanding or by their being converted
into shares of voting capital stock of the surviving entity) a majority of the
total voting power represented by the shares of the Company’s voting capital
stock (or the surviving entity) outstanding 

 

3

 

immediately after
such transaction; or (iii) the direct or indirect acquisition (including
by way of a tender or exchange offer) by any person, or persons acting as a
group, of beneficial ownership or a right to acquire beneficial ownership of
such shares representing a majority of the voting power of the then outstanding
shares of the Company’s capital stock.

 

5.             Term; Termination.

 

a.             Term. 
Unless sooner terminated as provided below, the Agreement will continue in effect for a
period of one year
(the “Term”). 
On each anniversary of the Effective Date, the Term will automatically
be extended for a period of one year unless otherwise terminated in accordance
with this Agreement.

 

b.             Termination.  Either Party may terminate this Agreement on
30 days prior written notice.  Either
Party may terminate this Agreement immediately and without prior notice if the
other Party is in breach of any material provision of the Agreement.

 

c.             Effect of Termination.  Following termination or expiration of this
Agreement, the Company shall be obligated to pay Consultant for Services
provided through the date of termination or expiration.  Termination of this Agreement for any reason
shall not affect the obligations of the Parties under Section 6 of this
Agreement entitled “Trade Secrets.”  If
the Company terminates this Agreement without cause, Consultant’s unvested
Stock Options shall continue to vest for three months after the date of
termination, at which time all remaining unvested Stock Options shall be
automatically forfeited.  Except as may
be otherwise provided in this Agreement, upon termination of this Agreement all
unvested Stock Options shall be automatically forfeited.

 

6.             Trade Secrets.

 

a.             Definition.  The Parties acknowledge and
agree that during the Term of this Agreement and in the course of the discharge
of his duties hereunder, Consultant shall have access to and become acquainted
with the following information concerning the operation of the Company and the
Company’s affiliates, and that of the Company’s clients and customers:  confidential information, future plans,
business forecasts, data and other technical information, test data, customer
lists, research and development activities, marketing plans and strategies,
processes, know-how and other trade secrets and proprietary information (the “Confidential Information”).

 

b.             Duty
of Confidentiality.  Consultant agrees that he shall
not disclose any Confidential Information, directly or indirectly, to any other
person or use such Confidential Information in any way, either during the Term of
this Agreement or at any other time thereafter, except as is required in the
course of Consultant’s Services to the Company, or as otherwise required by
applicable law.  Consultant further
agrees that all files, records, documents, equipment and similar items relating
to the Company’s business, whether prepared by Consultant during the term of
this Agreement or by others, are and shall remain exclusively the property of
the Company.

 

4

 

c.             Excluded Information.  The Parties agree that the prohibitions of
this Section 6 shall not apply to any information which:

 

(i)            At
the time of disclosure is in the public domain;

 

(ii)           After
disclosure becomes a part of the public domain through no act or omission of
Consultant;

 

(iii)          Was
known by or in the possession of Consultant prior to disclosure by the Company;
or

 

(iv)          Is
rightfully received by Consultant from third parties not employed by the
Company.

 

7.             Miscellaneous
Provisions.

 

a.             Notices. 
Any notice required to be given pursuant to this Agreement shall be
effective only if in writing and delivered personally or by mail.  If given by mail, such notice must be sent by
registered or certified mail, postage prepaid, and mailed to the Parties at the
addresses set forth on the signature page hereof, or at such other
addresses as the Parties may designate from time to time by written
notice.  Mailed notices shall be deemed
received two business days after the date of deposit in the mail.

 

b.             Partial Invalidity.  If any Section of
this Agreement or the application thereof to any person or circumstance shall
be held to be invalid or unenforceable to any extent, the other Sections of
this Agreement (or the application of the invalid Section to persons or
circumstances other than those to which it is held invalid or unenforceable)
shall not be affected thereby, and each term and provision of this Agreement
shall be valid and be enforceable to the fullest extent permitted by law.

 

c.             Waiver.  No waiver of any right
hereunder shall be effective for any purpose unless in writing and signed by
the Party hereto possessing said right. 
No such waiver shall be construed to be a waiver of any subsequent
right, term or provision of this Agreement.

 

d.             Attorneys’ Fees; Costs.  If any Party
to this Agreement institutes any legal action or proceeding against another
Party to enforce or construe any of the provisions of this Agreement, or to
determine the validity thereof, the Party prevailing in such action or
proceeding shall be entitled to recover from the other Party their costs of the
action, including as an element of damages reasonable attorneys’ fees, together
with such costs and fees incurred in enforcing any judgment or decisions
entered therein.  The Company shall pay
the reasonable and actual costs billed to Consultant for review of this
Agreement by his legal counsel.

 

e.             Governing Law.  This Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware, applicable to contracts made and to be performed 

 

5

 

wholly within the
State of Delaware, and without reference to the choice of law principles of the
State of Delaware, or any other state.

 

f.              Arbitration. 
Any disputes arising under this Agreement shall be submitted to binding
arbitration by one neutral arbitrator associated with JAMS/Endispute who is
mutually acceptable to the Parties.  The
County of Gwinnett, Georgia, U.S.A. shall be the venue for any proceeding,
which proceeding shall be conducted in accordance with the  rules and procedures of JAMS/Endisptue
and not by court action, except as provided by Delaware law for judicial review
of arbitration proceedings.  Any decision
or award entered as a result of such arbitration shall be final and binding
upon all Parties.  The filing of a
judicial action to enable the recording of a notice of a pending action, for
orders of injunction or other provisional remedies, shall not constitute a
waiver of the right to arbitrate under this provision.  The Parties agree to the exclusive personal
jurisdiction of courts of general jurisdiction in Gwinnett, Georgia, U.S.A.,
for enforcement of such arbitration awards, agree to accept any service of
process by personal service, facsimile, express or overnight mail, or regular
mail, return receipt requested, at the address listed below as being binding on
such Party and agree to accept such arbitrators and court as being the sole and
exclusive forum and venue for hearing such claims, disputes, controversies, breaches
or similar events.  The Parties agree to
waive any defense of forum non conveniens
or improper venue respecting such courts. 
The cost of the arbitration shall be borne by the losing Party or in
such proportion as the arbitrator shall decide.

 

g.             Representation by
Independent Counsel.  Consultant acknowledges that by
signing this Agreement, Consultant is deemed to have consulted with counsel of
Consultant’s own choosing in connection with this Agreement.  Each Party represents that they have read
this Agreement in full and understands and voluntarily consents to each and
every provision contained in this Agreement.

 

                                h.             Compliance.    Consultant represents and warrants to the
Company that he is not restricted or prohibited from entering into this Agreement
and providing the Services contemplated hereby, and that nothing in this
Agreement conflicts with any contract or employment obligation of
Consultant.  Nothing contained in this
Agreement shall require or  permit
Consultant or the Company to do any act inconsistent with the requirements of
any statute, regulation or rule of the United States or any State,
including, but not limited to the Foreign Corrupt Practices Act or any similar
law, regulation or rule that may be in effect from time to time, or any
contract or employment relationship of the Consultant of which either the
Consultant or the Company may become aware in the future, or any of Consultant’s
fiduciary obligations to any company, including without limitation, the
Company.

 

i.              Entire Agreement. 
This Agreement and the attached Exhibit(s) contain the entire
agreement and understanding between the Parties related to Consultant’s
Services to the Company and supersedes all prior agreements and understandings,
oral or written.  No modification, termination
or attempted waiver shall be valid unless in writing and signed by Consultant
and the Company.

 

j.              Execution.  This
Agreement may be executed in one or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become 

 

6

 

effective when
counterparts have been signed by each party and delivered to the other party,
it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered
by facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page were
an original thereof.

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement as set
forth below.

 

	
  Date:
  February 1, 2008

  	
  Date:
  February 1, 2008

  
	
   

  	
   

  
	
  Vyyo
  Inc.

  	
  James
  A. Chiddix

  
	
  6625 The Corners
  Parkway, Suite 100

  	
  6625 The Corners
  Parkway, Suite 100

  
	
  Norcross,
  Georgia 30092

  	
  Norcross,
  Georgia 30092

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Wayne H.
  Davis

  	
   

  	
  /s/ James A. Chiddix

  
	
  Name:

  	
  Wayne H. Davis

  	
   

  
	
  Title:

  	
  Chief Executive
  Officer

  	
   

  
				

 

7

 

EXHIBIT A

 

Services to be Performed

 

Consultant shall provide the following services to the
Company as needed and/or requested:

 

•             Speak or meet
with key customers in support of the Company and its products

 

•             Conduct
interviews with the trade and business press in support of the Company and its products

 

•             Speak or meet
with stock and industry analysts to support the Company and its products

 

•             Speak or meet
with parties who are considering an investment (equity or debt) in the Company

 

•             Meet with
Company management from time-to-time to discuss product strategy

 

•             Be reasonably
available to speak with Company senior management to discuss business, product,
customer and other issues.

 

8Exhibit 4.1

[FORM OF FACE OF SECURITY]

 

THIS
NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
‘‘SECURITIES ACT’’), OR ANY STATE SECURITIES LAWS.  NEITHER THIS NOTE, THE SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION OF THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN
OR THEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION UNDER
THE SECURITIES ACT.

 

BY ITS
ACQUISITION HEREOF, THE HOLDER AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS
NOTE PRIOR TO THE DATE WHICH IS ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF AND THE LAST DATE ON WHICH AAR CORP. (THE ‘‘COMPANY’’) OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS
NOTE) (THE ‘‘RESALE RESTRICTION TERMINATION DATE’’) ONLY (A) TO THE
COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BECOME EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER AS DEFINED IN RULE 144A
THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, OR (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
COMPANY’S AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSE (D) PRIOR TO THE RESALE RESTRICTION TERMINATION DATE TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES,
TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE
OTHER SIDE OF THIS NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.  THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.

 

THE
HOLDER OF THIS SECURITY IS ENTITLED TO THE BENEFITS OF A REGISTRATION RIGHTS
AGREEMENT (AS SUCH TERM IS DEFINED IN THE INDENTURE REFERRED TO ON THE REVERSE
HEREOF) AND, BY ITS ACCEPTANCE HEREOF, AGREES TO BE BOUND BY AND TO COMPLY WITH
THE PROVISIONS OF SUCH REGISTRATION RIGHTS AGREEMENT.

 

[THIS
SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY, A
NEW YORK CORPORATION (“DEPOSITARY”), OR A NOMINEE OF THE DEPOSITARY, WHICH MAY BE
TREATED 

 

1

 

BY THE COMPANY, THE TRUSTEE AND ANY AGENT THEREOF AS
THE OWNER AND HOLDER OF THIS SECURITY FOR ALL PURPOSES.  UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE, OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

TRANSFERS
OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART,
BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITARY, AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL
BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.]

 

2

 

	
  No.

  	
   

  	
  CUSIP NO.

  

 

 

 

AAR CORP.

 

1.625% Convertible Senior Notes due 2014

 

AAR
CORP., a Delaware corporation, promises to pay to Cede & Co., or
registered assigns, the principal sum set forth on the Schedule of
Increases and Decreases in the Global Note attached hereto, on March 1,
2014.

 

Interest
Payment Dates:  March 1, and September 1.

 

Record
Dates:  February 15 and August 15.

 

Additional
provisions of this Note are set forth on the other side of this Note.

 

	
   

  	
  AAR CORP.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

	
  TRUSTEE’S CERTIFICATE OF

  
	
  AUTHENTICATION

  
	
   

  
	
  Dated: February 11, 2008

  
	
   

  
	
  U.S. BANK NATIONAL ASSOCIATION,

  
	
  as Trustee, certifies that this is one of

  
	
  the Notes referred to in the within-mentioned
  Indenture.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized Signatory

  	
   

  

 

3

 

[FORM OF REVERSE
SIDE OF NOTE]

 

1.625% Convertible Senior Notes due 2014

 

1.                                       Interest

 

AAR
CORP., a Delaware corporation (such corporation, and its successors and assigns
under the Indenture hereinafter referred to, being herein called the “Company”),
promises to pay interest on the principal amount of this Note at the rate per
annum shown above.  The Company will pay
interest semiannually on March 1 and September 1 of each year.  Interest on the Notes will accrue from the
most recent date to which interest has been paid on the Notes or, if no
interest has been paid, from February 11, 2008.  The Company shall, to the fullest extent
permitted by law,  pay interest on
overdue principal and overdue installments of interest, if any (plus interest on
such interest to the extent lawful), at the rate borne by the Notes, which
interest shall be payable upon demand. 
Interest will be computed on the basis of a 360-day year of twelve
30-day months.

 

2.                                       Method of Payment

 

By no
later than 10:00 a.m. (New York City time) on the date on which any
principal of or interest on any Note is due and payable, the Company shall
irrevocably deposit with the Trustee or the Paying Agent money sufficient to
pay such principal and/or interest.  The
Company will pay interest (except Defaulted Interest) on the principal amount
of the Notes on each March 1 and September 1 to the Persons who are
registered Holders of Notes at 5:00 p.m. New York City time on the February 15
and August 15 next preceding the Interest Payment Date even if Notes are
canceled or repurchased after the Record Date and on or before the Interest
Payment Date.  Holders must surrender
Notes to a Paying Agent to collect principal payments.  The Company will pay principal and interest
in money of the United States that at the time of payment is legal tender for
payment of public and private debts.  The
Company will make all payments in respect of a Definitive Note (including
principal and interest) in U.S. dollars at the office of the Trustee.  At the Company’s option, however, the Company
may make such payments by mailing a check to the registered address of each
Holder thereof as such address shall appear on the Note Register or, with
respect to Notes represented by a Global Note, by wire transfer of immediately
available funds to the accounts specified by the Depositary.

 

3.                                       Paying Agent, Conversion Agent and
Registrar

 

Initially,
U.S. Bank National Association (“Trustee”) will act as Paying Agent, Conversion
Agent and Registrar.  The Company may
appoint and change any Paying Agent, Conversion Agent, Registrar or
co-registrar without notice to any Holder. 
The Company or any of its domestically incorporated Subsidiaries may act
as Paying Agent, Conversion Agent, Registrar or co-registrar.

 

4.                                       Indenture

 

The Company
issued the Notes under an Indenture dated as of February 11, 2008 (as it
may be amended or supplemented from time to time in accordance with the terms
thereof, the “Indenture”), among the Company and the Trustee.  The terms of the Notes include those stated 

 

4

 

in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939 (15 U.S.C.
§§ 77aaa-77bbbb) as in effect from time to time (the “Act”).  Capitalized terms used herein and not defined
herein have the meanings ascribed thereto in the Indenture.  The Notes are subject to all such terms, and
Holders are referred to the Indenture and the Act for a statement of those
terms.  To the extent permitted by
applicable law, in the event of any inconsistency between the terms of this
Note and the terms of the Indenture, the terms of the Indenture shall control.

 

The
Notes are senior unsecured obligations of the Company limited to $125,000,000,
or if the Initial Purchasers exercise their Overallotment Option, $137,500,000
aggregate principal amount.

 

5.                                       Purchase at the Option of the Holder Upon
a Designated Event

 

(a)           If a Designated Event shall occur,
each Holder shall have the right, at such Holder’s option and subject to the
terms and conditions of the Indenture, to require the Company to purchase any
or all of such Holder’s Notes or any portion of the principal amount thereof
that is equal to $1,000 or an integral multiple of $1,000 on the date that is
30 Business Days after the date on which the Designated Event occurs (or on
which the transaction constituting the Designated Event becomes effective)
(subject to extension to comply with applicable law) for a Designated Event
Purchase Price equal to 100% of the principal amount of Notes purchased plus
accrued and unpaid interest (including Liquidated Damages, if any) to but not
including the Designated Event Purchase Date, which Designated Event Purchase
Price shall be paid in cash.

 

(b)           Holders have the right to withdraw any
Designated Event Purchase Notice by delivery to the Paying Agent of a written
notice of withdrawal in accordance with the provisions of the Indenture.

 

6.                                       Conversion

 

Subject
to the procedures set forth in the Indenture, a Holder may convert Notes on or before
5:00 p.m. New York City time on the Business Day immediately preceding March 1,
2014.

 

Notes
in respect of which a Holder has delivered a notice of exercise of the option
to require the Company to purchase such Notes pursuant to Article VIII of
the Indenture may be converted only if the notice of exercise is withdrawn in
accordance with the terms of the Indenture.

 

The
initial Conversion Rate is 28.1116 shares of Common Stock per $1,000 principal
amount, subject to adjustment in certain events described in the
Indenture.  Upon conversion of the Notes,
the Company shall deliver the amount of cash and the number of shares of Common
Stock, if any, determined pursuant to Section 9.18 of the Indenture.

 

To
convert the Notes a Holder must (1) complete and manually sign the
irrevocable conversion notice on the back of the Notes (or complete and
manually sign a facsimile of such notice) and deliver such notice to the
Conversion Agent at the office maintained by the Conversion Agent for such
purpose, (2) surrender the Notes to the Conversion Agent, (3) furnish

 

5

 

appropriate endorsements and transfer documents if
required by the Conversion Agent, the Company or the Trustee and (4) pay
any transfer or similar tax, if required.

 

7.                                       Denominations; Transfer; Exchange

 

The
Notes are in registered form without coupons in denominations of principal
amount of $1,000 and whole multiples of $1,000. 
A Holder may transfer or exchange Notes in accordance with the
Indenture.  The Registrar may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture.

 

8.                                       Persons Deemed Owners

 

The
registered Holder of this Note may be treated as the owner of this Note for all
purposes.

 

9.                                       Unclaimed Money

 

If
money for the payment of the principal of, or interest on the Note remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back
to the Company at its written request unless an abandoned property law
designates another Person.  After any
such payment, Holders entitled to the money must look only to the Company and
not to the Trustee for payment.

 

10.                                 Amendment, Waiver

 

Subject
to certain exceptions set forth in the Indenture, (i) the Indenture and
the Notes may be amended with the written consent of the Holders of at least a
majority in aggregate principal amount of the then outstanding Notes
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes) and (ii) any default
(other than with respect to nonpayment) or noncompliance with any provision may
be waived with the written consent of the Holders of a majority in aggregate
principal amount of the then outstanding Notes (including, without limitation,
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, Notes).  Subject to certain
exceptions set forth in the Indenture, without the consent of any Holder, the
Company and the Trustee may amend the Indenture or the Notes.

 

11.                                 Defaulted Interest

 

Except
as otherwise specified with respect to the Notes, any Defaulted Interest on any
Note shall forthwith cease to be payable to the registered Holder thereof on
the relevant Record Date or accrual date, as the case may be, by virtue of
having been such Holder, and such Defaulted Interest may be paid by the Company
as provided for in Section 2.11 of the Indenture.

 

12.                                 No Recourse Against Others

 

No
recourse for the payment of the principal of or interest (or including
Liquidated Damages, if any) on this Note and no recourse under or upon any
obligation, covenant or 

 

6

 

agreement of the Company in the Indenture, this Note
or in any supplemental indenture, or because of the creation of any
Indebtedness represented thereby, shall be had against any incorporator,
stockholder, employee, agent, officer, director, or subsidiary, past, present
or future, of the Company or of any successor corporation or entity, whether by
virtue of any constitution, statute or rule of law, or by the enforcement
of any assessment or penalty or otherwise, it being understood that all such
liability is hereby waived and released as a condition to, and as a
consideration for, the execution and delivery of the Indenture and the issue of
this Note.

 

13.                                 Authentication

 

This
Note shall not be valid until an authorized signatory of the Trustee (or an
authenticating agent acting on its behalf) manually signs the certificate of
authentication on the other side of this Note.

 

14.                                 Abbreviations

 

Customary
abbreviations may be used in the name of a Holder or an assignee, such as TEN
COM (=tenants in common), TEN ENT (=tenants by the entirety), JT TEN (=joint
tenants with rights of survivorship and not as tenants in common), CUST
(=custodian) and U/G/M/A (=Uniform Gift to Minors Act).

 

15.                                 CUSIP Numbers

 

Pursuant
to a recommendation promulgated by the Committee on Uniform Security
Identification Procedures the Company has caused CUSIP numbers to be printed on
the Notes.  No representation is made as
to the accuracy of such numbers as printed on the Notes and reliance may be
placed only on the other identification numbers placed thereon.

 

16.                                 Governing Law

 

This
Note shall be governed by, and construed in accordance with, the laws of the
State of New York applicable to contracts made and to be performed entirely in
such state, without regard to principles of conflicts of law.

 

The
Company will furnish to any Holder upon written request and without charge to
the Holder a copy of the Indenture which has in it the text of this Note.  Requests may be made to:

 

AAR
CORP.

One AAR Place

1100 Wood Dale Road

Wood Dale, Illinois 60191

Attention:  General Counsel

Facsimile No.:  (630) 227-2059

 

7

 

ASSIGNMENT FORM

 

To assign this Note, fill in the form below:

 

I or we assign and transfer this Note to

 

(Print or type assignee’s name, address and zip code)

 

(Insert assignee’s soc. sec. or tax I.D. No.)

 

and irrevocably appoint                   agent
to transfer this Note on the books of the Company.  The agent may substitute another to act for
him.

 

	
  Date:

  	
   

  	
   

  	
   

  	
  Your signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature 

  	
   

  	
   

  
	
  Guarantee:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Signature must be
  guaranteed)

  	
   

  	
   

  
									

 

Sign
exactly as your name appears on the other side of this Note.

 

The
signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.

 

In
connection with any transfer or exchange of any of the Notes evidenced by this
certificate occurring prior to the date that is two years after the later of
the date of original issuance of such Notes and the last date, if any, on which
such Notes were owned by the Company or any Affiliate of the Company, the
undersigned confirms that such Notes are being:

 

CHECK ONE BOX BELOW:

 

	
  1.

  	
  o

  	
  acquired for the undersigned’s own account, without
  transfer; or

  
	
   

  	
   

  	
   

  
	
  2.

  	
  o

  	
  transferred to the Company; or

  
	
   

  	
   

  	
   

  
	
  3.

  	
  o

  	
  transferred pursuant to and in compliance with
  Rule 144A under the Securities Act of 1933, as amended (the “Securities
  Act”); or

  
	
   

  	
   

  	
   

  
	
  4.

  	
  o

  	
  transferred pursuant to an effective registration
  statement under the Securities Act; or

  
	
   

  	
   

  	
   

  
	
  5.

  	
  o

  	
  transferred pursuant to another available exemption
  from the registration requirements of the Securities Act of 1933.

  

 

Unless one of the boxes is checked, the Trustee will
refuse to register any of the Notes evidenced by this certificate in the name
of any person other than the registered Holder thereof; provided,
however, that if box (5) is checked, the Trustee or the Company
may require, 

 

8

 

prior to registering any such transfer of the Notes,
in their sole discretion, such legal opinions, certifications and other
information as the Trustee or the Company may reasonably request to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act, such as the exemption provided by Rule 144 under such Act.

 

	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
  Signature Guarantee:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (Signature must be
  guaranteed)

  	
   

  	
   

  	
  Signature

  	
   

  

 

 

 

The
signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.

 

TO BE
COMPLETED BY PURCHASER IF (1) OR (3) ABOVE IS CHECKED.

 

The
undersigned represents and warrants that it is purchasing this Note for its own
account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a qualified institutional buyer
within the meaning of Rule 144A under the Securities Act, as amended, and
is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned’s foregoing representations in order to claim the
exemption from registration provided by Rule 144A.

 

	
  Dated:

  	
   

  	
  NOTICE: To be executed by
  an executive officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [INSERT NAME OF ASSIGNOR]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

9

 

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

 

The initial outstanding principal amount of this
Global Note is
$                       .

 

The following increases or decreases in this Global
Note have been made:

 

	
  Date of

  exchange

  	
   

  	
  Amount
  of decrease in Principal Amount of this Global Note

  	
   

  	
  Amount
  of increase in Principal Amount of this Global Note

  	
   

  	
  Principal
  Amount of this Global Note following such decrease or increase

  	
   

  	
  Signature
  of authorized signatory of Trustee or Notes Custodian

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

10

 

OPTION OF HOLDER TO ELECT PURCHASE

 

If you
want to elect to have this Note purchased by the Company pursuant to Article VIII
of the Indenture, check the box:  o

 

If you
want to elect to have only part of this Note purchased by the Company pursuant
to Article VIII of the Indenture, state the amount in principal amount
(must be an integral multiple of $1,000): 
$                      .

 

	
  Date:

  	
   

  	
   

  	
  Your signature: 

  	
   

  
	
   

  	
   

  	
   

  	
  Sign exactly as your name
  appears on the other side of this Note

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature Guarantee:

  
	
  (Signature must be guaranteed)

  	
   

  	
   

  
							

 

The
signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.

 

11

 

FORM OF CERTIFICATE TO BE DELIVERED UPON
EXCHANGE

OR REGISTRATION OF TRANSFER OF SECURITIES

 

Re:  1.625% Convertible Senior Notes due 2014 of
AAR CORP. (the “Company”).

 

This
Certificate relates to $                                     principal
amount of Notes held in *           book-entry
or *           definitive
form by                                   (the
“Transferor”).

 

The
Transferor has requested the Trustee by written order to exchange or register
the transfer of a Note or Notes.

 

In
connection with such request and in respect of each such Note, the Transferor
does hereby certify that the Transferor is familiar with the Indenture, dated
as of February 11, 2008 (as amended or supplemented to date, the
“Indenture”), between the Company and U.S. Bank National Association, as
trustee (the “Trustee”), relating to the above-captioned Notes and that the
transfer of this Note does not require registration under the Securities Act
(as defined below) because:*

 

o            Such
Note is being acquired for the Transferor’s own account without transfer.

 

o            Such Note is being transferred to a “qualified
institutional buyer” (as defined in Rule 144A under the Securities Act of
1933, as amended (the “Securities Act”)), in accordance with Rule 144A
under the Securities Act.

 

o            Such Note is being transferred (i) pursuant to an
exemption from registration in accordance with Rule 144 under the
Securities Act (and based upon an opinion of counsel if the Company or the
Trustee so requests) or (ii) pursuant to an effective registration
statement under the Securities Act.

 

o            Such
Note is being transferred in reliance on and in compliance with another
exemption from the registration requirements of the Securities Act (and based
upon an opinion of counsel if the Company or the Trustee so requests).

 

*              Fill in blank or check appropriate
box, as applicable.

 

12

 

You
are entitled to rely upon this certificate and you are irrevocably authorized
to produce this certificate or a copy hereof to any interested party in any
administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.

 

	
   

  	
  [INSERT NAME OF
  TRANSFEROR]

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
  Address:

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

  
				

 

 

13

 

CONVERSION NOTICE

 

To convert this Note into Common Stock of the Company, check the box:

 

o

 

To convert only part of this Note, state the principal amount to be converted
(must be in integral multiples of $1,000):

 

$

 

If you want the stock certificate made out in another person’s name,
fill in the form below:

 

(Insert other person’s soc. sec. or tax I.D. no.)

 

(Print or type other person’s name, address and zip code)

 

	
  Date:

  	
   

  	
   

  	
  Your Signature(s)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (sign exactly as your name appears on this Note)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  *Signature(s) guaranteed
  by:

  	
   

  	
   

  
	
   

  	
   

  	
  *Signatures must be
  guaranteed by an “eligible guarantor institution” meeting the requirements of
  the Registrar, which requirements include membership or participation in the
  Security Transfer Agent Medallion Program (“STAMP”) or such other “signature
  guarantee program” as may be determined by the Registrar in addition to, or
  in substitution for, STAMP, all in accordance with the Securities Exchange
  Act of 1934, as amended.

  

 

 

14

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00136-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00136-of-00352.parquet"}]]