Document:

Exhibit 10.3

 

Amendment N°3

 

to the Airbus A330/A350XWB Purchase Agreement

 

Dated as of January 31, 2008

 

Between

 

AIRBUS S.A.S.

 

And

 

HAWAIIAN AIRLINES, INC.

 

This Amendment
N°3 between Airbus S.A.S. and Hawaiian Airlines, Inc., (hereinafter
referred to as the “Amendment”) is
entered into as of March 3, 2010, by and between Airbus S.A.S., organized
and existing under the laws of the Republic of France, having its registered
office located at 1, Rond-Point Maurice Bellonte, 31700 Blagnac, France
(hereinafter referred to as the “Seller”),
and Hawaiian Airlines, Inc. a corporation, organized and existing under
the laws of the State of Delaware, United States of America, having its
principal corporate offices located at 3375 Koapaka Street, Ste. G-350,
Honolulu, Hawaii, 96819, USA (hereinafter referred to as the “Buyer”).

 

WITNESSETH

 

WHEREAS, the
Buyer and the Seller have entered into an Airbus A330/A350XWB Purchase
Agreement dated as January 31, 2008 which agreement,
as previously amended by and supplemented with all exhibits, appendices, letter
agreements and amendments, including Amendment No. 1 dated as of June 26,
2008 and Amendment No. 2 dated as of November 27, 2009, (collectively,
the “Agreement”), relates to the
sale by the Seller and the purchase by the Buyer of certain aircraft; and

 

WHEREAS,
the Buyer and the Seller wish to amend certain provisions of the Agreement as
set forth herein.

 

NOW, THEREFORE, IT IS AGREED AS FOLLOWS:

 

Capitalized terms
used herein and not otherwise defined herein will have the meanings assigned to
them in the Agreement. The terms “herein,” “hereof” and “hereunder” and words
of similar import refer to this Amendment.

 

[**]
– Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been
omitted and filed separately with the Securities and Exchange Commission.

 

Confidential

 

 

1.                                      A330-200 PURCHASE RIGHT AIRCRAFT

 

1.1                                 The Seller will manufacture, sell and deliver,
and the Buyer will purchase and take delivery of an additional one (1) A330-200
Purchase Right Aircraft from the Seller, subject to the terms and conditions in
the Amendment and the Agreement (the “N(o)1 A330-200 Purchase Right Aircraft”).  Except as set forth in this Amendment, all
terms and conditions in the Agreement that are applicable to A330-200 Purchase
Right Aircraft will apply to the N(o)1 A330-200 Purchase Right Aircraft.

 

1.2                                 The Seller acknowledges having received a
Purchase Right Fee [**] for the N(o)1 A330-200 Purchase Right
Aircraft.  Notwithstanding the table in
Clause 5.2.3 of the Agreement, the balance of the first (1st), second (2nd), third (3rd) and fourth (4th) Predelivery Payment
[**]; all subsequent Predelivery Payments will be due
and payable in accordance with the schedule in such Clause 5.2.3 of the
Agreement.

 

1.3                                 Paragraph 2.2 (i) of Letter
Agreement No. 3 is hereby deleted and replaced with the following text
between quotes:

 

QUOTE

 

[**]

 

UNQUOTE

 

2.                                      DELIVERY

 

2.1                                 As a
consequence of Paragraph 1 above, the delivery schedule set forth in Clause
9.1.1 of the Agreement with respect to A330-200 Aircraft is hereby deleted in
its entirety and replaced with the following between QUOTE and UNQUOTE:

 

QUOTE

 

	
  Aircraft N°1*

  	
   

  	
  2nd Quarter 2011

  
	
  Aircraft N°2

  	
   

  	
  1st Quarter 2012

  
	
  Aircraft N°3

  	
   

  	
  2nd Quarter 2012

  
	
  Aircraft N°4

  	
   

  	
  1st Quarter 2013

  
	
  Aircraft N°5

  	
   

  	
  2nd Quarter 2013

  
	
  Aircraft N°6

  	
   

  	
  2nd Quarter 2013

  
	
  Aircraft N°7

  	
   

  	
  1st Quarter 2014

  

 

* A330-200 Purchase Right
Aircraft

 

UNQUOTE

 

2.2                                 The N(o)1 A330-200 Purchase Right Aircraft
will have a Scheduled Delivery Month of April 2011.

 

[**]
– Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been
omitted and filed separately with the Securities and Exchange Commission.

 

 

3.                                      SPECIFICATION

 

3.1                                 The Contractual Definition Freeze date for the
N(o)1 A330-200 Purchase Right Aircraft shall be of even date hereof.

 

4.                                      EFFECT OF THE AMENDMENT

 

The provisions of this Amendment are binding on
both parties upon execution hereof. The Agreement will be deemed amended to the
extent herein provided, and, except as specifically amended hereby, will
continue in full force and effect in accordance with its original terms. This
Amendment supersedes any previous understandings, commitments, or
representations whatsoever, whether oral or written, related to the subject
matter of this Amendment.

 

Both parties agree
that this Amendment will constitute an integral, nonseverable part of said
Agreement, that the provisions of said Agreement are hereby incorporated herein
by reference, and that this Amendment will be governed by the provisions of
said Agreement, except that if the Agreement and this Amendment have specific
provisions that are inconsistent, the specific provisions contained in this
Amendment will govern.

 

5.                                      CONFIDENTIALITY

 

This Amendment is subject to the confidentiality provisions set forth
in Clause 22.9 of the Agreement.

 

6.                                      COUNTERPARTS

 

This Amendment may be signed in any number of
separate counterparts.  Each counterpart,
when signed and delivered (including counterparts delivered by facsimile
transmission), will be an original, and the counterparts will together
constitute one and the same instrument.

 

[**]
– Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been
omitted and filed separately with the Securities and Exchange Commission.

 

 

If the foregoing
correctly sets forth your understanding, please execute the original and one (1) copy
hereof in the space provided below.

 

	
  Very truly yours,

  	
   

  
	
   

  	
   

  
	
  AIRBUS S.A.S.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Christophe Mourey

  	
   

  
	
   

  	
   

  	
   

  
	
  Its:

  	
  Senior Vice President Contracts

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Accepted and Agreed

  	
   

  
	
   

  	
   

  
	
  Hawaiian
  Airlines, Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Charles R. Nardello

  	
   

  
	
   

  	
   

  	
   

  
	
  Its:

  	
  Sr. Vice President – Operations

  	
   

  
	
   

  	
   

  	
   

  
	
  and

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Hoyt H. Zia

  	
   

  
	
   

  	
   

  	
   

  
	
  Its:

  	
  Sr. Vice
  President, General Counsel & Corporate Secretary

  	
   

  

 

[**]
– Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been
omitted and filed separately with the Securities and Exchange Commission.Exhibit 10.1

 

 

MASTER LOAN AGREEMENT

 

BETWEEN

 

EP AVIATION, LLC

 

(“BORROWER”)

 

AND

 

THE HUNTINGTON NATIONAL BANK

 

(“BANK”)

 

DATED AS OF APRIL 23, 2010

 

 

 

TABLE OF CONTENTS

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE I  CERTAIN DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.1.

  	
  Terms Defined in this Agreement

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.2.

  	
  Construction

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE II  THE LOANS

  	
  11

  
	
   

  	
   

  	
   

  
	
  Section 2.1.

  	
  Revolving Loan Commitment

  	
  11

  
	
   

  	
   

  	
   

  
	
  Section 2.2.

  	
  Disbursement Procedures For All
  Loans

  	
  11

  
	
   

  	
   

  	
   

  
	
  Section 2.3.

  	
  Deposits to Borrower’s Account

  	
  11

  
	
   

  	
   

  	
   

  
	
  Section 2.4.

  	
  Collateral and Guaranties

  	
  12

  
	
   

  	
   

  	
   

  
	
  Section 2.5.

  	
  Overadvance

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE III  THE NOTES

  	
  12

  
	
   

  	
   

  	
   

  
	
  Section 3.1.

  	
  The Revolving Loan Note

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV  INTEREST AND FEES

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 4.1.

  	
  Interest Rate

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 4.2.

  	
  Computation of Interest

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 4.3.

  	
  Suspension of LIBOR Rate

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 4.4.

  	
  LIBOR Rate Unlawful

  	
  14

  
	
   

  	
   

  	
   

  
	
  Section 4.5.

  	
  Changes in Law

  	
  14

  
	
   

  	
   

  	
   

  
	
  Section 4.6.

  	
  Mitigation

  	
  14

  
	
   

  	
   

  	
   

  
	
  Section 4.7.

  	
  Fees and Expenses

  	
  15

  
	
   

  	
   

  	
   

  
	
  ARTICLE V  PREPAYMENTS

  	
  15

  
	
   

  	
   

  	
   

  
	
  Section 5.1.

  	
  Optional Prepayments

  	
  15

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI  MAKING OF PAYMENTS

  	
  15

  
	
   

  	
   

  	
   

  
	
  Section 6.1.

  	
  Making of Payments

  	
  15

  

 

i

 

	
  Section 6.2.

  	
  Late Payments

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII  REPRESENTATIONS
  AND WARRANTIES

  	
  16

  
	
   

  	
   

  	
   

  
	
  Section 7.1.

  	
  Entity Organization

  	
  16

  
	
   

  	
   

  	
   

  
	
  Section 7.2.

  	
  Authorization; No Conflict

  	
  16

  
	
   

  	
   

  	
   

  
	
  Section 7.3.

  	
  Validity and Binding Nature

  	
  16

  
	
   

  	
   

  	
   

  
	
  Section 7.4.

  	
  Financial Statements

  	
  16

  
	
   

  	
   

  	
   

  
	
  Section 7.5.

  	
  Liens

  	
  17

  
	
   

  	
   

  	
   

  
	
  Section 7.6.

  	
  Subsidiaries

  	
  17

  
	
   

  	
   

  	
   

  
	
  Section 7.7.

  	
  Investment Company Act

  	
  17

  
	
   

  	
   

  	
   

  
	
  Section 7.8.

  	
  Public Utility Holding Company
  Act

  	
  17

  
	
   

  	
   

  	
   

  
	
  Section 7.9.

  	
  Regulation U

  	
  17

  
	
   

  	
   

  	
   

  
	
  Section 7.10.

  	
  Accuracy of Information

  	
  17

  
	
   

  	
   

  	
   

  
	
  Section 7.11.

  	
  No Default

  	
  17

  
	
   

  	
   

  	
   

  
	
  Section 7.12.

  	
  Licenses and Permits

  	
  17

  
	
   

  	
   

  	
   

  
	
  Section 7.13.

  	
  Compliance with Applicable Laws

  	
  17

  
	
   

  	
   

  	
   

  
	
  Section 7.14.

  	
  Perfected Security Interests

  	
  18

  
	
   

  	
   

  	
   

  
	
  Section 7.15.

  	
  Chief Executive Office

  	
  18

  
	
   

  	
   

  	
   

  
	
  Section 7.16.

  	
  Other Representations and
  Warranties

  	
  18

  
	
   

  	
   

  	
   

  
	
  Section 7.17.

  	
  Anti-Terrorism Law Compliance

  	
  18

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII  COVENANTS

  	
  18

  
	
   

  	
   

  	
   

  
	
  Section 8.1.

  	
  Reports, Certificates and Other
  Information

  	
  19

  
	
   

  	
   

  	
   

  
	
  Section 8.2.

  	
  Existence and Franchises

  	
  19

  
	
   

  	
   

  	
   

  
	
  Section 8.3.

  	
  Books, Records and Inspections

  	
  19

  
	
   

  	
   

  	
   

  
	
  Section 8.4.

  	
  Insurance

  	
  20

  
	
   

  	
   

  	
   

  
	
  Section 8.5.

  	
  Taxes and Liabilities

  	
  20

  

 

ii

 

	
  Section 8.6.

  	
  Limits on Commitments

  	
  20

  
	
   

  	
   

  	
   

  
	
  Section 8.7.

  	
  Ownership of Stock of Borrower

  	
  20

  
	
   

  	
   

  	
   

  
	
  Section 8.8.

  	
  Liens

  	
  20

  
	
   

  	
   

  	
   

  
	
  Section 8.9.

  	
  Change in Nature of Business

  	
  20

  
	
   

  	
   

  	
   

  
	
  Section 8.10.

  	
  Use of Proceeds

  	
  21

  
	
   

  	
   

  	
   

  
	
  Section 8.11.

  	
  Other Agreements

  	
  21

  
	
   

  	
   

  	
   

  
	
  Section 8.12.

  	
  Compliance with Applicable Laws

  	
  21

  
	
   

  	
   

  	
   

  
	
  Section 8.13.

  	
  Environmental Matters

  	
  21

  
	
   

  	
   

  	
   

  
	
  Section 8.14.

  	
  Financial Covenant

  	
  22

  
	
   

  	
   

  	
   

  
	
  Section 8.15.

  	
  Title to Aircraft Collateral

  	
  22

  
	
   

  	
   

  	
   

  
	
  Section 8.16.

  	
  Deposit Account

  	
  22

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX  CONDITIONS OF
  LENDING

  	
  22

  
	
   

  	
   

  	
   

  
	
  Section 9.1.

  	
  Conditions to Disbursement

  	
  22

  
	
   

  	
   

  	
   

  
	
  Section 9.2.

  	
  Waiver of Conditions Precedent
  to Loan

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE X  EVENTS OF DEFAULT
  AND THEIR EFFECT

  	
  24

  
	
   

  	
   

  	
   

  
	
  Section 10.1.

  	
  Events of Default

  	
  24

  
	
   

  	
   

  	
   

  
	
  Section 10.2.

  	
  Acceleration; Termination of
  Commitments

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 10.3.

  	
  Rights and Remedies Generally

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 10.4.

  	
  Direct Debtor to Dispose of
  Collateral

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 10.5.

  	
  Possession of Collateral

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 10.6.

  	
  Disposition of the Collateral

  	
  27

  
	
   

  	
   

  	
   

  
	
  Section 10.7.

  	
  Recourse

  	
  28

  
	
   

  	
   

  	
   

  
	
  Section 10.8.

  	
  Application of Proceeds

  	
  28

  
	
   

  	
   

  	
   

  
	
  Section 10.9.

  	
  Limitation on Duties Regarding
  Preservation of Collateral

  	
  28

  
	
   

  	
   

  	
   

  
	
  Section 10.10.

  	
  Waiver of Claims

  	
  29

  

 

iii

 

	
  Section 10.11.

  	
  Grant of License to Use General
  Intangibles

  	
  29

  
	
   

  	
   

  	
   

  
	
  Section 10.12.

  	
  Covenant of Quiet Engagement

  	
  30

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI  GENERAL

  	
  30

  
	
   

  	
   

  	
   

  
	
  Section 11.1.

  	
  Waiver; Amendments

  	
  30

  
	
   

  	
   

  	
   

  
	
  Section 11.2.

  	
  Notices

  	
  30

  
	
   

  	
   

  	
   

  
	
  Section 11.3.

  	
  Computations

  	
  31

  
	
   

  	
   

  	
   

  
	
  Section 11.4.

  	
  Regulation U

  	
  32

  
	
   

  	
   

  	
   

  
	
  Section 11.5.

  	
  Costs, Expenses and Taxes

  	
  32

  
	
   

  	
   

  	
   

  
	
  Section 11.6.

  	
  Interest on Advances

  	
  33

  
	
   

  	
   

  	
   

  
	
  Section 11.7.

  	
  Indemnification

  	
  33

  
	
   

  	
   

  	
   

  
	
  Section 11.8.

  	
  Power of Attorney

  	
  34

  
	
   

  	
   

  	
   

  
	
  Section 11.9.

  	
  Termination of Agreement;
  Recovery Claims

  	
  35

  
	
   

  	
   

  	
   

  
	
  Section 11.10.

  	
  References to Subsidiaries

  	
  35

  
	
   

  	
   

  	
   

  
	
  Section 11.11.

  	
  Governing Law; Jury Trial;
  Severability

  	
  35

  
	
   

  	
   

  	
   

  
	
  Section 11.12.

  	
  Joint and Several Liability

  	
  36

  
	
   

  	
   

  	
   

  
	
  Section 11.13.

  	
  Counterparts

  	
  36

  
	
   

  	
   

  	
   

  
	
  Section 11.14.

  	
  Successors and Assigns

  	
  37

  
	
   

  	
   

  	
   

  
	
  Section 11.15.

  	
  Prior Agreements

  	
  37

  
	
   

  	
   

  	
   

  
	
  Section 11.16.

  	
  Assignment; Sale of
  Participating Interests

  	
  37

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 1.1  PERMITTED LIENS

  	
  39

  
	
   

  	
   

  
	
  SCHEDULE 7.13  COMPLIANCE WITH
  APPLICABLE LAWS

  	
  40

  
	
   

  	
   

  
	
  SCHEDULE 7.14  FILING OFFICES

  	
  41

  
	
   

  	
   

  
	
  SCHEDULE 8.9  PERMITTED
  INDEBTEDNESS

  	
  42

  
	
   

  	
   

  
	
  EXHIBIT A  FORM OF:
  REVOLVING LOAN NOTE

  	
  43

  
	
   

  	
   

  
	
  EXHIBIT B  FORM OF:  COVENANT COMPLIANCE CERTIFICATE

  	
  45

  

 

iv

 

	
  EXHIBIT C 
  AIRCRAFT PLEDGED AS COLLATERAL

  	
  47

  

 

v

 

MASTER LOAN AGREEMENT

 

This Master
Loan Agreement dated as of April 23, 2010 (this “Agreement”),
is between EP AVIATION, LLC, a Delaware
limited liability company (the “Borrower”) and THE HUNTINGTON NATIONAL BANK, a national banking association
(together with its successors and assigns, the “Bank”).

 

Preliminary
Statement

 

The Borrower
has requested, and Bank has agreed, to lend not more than $65 million to
Borrower pursuant to the terms and conditions of this Agreement.  This loan refinances certain indebtedness
owed by the Borrower and certain of its affiliates to the Bank, and shall be
secured by certain aircraft owed by the Borrower, as described in this
Agreement.

 

Agreement

 

In
consideration of the facts set forth above, and the mutual covenants that follow,
the parties agree as follows:

 

ARTICLE I

 

CERTAIN DEFINITIONS

 

Section 1.1.           Terms Defined in this Agreement.  In addition to terms expressly defined
elsewhere in this Agreement, the following terms used in this Agreement shall
have the following respective meanings:

 

“AAR” means AAR CORP., a Delaware corporation.

 

“Aggregate Facility” means $65,000,000.00.

 

“Aggregate Revolving Credit Commitment”  See Section 2.1.

 

“Agreed Value” means:

 

(a)           with respect to any Aircraft acquired on or after the Closing
Date for which an appraisal has been obtained, the lesser of Borrower’s cost or
the Appraised Value of such Aircraft after taking into account the anticipated
upgrades and/or overhauls to be performed on such Aircraft within 180 days of
the acquisition of such Aircraft; AND

 

(b)           with respect to any Aircraft acquired by the Borrower
prior to the Closing Date, the Appraised Value of such Aircraft as set forth on
Schedule 1.1A.

 

Except as provided above, after
an Aircraft is added to the Borrowing Base and so long as it remains in the
Borrowing Base, the Agreed Value of that Aircraft shall not change except on
terms and conditions acceptable to the Bank in its sole discretion.

 

1

 

“Aircraft” means (i) any aircraft registered under the
laws of the United States, or (ii) any aircraft registered in a country
other than the United States that has ratified and adopted the Cape Town
Convention; (iii) all engines, propellers, avionics, accessories,
components, of the foregoing owned by Borrower, and (iv) all
substitutions, products, and proceeds of the foregoing.

 

“Amortized Value” shall mean the Agreed Value of any Eligible
Aircraft as reduced through amortization on a straight line basis over seven (7) years
(the “amortization period”) commencing as follows:

 

(a)           with respect to any Eligible Aircraft acquired prior to
the Closing Date, the amortization period shall commence on the Closing Date;
and

 

(b)           with respect to any Eligible Aircraft acquired on or after
the date hereof, the amortization period shall commence on the date such
Eligible Aircraft is purchased by the Borrower.

 

“Applicable Interest Rate” means the LIBOR Rate plus the
Applicable Margin, provided, however, that after the Credit Termination Date,
the Applicable Interest Rate shall be equal to the Default Rate.  Subject to any maximum or minimum interest
rate limitations specified herein or by applicable laws, the Applicable
Interest Rate shall change automatically without notice to the Borrower on the
first LIBOR Rate Bank Day of each calendar month to reflect any change in the
LIBOR Rate.

 

“Applicable Margin” means 3.25%.

 

“Appraised Value” means value based upon a fair market value
appraisal conducted in a manner satisfactory to the Bank in its sole discretion
not more than 180 days immediately prior to the date such Aircraft is added to
the Borrowing Base or, with respect to Aircraft added to the Borrowing Base as
of the Closing Date, as set forth on Exhibit C.  Bank acknowledges and agrees that there may
not be a developed market for one or more of the types of Aircraft to be
purchased by the Borrower, and therefore agrees to consider, in good faith,
appraisals and comparable sales information concerning such Aircraft provided
by Borrower that rely on global market data where no reliable U.S. market
exists for such Aircraft.

 

“Authorized Officer” means any officer of the Borrower duly
authorized by action of the Borrower’s board of directors to act on Borrower’s
behalf in connection with the Loans.

 

“Bank Parties” see Section 11.7.

 

“Borrower” see introductory paragraph.

 

“Borrowing Base” means the aggregate of 75% of the Amortized
Value of each Eligible Aircraft for which an appraisal has been received by the
Bank.

 

“Borrowing Base Report” see Section 8.1(f).

 

2

 

“Business Day” means any day of the year other than Saturdays
and Sundays on which banks located in Grand Rapids, Michigan are open for the
transaction of business.

 

“Cape Town Convention” 
means the Convention on International Interests in Mobile Equipment and
its related protocol, the Protocol to Convention on International Interests in
Mobile Equipment on Matters Specific to Aircraft Equipment.

 

“Capital Expenditures” means all expenditures which, in
accordance with GAAP, would be required to be capitalized and shown on the
Consolidated balance sheet of the Company, including expenditures in respect of
Capital Leases, but excluding expenditures made in connection with the
replacement, substitution or restoration of assets to the extent financed (a) from
insurance proceeds (or other similar recoveries) paid on account of the loss of
or damage to the assets being replaced or restored or (b) with awards of
compensation arising from the taking by eminent domain or condemnation of the
assets being replaced.

 

“Capital Lease” means, with respect to any Person, any lease
of (or other agreement conveying the right to use) any real or personal
property by such Person that, in conformity with GAAP, is accounted for as a
capital lease on the balance sheet of such Person.

 

“Capital Stock” shall mean (a) in the case of a
corporation, capital stock and (b) in the case of a limited liability
company, membership interests.

 

“Cash Equivalents” means (a) securities issued or
directly and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States of America is pledged in support thereof) having maturities
of not more than twelve (12) months from the date of acquisition, (b) U.S.
dollar denominated time deposits and certificate of deposit of (i) the
Bank, (ii) any domestic commercial bank of recognized standing having
capital and surplus in excess of $500,000,000 or (iii) any bank whose
short-term commercial paper rating from S&P is at least A-1 or the
equivalent thereof or from Moody’s is at least P-1 or the equivalent thereof
(any such bank being an “Approved Lender”), in each case with maturities of not
more than 364 days form the date of acquisition, (c) commercial paper and
variable or fixed rate notes issued by any Approved Lender (or by the parent
company thereof) or any variable or fixed rate notes issued by, or guaranteed
by, any domestic corporation rated A-1 (or the equivalent thereof) or better by
S&P or P-1 (or the equivalent thereof) or better by Moody’s and maturing
within six months of the date of acquisition, (d) repurchase agreements
with a bank or trust company (including Lender) or recognized securities dealer
having capital and surplus in excess of $500,000,000 for direct obligations
issued by or fully guaranteed by the United States of America in which the
owner shall have a perfected first priority security interest (subject to no
other Liens) and having, on the date of purchase thereof, a fair market value
of at least 100% of the amount of the repurchase obligations, (e) obligations
of any State of the United States or any political subdivision thereof, the
interest with respect to which is exempt from federal income taxation under Section 103
of the Code, having a long term rate of at least Aa-3 or AA- by Moody’s or
S&P, respectively, (f) investments in municipal auction preferred
stock (i) rated AAA or the equivalent thereof) or better by S&P or Aaa
(or the equivalent thereof) or better by Moody’s and (ii) with dividends
that reset at least once every 365 days and (g) investments, classified in
accordance with GAAP as current assets, in money market investment programs
registered under the Investment 

 

3

 

Company Act of 1940, as amended, which are administered by reputable
financial institutions having capital of at least $100,000,000 and the
portfolios of which are limited to investments of the character described in
the foregoing subdivisions (a) through (f).

 

“Closing Date” means April 23, 2010 or such later date
that all of the conditions to disbursement set forth in Section 10 have
been satisfied, and the initial disbursement of the Loan is made to Borrower.

 

“Collateral” means all Aircraft pledged now or hereafter as
security for the Loans, including as of the Closing Date but not limited to
those Aircraft described on the attached Exhibit C.

 

“Collateral Documents” means, collectively, any and all documents
and instruments pursuant to which a Lien is granted to the Bank (or to any
agent, trustee, or other party acting on the Bank’s behalf) as security for the
Loan or as security for any Guaranty, as such documents and instruments may be
amended, modified or supplemented from time to time with the Bank’s advance
written consent.

 

“Computation Period” means each period of four consecutive
fiscal quarters of AAR ending on the last day of a fiscal quarter.

 

“Consolidated” means the financial statements of AAR and each
Person controlled directly or indirectly by AAR which has been consolidated in
accordance with GAAP.

 

“Consolidated Net Income” means, with respect to the
Guarantor and its Subsidiaries for any period, the net income (or loss) of the
Guarantor and its Subsidiaries for such period (taken as a cumulative whole),
as determined in accordance with GAAP, after eliminating all offsetting debits
and credits between the Guarantor and its Subsidiaries and all other items
required to be eliminated in the course of the preparation of Consolidated
financial statements of the Guarantor and its Subsidiaries in accordance with
GAAP.

 

“Consolidated Rentals” means, for any Computation Period for
the Guarantor and its Subsidiaries, the aggregate fixed amounts payable by the
Guarantor and its Subsidiaries, determined on a Consolidated basis, under
Operating Leases.

 

“Consolidating” means the separate financial statements of
AAR and each Person controlled directly or indirectly by AAR.

 

“Contingent Liability” means, with respect to any Person, any
obligation (except the endorsement in the ordinary course of business of
negotiable instruments for deposit or collection) of such Person guaranteeing
or in effect guaranteeing any Debt, dividend or other obligation of any other
Person in any manner, whether directly or indirectly, including (without
limitation) obligations incurred through an agreement, contingent or otherwise,
by such Person: (a) to purchase such Debt or obligation or any property
constituting security therefor; (b) to advance or supply funds (i) for
the purchase or payment of such Debt or obligation, or (ii) to maintain
any working capital or other balance sheet condition or any income statement
condition of any other Person or otherwise to advance or make available funds
for the purchase or payment of such Debt or obligation; (c) to lease
properties or to purchase properties or services primarily

 

4

 

for
the purpose of assuring the owner of such Debt or obligation of the ability of
any other Person to make payment of the Debt or obligation; or (d) otherwise
to assure the owner of such Debt or obligation against loss in respect
thereof.  In any computation of the Debt
or other liabilities of the obligor under any Contingent Liability, the Debt or
other obligations that are the subject of such Contingent Liability shall be
assumed to be direct obligations of such obligor.

 

“Covenant
Compliance Certificate” - see Section 8.1(c) and Exhibit B.

 

“Credit
Termination Date” means the earlier of (i) April 23, 2015;
or (ii) such other date after the occurrence of an Event of Default as
provided in Section 10.2.

 

“Debt”
of any Person means, without duplication, (a) its liabilities for borrowed
money determined in accordance with GAAP; (b) its liabilities for the
deferred purchase price of property acquired by such Person (excluding accounts
payable and other accrued liabilities arising in the ordinary course of business
but including, without limitation, all liabilities created or arising under any
conditional sale or other title retention agreement with respect to any such
property); (c) its Capital Lease obligations; (d) all liabilities for
borrowed money (other than Nonrecourse Debt) secured by any Lien with respect
to any property owned by such Person (whether or not it has assumed or
otherwise become liable for such liabilities); (e) all obligations,
contingent or otherwise, with respect to the face amount of all letters of
credit (whether or not drawn), bankers’ acceptances and similar obligations
issued for the account of such Person (including the Letters of Credit under
the Guarantor Credit Agreement); (f) all Hedging Obligations of such
Person; and (g) any Contingent Liability of such Person with respect to
liabilities of a type described in any of clauses (a) through (f) hereof.  Debt of any Person shall include all
obligations of such Person of the character described in clauses (a) through
(g) to the extent such Person remains legally liable in respect thereof
notwithstanding that any such obligation is deemed to be extinguished under
GAAP.  For further certainty, obligations
of the Guarantor and its Subsidiaries as lessee in respect of operating leases
(including “leveraged leases” and “synthetic leases” that are accounted for as
operating leases) under GAAP shall not constitute “Debt” and obligations of the
Guarantor and its Subsidiaries in respect of intercompany expenses, billings
and other charges between and among the Guarantor and its Subsidiaries
consistent with their historical business practices shall not constitute “Debt”.

 

“Default Rate”
means the rate of interest per annum which is 250 basis points in excess of the
Applicable Interest Rate on the Credit Termination Date.

 

“Dollar(s)”
and the sign “$” means lawful money of the United States of America.

 

“EBITDA” means, for
any period Consolidated Net Income for such period plus, to the extent deducted
in determining such Consolidated Net Income, Interest Expense, income and
franchise tax expense, depreciation and amortization losses (less gains) from
asset dispositions, extraordinary losses (less extraordinary gains),
transaction costs in an aggregate amount not to exceed $4,000,000 incurred in
connection with the acquisition of the Borrower and Aviation Worldwide
Services, L.L.C., this Agreement and the 2010 Credit Agreement, and transaction
costs incurred in connection with the issuance by the Company of high-yield
debt or equity, in each case, for such period. 
EBITDA shall be calculated on a pro forma basis to give 

 

5

 

effect
to any acquisition consummated at any time on or after the first day of a
Computation Period, as if such acquisition had been consummated on the first
day of such Computation Period.

 

“EBITDAR”
means, for any period, EBITDA plus, to the extent deducted from Consolidated
Net Income when determining EBITDA, Consolidated Rentals for such period.

 

“Eligible
Aircraft” means any Aircraft (i) owned by the Borrower, (ii) in
which the Bank has a perfected, first priority security interest, (iii) covered
by insurance as required by this Agreement; (iv) in good order and repair
and in airworthy condition in accordance with the requirements of the
manufacturer’s operation and maintenance manuals and any applicable laws or
regulations pertaining to the operation and maintenance of the Aircraft
(Aircraft whose damage, loss or needed repair is adequately covered by
insurance as required by this Agreement shall be deemed in good order and
repair and in airworthy condition), (v) is not subject to or encumbered by
any Lien other than Permitted Liens, (vi) for which an Agreed Value shall
been determined in accordance with the terms and conditions of this Agreement, (vii) is
otherwise in material compliance with all other conditions and requirements of
this Agreement, and (viii) is designated by the Borrower as part of the
Borrowing Base.

 

“Environmental
Claims” see Section 8.13(c).

 

“Environmental
Laws” means any and all federal, state or local environmental or
health and safety related laws, regulations, rules, ordinances, orders or
directives.

 

“EP Aviation”
means EP Aviation, LLC, a Delaware limited liability company.

 

“Event of
Default” means any of the events described in Section 10.1.

 

“Fixed Charge
Coverage Ratio” means, for any Computation Period, the ratio of (a) the
total for such period of EBITDAR for the Guarantor and its Subsidiaries minus
the sum of income taxes paid in cash by the Guarantor and its Subsidiaries and
all Capital Expenditures incurred by the Guarantor and its Subsidiaries to (b) the
sum for such period of (i) cash Interest Expense paid by the Guarantor and
its Subsidiaries, plus (ii) required payments of principal of Funded Debt
for the Guarantor and its Subsidiaries (excluding (A) the Revolving Loans,
as defined in the Guarantor Credit Agreement, (B) revolving loans under
the 2010 Credit Agreement, (C) required principal payments under the
Company’s notes due May 15, 2011, the aggregate initial principal amount
of which is $42,000,000, and (D) the Loans), plus (iii) Consolidated
Rentals paid by the Guarantor and its Subsidiaries, plus (iv) Restricted
Payments paid by the Guarantor during such Computation Period.

 

“Funded Debt”
means, as to any Person, all Debt of such Person that matures more than one
year from the date of its creation (or is renewable or extendible, at the
option of such Person, to a date more than one year from such date).

 

“GAAP”
means the generally accepted accounting principles consistently applied with
such changes thereto as (i) shall be consistent with the then effective
principles promulgated or adopted by the Financial Accounting Standards Board
and its predecessors and successors and 

 

6

 

(ii) shall
be concurred in by the independent certified public accountants of recognized
standing certifying any financial statements of the Borrower and its
Subsidiaries.

 

“General
Intangibles” means “general intangibles” as such term is defined in
the UCC, including, without limitation, rights to the payment of money (other
than Accounts), trademarks, trade names, service marks, designs, logos, and the
goodwill of the business relating thereto, copyrights, copyright registrations,
patents, patent applications, and contracts, licenses and franchises (except in
the case of licenses and franchises in respect of which the Borrower is the
licensee or franchisee if the agreement in respect of such license or franchise
prohibits by its terms any assignment or grant of a security interest), limited
and general partnership interests and joint venture interests, distributions on
certificated securities (as defined in the UCC) and uncertificated securities
(as defined in the UCC), computer programs and other computer Software, tape
drives, utilities and application programs, inventions, designs, trade secrets,
goodwill, proprietary rights, customer lists, supplier contracts, sale orders,
correspondence, advertising materials, federal and state income tax refunds,
payments due in connection with any confiscation, condemnation, seizure or
forfeiture of any property, reversionary interests in pension and
profit-sharing plans and reversionary, beneficial and residual interests in trusts,
credits with and other claims against any Person, together with any collateral
for any of the foregoing and the rights under any security agreement granting a
security interest in such collateral.

 

“Guarantor”
means AAR.

 

“Guarantor
Credit Agreement” means that certain Credit Agreement dated as of August 31,
2006, among the Guarantor, the Lenders (as defined therein) and Bank of
America, N.A., as agent, as the same may be amended, restated, supplemented or
otherwise modified, from time to time, and any replacement or refinancing
thereof from time to time.

 

“Guaranty”
means the Guaranty Agreement, of even date herewith, executed by the Guarantor
in favor of the Bank with respect to any or all of the Obligations.

 

“Hazardous
Material” means any hazardous substance or any pollutant or
contaminant defined as such in (or for purposes of) the Comprehensive
Environmental Response, Compensation, and Liability Act, any so called “Superfund”
or “Superlien” law, the Toxic Substances Control Act, or any other federal,
state or local statute, law, ordinance, code, rule, regulation, order or decree
regulating, relating to or imposing liability or standards on conduct
concerning any hazardous, toxic or dangerous waste, substance or material, as
now or at any time hereafter in effect; asbestos or any substance or compound
containing asbestos; polychlorinated biphenyls or any substance or compound
containing any polychlorinated biphenyl; and any other hazardous, toxic or
dangerous waste, substance or material.

 

“Hedging Agreement”
means any interest rate, currency or commodity swap agreement, cap agreement or
collar agreement, and any other agreement or arrangement designed to protect a
Person against fluctuations in interest rates, currency exchange rates or
commodity prices.

 

7

 

“Hedging
Obligation” means, with respect to any Person, any liability of such
Person under any Hedging Agreement.

 

“Indemnified
Liabilities” see Section 11.7.

 

“Interest
Expense” means for any period the Consolidated net interest expense
of the Guarantor and its Subsidiaries for such period (including all imputed
interest on Capital Leases).

 

“LIBOR Rate”
means the rate obtained by dividing: (1) the actual or estimated per annum
rate, or the arithmetic mean of the per annum rates, of interest for deposits
in U.S. dollars for the related LIBOR Rate Interest Period (as hereinafter
defined), as determined by Bank in its discretion based upon reference to
information which appears on page LIBOR01, captioned British Bankers
Assoc. Interest Settlement Rates, of the Reuters America Network, a service of
Reuters America Inc. (or such other page that may replace that page on
that service for the purpose of displaying London interbank offered rates; or,
if such service ceases to be available or ceases to be used by Bank, such other
reasonably comparable money rate service as Bank may select) or upon
information obtained from any other reasonable procedure, as of two LIBOR Rate
Bank Days prior to the first day of a LIBOR Rate Interest Period; by (2) an
amount equal to one minus the stated maximum rate (expressed as a decimal), if
any, of all reserve requirements (including, without limitation, any marginal
emergency, supplemental, special or other reserves) that is specified on the
first day of each LIBOR Rate Interest Period by the Board of Governors of the
Federal Reserve System (or any successor agency thereto) for determining the
maximum reserve requirement with respect to eurocurrency funding (currently
referred to as “Eurocurrency liabilities” in Regulation D of such Board)
maintained by a member bank of the such System, or any other regulations of any
governmental authority having jurisdiction with respect thereto as conclusively
determined by the Bank.

 

“LIBOR Rate
Bank Day” means any day other than a Saturday or a Sunday on which
banks are open for business in Grand Rapids, Michigan and on which banks in
London, England settle payments.

 

“LIBOR Rate
Interest Period” means one (1) month, provided that (i) if
any LIBOR Rate Interest Period would otherwise expire on a day which is not a
LIBOR Rate Bank Day, the LIBOR Rate Interest Period shall be extended to the
next succeeding LIBOR Rate Bank Day (provided, however, that if such next
succeeding LIBOR Rate Bank Day occurs in the following calendar month, then the
LIBOR Rate Interest Period shall expire on the immediately preceding LIBOR Rate
Bank Day.)

 

“Lien”
means, with respect to any asset, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such asset.

 

“Loans”
means collectively all Revolving Loans, and the term “Loan”
means any such Revolving Loan.

 

“Margin Stock”
has the meaning given to such term in Regulation U.

 

8

 

“Material
Adverse Effect” means a material adverse effect on (a) the
business, operations, property or condition (financial or otherwise) of the
Guarantor and its Subsidiaries taken as a whole, (b) the ability of the
Borrower or the Guarantor to perform its respective material obligations, when
such obligations are required to be performed, under this Agreement, any of the
Notes or any of the other Related Documents or the material rights or remedies
of Bank thereunder or hereunder.

 

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

 

“Note”
shall mean collectively and individually the Revolving Loan Notes.

 

“Obligations”
mean any individual and the aggregate of all obligations, liabilities and
indebtedness of the Borrower to the Bank, howsoever created, arising or
evidenced, whether joint or several, direct or indirect, absolute or
contingent, now or hereafter existing or arising, or due or to become due under
this Agreement, the Notes or under any of the Related Documents, whether by
operation of law or otherwise, and any refinancings, substitutions, extensions,
renewals, replacements and modifications for or of any or all of the foregoing.

 

“Operating
Lease” means any lease of (or other agreement conveying the right to
use) any real or personal property by the Guarantor or any Subsidiary, as
lessee, other than any Capital Lease.

 

“Permitted
Liens” see Section 8.8 and Schedule 1.1.

 

“Person”
means an individual or a corporation, partnership, trust, incorporated or
unincorporated association, joint venture, joint stock company, limited
liability company, government (or any agency or political subdivision thereof)
or other entity of any kind.

 

“Presidential”
means Presidential Airways, Inc., a Florida corporation.

 

“Prime
Commercial Rate” means the rate established by Bank from time to
time based on its consideration of economic, money market, business and
competitive factors, and it is not necessarily the Bank’s most favored
rate.  Subject to any maximum or minimum
interest rate limitation specified herein or by applicable law, any variable
rate of interest on the Loans based upon the Prime Commercial Rate shall change
automatically without notice to the Borrower immediately with each change in
the Prime Commercial Rate.

 

“Proceeds”
means “proceeds” as such term is defined in the UCC.

 

“Recovery
Claim” - See Section 11.9.

 

“Regulation U”
means Regulation U of the Board of Governors of the Federal Reserve System and
any successor rule or regulation of similar import as in effect from time
to time.

 

9

 

“Related
Documents” means, collectively, the Notes, the Collateral Documents,
the Guaranty and all other documents, instruments and agreements executed by
the Borrower, or the Guarantor pursuant to or in connection with this
Agreement, or any amendment of this Agreement.

 

“Restricted
Payment” means any payment in connection with (a) any dividend
payment in cash or otherwise to any holders of the Capital Stock of the
Guarantor, and (b) any purchase or redemption of any of the Capital Stock
of the Guarantor.

 

“Revolving
Loans”  See Section 2.1.

 

“Revolving
Loan Note”  See Section 3.1.

 

“Security
Agreement” means any aircraft security agreement by which an
Aircraft is pledged to the Bank as collateral for any Loan made pursuant to
this Agreement and any security agreement by which the assets of the Borrower
or the Guarantor are pledged to the Bank as collateral for any Loan made
pursuant to this Agreement.

 

“Significant
Subsidiary” means at any time any Subsidiary of the Guarantor which
accounts for more than (i) 10% of the Consolidated assets of the Guarantor
and its Subsidiaries, or (ii) 10% of the Consolidated revenue of the
Guarantor and its Subsidiaries.

 

“Software”
means software as defined by the UCC.

 

“Subsidiary”
means a Person of which the Borrower and/or its other Subsidiaries own,
directly or indirectly, such number of outstanding shares as have more than 50%
of the ordinary voting power for the election of such corporation’s directors.

 

“2010 Credit
Agreement” means a Credit Agreement, to be entered into by and among
the Guarantor, the lenders party thereto, and Bank of America, as
Administrative Agent, providing for a $75,000,000 revolving credit facility, as
the same may be amended, restated, supplemented or otherwise modified from time
to time.

 

“UCC”
and “Uniform Commercial Code” mean the
Uniform Commercial Code as in effect from time to time in the State of
Michigan; provided, that if by reason of mandatory provisions of law, the
perfection or the effect of perfection or non-perfection of the security
interest or Lien in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than Michigan, “UCC” and “Uniform
Commercial Code” means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such perfection
or effect of perfection or non-perfection.

 

Section 1.2.                                   Construction.

 

(a)                                  The words “hereof,”
“herein,” and “hereunder,” and other words of a similar import refer to this
Agreement as a whole and not to the individual Sections in which such terms are
used.

 

10

 

(b)                                 References to
sections and other subdivisions of this Agreement are to the designated
Sections and other subdivisions of this Agreement as originally executed.

 

(c)                                  The headings of
sections and other captions are for convenience only and shall not define or
limit the provisions hereof.

 

(d)                                 Where the
context so requires, words used in singular shall include the plural and vice
versa, and words of one gender shall include all other genders.

 

ARTICLE II

 

THE
LOANS

 

Section 2.1.                                   Revolving Loan
Commitment.  On the
terms and subject to the conditions set forth in this Agreement, the Bank
agrees to disburse amounts (collectively, the “Revolving Loans”) from time to
time during the period from the date of this Agreement up to but not including
the Credit Termination Date in an aggregate principal amount not to exceed , at
any time outstanding, the Aggregate Facility (the “Aggregate Revolving Credit Commitment”).  The Aggregate Revolving Credit Commitment
shall not, at any time, exceed the lesser of the Aggregate Facility or the
Borrowing Base.  Each Revolving Loan
shall be made and maintained at the Bank’s Lending Office.  Subject to the limitations set forth above,
and the terms and conditions of this Agreement, amounts borrowed and repaid by
Borrower pursuant to this Section 2.1 may be reborrowed.

 

Section 2.2.                                   Disbursement
Procedures For All Loans.  The
Borrower shall give the Bank notice (in writing) of its request for any Loan
not later than 10:00 a.m. (Grand Rapids, Michigan time) on the Business
Day prior to the date such Loan is to be disbursed.  The notice shall be in a form provided by the
Bank, and shall specify (a) the date of the Loan, (b) the amount of
the Loan, (c) the account of the Borrower, the Guarantor or any other
Subsidiary of the Guarantor into which the Loan is to be disbursed, (d) the
borrowing date (which shall be a Business Day) and (e) shall include a
current Borrowing Base Report.  Each
request for a Loan shall automatically constitute a representation and warranty
by the Borrower that, as of the date of the disbursement, all conditions
precedent to the making of such advance have been satisfied, and that no Event
of Default exists.  Proceeds of any Loan
shall, if required by the Bank, be disbursed to an escrow agent acceptable to
the Bank, with instructions to first pay all liens and adverse interests in the
Aircraft to be acquired, and then pay the balance to Borrower, or in such other
manner acceptable to Borrower and the escrow agent.  Provided that all conditions precedent to
disbursement are satisfied, and provided that the requested Loan can be made in
accordance with the limitations contained in this Agreement, the Bank shall
disburse the requested Loan in immediately available funds on the borrowing
date.

 

Section 2.3.                                   Deposits to
Borrower’s Account.  Absent
direction to the contrary from the Borrower, the Bank shall have the right to
deposit any Loan disbursement in the Borrower’s cash concentration account
maintained at Bank of America, N.A. in the Borrower’s name.

 

11

 

Section 2.4.                                   Collateral and
Guaranties.  The
Obligations shall be secured as follows:

 

(a)                                  Except as
otherwise provided in Section 2.4 above, all Obligations shall be secured
by (i) a first priority security interest in all Aircraft now owned or
hereinafter acquired by the Borrower, and included in the Borrowing Base, and (ii) a
first priority security interest in every lease agreement pursuant to which any
Aircraft included in the Borrowing Base is leased to any third party, including
Presidential or any other Subsidiary of the Guarantor.  Borrower shall execute and deliver to the
Bank all documents, certificates and instruments to create, perfect and
establish the priority of any security interest required by the Bank pursuant
to this paragraph.  For purposes of this Section 2.4,
all Aircraft listed on the attached Exhibit C shall be pledged as
Collateral for the Obligations as of the Closing Date.

 

(b)                                 The Loans shall
be secured by (i) an unlimited, unsecured parent guaranty issued by AAR to
the Bank, and the Guaranty shall be in form and substance satisfactory to the
Bank and secure not less than 100% of the outstanding principal balance of the
Loans at any time.

 

(c)                                  At the Borrower’s
request, the Bank shall release its security interest in any Aircraft and
Collateral related to such Aircraft, including without limitation, its security
interest in any lease payments and accounts receivable derived from such
Aircraft, in connection with any financing or refinancing of such Aircraft with
credit extended by another financial institution separate and independent from
this Agreement, any sale of such Aircraft or any other removal of such Aircraft
from the Borrowing Base, upon Bank’s receipt of prepayment of the Loans to the
extent required under Section 2.5 immediately after giving effect to such
removal.  The Bank shall execute and
deliver such documents reasonably required by the Borrower to affect the release
required by this paragraph.

 

Section 2.5.                                   Overadvance.  If, at any time, the total outstanding
principal balance of the Revolving Loans exceeds any applicable limitation set
forth in this Agreement (an “Overadvance”),
Borrower shall prepay the excess within two (2) Business Days of written
notification from Bank.  Notwithstanding
anything contained herein to the contrary, the Borrower shall have the right to
request the Bank to extend Revolving Loans to the Borrower that will result in
an Overadvance provided, however, that Borrower pledges additional Collateral
sufficient in the Bank’s sole discretion, exercised in good faith, to
adequately secure the excess, or such excess is guaranteed by AAR.  The Bank may grant such request in its sole
discretion.

 

ARTICLE III

 

THE
NOTES

 

Section 3.1.                                   The Revolving
Loan Note.  All
Revolving Loans made by the Bank under this Agreement shall be evidenced by a
single promissory note (herein, as the same may be amended, modified or
supplemented from time to time, and together with any renewals 

 

12

 

thereof or exchanges or
substitutions therefore, called the “Revolving
Loan Note”) substantially in the form set forth in Exhibit A
with appropriate insertions, payable to the order of the Bank.  The Revolving Loan Note shall represent the
obligation of the Borrower to repay the Revolving Loans owing to the Bank.  The date and amount of each Revolving Loan
made by the Bank, and of each repayment of principal thereon received by the
Bank shall be recorded by such Bank in its records or, at its option, on a
schedule attached to the Revolving Loan Note. 
The aggregate unpaid principal amount so recorded shall be rebuttable
presumptive evidence of the principal amount owing and unpaid on the Revolving
Loan Note.  The failure so to record any
such amount or any error in so recording any such amount, however, shall not
limit or otherwise affect the Borrower’s obligations hereunder or under the
Revolving Loan Note to repay the principal amount of the Revolving Loans
together with all interest accruing thereon.

 

ARTICLE IV

 

INTEREST
AND FEES

 

Section 4.1.                                   Interest Rate.  The Borrower hereby promises to pay interest
on the unpaid principal amount of each Loan commencing on the date of disbursement
of such Loan until the Loan is paid in full at the Applicable Interest Rate;
provided, however, that upon the occurrence of an Event of Default and Borrower’s
failure to cure such Event of Default prior to the expiration of any applicable
cure period, the unpaid principal amount of the Loan shall bear interest
thereafter at a rate per annum equal to the Default Rate.

 

Section 4.2.                                   Computation of
Interest.  Interest on
the Loan shall be computed for the actual number of days elapsed on the basis
of a 360 day year and actual days elapsed. 
Subject to any maximum or minimum interest rate limitations specified
herein or by applicable laws, the Applicable Interest Rate shall change
automatically without notice to the Borrower on the first day of each LIBOR
Rate Interest Period but not more often than each month to reflect any change
in the LIBOR Rate.  Should any interest
or other charges paid or payable by the Borrower or any party liable for the
payment of a Loan in connection with this Agreement or any Related Document
result in the computation or earning of interest in excess of the maximum
allowed by applicable law, then any and all such excess shall be and the same
is hereby waived by the Bank, and any and all such excess paid shall be
automatically credited against and in reduction of the outstanding principal
balance of the Loan, and the portion of said excess paid which exceeds the
outstanding balance of the Loan shall be paid by the Bank to the person legally
entitled thereto.

 

Section 4.3.                                   Suspension of
LIBOR Rate.  In the
event that Bank reasonably determines that by reason of (1) any change
arising after the date of this Agreement affecting the interbank Eurocurrency
market or affecting the position of the Bank with respect to such market,
adequate and fair means do not exist for ascertaining the applicable interest
rates by reference to which the LIBOR Rate then being determined is to be
fixed, (2) any change arising after the date of this Agreement in any
applicable law or governmental rule, regulation or order (or any interpretation
thereof, including the introduction of any new law or governmental rule,
regulation or order), or (3) any other circumstance affecting the Bank or
the interbank market (such as, but not limited to, official reserve requirements
required by Regulation D of the Board of Governors of the Federal Reserve
System), the LIBOR Rate plus the Applicable Margin shall 

 

13

 

not represent the effective
pricing to the Bank of accruing interest hereunder based upon the LIBOR Rate,
then, and in any such event, the accruing of interest hereunder based upon the
LIBOR Rate shall be suspended until Bank shall notify the Borrower that the
circumstances causing such suspension no longer exist.  In such case, beginning on the date of such
suspension interest shall accrue hereunder at a variable rate of interest per
annum, which shall change in the manner set forth below, equal to .26
percentage points in excess of the Prime Commercial Rate.

 

Section 4.4.                                   LIBOR Rate
Unlawful.  In the
event that on any date Bank shall have reasonably determined that accruing
interest hereunder based upon the LIBOR Rate has become unlawful by compliance
by the Bank in good faith with any law, governmental rule, regulation or order,
then, and in any such event, the Bank shall promptly give notice thereof to the
Borrower.  In such case, accruing
interest hereunder based upon the LIBOR Rate shall be terminated and the
Borrower shall, at the earlier of the end of each LIBOR Rate Interest Period
then in effect or when required by law, repay the advances based upon the LIBOR
Rate, together with all interest accrued thereon.  In such case, when required by law, interest
shall accrue hereunder at a variable rate of interest per annum, which shall
change in the manner set forth below, equal to .26 percentage points in excess
of the Prime Commercial Rate.

 

Section 4.5.                                   Changes in Law.  If, due to (1) the introduction of or
any change in or in the interpretation of any law or regulation, (2) the
compliance with any guideline or request from any central bank or other public
authority (whether or not having the force of law), or (3) the failure of
the Borrower to repay any advance when required by the terms of this Agreement,
there shall be any loss or increase in the cost to the Bank of accruing
interest hereunder based upon the LIBOR Rate, then the Borrower agrees that the
Borrower shall, from time to time, upon demand by the Bank, pay to the Bank
additional amounts sufficient to compensate the Bank for such loss or increased
cost.

 

Section 4.6.                                   Mitigation.  If the Bank becomes entitled to claim any
additional amounts pursuant to Section 4.5, it shall promptly furnish to
Borrower a certificate setting forth in reasonable detail the calculation of
such amounts, which certificate shall be conclusive evidence, absent manifest
error, of the correctness of such amounts. 
Notwithstanding anything to the contrary herein, Borrower shall not be
required to compensate the Bank pursuant to this Section 4 for any amounts
incurred more than six months prior to the date that the Bank submits such
certificate to Borrower.  Subject to the
terms of the immediately preceding sentence, the obligations of Borrower
pursuant to this Section shall survive the termination of this Agreement
and the payment of the Loans and Notes and all other amounts payable
hereunder.  The Bank agrees that, upon
the occurrence of an event or existence of a condition that would entitle it to
receive payments under Section 4.5, it will, if requested by the Borrower,
to the extent not inconsistent with any applicable legal or regulatory
restrictions, use reasonable efforts (a) to make, fund or maintain the
interest in its Loans through another lending office, or (b) to take such other
reasonable measures, if as a result thereof the additional amounts that would
otherwise be required to be paid to the Bank pursuant to this Section would
be reduced and if the making, funding or maintaining of its interest in the
Loans through such other lending office or in accordance with such other
measures, as the case may be, would not, in the good faith judgment of the
Bank, result in an economic, legal or regulatory disadvantage or adverse tax
consequences to the Bank.

 

14

 

Section 4.7.                                Fees and
Expenses.  The
Borrower shall be obligated to pay the following fees and expenses:

 

(a)                                  Commitment Fee.  A commitment fee in the amount of $325,000,
shall be due and payable at closing.

 

(b)                                 Out-of-Pocket Expenses.  All out-of-pocket expenses incurred by the
Bank incurred in the course of its due diligence and documentation of the
Loans, including, without limitation all attorney’s fees, filing fees, title
insurance, and appraisal fees, provided that such fees and expenses shall not exceed
(i) $35,000 with respect to appraisal fees, and (ii) $80,000 with
respect to all other out-of-pocket fees and expenses.

 

ARTICLE V

 

PREPAYMENTS

 

Section 5.1.                                The Borrower
may from time to time prepay the Obligations at any time, in whole or in part.  If a prepayment is made with the proceeds from
the sale of Aircraft no longer needed by Borrower for its operations or is a
casualty loss of any Aircraft, such prepayment may be made without premium or
penalty.  In connection with any other
prepayment, Borrower shall pay Bank a pre-payment penalty equal to (a) 50
basis points on the amount of Obligations prepaid during the first 36 months of
the term of this Agreement, and (b) 25 basis points on the amount of any
Obligations prepaid thereafter. 
Notwithstanding the foregoing, during any period of time while interest
is accruing hereunder based upon the LIBOR Rate Borrower may not prepay any
portion of the outstanding principal balance prior to the expiration of the
then current LIBOR Rate Interest Period.

 

ARTICLE
VI

 

MAKING OF PAYMENTS

 

Section 6.1.                                Making of
Payments.

 

(a)                                  Except as otherwise provided
in paragraph (b) below, all payments payable by the Borrower to the Bank
with respect to the Loans (including, without limitation, principal, interest,
fees and expenses) shall be made by wire transfer to the Bank at 105 East 4th Street (CN01), Cincinnati, OH 45202, not later
than 3:00 p.m. (Grand Rapids, Michigan time) on the date due, in
accordance with wire instructions provided by the Bank to the Borrower after
the date of this Agreement.  Payments
received after that hour shall be deemed to have been received by the Bank on
the next following Business Day. 
Multiple payments, including without limitation fees, due at the same
time may be paid by way of a single wire transfer.

 

(b)                                 For purposes of this
Agreement, all payments and Loan disbursements shall be made in the form of
U.S. currency unless otherwise agreed in writing by the parties.

 

15

 

Section 6.2.                                Late Payments.  If a regularly scheduled payment is ten (10) days
or more late, the Borrower will be charged five percent (5%) of the payment or
$25.00, whichever is greater, but such amount shall become due only if such
regularly scheduled payment remains unpaid for three (3) Business Days
after Borrower has received notice from Bank of the expiration of such 10-day
period.  Said charge shall be in addition
for any amounts due as interest at the Default Rate.  Nothing in this Section shall be deemed
to postpone the date on which a payment is due or to allow the Borrower any
period of grace within which to make any payment.

 

ARTICLE
VII

 

REPRESENTATIONS AND WARRANTIES

 

To induce the Bank to enter
into this Agreement and to make the Loans hereunder, the Borrower represents
and warrants to the Bank that, as of the date hereof and on the date of
disbursement of each Loan:

 

Section 7.1.                                Entity
Organization.  Borrower is
a limited liability company, duly existing and in good standing under the laws
of the State of Delaware, and is duly qualified and in good standing as a
limited liability company authorized to do business in each jurisdiction where
such qualification is required because of the nature of its activities or
properties and where a failure to so qualify would reasonably be expected to
have a Material Adverse Effect on its business, operations, assets or
condition, financial or otherwise.

 

Section 7.2.                                Authorization;
No Conflict.  The
Borrower’s execution, delivery and performance of this Agreement and each of
the Related Documents to which it is a party and the consummation of the
transactions contemplated by this Agreement and each of the Related Documents
are within the Borrower’s entity powers, have been duly authorized by all
necessary entity action, require no material governmental, regulatory or other
approval which will not be obtained on or prior to the Closing Date, and do not
and will not contravene or conflict with any provision of (i) applicable
law, (ii) any judgment, decree or order binding on the Borrower or any of
its properties, or (iii) the Borrower’s organizational documents, and will
not contravene or conflict with, or cause any Lien to arise under, any
provision of any agreement or instrument binding upon the Borrower or upon any
property of the Borrower.

 

Section 7.3.                                Validity and
Binding Nature.  This
Agreement and each of the Related Documents to which the Borrower is a party is
(or, when duly executed and delivered, will be) the legal, valid and binding
obligation of the Borrower enforceable against the Borrower in accordance with
its terms subject to bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforceability of agreements and rights
granted thereunder generally, and subject to general principles of equity.

 

Section 7.4.                                Financial
Statements.  All
financial statements for AAR and its Subsidiaries available on line via Edgar
have been or will be prepared in accordance with GAAP consistently applied
(except as disclosed therein) and do or will present fairly the financial
condition of the Persons covered thereby as at the dates thereof and the
results of their operations for the periods then ended.

 

16

 

Section 7.5.                                Liens.  None of the Collateral is or will be subject
to any Lien, except Permitted Liens.

 

Section 7.6.                                Subsidiaries.  The Borrower has no Subsidiaries as of the
Closing Date.

 

Section 7.7.                                Investment
Company Act.  The
Borrower is not an “investment company” or a company “controlled” by an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.

 

Section 7.8.                                Public Utility
Holding Company Act.  The
Borrower is not a “holding company”, or a “subsidiary company” of a “holding
company”, or an “affiliate” of a “holding company” or of a “subsidiary company”
of a “holding company, within the meaning of the Public Utility Holding Company
Act of 1935, as amended.

 

Section 7.9.                                Regulation U.  The Borrower is not engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying Margin Stock.

 

Section 7.10.                          Accuracy of
Information.  All factual
information heretofore or contemporaneously furnished by or on behalf of the
Borrower to the Bank for purposes of or in connection with this Agreement or
any transaction contemplated hereby is, and all other factual information
hereafter furnished by or on behalf of the Borrower to the Bank will be, true
and accurate in every material respect on the date as of which such information
is dated or certified, and, to the best of its knowledge, the Borrower has not
omitted and will not omit any material fact necessary to prevent such
information from being false or misleading. 
The Borrower has disclosed to the Bank in writing all facts of which the
Borrower has knowledge which might materially and adversely affect the
business, credit, operations, financial condition or prospects of the Borrower
or which at any time hereafter might materially and adversely affect any
material portion of the Borrower’s properties, or the Borrower’s ability to
perform its obligations under this Agreement or the Related Documents.

 

Section 7.11.                          No Default.  To the best of Borrower’s knowledge, no event
has occurred and no condition exists which, upon the execution and delivery of,
or consummation of any transaction contemplated by, this Agreement or any
Related Document, or upon the funding of any Loan will constitute an Event of
Default.

 

Section 7.12.                          Licenses and
Permits.  To the best of its knowledge,
the Borrower has obtained all licenses, permits, franchises and other
governmental authorizations necessary to the ownership of its properties or to
the conduct of its businesses, a failure to obtain or violation of which would reasonably
be expected to have a Material Adverse Effect.

 

Section 7.13.                          Compliance with
Applicable Laws.  Except as
set forth on Schedule 7.13, to the best of its knowledge, the Borrower is
compliance with the requirements of all applicable laws, rules, regulations,
and orders of all governmental authorities (Federal, state, local or foreign,
and including, without limitation, environmental laws, rules, regulations and
orders), a breach of which would reasonably be expected to have a Material
Adverse Effect.

 

17

 

Section 7.14.                          Perfected
Security Interests.  This
Agreement, the other Related Documents and the filing of financing statements
necessary to perfect the security interests granted in the Collateral create a
valid and perfected first priority security interest in such of the Collateral
as to which a security interest may be perfected by the filing of a financing
statement, subject only to Permitted Liens. 
The filing of Aircraft Security Agreements (in form and substance
satisfactory to the Bank) with the applicable governmental regulatory agencies
for the countries in which such Aircraft are registered, and the International
Registry pursuant to the Cape Town Convention shall constitute perfection of security
interest of Bank in such Aircraft required under this Agreement and the Related
Documents.  As of the date of this
Agreement, the filing offices necessary to perfect the security interests
granted hereunder in the Collateral in which a security interest may be
perfected by the filing of a financing statement are listed on Schedule 7.19
attached hereto, and all filings and other actions necessary or desirable to
perfect such security interest have been duly taken.

 

Section 7.15.                          Chief Executive
Office.  The chief executive office and
principal place of business of Borrower is 1100 N. Wood Dale Road, Wood Dale,
Illinois 60191.

 

Section 7.16.                          Other
Representations and Warranties.  To the best of Borrower’s knowledge, each of
the representations and warranties by the Borrower or the Guarantor in the
Related Documents and all information shown in schedules, reports and other
documents prepared by or at the request of the Borrower and delivered to the
Bank, as such information may be modified by information made available to the
Bank pursuant to Section 8.1, is true and correct, in all material
respects.

 

Section 7.17.                          Anti-Terrorism
Law Compliance.  Neither the
Borrower nor any of its Subsidiaries is subject to or in violation of any law,
regulation, or list of any government agency (including without limitation, the
U.S. Office of Foreign Asset Control list, Executive Order No. 13224 of
the USA Patriot Act) that prohibits or limits the conduct of business with or
the receiving of funds, goods or services to or for the benefit of certain
Persons specified therein or that prohibits or limits any Bank from making any
advances or extensions of credit to the Borrower or from otherwise conducting
business with the Borrower.  The Borrower
and the Guarantor shall execute and deliver to the Bank such information
required by the Bank to verify their respective identities, and to verify the
accuracy of the representations set forth in this Section 7.23.

 

ARTICLE
VIII

 

COVENANTS

 

Until the Credit Termination
Date and thereafter until all Obligations including any Recovery Claims arising
hereunder or under any of the Related Documents are paid in full, the Borrower
agrees that, unless at any time the Bank shall otherwise expressly consent in
writing, it will:

 

18

 

Section 8.1.                                Reports,
Certificates and Other Information.  Furnish to the Bank:

 

(a)                                  Annual Financial Statements —
AAR.  As soon as possible, and in
any event within 120 days after the close of each fiscal year ended May 31,
Consolidated financial statements of AAR, will be available on the internet.

 

(b)                                 Quarterly Financial
Statements — AAR.  As soon as
available, and in any event within forty-five (45) days after the close of each
fiscal quarter, Consolidated financial statements of AAR will be available on
the internet.

 

(c)                                  Quarterly Covenant
Compliance Certificate. 
Within ten (10) Business Days of the making available on EDGAR or
the internet of the annual financial statements referenced in Section 8.1(a) or
the quarterly financial statements referenced in Section 8.1(b), furnish
to the Bank a duly completed certificate in the form of attached Exhibit B
(a “Covenant Compliance Certificate”)
dated the date of such financial statements and signed by an Authorized Officer
of AAR, which Covenant Compliance Certificate shall (i) as of the end of
each fiscal year of AAR, contain a computation of, and show compliance with the
financial ratio contained in Section 8.14 as of the end of such fiscal
year, and (ii) state that no Event of Default has occurred and is
continuing, or, if there is any such event, describes it and the steps, if any,
being taken to cure it.

 

(d)                                 Notice of Default.  Immediately upon learning of the occurrence
of an Event of Default, provide written notice thereof which describes the same
and the steps being taken by the Borrower to cure such Event of Default.

 

(e)                                  Insurance Certificates.  At the time of the initial disbursement of
any of the Loans, and from time-to-time thereafter, as reasonably requested by
Bank, a certificate of insurance and broker’s undertaking evidencing compliance
with the insurance requirements of the Security Agreement

 

(f)                                    Borrowing Base Report.  Upon and in conjunction with any request for
a disbursement of a Revolving Loan and within ten (10) Business Days after
any Aircraft ceases to be an Eligible Aircraft, and within Twenty (20) days
after the end of each calendar month, Borrower shall provide to the Bank a
current calculation of the Borrowing Base in form and substance reasonably
satisfactory to the Bank (“Borrowing Base
Report”).

 

(g)                                 Other Information.  Such other information concerning the
Borrower or the Guarantor as the Bank may reasonably request from time to time.

 

Section 8.2.                                Existence and
Franchises.  Except as
otherwise expressly permitted in this Agreement, maintain and cause Borrower to
maintain in full force and affect its existence and all rights, licenses,
leases and franchises necessary to the conduct of its business, other than such
rights, licenses, leases and franchises the failure of which to maintain would
not reasonably be expected to have a Material Adverse Effect.

 

Section 8.3.                                Books, Records
and Inspections.  Maintain
complete and accurate books and records, permit the Bank to have access to such
books and records, and permit the 

 

19

 

Bank, at the Bank’s expense, to inspect the properties and operations
of the Borrower at reasonable times, upon reasonable advance notice to the
Borrower and during normal business hours.

 

Section 8.4.                                Insurance.  Maintain in addition to insurance required to
be maintained under any other section of this Agreement, such insurance as may
be required by law or by the Collateral Documents.

 

Section 8.5.                                Taxes and
Liabilities.  Promptly
pay, when due, all taxes, duties assessments and other liabilities, except such
taxes, duties, assessments and other liabilities as the Borrower is diligently
contesting in good faith and by appropriate proceedings; provided that the
Borrower has established and is maintaining adequate reserves with respect
thereto in accordance with GAAP.

 

Section 8.6.                                Limits on
Commitments.  Not permit
the aggregate outstanding principal amount of any Loan to exceed the limits
applicable to it as set forth in Article II.

 

Section 8.7.                                Ownership of
Stock of Borrower.  Not permit,
without the prior written consent of the Bank, which consent shall not be
unreasonably withheld or delayed, the majority of the issued and outstanding
stock or other equity interests of the Borrower, or any warrants or rights
convertible, with or without the payment of money, into stock or other equity
interests of the Borrower, to be owned by any Persons other than an entity
wholly-owned directly or indirectly by AAR. 
Borrower shall provide prior written notice to the Bank of any proposed
corporate reorganization that results in the transfer of substantially all of
the assets of Borrower to the Guarantor or any Subsidiary of the Guarantor.

 

Section 8.8.                                Liens.  Not create or permit to exist any Lien with
respect to any Collateral now owned or hereafter acquired, except the following
Liens (herein collectively called the “Permitted
Liens”):  (a) Liens for
current taxes and duties not delinquent or for taxes being contested in good
faith, by appropriate proceedings which do not involve, in the good faith
determination of the Bank, any material danger of the sale or loss of any of
the Collateral and with respect to which the Borrower has provided for and is
maintaining adequate reserves in accordance with GAAP, (b) Liens in favor
of the Bank, (c) Liens of mechanics, materialmen, carriers, warehousemen
or other like statutory or common law liens securing obligations incurred in
good faith in the ordinary course of business that are not yet delinquent in
accordance with its terms or are not yet due and payable, (d) Liens in the
nature of licenses that arise in the ordinary course of business and consistent
with past practice; (e) leases and subleases not prohibited hereunder
granted to others not interfering in any material respect in the business of
Borrower or any Subsidiary, or (f) attachments or judgment Liens, where
the attachment or judgment which gave rise to such Liens does not constitute an
Event of Default hereunder.

 

Section 8.9.                                Change in
Nature of Business.  Not without
the prior written consent of the Bank, which consent shall not be unreasonably
withheld or delayed carry on any business other than a business which is the
same in all material respects as its business on the date of this Agreement.

 

20

 

Section 8.10.                          Use of Proceeds.  Not use or permit the direct or indirect use
of any proceeds of or with respect to the Loan for the purpose, whether
immediate, incidental or ultimate, of “purchasing or carrying” (within the
meaning of Regulation U) Margin Stock.

 

Section 8.11.                          Other
Agreements.  Not enter
into any agreement containing any provision which would be violated or breached
by the performance of its obligations hereunder or under any instrument or
document delivered or to be delivered by it hereunder or in connection herewith
or which would violate or breach any provision hereof or of any such instrument
or document.

 

Section 8.12.                          Compliance with
Applicable Laws.  Comply, and
cause each of its Subsidiaries to comply, with the requirements of all
applicable laws, rules, regulations, and orders of all governmental authorities
(Federal, state, local or foreign, and including, without limitation,
environmental laws, rules, regulations and orders), a breach of which would not
reasonably be expected to have a Material Adverse Effect, except where the
Borrower is contesting an alleged breach in good faith and by proper
proceedings and for which the Borrower or such Subsidiary is maintaining adequate
reserves in accordance with GAAP.

 

Section 8.13.                          Environmental
Matters.

 

(a)                                  Not permit the Collateral or
any portion thereof to be involved in the use, generation, manufacture,
storage, disposal or transportation of Hazardous Material except in compliance
with all Environmental Laws.

 

(b)                                 Keep and maintain the
Collateral and each portion thereof in compliance in all material respects
with, and not cause or permit the Collateral or any portion thereof to be in
material violation of, any Environmental Law.

 

(c)                                  Immediately notify the Bank
in writing of:

 

(i)                                     Any and all enforcement,
cleanup, removal or other governmental or regulatory actions completed,
instituted or threatened, or notifications of potential liability issued
against the Collateral pursuant to the application of any Environmental Laws;

 

(ii)                                  Any and all claims made or
overtly threatened in writing by any Person against the Collateral relating to
damage, contribution, cost recovery, compensation, loss or injury resulting
from any presence, release, discharge or migration of any Hazardous Material
(the matters set forth in this clause (ii) and the foregoing clause (i) being
hereinafter referred to as “Environmental
Claims”);

 

(iii)                               Any and all settlement
agreements, consent decrees or other compromises which the Borrower shall enter
into with respect to any Environmental Claims; and

 

(iv)                              Knowledge by Borrower of any
occurrence or condition on any real property adjoining or in the vicinity of
the Collateral that could 

 

21

 

cause the Collateral or any part thereof to be subject to any material
restrictions on the ownership, occupancy, transferability or use thereof under
any Environmental Law.

 

Section 8.14.                          Financial
Covenant.  Guarantor
covenants that it will not permit the Fixed Charge Coverage Ratio for any
Computation Period to be less than 1.50 to 1.00.

 

Section 8.15.                          Title to
Aircraft Collateral.  Borrower
shall, at all times, hold good and marketable title to all Aircraft pledged as
Collateral for the Loans, free and clear of all Liens except Permitted
Liens.  During any period that any
engine, propeller, component, appliance, accessory, instrument, equipment or
any other part (each, an “Aircraft Component”)is temporarily replaced, the Bank’s
Lien on the replaced Aircraft Component shall continue until permanently
replaced as provided in the applicable Security Agreement.

 

Section 8.16.                          Deposit Account.  Borrower shall cause AAR to deposit $6.5
million in a non-interest bearing direct deposit account at the Bank on or
before the Closing Date, and shall cause AAR to maintain a balance of not less
than 10% of the outstanding Obligations, from time to time, in that account
until the Obligations are repaid in full and the Bank’s obligation to extend
credit under this Agreement has terminated.

 

ARTICLE IX

 

CONDITIONS OF LENDING

 

The Bank’s obligation to
make any Loan is subject to the following conditions precedent:

 

Section 9.1.                                Conditions to
Disbursement.  The Bank’s
obligation to make any Loan is subject to the satisfaction of each of the
following conditions precedent:

 

(a)                                  Fees and Expenses.  The Borrower shall have paid all fees owed to
the Bank and shall have reimbursed the Bank for all expenses due and payable
under this Agreement on or before the Closing Date including, but not limited
to, reasonable attorney’s fees incurred by the Bank.

 

(b)                                 Documents.  The Bank shall have received all of the
following, each duly executed and delivered and dated the Closing Date or such
earlier date as shall be satisfactory to the Bank, in form and substance
satisfactory to the Bank:

 

(i)                                     Related Documents.  The Notes, the other Related Documents and
such other instruments and documents as the Bank may require.

 

(ii)                                  Resolutions. Certified
copies of resolutions of the Board of Directors or Members of Borrower and,
where required, shareholders, authorizing or ratifying the execution, delivery
and performance of this Agreement, the Related Documents to which the Borrower
is a party and 

 

22

 

any other documents provided for herein or therein to be executed by
the Borrower.

 

(iii)                               Consents.  Certified copies of all documents evidencing
any necessary corporate action, consents and governmental approvals, if any,
with respect to this Agreement, the Related Documents and any other documents
provided for herein or therein to be executed by the Borrower.

 

(iv)                              Incumbency and Signatures.  A certificate of the Secretary or an
Assistant Secretary of the Borrower certifying the names of the officer or
officers of the Borrower authorized to sign this Agreement and the Related
Documents to which it is a party, together with a sample of the true signature
of each such officer. The Bank may conclusively rely on each such certificate
until formally advised by a like certificate of any changes therein.

 

(v)                                 Opinion of Counsel.  An opinion of legal counsel to the Borrower
and the Guarantor, in the form and substance satisfactory to the Bank and its
counsel.

 

(vi)                              Governance Documents.  Certified copies of the Borrower’s current
governance documents and certificates evidencing that the Borrower is in good
standing under the laws of the State of its formation, and each state or
country in which it is required to be qualified to do business and where a
failure to so qualify would have a Material Adverse Effect on the business,
operations, assets or condition, financial or otherwise, of the Borrower.

 

(vii)                           Lien Discharges.  Such termination statements and other
documents as the Bank deems necessary or appropriate in order to discharge all
outstanding Liens on the Collateral (with the exception of Permitted Liens),
shall have been filed in all jurisdictions that the Bank deems necessary or
advisable.

 

(viii)                        Documentation with respect
to Collateral.  Such
policies of title insurance, lien and security interest searches and other
documents and instruments as the Bank may reasonably require to evidence the
perfection and priority of its liens and security interests in the
Collateral.  Notwithstanding the
foregoing, no title search or policy of title insurance shall be required with
respect to Aircraft pledged to the Bank as collateral for the Obligations,
unless and until such Aircraft are included in the Borrowing Base.

 

(ix)                                Insurance Certificates.  Certificates of insurance and, if requested
by the Bank, copies of insurance policies in form reasonably satisfactory to
Bank indicating the coverages and conditions required by the Security
Agreements. Notwithstanding the foregoing, proof of the 

 

23

 

insurance coverage described above shall not be required for Aircraft
pledged to the Bank as collateral for the Obligations unless and until such
Aircraft are included in the Borrowing Base.

 

(x)                                   Appraisals.  The Bank shall have received satisfactory
appraisals of each Aircraft proposed by Borrower for inclusion in the Borrowing
Base as of the Closing Date, performed by an appraiser acceptable to the Bank,
and the Bank acknowledges that it has received satisfactory appraisals for all
such Aircraft.

 

(xi)                                Representations and
Warranties. All representations and warranties set forth in
this Agreement or any Related Documents shall be true and accurate in all
material respects as of the Closing Date.

 

(xii)                             Final Credit Review and
Approval.  The Bank
shall have completed its final credit review of Borrower and the Guarantor,
including a review of all outstanding liabilities and contingent liabilities,
and the Bank shall be satisfied with the results of that review.

 

(xiii)                          Other.  Such other documents as the Bank may, in its
sole discretion, request.

 

Section 9.2.                                Waiver of
Conditions Precedent to Loan.  The waiver by the Bank with respect to any
Loan of its right to receive one or more of the documents, instruments,
approvals and opinions required to be delivered to the Bank under this Article IX
as a condition precedent to the making of any Loan and/or the waiver by the
Bank of any other condition or conditions precedent to the making of such Loan,
whether contained in this Article IX, elsewhere in this Agreement or in
any of the Related Documents, shall not relieve the Borrower of its obligation
to deliver to the Bank all such documents, instruments, approvals and opinions
and to comply with all such other conditions, and the Borrower hereby covenants
and agrees that it will deliver all such documents, instruments, approvals and
opinions and will comply with all such conditions within 45 days following the
Closing Date, and if the Borrower fails to make all such deliveries or
otherwise fully complied with all conditions precedent to the making of any
Loan, such failure shall constitute an Event of Default.

 

ARTICLE X

 

EVENTS OF DEFAULT AND THEIR EFFECT

 

Section 10.1.                          Events of
Default.  Each of the following shall
constitute an Event of Default under this Agreement:

 

(a)                                  Nonpayment of Loan and Other
Obligations.  Default in
the payment when due of principal of or any interest on any Loan, or of any
fees or any other amounts payable by the Borrower to the Bank hereunder, and
such default shall have continued for a period in excess of five (5) Business
Days.

 

24

 

(b)                                 Nonpayment of
Other Debt.  Any default
shall occur under the terms applicable to any Debt of any the Guarantor or any
Significant Subsidiary in an aggregate amount (for all such Debt so affected
and including undrawn committed or available amounts and amounts owing to all
creditors under any combined or syndicated credit arrangement) exceeding
$10,000,000 and such default shall (a) consist of the failure to pay such
Debt when due, whether by acceleration or otherwise, or (b) accelerate the
maturity of such Debt or permit the holder or holders thereof, or any trustee
or agent for such holder or holders, to cause such Debt to become due and
payable (or require the Guarantor or any Subsidiary to purchase or redeem such
Debt or post cash collateral in respect thereof) prior to its expressed
maturity.

 

(c)                                  Bankruptcy or
Insolvency.  A Borrower
or the Guarantor becomes insolvent or generally fails to pay, or admits in
writing its inability to pay, debts as they become due; or the Borrower or the
Guarantor applies for, consents to, or acquiesces in the appointment of, a
trustee, receiver or other custodian for the Borrower or the Guarantor or any
property thereof, or makes a general assignment for the benefit of creditors;
or, in the absence of such application, consent or acquiescence, a trustee,
receiver or other custodian is appointed for the Borrower or the Guarantor or
for a substantial part of the property thereof and is not discharged within
sixty (60) days; or any bankruptcy, reorganization, debt arrangement, or other
case or proceeding under any bankruptcy or insolvency law, or any dissolution
or liquidation proceeding, is commenced in respect of the Borrower or the
Guarantor, and if such case or proceeding is not commenced by the Borrower or
the Guarantor, it is consented to or acquiesced in by the Borrower or the
Guarantor or remains for sixty (60) days undismissed; or the Borrower or the
Guarantor takes any action to authorize, or in furtherance of, any of the
foregoing.

 

(d)                                 Other
Noncompliance with this Agreement or any Related Document.  Failure by the Borrower to comply with or to
perform any provision of this Agreement or any provision of any Related
Document (and not constituting an Event of Default under any of the other
provisions of this Section 10) and continuance of such failure for 30 days
after notice thereof to the Borrower from the Bank or the holder of any Note.

 

(e)                                  Representations
and Warranties.  Any
representation or warranty made by the Borrower herein or in any Related
Document is false or misleading in any material respect, and if capable of
cure, is not cured within thirty (30) days after receipt of notice of such
default by Borrower, or any schedule, certificate, financial statement, report,
notice, or other writing furnished to the Bank by the Borrower is false or
misleading in any material respect on the date as of which the facts therein
set forth are stated or certified.

 

(f)                                    Related
Documents.  Any of the
Related Documents shall fail to remain in full force and effect except as
expressly provided therein due to the breach by the Borrower or the Guarantor;
or any action shall be taken by the Borrower or the Guarantor to assert the
unenforceability or invalidity of any of the Related Documents.

 

25

 

(g)                                 Judgments.  Final judgments which exceed an aggregate of
$10,000,000 shall be rendered against the Guarantor or any Significant
Subsidiary and shall not have been paid, discharged or vacated or had execution
thereof stayed pending appeal with sixty (60) days after entry or filing of
such judgments.

 

(h)                                 Dissolution of
the Borrower or the Guarantor.  A Borrower or the Guarantor voluntarily or
involuntarily dissolves or is dissolved, or terminates its existence or has its
existence terminated, except in connection with a merger or consolidation of
Borrower with, or transfer of all or substantially all assets of Borrower to
AAR, or one of its Subsidiaries, and prior notice thereof has been provided to
Bank in accordance with Section 8.7.

 

Section 10.2.  Acceleration;
Termination of Commitments.  Upon the
occurrence of an Event of Default specified in Section 10.1 above and the
expiration of any applicable cure period without a cure being effected, the
Bank shall have the right to declare the principal of and the interest on all
Loans at the time outstanding, and all other amounts owed to the Bank under
this Agreement and the Related Documents, to be forthwith due and payable
without presentment, demand, protest, or other notice of any kind, all of which
are expressly waived, anything in this Agreement or the Related Documents to
the contrary notwithstanding.

 

Section 10.3.  Rights
and Remedies Generally.  If any Event
of Default shall occur and be continuing, then the Bank shall have all the
rights of a secured party under the UCC, shall have all rights now or hereafter
existing under all other applicable laws, and, subject to any mandatory
requirements of applicable law then in effect, shall have all the rights set
forth in this Agreement and all the rights set forth with respect to the
Collateral or this Agreement in any other Related Agreement between the parties
hereto.  No enumeration of rights in this
Section or anywhere else in this Agreement or in any other Related
Agreement between the parties hereto shall be construed to in any way limit the
rights or remedies of the Bank.

 

Section 10.4.  Direct
Debtor to Dispose of Collateral. 
After the occurrence and during the continuance of any Event of Default,
the Bank may direct the Borrower to sell, assign or otherwise liquidate or
dispose of all or from time to time any portion of the Collateral, and the
Borrower shall use reasonable commercial efforts to comply with such
directions, and the Bank may take possession of the Net Proceeds of such
Collateral.  The Bank may require the
Borrower to direct that all Net Proceeds of such Collateral be paid directly to
the Bank and upon such direction the Borrower shall promptly comply.

 

Section 10.5.  Possession
of Collateral.  After the occurrence
and during the continuance of any Event of Default, the Bank may take
possession of the Collateral as follows:

 

(a)                                  Bank may
require Borrower to deliver to Bank all or any portion of the Collateral and
any documents relating to the Collateral. 
The Bank may require Borrower to assemble the Collateral and make it
available to the Bank at a place to be designated by the Bank.

 

(b)                                 Bank may,
personally or by agents, representatives or attorneys, immediately take
possession of all or any part of the Collateral (including the originals of 

 

26

 

all records pertaining to the Collateral), from Borrower or any other
person who then has possession of any part thereof with or without notice or
judicial process, and in order to take possession may enter upon any premises
of Borrower where all or any part of the Collateral is located and remove such
Collateral provided no breach of peace is committed, and may use in connection
with such removal any and all services, supplies and other facilities of the
Borrower or may, without being responsible for loss or damage (other than loss
or damage caused by the gross negligence or willful misconduct of the Bank or
its agents) hold, store, keep idle, use, operate or otherwise use or permit the
use of the same or any part thereof for such time as the Bank may deem to be
commercially reasonable.

 

(c)                                  Notwithstanding
any provision in this Agreement to the contrary, the immediately preceding
paragraphs (a) and (b) shall not apply with respect to an item of
Collateral during any period of time (identified and commenced by written
notice from Borrower to the Bank) when (i) it is necessary to place such
Collateral in service pursuant to a contract between Borrower (or any
Subsidiary of the Guarantor) and the United States Government or other
governmental entity or subdivision thereof (the necessity of which shall be
verified to the Bank’s reasonable satisfaction by Borrower or such other person
reasonably required by the Bank without disclosing classified information) or (ii) when
such actions are prohibited by applicable laws and regulations, provided  that within ten
(10) days after the commencement of any such period of time, Borrower
pledges to the Bank cash, Cash Equivalents, or a letter of credit issued by a
financial institution other than the Bank that is reasonably satisfactory to
the Bank equal to the fair market value of such Collateral as additional
security for the Obligations.

 

(d)                                 At any time
Collateral is in the Bank’s possession, the Borrower shall pay, or promptly
reimburse the Bank on demand for, all reasonable costs and expenses (including
the cost of any insurance and payment of taxes or other charges) incurred in
the custody, preservation, use or operation of the Collateral, and the
obligation to reimburse all such costs and expenses shall be secured hereby.

 

Section 10.6.  Disposition
of the Collateral.  After the
occurrence and during the continuance of any Event of Default, the Bank may
sell, assign, lease, give an option or options to purchase or otherwise dispose
of all or any part of the Collateral (or contract to do any of the foregoing)
under one or more contracts, agreements or as an entirety, and without the
necessity of gathering at the location of sale the property to be sold, at
public or private sale or sales, conducted by any officer, nominee or agent of,
or auctioneer or attorney for, the Bank at any location of any third party
conducting or otherwise involved in such sale or any office of the Bank or
other location and in general in such manner, at such time or times and upon
such terms and conditions and at such price as the Bank may consider
commercially reasonable, for cash or on credit or for future delivery without
assumption of any credit risk.  Any of
the Collateral may be sold, leased, assigned or options or contracts entered to
do so, or otherwise disposed of, in the condition in which such Collateral
existed when taken by the Bank or after any overhaul or repair which the Bank
shall determine to be commercially reasonable. 
Any such disposition which shall be a private sale or other private
proceeding shall be made upon not less than ten (10) days advance written
notice to the Borrower describing the time after which such disposition is to
be made and the intended sale price or other consideration therefor.  Any such 

 

27

 

disposition which shall be a public sale shall be made upon not less
than ten (10) days advance written notice to the Borrower (which the Borrower
hereby acknowledges and agrees to be commercially reasonable) specifying the
time and place of such sale and, in the absence of applicable requirements of
law to the contrary, shall be by public auction, after publication of notice of
such auction not less than ten (10) days prior thereto.  To the fullest extent permitted by applicable
law, the Bank may bid for and become the purchaser of the Collateral or any
item thereof, offered for sale in accordance with this Section without
accountability to the Borrower (except to the extent of surplus money received
and except as to any accounting of any surplus or deficiency that Borrower is
permitted to request under the UCC).  The
Bank may require such potential bidders or purchasers to have certain commercially
reasonable qualifications. 
Notwithstanding anything to the contrary contained in this Agreement, if
all or any part of the Collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold in a recognized market only
such notice as shall be reasonably practicable shall be required.

 

Section 10.7.  Recourse.  The Borrower shall be liable for any
deficiency if the proceeds of any sale or other disposition of the Collateral
are insufficient to satisfy the Obligations.  The Borrower shall also be liable for all
reasonable costs and expenses of the Bank incurred in connection with
collecting such deficiency, including, without limitation, the reasonable fees
and disbursements of any attorneys employed by the Bank to collect such
deficiency.

 

Section 10.8.  Application
of Proceeds.  The proceeds of any
disposition of Collateral shall be applied as follows:

 

(a)                                  first, to the
payment of any and all expenses and fees (including reasonable attorneys’ fees
and disbursements) incurred by the Bank in connection with the exercise of
their rights and remedies hereunder, including, without limitation, expenses
and fees in connection with obtaining, taking possession of, removing, holding,
insuring, repairing, preparing for sale or lease, storing and disposing of
Collateral;

 

(b)                                 next, to the
satisfaction of the Obligations in such order of application as the Bank, in
its sole discretion, may elect;

 

(c)                                  next, to any
other payment of any amount required to be paid by the Bank by law; and

 

(d)                                 finally, any
remaining surplus to the Borrower.

 

Section 10.9.  Limitation
on Duties Regarding Preservation of Collateral.  The Bank’s sole duty to the Borrower with
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under the UCC or otherwise, shall be to deal with such
Collateral in the same manner as the Bank deals with similar property for its
own account.  The Bank shall have no
obligation to take any steps to preserve rights against prior parties to any
Collateral.  Neither the Bank nor any of
its directors, officers, employees or agents shall be liable for failure to
demand, collect or realize upon all or any part of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Borrower or otherwise.

 

28

 

Section 10.10. Waiver
of Claims.  EXCEPT AS OTHERWISE
PROVIDED IN THIS AGREEMENT, THE BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE
BANK’S TAKING POSSESSION OR SALE OR THE BANK’S DISPOSITION OF ANY OF THE
COLLATERAL DURING THE EXISTENCE OF AN EVENT OF DEFAULT, INCLUDING, WITHOUT
LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR
REMEDIES AND ANY SUCH RIGHT WHICH THE BORROWER WOULD OTHERWISE HAVE UNDER THE
CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE.  THE BORROWER HEREBY FURTHER WAIVES (AND RELEASES
ANY CAUSE OF ACTION AND CLAIM AGAINST THE BANK AS A RESULT OF), TO THE FULLEST
EXTENT PERMITTED BY LAW:

 

(a)                                  ALL DAMAGES
OCCASIONED BY SUCH TAKING OF POSSESSION, COLLECTION OR SALE EXCEPT ANY DAMAGES
WHICH ARE THE DIRECT RESULT OF THE BANK’S GROSS NEGLIGENCE, WILLFUL MISCONDUCT,
OR NEGLIGENT CONDUCT ESTABLISHED BY CLEAR AND CONVINCING EVIDENCE;

 

(b)                                 ALL OTHER
REQUIREMENTS AS TO THE TIME, PLACE AND TERMS OF SALE OR OTHER REQUIREMENTS WITH
RESPECT TO THE ENFORCEMENT OF THE BANK’S RIGHTS HEREUNDER;

 

(c)                                  EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED BY THIS AGREEMENT, DEMAND OF PERFORMANCE OR OTHER
DEMAND, NOTICE OF INTENT TO DEMAND OR ACCELERATE, NOTICE OF ACCELERATION,
PRESENTMENT, PROTEST, ADVERTISEMENT OR NOTICE OF ANY KIND TO OR UPON THE
BORROWER OR ANY OTHER PERSON;

 

(d)                                 ALL RIGHTS OF
APPRAISEMENT, VALUATION, DILIGENCE, STAY, EXTENSION, MORATORIUM OR POST-SALE
RIGHTS OF REDEMPTION NOW OR HEREAFTER IN FORCE UNDER ANY APPLICABLE LAW IN
ORDER TO DELAY THE ENFORCEMENT OF THIS AGREEMENT; AND

 

(e)                                  ANY RIGHT TO REQUIRE
ANY MARSHALING OF ASSETS AND ANY SIMILAR RIGHT.

 

Section 10.11. Grant
of License to Use General Intangibles. 
Solely for the purpose of enabling the Bank to exercise rights and
remedies hereunder at such time as the Bank shall be lawfully entitled to
exercise such rights and remedies, the Borrower hereby grants to the Bank
(subject to any license restrictions binding upon the Borrower), an
irrevocable, nonexclusive license (exercisable without payment of royalty or
other compensation to the Borrower) to use, assign, license or sublicense any
of the General Intangibles, now owned or hereafter acquired by the Borrower,
and wherever the same may be located, including in such license reasonable
access to all media in which any of the licensed items may be recorded or
stored and to all computer programs used for the compilation or printout
thereof, to the extent 

 

29

 

such General Intangibles do not constitute classified information and
such use is permitted under applicable law.

 

Section 10.12. Covenant
of Quiet Engagement.  Provided no
Event of Default shall have occurred and be continuing, neither the Bank nor
any person or entity lawfully claiming by or through the Bank shall interfere
with Borrower’s, the Guarantor’s or any Subsidiary of Guarantor’s, or any
lessee’s quiet use, possession or enjoyment of any Aircraft constituting
collateral in respect of any Loan made hereunder.

 

ARTICLE XI

 

GENERAL

 

Section 11.1.  Waiver;
Amendments.  No delay on the part of
the Bank or the holder of any Note in the exercise of any right, power or
remedy shall operate as a waiver thereof, nor shall any single or partial
exercise by any of them of any right, power or remedy preclude other or further
exercise thereof, or the exercise of any other right, power or remedy.  No amendment, modification or waiver of, or
consent with respect to, any provision of this Agreement or any Related
Document shall in any event be effective unless the same shall be in writing
and signed and delivered by the Bank, and then any such amendment,
modification, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.

 

Section 11.2.  Notices.  Except as otherwise specifically provided for
herein or therein, all notices and other communications under this Agreement
and any of the Related Documents shall be in writing or by telephone, confirmed
in writing.  Written notices and
communications shall be given by:

 

(a)                                  certified mail;

 

(b)                                 facsimile or
other electronic transmission confirmed by mailing or delivering a copy as
provided in clause (a), clause, (c) or clause (d) hereof;

 

(c)                                  by hand
delivery; or

 

(d)                                 by courier
service (including overnight delivery service such as Federal Express).

 

Notices shall be deemed to
have been given (a) in the case of notice by certified mail, three days
after deposit thereof in the United States mails, postage prepaid, return
receipt requested, and (b) in all other cases, upon receipt of the notice
without regard to the date of receipt of any confirming copy; provided that a
notice directed to the attention of any individual at a business entity, other
than a notice given by telephone, shall be deemed given when received by any
employee of the entity at the address or facsimile number to which such notice
is to be sent as determined in accordance with this Section.  Copies of notices directed to a party which
are required to be sent to other persons shall be deemed received by such other
persons on the date on which the party receives such notice.

 

30

 

Notices to the Borrower
shall be directed as follows:

 

EP AVIATION, LLC

1100 North Wood Dale Road

Wood Dale, Illinois  60191

Attention:  Michael Carr, Vice President

Telephone No. (630)
227-2140

Facsimile No. (630)
227-2149

Email: mcarr@aarcorp.com

 

With a copy to:

AAR CORP.

1100 North Wood Dale Road

Wood Dale, Illinois  60191

Attention:  Michael Carr, Vice President

Telephone No. (630)
227-2140

Facsimile No. (630)
227-2149

Email: mcarr@aarcorp.com

 

Notices in writing to the
Bank shall be directed as follows:

 

THE HUNTINGTON NATIONAL BANK

105 East 4th Street (CN01)

Cincinnati, OH  45202

Attention:  Kim Trombetta, Sr. Vice President

Telephone Number: (513)
762-5194

Facsimile Number: (513)
762-1873

 

Notices shall be given to
the officer of the Bank at the time responsible for the administration of this
Agreement as specified by the Bank to the Borrower from time to time.  A telephonic notice to the Bank, as understood
by the Bank, shall be deemed to be the controlling and proper notice in the
event of a discrepancy with or failure to receive a confirming written
notice.  Either party may change, from
time to time, the persons to whom or the addresses, or the telephone numbers or
the facsimile numbers to which notices are to be sent by serving upon the other
a written notice designated as a “Notice of Change of Address”.

 

Section 11.3.  Computations.  Where the character or amount of any asset or
liability or item of income or expense is required to be determined, or any
consolidation or other accounting computation is required to be made, for
purposes of this Agreement such determination or calculation shall, to the
extent applicable and except as otherwise specified in this Agreement, be made
in accordance with GAAP consistently applied; provided that if the Borrower or
the Guarantor notifies the Bank that the Guarantor wishes to amend, or has been
required to amend under the Guarantor Credit Agreement, the covenant in
Sections 8.14 (or any related definition) to eliminate or to take into account
the effect of any change in GAAP on the operation of such covenant, then the
Guarantor’s compliance with such covenant shall be determined on the basis of
GAAP in effect immediately before the relevant change in GAAP 

 

31

 

became effective, until either such notice is withdrawn or such
covenant (or related definition) is amended in a manner satisfactory to the
Guarantor and the Bank.

 

Section 11.4.  Regulation
U.  Each Bank represents that it, in
good faith, is not relying either directly or indirectly upon any Margin Stock
as collateral security for the extension or maintenance by it of any credit
provided for in this Agreement.

 

Section 11.5.  Costs,
Expenses and Taxes.

 

(a)                                  Subject to the
limitation set forth in Section 4.6(b), Borrower agrees to pay on demand
all of the Bank’s reasonable out of pocket costs and expenses (including the
reasonable fees and out of pocket expenses of counsel) in connection with the
preparation, execution, and delivery of this Agreement, the Related Documents
and all other instruments or documents provided for herein or delivered or to
be delivered hereunder or in connection herewith (including, without limitation,
all amendments, supplements and waivers executed and delivered pursuant hereto
or in connection herewith).  The Borrower
further agrees that the Bank, in its sole discretion, and following notice to
the Borrower may deduct all such unpaid amounts from the aggregate proceeds of
the Loan.

 

(b)                                 The Obligations
shall include, and the Borrower shall pay to the Bank on demand, any and all
reasonable costs, charges, fees and other expenses incurred by the Bank if the
Bank, in its sole discretion, (i) employs counsel for advice or other
representation (A) with respect to the amendment or enforcement of this
Agreement or the Related Documents, or with respect to the Collateral or any
other collateral securing the Obligations, (B) to represent the Bank in
any litigation, contest, dispute, suit or proceeding or to commence, defend or
intervene or to take any other action in or with respect to any litigation,
contest, dispute, suit or proceeding (whether instituted by the Bank, the
Borrower or any other Person) in any way or respect relating to this Agreement,
the Related Documents, the Borrower’s affairs, the Collateral or any other
collateral securing the Obligations or (C) to enforce any of the Bank’s
rights with respect to the Borrower; (ii) takes any action to protect,
collect, sell, liquidate or otherwise dispose of the Collateral any other
collateral securing the Obligations hereunder (other than any action by
Borrower against and determined adversely to Bank and/or its assigns for breach
of any obligation of the “Bank” hereunder and/or under any Related Document);
and/or (iii) seeks to enforce or enforces any of the Bank’s rights and
remedies with respect to the Borrower. 
Without limiting the generality of the foregoing, such costs, charges,
fees and expenses shall include:

 

(i)                                     reasonable
fees, costs and expenses of attorneys, accountants and consultants; court costs
and expenses; court reporter fees, costs and expenses; long distance telephone
charges; telecopier charges; and expenses for travel, lodging and food; and

 

32

 

(ii)                                  any and all
fees, costs, and expenses of whatever kind or nature reasonably incurred in
connection with the creation, preservation or protection of the Bank’s Liens
on, and security interest in, the Collateral, including, without limitation,
all fees and taxes in connection with the recording or filing of instruments
and documents in public offices, payment or discharge of any taxes or Liens
upon or in respect of the Collateral, premiums for insurance with respect to
the Collateral and all other fees, costs and expenses in connection with
protecting, maintaining or preserving the Collateral and the Bank’s interest
therein, whether through judicial proceedings or otherwise, or in defending or
prosecuting any actions, suits or proceedings arising out of or relating to the
Collateral.

 

(c)                                  The Borrower
further agrees to pay, and to save the Bank harmless from all liability for,
any stamp or other taxes which may be payable in connection with the execution
or delivery of this Agreement, the Related Documents, the borrowing hereunder,
or the issuance of the Notes or of any other instruments or documents provided
for herein or delivered or to he delivered hereunder or in connection herewith.

 

(d)                                 All of the
Borrower’s obligations provided for in this Section 11.5 shall be
Obligations, and shall survive repayment of any Loan, cancellation of any Note,
or any termination of this Agreement or any Related Document.

 

Section 11.6.  Interest
on Advances.  Whenever under the
provisions of this Agreement or of any of the Related Documents, the Borrower
is obligated to pay certain expenses of the Bank or to reimburse the Bank for
amounts advanced by it, whether such advance is by reason of a default by the
Borrower or otherwise, the amounts so advanced shall, after three (3) days
prior notice from Bank to Borrower, bear interest at the Applicable Interest
Rate.

 

Section 11.7.  Indemnification.  In consideration of the Bank’s execution and
delivery of this Agreement and the Bank’s agreement to make any disbursement of
the Loan hereunder, the Borrower hereby agrees to indemnify, exonerate and hold
the Bank and each of its officers, directors, employees and agents (herein
collectively called the “Bank Parties”
and individually called a “Bank Party”)
free and harmless from and against any and all actions, causes of action,
suits, losses, costs (including, without limitation, all documentary or other
stamp taxes or duties), liabilities and damages, and expenses in connection
therewith, but excluding any action, suits, losses, costs, liabilities and
damages, and expenses arising from the Banks’ or any holder of a Note’s gross
negligence or willful misconduct (irrespective of whether such Bank Party is a
party to the action for which indemnification hereunder is sought) (the “Indemnified Liabilities”), including,
without limitation, reasonable attorneys’ fees and disbursements, incurred by
the Bank Parties or any of them as a result of, or arising out of, or relating
to:

 

(a)                                  any transaction
financed or to be financed in whole or in part, directly or indirectly, with
the proceeds of the Loans;

 

33

 

(b)                                 the execution,
delivery, performance, administration or enforcement of this Agreement and the
Related Documents in accordance with their respective terms by any of the Bank
Parties, provided that nothing contained in this clause (b) shall require
the Borrower to indemnify, exonerate or hold harmless any of the Bank Parties
with respect to any act or failure to act by such Bank Party in breach of the
undertakings of the Bank under this Agreement and the Related Documents;

 

(c)                                  the presence
(prior to the date that the Bank acquires possession of the Collateral) on or
under the Collateral of any Hazardous Material or underground storage tank, or
any releases or discharges of any Hazardous Material (prior to the date that
the Bank acquires possession of the Collateral), on, under or from the
Collateral (including residual contamination thereon or thereunder), or
affecting natural resources; or the performance of any activity undertaken on
or off the Collateral (prior to the date that the Bank acquires possession of
the Collateral) or relating to the generation, use, handling, treatment, removal,
storage, decontamination, clean up, transport or disposal of any Hazardous
Material located on or under the Collateral (prior to the date that the Bank
acquires possession of the Collateral), irrespective whether (i) the
Borrower or any of its employees, agents, contractors or subcontractors, (ii) any
predecessor in title, or any employees, agents, contractors or subcontractors
of the predecessor in title, or (iii) any third Persons occupying or
present on the Collateral who engaged in such activity prior to, during or
subsequent to the term of this Agreement or whether such activities were or
will be taken in accordance with applicable laws, regulations, codes and
ordinances, except for any such Indemnified Liabilities arising solely on
account of such Bank Party’s gross negligence, willful misconduct, or
negligence established by clear and convincing evidence; or

 

(d)                                 any
misrepresentation in this Agreement or in any Related Document or in any
statement or writing contemplated by or made or delivered pursuant to or in
connection with this Agreement or any Related Document or any breach of any
warranty or covenant herein or in any Related Document

 

If and to the extent that
the foregoing agreements described in this Section 11.7 may be
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.  All of the Borrower’s obligations under this Section 11.7
shall survive repayment of the Loans, cancellation of any Note, or any
termination of this Agreement or any Related Document

 

Section 11.8.  Power
of Attorney.  After the occurrence
and continuation of an Event of Default, and after the Bank has accelerated the
Loans and given notice thereof to Borrower, the Borrower hereby irrevocably
appoints the Bank (and any officers, employees or agents designated by Bank),
with full power of substitution by Bank, as its attorney, with power (a) to
endorse the name of the Borrower on any checks, notes, acceptances, money
orders, drafts or other forms of payment or security that constitute part of
the Collateral or that may come into the Bank’s possession in accordance with
this Agreement, and (b) in the exercise of its rights hereunder or as may
otherwise be reasonably necessary or desirable to accomplish the purposes of
this Agreement, to sign the name of the Borrower on any invoice or bill of
lading relating to

 

34

 

any Collateral, on any drafts against customers related to letters of
credit, on schedules and assignments of accounts furnished to the Bank by the
Borrower, on notices of assignment, financing statements, chattel mortgages and
amendments and supplements thereto, and other documents relating to the
perfection or priority of any of the Bank’s security interests, or
verifications of account and on notices to or from customers.  The Borrower hereby ratifies all that said
attorneys shall lawfully do or cause to be done by virtue hereof.  This power of attorney is a power coupled
with an interest and shall be irrevocable. 
Any failure by the Bank to give the Borrower prior notice of actions
taken by the Bank under this Section shall not affect the validity or enforceability
of any such actions, nor shall the Bank incur any liability or penalties for
such failure.  The powers conferred on
the Bank hereunder are solely to protect the interests of the Bank in the
Collateral and shall not impose any duty upon the Bank to exercise any such
powers.

 

Section 11.9.  Termination
of Agreement; Recovery Claims.  This
Agreement shall terminate when all the Obligations have been fully and finally
paid and performed (other than continuing indemnification obligations not then
due and payable) and all commitments and other undertakings of the Bank to
extend credit to the Borrower have terminated, at which time the Bank shall
reassign and redeliver (or cause to be reassigned and redelivered) to the
Borrower, or to such Person as the Borrower shall designate, against receipt,
such of the Collateral (if any) assigned by the Borrower to the Bank as shall
not have been sold or otherwise applied by the Bank pursuant to the terms
hereof and shall still be held by it hereunder, together with appropriate
instruments of reassignment and release. 
Any such reassignment shall be without recourse upon or representation
or warranty by the Bank and shall be at the cost and expense of the Borrower.  Should a claim (“Recovery Claim”) be made upon the Bank at any time for
recovery of any amount received by the Bank in payment of the Obligations
(whether received from the Borrower or otherwise) and should the Bank repay all
or part of said amount by reason of (a) any judgment, decree or order of
any court or administrative body having jurisdiction over the Bank or any of
its property; or (b) any settlement or compromise of, or other agreement
with respect to, any such Recovery Claim effected by the Bank with the claimant
(including the Borrower), this Agreement and the security interests granted to
the Bank hereunder shall continue in effect with respect to the amount so
repaid to the same extent as if such amount had never originally been received
by the Bank, notwithstanding any prior termination of this Agreement, the
release of any or all of the Collateral, or the cancellation of any note or
other instrument evidencing the Obligations.

 

Section 11.10. References
to Subsidiaries.  The provisions of
this Agreement relating to Subsidiaries shall apply only during such times as
the Borrower has one or more Subsidiaries.

 

Section 11.11. Governing
Law; Jury Trial; Severability.  This
Agreement and the Note shall be a contract made under and governed by the laws
of the State of Michigan, without regard to conflict of laws principles.
Wherever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under such law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement. 
All obligations of the Borrower and rights of the Bank and any other
holders of the Note, which obligations and 

 

35

 

rights are described herein or in the Note, shall be in addition to and
not in limitation of those provided by applicable law.

 

THE BORROWER AND THE BANK
IRREVOCABLY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING (I) TO
ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE
RELATED DOCUMENTS, THE LOAN OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH
OR THEREWITH, OR (II) ARISING FROM ANY DISPUTE OR CONTROVERSY IN
CONNECTION WITH OR RELATED TO THIS AGREEMENT, THE RELATED DOCUMENTS, THE LOAN,
OR ANY SUCH AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT, AND AGREE THAT ANY
SUCH ACTION OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY.

 

THE BORROWER IRREVOCABLY
AGREES THAT, SUBJECT TO THE BANK’S SOLE AND ABSOLUTE ELECTION, ANY ACTION OR
PROCEEDING IN ANY WAY, MANNER OR RESPECT ARISING OUT OF THIS AGREEMENT, THE
RELATED DOCUMENTS, THE LOAN OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH
OR THEREWITH, OR ARISING FROM ANY DISPUTE OR CONTROVERSY ARISING IN CONNECTION WITH
OR RELATED TO THIS AGREEMENT, THE RELATED DOCUMENTS, THE LOAN OR ANY SUCH
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT SHALL BE LITIGATED ONLY IN THE
COURTS HAVING SITUS WITHIN THE STATE OF MICHIGAN, AND THE BORROWER HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT
LOCATED WITHIN SUCH STATE.  THE BORROWER
HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY
LITIGATION BROUGHT AGAINST THE BORROWER BY THE BANK IN ACCORDANCE WITH THIS
SECTION.

 

IF AND TO THE EXTENT ANY
PROVISION OF ANY RELATED DOCUMENT IS INCONSISTENT WITH THE PROVISIONS OF THIS
AGREEMENT, THE PROVISIONS OF THIS AGREEMENT SHALL CONTROL.

 

Section 11.12. Joint
and Several Liability. 
Notwithstanding anything to the contrary set forth in this Agreement or
in any Related Document, to the extent that the more than one entity falls
within the definition of “Borrower” as defined herein, the obligations of the
Borrower hereunder and under the Related Documents are joint and several and
each entity comprising the Borrower hereby agrees that it shall be liable for
the entire amount of the Obligations.

 

Section 11.13. Counterparts.  This Agreement and any amendment or
supplement hereto or any waiver granted in connection herewith may be executed
in any number of counterparts and by the different parties on separate
counterparts and each such counterpart shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same Agreement.  An executed counterpart of this Agreement
delivered by facsimile or other 

 

36

 

electronic means shall for all purposes be as effective as delivery of
an original, executed counterpart.

 

Section 11.14. Successors
and Assigns.  This Agreement shall be
binding upon the Borrower, the Bank and their respective successors and
assigns, and shall inure to the benefit of the Borrower, the Bank and the Bank’s
successors and assigns. The Borrower shall have no right to assign its rights
or delegate its duties under this Agreement.

 

Section 11.15. Prior
Agreements.  The terms and conditions
set forth in this Agreement shall supersede all prior agreements, discussions,
correspondence, memoranda and understandings (whether written or oral) of the Borrower
and the Bank concerning or relating to the subject matter of this Agreement.

 

Section 11.16. Assignment;
Sale of Participating Interests.  The
Bank may sell or assign all or any part of its interest in any Loan to another
financial institution with the consent of the Borrower (which consent shall not
be unreasonably withheld or delayed and shall not be required for an assignment
by the Bank to one of its Affiliates or in the event Bank is acquired by or
merged with another financial institution); provided that, if an Event of
Default exists, no such notice to, or consent from, the Borrower shall be
required.  The Bank may sell or assign
one or more participating interests in any Loan to other financial institutions
without notice to, or consent from, the Borrower.  The terms and conditions of any such sale or
assignment shall be determined by the Bank in its sole discretion.

 

(Signatures appear on the
following page)

 

37

 

WHEREFORE, the parties have
executed this Master Loan Agreement as of the date first written above.

 

	
   

  	
  EP AVIATION, LLC, a Delaware limited
  liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Timothy J. Romenesko

  
	
   

  	
   

  
	
   

  	
  Its

  	
  Manager

  
	
   

  	
   

  
	
   

  	
   

  	
  BORROWER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Solely for the purpose of agreeing to the
  Financial Covenant of Section 8.14:

  
	
   

  	
   

  
	
   

  	
  AAR CORP., a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ David P. Storch

  
	
   

  	
   

  
	
   

  	
  Its

  	
  Chairman & CEO

  
	
   

  	
   

  
	
   

  	
   

  	
  GUARANTOR

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE HUNTINGTON NATIONAL BANK, a national
  banking association

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Kim J. Trombatta

  
	
   

  	
   

  
	
   

  	
  Its

  	
  Sr. Vice President

  
	
   

  	
   

  	
  Equipment Finance Division

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  BANK

  
					

 

38

 

SCHEDULE 1.1

PERMITTED LIENS

 

[NONE]

 

39

 

SCHEDULE 7.13

COMPLIANCE WITH APPLICABLE LAWS

 

The matters described on
Schedules 5.8 and 5.9 of the Membership Interest Purchase Agreement, dated as
of March 25, 2009, by and among Xe Services, AAR Airlift, LLC and AAR
Corp.

 

40

 

SCHEDULE 7.14

FILING OFFICES

 

1.                                       Federal Aviation
Administration IAA Aircraft Registry

P.O. Box 25504

Oklahoma City, Oklahoma  73125

 

2.                                       International
Registry of Mobile Assets (Cape Town)

 

3.                                       State of
Delaware

Delaware Division of
Corporations

401 Federal Suite — Suite 4

Dover, DE  19901

 

41

 

SCHEDULE 8.9

PERMITTED INDEBTEDNESS

[NONE]

 

42

 

EXHIBIT A

 

FORM OF:

REVOLVING LOAN NOTE

 

	
  $65,000,000.00

  	
  Grand Rapids, Michigan

  
	
   

  	
  April 23, 2010           

  

 

The undersigned, for value
received, jointly and severally promise to pay to the order of THE HUNTINGTON NATIONAL BANK (together with its successors
and assigns, called the “Bank”) at the Bank’s principal office in Grand Rapids,
Michigan, the principal amount of Sixty-Five Million and No/100 Dollars
($65,000,000.00), or, such lesser amount as shown either on any Schedule
attached hereto or in the Bank’s records.

 

Each disbursement under this
Note shall be accounted for separately, and shall be repaid in equal monthly
installments of 1/84th of the principal amount of such disbursement,
plus interest accrued at the Applicable Interest Rate on the outstanding amount
of such disbursement through the date of payment.  Payments under this Note shall begin on the
first Business Day of the month immediately following the initial disbursement
of the Loan, and continuing on the first Business Day of each month thereafter.  Notwithstanding the foregoing, all
outstanding principal and accrued interest shall automatically become due and
payable on the Credit Termination Date.

 

Subject to any maximum or
minimum interest rate limitations specified herein or by applicable laws, the
Applicable Interest Rate shall change automatically without notice to the
Borrower on the first day of each LIBOR Rate Interest Period but not more often
than each month to reflect any change in the LIBOR Rate.  This Note may be prepaid in whole or in part
at any time as provided in the Credit Agreement (as hereinafter defined).  Payments of both principal and interest shall
be made in the form of lawful money of the United States of America.  If a regularly scheduled payment is made ten (10) or
more days after it is due, the undersigned will be charged the greater of 5% of
the late payment or $25.00.

 

Terms used but not otherwise
defined herein are defined in that Master Loan Agreement dated as of April 23,
2010 between the undersigned and the Bank (herein, as the same may be amended,
modified or supplemented from time-to-time called the “Credit Agreement”).  The Credit Agreement sets forth said terms
and provisions, including those under which this Note may or must be paid prior
to its due date or may have its due date accelerated.  This Note is secured pursuant to the Credit
Agreement and various Related Documents referred to therein, and reference is
made thereto for a statement of terms and provisions.

 

In addition to, and not in
limitation of, the foregoing and the provisions of the Credit Agreement
hereinabove referred to, the undersigned further jointly and severally agree,
subject only to any limitation imposed by applicable law, to pay all reasonable
expenses, including reasonable attorneys’ fees and expenses, incurred by the
holder of this Note in seeking to collect any amounts payable hereunder which
are not paid when due, whether by acceleration or otherwise.

 

43

 

The undersigned and the Bank
acknowledge and agree that execution and delivery of this Note by the Trustee,
not in its individual capacity but only in its capacity as Trustee of the
Aircraft Trust, shall not create or impose any liability for the Obligations
upon the Trustee, but shall only bind the Aircraft Trust.

 

This Note is binding upon
the undersigned and its successors and assigns, and shall inure to the benefit
of the Bank and its successors and assigns. 
This Note is made under and governed by the laws of the State of
Michigan without regard to conflict of laws principles.

 

	
   

  	
  EP AVIATION, LLC,

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  

 

44

 

EXHIBIT B

FORM OF:

COVENANT COMPLIANCE CERTIFICATE

 

The undersigned certifies to
Huntington National Bank (the “Bank”), as of
the date of this Certificate, the following:

 

A.                                   The undersigned
is the chief financial officer of AAR CORP., a Delaware corporation (“AAR”),
and have been authorized and directed to execute this Certificate on behalf of
AAR and its subsidiaries, and EP Aviation, LLC, a Delaware limited liability
company (“Borrower”).

 

B.                                     We have read
and understand the Master Loan Agreement dated as of April       ,
2010, and as subsequently amended, supplemented or otherwise modified “) from
time to time (the “Credit Agreement”)
between the Borrower and the Bank.

 

C.                                     The financial
statements of AAR and its Subsidiaries available online via Edgar are true and
accurate, and fairly reflect the financial condition of such as of the
reporting periods covered by those financial statements which are in accordance
with Generally Accepted Accounting Practices, except as follows:

 

	
  1

  	
   

  	
  .

  
	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  .

  

 

D.                                    The undersigned
represents and warrants that no Event of Default under the Credit Agreement has
occurred on or before the date of this Certificate except as follows: (check
the appropriate box with an X)

 

1                                          o Not Applicable (No Events of Default have
occurred that have not been waived in writing by the Bank).

 

2                                          o The following
Events of Default have occurred and/or are continuing and have not been waived
in writing or amended in writing by the Bank:

 

	
  a.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  b.

  	
   

  	
   

  

 

E.                                      Based upon the
Consolidated and Consolidating financial statements of AAR the Fixed Charge
Coverage Ratio is
                
to
                
and therefore, Borrower (is/is not) in compliance with the financial covenant
set forth in Section 8.14 of the Credit Agreement.

 

F.                                      Terms not
otherwise defined in this Certificate shall have the meanings given to them in
the Credit Agreement.

 

45

 

The undersigned has signed
this Certificate on behalf of AAR and the Borrower on
                                      ,
20      .

 

	
   

  	
  AAR CORP., a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  

 

46

 

EXHIBIT C

AIRCRAFT PLEDGED AS COLLATERAL

 

	
  Owner

  	
   

  	
  Deployed/

  Not Deployed

  	
   

  	
  Model

  	
   

  	
  Reg. No.

  	
   

  	
  HNB – Appraisal

  Value

  	
   

  	
  75% of HNB

  Appraisal Value

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  C-212-200 CC 50

  	
   

  	
  N966BW

  	
   

  	
  $

  	
  891,781.00

  	
   

  	
  $

  	
  668,835.75

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  C-212-200 CC 60

  	
   

  	
  N963BW

  	
   

  	
  $

  	
  1,065,597.00

  	
   

  	
  $

  	
  799,197.75

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  C-212-200 CD 51

  	
   

  	
  N967BW

  	
   

  	
  $

  	
  902,242.00

  	
   

  	
  $

  	
  676,681.50

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  C-212-200 CD 51

  	
   

  	
  N2357G

  	
   

  	
  $

  	
  1,084,952.00

  	
   

  	
  $

  	
  813,714.00

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  C-212-300 DF

  	
   

  	
  N6369C

  	
   

  	
  $

  	
  1,201,210.00

  	
   

  	
  $

  	
  900,907.50

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  S-61N

  	
   

  	
  N61NH

  	
   

  	
  $

  	
  3,969,000.00

  	
   

  	
  $

  	
  2,976,750.00

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  S-61N

  	
   

  	
  N725JH

  	
   

  	
  $

  	
  4,129,000.00

  	
   

  	
  $

  	
  3,096,750.00

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  S-61N

  	
   

  	
  N905AL

  	
   

  	
  $

  	
  4,177,700.00

  	
   

  	
  $

  	
  3,133,275.00

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  S-61N

  	
   

  	
  N103WF

  	
   

  	
  $

  	
  4,307,000.00

  	
   

  	
  $

  	
  3,230,250.00

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  S-61N

  	
   

  	
  N364FH

  	
   

  	
  $

  	
  4,312,000.00

  	
   

  	
  $

  	
  3,234,000.00

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  S-61N

  	
   

  	
  N116AZ

  	
   

  	
  $

  	
  4,483,700.00

  	
   

  	
  $

  	
  3,362,775.00

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  SA-227DC Metro 23

  	
   

  	
  N955BW

  	
   

  	
  $

  	
  941,450.00

  	
   

  	
  $

  	
  706,087.50

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  SA-227DC Metro 23

  	
   

  	
  N956BW

  	
   

  	
  $

  	
  1,066,900.00

  	
   

  	
  $

  	
  800,175.00

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  214ST

  	
   

  	
  N3897N

  	
   

  	
  $

  	
  1,759,950.00

  	
   

  	
  $

  	
  1,319,962.50

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  214ST

  	
   

  	
  N5748M

  	
   

  	
  $

  	
  2,084,250.00

  	
   

  	
  $

  	
  1,563,187.50

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  214ST

  	
   

  	
  N59806

  	
   

  	
  $

  	
  2,118,290.00

  	
   

  	
  $

  	
  1,588,717.50

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  214ST

  	
   

  	
  N8045T

  	
   

  	
  $

  	
  2,121,795.00

  	
   

  	
  $

  	
  1,591,346.25

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  214ST

  	
   

  	
  N391AL

  	
   

  	
  $

  	
  2,213,950.00

  	
   

  	
  $

  	
  1,660,462.50

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  CN 235

  	
   

  	
  N2696S

  	
   

  	
  $

  	
  2,031,499.00

  	
   

  	
  $

  	
  1,523,624.25

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  CN 235

  	
   

  	
  N1269J

  	
   

  	
  $

  	
  2,063,074.00

  	
   

  	
  $

  	
  1,547,305.50

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  DHC-8-102

  	
   

  	
  N308RD

  	
   

  	
  $

  	
  3,611,600.00

  	
   

  	
  $

  	
  2,708,700.00

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  DHC-8-103

  	
   

  	
  N810LR

  	
   

  	
  $

  	
  2,533,000.00

  	
   

  	
  $

  	
  1,899,750.00

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  DHC-8-103

  	
   

  	
  N150RN

  	
   

  	
  $

  	
  2,588,600.00

  	
   

  	
  $

  	
  1,941,450.00

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  DHC-8-103

  	
   

  	
  N801LR

  	
   

  	
  $

  	
  2,842,000.00

  	
   

  	
  $

  	
  2,131,500.00

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  S-61N

  	
   

  	
  N410GH

  	
   

  	
  $

  	
  3,962,500.00

  	
   

  	
  $

  	
  2,971,875.00

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  S-61N

  	
   

  	
  N612RM

  	
   

  	
  $

  	
  4,912,000.00

  	
   

  	
  $

  	
  3,864,000.00

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  SA330J Puma

  	
   

  	
  N6973C

  	
   

  	
  $

  	
  2,212,300.00

  	
   

  	
  $

  	
  1,659,225.00

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  SA330J Puma

  	
   

  	
  N2851T

  	
   

  	
  $

  	
  3,018,500.00

  	
   

  	
  $

  	
  2,263,875.00

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  SA330J Puma

  	
   

  	
  N2783R

  	
   

  	
  $

  	
  3,336,100.00

  	
   

  	
  $

  	
  2,502,075.00

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  SA330J Puma

  	
   

  	
  N330KW

  	
   

  	
  $

  	
  3,459,000.00

  	
   

  	
  $

  	
  2,594,250.00

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  SA330J Puma

  	
   

  	
  N10248

  	
   

  	
  $

  	
  3,723,700.00

  	
   

  	
  $

  	
  2,792,775.00

  	
   

  
	
  EPA

  	
   

  	
  Deployed

  	
   

  	
  SA330J Puma

  	
   

  	
  N605R

  	
   

  	
  $

  	
  4,149,400.00

  	
   

  	
  $

  	
  3,112,050.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  TOTAL:

  	
   

  	
  $

  	
  87,274,040.00

  	
   

  	
  $

  	
  65,455,530.00

  	
   

  

 

47

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00172-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00172-of-00352.parquet"}]]