Document:

Exhibit 4.2

 

Execution Copy

 

 

 

 

AAR CORP.

 

as Issuer,

 

and

 

U.S. Bank National Association,

 

as Trustee

 

 

INDENTURE

 

Dated as of February 3, 2004

 

 

$75,000,000

 

2.875% Convertible Senior Notes due
February 1, 2024

 

 

 

 

CROSS-REFERENCE TABLE

 

	
  TIA

  Section

  	
   

  	
  Indenture

  Section

  
	
   

  	
   

  
	
  310

  	
  (a)(1)

  	
  11.10

  
	
   

  	
  (a)(2)

  	
  11.10

  
	
   

  	
  (a)(3)

  	
  N.A.

  
	
   

  	
  (a)(4)

  	
  N.A.

  
	
   

  	
  (a)(5)

  	
  N.A.

  
	
   

  	
  (b)

  	
  11.8; 11.10; 15.2

  
	
   

  	
  (c)

  	
  N.A.

  
	
  311

  	
  (a)

  	
  11.11

  
	
   

  	
  (b)

  	
  11.11

  
	
   

  	
  (c)

  	
  N.A.

  
	
  312

  	
  (a)

  	
  2.5

  
	
   

  	
  (b)

  	
  14.3

  
	
   

  	
  (c)

  	
  14.3

  
	
  313

  	
  (a)

  	
  11.6

  
	
   

  	
  (b)(1)

  	
  N.A.

  
	
   

  	
  (b)(2)

  	
  11.6

  
	
   

  	
  (c)

  	
  11.6; 15.2

  
	
   

  	
  (d)

  	
  11.6

  
	
  314

  	
  (a)

  	
  3.5

  
	
   

  	
  (b)

  	
  N.A.

  
	
   

  	
  (c)(1)

  	
  14.4

  
	
   

  	
  (c)(2)

  	
  14.4

  
	
   

  	
  (c)(3)

  	
  N.A.

  
	
   

  	
  (d)

  	
  N.A.

  
	
   

  	
  (e)

  	
  14.5

  
	
   

  	
  (f)

  	
  N.A.

  
	
  315

  	
  (a)

  	
  11.1(b)

  
	
   

  	
  (b)

  	
  11.5; 15.2

  
	
   

  	
  (c)

  	
  11.1(a)

  
	
   

  	
  (d)

  	
  11.1(c)

  
	
   

  	
  (e)

  	
  10.9

  
	
  316

  	
  (a)(last sentence)

  	
  2.9

  
	
   

  	
  (a)(1)(A)

  	
  10.7

  
	
   

  	
  (a)(1)(B)

  	
  10.7

  
	
   

  	
  (a)(2)

  	
  N.A.

  
	
   

  	
  (b)

  	
  10.4

  
	
  317

  	
  (a)(1)

  	
  10.2

  
	
   

  	
  (a)(2)

  	
  10.2

  
	
   

  	
  (b)

  	
  2.04

  
	
  318

  	
  (a)

  	
  14.1

  
				

 

N.A. means not applicable

Note:                   This
Cross-Reference table shall not, for any purpose, be deemed to be part of this
Indenture.

 

i

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  DEFINITIONS AND INCORPORATION BY REFERENCE

  
	
   

  	
   

  	
   

  
	
  SECTION 1.1.

  	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1.2.

  	
  Incorporation
  by Reference of Trust Indenture Act

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1.3.

  	
  Rules
  of Construction

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  THE NOTES

  
	
   

  	
   

  	
   

  
	
  SECTION 2.1.

  	
  Form,
  Dating and Terms

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.2.

  	
  Execution
  and Authentication

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.3.

  	
  Registrar,
  Conversion Agent and Paying Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.4.

  	
  Paying
  Agent To Hold Money and Securities in Trust

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.5.

  	
  Holder
  Lists

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.6.

  	
  Transfer
  and Exchange

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.7.

  	
  Form
  of Certificate To Be Delivered in Connection with Transfers to Institutional
  Accredited Investors

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.8.

  	
  Mutilated,
  Destroyed, Lost or Stolen Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.9.

  	
  Outstanding
  Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.10.

  	
  Temporary
  Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.11.

  	
  Cancellation

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.12.

  	
  Payment
  of Interest; Defaulted Interest

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.13.

  	
  Computation
  of Interest

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.14.

  	
  CUSIP
  Numbers

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.15.

  	
  Issuance,
  Transfer and Exchange of Common Stock Issuable Upon Conversion of the Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.16.

  	
  Calculations
  in Respect of the Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  COVENANTS

  
	
   

  	
   

  	
   

  
	
  SECTION 3.1.

  	
  Payment
  of Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.2.

  	
  Maintenance
  of Office or Agency

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.3.

  	
  Money
  and Securities for Note Payments To Be Held in Trust

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.4.

  	
  Corporate
  Existence

  	
   

  

 

ii

 

	
  SECTION 3.5.

  	
  Further
  Instruments and Acts

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.6.

  	
  Liquidated
  Damages Notices

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.7.

  	
  SEC
  Reports

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.8.

  	
  Compliance
  Certificates

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.9.

  	
  Rule
  144A Information Requirement

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.10.

  	
  Stay,
  Extension and Usury Laws

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.11.

  	
  Notice
  of Default

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  SUCCESSOR COMPANY

  
	
   

  	
   

  	
   

  
	
  SECTION 4.1.

  	
  Merger
  and Consolidation

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4.2.

  	
  Successor
  Corporation Substituted

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  REDEMPTION OF NOTES

  
	
   

  	
   

  	
   

  
	
  SECTION 5.1.

  	
  Optional
  Redemption

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.2.

  	
  Applicability
  of Article

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.3.

  	
  Election
  to Redeem; Notice to Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.4.

  	
  Selection
  by Trustee of Notes To Be Redeemed

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.5.

  	
  Notice
  of Redemption

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.6.

  	
  Deposit
  of Redemption Price

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.7.

  	
  Notes
  Payable on Redemption Date

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.8.

  	
  Notes
  Redeemed in Part

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.9.

  	
  Arrangement
  on Call for Redemption

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  PURCHASE UPON A DESIGNATED EVENT

  
	
   

  	
   

  	
   

  
	
  SECTION 6.1.

  	
  Purchase
  at the Option of the Holder upon a Designated Event

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6.2.

  	
  Notice
  of Designated Event

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6.3.

  	
  Exercise
  of Option

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6.4.

  	
  Procedures

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  OPTIONAL PURCHASE

  
	
   

  	
   

  	
   

  
	
  SECTION 7.1.

  	
  Purchase
  of Notes by the Company at the Option of the Holder

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  CONDITIONS AND PROCEDURES FOR PURCHASES AT OPTION OF HOLDERS

  
	
   

  	
   

  	
   

  
	
  SECTION 8.1.

  	
  Notice
  of Repurchase Date or Designated Event

  	
   

  

 

iii

 

	
  SECTION 8.2.

  	
  Effect
  of Purchase Notice or Designated Event Purchase Notice

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.3.

  	
  Notes
  Purchased in Part

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.4.

  	
  Covenant
  to Comply with Securities Laws upon Purchase of Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.5.

  	
  Repayment
  to the Company

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.6.

  	
  Exchange
  in Lieu of Repurchase

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  CONVERSION OF NOTES

  
	
   

  	
   

  	
   

  
	
  SECTION 9.1.

  	
  Right
  To Convert

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.2.

  	
  Determination
  of Satisfaction of Certain Conversion Triggers

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.3.

  	
  Conversion
  Procedures

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.4.

  	
  Cash
  Payments in Lieu of Fractional Shares

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.5.

  	
  Taxes
  on Conversion

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.6.

  	
  Exchange
  in Lieu of Conversion

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.7.

  	
  Covenants
  of the Company

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.8.

  	
  Adjustments
  to Conversion Rate

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.9.

  	
  Calculation
  Methodology

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.10.

  	
  When
  No Adjustment Required

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.11.

  	
  Notice
  of Adjustment

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.12.

  	
  Voluntary
  Increase

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.13.

  	
  Notice
  to Holders Prior to Certain Actions

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.14.

  	
  Effect
  of Reclassification, Consolidation, Merger, Binding Share Exchange or Sale

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.15.

  	
  Responsibility
  of Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.16.

  	
  Successive
  Adjustments

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.17.

  	
  General
  Considerations

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.18.

  	
  Payment
  of Cash in Lieu of Common Stock

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  DEFAULTS AND REMEDIES

  
	
   

  	
   

  	
   

  
	
  SECTION 10.1.

  	
  Events
  of Default

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 10.2.

  	
  Payment
  of Notes on Default; Suit Therefor

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 10.3.

  	
  Application
  of Moneys Collected by Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 10.4.

  	
  Proceedings
  by Holders

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 10.5.

  	
  Proceedings
  by Trustee

  	
   

  

 

iv

 

	
  SECTION 10.6.

  	
  Remedies Cumulative and Continuing

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 10.7.

  	
  Direction of Proceedings; Waiver of
  Defaults by Majority of Holders

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 10.8.

  	
  Notice of Defaults

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 10.9.

  	
  Undertaking to Pay Costs

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  TRUSTEE

  
	
   

  	
   

  	
   

  
	
  SECTION 11.1.

  	
  Duties of Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.2.

  	
  Rights of Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.3.

  	
  Individual Rights of Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.4.

  	
  Trustee’s Disclaimer

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.5.

  	
  Notice of Defaults

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.6.

  	
  Reports by Trustee to Holders

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.7.

  	
  Compensation and Indemnity

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.8.

  	
  Replacement of Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.9.

  	
  Successor Trustee by Merger

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.10.

  	
  Eligibility; Disqualification

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.11.

  	
  Preferential Collection of Claims Against
  Company

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII

  SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS

  
	
   

  	
   

  	
   

  
	
  SECTION 12.1.

  	
  Satisfaction and Discharge of Indenture

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.2.

  	
  Application by Trustee of Funds Deposited
  for Payment of Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.3.

  	
  Repayment of Moneys Held by Paying Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.4.

  	
  Return of Moneys Held by Trustee and
  Paying Agent Unclaimed for Two Years

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.5.

  	
  Indemnity for U.S

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  AMENDMENTS

  
	
   

  	
   

  	
   

  
	
  SECTION 13.1.

  	
  Without Consent of Holders

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 13.2.

  	
  With Consent of Holders

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 13.3.

  	
  Compliance with Trust Indenture Act

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 13.4.

  	
  Revocation and Effect of Consents and
  Waivers

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 13.5.

  	
  Notation on or Exchange of Notes

  	
   

  

 

v

 

	
  SECTION 13.6.

  	
  Trustee To Sign Amendments

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV

  MISCELLANEOUS

  
	
   

  	
   

  	
   

  
	
  SECTION 14.1.

  	
  Trust Indenture Act Controls

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 14.2.

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 14.3.

  	
  Communication by Holders with Other
  Holders

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 14.4.

  	
  Certificate and Opinion as to Conditions
  Precedent

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 14.5.

  	
  Statements Required in Certificate or
  Opinion

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 14.6.

  	
  When Notes Disregarded

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 14.7.

  	
  Rules by Trustee, Paying Agent and
  Registrar

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 14.8.

  	
  Governing Law

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 14.9.

  	
  No Recourse Against Others

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 14.10.

  	
  Successors

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 14.11.

  	
  Multiple Originals

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 14.12.

  	
  Variable Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 14.13.

  	
  Qualification of Indenture

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  
	
   

  
	
  EXHIBIT A

  	
  Form of Note

  
	
   

  	
   

  
	
  EXHIBIT B

  	
  Form of Transfer Certificate for Transfer of
  Restricted Stock

  
				

 

vi

 

INDENTURE, dated as of February 3, 2004,
between AAR CORP., a Delaware corporation (the “Company”), and U.S. Bank
National Association, a United States banking association, as trustee (the
“Trustee”).

 

RECITALS OF THE COMPANY

 

The Company has duly authorized the execution
and delivery of this Indenture to provide for the issuance of up to $90,000,000
principal amount of the Company’s 2.875% Convertible Senior Notes due
February 1, 2024, convertible into common stock, par value $1.00 per share
(the “Common Stock”), of the Company (the “Notes”).

 

Each party agrees as follows for the benefit of
the other parties and for the equal and ratable benefit of the Holders of the
Notes:

 

ARTICLE I

 

DEFINITIONS
AND INCORPORATION BY REFERENCE

 

SECTION 1.1.                       Definitions.

 

“actual
knowledge” has the meaning set forth in Section 11.2(g).

 

“Affiliate”
of any specified Person means any other Person, directly or indirectly,
controlling or controlled by or under direct or indirect common control with
such specified Person.  For the purposes
of this definition, “control” when used with respect to any Person means the
power to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms “controlling” and “controlled” have meanings correlative to the
foregoing.

 

“Agent
Members” has the meaning set forth in Section 2.1(g).

 

“Applicable
Stock Price” means the average of the Closing Sale Prices of the
Common Stock for the five consecutive Trading Day period beginning on the third
Trading Day following the Conversion Date.

 

“Authenticating
Agent” has the meaning set forth in Section 2.2.

 

“Bankruptcy
Code” means the United States Bankruptcy Code, 11 United States Code
§ 101 et seq., or any
successor statute thereto.

 

“Beneficial
Owner” has the meaning set forth in Rule 13d-3 of the Exchange Act.

 

“Board of
Directors” means either the board of directors of the Company or
other body fulfilling the function of a board of directors of a corporation or
other Person or any committee of such board.

 

1

 

“Board
Resolution” means a copy of a resolution certified by the Secretary
or an Assistant Secretary of a company to have been duly adopted by the board
of directors of such company and to be in full force and effect on the date of
such certification, and delivered to the Trustee.

 

“Business
Day” means each day that is not a Saturday, Sunday or other day on
which banking institutions in New York, New York are authorized or
required by law, regulation or executive order to close.

 

“Capital
Stock” of any Person means any and all shares (including ordinary
shares or “American Depositary Shares”), interests, rights to purchase,
warrants, options, participations or other equivalents of or interests in
(however designated) capital stock or other equity participations, including
partnership interests, whether general or limited, of such Person and any
rights (other than debt securities convertible or exchangeable into an equity
interest), warrants or options to acquire an equity interest in such Person.

 

“Cash Amount
Per Note” has the meaning set forth in Section 9.18(b).

 

A “Change in
Control” shall be deemed to have occurred at such time after the
original issuance of the Notes that any of the following occurs:

 

(a) any person,
including any syndicate or group deemed to be a “person” under
Section 13(d) (3) of the Exchange Act, acquires beneficial ownership,
directly or indirectly, through a purchase, merger or other acquisition
transaction or series of transactions, of shares of the Company’s Capital Stock
entitling the person to exercise 50% or more of the total voting power of all
shares of the Company’s Capital Stock that are entitled to vote generally in
elections of directors, other than an acquisition by the Company, any of its
Subsidiaries or any of its employee benefit plans and other than any
transaction contemplated by the paragraph (b)(ii) below.

 

(b) the Company
merges or consolidates with or into any other Person (other than a Subsidiary),
any merger of another Person into the Company, or the Company conveys, sells,
transfers or leases all or substantially all of its assets to another Person,
other than any transaction:  (i) that
does not result in a reclassification, conversion, exchange or cancellation of
the Company’s outstanding shares of Common Stock, or (ii) pursuant to which the
holders of the Company’s Common Stock immediately prior to the transaction have
the entitlement to exercise, directly or indirectly, 50% or more of the total
voting power of all shares of Capital Stock entitled to vote generally in the
election of directors of the continuing or surviving corporation immediately
after the transaction, or (iii) which is effected solely to change the
Company’s jurisdiction of incorporation and results in a reclassification,
conversion or exchange of outstanding shares of the Company’s Common Stock
solely into shares of common stock of the surviving entity.

 

Notwithstanding the foregoing provisions, a
Change in Control shall not be deemed to have occurred if:  (i) the Closing Sale Price of the Common
Stock for any five Trading Days within the period of ten consecutive Trading
Days ending immediately after the later of the Change in Control or the public
announcement of the Change in Control, in the case of a 

 

2

 

Change in Control relating to an acquisition of
Capital Stock under clause (a) of this definition, or the period of ten
consecutive Trading Days ending immediately before the Change in Control, in
the case of a Change in Control relating to a merger, consolidation, asset sale
or otherwise under clause (b) of this definition, equals or exceeds 105% of the
Conversion Price in effect on each of those five Trading Days; or (ii) all of
the consideration paid for the Common Stock (excluding cash payments for
fractional shares and cash payments made pursuant to dissenters’ appraisal
rights) in a merger or consolidation or a conveyance, sale, transfer or lease
otherwise constituting a Change in Control under clause (a) and/or clause (b)
of this definition consists of shares of Capital Stock traded on a national
securities exchange or quoted on Nasdaq or its successor (or will be so traded
or quoted immediately following the merger or consolidation) and, as a result
of the merger or consolidation, the Notes become convertible into shares of
such Capital Stock.

 

“Closing
Sale Price” of the Common Stock on any date means the closing per
share sale price (or, if no closing sale price is reported, the average of the
bid and ask prices or, if more than one in either case, the average of the
average bid and the average ask prices) on that date as reported on the New
York Stock Exchange or, if the Common Stock is not then listed on the New York
Stock Exchange, then on the principal U.S. national or regional securities
exchange or market on which the Common Stock is then listed or quoted, or if
the Common Stock is not listed or quoted on the U.S. national or regional
exchange or market, as reported on the principal other market on which the
Common Stock is then traded.  If the
Common Stock is not traded or listed on any other market, exchange or quotation
system, the Closing Sale Price will be determined by the Board of Directors in
good faith.

 

“Commission”
means the Securities and Exchange Commission.

 

“Common
Stock” means the common stock, par value $1.00 per share, of the
Company.

 

“Company”
means AAR CORP., a Delaware corporation, and, subject to Article IV, its
successors and assigns.

 

“Company
Notice” has the meaning set forth in Section 8.1.

 

“Company
Notice Date” has the meaning set forth in Section 8.1.

 

“Company
Order” has the meaning set forth in Section 2.2.

 

“Conversion
Agent” means the office or agency designated by the Company where
Notes may be presented for conversion.

 

“Conversion
Date” has the meaning set forth in Section 9.3.

 

“Conversion
Obligation” has the meaning set forth in Section 9.18.

 

“Conversion
Price” means $1,000 divided by the Conversion Rate.

 

“Conversion
Rate” has the meaning set forth in Section 9.1.

 

3

 

“Corporate
Trust Office” means the designated corporate trust office of the
Trustee at which at any time its corporate trust business shall be
administered, which office at the date hereof is located at 60 Livingston
Avenue, St. Paul, Minnesota 55107, Attention: 
Corporate Trust Services, or such other address as the Trustee may
designate from time to time by notice to the Holders and the Company, or the
designated corporate trust office of any successor Trustee (or such other
address as such successor Trustee may designate from time to time by notice to
the Holders and the Company).

 

“Current
Market Price” means the average of the Closing Sale Prices of the
Common Stock for the five consecutive Trading Days ending on or at the Time of
Determination.

 

“Default”
means any event or condition that is, or after notice or passage of time or
both would be, an Event of Default.

 

“Defaulted
Interest” has the meaning set forth in Section 2.12.

 

“Definitive
Notes” means the Notes that are in registered definitive form.

 

“Depositary”
means The Depository Trust Company, its nominees and their respective
successors and assigns, or such other depositary institution hereinafter
appointed by the Company.

 

“Designated
Event “ means the occurrence of a Change in Control or a Termination
of Trading.

 

“Designated
Event Purchase Date” has the meaning set forth in Section 6.1.

 

“Designated
Event Purchase Notice” has the meaning set forth in
Section 6.3.

 

“Designated
Event Purchase Price” has the meaning set forth in Section 6.1.

 

“Distributed
Assets” has the meaning set forth in Section 9.8(c).

 

“Equity
Interests” means any Capital Stock, partnership, joint venture,
member or limited liability or unlimited liability company interest, beneficial
interest in a trust or similar entity or other equity interest or equity
investment of whatever nature.

 

“Event of
Default” means any event or condition specified as such in
Section 10.1.

 

“Exchange
Act” means the Securities Exchange Act of 1934, as amended.

 

“Ex-date”
or  “Ex-dividend date” has the meaning set forth in Section 9.1(g).

 

“Expiration
Time” has the meaning set forth in Section 9.8(f).

 

“Fair Market
Value” means, with respect to any asset or property, the price which
could be negotiated in an arm’s-length, free market transaction, for cash,
between a willing seller 

 

4

 

and a willing and able buyer, neither of whom
is under undue pressure or compulsion to complete the transaction.  Fair Market Value shall be determined by the
Board of Directors acting reasonably and in good faith.

 

“GAAP”
means generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accounting profession of the
United States, as in effect on the date hereof.

 

“Global
Notes” means Notes that are in the form of the Note attached hereto
as Exhibit A and that are issued to a Depositary.

 

“Holder”
means, in the case of any Note, the Person in whose name such Note is
registered in the Note Register kept by the Registrar for that purpose in
accordance with the terms hereof.

 

“IAI”
means institutional accredited investors (as defined in Rules 501(a)(1), (2),
(3) and (7) under the Securities Act) who are not QIBs.

 

“Indebtedness”
as applied to any Person, means (i) all indebtedness, obligations and other
liabilities, contingent or otherwise, (A) for borrowed money, including
overdrafts, foreign exchange contracts, currency exchange agreements, interest
rate protection agreements, any liability for the deferred purchase price of
property or services, and any loans or advances from banks, whether or not
evidenced by notes or similar instruments, or (B) evidenced by credit or loan
agreements, bonds, debentures, notes or similar instruments, whether or not the
recourse of the lender is to the whole of such Person’s assets or to only a
portion thereof, other than any account payable or other accrued current
liability or obligation incurred in the ordinary course of business in
connection with the obtaining of materials or services; (ii) all reimbursement
obligations and other liabilities, contingent or otherwise, with respect to
letters of credit, bank guarantees, bankers’ acceptances or other similar
credit transactions;  (iii) all
obligations and liabilities, contingent or otherwise, in respect of leases
required, in conformity with GAAP, to be accounted for as capitalized lease
obligations on such Person’s balance sheet; 
(iv) all obligations and other liabilities, contingent or otherwise,
under any lease or related document, including a purchase agreement,
conditional sale or other title retention agreement, in connection with the
lease of real property or improvements thereon (or any personal property
included as part of any such lease) which provides that such Person is
contractually obligated to purchase or cause a third party to purchase the
leased property or pay an agreed upon residual value of the leased property,
including such Person’s obligations under such lease or related document to
purchase or cause a third party to purchase such leased property or pay an agreed
upon residual value of the leased property to the lessor; (v) all such Person’s
obligations, contingent or otherwise, with respect to an interest rate or other
swap, cap, floor or collar agreement or hedge agreement, forward contract or
other similar instrument or agreement or foreign currency hedge, exchange,
purchase or similar instrument or agreement; (vi) all such Person’s direct or
indirect guarantees or similar agreements by such Person in respect of, and all
of its obligations or liabilities to purchase or otherwise acquire or otherwise
assure a creditor against loss in respect of, indebtedness, obligations or
liabilities of another Person of the kinds described in clauses (i) through
(v); and (vii) any and all 

 

5

 

deferrals, renewals, extensions, refinancings
and refundings of, or amendments, modifications or supplements to, any
indebtedness, obligation or liability of the kinds described in clauses (i)
through (vi).

 

“Indenture”
means this Indenture as amended or supplemented from time to time, including,
for all purposes of this instrument and any supplemental indenture or amendment
hereto, the provisions of the TIA that are deemed to be a part of and govern
this instrument and any such supplemental indenture or amendment, respectively.

 

“Initial
Public Offering” means, in the event of a Spin-Off, the first time
securities of the same class or type as the securities being distributed in the
Spin-Off are bona fide offered to the public for cash.

 

“Initial
Purchasers” means the initial purchasers of the Notes.

 

“Interest
Payment Date” has the meaning set forth in the form of Note attached
hereto as Exhibit A.

 

“Liquidated
Damages” has the meaning set forth in Section 3.6.  For all purposes under this Indenture, the
term “interest” shall include Liquidated Damages, if any, with respect to the
Notes.

 

“Liquidated
Damages Notice” has the meaning set forth in Section 3.6.

 

“Moody’s”
means Moody’s Investor Services, Inc. (or its successors).

 

“non-electing
share” has the meaning set forth in Section 9.14.

 

“Note”
or “Notes” has the meaning stated
in the first recital of this Indenture or, as the case may be, means Notes that
have been authenticated and delivered pursuant to this Indenture, including the
Global Note(s).

 

“Note
Register” has the meaning set forth in Section 2.3.

 

“Notes
Custodian” means the custodian with respect to the Global Note (as
appointed by the Depositary or any successor Person thereto) and shall
initially be the Trustee.

 

“Officer”
means the Chief Executive Officer, the President, the Chief Financial Officer,
any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or
any Assistant Secretary of the Company.

 

“Officers’
Certificate” means a certificate signed by any two Officers of the
Company.  Each such certificate shall
include the statements provided for in Section 14.5, if and to the extent
required by the provisions of Section 14.4.

 

“Opinion of
Counsel” means a written opinion from legal counsel.  The counsel may be an employee of or counsel
to the Company.  Each such opinion shall
include the state

6

 

ments provided for in Section 14.5, if and
to the extent required by the provisions of Section 14.4.

 

“Outstanding
Notes” has the meaning set forth in Section 2.9.

 

“Paying
Agent” means the office or agency designated by the Company where
Notes may be presented for payment, initially the Trustee.

 

“Person”
means any individual, corporation, partnership, limited liability company,
joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.

 

“protected
purchaser” has the meaning set forth in Section 2.8.

 

“Purchase
Notice” has the meaning set forth in Section 7.1(a)(1).

 

“Purchase
Price” has the meaning provided in paragraph 7 of the Notes.

 

“Purchased
Shares” has the meaning set forth in Section 9.8(f)(i).

 

“QIB”
means any “qualified institutional buyer” (as defined in Rule 144A under the
Securities Act).

 

“Record Date”
has the meaning set forth in the form of Note attached hereto as Exhibit A.

 

“Redemption
Date” means the date fixed for redemption of the Notes.

 

“Redemption
Price” has the meaning set forth in paragraph 5 of the Notes.

 

“Registrar”
means the office or agency maintained by the Company where Notes may be
presented for registration of transfer or exchange, initially the Trustee.

 

“Registration
Rights Agreement” means that certain registration rights agreement
dated as of the date of this Indenture by and between the Company and the
Initial Purchasers.

 

“Repurchase
Date” has the meaning set forth in Section 7.1(a).

 

“Resale
Restriction Termination Date” has the meaning set forth on
Section 2.6(a).

 

“Responsible
Officer,” when used with respect to the Trustee, means any officer
assigned by the Trustee to administer its corporate trust matters and who is
located at the Corporate Trust Office and who shall have the direct
responsibility for the administration of this Indenture.

 

“Restricted
Note Legend” means the legend set forth in Section 2.1(d).

 

“Restricted
Stock Legend” means the legend required by Section 2.1(e).

 

7

 

“Securities
Act” means the Securities Act of 1933, as amended.

 

“Shelf
Registration Statement” shall have the meaning set forth in the
Registration Rights Agreement.

 

“Significant
Subsidiary” means any Subsidiary that is a “Significant Subsidiary”
of the Company within the meaning of Rule 1-02(w) under Regulation S-X
promulgated by the Commission.

 

“Special
Interest Payment Date” has the meaning set forth in
Section 2.12(a).

 

“Special
Record Date” has the meaning set forth in Section 2.12(a).

 

“Spin-Off”
means a dividend or other distribution of shares of Capital Stock of any class
or series, or similar Equity Interests, of or relating to a Subsidiary or other
business unit of the Company.

 

“Spin-Off
Market Price” (a) per share of Common Stock means (i) in the event a
Spin-Off is not effected simultaneously with an Initial Public Offering, the
average of the Closing Sale Prices of the Common Stock for the ten Trading Days
after the effective date of such Spin-Off or (ii) in the event an Initial
Public Offering is effected simultaneously with the Spin-Off, the Closing Sale
Price of the Common Stock on the Trading Day on which the initial public
offering price of securities being distributed in the Initial Public Offering
is determined and (b) per Equity Interest of a Subsidiary or other business
unit of the Company means (i) in the event a Spin-Off is not effected
simultaneously with an Initial Public Offering, the average of the closing sale
prices of such Equity Interest to be distributed with respect to one share of
Common Stock for the ten Trading Days after the “ex date” with respect to such
Spin-Off or (ii) in the event an Initial Public Offering is effected
simultaneously with the Spin-Off, the initial public offering price in the
Initial Public Offering of such Equity Interest to be distributed with respect
to one share of Common Stock.

 

“Standard
& Poor’s” means Standard & Poor’s Rating Services (or its
successors).

 

“Stated
Maturity,” when used with respect to the Notes, means
February 1, 2024.

 

“Subsidiary”
of any Person means (a) any corporation, association or other business entity
(other than a partnership, joint venture, limited liability company or similar
entity) of which more than 50% of the total ordinary voting power of shares of
Capital Stock entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof (or Persons
performing similar functions) or (b) any partnership, joint venture, limited
liability company or similar entity of which more than 50% of the capital
accounts, distribution rights, total equity and voting interests or general or
limited partnership interests, as applicable, are, in the case of clauses (a)
and (b), at the time owned or controlled, directly or indirectly, by (1) such
Person, (2) such Person and one or more Subsidiaries of such Person or (3) one
or more Subsidiaries of such Person. 
Unless otherwise specified herein, each reference to a Subsidiary will
refer to a Subsidiary of the Company.

 

8

 

“Successor
Company” shall have the meaning assigned thereto in clause (i) of
Section 4.1(i).

 

“Termination
of Trading” will be deemed to have occurred if the Common Stock (or
other Common Stock into which the Notes are then convertible) is neither listed
for trading on the New York Stock Exchange nor approved for trading on The
Nasdaq National Market.

 

“TIA”
or “Trust Indenture Act” means
the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb), as in effect
from time to time.

 

“Time of
Determination” means the time and date of the determination
of stockholders entitled to receive rights, warrants or options or a
distribution, in each case, to which Section 9.1(g), 9.8(a) or (b) applies
(or, if such date is not a Trading Day, then on the last Trading Day prior to such
date).

 

“Trading Day”
means a day during which trading in securities generally occurs on the New York
Stock Exchange or, if the Common Stock is not then listed on the New York Stock
Exchange, then on another national or regional securities exchange on which the
Common Stock is then listed or, if the Common Stock is not listed on a national
or regional securities exchange, on the National Association of Securities
Dealers Automated Quotation System or, if the Common Stock is not quoted on the
National Association of Securities Dealers Automated Quotation System, then on
the principal other market on which the Common Stock is then traded.

 

“Trading
Price,” with respect to the Notes, on any date of determination
means the average of the secondary market bid quotations per Note obtained by
the Trustee, at any time the Company instructs the Trustee to determine the
Trading Price, for $5.0 million principal amount of the Notes at approximately
3:30 p.m., New York City time, on such determination date from two independent
nationally recognized securities dealers selected by the Company, which may
include the Initial Purchasers, provided
that if at least two such bids cannot reasonably be obtained by the Trustee,
but one such bid can reasonably be obtained by the Trustee, this one bid shall
be used. If the Trustee cannot reasonably obtain at least one bid for $5.0
million principal amount of the Notes from a nationally recognized securities
dealer, or in the reasonable judgment of the Company, the bid quotations are
not indicative of the secondary market value of the Notes, then the Trading
Price of the Notes will equal (a) the applicable Conversion Rate of the Notes
multiplied by (b) the Closing Sale Price of the Common Stock on such
determination date.

 

“Transfer Restricted
Notes” has the meaning set forth in Section 2.1(d).

 

“Trustee”
means the Person identified as “Trustee” in the first paragraph hereof and,
subject to the provisions of Article XI, shall also include any successor
trustee.

 

“Trust
Officer” means, with respect to the Trustee, any officer assigned to
the Corporate Trust Office, and also, with respect to a particular matter, any
other officer to whom such matter is referred because of such officer’s
knowledge of and familiarity with the particular subject.

 

9

 

“Uniform
Commercial Code” means the New York Uniform Commercial Code as in
effect from time to time in the State of New York.

 

“U.S.
Government Obligations” means securities that are (a) direct obligations
of the United States of America for the timely payment of which its full faith
and credit is pledged or (b) obligations of a Person controlled or supervised
by and acting as an agency or instrumentality of the United States of America
the timely payment of which is unconditionally guaranteed as a full faith and
credit obligation of the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depositary receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act), as custodian with respect to any
such U.S. Government Obligations or a specific payment of principal of or
interest on any such U.S. Government Obligations held by such custodian for the
account of the holder of such depositary receipt; provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depositary receipt from any amount received by the custodian in respect of
the U.S. Government Obligations or the specific payment of principal of or
interest on the U.S. Government Obligations evidenced by such depositary
receipt.

 

SECTION 1.2.                       Incorporation
by Reference of Trust Indenture Act. 
This Indenture is subject to the mandatory provisions of the TIA which
are incorporated by reference in and made a part of this Indenture.  The following TIA terms have the following
meanings:

 

“indenture securities” means the Notes.

 

“indenture security holder” means a Holder.

 

“indenture to be qualified” means this
Indenture.

 

“indenture trustee” or “institutional trustee”
means the Trustee.

 

“obligor” on the indenture securities means the
Company and any other obligor on the indenture securities.

 

All other TIA terms used in this Indenture that
are defined by the TIA, defined by the TIA by reference to another statute or
defined by Commission rule have the meanings assigned to them by such
definitions.

 

SECTION 1.3.                       Rules of
Construction.  Unless the context otherwise
requires:

 

(1)                                  a term has the meaning assigned to it;

 

(2)                                  an accounting term not otherwise defined
has the meaning assigned to it in accordance with GAAP;

 

(3)                                  “or” is not exclusive;

 

(4)                                  words in the singular include the plural
and words in the plural include the singular;

 

10

 

(5)                                  unsecured Indebtedness shall not be
deemed to be subordinate or junior to secured Indebtedness merely by virtue of
its nature as unsecured Indebtedness;

 

(6)                                  the principal amount of any non-interest
bearing or other discount security at any date shall be the principal amount
thereof that would be shown on a balance sheet of the issuer dated such date
prepared in accordance with GAAP;

 

(7)                                  the table of contents and headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not intended to be considered a part hereof and shall
not modify or restrict any of the terms or provisions hereof;

 

(8)                                  the words “herein,” “hereof” and
“hereunder” and other words of similar import refer to this Indenture as a
whole and not to any particular Article, Section or other subdivision;

 

(9)                                  all references to “$” or “dollars” shall
refer to the lawful currency of the United States of America;

 

(10)                            the words “include,” “included” and
“including” as used herein shall be deemed in each case to be followed by the
phrase “without limitation,” if not expressly followed by such phrase or the
phrase “but not limited to”;

 

(11)                            references to sections of or rules under
the Securities Act, the Exchange Act or the TIA shall be deemed to include
substitute, replacement or successor sections or rules adopted by the
Commission from time to time thereunder; and

 

(12)                            any reference to a Section or
Article refers to such Section or Article of this Indenture
unless otherwise indicated.

 

ARTICLE II

 

THE NOTES

 

SECTION 2.1.                       Form, Dating and Terms.

 

(a)                                  The maximum
aggregate principal amount of Notes that may be authenticated and delivered
under this Indenture is $90,000,000.  Furthermore,
Notes may be authenticated and delivered upon registration or transfer, or in
lieu of, other Notes pursuant to Section 2.6, 2.8 or 13.5.

 

The Notes shall be known and designated as
2.875% Convertible Senior Notes due February 1, 2024.  Pursuant to the provisions of
Article IX, the Notes shall be convertible into Common Stock.

 

11

 

Each Note shall bear the applicable legends, if
any, set forth in Section 2.1(d) and transfers of the Notes shall be made
only in accordance with the restrictions described in the applicable
legend.  The Notes may have notations,
legends or endorsements required by law, stock exchange rule or usage, in
addition to those set forth on Exhibit A and in Section 2.1(d).  The Company and the Trustee shall approve
the forms of the Notes and any notation, endorsement or legend on them.  Each Note shall be dated the date of its
authentication.  The terms of the Note
set forth in Exhibit A are part of the terms of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to be bound by such terms.

 

The principal of and interest on the Notes
shall be payable at the office or agency of the Company maintained for such
purpose in the City of New York, or at such other office or agency of the
Company as may be maintained for such purpose pursuant to
Section 2.3.  Payments in respect
of a Definitive Note (including principal, interest and Liquidated Damages, if
any) shall be made in U.S. dollars at the office of the Trustee.  At the Company’s option, however, the
Company may make such payments by mailing a check to the registered address of
each Holder thereof as such address as shall appear on the Note Register or
with respect to Notes represented by a Global Note, by wire transfer of
immediately available funds to the accounts specified by the Depositary.  If a payment date is a date other than a
Business Day, payment may be made at that place on the next succeeding day that
is a Business Day and no interest shall accrue for the intervening period.

 

(b)                                 Notes offered
and sold to QIBs in reliance on Rule 144A and resold to IAIs in the United
States of America shall be issued in the form of one or more permanent Global
Notes, without interest coupons, substantially in the form of Exhibit A.  Such Global Notes shall be deposited on
behalf of the purchasers of the Notes represented thereby with the Notes
Custodian for the Depositary for the accounts of participants in the
Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided.  The aggregate
principal amount of a Global Note may from time to time be increased or
decreased by adjustments made on the records of the Notes Custodian, as
hereinafter provided.

 

(c)                                  The Notes
shall be issuable only in fully registered form, without coupons, and only in
denominations of $1,000 and any integral multiple thereof.

 

(d)                                 Every Note
that bears or is required under this Section 2.1(d) to bear the legend set
forth in this Section 2.1(d) (the “Transfer Restricted Notes”) shall be
subject to the restrictions on transfer set forth in this Section 2.1(d)
(including those set forth in the legend set forth below), and the Holder of
each such Transfer Restricted Note, by such Holder’s acceptance thereof, agrees
to be bound by all such restrictions on transfer.  As used in Sections 2.1(d) and 2.1(e), the term “transfer”
includes any sale, pledge, transfer or other disposition whatsoever of any
Transfer Restricted Note.  The Registrar
shall not register any transfer of a Transfer Restricted Note not made in
accordance with the restrictions on transfer set forth in this
Section 2.1.

 

Subject to the last paragraph of this
Section 2.1(d) and Section 2.15 with respect to Common Stock, until
the expiration of the holding period applicable to sales thereof under Rule
144(k) under the Securities Act (or any successor provision), any certificate
evidencing any Note (and all securities issued in exchange therefor or
substitution thereof, including Common 

 

12

 

Stock, if any, issued upon conversion thereof,
which shall bear the legend set forth in Section 2.1(e), if applicable),
shall bear a legend in substantially the following form:

 

“THIS NOTE AND ANY COMMON STOCK ISSUABLE UPON
THE CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE ‘SECURITIES ACT’), AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM.  EACH PURCHASER OF
THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED
BY RULE 144A THEREUNDER.

 

THIS NOTE AND ANY COMMON STOCK ISSUABLE UPON
THE CONVERSION OF THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT (A) (1) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 THEREUNDER (IF AVAILABLE), (3) TO AN INSTITUTIONAL INVESTOR THAT IS AN
ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) OR (4) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED
STATES AND OTHER JURISDICTIONS.

 

“THIS NOTE, ANY SHARES OF COMMON STOCK ISSUABLE
UPON ITS CONVERSION AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER
TRANSFERS OF THIS NOTE AND ANY SUCH SHARES TO REFLECT ANY CHANGE IN APPLICABLE
LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO
THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY.  THE HOLDER OF THIS NOTE AND SUCH SHARES OF
COMMON STOCK SHALL BE DEEMED BY THE ACCEPTANCE OF THIS NOTE AND ANY SUCH SHARES
TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.”

 

13

 

Any Note (or security issued in exchange or
substitution therefor) as to which such restrictions on transfer shall have
expired in accordance with their terms or that has been transferred pursuant to
a registration statement that has been declared effective under the Securities
Act may, upon surrender of such Note to the Registrar for exchange in
accordance with the provisions of this Section 2.1, be exchanged for a new
Note or Notes, of like tenor and aggregate principal amount, which shall not
bear the Restricted Note Legend required by this Section 2.1(d).

 

(e)                                  Every stock
certificate representing Common Stock issued upon conversion of a Transfer
Restricted Note that bears or is required under this Section 2.1(e) to
bear the legend set forth in this Section 2.1(e) shall be subject to the
restrictions on transfer set forth in this Section 2.1(e) (including those
set forth in the legend set forth below), and the Holder of such Common Stock
issued upon conversion of a Transfer Restricted Note, by such Holder’s
acceptance thereof, agrees to be bound by all such restrictions on transfer and
the further restrictions set forth in Section 2.15.  The Company shall not register any transfer
of Common Stock issued upon conversion of such a Transfer Restricted Note not
made in accordance with the restrictions on transfer set forth in this
Section 2.1.

 

Until the expiration of the holding period
applicable to sales thereof under Rule 144(k) under the Securities Act (or any
successor provision), any stock certificate representing Common Stock issued
upon conversion of a Transfer Restricted Note shall bear a legend in
substantially the following form, unless such Common Stock has been sold
pursuant to a registration statement that has been declared effective under the
Securities Act (and which continues to be effective at the time of such
transfer) or such Common Stock has been issued upon conversion of Notes that
have been transferred pursuant to a registration statement that has been
declared effective under the Securities Act:

 

“THIS SECURITY (OR ITS PREDECESSOR) WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED
STATES SECURITIES ACT OF 1933 (THE ‘SECURITIES ACT’), AND THIS SECURITY MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN APPLICABLE EXEMPTION THEREFROM. 
EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF
THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

 

“THE HOLDER OF THIS SECURITY AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED, EXCEPT (X) (I) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
ANOTHER QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION

 

14

 

MEETING THE REQUIREMENTS OF RULE 144A, (II)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 THEREUNDER (IF AVAILABLE), (III) TO AN INSTITUTIONAL INVESTOR THAT IS
AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) OR (IV) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (Y) IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED
STATES AND OTHER JURISDICTIONS, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY FROM IT OF THE
RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.”

 

“THIS SECURITY AND ANY RELATED DOCUMENTATION
MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON
RESALES AND OTHER TRANSFERS OF THIS SECURITY TO REFLECT ANY CHANGE IN
APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES
RELATING TO THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY.  THE HOLDER OF THIS SECURITY SHALL BE DEEMED
BY THE ACCEPTANCE OF THIS SECURITY TO HAVE AGREED TO ANY SUCH AMENDMENT OR
SUPPLEMENT.”

 

Any stock certificate (or security issued in
exchange or substitution therefor) as to which such restrictions on transfer
shall have expired in accordance with their terms or that has been transferred
pursuant to a registration statement that has been declared effective under the
Securities Act may, upon surrender of such stock certificate to the Registrar
for exchange in accordance with the provisions of this Section 2.1 and
Section 2.15, be exchanged for a new stock certificate, of like tenor and
aggregate number of shares, which shall not bear the Restricted Stock Legend
required by this Section 2.1(e).

 

(f)                                    Each Global
Note, whether or not a Transfer Restricted Note, shall bear the following
legend:

 

“THIS SECURITY IS A GLOBAL SECURITY WITHIN THE
MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DEPOSITARY”), OR A
NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY THE COMPANY, THE TRUSTEE AND
ANY AGENT THEREOF AS THE OWNER AND HOLDER OF THIS SECURITY FOR ALL
PURPOSES.  UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TO THE 

 

15

 

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

 

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

 

(g)                                 The following
book-entry provisions shall apply only to Global Notes deposited with the Notes
Custodian:

 

(i)                                     Each Global
Note initially shall (x) be registered in the name of the Depositary for such
Global Note or the nominee of such Depositary, (y) be delivered to the Notes
Custodian and (z) bear legends as set forth in Section 2.1(d).

 

(ii)                                  Except as
provided herein, members of, or participants in, the Depositary (“Agent
Members”) shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depositary or by the Notes Custodian or under
such Global Note, and the Depositary may be treated by the Company, the
Trustee, the Notes Custodian and any agent of the Company or the Trustee as the
absolute owner of such Global Note for all purposes whatsoever.  Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or
the Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices of the Depositary
governing the exercise of the rights of a Beneficial Owner of an interest in
any Global Note.

 

(iii)                               The registered Holder of a Global Note
may grant proxies and otherwise authorize any Person, including Agent Members
and Persons that may hold interests through Agent
Members, to take any action which a Holder is entitled to take under this
Indenture or the Notes.

 

16

 

(iv)                              In connection
with any transfer of a portion of the beneficial interest in a Global Note
pursuant to Section 2.1(h) to Beneficial Owners who are required to hold
Definitive Notes, the Trustee shall reflect on its books and records the date
and a decrease in the principal amount of such Global Note in an amount equal
to the principal amount of the beneficial interest in the Global Note to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Definitive Notes of like tenor and amount.

 

(v)                                 In connection
with the transfer of an entire Global Note to Beneficial Owners pursuant to
Section 2.1(h), such Global Note shall be deemed to be surrendered to the
Trustee for cancellation, and the Company shall execute, and the Trustee shall
authenticate and deliver, to each Beneficial Owner identified by the Depositary
in exchange for its beneficial interest in such Global Note, an equal aggregate
principal amount of Definitive Notes of authorized denominations.

 

(vi)                              Any Holder of
a Global Note shall, by acceptance of such Global Note, agree that transfers of
beneficial interests in such Global Note may be effected only through a
book-entry system maintained by (a) the Holder of such Global Note (or its
agent) or (b) any Holder of a beneficial interest in such Global Note, and that
ownership of a beneficial interest in such Global Note shall be required to be
reflected in a book entry.

 

(h)                                 Except as
provided below, owners of beneficial interests in Global Notes will not be
entitled to receive Definitive Notes. 
If required to do so pursuant to any applicable law or regulation,
Beneficial Owners may obtain Definitive Notes in exchange for their beneficial
interests in a Global Note upon written request in accordance with the
Depositary’s and the Registrar’s procedures. 
In addition, Definitive Notes shall be transferred to all Beneficial
Owners in exchange for their beneficial interests in a Global Note if (i) the
Depositary notifies the Company that it is unwilling or unable to continue as
depositary for such Global Note or the Depositary ceases to be a clearing
agency registered under the Exchange Act, at a time when the Depositary is
required to be so registered in order to act as Depositary, and in each case a
successor depositary is not appointed by the Company within 90 days of such
notice or (ii) the Company, in its sole discretion, executes and delivers to
the Trustee and Registrar an Officers’ Certificate stating that such Global
Note shall be so exchangeable or (iii) an Event of Default has occurred and is
continuing and the Registrar has received a request from the Depositary.

 

In the event that the Certificated Notes are
not issued to each such beneficial owner promptly after the Registrar has
received a request form the Holder of a Global Note to issue such Certificated
Notes, the Company expressly acknowledges, with respect to the right of any
Holder to pursue a remedy pursuant to Section 10.4 or 10.6 hereof, the
right of any Beneficial Owner of Notes to pursue such remedy with respect to
the portion of the Global Note that represents such Beneficial Owner’s Notes as
if such Certificated Notes had been issued.

 

(i)                                     Any Definitive
Note delivered in exchange for an interest in a Global Note pursuant to
Section 2.1(g)(iv) or (v) shall, except as otherwise provided by
Section 2.6, bear the Restricted Note Legend applicable to the Definitive
Note set forth in Section 2.1(d).

 

17

 

(j)                                     In connection
with the exchange of a portion of a Definitive Note for a beneficial interest
in a Global Note, the Trustee shall cancel such Definitive Note, and the
Company shall execute, and the Trustee shall authenticate and deliver, to the
transferring Holder a new Definitive Note representing the principal amount not
so transferred.

 

SECTION 2.2.                       Execution and
Authentication.  An Officer shall sign the
Notes for the Company by manual or facsimile signature.  If an Officer whose signature is on a Note
no longer holds that office at the time the Trustee authenticates the Note, the
Note shall be valid nevertheless.

 

A Note shall not be valid until an authorized
signatory of the Trustee manually authenticates the Note.  The signature of the Trustee on a Note shall
be conclusive evidence that such Note has been duly and validly authenticated
and issued under this Indenture.

 

At any time and from time to time after the
execution and delivery of this Indenture, the Trustee shall, upon the written
direction or order of the Company, authenticate and make available for
delivery:  Notes for original issue in
an aggregate principal amount of up to $90,000,000 upon a written order of the
Company signed by two Officers of the Company (the “Company Order”).  Such Company Order shall specify the amount
of the Notes to be authenticated.

 

The Trustee may appoint an agent (the
“Authenticating Agent”) reasonably acceptable to the Company to authenticate
the Notes.  Unless limited by the terms
of such appointment, any such Authenticating Agent may authenticate Notes
whenever the Trustee may do so.  Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent.

 

In case the Company pursuant to Article IV
shall be consolidated or merged with or into any other Person or shall convey,
transfer, lease or otherwise dispose of its properties and assets substantially
as an entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company shall have
been merged, or the Person which shall have received a conveyance, transfer,
lease or other disposition as aforesaid, shall have executed an indenture
supplemental hereto with the Trustee pursuant to Article IV, any of the
Notes authenticated or delivered prior to such consolidation, merger,
conveyance, transfer, lease or other disposition may, from time to time, at the
request of the successor Person, be exchanged for other Notes executed in the
name of the successor Person with such changes in phraseology and form as may
be appropriate, but otherwise in substance of like tenor as the Notes
surrendered for such exchange and of like principal amount; and the Trustee,
upon Company Order of the successor Person, shall authenticate and deliver
Notes as specified in such order for the purpose of such exchange.  If Notes shall at any time be authenticated
and delivered in any new name of a successor Person pursuant to this Section 2.2
in exchange or substitution for or upon registration of transfer of any Notes,
such successor Person, at the option of the Holders but without expense to
them, shall provide for the exchange of all Notes at the time outstanding for
Notes authenticated and delivered in such new name.

 

SECTION 2.3.                       Registrar,
Conversion Agent and Paying Agent. 
The Trustee shall initially serve as the Registrar, Conversion Agent and
Paying Agent for the Notes. The 

 

18

 

Registrar, the Conversion Agent and the Paying
Agent shall each maintain an office or agency in the Borough of Manhattan, The
City of New York.  The Registrar shall
keep a register of the Notes and of their transfer and exchange (the “Note
Register”).  The Company may have one or
more co-registrars and one or more additional conversions agents and paying
agents.  The term Paying Agent includes
any additional paying agents, the term Conversion Agent includes any additional
conversion agents and the term Registrar includes any co-registrar.  The Company may appoint and change any
Paying Agent, Conversion Agent or Registrar without prior notice to any Holder.

 

The Company shall enter into an appropriate
agency agreement with any Registrar, Conversion Agent or Paying Agent not a
party to this Indenture, which shall incorporate the terms of the TIA.  The agreement shall implement the provisions
of this Indenture that relate to such agent. 
The Company shall notify the Trustee in writing of the name and address
of each such agent.  If the Company
fails to maintain a Registrar, Conversion Agent or Paying Agent, the Trustee
shall act as such and shall be entitled to appropriate compensation therefor
pursuant to Section 11.7.  The
Company or any of its domestically incorporated Subsidiaries may act as Paying
Agent, Conversion Agent or Registrar.

 

The Company may remove any Registrar,
Conversion Agent or Paying Agent upon written notice to such Registrar,
Conversion Agent or Paying Agent and to the Trustee; provided, however,
that no such removal shall become effective until (i) acceptance of any
appointment by a successor as evidenced by an appropriate agreement entered
into by the Company and such successor Registrar, Conversion Agent or Paying
Agent, as the case may be, and delivered to the Trustee or (ii) notification to
the Trustee that the Trustee shall serve as Registrar, Conversion Agent or
Paying Agent until the appointment of a successor in accordance with clause (i)
above.  The Registrar, Conversion Agent
or Paying Agent may resign at any time upon written notice to the Company and
the Trustee.

 

SECTION 2.4.                       Paying Agent
To Hold Money and Securities in Trust. 
Except as otherwise provided herein, on or prior to 10:00 a.m. (New York
City time) on each due date of payment in respect of any Note, the Company shall
deposit with the Paying Agent a sum of money (in immediately available funds)
sufficient to make such payments when due. 
The Company shall require each Paying Agent (other than the Trustee) to
agree in writing that such Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all money held by such Paying Agent for the payment of
principal of, interest on, and other payments in respect of the Notes, and
shall notify the Trustee in writing of any default by the Company in making any
such payment.  If the Company or a
Subsidiary acts as Paying Agent, it shall segregate the money held by it as
Paying Agent and hold it as a separate trust fund for the benefit of the
Holders of the Notes.  The Company at
any time may require a Paying Agent (other than the Trustee) to pay all money
held by it to the Trustee and to account for any funds disbursed by such Paying
Agent.  Upon complying with this
Section 2.4, the Paying Agent (if other than the Company or a Subsidiary)
shall have no further liability for the money delivered to the Trustee.  Upon any bankruptcy, reorganization or
similar proceeding with respect to the Company, the Trustee shall serve as
Paying Agent for the Notes.

 

SECTION 2.5.                       Holder Lists.  The Trustee shall preserve in as current a
form as is reasonably practicable the most recent list available to it of the
names and addresses of Holders 

 

19

 

and shall otherwise comply with TIA
§ 312(a).  If the Trustee is not
the Registrar or to the extent otherwise required under the TIA, the Company,
on its own behalf, shall furnish to the Trustee, in writing at least seven
Business Days before each Interest Payment Date and at such other times as the
Trustee may reasonably request in writing within 15 days, a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of Holders and the Company shall otherwise comply with TIA
§ 312(a).

 

SECTION 2.6.                       Transfer and
Exchange.

 

(a)                                  The following
provisions shall apply with respect to any proposed transfer of a Note prior to
the date which is two years after the later of the date of its original issue
and the last date on which the Company or any Affiliate of the Company was the
owner of such Notes (or any predecessor thereto) (the “Resale Restriction
Termination Date”):

 

(i)                                     a transfer of
a Note or a beneficial interest therein to a QIB shall be made upon receipt by
the Trustee or its agent of a certificate substantially in the form of the Form
of Certificate to be Delivered Upon Exchange or Registration of Transfer of
Securities set forth on the reverse of the Note that the transferee is
purchasing the Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
“qualified institutional buyer” within the meaning of Rule 144A, and is aware
that the sale to it is being made in reliance on Rule 144A and acknowledges
that it has received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such information and
that it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration provided by
Rule 144A; and

 

(ii)                                  a transfer of
a Note or a beneficial interest therein to an IAI shall be made upon receipt by
the Trustee or its agent of a certificate substantially in the form set forth
in Section 2.7 from the proposed transferee and the delivery of an Opinion
of Counsel, certification and/or other information satisfactory to each of
them.

 

(b)                                 Upon the
transfer, exchange or replacement of Notes not bearing a Restricted Note
Legend, the Registrar shall deliver Notes that do not bear a Restricted Note
Legend.  Upon the transfer, exchange or
replacement of Notes bearing a Restricted Note Legend, the Registrar shall
deliver only Notes that bear such Restricted Note Legend unless (i) a Note is
being transferred pursuant to an effective registration statement or (ii) there
is delivered to the Registrar an Opinion of Counsel to the effect that neither
such legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.

 

(c)                                  The Registrar
shall retain copies of all letters, notices and other written communications
received pursuant to Section 2.1 or this Section 2.6 until the Notes
have matured and been paid in full.  The
Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.

 

(d)                                 The following
obligations with respect to transfers and exchanges of Notes shall apply:

 

20

 

(i)                                     To permit
registrations of transfers and exchanges, the Company shall, subject to the
other terms and conditions of this Article II, execute and the Trustee
shall upon receipt of a Company Order, authenticate Definitive Notes and Global
Notes at the Registrar’s request.

 

(ii)                                  No service
charge shall be made to a Holder for any registration of transfer or exchange,
but the Company may require payment of a sum sufficient to cover any transfer
tax, assessments or similar governmental charge payable in connection therewith
(other than any such transfer taxes, assessments or similar governmental
charges payable upon exchange or transfer pursuant to Section 6.4, 7.1 or
9.5).

 

(iii)                               The Registrar
shall not be required to register the transfer of or exchange of any Note (A)
for a period beginning at the opening of business 15 days before any selection
of Notes for redemption or repurchase and ending at the close of business on
the day notice of such redemption or repurchase is deemed to have been given to
all Holders of Notes to be so redeemed or repurchased or (B) selected for
redemption or repurchase in whole or in part, except for the transfer of the
unredeemed portion of any Note being redeemed in part.

 

(iv)                              Prior to the
due presentation for registration of transfer of any Note, the Company, the
Trustee, Paying Agent, the Conversion Agent or the Registrar may deem and treat
the Person in whose name a Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest
(including Liquidated Damages, if any) on such Note and for all other purposes
whatsoever, whether or not such Note is overdue, and none of the Company, the
Trustee, the Paying Agent, the Conversion Agent or the Registrar shall be
affected by notice to the contrary.

 

(v)                                 All Notes
issued upon any transfer or exchange pursuant to the terms of this Indenture
shall evidence the same debt and shall be entitled to the same benefits under
this Indenture as the Notes surrendered upon such transfer or exchange.

 

SECTION 2.7.                       Form of
Certificate To Be Delivered in Connection with Transfers to Institutional
Accredited Investors.

 

[Date]

 

AAR CORP.

c/o U.S. Bank National Association

60 Livingston Avenue

St. Paul, MN  55107

Attention: 
Corporate Trust Services

 

Ladies and Gentlemen:

 

This certificate is delivered to request a
transfer of
$                     principal
amount of the 2.875% Convertible Senior Notes due February 1, 2024 (the
“Notes”) of AAR CORP. (the “Company”).

 

21

 

Upon transfer, the Notes would be registered in
the name of the new beneficial owner as follows:

 

Name:

 

Address:

 

Taxpayer ID Number:

 

The undersigned represents and warrants to you
that:

 

1.                                       We are an
institutional accredited investor (as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act of 1933, as amended (the “Securities Act”))
purchasing for our own account or for the account of such an institutional
accredited investor at least $250,000 principal amount of the Notes, and we are
acquiring the Notes not with a view to, or for offer or sale in connection
with, any distribution in violation of the Securities Act.  We have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risk of our investment in the Notes and we invest in or purchase securities
similar to the Notes in the normal course of our business.  We and any accounts for which we are acting
are each able to bear the economic risk of the complete loss of our or its
investment.

 

2.                                       We understand
that the Notes have not been registered under the Securities Act and, unless so
registered, may not be sold except as permitted in the following sentence.  We agree on our own behalf and on behalf of
any investor account for which we are purchasing Notes to offer, sell or
otherwise transfer such Notes prior to the date that is two years after the
later of the date of original issue and the last date on which the Company or
any affiliate of the Company was the owner of such Notes (or any predecessor
thereto) (the “Resale Restriction Termination Date”) only (a) to the Company,
(b) pursuant to a registration statement which has been declared effective
under the Securities Act, (c) in a transaction complying with the requirements
of Rule 144A under the Securities Act (“Rule 144A”), to a person we reasonably
believe is a qualified institutional buyer under Rule 144A (a “QIB”) that
purchases for its own account or for the account of a QIB and to whom notice is
given that the transfer is being made in reliance on Rule 144A, (d) to an
institutional accredited investor within the meaning of Rule 501(a)(1), (2),
(3) or (7) under the Securities Act that is purchasing for its own account or
for the account of such an institutional accredited investor, in each case in a
minimum principal amount of Notes of $250,000 or (e) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or
accounts be at all times within our or their control and in compliance with any
applicable state securities laws.  The
foregoing restrictions on resale will not apply subsequent to the Resale
Restriction Termination Date.  If any
resale or other transfer of the Notes is proposed to be made pursuant to clause
(e) above prior to the Resale Restriction Termination Date, the transferor shall
deliver a letter from the transferee substantially in the form of this letter
to the Company and the Trustee, which shall provide, among other things, that
the transferee is an institutional accredited investor (within the 

 

22

 

meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act) and that it is acquiring such Notes for investment
purposes and not for distribution in violation of the Securities Act.  Each purchaser acknowledges that the Company
and the Trustee reserve the right prior to any offer, sale or other transfer
prior to the Resale Termination Date of the Notes pursuant to clauses (d), (e)
or (f) above to require the delivery of an opinion of counsel, certifications
and/or other information satisfactory to the Company and the Trustee.

 

	
   

  	
  TRANSFEREE:

  	
   

  
	
   

  	
   

  
	
   

  	
  BY:

  	
   

  
				

 

 

SECTION 2.8.                       Mutilated,
Destroyed, Lost or Stolen Notes.  If a
mutilated Note is surrendered to the Registrar or if the Holder of a Note
claims that the Note has been lost, destroyed or wrongfully taken, subject to compliance
with the provisions of the next sentence of this Section 2.8, the Company
shall issue and the Trustee, upon Company Order, shall authenticate a
replacement Note if the requirements of Section 8-405 of the Uniform
Commercial Code are met such that the Holder (a) notifies the Company and the
Trustee within a reasonable time after such Holder has notice of such loss,
destruction or wrongful taking and the Registrar has not registered a transfer
prior to receiving such notification, (b) makes such request to the Company
prior to the Company having notice that the Note has been acquired by a
protected purchaser as defined in Section 8-303 of the Uniform Commercial
Code (a “protected purchaser”) and (c) satisfies any other reasonable
requirements of the Company and the Trustee. 
Such Holder shall furnish an indemnity bond sufficient in the judgment
of the Company and the Trustee to protect the Company, the Trustee, the Paying
Agent, the Conversion Agent and the Registrar from any loss which any of them
may suffer if a Note is replaced, then, in the absence of notice to the
Company, or the Trustee, Paying Agent, Conversion Agent or Registrar, that such
Note has been acquired by a protected purchaser, the Company shall execute and
upon Company Order the Trustee shall authenticate and deliver, in exchange for
any such mutilated Note or in lieu of any such destroyed, lost or stolen Note,
a new Note of like tenor and principal amount, bearing a number not
contemporaneously outstanding.

 

In case any such mutilated, destroyed, lost or
stolen Note has become or is about to become due and payable, the Company in
its discretion, but subject to any conversion rights, may, instead of issuing a
new Note, pay such Note upon satisfaction of the conditions set forth in the preceding
paragraph.

 

Upon the issuance of any new Note under this
Section, the Company may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including attorneys’ fees and expenses and the fees and
expenses of the Trustee) in connection therewith.

 

Every new Note issued pursuant to this
Section in lieu of any mutilated, destroyed, lost or stolen Note shall
constitute an original additional contractual obligation of the Company and any
other obligor upon the Notes, whether or not the mutilated, destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled
to all benefits of this Indenture equally and proportionately with any and all
other Notes duly issued hereunder.

 

23

 

The provisions of this Section are
exclusive and shall preclude (to the extent lawful) all other rights and
remedies with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Notes.

 

SECTION 2.9.                       Outstanding
Notes.  Notes outstanding at any time
(“Outstanding Notes”) are all Notes authenticated by the Trustee except for:

 

(i)                                     Notes
theretofore canceled by the Trustee or delivered to the Trustee for
cancellation:

 

(ii)                                  Notes for the
payment or redemption of which money in the necessary amount has been
theretofore deposited with the Trustee or any Paying Agent (other than the
Company) in trust or set aside and segregated in trust by the Company (if the
Company shall act as its own Paying Agent) for the Holders of such Notes,
provided that if such Notes are to be redeemed, notice of such redemption has
been duly given pursuant to this Indenture or provision therefor reasonably
satisfactory to the Trustee has been made;

 

(iii)                               Notes which
have been paid pursuant to Section 2.8 or in exchange for or in lieu of
which other Notes have been authenticated and delivered pursuant to this
Indenture, other than any such Notes in respect of which there shall have been
presented to the Trustee proof satisfactory to it that such Notes are held by a
bona fide purchaser in whose hands such Notes are valid obligations of the
Company; and

 

(iv)                              Notes
converted into Common Stock pursuant to Article IX;

 

provided, however that in determining whether the
Holders of the requisite principal amount of Outstanding Notes are present at a
meeting of Holders of Notes for quorum purposes or have given, made or taken
any request, demand, authorization, direction, notice, consent or waiver or
other action hereunder, Notes owned by the Company or any Affiliate of the
Company shall be disregarded and deemed not to be Outstanding Notes, except
that, in determining whether the Trustee shall be protected in relying upon any
such determination as to the presence of a quorum or upon any such request,
demand, authorization, direction, notice, consent or waiver or other action,
only Notes which a Responsible Officer of the Trustee has been notified in
writing to be so owned shall be so disregarded.  Notes so owned which have been pledged in good faith may be
regarded as Outstanding Notes if the pledgee is not the Company or any
Affiliate of the Company, and the Trustee shall be protected in relying upon an
Officer’s Certificate to such effect.

 

SECTION 2.10.                 Temporary
Notes.  In the event that Definitive
Notes are to be issued under the terms of this Indenture, until such Definitive
Notes are ready for delivery, the Company may prepare and, upon receipt of a
Company Order, the Trustee shall authenticate temporary Notes.  Temporary Notes shall be substantially in
the form of Definitive Notes but may have variations that the Company considers
appropriate for temporary Notes. 
Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate Definitive Notes. 
After the preparation of Definitive Notes, the temporary Notes shall be
exchangeable for Definitive Notes upon surrender of the temporary Notes at any
office or agency maintained by the Company for that purpose and such exchange
shall be without charge to the Holder. 
Upon surrender 

 

24

 

for cancellation of any one or more temporary
Notes, the Company shall execute, and the Trustee shall authenticate and make
available for delivery in exchange therefor, one or more Definitive Notes
representing an equal principal amount of Notes.  Until so exchanged, the Holder of temporary Notes shall in all
respects be entitled to the same benefits under this Indenture as a Holder of
Definitive Notes.

 

SECTION 2.11.                 Cancellation.  The Company at any time may deliver Notes to
the Trustee for cancellation.  The
Registrar and the Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment.  The Trustee and no one else shall cancel and
return to the Company all Notes surrendered for registration of transfer,
exchange, payment, redemption, purchase, conversion or cancellation.  All Notes so delivered to the Trustee shall
be cancelled promptly by the Trustee. 
The Company may not issue new Notes to replace Notes it has paid or
delivered to the Trustee for cancellation.

 

At such time as all beneficial interests in a
Global Note have either been exchanged for Definitive Notes, transferred, paid,
redeemed, repurchased, converted or canceled, such Global Note shall be
returned by the Depositary or the Notes Custodian to the Trustee for
cancellation or retained and canceled by the Trustee.  At any time prior to such cancellation, if any beneficial
interest in a Global Note is exchanged for Definitive Notes, transferred in
exchange for an interest in another Global Note, paid, redeemed, repurchased,
converted or canceled, the principal amount of Notes represented by such Global
Note shall be reduced and an adjustment shall be made on the Global Note and on
the books and records of the Trustee (if it is then the Notes Custodian for
such Global Note) with respect to such Global Note, by the Trustee or the Notes
Custodian, to reflect such reduction.

 

SECTION 2.12.                 Payment of
Interest; Defaulted Interest. 
Interest on any Note which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name such Note (or one or more predecessor Notes) is registered at the close of
business on the Record Date for such interest at the office or agency of the
Company maintained for such purpose pursuant to Section 2.3.

 

Any interest on any Note which is payable, but
is not paid when the same becomes due and payable and such nonpayment continues
for a period of 30 days shall forthwith cease to be payable to the Holder on
the Record Date, and such defaulted interest and (to the extent lawful)
interest on such defaulted interest at the rate borne by the Notes (such
defaulted interest and interest thereon herein collectively called “Defaulted
Interest”) shall be paid by the Company, at its election in each case, as
provided in clause (a) or (b) below:

 

(a)                                  The Company may elect to make payment of
any Defaulted Interest to the Persons in whose names the Notes (or their
respective predecessor Notes) are registered at the close of business on a
Special Record Date (as defined below) for the payment of such Defaulted
Interest, which shall be fixed in the following manner.  The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each Note
and the date (not less than 30 days after such notice) of the proposed payment
(the “Special Interest Payment Date”), and the Company shall make arrangements
reasonably satisfactory to the Trustee to deposit with the Trustee an amount of
money equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest on or prior to the date of the proposed payment, such money 

 

25

 

when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted Interest as in
this clause provided.  Thereupon the
Trustee shall fix a record date (the “Special Record Date”) for the payment of
such Defaulted Interest which shall be not more than 15 days and not less than
10 days prior to the Special Interest Payment Date and not less than 10 days
after the receipt by the Trustee of the notice of the proposed payment.  The Trustee shall promptly notify the
Company of such Special Record Date, and in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date and Special Interest Payment Date therefor to be
given in the manner provided for in Section 15.2, not less than 10 days
prior to such Special Record Date. 
Notice of the proposed payment of such Defaulted Interest and the
Special Record Date and Special Interest Payment Date therefor having been so
given, such Defaulted Interest shall be paid on the Special Interest Payment
Date to the Persons in whose names the Notes (or their respective Predecessor
Notes) are registered at the close of business on such Special Record Date and shall
no longer be payable pursuant to the following clause (b).

 

(b)                                 The Company may make payment of any
Defaulted Interest in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Notes may be listed, and upon
such notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause, such
manner of payment shall be deemed practicable by the Trustee.

 

Subject to the foregoing provisions of this
Section, each Note delivered under this Indenture upon registration of transfer
of, or in exchange for, or in lieu of any other Note shall carry the rights to
interest accrued and unpaid which were carried by such other Note.

 

SECTION 2.13.                 Computation of
Interest.  Interest on the Notes shall
be computed on the basis of a 360-day year comprised of twelve 30-day months.

 

SECTION 2.14.                 CUSIP Numbers.  The Company in issuing the Notes and Common
Stock upon conversion of the Notes may use CUSIP numbers (if then generally in
use).  The Trustee shall not be
responsible for the use of CUSIP numbers, and the Trustee makes no
representation as to their correctness as printed on any Note, certificate of
Common Stock or notice to Holders and that reliance may be placed only on the
other identification numbers printed on the Notes, and any redemption shall not
be affected by any defect in or omission of such CUSIP numbers.  The Company shall promptly notify the Trustee
in writing of any change in the CUSIP numbers.

 

SECTION 2.15.                 Issuance,
Transfer and Exchange of Common Stock Issuable Upon Conversion of the Notes.

 

(a)                                  Shares of
Common Stock to be issued upon conversion of Notes prior to the effectiveness
of a Shelf Registration Statement shall be physically delivered in certificated
form to the Holders converting such Notes and the certificate representing such
shares of Common Stock shall bear the Restricted Stock Legend unless removed in
accordance with Section 2.1(e).

 

26

 

(b)                                 If (i) shares
of Common Stock to be issued upon conversion of Notes prior to the
effectiveness of a Shelf Registration Statement are to be registered in a name
other than that of the Holder of such Notes or (ii) shares of Common Stock represented
by a certificate bearing the Restricted Stock Legend are transferred
subsequently by such Holder, then, unless the Shelf Registration Statement has
become effective and such shares are being transferred pursuant to the Shelf
Registration Statement, the Holder must deliver to the transfer agent for the
Common Stock and to the Company a certificate in substantially the form of
Exhibit B as to compliance with the restrictions on transfer applicable to such
shares of Common Stock and neither the transfer agent nor the registrar for the
Common Stock shall be required to register any transfer of such Common Stock
not so accompanied by a properly completed certificate.

 

(c)                                  Except in
connection with a Shelf Registration Statement, if certificates representing
shares of Common Stock are issued upon the registration of transfer, exchange
or replacement of any other certificate representing shares of Common Stock
bearing the Restricted Stock Legend, or if a request is made to remove such
Restricted Stock Legend from certificates representing shares of Common Stock,
the certificates so issued shall bear the Restricted Stock Legend, or the
Restricted Stock Legend shall not be removed, as the case may be, unless there
is delivered to the Company such reasonably satisfactory evidence, which, in
the case of a transfer made pursuant to Rule 144 under the Securities Act, may
include an Opinion of Counsel, as may be reasonably required by the Company,
that neither the legend nor the restrictions on transfer set forth therein are
required to ensure that transfers thereof comply with the provisions of Rule
144A or Rule 144 under the Securities Act and that such shares of Common Stock
are securities that are not “restricted” within the meaning of Rule 144 under
the Securities Act.  Upon provision to
the Company of such reasonably satisfactory evidence, the Company shall cause
the transfer agent for the Common Stock to countersign and deliver certificates
representing shares of Common Stock that do not bear the Restricted Stock
Legend.

 

SECTION 2.16.                 Calculations
in Respect of the Notes.  The Company shall be responsible for making
all calculations called for under the Notes. These calculations include, but
are not limited to, determinations of the Trading Prices of the Notes and the
Closing Sale Price of the Common Stock, any accrued interest payable on the
Notes and the Conversion Rate of the Notes, and the projected payment schedule.
The Company shall make these calculations in good faith and, absent manifest
error, such calculations will be final and binding on Holders of the Note. The
Company shall provide to the Trustee a schedule of its calculations, and
the Trustee, subject to Sections 11.1 and 11.2, shall be entitled to rely upon
the accuracy of such calculations without independent verification. The Trustee
shall forward the Company’s calculations to any Holder of the Notes upon the
request of such Holder.

 

ARTICLE III

 

COVENANTS

 

SECTION 3.1.                       Payment of
Notes.  The Company shall promptly
pay the principal of and interest and Liquidated Damages, if any, on the Notes
on the dates and in the manner provided in the Notes and in this
Indenture.  Principal, interest and
Liquidated Damages, if any, 

 

27

 

shall be considered paid on the date due if on
such date the Trustee or the Paying Agent holds in accordance with this
Indenture money sufficient to pay all principal, interest and Liquidated
Damages, if any, then due and the Trustee or the Paying Agent, as the case may
be, is not prohibited from paying such money to the Holders on that date
pursuant to the terms of this Indenture.

 

The Company shall pay interest on overdue
principal at the rate specified therefor in the Notes, and it shall pay
interest on overdue installments of interest at the same rate to the extent
lawful.

 

Notwithstanding anything to the contrary
contained in this Indenture, the Company may, to the extent it is required to
do so by law, deduct or withhold income or other taxes imposed by the United
States of America or any state or local government from principal or interest
(including Liquidated Damages, if any) payments hereunder.

 

SECTION 3.2.                       Maintenance of
Office or Agency.  The Company will maintain in
the City of New York, as required by Section 2.3, an office or agency
where the Notes may be presented or surrendered for payment, where, if
applicable, the Notes may be surrendered for registration of transfer or
exchange or conversion and where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served.  The office of the Trustee, at 60 Livingston
Avenue, St. Paul, Minnesota 55107, Attention: 
Corporate Trust Services, shall be such office or agency of the Company
for payment, unless the Company shall designate and maintain some other office
or agency for one or more of such purposes. 
The Company will give prompt written notice to the Trustee of any change
in the location of any such office or agency. 
If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at
the Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.

 

The Company may also from time to time
designate one or more other offices or agencies (in or outside of the City of
New York) where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind any such designation; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the City of New York for such
purposes.  The Company will give prompt
written notice to the Trustee of any such designation or rescission and any
change in the location of any such other office or agency.

 

SECTION 3.3.                       Money and
Securities for Note Payments To Be Held in Trust.  If the Company shall at any time act as its
own Paying Agent, it will, on or before each due date of any payment in respect
of the Notes, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum of money in same day funds (or New York Clearing House
funds if such deposit is made prior to the date that such deposit is required
to be made), sufficient to make such payments when so becoming due until such
sums shall be paid to such Persons or otherwise disposed of as herein provided
and will promptly notify the Trustee in writing of its action or failure to so
act.

 

28

 

Whenever the Company shall have one or more
Paying Agents for the Notes, it will, on or before each due date of any payment
in respect of the Notes, deposit with any Paying Agent a sum of money in same
day funds (or New York Clearing House funds if such deposit is made prior to
the date on which such deposit is required to be made, that shall be available
to the Trustee by 11:00 a.m. New York City time on such due date, sufficient to
pay the amount so becoming due, such sum to be held in trust for the benefit of
the Persons entitled to such payment, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee in writing of such action
or any failure to so act.

 

The Company will cause each Paying Agent (other
than the Trustee) to execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee, subject to the provisions of
this Section 3.3, that such Paying Agent will:

 

(a)                                  hold all money held by it for the making
of any payments in respect of the Notes in trust for the benefit of the Persons
entitled thereto until such money shall be paid to such Persons or otherwise
disposed of as herein provided;

 

(b)                                 give the Trustee prompt written notice
of any Default by the Company (or any other obligor upon the Notes) in the
making of any payment in respect of the Notes; and

 

(c)                                  at any time during the continuance of any
such Default, upon the written request of the Trustee, forthwith pay to the
Trustee all money so held in trust by such Paying Agent.

 

The Company may at any time, for the purpose of
obtaining the satisfaction and discharge of this Indenture or for any other
purpose, pay, or by Company Order direct any Paying Agent to pay, to the
Trustee all money held in trust by the Company or such Paying Agent, such money
to be held by the Trustee upon the same trusts as those upon which such money
were held by the Company or such Paying Agent; and, upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money and/or shares of Common Stock.

 

Any money deposited with the Trustee or any
Paying Agent, or then held by the Company, in trust for the payment of any
amounts due in respect of the Notes and remaining unclaimed for two years after
such payment has become due and payable shall be paid to the Company on Company
Order, or (if then held by the Company) shall be discharged from such trust;
and the Holder of such Note shall thereafter, as an unsecured general creditor,
look only to the Company for payment thereof, and all liability of the Trustee
or such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however,
that the Trustee or such Paying Agent, before being required to make any such
repayment to the Company, shall at the expense of the Company cause to be published
once, in a leading daily newspaper (if practicable, The Wall Street Journal (Eastern Edition)) printed in the
English language and of general circulation in New York City, notice that such
money and/or shares of Common Stock remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
publication nor shall it be later than two years after such payment shall have
become due and payable, any unclaimed balance of such money then remaining will
be repaid to the Company.

 

29

 

SECTION 3.4.                       Corporate
Existence.  Subject to Article IV,
the Company will do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence and the corporate rights
(charter and statutory) licenses and franchises of the Company; provided, however,
that the Company shall not be required to preserve any such existence, right,
license or franchise if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company, and that the loss thereof is not, and will not be, disadvantageous
in any material respect to the Holders.

 

SECTION 3.5.                       Further
Instruments and Acts.  Upon
request of the Trustee, the Company will execute and deliver such further
instruments and do such further acts as may be reasonably necessary or proper
to carry out more effectively the purpose of this Indenture.

 

SECTION 3.6.                       Liquidated
Damages Notices.  In the event that the Company
is required to pay liquidated damages to Holders of Notes pursuant to the
Registration Rights Agreement (“Liquidated Damages”), the Company will provide
a direction or order in the form of a written notice (“Liquidated Damages
Notice”) to the Trustee of its obligation to pay Liquidated Damages no later
than five Business Days prior to the proposed payment date set for the amount
of Liquidated Damages, and the Liquidated Damages Notice shall set forth the
amount of Liquidated Damages to be paid by the Company on such Payment Date and
direct the Trustee to make payment.

 

SECTION 3.7.                       SEC Reports. 
The Company shall file all reports and other information and documents
which it is  required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act, and within
15 days after it files them with the Commission, the Company shall send copies
of all such reports, information and other documents to the Trustee.

 

SECTION 3.8.                       Compliance Certificates. 
The Company shall deliver to the Trustee, within 90 days after the end
of each fiscal year of the Company (beginning with the fiscal year ending May
31, 2004), an Officers’ Certificate as to the signer’s knowledge of the
Company’s compliance with all conditions and covenants on their part contained
in this Indenture and stating whether or not the signer knows of any Default or
Event of Default.  If such signer knows
of such a Default or Event of Default, the Officers’ Certificate shall describe
the Default or Event of Default and the efforts to remedy the same.  For the purposes of this Section 3.8,
compliance shall be determined without regard to any grace period or
requirement of notice provided pursuant to the terms of this Indenture.

 

SECTION 3.9.                       Rule 144A Information Requirement. 
Within the period prior to the expiration of the holding period
applicable to sales of the Notes under Rule 144(k) under the Securities Act (or
any successor provision), the Company covenants and agrees that it shall,
during any period in which it is not subject to Section 13 or 15(d) under
the Exchange Act, upon the request of any Holder or beneficial holder of the
Notes or any Common Stock issued upon conversion thereof make available to such
Holder or beneficial holder of Notes or any Common Stock issued upon conversion
thereof in connection with any sale thereof and any prospective purchaser of
Notes or such Common Stock designated by such Holder or beneficial holder, the
information required pursuant to Rule 144A(d)(4) under the Securities Act and
they will take such further action as any Holder or beneficial holder of such
Notes or such Common Stock may 

 

30

 

reasonably request, all to the
extent required from time to time to enable such Holder or beneficial holder to
sell its Notes or Common Stock without registration under the Securities Act
within the limitation of the exemption provided by Rule 144A, as such Rule may
be amended from time to time.  Upon the
request of any Holder or any beneficial holder of the Notes or such Common
Stock, the Company will deliver to such Holder a written statement as to
whether such Holder and prospective purchaser have complied with such
requirements

 

SECTION 3.10.                 Stay,
Extension and Usury Laws.  The Company covenants (to the extent that it
may lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law or other law which would prohibit or forgive the Company
from paying all or any portion of the principal of, interest or Liquidated
Damages, if any, on the Notes as contemplated herein, wherever enacted, now or
at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture, and the Company (to the extent it may lawfully
do so) hereby expressly waives all benefit or advantage of any such law and
covenant that it will not, by resort to any such law, hinder, delay or impede
the execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.

 

SECTION 3.11.                 Notice of
Default.  In the event that any Default that could
mature into an Event of Default under Section  10.1(c) hereof shall occur,
the Company shall give written notice of such Default to the Trustee within 30
days of such Default.

 

ARTICLE IV

 

SUCCESSOR COMPANY

 

SECTION 4.1.                       Merger and
Consolidation.  The Company shall not (1)
consolidate with or merge with or into, or convey, sell, transfer, lease or
otherwise dispose of all or substantially all its properties and assets to, any
other Person in any one transaction or series of related transactions, or (2)
permit any Person to consolidate with or merge into the Company, unless:

 

(i)                                     in the case of a merger or
consolidation, either the Company is the surviving Person, or if the Company is
not the surviving Person, the surviving Person formed by such consoldation or
into which the Company is merged or to which the properties and assets of the
Company are transferred (such surviving Person in any such case, the “Successor
Company”) shall be a corporation organized and existing under the laws of the
United States of America, any State of the United States or the District of
Columbia and the Successor Company (if not the Company) shall expressly assume,
by supplemental indenture, executed and delivered to the Trustee, in form
reasonably satisfactory to the Trustee, the payment when due of the principal
of and interest on the Notes and the performance of each of the Company’s other
obligations under the Notes and this Indenture;

 

31

 

(ii)                                  immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing; and

 

(iii)                               the Company shall have delivered to the
Trustee on or prior to the proposed transaction an Officers’ Certificate and an
Opinion of Counsel, each stating that (a) such consolidation, merger or
transfer and such supplemental indenture (if any) comply with this Indenture,
(b) the Successor Company agrees to be bound by this Indenture and (c) that all
conditions precedent herein provided for relating to such transaction have been
complied with.

 

For purposes of this Article IV, the sale,
lease, conveyance, assignment, transfer, or other disposition of all or
substantially all of the properties and assets of one or more Subsidiaries of
the Company, which properties and assets, if held by the Company instead of such
Subsidiaries, would constitute all or substantially all of the properties and
assets of the Company on a consolidated basis, shall be deemed to be the
transfer of all or substantially all of the properties and assets of the
Company.

 

SECTION 4.2.                       Successor Corporation
Substituted.  Upon any consolidation of the Company with,
or merger of the Company into, any other Person or any conveyance, transfer or
lease of all or substantially all the properties and assets of the Company in
accordance with Section 4.1, the Successor Company shall succeed to, and
be substituted for, and may exercise every right and power of, the Company
under this Indenture with the same effect as if the Successor Company had been
named as the Company herein, and thereafter, except in the case of a lease of
all or substantially all of its assets, the predecessor Person shall be
relieved of all obligations and covenants under this Indenture and the Notes.

 

ARTICLE V

 

REDEMPTION OF NOTES

 

SECTION 5.1.                       Optional
Redemption.  On or after February 1,
2008, the Notes may be redeemed for cash, as a whole or from time to time in
part, subject to the conditions specified in the form of Note set forth in
Exhibit A hereto, which is hereby incorporated by reference and made a part of
this Indenture, in an amount equal to the Redemption Price.

 

SECTION 5.2.                       Applicability
of Article.  Redemption of Notes at the
election of the Company or otherwise, as permitted or required by any provision
of this Indenture or the Notes, shall be made in accordance with such provision
and this Article.

 

SECTION 5.3.                       Election to
Redeem; Notice to Trustee.  The
election of the Company to redeem any Notes pursuant to Section 5.1 shall
be evidenced by a Board Resolution.  In
case of any redemption at the election of the Company, the Company shall, not
later than the earlier of the date that is 35 days prior to the Redemption Date
fixed by the Company and the date on which notice is given to the Holders
(except as provided in Section 5.5 or unless a shorter notice shall be satisfactory
to the Trustee), notify the Trustee of such Redemption Date

 

32

 

and of the principal amount of Notes to be
redeemed, deliver to the Trustee such documentation and records as shall enable
the Trustee to select the Notes to be redeemed pursuant to Section 5.4 and
direct the Trustee to redeem the Notes in accordance with the Board
Resolution.  Any such notice may be
canceled at any time prior to notice of such redemption being mailed to any
Holder and shall thereby be void and of no effect.

 

SECTION 5.4.                       Selection by
Trustee of Notes To Be Redeemed.  If
less than all the Notes are to be redeemed at any time pursuant to an optional
redemption, the particular Notes to be redeemed shall be selected not more than
60 days prior to the Redemption Date by the Trustee, from the outstanding Notes
not previously called for redemption, in compliance with the requirements of
the principal securities exchange, if any, on which such Notes are listed, or,
if such Notes are not so listed, on a pro
rata basis, by lot or by such
other method as the Trustee shall deem fair and appropriate (and in such manner
as complies with applicable legal requirements) and which may provide for the
selection for redemption of portions of the principal of the Notes; provided, however,
that Notes selected for partial redemption shall be in denominations of $1,000
and integral multiples thereof.

 

The Trustee shall promptly notify the Company
in writing of the Notes selected for redemption and, in the case of any Notes
selected for partial redemption, the method it has chosen for the selection of
Notes and the principal amount thereof to be redeemed and upon the Company’s
written approval of such selection, the Trustee shall redeem the selected Notes.

 

For all purposes of this Indenture, unless the
context otherwise requires, all provisions relating to redemption of Notes
shall relate, in the case of any Note redeemed or to be redeemed only in part,
to the portion of the principal amount of such Note which has been or is to be
redeemed.

 

SECTION 5.5.                       Notice of
Redemption.  Notice of redemption shall be
given by first class mail not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of Notes to be redeemed.  At the Company’s written request, the
Trustee shall give notice of redemption in the Company’s name and at the
Company’s expense; provided, however, that the Company shall deliver to
the Trustee, at least 35 days prior to the Redemption Date (unless a shorter
notice period shall be satisfactory to the Trustee) a Company Order requesting
that the Trustee give such notice at the Company’s expense and setting forth
the information to be stated in such notice as provided in the following items:

 

(i)                                     the Redemption Date,

 

(ii)                                  the Redemption Price and the amount of
accrued interest to but excluding the Redemption Date payable as provided in
Section 5.7, if any,

 

(iii)                               the then existing Conversion Rate,

 

(iv)                              if less than all outstanding Notes are
to be redeemed, the aggregate principal amount of Notes to be redeemed and the
aggregate principal amount of Notes to be outstanding after such partial
redemption,

 

33

 

(v)                                 in case any Note is to be redeemed in
part only, the notice that relates to such Note shall state that on and after
the Redemption Date, upon surrender of such Note, the Holder will receive,
without charge, a new Note or Notes of authorized denominations for the
principal amount thereof remaining unredeemed,

 

(vi)                              that on the Redemption Date, 100% of the
principal amount of the Notes to be redeemed (and accrued interest, if any, to
but excluding the Redemption Date payable as provided in Section 5.7) will
become due and payable upon each such Note, or the portion thereof, to be
redeemed, and, unless the Company defaults in making the redemption payment,
that interest (and Liquidated Damages, if any) on Notes called for redemption
(or the portion thereof) will cease to accrue on and after said date,

 

(vii)                           the place or places where such Notes are
to be surrendered for payment of the Redemption Price and accrued interest, if
any,

 

(viii)                        the name and address of the Paying Agent
and the Conversion Agent,

 

(ix)                                that Notes called for redemption must be
surrendered to the Paying Agent to collect the Redemption Price,

 

(x)                                   the CUSIP number of the Notes to be
redeemed, provided that no representation is made as to the accuracy or
correctness of the CUSIP number, if any, listed in such notice or printed on
the Notes, and any redemption shall not be affected by any defect in such CUSIP
numbers,

 

(xi)                                the paragraph of the Notes pursuant to
which the Notes are to be redeemed,

 

(xii)                             that the Notes called for redemption may
be converted at any time before the close of business one Business Day prior to
the Redemption Date,

 

(xiii)                          whether the Company intends to satisfy
its obligation by delivering Common Stock, cash or a combination of cash and
Common Stock (and in such case, the dollar amount per Note to be satisfied in
cash) in the event that Holders elect to convert their Notes in connection with
the redemption, and

 

(xiv)                         the Holders who wish to convert Notes
must comply with the procedures in Article IX and paragraph 8 of the
Notes.

 

If the Company exercises its right to redeem
the Notes, in whole or in part, the Company shall disseminate a press release
containing information regarding the redemption, through a public medium that
is customary for such press releases or publish the information on its Web Site
or through such other public medium as the Company may use at that time.

 

SECTION 5.6.                       Deposit of
Redemption Price.  On or before 10:00 a.m. on
any Redemption Date, the Company shall deposit with the Trustee or with a
Paying Agent (or, if the Company is acting as its own Paying Agent, segregate
and hold in trust as provided in Section 2.4) an amount of money
sufficient to pay the Redemption Price of the Notes which are to be 

 

34

 

redeemed on that date, other than Notes or
portions of Notes called for redemption that are beneficially owned by the
Company and have been delivered by the Company to the Trustee for cancellation
or Notes that have been converted.

 

SECTION 5.7.                       Notes Payable
on Redemption Date.  Notice of redemption having been
given as aforesaid, the Notes or portions of Notes so to be redeemed shall, on
the Redemption Date, become due and payable at a price equal to the Redemption
Price, except for Notes which are converted in accordance with the terms of
this Indenture, and from and after such date (unless the Company shall default
in the payment of the Redemption Price) such Notes shall cease to bear interest
(and Liquidated Damages, if any).  Upon
surrender of any such Note for redemption in accordance with said notice, such
Note shall be paid by the Company at the Redemption Price on the Redemption
Date (subject to the rights of Holders of record on the relevant Record Date to
receive interest due on the relevant Interest Payment Date).

 

If any Note called for redemption shall not be
so paid upon surrender thereof for redemption, the principal shall, until paid,
bear interest from the Redemption Date at the rate borne by the Notes.

 

SECTION 5.8.                       Notes Redeemed
in Part.  Any Note which is to be
redeemed only in part (pursuant to the provisions of this Article) shall be
surrendered at the office or agency of the Company maintained for such purpose
pursuant to Section 2.3 (with due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or such Holder’s attorney duly authorized in writing),
and the Company shall execute, and the Trustee shall authenticate and make
available for delivery to the Holder of such Note at the expense of the Company,
a new Note or Notes, of any authorized denomination as requested by such
Holder, in an aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal amount of the Note so surrendered, provided, that each such new Note will be in a
principal amount of $1,000 or integral multiple thereof.

 

If a Holder converts a portion of its Note
prior to receipt of the redemption notice for a Note to be redeemed only in
part, the converted portion will be deemed to be from the portion selected for
redemption.  In the event of any
redemption in part, the Company will not be required to (i) issue, register the
transfer of or exchange any Note during a period beginning at the opening of
business 15 days before any selection of Notes for redemption and ending at the
close of business on the earliest date on which the relevant notice of
redemption is deemed to have been given to all Holders of Notes to be so
redeemed; or (ii) register the transfer of or exchange any Note so selected for
redemption, in whole or in part, except the unredeemed portion of any Note
being redeemed in part.

 

SECTION 5.9.                       Arrangement on
Call for Redemption.

 

(a)                                  In connection
with any redemption of Notes, the Company may arrange at or shortly before the
time of the redemption for the purchase and conversion of any Notes called for
redemption by an agreement with one or more investment banks or other
purchasers to purchase such Notes by paying to the Trustee in trust for the
Holders, on or prior to 11:00 a.m. (New York City time) on the Redemption Date,
an amount that, together with any amounts deposited with the Trustee by the
Company for the redemption of such Notes, is not less than the Redemption 

 

35

 

Price of such Notes. Notwithstanding anything
to the contrary contained in this Article V, the obligation of the Company
to pay the Redemption Prices of such Notes shall be deemed to be satisfied and
discharged to the extent such amount is so paid by such purchasers; provided, however, that nothing in this
Section 5.9 shall relieve the Company of its obligation to pay the
Redemption Price (plus accrued interest and Liquidated Damages, if any to, but
excluding, the relevant Redemption Date) on Notes called for redemption.

 

(b)                                 If such an
agreement is entered into, any Notes called for redemption that are not duly
surrendered for conversion by the Holders thereof may, at the option of the
Company, be deemed, to the fullest extent permitted by law, acquired by such
purchasers from such Holders as of the close of business on the Redemption
Date, subject to payment of the above amount as aforesaid.

 

(c)                                  At the written
direction of the Company, the Trustee shall hold and pay to the Holders whose
Notes are selected for redemption any such amount paid to it for purchase in
the same manner as it would moneys deposited with it by the Company for the
redemption of Notes.  Without the
Trustee’s prior written consent, no arrangement between the Company and such
purchasers for the purchase and conversion of any Notes shall increase or
otherwise affect any of the powers, duties, responsibilities or obligations of
the Trustee as set forth in this Indenture, and the Company agrees to indemnify
the Trustee from, and hold it harmless against, any loss, liability or expense
arising out of or in connection with any such arrangement for the purchase of
any Notes between the Company and such purchasers, including the reasonable
costs and out-of-pocket expenses incurred by the Trustee in the defense of any
claim or liability arising out of or in connection with the exercise or
performance of any of its powers, duties, responsibilities or obligations under
this Section 5.9.

 

ARTICLE VI

 

PURCHASE UPON
A DESIGNATED EVENT

 

SECTION 6.1.                       Purchase at
the Option of the Holder upon a Designated Event.  If a Designated Event shall occur, each
Holder shall have the right, at such Holder’s option, to require the Company to
purchase any or all of such Holder’s Notes not previously called for redemption
for cash on the date that is no later than 45 days after the date of the
Company Notice of the occurrence of such Designated Event (subject to extension
to comply with applicable law, as provided in Section 8.5) (the
“Designated Event Purchase Date”).  The
Notes shall be repurchased in integral multiples of $1,000 of the principal
amount.  The Company shall purchase such
Notes at a price (the “Designated Event Purchase Price”) equal to 100% of the
principal amount of the Notes to be purchased plus accrued and unpaid interest,
if any, and Liquidated Damages, if any, to, but not including, the Designated
Event Purchase Date.

 

SECTION 6.2.                       Notice of
Designated Event.  The Company, or at its
request (which must be received by the Paying Agent at least three Business
Days (or such lesser period as agreed to by the Paying Agent) prior to the date
the Paying Agent is requested to give such notice as described below), the
Paying Agent in the name of and at the expense of the Company, 

 

36

 

shall mail to all Holders and the Trustee a
Company Notice of the occurrence of a Designated Event and of the purchase
right arising as a result thereof, including the information required by
Section 8.1, on or before the 30th day after the occurrence of such
Designated Event.  In addition, the
Company will disseminate a press release containing information about the
Designated Event and the repurchase right arising as a result of the Designated
Event through a public medium that is customary for such press releases or
publish the information on the Company’s Web Site or through such other public
medium as the Company may use at that time.

 

SECTION 6.3.                       Exercise of
Option.  For a Note to be so purchased
at the option of the Holder, the Trustee must receive such Note duly endorsed
for transfer, together with a written notice of purchase (a “Designated Event
Purchase Notice”) and the form entitled “Option of Holder to Elect Purchase” on
the reverse thereof duly completed, on or before the 30th day after the date of
the Company Notice of the occurrence of such Designated Event, subject to
extension to comply with applicable law, as provided in Section 8.5.  The Designated Event Purchase Notice shall
state:

 

(i)                                     if the Notes are certificated, the
certificate numbers of the Notes which the Holder shall deliver to be
purchased, or, if the Notes are not certificated, the Designated Event Purchase
Notice must comply with appropriate Depositary procedures;

 

(ii)                                  the portion of the principal amount of
the Notes which the Holder shall deliver to be purchased, which portion must be
$1,000 in principal amount or an integral multiple thereof; and

 

(iii)                               that such Notes shall be purchased as of
the Designated Event Purchase Date pursuant to the terms and conditions specified
in paragraph 8 of the Notes and in this Indenture.

 

SECTION 6.4.                       Procedures.  The Company shall purchase from a Holder,
pursuant to this Article VI, Notes if the principal amount of such Notes
is $1,000 or a multiple of $1,000 if so requested by such Holder.

 

Any purchase by the Company contemplated
pursuant to the provisions of this Article VI shall be consummated by the
delivery of the Designated Event Purchase Price to be received by the Holder
promptly following the later of the Designated Event Purchase Date or the time
of book-entry transfer or delivery of the Notes.

 

The Paying Agent shall promptly notify the
Company of the receipt by it of any Designated Event Purchase Notice.

 

On or before 11:00 a.m., New York City time, on
the Designated Event Purchase Date, the Company shall deposit with the Paying
Agent (or if the Company or an Affiliate of the Company is acting as the Paying
Agent, shall segregate and hold in trust) cash, sufficient to pay the aggregate
Designated Event Purchase Price of the Notes to be purchased pursuant to this
Article VI.  Payment by the Paying
Agent of the Designated Event Purchase Price for such Notes shall be made
promptly following the later of the Designated Event Purchase Date and the time
of book-entry transfer or delivery of such Notes.  If the Paying Agent holds, in accordance with the terms of this
Indenture, cash sufficient to pay the Designated Event Purchase Price of such 

 

37

 

Notes on the Designated Event Purchase Date,
then, on and after such date, such Notes shall cease to be outstanding and
interest (including Liquidated Damages, if any) on such Notes shall cease to
accrue, whether or not book-entry transfer of such Notes is made or such Notes
are delivered to the Paying Agent, and all other rights of the Holder shall
terminate (other than the right to receive the Designated Event Purchase Price
upon delivery or transfer of the Notes). 
Nothing herein shall preclude the withholding of any tax required by law
or regulations.

 

The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that the Paying Agent shall hold
in trust for the benefit of Holders or the Trustee all cash held by the Paying
Agent for the payment of the Designated Event Purchase Price and shall notify
the Trustee of any Default by the Company in making any such payment.  The Company at any time may require a Paying
Agent to deliver all cash held by it to the Trustee and to account for any
funds disbursed by the Paying Agent. 
Upon doing so, the Paying Agent shall have no further liability for the
cash delivered to the Trustee.

 

All questions as to the validity, eligibility
(including time of receipt) and acceptance of any Notes for repurchase shall be
determined by the Company, whose determination shall be final and binding.

 

ARTICLE VII

 

OPTIONAL
PURCHASE

 

SECTION 7.1.                       Purchase of
Notes by the Company at the Option of the Holder.

 

(a)                                  On each of
February 1, 2010, February 1, 2014 and February 1, 2019 (each, a
“Repurchase Date”), Holders shall have the option to require the Company to
purchase any Notes at 100% of the principal amount of the Notes to be
repurchased plus accrued and unpaid interest, if any, and Liquidated Damages,
if any, to but not including such Repurchase Date, subject to the satisfaction
by or on behalf of the Holder of the requirements set forth below:

 

(1)                                  Purchases of Notes under this
Section 7.1 shall be made, at the option of the Holder thereof, upon
delivery to the Paying Agent by the Holder of a written notice of repurchase (a
“Purchase Notice”) in the form attached to the Note at any time from the
opening of business on the date that is 20 Business Days prior to a Repurchase
Date until the close of business on the last Business Day immediately prior to
such Repurchase Date, stating:

 

(i)                                     if the Notes
are certificated, the certificate numbers of the Notes which the Holder will
deliver to be purchased, or, if the Notes are not certificated, the Purchase
Notice must comply with appropriate Depositary procedures;

 

(ii)                                  the portion of
the principal amount of the Notes which the Holder will deliver to be
purchased, which portion must be $1,000 in principal amount or an integral
multiple thereof; and

 

38

 

(iii)                               that such
Notes shall be purchased as of the Repurchase Date pursuant to the terms and
conditions specified in paragraph 7 of the Notes and in this Indenture; and

 

(2)                                  delivery or book-entry transfer of such
Notes to the Paying Agent prior to, on or after the Repurchase Date (together
with all necessary endorsements) at the offices of the Paying Agent, such
delivery or transfer being a condition to receipt by the Holder of the Purchase
Price therefor; provided, however, that such Purchase Price shall be
so paid pursuant to this Section 7.1 only if the Notes so delivered or
transferred to the Paying Agent shall conform in all respects to the
description thereof in the related Purchase Notice.

 

The Purchase Price with respect to Notes
purchased on a Repurchase Date shall be paid solely in cash.

 

(b)                                 The Company
shall purchase from a Holder, pursuant to the terms of this Section 7.1,
Notes if the principal amount of such Notes is $1,000 or a multiple of $1,000
if so requested by such Holder.

 

(c)                                  Any purchase
by the Company contemplated pursuant to the provisions of this Section 7.1
shall be consummated by the delivery of the Purchase Price to be received by
the Holder promptly following the later of the Repurchase Date and the time of
book-entry transfer or delivery of the Notes.

 

(d)                                 Notwithstanding
anything herein to the contrary, any Holder delivering to the Paying Agent the
Purchase Notice contemplated by this Section 7.1 shall have the right at
any time prior to the close of business on the Business Day prior to the
Repurchase Date to withdraw such Purchase Notice (in whole or in part) by
delivery of a written notice of withdrawal to the Paying Agent in accordance
with Section 8.2.

 

(e)                                  The Paying
Agent shall promptly notify the Company of the receipt by it of any Purchase
Notice or written notice of withdrawal thereof.

 

(f)                                    On or before
11:00 a.m. on the Repurchase Date, the Company shall deposit with the Paying
Agent (or if the Company or an Affiliate of the Company is acting as the Paying
Agent, shall segregate and hold in trust) cash sufficient to pay the aggregate
Purchase Price of the Notes to be purchased pursuant to this
Section 7.1.  Payment by the Paying
Agent of the Purchase Price for such Notes shall be made promptly following the
later of the Repurchase Date and the time of book-entry transfer or delivery of
such Notes.  If the Paying Agent holds,
in accordance with the terms of this Indenture, cash sufficient to pay the
Purchase Price of such Notes on the Repurchase Date, then, on and after such
date, such Notes shall cease to be outstanding and interest and Liquidated
Damages, if any, on such Notes shall cease to accrue, whether or not book-entry
transfer of such Notes is made or such Notes are delivered to the Paying Agent,
and all other rights of the Holder shall terminate (other than the right to
receive the Purchase Price upon delivery or transfer of the Notes).

 

(g)                                 The Company
shall require each Paying Agent (other than the Trustee) to agree in writing
that the Paying Agent shall hold in trust for the benefit of Holders or the
Trustee 

 

39

 

all cash held by the Paying Agent for the
payment of the Purchase Price and shall notify the Trustee of any Default by
the Company in making any such payment. 
The Company at any time may require a Paying Agent to deliver all cash
held by it to the Trustee and to account for any funds disbursed by the Paying
Agent.  Upon doing so, the Paying Agent
shall have no further liability for the cash and/or Common Stock, as the case
may be, delivered to the Trustee.

 

ARTICLE VIII

 

CONDITIONS AND
PROCEDURES FOR PURCHASES AT OPTION OF HOLDERS

 

SECTION 8.1.                       Notice of
Repurchase Date or Designated Event. 
The Company shall send notices (each, a “Company Notice”) to the Holders
(and to Beneficial Owners as required by applicable law) at their addresses
shown in the Note Register not less than 20 Business Days prior to each
Repurchase Date, in accordance with Section 7.1 hereof, or on or before
the 30th day after the occurrence of a Designated Event, in accordance with
Section 6.2 hereof, as the case may be (each such date of delivery, a
“Company Notice Date”). The Company shall also deliver a copy of such Company
Notice to the Trustee and any Paying Agent. 
Each Company Notice shall include a form of Purchase Notice or
Designated Event Purchase Notice to be completed by a Holder and shall state:

 

(i)                                     the applicable Purchase Price or
Designated Event Purchase Price, excluding accrued and unpaid interest,
Conversion Rate at the time of such notice (and any adjustments to the
Conversion Rate) and, to the extent known at the time of such notice, the
amount of accrued and unpaid interest and Liquidated Damages, if any, that will
be payable with respect to the Notes on the applicable Repurchase Date or
Designated Event Purchase Date;

 

(ii)                                  if the notice relates to a Designated
Event, the events causing the Designated Event and the date of the Designated
Event;

 

(iii)                               the Repurchase Date or Designated Event
Purchase Date;

 

(iv)                              the last date on which a Holder may
exercise its purchase right;

 

(v)                                 the name and address of the Paying Agent
and the Conversion Agent;

 

(vi)                              that Notes must be surrendered to the
Paying Agent to collect payment of the Purchase Price or Designated Event Purchase
Price;

 

(vii)                           that Notes as to which a Purchase Notice
or Designated Event Purchase Notice has been given may be converted only if the
applicable Purchase Notice or Designated Event Purchase Notice has been
withdrawn in accordance with the terms of this Indenture;

 

(viii)                        that the Purchase Price or Designated
Event Purchase Price for any Notes as to which a Purchase Notice or a
Designated Event Purchase Notice, as applicable, has 

 

40

 

been given and not withdrawn
shall be paid by the Paying Agent promptly following the later of the
Repurchase Date or Designated Event Purchase Date, as applicable, and the time
of book-entry transfer or delivery of such Notes;

 

(ix)                                the procedures the Holder must follow under
Article VI or VII hereof, as applicable, and this Article VIII;

 

(x)                                   briefly, the conversion rights of the
Notes;

 

(xi)                                that, unless the Company defaults in
making payment of such Purchase Price or Designated Event Purchase Price on
Notes covered by any Purchase Notice or Designated Event Purchase Notice, as
applicable, interest and Liquidated Damages, if any, will cease to accrue on
and after the Repurchase Date or Designated Event Purchase Date, as applicable;

 

(xii)                             the CUSIP or ISIN number of the Notes;
and

 

(xiii)                          the procedures for withdrawing a
Purchase Notice or Designated Event Purchase Notice.

 

In connection with providing such Company
Notice, the Company will issue a press release and publish a notice containing
the information in such Company Notice in a newspaper of general circulation in
the City of New York or publish such information on the Company’s then existing
website or through such other public medium as the Company may use at the time.

 

If any of the Notes is in the form of  a Global Note, then the Company shall modify
such Company Notice to the extent necessary to accord with the procedures of
the Depositary applicable to the repurchase of Global Notes.

 

At the Company’s request, made at least one
Business Day prior to the date upon which such notice is to be mailed, and at
the Company’s expense, the Paying Agent shall give the Company Notice in the
Company’s name to the Holders; provided,
however, that, in all cases, the
text of the Company Notice shall be prepared by the Company.

 

SECTION 8.2.                       Effect of
Purchase Notice or Designated Event Purchase Notice.  Upon receipt by the Company of a properly
completed and executed Purchase Notice or Designated Event Purchase Notice
specified in Section 7.1 or Section 6.3, as applicable, the Holder of
the Notes in respect of which such Purchase Notice or Designated Event Purchase
Notice, as the case may be, was given shall (unless such Purchase Notice or
Designated Event Purchase Notice is withdrawn as specified in the following two
paragraphs) thereafter be entitled to receive solely the Purchase Price or
Designated Event Purchase Price with respect to such Notes.  Such Purchase Price or Designated Event
Purchase Price shall be paid by the Paying Agent to such Holder promptly
following the later of (i) the Repurchase Date or the Designated Event Purchase
Date, as the case may be, with respect to such Notes (provided the conditions in
Section 7.1 or Section 6.2, as applicable, have been satisfied) and
(ii) the time of delivery or book-entry transfer of such Notes to the Paying
Agent by the Holder thereof in the manner required by Section 7.1 or
Section 6.4, as applicable.  Notes
in respect of which a Purchase Notice or Designated Event Purchase 

 

41

 

Notice, as the case may be, has been given by
the Holder thereof may not be converted for shares of Common Stock on or after
the date of the delivery of such Purchase Notice or Designated Event Purchase
Notice, as the case may be, unless such Purchase Notice or Designated Event
Purchase Notice, as the case may be, has first been validly withdrawn as
specified in the following two paragraphs.

 

A Purchase Notice or Designated Event Purchase
Notice, as the case may be, may be withdrawn by means of a written notice of
withdrawal delivered to the office of the Paying Agent (with a copy to the
Company) at any time prior to 5:00 p.m. New York City time on the Business Day
prior to the Repurchase Date or the Designated Event Purchase Date, as the case
may be, to which it relates specifying:

 

(i)                                     if the Notes are certificated, the
certificate number of the Notes in respect of which such notice of withdrawal
is being submitted, or, if not certificated, the written notice of withdrawal
must comply with appropriate Depositary procedures;

 

(ii)                                  the principal amount of the Notes with
respect to which such notice of withdrawal is being submitted; and

 

(iii)                               the principal amount, if any, of such
Notes which remains subject to the original Purchase Notice or Designated Event
Purchase Notice, as the case may be, and which has been or shall be delivered
for purchase by the Company.

 

The Paying Agent shall promptly return to the
respective Holders thereof any Notes with respect to which a Purchase Notice or
Designated Event Purchase Notice, as the case may be, has been withdrawn in
compliance with this Indenture.

 

SECTION 8.3.                       Notes
Purchased in Part.  Any Notes that are to be
purchased only in part shall be surrendered at the office of the Paying Agent
(with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or such Holder’s attorney duly
authorized in writing) and the Company shall execute and the Trustee or the
Authenticating Agent shall authenticate and deliver to the Holder of such
Notes, without service charge, a new Note or Notes, of any authorized
denomination as requested by such Holder in aggregate principal amount equal
to, and in exchange for, the portion of the principal amount of the Notes so
surrendered which is not purchased.

 

SECTION 8.4.                       Covenant to
Comply with Securities Laws upon Purchase of Notes.  In connection with any offer to purchase
Notes under Article VI or Article VII hereof, the Company shall, to
the extent required by applicable law, (a) comply with Rules 13e-4 and 14e-1
(and any successor provisions thereto) and any other rules relating to tender
offers under the Exchange Act, if applicable; (b) file the related Schedule TO
(or any successor schedule, form or report) under the Exchange Act, if
applicable; and (c) otherwise comply in all material respects with all
applicable federal and state securities laws so as to permit the rights and
obligations under Article VI or Article VII to be exercised in the
time and in the manner specified in Article VI or Article VII.

 

42

 

SECTION 8.5.                       Repayment to
the Company.  The Trustee and the Paying
Agent shall return to the Company any cash or property that remains unclaimed
as provided in paragraph 12 of the Notes and Section 3.3 hereof, together
with interest that the Trustee or Paying Agent, as the case may be, has agreed
to pay, if any, held by them for the payment of a Purchase Price or Designated
Event Purchase Price, as the case may be; provided,
however, that to the extent that
the aggregate amount of cash or property deposited by the Company pursuant to
Section 7.1(f) or 6.4, as applicable, exceeds the aggregate Purchase Price
or Designated Event Purchase Price, as the case may be, of the Notes or
portions thereof which the Company is obligated to purchase as of the
Repurchase Date or Designated Event Purchase Date, as the case may be, then
promptly on and after the Business Day immediately following the Repurchase
Date or Designated Event Purchase Date, as the case may be, the Trustee and the
Paying Agent shall return any such excess to the Company together with interest
that the Trustee or Paying Agent, as the case may be, has agreed to pay, if
any.

 

SECTION 8.6.                       Exchange in Lieu of Repurchase. 
The Company shall have the option, exercisable at any time or from time
to time, by an instrument in writing signed by the Company and provided to the
Paying Agent, to designate a, or change the existing designation of the,
financial institution (a “Purchase Party”) to which Notes surrendered by a
Holder for repurchase in accordance with Article VI or Article VII,
as applicable will be initially offered by the Paying Agent on behalf of a
Holder for exchange in lieu of repurchase. In order to accept any Notes
surrendered for repurchase, the Purchase Party must agree to deliver, in
exchange for such Notes, the Purchase Price or the Designated Event Purchase
Price, as the case may be, for such Notes in the amount that would be payable
if the Notes were repurchased by the Company in accordance with Article VI
or Article VII, as applicable.  If
the Purchase Party accepts any Notes for repurchase, it will deliver to the
Paying Agent, and the Paying Agent will deliver to Holders that surrendered
such Notes for repurchase, the Purchase Price or the Designated Event Purchase
Price, as applicable, payable with respect to such Notes.  In the event that the Purchase Party agrees
to accept any Notes for repurchase but fails to deliver the Purchase Price or
the Designated Event Purchase Price to the Paying Agent by the Repurchase Date,
the Notes will be repurchased by the Company in accordance with Article VI
or Article VII, as applicable, and the Company will, as promptly as
practical thereafter, but not later than one Business Day following the
Repurchase Date or the Designated Event Purchase Date, as the case may be,
cause the Purchase Price or the Designated Event Purchase Price, as the case
may be, for the Notes to be paid (provided,
however, that interest shall
continue to accrue on the Notes to be repurchased until the Purchase Price or
the Designated Event Purchase Price, as the case may be, has been paid).  Any Notes purchased by the Purchase Party
shall remain outstanding.  The
designation by the Company of a Purchase Party does not require such Purchase
Party to accept any Notes. If the Purchase Party declines to accept any Notes
surrendered for repurchase, the Company will repurchase the Notes on the terms
provided in this Indenture.  The Company
will not pay any consideration to, or otherwise enter into any arrangement
with, the Purchase Party for or with respect to such designation.

 

43

 

ARTICLE IX

 

CONVERSION OF NOTES

 

SECTION 9.1.   Right To Convert.  Subject to and upon compliance with the
provisions of this Article IX, a Holder may convert its Notes into shares
of Common Stock at the applicable Conversion Rate (defined below) at any time
during which the following conditions are met:

 

(a)                                  on any
Business Day, if the Closing Sale Price of the Common Stock for at least twenty
Trading Days in a period of thirty consecutive Trading Days ending on the
eleventh Trading Day of any fiscal quarter of the Company is greater than 120%
of the applicable Conversion Price on the eleventh Trading Day of that fiscal
quarter (and, in such event, the Notes shall be convertible into Common Stock
at any time thereafter, subject to the conditions of this Article IX);

 

(b)                                 at any time
after February 1, 2019, if, on any date after February 1, 2019, the
Closing Sale Price of the Common Stock is greater than 120% of the applicable
Conversion Price (and, in such event, the Notes shall be convertible into
Common Stock at any time thereafter, subject to the conditions of this
Article IX);

 

(c)                                  at any time
until February 1, 2019, during the five consecutive Business Day period
following any five consecutive Trading Day period in which the Trading Price
for a Note for each day of that trading period was less than 98% of the Closing
Sale Price of the Common Stock on such corresponding Trading Day multiplied by
the applicable Conversion Rate; provided,
however, that if, on the Trading
Day immediately prior to the Conversion Date, the Closing Sale Price of the
Common Stock is greater than 100% of the applicable Conversion Price but less
than or equal to 120% of the applicable Conversion Price, a Note is surrendered
for conversion and the Notes are not otherwise convertible, then Holders will
receive, in lieu of Common Stock based on the Conversion Rate, cash, Common
Stock or a combination of cash and Common Stock, at the Company’s option, with
a value equal to 100% of the principal amount of the Note to be converted plus
accrued and unpaid interest, if any, to but not including the Conversion Date
(a “Principal Value Conversion”).  If a
Holder surrenders its Notes for a Principal Value Conversion pursuant to this
Section 9.1(c), the Company will notify such Holder through the Conversion
Agent whether the Company will pay such Holder all or a portion of the
principal amount plus accrued and unpaid interest, if any, of such Notes in
cash, Common Stock or a combination of cash and Common Stock and in what
percentage or amount at any time on or before the date that is two Trading Days
following the Conversion Date. 
Settlement (in cash and/or Common Stock) will occur on the third
Business Day following the final day of the five consecutive Trading Day period
beginning on the third Trading Day following the Conversion Date.  Any Common Stock delivered upon a Principal
Value Conversion in accordance with  
this Section 9.1(c) shall be valued at 100% of the average of the
Closing Sale Prices of the Common Stock for the five consecutive Trading Days
commencing on the third Trading Day following the Conversion Date; the Notes
shall not be convertible pursuant to this Section 9.1 (c) after
February 1, 2019;

 

44

 

(d)                                 during such
period, if any, in which (i) the credit rating assigned to the Notes by Moody’s
is below Caa1 and by Standard & Poor’s is below B, (ii) neither Moody’s nor
Standard & Poor’s continues to assign credit ratings to the long-term debt
of the Company or (iii) the credit ratings assigned to the Notes by both such
agencies are suspended or withdrawn;

 

(e)                                  in the event
that the Company calls the Notes for redemption pursuant to Article V
hereof, at any time prior to 5:00 p.m., New York City time, one Business Day
prior to the Redemption Date, provided that if the Company elects to redeem
less than all the Notes, only those Notes called for redemption may be redeemed
pursuant to this Section 9.1(e);

 

(f)                                    the Company
becomes a party to a consolidation, merger or binding share exchange pursuant
to which all or substantially all of the Common Stock would be converted into
cash, securities or other property, in which case a Holder may surrender Notes
for conversion at any time from and after the date that is 15 days prior to the
anticipated effective date for the transaction until 15 days after the actual
effective date of such transaction; or

 

(g)                                 the Company
elects to (i) distribute to all holders of Common Stock assets, debt securities
or rights to purchase securities, other than rights referred to in (ii) below
of the Company, which distribution has a per share value as determined by the
Board of Directors exceeding 10% of the Closing Sale Price of the Common Stock
on the Trading Day immediately preceding the declaration date for such distribution,
or (ii) distribute to all holders of Common Stock rights, options or warrants
entitling them to purchase shares of Common Stock at less than the Current
Market Price.  In the case of the
foregoing clauses (i) and (ii), the Company must notify the Holders at least 20
days immediately prior to the ex-dividend date for such distribution.  Once the Company has given such notice,
Holders may surrender their Notes for conversion at any time thereafter until
the earlier of the close of business on the Business Day immediately prior to
the ex-dividend date and the Company’s announcement that such distribution will
not take place, even if the Notes are not otherwise convertible at such time; provided, however,
that a Holder may not exercise this right to convert if the Holder is otherwise
entitled to participate in the distribution without conversion.  As used herein, the term “ex-dividend date”
or “ex-date” when used with respect to any issuance or distribution, shall mean
the first date upon which a sale of shares of Common Stock does not
automatically transfer the right to receive the relevant dividend or
distribution from the seller of such Common Stock to its buyer.

 

Upon the Company’s determination that Holders
are or will be entitled to convert Notes into shares of Common Stock in
accordance with the provisions of this Section 9.1, the Company will issue
a press release through a public medium that is customary for such press
releases or publish the information on the Company’s Web Site or through such
other public medium as the Company may use at that time.

 

The number of shares of Common Stock issuable
upon conversion of a Note per $1,000 principal amount (the “Conversion Rate”)
shall be that set forth in paragraph 8 in the Notes, subject to adjustment as
herein set forth.  The initial
Conversion Rate is 53.7924 shares of Common Stock issuable upon conversion of a
Note per $1,000 principal amount.

 

A Holder may convert a portion of the principal
amount of Notes if the portion is $1,000 or a multiple of $1,000.

 

45

 

SECTION 9.2.   Determination of Satisfaction of Certain
Conversion Triggers.

 

(a)                                  The Conversion
Agent shall, on behalf of the Company, determine on a daily basis if the Notes
are convertible in accordance with Section 9.1(a) or 9.1(b) and shall
notify the Company and the Trustee if the Notes become convertible; provided that the Company shall provide
to the Conversion Agent, upon written request, the Closing Sale Price of the
Common Stock.

 

(b)                                 The Conversion
Agent will, on behalf of the Company, determine if the Notes are convertible in
accordance with Section 9.1(c) and notify the Company and the Trustee if
the Notes become convertible; provided,
however, that the Conversion
Agent shall have no obligation to determine the Trading Price of the Notes
unless the Company has requested such determination in writing and the Company
shall have no obligation to make such request unless requested in writing to do
so by a Holder.  Upon request by the Company
to the Conversion Agent to determine the Trading Price, the Company shall
instruct the Conversion Agent to determine the Trading Price of the Notes
beginning on the next succeeding Trading Day and on each successive Trading Day
until the Trading Price of the Notes is greater than or equal to 98% of the
product of the Closing Sale Price of the Common Stock and the applicable
Conversion Rate.

 

SECTION 9.3.   Conversion Procedures.  To convert Notes, a Holder must satisfy the
requirements in this Section 9.3 and in paragraph 8 of the Notes.  The date on which the Holder satisfies all
those requirements and delivers an irrevocable conversion notice, together, if
the Notes are in certificated form, with the certificated Note, to the
Conversion Agent, along with appropriate endorsements and transfer documents,
and pays any transfer or similar tax, is the conversion date (the “Conversion
Date”).  As soon as practicable, but in
no event later than the third Business Day following the determination of the
Applicable Stock Price, the Company shall deliver to the Holder, through the
Conversion Agent, a certificate for the number of full shares of Common Stock
issuable upon the conversion which shall be equal to (1) the aggregate original
principal amount of the Notes to be converted divided by 1,000, multiplied by
(2) the Conversion Rate rounded down to the nearest whole share, and cash in
lieu of any fractional share determined pursuant to Section 9.4.  Upon conversion, the Company may choose to
deliver, in lieu of Common Stock, cash or a combination of cash and Common
Stock as set forth in Section 9.18. 
The Person in whose name the certificate is registered shall only be
treated as a stockholder of record on and after the Conversion Date; provided, however,
that no surrender of Notes on any date when the stock transfer books of the
Company shall be closed shall be effective to constitute the Person or Persons
entitled to receive the shares of Common Stock upon such conversion as the
record holder or holders of such shares of Common Stock on such date, but such
surrender shall be effective to constitute the Person or Persons entitled to
receive such shares of Common Stock as the record holder or holders thereof for
all purposes at the close of business on the next succeeding Business Day on
which such stock transfer books are open; such conversion shall be at the
Conversion Rate in effect on the date that such Notes were surrendered for
conversion, as if the stock transfer books of the Company had not been closed.  Upon conversion of Notes, such Person shall
no longer be a Holder of such Notes.

 

46

 

No payment or adjustment shall be made for
dividends on or other distributions with respect to any Common Stock except as provided
in Section 9.8 or as otherwise provided in this Indenture.

 

Except as provided in this paragraph, a
converting Holder of Notes shall not be entitled to received any accrued and
unpaid interest on any such Notes being converted.  By delivery to the Holder of the number of shares of Common Stock
or other consideration issuable or payable upon conversion in accordance with
this Section 9.3, any accrued and unpaid interest on such Notes will be
deemed to have been paid in full.  If
any Conversion Date occurs subsequent to the Regular Record Date preceding an
Interest Payment Date but prior to such Interest Payment Date, the Holder of
such Notes at 5:00 p.m. New York City time on any Record Date shall receive the
interest payable on such Note on such Interest Payment Date notwithstanding the
conversion thereof. Notes surrendered for conversion during the period from
5:00 p.m. New York City time on any Record Date shall (except in the case of
Notes which have been called for redemption on a Redemption Date within such
period) be accompanied by payment from converting Holders, for the account of
the Company, in New York Clearing House funds, of an amount equal to the
interest payable on such Interest Payment Date on the Notes being surrendered
for conversion; provided, however,
if the Company elects to redeem Notes on a date that is after the Regular
Record Date but on or prior to the corresponding Interest Payment Date, and
such Holder elects to convert those Notes, the Holder will not be required to
pay the Company, at the time that Holder surrenders those Notes for conversion,
the amount of interest such Holder will receive on the Interest Payment
Date.  Upon conversion of Notes, that
portion of accrued but unpaid interest, if any, with respect to the converted
Notes shall not be canceled, extinguished or forfeited, but rather shall be
deemed to be paid in full to the Holder thereof through delivery of the Common
Stock (together with the cash payment, if any, in lieu of fractional shares) or
cash or a combination of cash and Common Stock in exchange for the Notes being
converted pursuant to the provisions hereof, and the cash or the Fair Market
Value of such shares of Common Stock (together with any such cash payment in
lieu of fractional shares) shall be treated as issued, to the extent thereof,
first in exchange for interest accrued and unpaid through the Conversion Date
and the balance, if any, of such cash or the Fair Market Value of such Common
Stock (and any such cash payment) shall be treated as issued in exchange for
the principal amount of the Notes being converted pursuant to the provisions
hereof.  Notwithstanding conversion of
any Notes, the Holders of the Notes and any Common Stock issuable upon
conversion thereof will continue to be entitled to receive Liquidated Damages,
if any, in accordance with the Registration Rights Agreement.  The Company will not adjust the Conversion
Rate to account for accrued interest on any Note.

 

If a Holder converts more than one Note at the
same time, the number of shares of Common Stock issuable upon the conversion
shall be based on the total principal amount of the Notes converted.

 

Upon surrender of a Note that is converted in
part, the Company shall execute, and the Trustee or the Authenticating Agent
shall authenticate and deliver to the Holder, a new Note in an authorized
denomination equal in principal amount to the unconverted portion of the Note
surrendered.

 

47

 

If the last day on which Notes may be converted
is not a Business Day in a place where a Conversion Agent is located, the Notes
may be surrendered to that Conversion Agent on the next succeeding Business
Day.

 

Holders that have already delivered a Purchase
Notice or a Designated Event Purchase Notice with respect to a Note, may not
surrender such Note for conversion until the Purchase Notice or Designated
Event Purchase Notice, as the case may be, has been withdrawn in accordance
with the procedures set forth in Section 8.2.

 

SECTION 9.4.   Cash Payments in Lieu of Fractional
Shares.  The Company shall not issue
a fractional share of Common Stock upon conversion of Notes.  Instead the Company shall deliver cash for
the Fair Market Value of the fractional share. 
The Fair Market Value of a fractional share shall be determined to the
nearest 1/10,000th of a share by multiplying the Applicable Stock Price of a
full share of Common Stock by the fractional amount and rounding the product to
the nearest whole cent.  Whether
fractional shares are issuable upon a conversion will be determined on the
basis of the total number of Notes that the Holder is then converting into
Common Stock and the aggregate number of shares of Common Stock issuable upon
such conversion.

 

SECTION 9.5.   Taxes on Conversion.  If a Holder converts Notes, the Company
shall pay any documentary, stamp or similar issue or transfer tax due on the
issue of shares of Common Stock upon the conversion.  However, the Holder shall pay any such tax which is due because
the Holder requests the shares to be issued in a name other than the Holder’s
name.  The Conversion Agent may refuse
to deliver the certificates representing the Common Stock being issued in a
name other than the Holder’s name until the Conversion Agent receives a sum
sufficient to pay any tax which shall be due because the shares are to be
issued in a name other than the Holder’s name. 
Nothing herein shall preclude the withholding of any tax required by law
or regulations.

 

SECTION 9.6.   Exchange in Lieu of
Conversion.  The Company shall have the option,
exercisable at any time or from time to time, by an instrument in writing
signed by the Company and provided to the Conversion Agent, to designate a, or
change the existing designation of the, financial institution (an “Exchange
Party”) to which Notes surrendered by a Holder for conversion will be initially
offered by the Conversion Agent on behalf of a Holder for exchange in lieu of
conversion. In order to accept any Notes surrendered for conversion, the
Exchange Party must agree to deliver in exchange for such Notes, a number of
full shares of Common Stock issuable on conversion thereof based on the
applicable Conversion Rate, plus cash for any fractional shares, or cash or a
combination of cash and Common Stock in lieu thereof in the form that would
otherwise have been deliverable by the Company under this Article IX. If
the Exchange Party accepts any Notes for conversion, it will deliver to the
Conversion Agent, and the Conversion Agent will deliver to converting Holders,
the shares of Common Stock or other consideration payable with respect to such
Notes. In the event that the Exchange Party agrees to accept any Notes for
conversion but fails to deliver the consideration for the converted Notes by
the second Business Day following the determination of the Applicable Stock
Price, the Notes will be converted by the Company in accordance with this
Article IX and the Company will, as promptly as practical thereafter, but
not later than three Business Days following the determination of the Applicable
Stock Price, deliver to the Holder shares of Common Stock (together with

 

48

 

any cash payment in
lieu of fractional shares) or cash or a combination of cash and shares of
Common Stock in accordance with Section 9.3.  Any Notes exchanged by the Exchange Party shall remain
outstanding. The designation by the Company of an Exchange Party does not
require such Exchange Party to accept any Notes for conversion. If the Exchange
Party declines to accept any Notes surrendered for conversion, the Company will
convert the Notes on the terms provided in this Indenture. The Company will not
pay any consideration to, or otherwise enter into any arrangement with, the
Exchange Party for or with respect to such designation.

 

SECTION 9.7.   Covenants of the Company.  The Company shall, prior to issuance of any
Notes hereunder, and from time to time as may be necessary, reserve out of its
authorized but unissued Common Stock a sufficient number of shares of Common
Stock to permit the conversion of the Notes.

 

All shares of Common Stock
delivered upon conversion of the Notes shall be newly issued shares or treasury
shares, shall be duly and validly issued and fully paid and nonassessable and
shall be free from preemptive rights and free of any lien or adverse claim
placed thereon by the Company.

 

The Company shall endeavor promptly
to comply with all federal and state securities laws regulating the order and
delivery of shares of Common Stock upon the conversion of Notes, if any, and
shall cause to have listed or quoted all such shares of Common Stock on each
United States national securities exchange or over-the-counter or other
domestic market on which the Common Stock is then listed or quoted.

 

SECTION 9.8.   Adjustments to Conversion Rate.  The Conversion Rate shall be subject to
adjustment from time to time, without duplication, as follows:

 

(a)                                  In
case the Company shall (i) pay a dividend, or make a distribution on its Common
Stock, payable exclusively in shares of Common Stock or other Capital Stock of
the Company; (ii) subdivide or split its outstanding Common Stock into a
greater number of shares; (iii) combine or reclassify its outstanding Common
Stock into a smaller number of shares; or (iv) issue by reclassification of the
shares of Common Stock any shares of the Company’s Capital Stock, the
Conversion Rate in effect immediately prior to the record date or effective
date, as the case may be, for the adjustment pursuant to this
Section 9.8(a) as described below, shall be adjusted so that the Holder of
any Notes thereafter surrendered for conversion shall be entitled to receive
the number of shares of Common Stock and/or Capital Stock which such Holder
would have owned or have been entitled to receive after the happening of any of
the events described above had such Notes been converted immediately prior to
such record date or effective date, as the case may be.  An adjustment made pursuant to this
Section 9.8(a) shall become effective immediately after the applicable
record date in the case of a dividend or distribution and shall become
effective immediately after the applicable effective date in the case of
subdivision, combination or reclassification of the Common Stock.  If any dividend or distribution of the type
described in clause (i) above is not so paid or made, the Conversion Rate shall
again be immediately readjusted, effective as of the date the Board of
Directors determines not to pursue such action, to the Conversion Rate that
would then be in effect if such dividend or distribution had not been
declared.  If any subdivision or split,
combination or reclassification or issuance of the type described in clauses
(ii) through (iv) of this Section 9.8(a) is not so made, the Conversion

 

49

 

Rate
shall again be immediately readjusted, effective as of the date the Board of
Directors determines not to pursue such action, to the Conversion Rate that
would then be in effect if such subdivision or split, combination or reclassification
or issuance had not been declared.

 

(b)                                 In
case the Company at any time or from time to time after the issuance of the
Notes shall issue rights or warrants to all or substantially all holders of the
Common Stock entitling them to subscribe for or purchase Common Stock at a
price per share less (or having a conversion price per share less) than the
Current Market Price per share of Common Stock, the Conversion Rate shall be
adjusted so that the same shall equal the Conversion Rate determined by
multiplying the Conversion Rate in effect immediately prior to the close of
business on the record date fixed for determination of stockholders entitled to
receive such rights or warrants (prior to any adjustment in accordance with
this Section 9.8(b)) by a fraction of which (i) the numerator shall be the
number of shares of Common Stock outstanding on such record date plus the
number of additional shares of Common Stock offered for subscription or
purchase, and (ii) the denominator shall be the number of shares of Common
Stock outstanding on such record date plus the number of shares which the
aggregate offering price of the total number of shares so offered would
purchase at the Current Market Price per share of Common Stock on the earlier
of such record date and the Trading Day immediately preceding the ex date for
such issuance of rights or warrants. 
Such adjustment shall be made successively whenever any such rights or
warrants are issued, and shall become effective immediately after the opening
of business on the day following the record date for the determination of
stockholders entitled to receive such rights or warrants.  To the extent that shares of Common Stock
are not delivered after the expiration of such rights or warrants, the
Conversion Rate shall immediately be readjusted to the Conversion Rate which
would then be in effect had the adjustments made upon the issuance of such
rights or warrants been made on the basis of delivery of only the number of
shares of Common Stock actually delivered. 
If such rights or warrants are not so issued, the Conversion Rate shall
again be immediately readjusted to be the Conversion Rate which would then be
in effect if such record date for the determination of shareholders entitled to
receive such rights or warrants had not been fixed.  In determining whether any rights or warrants entitle the holders
to subscribe for or purchase shares of Common Stock at less than such Current
Market Price, and in determining the aggregate offering price of such shares of
Common Stock, there shall be taken into account any consideration received by
the Company for such rights or warrants, the value of such consideration, if
other than cash, to be determined by the Board of Directors.

 

(c)                                  In
case the Company shall, by dividend or in a merger, amalgamation or
consolidation or otherwise, distribute to all or substantially all holders of
Common Stock any evidences of Indebtedness, shares of Capital Stock of any
class or series, other securities, cash or assets (excluding (i) any dividend,
distribution or issuance covered by those referred to in Section 9.8(a) or
9.8(b) hereof, (ii) any dividend or distribution paid exclusively in cash
referred to in Section 9.8(d) hereof or (iii) any dividend or distribution
that constitutes a Spin-Off which is covered by Section 9.8(e) hereof), or
rights or warrants to subscribe for or purchase any of its securities
(including the distribution of rights to all holders of Common Stock pursuant
to a stockholders rights plan or the detachment of such rights under the terms
of such stockholder rights plan but excluding those rights or warrants referred
to in Section 9.8(b)) (any of the foregoing hereinafter in this
Section 9.8(c) called the “Distributed Assets”), then in each such case
the Conversion Rate shall be adjusted so that the same shall equal the
Conversion Rate determined by multiplying the Conversion Rate in effect
immediately prior to the close of business on

 

50

 

the
record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which (A) the numerator shall be the Current
Market Price per share of the Common Stock and (B) the denominator shall be (1)
the Current Market Price per share of the Common Stock less (2) the Fair Market
Value on such record date (as determined in good faith by the Board of
Directors, whose determination shall be conclusive evidence of such Fair Market
Value, and described in a certificate filed with the Trustee and the Paying
Agent) of the portion of the Distributed Assets so distributed applicable to
one share of Common Stock.  Such
adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such distribution; provided, however,
that, if (i) the Fair Market Value of the portion of the Distributed
Assets so distributed applicable to one share of Common Stock is equal to or
greater than the Current Market Price of the Common Stock or (ii) the Current
Market Price of the Common Stock is greater than the Fair Market Value per
share of such Distributed Assets by less than $1.00, then, in lieu of the
adjustment provided in this Section 9.8(c), adequate provision shall be
made so that each Holder shall have the right to receive upon conversion, in
addition to the shares of Common Stock, the kind and amount of assets, debt
securities, or rights or warrants comprising the Distributed Assets the Holder
would have received had such Holder converted such Notes immediately prior to
the record date for the determination of stockholders entitled to receive such
distribution.  In the event that such
distribution is not so paid or made, the Conversion Rate shall again be
adjusted to the Conversion Rate which would then be in effect if such
distribution had not been declared.

 

(d)                                 In
case the Company shall make any distributions, by dividend or otherwise,
consisting exclusively of cash to all or substantially all holders of
outstanding shares of Common Stock, then, and in each such case, the Conversion
Rate shall be adjusted so that the same shall equal the Conversion Rate
determined by multiplying the Conversion Rate in effect immediately prior to
the close of business on the record date fixed for the determination of holders
of Common Stock entitled to receive such distribution by a fraction of which
(A) the numerator shall be the Current Market Price per share of the Common
Stock and (B) the denominator shall be (1) the Current Market Price per share
of Common Stock minus (2) the amount per share of such distributions
(appropriately adjusted from time to time for any stock dividends on or
subdivisions or combination of Common Stock); provided,
however, that if (i) the per share amount of such distribution
equals or exceeds the Current Market Price of the Common Stock or (ii) the
Current Market Price of the Common Stock exceeds the per share amount of such
distribution by less than $1.00, in lieu of the foregoing adjustment, adequate
provision shall be made so that each Holder of a Note shall have the right to
receive upon conversion, such dividend or distribution such Holder would have
received had such Holder converted each Note immediately prior to the record
date for the determination of stockholders entitled to receive the distribution.

 

(e)                                  In
the event that the Company makes any distribution to all holders of Common
Stock that constitutes a Spin-Off, the Conversion Rate shall be adjusted so
that the same shall equal the Conversion Rate determined by multiplying the
Conversion Rate in effect immediately prior to the close of business on the
record date fixed for the determination of holders of Common Stock entitled to
receive such distribution by a fraction of which (i) the numerator shall be the
Spin-Off Market Price per share of the Common Stock on such record date plus
the Spin-Off Market Price per Equity Interest of the Subsidiary or other
business unit of the Company on such record date applicable to each share of
Common Stock and (ii) the denominator shall be the Spin-Off Market Price per
share of the Common Stock.  The
adjustment to the

 

51

 

Conversion
Rate set forth in this Section 9.8(e) will occur at the earlier of (1) the
10th Trading Day from, and including, the effective date of the Spin-Off and
(2) the date of the Initial Public Offering of the securities being distributed
in the Spin-Off, if that Initial Public Offering is effected simultaneously
with the Spin-Off; provided, however, that, if (i) the Spin-Off Market
Price per Equity Interest of the Subsidiary so distributed applicable to one
share of Common Stock is equal to or greater than the Current Market Price of
the Common Stock or (ii) the Current Market Price of the Common Stock is
greater than the Spin-Off Market price per Equity Interest of the Subsidiary by
less than $1.00, in lieu of the foregoing adjustment, adequate provision shall
be made so that each Holder of a Note shall have the right to receive upon
conversion, such distribution such Holder would have received had such Holder
converted each Note immediately prior to the record date for the determination
of stockholders entitled to receive the distribution.

 

(f)                                    In
case a tender or exchange offer made by the Company or any Subsidiary shall
expire and such tender or exchange offer (as amended upon the expiration
thereof) shall require the payment to stockholders of consideration per share
of Common Stock having a Fair Market Value (as determined in good faith by the
Company’s Board of Directors, whose determination shall be conclusive and
described in a resolution of the Board of Directors) that as of the last time
(the “Expiration Time”) tenders or exchanges may be made pursuant to such
tender or exchange offer (as it may be amended) exceeds the Closing Sale Price
of a share of Common Stock on the Trading Day next succeeding the Expiration
Time, the Conversion Rate shall be adjusted so that the same shall equal the
rate determined by multiplying the Conversion Rate by a fraction,

 

(i)                                     the
numerator of which shall be the sum of (x) the Fair Market Value (determined as
aforesaid) of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the tender or exchange
offer) of all shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the shares deemed so accepted up to any such maximum, being
referred to as the “Purchased Shares”) and (y) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares) at the
Expiration Time and the Closing Sale Price of a share of Common Stock on the
Trading Day next succeeding the Expiration Time, and

 

(ii)                                  the
denominator of which shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) at the Expiration Time multiplied
by the Closing Sale Price of a share of Common Stock on the Trading Day next
succeeding the Expiration Time, such adjustment to become effective immediately
prior to the opening of business on the day following the Expiration Time. If
the Company is obligated to purchase shares pursuant to any such tender or
exchange offer, but the Company is permanently prevented by applicable law from
effecting any such purchases or all such purchases are rescinded, the Conversion
Rate shall again immediately be readjusted to be the Conversion Rate that would
then be in effect if such tender or exchange offer had not been made.

 

(g)                                 Upon
conversion of the Notes, the Holders shall receive, if they receive shares of
Common Stock, in addition to the Common Stock issuable upon such conversion,
the rights issued under any shareholder rights plan the Company implements
(notwithstanding the

 

52

 

occurrence
of an event causing such rights to separate from the Common Stock at or prior
to the time of conversion) unless, prior to conversion, the rights have
expired, terminated or been redeemed or exchanged in accordance with the rights
plan.  If, and only if, the Holders of
Notes receive rights under such shareholder rights plans as described in the
preceding sentence upon conversion of their Notes, then no other adjustment
pursuant to this Section 9.8 shall be made in connection with such
shareholder rights plans.

 

(h)                                 For
purposes of this Section 9.8, the number of shares of Common Stock at any
time outstanding shall not include shares held in the treasury of the Company
but shall include shares issuable in respect of scrip certificates issued in
lieu of fractions of shares of Common Stock. 
The Company shall not pay any dividend or make any distribution on
shares of Common Stock held in the treasury of the Company.

 

SECTION 9.9.   Calculation Methodology.  Except as stated in this Article IX,
the Conversion Rate will not be adjusted for the issuance of Common Stock or
any securities convertible into or exchangeable for Common Stock or carrying
the right to purchase any of the foregoing. 
If after an adjustment a Holder of a Note upon conversion of such Note
may receive shares of two or more classes of Capital Stock of the Company, the
Conversion Rate shall thereafter be subject to adjustment upon the occurrence
of an action with respect to any such class of Capital Stock as is contemplated
by this Article IX with respect to the Common Stock, on terms comparable
to those applicable to Common Stock in this Article IX.  All calculations under Article VIII,
Section 9.8 and this Section 9.9 shall be made to the nearest cent or
to the nearest 1/10,000th of a share, as the case may be.

 

SECTION 9.10.   When No Adjustment Required.  No adjustment to the Conversion Rate need be
made:

 

(i)                                     upon
the issuance of any shares of Common Stock pursuant to any present or future
plan providing for the reinvestment of dividends or interest payable on
securities of the Company and the investment of additional optional amounts in
shares of Common Stock under any such plan;

 

(ii)                                  upon
the issuance of any shares of Common Stock or options or rights to purchase
those shares pursuant to any present or future employee, director or consultant
benefit plan or program of or assumed by the Company or any of its
Subsidiaries;

 

(iii)                               upon
the issuance of any shares of Common Stock pursuant to any option, warrant,
right, or exercisable, exchangeable or convertible security not described in
paragraph (ii) above and outstanding as of the date of this Indenture;

 

(iv)                              for
a change in the par value of the Common Stock; or

 

(v)                                 for
accrued and unpaid interest (including Liquidated Damages owed, if any).

 

To the extent the Notes become
convertible into cash, assets, or property (other than Capital Stock of the
Company or securities to which Section 9.14 applies), no adjustment shall
be made thereafter as to the cash, assets or property.  Interest shall not accrue on such cash.

 

53

 

No adjustment need be made for a
transaction referred to in Sections 9.8(b), (c) or (e) if Holders of the Notes
may participate in the transaction on a basis and with notice that the Board of
Directors determines to be fair and appropriate in light of the basis and
notice on which holders of Common Stock participate in the transaction.

 

SECTION 9.11.   Notice of Adjustment.  Whenever the Conversion Rate is adjusted,
the Company shall promptly mail, or cause to be mailed, by first class mail to
Holders in accordance with Section 15.2 a notice of the adjustment.  The Company shall file with the Trustee and
the Conversion Agent a certificate signed by the Chief Financial Officer of the
Company setting forth the adjusted Conversion Rate.  The certificate shall, absent manifest error, be conclusive
evidence that the adjustment is correct. 
Neither the Trustee nor any Conversion Agent shall be under any duty or
responsibility with respect to any such certificate except to exhibit the same
to any Holder desiring inspection thereof.

 

SECTION 9.12.   Voluntary Increase.  The Company may make such increases in the
Conversion Rate, in addition to those required by Section 9.8, as the
Board of Directors considers to be advisable to avoid or diminish any income
tax to holders of Common Stock or rights to purchase Common Stock resulting
from any dividend or distribution of stock (or rights to acquire stock) or from
any event treated as such for income tax purposes.  To the extent permitted by applicable law, the Company may from
time to time increase the Conversion Rate by any amount for any period of time
if the period is at least 20 days, the increase is irrevocable during the
period and the Board of Directors shall have made a determination that such
increase would be in the best interests of the Company, which determination
shall be conclusive.  Whenever the
Conversion Rate is so increased, the Company shall mail to Holders and file
with the Trustee and the Conversion Agent a notice of such increase.  Neither the Trustee nor any Conversion Agent
shall be under any duty or responsibility with respect to any such notice
except to exhibit the same to any Holder desiring inspection thereof.  The Company shall mail the notice at least
15 days before the date the increased Conversion Rate takes effect.  The notice shall state the increased
Conversion Rate and the period it shall be in effect.

 

SECTION 9.13.   Notice to Holders Prior to Certain
Actions.  In case:

 

(a)                                  The
Company shall declare a dividend (or any other distribution) on its Common
Stock that would require an adjustment in the Conversion Rate pursuant to
Section 9.8;

 

(b)                                 The
Company shall authorize the granting to all or substantially all the holders of
its Common Stock of rights or warrants to subscribe for or purchase any share
of any class or any other rights or warrants;

 

(c)                                  Of
any reclassification or reorganization of the Common Stock of the Company
(other than a subdivision or combination of its outstanding Common Stock, or a
change in par value, or from par value to no par value, or from no par value to
par value), or of any consolidation or merger to which the Company is a party
and for which approval of any shareholders of the Company is required, or of
the sale or transfer of all or substantially all of the assets of the Company;
or

 

54

 

(d)                                 Of
the voluntary or involuntary dissolution, liquidation or winding-up of the
Company, the Company shall cause to be filed with the Conversion Agent and
shall cause to be mailed to each Holder at its address appearing on the Note
Register, as promptly as possible but in any event at least 15 days (10 days in
the case of (a) or (b) above) prior to the applicable date hereinafter specified,
a notice stating (x) the date on which a record is to be taken for the purpose
of such dividend, distribution or rights or warrants, or, if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution, or rights or warrants are to be
determined or (y) the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, dissolution, liquidation or winding-up
is expected to become effective or occur, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their Common Stock for securities, cash or other property deliverable upon such
reclassification, reorganization, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up. 
Failure to give such notice, or any defect therein, shall not affect the
legality or validity of such dividend, distribution, reclassification,
reorganization, consolidation, merger, sale, transfer, dissolution, liquidation
or winding-up.

 

SECTION 9.14.   Effect of Reclassification,
Consolidation, Merger, Binding Share Exchange or Sale.  If any of the following events occur, namely
(a) any reclassification or change of outstanding shares of Common Stock (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination); (b) any
consolidation, merger, combination or binding share exchange of the Company
with another corporation as a result of which holders of Common Stock shall be
entitled to receive stock, securities or other property or assets (including
cash) with respect to or in exchange for such Common Stock; or (c) any sale or
conveyance of the properties and assets of the Company as, or substantially as,
an entirety to any other corporation as a result of which holders of Common
Stock shall be entitled to receive stock, securities or other property or
assets (including cash) with respect to or in exchange for such Common Stock,
then the Company or the successor or purchasing corporation, as the case may
be, shall execute with the Trustee a supplemental indenture, providing that
each Note shall be convertible into the kind and amount of shares of stock and
other securities or property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, combination, binding share
exchange, sale or conveyance by a holder of a number of shares of Common Stock
issuable upon conversion of such Note immediately prior to such
reclassification, change, consolidation, merger, combination, binding share
exchange, sale or conveyance assuming such holder of Common stock did not
exercise his rights of election, if any, as to the kind or amount of stock,
other securities or other property or assets (including cash) receivable upon
such reclassification, change, consolidation, merger, combination, binding
share exchange, sale or conveyance (provided that, if the kind or amount of
stock, other securities or other property or assets (including cash) receivable
upon such reclassification, change, consolidation, merger, combination, sale or
conveyance is not the same for each share of Common Stock in respect of which
such rights of election shall not have been exercised (“non-electing share”),
then for the purposes of this Section 9.14 the kind and amount of stock,
other securities or other property or assets (including cash) receivable upon
such reclassification, change, consolidation, merger, combination, binding
share exchange, sale or conveyance for each non-electing share shall be deemed
to be the kind and amount so receivable per share by a plurality of the
non-electing shares).  Such supplemental
indenture shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Article IX.

 

55

 

The Company shall cause notice of
the execution of such supplemental indenture to be mailed to each Holder, at
its address appearing on the Note Register, within 20 days after execution
thereof.  Failure to deliver such notice
shall not affect the legality or validity of such supplemental indenture.

 

The above provisions of this
Section 9.14 shall similarly apply to successive reclassifications,
changes, consolidations, mergers, combinations, binding share exchanges, sales
and conveyances.

 

If this Section 9.14 applies
to any event or occurrence, Section 9.8 shall not apply.

 

SECTION 9.15.   Responsibility of Trustee.  Except as specifically required in
Section 9.2 herein, the Trustee and any Conversion Agent shall not at any
time be under any duty or responsibility to any Holder to either calculate the
Conversion Rate or determine whether any facts exist which may require any adjustment
of the Conversion Rate, or with respect to the nature or extent or calculation
of any such adjustment when made, or with respect to the method employed, or
herein or in any supplemental indenture provided to be employed, in making the
same and, subject to Sections 11.1 and 11.2 hereof and the provisions of this
Article IX, shall be protected in relying upon an Officers’ Certificate
with respect to the same.  The Trustee
and any Conversion Agent shall not be accountable with respect to the validity
or value (or the kind or amount) of any shares of Common Stock, or of any
securities or property, which may at any time be issued or delivered upon the
conversion of any Notes and the Trustee and any Conversion Agent make no
representations with respect thereto. 
Neither the Trustee nor any Conversion Agent shall be responsible for
any failure of the Company to issue, transfer or deliver any shares of Common
Stock or stock certificates or other securities or property or cash upon the
surrender of any Notes for the purpose of conversion or to comply with any of
the duties, responsibilities or covenants of the Company contained herein.

 

SECTION 9.16.   Successive Adjustments.  After an adjustment to the Conversion Rate
under Section 9.8, any subsequent event requiring an adjustment under
Section 9.8 shall cause an adjustment to the Conversion Rate as so
adjusted.

 

SECTION 9.17.   General Considerations.  Whenever successive adjustments to the
Conversion Rate are called for pursuant to this Article IX, such adjustments
shall be made to the Current Market Price as may be necessary or appropriate to
effectuate the intent of this Article IX and to avoid unjust or
inequitable results as determined in good faith by the Board of Directors of
the Company.

 

SECTION 9.18.   Payment of Cash in Lieu of Common Stock.  If a Holder elects to convert all or any
portion of a Note into shares of Common Stock as set forth in Section 9.1
and delivers an irrevocable conversion notice, together, if the Notes are in
certificated form, with the certificated Note as set forth in Section 9.3,
the Company may choose to satisfy all or any portion of its conversion
obligation with respect to a Note (the “Conversion Obligation”) in cash or a
combination of cash and Common Stock. 
Upon such election, the Company will notify such Holder through the
Conversion Agent of the Company’s election to pay cash in lieu of delivery of
some or all of the shares of Common Stock and the dollar amount per Note to be
satisfied in cash (which must be expressed either as 100% of the Conversion
Obligation or as a fixed dollar

 

56

 

amount) at any time on or before
the date that is two Business Days following the Conversion Date unless the
Company has previously informed Holders of its election in connection with a
redemption of the Notes in accordance with Section 5.1 of this
Indenture.  Settlement (in cash and/or
Common Stock) will occur on the third Business Day following the final day of
the five consecutive Trading Day period beginning on the third Trading Day
after the Conversion Date.  Settlement
amounts will be computed as follows:

 

(a)                                  if
the Company elects to satisfy the entire Conversion Obligation in cash, the
Company will deliver to such Holder cash in an amount equal to the product
of:  (1) a number equal to (x) the
aggregate original principal amount of Notes to be converted divided by 1,000,
multiplied by (y) the Conversion Rate, and (2) the Applicable Stock Price; and

 

(b)                                 if
the Company elects to satisfy a fixed portion (other than 100%) of the
Conversion Obligation in cash, the Company will deliver to such Holder (1) cash
in an amount equal to (x) the aggregate principal amount of Notes to be
converted divided by 1,000, multiplied by (y) such cash amount per $1,000
aggregate original principal amount Notes to be converted (“Cash Amount Per
Note”) and (2) a number of shares of Common Stock equal to (x) the aggregate
original principal amount of Notes to be converted by such Holder divided by
1,000, multiplied by (y) a fraction, the numerator of which is (A) the
Applicable Stock Price multiplied by the Conversion Rate, less (B) the Cash
Amount Per Note, and the denominator of which is the Applicable Stock Price; provided, however,
that the Company will pay cash in lieu of fractional shares of Common Stock in
accordance with Section 9.4.

 

ARTICLE X

 

DEFAULTS AND
REMEDIES

 

SECTION 10.1.   Events of Default.  “Event of Default,” wherever used herein
with respect to the Notes, means any one or more of the following events:

 

(a)                                  default
in the payment of any installment of interest or Liquidated Damages, if any,
upon any of the Notes as and when the same shall become due and payable, and
continuance of such Default for a period of 30 days; or

 

(b)                                 default
in the payment of the principal of any of the Notes as and when the same shall
become due and payable either at maturity, upon redemption, required
repurchase, by declaration or otherwise (including the failure to purchase
Notes in accordance with Articles VI, VII and VIII); or

 

(c)                                  failure
on the part of the Company to perform any other of the covenants or agreements
on the part of the Company in the Notes or in this Indenture for a period of 60
days after the date on which written notice of such failure, requiring the same
to be remedied, shall have been given to the Company by the Trustee, or to the
Company and the Trustee by the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding; or

 

57

 

(d)                                 default
by the Company or any of its Significant Subsidiaries in the payment of
principal or premium at final maturity under any instrument or instruments
evidencing Indebtedness (other than the Notes), which Default is in an
aggregate amount exceeding $10.0 million or its equivalent in any other
currency or currencies and continues in effect for more than 30 days after the
expiration of any grace period or extension of time for payment applicable
thereto; or

 

(e)                                  default
by the Company or any of its Significant Subsidiaries under any instrument or
instruments evidencing Indebtedness (other than the Notes) having an
outstanding principal amount of $10.0 million (or its equivalent in any other
currency or currencies) or more, which results in acceleration of the maturity
of such Indebtedness, unless such acceleration has been rescinded within 10
days after the date on which written notice of such failure, requiring the same
to be remedied, shall have been given to the Company by the Trustee, or to the
Company and the Trustee by the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding; or

 

(f)                                    default
on the part of the Company in its obligation to convert the Notes upon exercise
of a Holder’s conversion right in accordance with the terms of the Notes and
Article IX hereof and such conversion Default is not cured or such
conversion is not rescinded within 5 days after written notice of Default is
given by registered mail to the Company by the Trustee or to the Company and
the Trustee by the Holder of such Note; or

 

(g)                                 default
on the part of the Company in its obligation give notice to Holders of their
right to require the Company to repurchase Notes following the occurrence of a
Designated Event within the time required to give such notice; or

 

(h)                                 a
court of competent jurisdiction shall enter an order for relief with respect to
the Company or a Significant Subsidiary under the Bankruptcy Code or a court of
competent jurisdiction shall enter a judgment, order or decree adjudging the
Company or a Significant Subsidiary a bankrupt or insolvent, or enter an order
for relief for reorganization, arrangement, adjustment or composition of or in
respect of the Company under the Bankruptcy Code or applicable state insolvency
law and the continuance of any such judgment, order or decree is unstayed and
in effect for a period of 60 consecutive days; or

 

(i)                                     the
Company or a Significant Subsidiary shall institute proceedings for entry of an
order for relief with respect to the Company or a Significant Subsidiary under
the Bankruptcy Code or for an adjudication of insolvency, or shall consent to
the institution of bankruptcy or insolvency proceedings against it, or shall
file a petition seeking, or seek or consent to reorganization, arrangement,
composition or relief under the Bankruptcy Code or any applicable state law, or
shall consent to filing of such petition or to the appointment of a receiver,
custodian, liquidator, assignee, trustee, sequestrator or similar official
(other than a custodian pursuant to 8 Delaware Code § 226 or any similar
statute under other state laws) of the Company or of substantially all of its
property, or the Company or a Significant Subsidiary shall make a general
assignment for the benefit of creditors as recognized under the Bankruptcy
Code.

 

If an Event of Default with respect
to the Notes then outstanding occurs and is continuing (other than an Event of
Default specified in Section 10.1(h) or Section 10.1(i)), then

 

58

 

and in each and every such case,
unless the principal of all of the Notes shall have already become due and
payable, either the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Notes then outstanding, by notice in writing to the
Company (and to the Trustee if given by Holders), may declare the principal of
all the Notes and the interest, if any, accrued thereon and Liquidated Damages,
if any, thereon to be due and payable immediately, and upon any such declaration
the same shall become and shall be immediately due and payable, anything in
this Indenture or in the Notes contained to the contrary notwithstanding.  This provision, however, is subject to the
condition that if at any time after the principal (or such specified amount) of
the Notes shall have been so declared due and payable and before any judgment
or decree for the payment of the moneys due shall have been obtained or entered
as hereinafter provided, the Company shall pay or shall deposit with the Trustee
a sum sufficient to pay all matured installments of interest, if any, and
Liquidated Damages, if any, upon all of the Notes and the principal of any and
all Notes, which shall have become due otherwise than by acceleration (with
interest on overdue installments of interest, if any, to the extent that
payment of such interest is enforceable under applicable law and on such
principal at the rate borne by the Notes to the date of such payment or
deposit) and shall pay the reasonable compensation, disbursements, expenses and
advances of the Trustee, and any and all Defaults under this Indenture, other
than the nonpayment of principal of and accrued interest, if any, and
Liquidated Damages, if any, on the Notes, which shall have become due solely by
reason of the acceleration, shall have been cured or shall have been waived in
accordance with this Indenture, then and in every such case the declaration of
acceleration shall be automatically annulled and rescinded; but no such
rescission and annulment shall extend to or shall affect any subsequent
Default, or shall impair any right consequent thereon.  If any Event of Default with respect to the
Company specified in Section 10.1(h) or 10.1(i) occurs, all unpaid principal
and accrued interest and Liquidated Damages, if any, on all Notes then
outstanding shall ipso  facto become and be immediately due and
payable without any declaration or other act by the Trustee or any Holder.

 

If the Trustee shall have proceeded
to enforce any right under this Indenture and such proceedings shall have been
discontinued or abandoned because of such rescission or annulment or for any
other reason or shall have been determined adversely to the Trustee, then and
in every such case the Company, the Trustee and the Holders shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the Trustee and the Holders shall continue
as though no such proceeding had been taken.

 

In determining whether the Holders
of the requisite aggregate principal amount of the Notes outstanding have given
any request, demand, authorization or consent under this Indenture, the
principal amount of Notes that will be deemed to be outstanding will be the
amount of the principal of the Notes that would be due and payable as of the
date of the determination upon a declaration of acceleration of the maturity of
the Notes.

 

SECTION 10.2.   Payment of Notes on Default; Suit
Therefor.  The Company covenants
that (a) if a Default shall be made in the payment of any installment of
interest upon the Notes then outstanding as and when the same shall become due
and payable, and such Default shall have continued for a period of 30 days, or
(b) if a Default shall be made in the payment of the principal of any of the
Notes as and when the same shall have become due and payable, whether at
maturity of the Notes or upon redemption or by declaration or otherwise, then,
upon demand of the Trustee, the Company will pay to the Trustee, for the
benefit of the Holders

 

59

 

of the Notes, the whole amount that
then shall have become due and payable on all such Notes for principal or
interest, if any, or both, as the case may be, with interest upon the overdue
principal and (to the extent that payment of such interest is enforceable under
applicable law) upon the overdue installments of interest, if any, at the rate
borne by the Notes; and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable costs and expenses of the Trustee, its agents, attorneys and counsel
and any expenses or liabilities incurred by the Trustee hereunder other than
through its negligence or bad faith.

 

If the Company shall fail forthwith
to pay such amounts upon such demand, the Trustee, in its own name and as
trustee of an express trust, shall be entitled and empowered to institute any
actions or proceedings at law or in equity for the collection of the sums so
due and unpaid, and may prosecute any such action or proceeding to judgment or
final decree, and may enforce any such judgment or final decree against the
Company and collect in the manner provided by law out of the property of the
Company, wherever situated, the moneys adjudged or decreed to be payable.

 

If there shall be pending
proceedings for the bankruptcy or for the reorganization of the Company under
any bankruptcy, insolvency or other similar law now or hereafter in effect, or
if a receiver or trustee or similar official shall have been appointed for the
property of the Company, or in the case of any other similar judicial
proceedings relative to the Company, or to the creditors or property of the
Company, the Trustee, irrespective of whether the principal of the Notes shall
then be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand pursuant to the
provisions of this Section 10.2, shall be entitled and empowered by
intervention in such proceedings or otherwise to file and prove a claim or
claims for the whole amount of principal and interest, if any, owing and unpaid
in respect of the Notes, and, in case of any judicial proceedings, to file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and of the Holders allowed in such
judicial proceedings relative to the Company, its creditors, or its property,
and to collect and receive any moneys or other property payable or deliverable
on any such claims, and to distribute the same after the deduction of its
reasonable expenses, and any receiver, assignee or trustee or similar official
in bankruptcy or reorganization is hereby authorized by each of the Holders to
make such payments to the Trustee, and, if the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it pursuant to Section 11.7 hereof for reasonable
expenses.  To the extent that such
payment of reasonable expenses out of the estate in any such proceedings shall
be denied for any reason, payment of the same shall be secured by a lien on,
and shall be paid out of, any and all distributions, dividends, moneys,
securities and other property which the Holders of the Notes may be entitled to
receive in such proceedings, whether in liquidation or under any plan of
reorganization or arrangement or otherwise.

 

All rights of action and of
asserting claims under this Indenture, or under any of the Notes, may be enforced
by the Trustee without the possession of any of the Notes, or the production
thereof at any trial or other proceeding relative thereto, and any such suit or
proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall be for the
ratable benefit of the Holders of the Notes in respect of which such judgment
has been recovered.

 

60

 

SECTION 10.3.   Application of Moneys Collected by
Trustee.  Any moneys collected by
the Trustee pursuant to Section 10.2 with respect to the Notes then
outstanding shall be applied in the order following, at the date or dates fixed
by the Trustee for the distribution of such moneys, upon presentation of the
several Notes, and stamping thereon the payment, if only partially paid, and
upon surrender thereof, if fully paid:

 

FIRST:  To the payment of all amounts due to the
Trustee pursuant to Section 11.7 except as a result of its negligence or
bad faith;

 

SECOND:  If the principal of the outstanding Notes
shall not have become due and be unpaid, to the payment of interest and
Liquidated Damages, if any, on the Notes, in the order of the maturity of the
installments of such interest, if any, with interest (to the extent that such
interest has been collected by the Trustee) upon the overdue installments of
interest and Liquidated Damages, if any, at the rate borne by the Notes, such
payment to be made ratably to the Persons entitled thereto;

 

THIRD:  If the principal of the outstanding Notes
shall have become due, by declaration or otherwise, to the payment of the whole
amount then owing and unpaid upon the Notes for principal and interest, if any,
with interest on the overdue principal and (to the extent that such interest
has been collected by the Trustee) upon overdue installments of interest, if
any, at the rate borne by the Notes; and in case such moneys shall be
insufficient to pay in full the whole amounts so due and unpaid upon the Notes,
then to the payment of such principal and interest and Liquidated Damages, if
any, without preference or priority of principal over interest and Liquidated
Damages or of interest and Liquidated Damages over principal, or of any
installment of interest and Liquidated Damages over any other installment of
interest and Liquidated Damages, or of any Note over any other Note, ratably to
the aggregate of such principal and accrued and unpaid interest; and

 

FOURTH:  To the payment of any surplus then remaining
to the Company, its successors or assigns, or as a court of competent
jurisdiction shall direct in writing.

 

SECTION 10.4.   Proceedings by Holders.  No Holder of any Notes then outstanding
shall have any right by virtue of or by availing of any provision of this
Indenture to institute any suit, action or proceeding in equity or at law upon
or under or with respect to this Indenture or the Notes or for the appointment
of a receiver or trustee or similar official, or for any other remedy hereunder
or thereunder, unless (i)  such Holder
previously shall have given to the Trustee written notice of a continuing Event
of Default, (ii) the Holders of at least 25% in aggregate principal amount of
the Notes then outstanding shall have made a written request to the Trustee to
institute such action, suit or proceeding in its own name as Trustee hereunder,
(iii) the Trustee, after its receipt of such notice, request and offer of
indemnity, shall have neglected or refused to institute any such action, suit
or proceeding for 60 days, and (iv) during such 60-day period the Holders of a
majority in aggregate principal amount of the outstanding Notes do not give the
Trustee a direction inconsistent with the request, it being understood and
intended, and being expressly covenanted by the Holder of every Note with every
other Holder and the Trustee, that no one or more Holders of the Notes shall
have any right in any manner whatever by virtue of or by availing of any
provision of this Indenture or of the Notes to affect, disturb or

 

61

 

prejudice the rights of any other
Holder of such Notes or to obtain or seek to obtain priority over or preference
as to any other such Holder, or to enforce any right under this Indenture or
the Notes, except in the manner herein provided and for the equal, ratable and
common benefit of all Holders of Notes.

 

Notwithstanding any other
provisions in this Indenture, the right of any Holder of any Note to receive
payment of the principal of and interest, if any, on such Note, on or after the
respective due dates expressed in this Indenture and such Note, to institute
suit for the enforcement of any such payment or any right to convert on or
after such respective dates or to convert its Notes in accordance with the Indenture
is absolute and unconditional and shall not be impaired or affected without the
consent of such Holder.

 

SECTION 10.5.   Proceedings by Trustee.  In case of an Event of Default hereunder,
the Trustee may in its discretion proceed to protect and enforce the rights
vested in it by this Indenture by such appropriate judicial proceedings as the
Trustee shall deem necessary to protect and enforce any of such rights, either
by suit in equity or by action at law or by proceedings in bankruptcy or
otherwise, whether for the specific enforcement of any covenant or agreement
contained in this Indenture or in aid of the exercise of any power granted in
this Indenture, or to enforce any other legal or equitable right vested in the
Trustee by this Indenture or by law.

 

SECTION 10.6.   Remedies Cumulative and Continuing.  All powers and remedies given by this
Article X to the Trustee or to the Holders shall, to the extent permitted
by law, be deemed cumulative and not exclusive of any thereof or of any other
powers and remedies available to the Trustee or the Holders, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained in this Indenture, and no delay or omission
of the Trustee or of any Holder to exercise any right or power accruing upon
any Default occurring and continuing as aforesaid shall impair any such right
or power, or shall be construed to be a waiver of any such Default or an
acquiescence therein; and, subject to the provisions of Section 10.4,
every power and remedy given by this Article X or by law to the Trustee or
to the Holders may be exercised from time to time, and as often as shall be
deemed expedient, by the Trustee or by the Holders, respectively.

 

SECTION 10.7.   Direction of Proceedings; Waiver of
Defaults by Majority of Holders. 
Subject to Sections 10.4 and 14.2, the Holders of a majority in
aggregate principal amount of the Notes then outstanding shall have the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee with respect to the Notes; provided,
however, that (subject to the
provisions of Section 11.1) the Trustee shall have the right to decline to
follow any such direction if the Trustee shall determine upon advice of counsel
that the action or proceeding so directed may not lawfully be taken or is in
conflict with this Indenture or if the Trustee in good faith by its board of
directors, its executive committee, or a trust committee of directors or
Responsible Officers or both shall determine that the action or proceeding so
directed would involve the Trustee in personal liability or would be unduly
prejudicial to the rights of the other Holders of the Notes.  The Holders of a majority in aggregate
principal amount of the Notes then outstanding may on behalf of the Holders of
all of the Notes waive any past Default or Event of Default hereunder and its
consequences (including acceleration and any related payment Default from such
acceleration) except a Default in the payment of interest, if any, on, or the
principal of,

 

62

 

the Notes or a Default in the
compliance with any provision hereunder that cannot be amended or supplemented
pursuant to Article XIV without the consent of each Holder of Notes
affected.  Upon any such waiver the
Company, the Trustee and the Holders of the Notes shall be restored to their
former positions and rights hereunder, respectively; but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereon.  Whenever any
Default or Event of Default hereunder shall have been waived as permitted by this
Section 10.7, said Default or Event of Default shall for all purposes of
the Notes and this Indenture be deemed to have been cured and to be not
continuing.

 

SECTION 10.8.   Notice of Defaults.  The Trustee shall, within 90 days after the
occurrence of a Default or Event of Default, with respect to the Notes then
outstanding, mail to all Holders of the Notes, as the names and the addresses
of such Holders appear upon the Note Register, notice of all defaults known to
the Trustee with respect to the Notes, unless such defaults shall have been cured
before the giving of such notice (the term “defaults” for the purpose of this
Section 10.8 being hereby defined to be the events specified in clauses
(a), (b), (c), (d), (e), (f), (g), (h) and (i)of Section 10.1, not
including periods of grace, if any, provided for therein and irrespective of
the giving of the written notice specified in said clause (c), but in the case
of any default of the character specified in said clause (c) no such notice to
Holders shall be given until at least 60 days after the giving of written
notice thereof to the Company pursuant to said clause (c)); provided, however,
that, except in the case of default in the payment of the principal of or
interest or Liquidated Damages, if any, on any of the Notes, the Trustee shall
be protected in withholding such notice if and so long as the board of
directors, the executive committee, or a trust committee of directors or
Responsible Officers or both of the Trustee in good faith determines that the
withholding of such notice is in the best interests of the Holders.

 

SECTION 10.9.   Undertaking to Pay Costs.  All parties to this Indenture agree, and
each Holder of any Note by his acceptance thereof shall be deemed to have
agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken or omitted by it as Trustee, the filing by any
party litigant in such suit of an undertaking to pay the cost of such suit, and
that such court may in its discretion assess reasonable costs, including
reasonable attorneys’ fees and expenses, against any party litigant in such
suit, having due regard to the merits and good faith of the claims or defenses
made by such party litigant; but the provisions of this Section 10.9 shall
not apply to any suit instituted by the Trustee, to any suit instituted by any
Holder or group of Holders, holding in the aggregate more than 10% in aggregate
principal amount of the Notes then outstanding, or to any suit instituted by
any Holders for the enforcement of the payment of the principal of or interest,
if any, on any Note against the Company on or after the due date thereto
expressed in such Note.

 

63

 

ARTICLE XI

 

TRUSTEE

 

SECTION 11.1.   Duties of Trustee.

 

(a)                                  If
an Event of Default has occurred and is continuing, the Trustee shall exercise
the rights and powers vested in it by this Indenture and use the same degree of
care and skill in their exercise as a prudent Person would exercise or use
under the circumstances in the conduct of such Person’s own affairs; provided that if an Event of Default
occurs and is continuing, the Trustee will be under no obligation to exercise
any of the rights or powers under this Indenture at the request or direction of
any of the Holders unless such Holders have provided the Trustee indemnity or
security reasonably satisfactory to the Trustee against loss, liability or
expense.

 

(b)                                 Except
during the continuance of an Event of Default:

 

(1)                                  the
Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and

 

(2)                                  in
the absence of bad faith on its part, the Trustee may conclusively rely, as to
the truth of the statements and the correctness of the opinions expressed
therein, upon certificates, directions, notices or opinions furnished to the
Trustee.  However, in the case of any
such certificates, directions, notices or opinions which by any provisions
hereof are specifically required to be furnished to the Trustee, the Trustee
shall examine such certificates and opinions to determine whether or not they
conform to the requirements of this Indenture (but need not confirm or
investigate the accuracy of mathematical calculations or other facts stated
therein).

 

(c)                                  The
Trustee may not be relieved from liability for its own negligent action, its
own negligent failure to act or its own willful misconduct, except that:

 

(1)                                  this
paragraph does not limit the effect of paragraph (b) of this Section;

 

(2)                                  the
Trustee shall not be liable for any error of judgment made in good faith by a
Responsible Officer unless it is proved that the Trustee was negligent in
ascertaining the pertinent facts; and

 

(3)                                  the
Trustee shall not be liable with respect to any action it takes or omits to
take in good faith in accordance with a direction received by it pursuant to
Section 10.4.

 

(d)                                 The
Trustee shall not be liable for interest on any money received by it except as
the Trustee may agree in writing with the Company.

 

64

 

(e)                                  Money
held in trust by the Trustee need not be segregated from other funds except to
the extent required by law.

 

(f)                                    No
provision of this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder or in the exercise of any of its rights or powers, if it
shall have reasonable grounds to believe that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.

 

(g)                                 Every
provision of this Indenture relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Section 11.1 and to the provisions of the TIA.

 

(h)                                 The
Trustee shall be under no obligation to exercise any of the rights or powers
vested in it by this Indenture at the request or direction of any of the
Holders unless such Holders shall have provided to the Trustee security or
indemnity reasonably satisfactory to it against the costs, expenses (including
reasonable attorneys’ fees and expenses) and liabilities that might be incurred
by it in compliance with such request or direction.

 

SECTION 11.2.   Rights of Trustee.

 

(a)                                  The
Trustee may conclusively rely and shall be protected in acting or refraining
from acting upon any paper or document believed by it to be genuine and to have
been signed or presented by the proper Person or Persons.  The Trustee need not investigate any fact or
matter stated in the document.

 

(b)                                 Before
the Trustee acts or refrains from acting, it may require an Officers’
Certificate or an Opinion of Counsel. 
The Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on the Officers’ Certificate or Opinion of Counsel.

 

(c)                                  The
Trustee may act through its attorneys and agents and shall not be responsible
for the misconduct or negligence of any attorney or agent appointed with due
care.

 

(d)                                 The
Trustee shall not be liable for any action it takes or omits to take in good
faith which it believes to be authorized or within its rights or powers; provided, however,
that the Trustee’s conduct does not constitute willful misconduct or
negligence.

 

(e)                                  The
Trustee may consult with counsel of its selection, and the advice or opinion of
such counsel appointed with due care with respect to legal matters relating to
this Indenture and the Notes shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered
by it hereunder in good faith and in accordance with the advice or opinion of
such counsel.

 

(f)                                    The
Trustee shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion, notice,
request, direction, consent, order, bond or other paper or document; but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine

 

65

 

the books, records and premises of
the Company at reasonable times, in a reasonable manner and upon reasonable
advance notice, personally or by agent or attorney at the sole cost of the
Company and shall incur no liability or additional liability of any kind by
reason of such inquiry or investigation.

 

(g)                                 The
Trustee shall not be deemed to have knowledge of any Default or Event of
Default except, (i) during any period it is serving as Registrar and Paying
Agent for the Notes, any Event of Default occurring pursuant to Sections
10.1(a), 10.1(b) or 10.1(e) or (ii) any Default or Event of Default of which a
Responsible Officer shall have received written notification or obtained actual
knowledge.  The term “actual knowledge”
shall mean the actual fact or statement of knowing by a Responsible Officer
without independent investigation with respect thereto.

 

(h)                                 Delivery
of the reports, information and documents to the Trustee is for informational
purposes only and the Trustee’s receipt of such shall not constitute
constructive notice of any information contained therein or determinable from
information contained therein, including the Company’s compliance with any of
its covenants hereunder (as to which the Trustee is entitled to rely
exclusively on Officers’ Certificates).

 

(i)                                     In
no event shall the Trustee be responsible or liable for special, indirect, or
consequential loss or damage of any kind whatsoever (including, but not limited
to, loss of profit) irrespective of whether the Trustee has been advised of the
likelihood of such loss or damage and regardless of the form of action.

 

(j)                                     The
rights, privileges, protections, immunities and benefits given to the Trustee,
including its right to be indemnified, are extended to, and shall be
enforceable by, the Trustee in each of its capacities hereunder, and each
agent, custodian and other Person employed to act hereunder.

 

(k)                                  The
Trustee may request that the Company deliver an Officers’ Certificate setting
forth the names of individuals and/or titles of officers authorized at such
time to take specified actions pursuant to this Indenture, which Officers’
Certificate may be signed by any Person authorized to sign an Officers’
Certificate, including any Person specified as so authorized in any such
certificate previously delivered and not superseded.

 

SECTION 11.3.   Individual Rights of Trustee.  The Trustee in its individual or any other
capacity may become the owner or pledgee of Notes and may otherwise deal with
the Company or its Affiliates with the same rights it would have if it were not
Trustee.  Any Paying Agent, Registrar,
co-registrar or co-paying agent may do the same with like rights.  However, the Trustee must comply with
Sections 11.10 and 11.11.  In addition,
the Trustee shall be permitted to engage in transactions with the Company; provided, however,
that if the Trustee acquires any conflicting interest (as such term is defined
in Section 310(b) of the TIA) the Trustee must (i) eliminate such conflict
within 90 days of acquiring such conflicting interest, (ii) apply to the
Commission for permission to continue acting as Trustee or (iii) resign as
Trustee hereunder.

 

SECTION 11.4.   Trustee’s Disclaimer.  The Trustee shall not be responsible for and
makes no representation as to the validity or adequacy of this Indenture or the
Notes, it shall

 

66

 

not be accountable for the
Company’s use of the Notes or the proceeds from the Notes, and it shall not be
responsible for any statement of the Company in this Indenture or in any
document issued or offering circular (or similar document) used in connection
with the sale of the Notes or in the Notes other than the Trustee’s certificate
of authentication or for the use or application of any funds received by any
Paying Agent other than the Trustee.

 

SECTION 11.5.   Notice of Defaults.  If a Default or Event of Default occurs and
is continuing and if a Responsible Officer has actual knowledge thereof, the
Trustee shall mail to each Holder notice of the Default or Event of Default
within 90 days after it occurs.  Except
in the case of a Default or Event of Default in payment of principal of, or
interest on any Note (including payments pursuant to the required repurchase
provisions of such Note, if any), the Trustee may withhold the notice if and so
long as its board of directors, a committee of its board of directors or a
committee of its Responsible Officers and/or a Responsible Officer in good
faith determines that withholding the notice is in the interests of registered
Holders.

 

SECTION 11.6.   Reports by Trustee to Holders.  As promptly as practicable after each May 15
beginning with the May 15 following the date of this Indenture, and in any
event prior to December 15 in each year, the Trustee shall mail to each
Holder a brief report dated as of such May 15 that complies with TIA
§ 313(a), if and to the extent such report may be required by the
TIA.  The Trustee also shall comply with
TIA § 313(b).  The Trustee shall
also transmit by mail all reports required by TIA § 313(c).

 

A copy of each report at the time
of its mailing to Holders shall be filed with the Commission and each stock
exchange (if any) on which the Notes are listed.  The Company agrees to notify promptly the Trustee in writing
whenever the Notes become listed on any stock exchange and of any delisting
thereof.

 

SECTION 11.7.   Compensation and Indemnity.  The Company shall pay to the Trustee from
time to time such reasonable compensation for its services as the parties shall
agree in writing from time to time.  The
Trustee’s compensation shall not be limited by any law on compensation of a
trustee of an express trust.  The
Company shall reimburse the Trustee upon written request for all reasonable and
documented out-of-pocket expenses incurred or made by it, including, but not
limited to, costs of collection, costs of preparing and reviewing reports,
certificates and other documents, costs of preparation and mailing of notices
to Holders and reasonable costs of counsel retained by the Trustee in
connection with the delivery of an Opinion of Counsel or otherwise, in addition
to the compensation for its services. 
Such expenses shall include the reasonable compensation and reasonable
and documented out-of-pocket expenses, disbursements and advances of the Trustee’s
agents, counsel, accountants and experts. 
The Company shall indemnify the Trustee, and each of its officers,
directors, counsel and agents, against any and all loss, liability or expense
(including, but not limited to, reasonable attorneys’ fees and expenses)
incurred by it in connection with the administration of this trust and the
performance of its duties hereunder, including the costs and expenses of
enforcing this Indenture (including this Section 11.7) and of defending
itself against any claims (whether asserted by any Holder, the Company or
otherwise).  The Trustee shall notify
the Company promptly of any claim of which a Responsible Officer receives
written notice for which it may seek indemnity.  Failure by the Trustee to so notify the Company shall not relieve
the Company of its obligations hereunder except to the extent the Company is
prejudiced thereby.  The Company shall
defend the claim and the Trustee

 

67

 

may have separate counsel and, if the
Trustee determines in its reasonable judgment that a conflict of interest
exists between the Trustee and the Company, the Company shall pay the fees and
expenses of such counsel.  The Company
need not reimburse any expense or indemnify against any loss, liability or
expense incurred by the Trustee through the Trustee’s own willful misconduct,
negligence or bad faith, subject to the exceptions contained in
Section 11.1(c) hereof.

 

To secure the Company’s payment
obligations in this Section 11.7, the Trustee shall have a lien prior to
the Notes on all money or property held or collected by the Trustee other than
money or property held in trust to pay principal of and interest on particular
Notes.

 

The Company’s payment obligations
pursuant to this Section and any lien arising hereunder shall survive the
discharge of this Indenture and the resignation or removal of the Trustee.  When the Trustee incurs expenses after the
occurrence of a Default specified in Section 10.1(g) or (h) with respect
to the Company, the expenses are intended to constitute expenses of
administration under the Bankruptcy Code.

 

SECTION 11.8.   Replacement of Trustee.  The Trustee may resign at any time by so
notifying the Company.  The Holders of a
majority in principal amount of the Notes may remove the Trustee by so
notifying the Company and the Trustee in writing and the Company may appoint a
successor Trustee.  The Company shall
remove the Trustee if:

 

(1)                                  the
Trustee fails to comply with Section 11.10;

 

(2)                                  the
Trustee is adjudged bankrupt or insolvent;

 

(3)                                  a
receiver or other public officer takes charge of the Trustee or its property;
or

 

(4)                                  the
Trustee otherwise becomes incapable of acting.

 

If the Trustee resigns or is
removed by the Company or by the Holders of a majority in principal amount of
the Notes and the Company does not reasonably promptly appoint a successor
Trustee, or if a vacancy exists in the office of Trustee for any reason (the
Trustee in such event being referred to herein as the retiring Trustee), the
Holders of a majority in aggregate principal amount of the Notes may appoint a
successor Trustee.

 

A successor Trustee shall deliver a
written acceptance of its appointment to the retiring Trustee and to the
Company.  Thereupon the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture.  The successor Trustee shall
mail a notice of its succession to Holders. 
The retiring Trustee shall promptly transfer all property held by it as
Trustee to the successor Trustee, subject to the lien provided for in
Section 11.7.

 

If the Company has not appointed a
successor Trustee within 60 days after the retiring Trustee resigns or is
removed, the retiring Trustee or the Holders of 10% in principal amount of the
Notes may petition, at the expense of the Company, any court of competent
jurisdiction for the appointment of a successor Trustee.

 

68

 

If the Trustee fails to comply with
Section 11.10, unless the Trustee’s duty to resign is stayed as provided
in TIA § 310(b), any Holder may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.

 

Notwithstanding the replacement of
the Trustee pursuant to this Section 11.8, the Company’s obligations under
Section 11.7 shall continue for the benefit of the retiring Trustee.

 

SECTION 11.9.   Successor Trustee by Merger.  If the Trustee consolidates with, merges or
converts into, or transfers all or substantially all its corporate trust
business or assets to, another corporation or banking association, the
resulting, surviving or transferee corporation without any further act shall be
the successor Trustee.

 

In case at the time such successor
or successors by merger, conversion or consolidation to the Trustee shall
succeed to the trusts created by this Indenture, any of the Notes shall have
been authenticated but not delivered, any such successor to the Trustee may
adopt the certificate of authentication of any predecessor trustee, and deliver
such Notes so authenticated; and in case at that time any of the Notes shall
not have been authenticated, any successor to the Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have
the full force which it is anywhere in the Notes or in this Indenture provided
that the certificate of the Trustee shall have.

 

SECTION 11.10.   Eligibility; Disqualification.  The Trustee shall at all times satisfy the
requirements of TIA § 310(a).  The
Trustee shall have a combined capital and surplus of at least $50 million as
set forth in its most recently filed annual report of condition.  The Trustee shall comply with TIA
§ 310(b).

 

SECTION 11.11.   Preferential Collection of Claims
Against Company.  If and when the
Trustee shall be or become a creditor of the Company, the Trustee shall comply
with TIA § 311(a), excluding any creditor relationship listed in TIA
§ 311(b).  A Trustee who has
resigned or been removed shall be subject to TIA § 311(a) to the extent
indicated.

 

ARTICLE XII

 

SATISFACTION AND
DISCHARGE OF INDENTURE; UNCLAIMED MONEYS

 

SECTION 12.1.   Satisfaction and Discharge of Indenture.  If at any time (a) the Company shall have
paid or caused to be paid the principal of and interest and Liquidated Damages,
if any, on all the Notes outstanding (other than Notes which have been
destroyed, lost or stolen and which have been replaced or paid as provided in
Section 2.8) as and when the same shall have become due and payable, or
(b) the Company shall have delivered to the Trustee for cancellation all Notes
theretofore authenticated (other than Notes which have been destroyed, lost or
stolen and which have been replaced or paid as provided in Section 2.8);
and if, in any such case, the Company shall also pay or cause to be paid all
other sums payable hereunder by the Company, then this Indenture shall cease to
be of further effect, and the Trustee, on demand

 

69

 

of the Company accompanied by an
Officers’ Certificate and an Opinion of Counsel, each stating that all
conditions precedent relating to the satisfaction and discharge contemplated by
this provision have been complied with, and at the cost and expense of the
Company, shall execute proper instruments acknowledging such satisfaction and
discharging this Indenture.  The Company
agrees to reimburse the Trustee for any costs or expenses thereafter reasonably
and properly incurred, and to compensate the Trustee for any services
thereafter reasonably and properly rendered, by the Trustee in connection with
this Indenture or the Notes.

 

If at any time the exact amount described
in clause (ii) below can be determined at the time of making the deposit
referred to in such clause (ii), (i) all of the Notes not theretofore delivered
to the Trustee for cancellation shall have become due and payable, or are by
their terms to become due and payable within one year or are to be called for
redemption within one year under arrangements satisfactory to the Trustee for
the giving of notice of redemption, and (ii) (a) the Company shall have
irrevocably deposited or caused to be deposited with the Trustee as funds in
trust, specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of the Notes, cash in an amount (other than moneys
repaid by the Trustee or any Paying Agent to the Company in accordance with Section 12.4)
or U.S. Government Obligations, maturing as to principal and interest, if any,
at such times and in such amounts as will insure the availability of cash
sufficient in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, to pay the principal of and interest, if any, on all of the Notes on
each date that such principal or interest, if any, is due and payable in
accordance with the terms of this Indenture and the Notes, and (b) the Company
has paid or caused to be paid all other sums payable hereunder by the Company;
then the Company shall be deemed to have paid and discharged the entire
indebtedness on all the Notes on the date of the deposit referred to in this
clause (ii), and the provisions of this Indenture with respect to the Notes
shall no longer be in effect (except as to (i) rights of registration of
transfer and exchange of Notes, (ii) substitution of mutilated, defaced,
destroyed, lost or stolen Notes, (iii) rights of Holders of Notes to receive
payments of principal thereof and interest, if any, thereon upon the original
stated due dates therefor (but not upon acceleration), (iv) the rights,
obligations, duties and immunities of the Trustee hereunder, (v) the rights of
the Holders of Notes as beneficiaries hereof with respect to the property so
deposited with the Trustee payable to all or any of them (vi) rights of Holders
of Notes to convert the Notes pursuant to Article IX and (vii) the obligations
of the Company under Section 3.3 with respect to the Notes) and the
Trustee, on demand of the Company accompanied by an Officers’ Certificate and
an Opinion of Counsel, each stating that all conditions precedent contemplated
by this provision have been complied with, and at the cost and expense of the
Company, shall execute proper instruments acknowledging such satisfaction and
discharging such Indebtedness.

 

SECTION 12.2.   Application by Trustee of Funds
Deposited for Payment of Notes.  All
moneys deposited with the Trustee or any Paying Agent shall be held in trust
and applied by it to the payment, either directly or through any Paying Agent
(including the Company acting as its own paying agent), to the Holders of the
Notes for the payment or redemption of which such moneys have been deposited
with the Trustee, of all sums due and to become due thereon for principal and
interest, if any, but such money need not be segregated from other funds except
to the extent required by law.

 

70

 

SECTION 12.3.   Repayment of Moneys Held by Paying Agent.  In connection with the satisfaction and
discharge of this Indenture with respect to the Notes, all moneys then held by
any Paying Agent under the provisions of this Indenture with respect to the
Notes shall, upon demand of the Company, be repaid to it and thereupon such
Paying Agent shall be released from all further liability with respect to such
moneys.

 

SECTION 12.4.   Return of Moneys Held by Trustee and
Paying Agent Unclaimed for Two Years. 
Any moneys deposited with or paid to the Trustee or any Paying Agent for
the payment of the principal of or interest, if any, on the Notes and not
applied but remaining unclaimed for two years after the date upon which such principal
or interest, if any, shall have become due and payable, shall, upon the written
request of the Company and unless otherwise required by mandatory provisions of
applicable escheat or abandoned or unclaimed property law, be repaid to the
Company by the Trustee or such Paying Agent, and the Holder of the Notes shall,
unless otherwise required by mandatory provisions of applicable escheat or
abandoned or unclaimed property laws, thereafter look only to the Company for
any payment which such Holder may be entitled to collect, and all liability of
the Trustee or any Paying Agent with respect to such moneys shall thereupon
cease; provided, however, that the Trustee or such Paying
Agent, before being required to make any such repayment with respect to moneys
deposited with it for any payment in respect of the Notes, shall, at the
expense of the Company, mail by first-class mail to Holders of the Notes at
their addresses as they shall appear on the Note register notice that such
moneys remain and that, after a date specified therein, which shall not be less
than thirty days from the date of such mailing or publication, any unclaimed
balance of such money then remaining will be repaid to the Company.

 

SECTION 12.5.   Indemnity for U.S. Government
Obligations.  The Company shall pay
and indemnify the Trustee against any tax, fee or other charge imposed on or
assessed against the U.S. Government Obligations deposited pursuant to
Section 12.1 or the principal or interest received in respect of such
obligations.

 

ARTICLE XIII

 

AMENDMENTS

 

SECTION 13.1.   Without Consent of Holders.  The Company and the Trustee may amend this
Indenture or the Notes without notice to or consent of any Holder:

 

(1)                                  to
cure any ambiguity, omission, defect or inconsistency;

 

(2)                                  to
provide for the assumption by a Successor Company of the Company’s obligations
under this Indenture and the Notes;

 

(3)                                  to
provide for uncertificated Notes in addition to or in place of certificated
Notes;

 

(4)                                  to
secure the Notes or to provide guarantees of the Notes;

 

71

 

(5)                                  to
add covenants that would benefit the Holders of the Notes or to surrender any
rights of the Company under this Indenture;

 

(6)                                  to
comply with any requirements to effect or maintain the qualification of this
Indenture under the TIA;

 

(7)                                  to
add Events of Default with respect to the Notes; or

 

(8)                                  to
make any change that does not adversely affect any outstanding Notes in any
material respect.

 

After an amendment under this
Section becomes effective, the Company shall prepare and cause the Trustee
to mail to Holders, a notice briefly describing such amendment.  The failure to give such notice to all
Holders, or any defect therein, shall not impair or affect the validity of an
amendment under this Section.

 

SECTION 13.2.   With Consent of Holders.  The Company and the Trustee may amend this
Indenture or the Notes without notice to any Holder but with the written
consent of the Holders of at least a majority in aggregate principal amount of
the Notes then outstanding.  However,
without the consent of each Note then outstanding, an amendment, supplement or
waiver may not:

 

(1)                                  reduce
the amount of Notes whose Holders must consent to an amendment, supplement or
waiver;

 

(2)                                  reduce
the rate of accrual of interest or modify the method for calculating interest
or change the time for payment of interest on the Notes;

 

(3)                                  modify
the provisions with respect to a Holder’s rights upon a Designated Event in a
manner adverse to the Holders of the Notes, including the Company’s obligations
to repurchase the Notes following a Designated Event;

 

(4)                                  reduce
the principal amount of Notes or change their Stated Maturity;

 

(5)                                  reduce
the Redemption Price or Purchase Price of the Notes or change the time at which
the Notes may or must be redeemed or repurchased;

 

(6)                                  make
payments on the Notes payable in currency other than as originally stated in
the Notes;

 

(7)                                  impair
the Holder’s right to institute suit for the enforcement of any payment on the
Notes;

 

(8)                                  make
any change in the percentage of principal amount of Notes necessary to waive
compliance with provisions of this Indenture or to make any change to this
Section 13.2 or Section 13.3;

 

72

 

(9)                                  waive
a continuing Default or Event of Default regarding any payment on the Notes; or

 

(10)                            adversely
affect the conversion or repurchase provisions of the Notes.

 

It shall not be necessary for the
consent of the Holders under this Section 13.2 to approve the particular
form of any proposed amendment, but it shall be sufficient if such consent
approves the substance thereof.

 

After an amendment under this
Section 14.2 becomes effective, the Company shall mail to Holders a notice
briefly describing such amendment.  The
failure to give such notice to all Holders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section 14.2.

 

SECTION 13.3.   Compliance with Trust Indenture Act.  Every amendment to this Indenture or the
Notes shall comply with the TIA as then in effect.

 

SECTION 13.4.   Revocation and Effect of Consents and
Waivers.  A consent to an amendment
or a waiver by a Holder of a Note shall bind the Holder and every subsequent
Holder of that Note or portion of the Note that evidences the same debt as the
consenting Holder’s Note, even if notation of the consent or waiver is not made
on the Note.  However, any such Holder
or subsequent Holder may revoke the consent or waiver as to such Holder’s Note
or portion of the Note if the Trustee receives the notice of revocation before
the date the amendment or waiver becomes effective.  After an amendment or waiver becomes effective, it shall bind
every Holder.  An amendment or waiver
made pursuant to Section 14.2 shall become effective upon receipt by the
Trustee of the requisite number of written consents.

 

The Company may, but shall not be
obligated to, fix a record date for the purpose of determining the Holders
entitled to give their consent or take any other action described above or
required or permitted to be taken pursuant to this Indenture.  If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Holders at such record date (or their duly designated proxies), and only those
Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such action, whether or not such Persons
continue to be Holders after such record date. 
No such consent shall become valid or effective more than 120 days after
such record date.

 

SECTION 13.5.   Notation on or Exchange of Notes.  If an amendment changes the terms of a Note,
the Trustee may require the Holder of the Note to deliver it to the
Trustee.  The Trustee may place an
appropriate notation on the Note regarding the changed terms and return it to
the Holder.  Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the Note
shall issue and the Trustee shall authenticate a new Note that reflects the
changed terms.  Failure to make the
appropriate notation or to issue a new Note shall not affect the validity of
such amendment.

 

SECTION 13.6.   Trustee To Sign Amendments.  The Trustee shall sign any amendment
authorized pursuant to this Article XIII if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the
Trustee.  If it does, the Trustee may
but need not sign it.  In signing such
amendment the Trustee shall be provided with, and (subject to Section

 

73

 

11.1) shall be fully protected in
relying upon, an Officers’ Certificate and an Opinion of Counsel stating that
such amendment is authorized or permitted by this Indenture.

 

ARTICLE XIV

 

MISCELLANEOUS

 

SECTION 14.1.   Trust Indenture Act Controls.  If any provision of this Indenture limits,
qualifies or conflicts with another provision which is required to be included
in this Indenture by the TIA, the provision required by the TIA shall control.

 

SECTION 14.2.   Notices.  Any notice or communication shall be in writing and delivered in
person or mailed by first-class mail addressed as follows:

 

If to the
Company:

 

AAR CORP.

One AAR Place

1100 Wood Dale Road

Wood Dale, Illinois  60191 

Attention:  Howard A. Pulsifer

Facsimile No.:  (630) 227-2059

 

With
copies to:

 

Schiff Hardin LLP

6600 Sears Tower

Chicago, IL  60606

Attention:  Robert Regan

Facsimile No.:  (312) 258-5600

 

If to the
Trustee:

 

U.S. Bank National Association 

60 Livingston Avenue

St. Paul, MN  55107

Attention:  Corporate Trust Services

Facsimile No.:  (651) 495-8097

 

The Company or the Trustee by
notice to the other may designate additional or different addresses for
subsequent notices or communications.

 

Any notice or communication mailed
to a Holder shall be mailed to the Holder at the Holder’s address as it appears
on the Note Register and shall be sufficiently given if so

 

74

 

mailed within the time prescribed.
Notices shall be deemed to have been given as of the date of mailing.

 

Failure to mail a notice or
communication to a Holder or any defect in it shall not affect its sufficiency
with respect to other Holders.  If a
notice or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.

 

SECTION 14.3.   Communication by Holders with Other
Holders.  Holders may communicate
pursuant to TIA § 312(b) with other Holders with respect to their rights
under this Indenture or the Notes.  The
Company, the Trustee, the Registrar and anyone else shall have the protection
of TIA § 312(c).

 

SECTION 14.4.   Certificate and Opinion as to Conditions
Precedent.  Upon any request or
application by the Company to the Trustee to take or refrain from taking any
action under this Indenture, the Company shall furnish to the Trustee such
certificates and opinions as may be required under the TIA.  Each such certificate or opinion shall be
given in the form of one or more Officers’ Certificates, if to be given by an
Officer, or an Opinion of Counsel, if to be given by counsel, and shall comply
with the requirements of the TIA and any other requirements set forth in this
Indenture.  Notwithstanding the
foregoing, in the case of any such request or application as to which the
furnishing of any Officers’ Certificate or Opinion of Counsel is specifically
required by any provision of this Indenture relating to such particular request
or application, no additional certificate or opinion need be furnished.

 

SECTION 14.5.   Statements Required in Certificate or
Opinion.  Each certificate or
opinion with respect to compliance with a covenant or condition provided for in
this Indenture (except for certificates provided for in Section 8.7) shall
include:

 

(1)                                  a
statement that the individual making such certificate or opinion has read such
covenant or condition;

 

(2)                                  a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based;

 

(3)                                  a
statement that, in the opinion of such individual, he has made such examination
or investigation as is necessary to enable him to express an informed opinion
as to whether or not such covenant or condition has been complied with; and

 

(4)                                  a
statement as to whether or not, in the opinion of such individual, such
covenant or condition has been complied with.

 

In giving an Opinion of Counsel,
counsel may rely as to factual matters on an Officers’ Certificate or such
other certificates of Officer(s) as it may deem appropriate and on certificates
of public officials.

 

SECTION 14.6.   When Notes Disregarded.  In determining whether the Holders of the
required principal amount of Notes have concurred in any direction, waiver or
consent, Notes owned by the Company or by any Person directly or indirectly
controlling or controlled by

 

75

 

or under direct or indirect common
control with the Company shall be disregarded and deemed not to be outstanding,
except that, for the purpose of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent, only Notes which
a Responsible Officer of the Trustee actually knows are so owned shall be so
disregarded.  Also, subject to the foregoing,
only Notes outstanding at the time shall be considered in any such
determination.

 

SECTION 14.7.   Rules by Trustee, Paying Agent and
Registrar.  The Trustee may make
reasonable rules for action by, or a meeting of, Holders.  The Registrar and the Paying Agent may make
reasonable rules for their functions.

 

SECTION 14.8.   Governing Law.  This Indenture and the Notes shall be
governed by, and construed in accordance with, the laws of the State of New
York.

 

SECTION 14.9.   No Recourse Against Others.  No recourse for the payment of the principal
of, or interest (including Liquidated Damages, if any) on any Note and no
recourse under or upon any obligation, covenant, agreement of the Company in
this Indenture, the Notes or in any supplemental indenture, or because of the
creation of any Indebtedness represented thereby, shall be had against any
incorporator, stockholder, employee, agent, officer, director, or subsidiary,
past, present or future, of the Company or of any successor corporation or
entity, whether by virtue of any constitution, statute or rule of law, or by
the enforcement of any assessment or penalty or otherwise, it being understood
that all such liability is hereby waived and released as a condition to, and as
a consideration for, the execution and delivery of this Indenture and the issue
of the Notes.

 

SECTION 14.10.   Successors.  All agreements of the Company in this
Indenture and the Notes shall bind its successors.  All agreements of the Trustee in this Indenture shall bind its
successors.

 

SECTION 14.11.   Multiple Originals.  The parties may sign any number of copies of
this Indenture.  Each signed copy shall
be an original, but all of them together represent the same agreement.  One signed copy is enough to prove this
Indenture.

 

SECTION 14.12.   Variable Provisions.  The Company initially appoints the Trustee
as Paying Agent and Registrar and custodian with respect to any Global Notes.

 

SECTION 14.13.   Qualification of Indenture.  The Company shall qualify this Indenture
under the TIA in accordance with the terms and conditions of the Registration
Rights Agreement and shall pay all reasonable costs and expenses (including
attorneys’ fees and expenses for the Company and the Trustee) incurred in
connection therewith, including, but not limited to, costs and expenses of qualification
of the Indenture and the Notes and printing this Indenture and the Notes.  The Trustee shall be entitled to receive
from the Company any such Officers’ Certificates, Opinions of Counsel or other
documentation as it may reasonably request in connection with any such
qualification of this Indenture under the TIA.

 

76

 

SIGNATURES

 

IN WITNESS WHEREOF, the parties
hereto have caused this Indenture to be duly executed, all as of the date first
written above.

 

	
   

  	
  AAR CORP.,

  	
   

  
	
   

  	
  as
  Issuer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ TIMOTHY J. ROMENESKO

  	
   

  
	
   

  	
  Name:

  	
  Timothy J. Romenesko

  	
   

  
	
   

  	
  Title:

  	
  Vice President and Chief
  Financial

  	
   

  
	
   

  	
  Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  U.S. BANK NATIONAL ASSOCIATION,

  	
   

  
	
   

  	
  as
  Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ BENJAMIN J. KRUEGER

  	
   

  
	
   

  	
  Name:  Benjamin J. Krueger

  	
   

  
	
   

  	
  Title:  Trust Officer

  	
   

  
					

 

 

S-1

 

EXHIBIT
A

 

[FORM OF
FACE OF SECURITY]

 

THIS NOTE AND ANY COMMON STOCK
ISSUABLE UPON THE CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM.  EACH
PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

 

THIS NOTE AND ANY COMMON STOCK
ISSUABLE UPON THE CONVERSION OF THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHO THE TRANSFEROR REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (3) TO AN INSTITUTIONAL
INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1),
(2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) OR (4)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND
(B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE
UNITED STATES AND OTHER JURISDICTIONS.

 

THIS NOTE, ANY SHARES OF COMMON
STOCK ISSUABLE UPON ITS CONVERSION AND ANY RELATED DOCUMENTATION MAY BE AMENDED
OR SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND
OTHER TRANSFERS OF THIS NOTE AND ANY SUCH SHARES TO REFLECT ANY CHANGE IN
APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES
RELATING TO THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY.  THE HOLDER OF THIS NOTE AND SUCH SHARES OF
COMMON STOCK SHALL BE DEEMED BY THE ACCEPTANCE OF THIS NOTE AND ANY SUCH SHARES
TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.

 

A-1

 

THIS SECURITY IS A GLOBAL SECURITY
WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED
IN THE NAME OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
(“DEPOSITARY”), OR A NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY THE
COMPANY, THE TRUSTEE AND ANY AGENT THEREOF AS THE OWNER AND HOLDER OF THIS
SECURITY FOR ALL PURPOSES.  UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TO
THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.

 

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

 

A-2

 

 

	
  No.
            

  	
  Principal Amount
  $                    ,

  as revised by the Schedule of Increases

  and Decreases in the Global Note attached hereto

  

 

CUSIP NO. 000361 AE5

 

AAR CORP.

 

2.875% Convertible Senior
Notes due February 1, 2024

 

AAR CORP., a Delaware corporation,
promises to pay to Cede & Co., or registered assigns, the principal sum of
$[                 ]
Dollars, as revised by the Schedule of Increases and Decreases in the
Global Note attached hereto, on February 1, 2024.

 

Interest Payment Dates:  February 1, and August 1.

 

Record Dates:  January 15 and July 15.

 

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

 

	
   

  	
  AAR CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  

 

TRUSTEE’S
CERTIFICATE OF

AUTHENTICATION

 

Dated:

 

U.S. BANK
NATIONAL ASSOCIATION,

as Trustee, certifies that this is one of

the Notes referred to in the within-mentioned Indenture.

 

	
  By:

  	
   

  	
   

  
	
  Authorized Signatory

  	
   

  

 

A-3

 

[FORM OF REVERSE SIDE OF
NOTE]

 

2.875% Convertible Senior
Notes due February 1, 2024

 

1.                                       Interest

 

AAR CORP., a Delaware corporation
(such corporation, and its successors and assigns under the Indenture
hereinafter referred to, being herein called the “Company”), promises to pay
interest on the principal amount of this Note at the rate per annum shown
above.  The Company will pay interest
semiannually on February 1 and August 1 of each year.  Interest on the Notes will accrue from the
most recent date to which interest has been paid on the Notes or, if no
interest has been paid, from February 3, 2004.  The Company shall, to the fullest extent permitted by law,  pay interest on overdue principal and
overdue installments of interest, if any (plus interest on such interest to the
extent lawful), at the rate borne by the Notes, which interest shall be payable
upon demand.  Interest will be computed
on the basis of a 360-day year of twelve 30-day months.

 

2.                                       Method
of Payment

 

By no later than 11:00 a.m. (New
York City time) on the date on which any principal of or interest on any Note
is due and payable, the Company shall irrevocably deposit with the Trustee or
the Paying Agent money sufficient to pay such principal and/or interest.  The Company will pay interest (except
Defaulted Interest) on the principal amount of the Notes on each
February 1 and August 1 to the Persons who are registered Holders of
Notes at the close of business on the January 15 and July 15 next
preceding the Interest Payment Date even if Notes are canceled or repurchased
after the Record Date and on or before the Interest Payment Date.  Holders must surrender Notes to a Paying
Agent to collect principal payments. 
The Company will pay principal and interest in money of the United States
that at the time of payment is legal tender for payment of public and private
debts.  The Company will make all
payments in respect of a Definitive Note (including principal and interest) in
U.S. dollars at the office of the Trustee. 
At the Company’s option, however, the Company may make such payments by
mailing a check to the registered address of each Holder thereof as such
address shall appear on the Note Register or, with respect to Notes represented
by a Global Note, by wire transfer of immediately available funds to the
accounts specified by the Depositary.

 

3.                                       Paying
Agent, Conversion Agent and Registrar

 

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

 

4.                                       Indenture

 

The Company issued the Notes under
an Indenture dated as of February 3, 2004 (as it may be amended or
supplemented from time to time in accordance with the terms thereof, the
“Indenture”), among the Company and the Trustee.  The terms of the Notes include those

 

A-4

 

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

 

The Notes are senior unsecured
obligations of the Company limited to $90,000,000 aggregate principal amount.

 

5.                                       Redemption
at the Option of the Company

 

No sinking fund is provided for the
Notes.  The Notes are redeemable for
cash in whole, or in part, at any time on or after February 1, 2008 at the
option of the Company at a redemption price (“Redemption Price”) equal to the
following plus any accrued and unpaid interest (including Liquidated Damages,
if any) to, but not including, the Redemption Date:

 

•                  Beginning
February 1, 2008 through January 31, 2009:  100.958% of the principal amount;

 

•                  Beginning
February 1, 2009 through January 31, 2010: 100.479% of the principal
amount;

 

•                  On
or after February 1, 2010: 100.000% of the principal amount.

 

6.                                       Notice
of Redemption at the Option of the Company

 

Notice of redemption at the option
of the Company shall be mailed at least 30 days but not more than 60 days
before a Redemption Date to the Trustee, the Paying Agent and each Holder of
Notes to be redeemed at the Holder’s registered address.  If money sufficient to pay the Redemption
Price of all Notes (or portions thereof) to be redeemed on the Redemption Date is
deposited with the Paying Agent prior to or on the Redemption Date, on and
after the Redemption Date, interest (including Liquidated Damages, if any), if
any, shall cease to accrue on such Notes or portions thereof.  Notes in denominations larger than $1,000
principal amount may be redeemed in part but only in integral multiples of
$1,000 principal amount.

 

7.                                       Purchase
by the Company at the Option of the Holder;

Purchase at the Option of
the Holder Upon a Designated Event

 

(a)                                  Subject
to the terms and conditions of the Indenture, a Holder shall have the option to
require the Company to purchase the Notes held by such Holder on
February 1, 2010, February 1, 2014 and February 1, 2019 (each, a
“Repurchase Date”) at a purchase price (the “Purchase Price”) equal to 100% of
the principal amount of the Notes to be purchased plus any accrued and unpaid
interest, if any (including Liquidated Damages, if any), to but not including
such Repurchase Date, upon delivery of a Purchase Notice containing the
information set forth in the Indenture, from the opening of business on the
date that is 20 Business Days prior to such Repurchase Date until the close of
business on the Business Day immediately prior to such

 

A-5

 

Repurchase Date and upon delivery
of the Notes to the Paying Agent by the Holder as set forth in the
Indenture.  The Company will pay the
Purchase Price in cash with respect each Repurchase Date.

 

Notes in denominations larger than
$1,000 principal amount may be purchased in part, but only in integral
multiples of $1,000 principal amount.

 

(b)                                 If
a Designated Event shall occur, each Holder shall have the right, at such
Holder’s option and subject to the terms and conditions of the Indenture, to
require the Company to purchase any or all of such Holder’s Notes or any
portion of the principal amount thereof that is equal to $1,000 or an integral
multiple of $1,000 on the day that is 45 days after the date of the Company
Notice of the occurrence of the Designated Event (subject to extension to
comply with applicable law) for a Designated Event Purchase Price equal to 100%
of the principal amount of Notes purchased plus accrued and unpaid interest
(including Liquidated Damages, if any) to but not including the Designated
Event Purchase Date, which Designated Event Purchase Price shall be paid in
cash.

 

(c)                                  Holders
have the right to withdraw any Purchase Notice or Designated Event Purchase
Notice, as the case may be, by delivery to the Paying Agent of a written notice
of withdrawal in accordance with the provisions of the Indenture.

 

8.                                       Conversion

 

Subject to the procedures set forth
in the Indenture, a Holder may convert Notes into Common Stock on or before the
close of business on January 31, 2024 during the periods and upon
satisfaction of the conditions set forth in the Indenture.

 

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

 

The initial Conversion Rate is
53.7924 shares of Common Stock per $1,000 principal amount, subject to
adjustment in certain events described in the Indenture.  The Company may, at its option, deliver in
lieu of shares of Common Stock, cash or a combination of cash and shares of
Common Stock.

 

To convert the Notes a Holder must
(1) complete and manually sign the irrevocable conversion notice on the back of
the Notes (or complete and manually sign a facsimile of such notice) and
deliver such notice to the Conversion Agent at the office maintained by the
Conversion Agent for such purpose, (2) surrender the Notes to the Conversion
Agent, (3) furnish appropriate endorsements and transfer documents if required
by the Conversion Agent, the Company or the Trustee and (4) pay any transfer or
similar tax, if required.

 

9.                                       Denominations;
Transfer; Exchange

 

The Notes are in registered form
without coupons in denominations of principal amount of $1,000 and whole multiples
of $1,000.  A Holder may transfer or
exchange Notes in

 

A-6

 

accordance with the Indenture.  The Registrar may require a Holder, among
other things, to furnish appropriate endorsements or transfer documents and to
pay any taxes and fees required by law or permitted by the Indenture.  The Registrar need not register the transfer
of or exchange any Notes (A) for a period beginning at the opening of business
15 days before any selection of Notes for redemption or repurchase and ending
at the close of business on the day notice of such redemption or repurchase is
deemed to have been given to all Holders of Notes to be so redeemed or
repurchased or (B) selected for redemption or repurchase in whole or in part,
except for the transfer of the unredeemed portion of any Note being redeemed in
part.

 

10.                                 Persons
Deemed Owners

 

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

 

11.                                 Unclaimed
Money

 

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

 

12.                                 Amendment,
Waiver

 

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

 

13.                                 Defaulted
Interest

 

Except as otherwise specified with
respect to the Notes, any Defaulted Interest on any Note shall forthwith cease
to be payable to the registered Holder thereof on the relevant Record Date or
accrual date, as the case may be, by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company as provided for in
Section 2.12 of the Indenture.

 

14.                                 No
Recourse Against Others

 

No recourse for the payment of the
principal of or interest (or including Liquidated Damages, if any) on this Note
and no recourse under or upon any obligation, covenant or agreement of the
Company in the Indenture, this Note or in any supplemental indenture, or
because of the creation of any Indebtedness represented thereby, shall be had
against any incorporator,

 

A-7

 

stockholder, employee, agent,
officer, director, or subsidiary, past, present or future, of the Company or of
any successor corporation or entity, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, it being understood that all such liability is hereby waived and
released as a condition to, and as a consideration for, the execution and
delivery of the Indenture and the issue of this Note.

 

15.                                 Authentication

 

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

 

16.                                 Abbreviations

 

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

 

17.                                 CUSIP
Numbers

 

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

 

18.                                 Governing
Law

 

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

 

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

 

AAR CORP.

One AAR Place

1100 Wood Dale Road 

Wood Dale, Illinois 60191

Attention:  General Counsel

Facsimile No.:  (630) 227-2059

 

A-8

 

ASSIGNMENT FORM

 

To assign this Note, fill in the
form below:

 

I or we assign and transfer this
Note to

 

 

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

 

 

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

 

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

 

 

	
  Date:

  	
   

  	
   

  	
  Your Signature:

  	
   

  	
   

  
	
   

  
	
  Signature Guarantee:

  	
   

  	
   

  
	
  (Signature must be guaranteed)

  	
   

  
								

 

 

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

 

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

 

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

 

CHECK ONE BOX BELOW:

 

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

 

2.                                       o                                    transferred
to the Company; or

 

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

 

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

 

5.                                       o                                    transferred
to an institutional accredited investor (as defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act), that has furnished to the Trustee a signed
letter containing certain representations and agreements (the form of which
letter appears as Section 2.7 of the Indenture); or

 

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

 

A-9

 

Unless one of the boxes is checked,
the Trustee will refuse to register any of the Notes evidenced by this
certificate in the name of any person other than the registered Holder thereof;
provided, however, that if box (5) or (6) is
checked, the Trustee or the Company may require, prior to registering any such
transfer of the Notes, in their sole discretion, such legal opinions,
certifications and other information as the Trustee or the Company may
reasonably request to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration requirements
of the Securities Act, such as the exemption provided by Rule 144 under such
Act.

 

	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
  Signature Guarantee:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Signature must be guaranteed)

  	
  Signature

  
			

 

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

 

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

 

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

 

 

	
  Dated:

  	
  NOTICE:  To be executed by an executive officer

  
	
   

  	
   

  
	
   

  	
  [INSERT NAME OF ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

A-10

 

SCHEDULE OF INCREASES
OR DECREASES IN GLOBAL SECURITY

 

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

 

 

	
  Date of

  Exchange

  	
   

  	
  Amount of decrease in

  Principal Amount of this

  Global Note

  	
   

  	
  Amount of increase in

  Principal Amount of this

  Global Note

  	
   

  	
  Principal Amount of this

  Global Note following such

  decrease or increase

  	
   

  	
  Signature of authorized

  signatory of Trustee or Notes

  Custodian

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

A-11

 

OPTION OF HOLDER TO ELECT
PURCHASE

 

If you want to elect to have this
Note purchased by the Company pursuant to Section 7.1 or Article VI
of the Indenture, check the box:  o

 

If you want to elect to have only
part of this Note purchased by the Company pursuant to Section 7.1 or
Article VI of the Indenture, state the amount in principal amount (must be
an integral multiple of $1,000): 
$                              .

 

 

	
  Date:

  	
   

  	
   

  	
  Your Signature:

  	
   

  
	
   

  	
  (Sign exactly as your name
  appears

  on the other side of this Note)

  
	
   

  
	
  Signature Guarantee:

  	
   

  	
   

  
	
  (Signature must be guaranteed)

  	
   

  
							

 

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

 

A-12

 

FORM OF
CERTIFICATE TO BE DELIVERED UPON EXCHANGE

OR
REGISTRATION OF TRANSFER OF SECURITIES

 

Re:                               2.875%
Convertible Senior Notes due February 1, 2024 of AAR CORP. (the
“Company”).

 

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

 

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

 

In connection with such request and
in respect of each such Note, the Transferor does hereby certify that the
Transferor is familiar with the Indenture, dated as of February 3, 2004
(as amended or supplemented to date, the “Indenture”), between the Company and
U.S. Bank National Association, as trustee (the “Trustee”), relating to the
above-captioned Notes and that the transfer of this Note does not require
registration under the Securities Act (as defined below) because:*

 

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

 

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

 

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

 

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

 

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

 

A-13

 

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

 

	
   

  	
  [INSERT NAME OF TRANSFEROR]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  Date:

  

 

A-14

 

CONVERSION NOTICE

 

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

 

o

 

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

 

$

 

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

 

 

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

 

 

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

 

 

	
  Date:

  	
   

  	
   

  	
  Signature(s):

  	
   

  	
   

  
	
   

  
	
   

  	
   

  
	
   

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

  
							

 

A-15

 

	
  Signature(s) guaranteed by:

  	
   

  
	
   

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

  

 

A-16

 

EXHIBIT
B

 

FORM OF
TRANSFER CERTIFICATE FOR TRANSFER

OF
RESTRICTED COMMON STOCK

 

[NAME AND
ADDRESS OF COMMON STOCK TRANSFER AGENT]

 

Re:                               AAR
CORP. 2.875% Convertible Senior Notes Due February 1, 2024 (the “Notes”)

 

Reference is hereby made to the
Indenture dated as of February 3, 2004 between the Company and the Trustee
(collectively, the “Indenture”). 
Capitalized terms used but not defined herein shall have the meanings
given them in the Indenture.

 

This letter relates to
                  
shares of Common Stock represented by the accompanying certificate(s) that were
issued upon conversion of Notes and which are held in the name of [name of
transferor] (the “Transferor”) to effect the transfer of such Common Stock.

 

In connection with the transfer of
such shares of Common Stock, the undersigned confirms that such shares of
Common Stock are being transferred and do not require registration under the
Securities Act (as defined below) because:

 

CHECK ONE BOX BELOW:

 

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

 

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

 

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

 

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

 

B-1

 

Unless one of the boxes is checked,
the transfer agent will refuse to register any of the Common Stock evidenced by
this certificate in the name of any person other than the registered holder
thereof; provided, however, that if box (2), (3) or (4) is
checked, the transfer agent may require, prior to registering any such transfer
of the Common Stock such certifications and other information, including
opinions of counsel, as the Company has reasonably requested in writing, by
delivery to the transfer agent of a standing letter of instruction, to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act.

 

	
   

  	
  [Name of Transferor],

  
	
   

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Dated:

  
					

 

B-2Exhibit
4.3

 

Execution Copy

 

AAR
CORP.

 

 

2.875% Convertible Notes due February 1, 2024

 

Registration Rights Agreement

 

	
   

  	
  February 3, 2004

  
	
  Goldman, Sachs & Co.,

  
	
  As representative of
  the several Purchasers

  named in Schedule I to the Purchase Agreement

  
	
  c/o Goldman, Sachs
  & Co.

  
	
  85 Broad Street

  
	
  New York, New York 10004

  

 

Ladies and Gentlemen:

 

AAR
CORP., a Delaware corporation (the “Company”), proposes to issue and sell to
the Purchasers (as defined herein) upon the terms set forth in the Purchase
Agreement (as defined herein) its 2.875% Convertible Notes due February 1, 2024
(the “Securities”).  As an inducement to
the Purchasers to enter into the Purchase Agreement and in satisfaction of a
condition to the obligations of the Purchasers thereunder, the Company agrees
with the Purchasers for the benefit of Holders (as defined herein) from time to
time of the Registrable Securities (as defined herein) as follows:

 

1.             Definitions.

 

(a)           Capitalized terms used herein without definition
shall have the meanings ascribed to them in the Purchase Agreement.  As used in this Agreement, the following
defined terms shall have the following meanings:

 

“Affiliate” of any specified person means any other person
which, directly or indirectly, is in control of, is controlled by, or is under
common control with such specified person. 
For purposes of this definition, control of a person means the power,
direct or indirect, to direct or cause the direction of the management and
policies of such person whether by contract or otherwise; and the terms
“controlling” and “controlled” have meanings correlative to the foregoing.

 

“Closing Date” means the First Time of Delivery as defined in
the Purchase Agreement.

 

“Commission” means the United States Securities and Exchange
Commission, or any other federal agency at the time administering the Exchange
Act or the Securities Act, whichever is the relevant statute for the particular
purpose.

 

“Common Stock” means the Company’s common stock, par value $1.00
per share together with any associated share purchase rights.

 

1

 

“DTC” means The Depository Trust Company.

 

“Effective
Date” has the meaning
assigned thereto in Section 2(b)(i) hereof.

 

“Effective
Failure” has the meaning
assigned thereto in Section 7(b) hereof.

 

“Effectiveness
Period” has the meaning
assigned thereto in Section 2(b)(i) hereof.

 

“Effective
Time” means the time at
which the Commission declares the Shelf Registration Statement effec­tive or at
which the Shelf Registration Statement otherwise becomes effective.

 

“Electing
Holder” has the meaning
assigned thereto in Section 3(a)(iii) hereof.

 

“Exchange Act” means the United States Securities Exchange Act
of 1934, as amended.

 

“Holder” means any person that is the record owner of Registrable
Securities (and includes any person that has a beneficial interest in any
Registrable Security in book-entry form).

 

“Indenture” means the Indenture, dated as of February 3, 2004,
between the Company and U.S. Bank National Association, as amended and supplemented
from time to time in accordance with its terms.

 

“Liquidated
Damages” has the meaning
assigned thereto in Section 7(a) hereof.

 

“Managing
Underwriters” means the
investment banker or investment bankers and manager or managers that shall administer
an underwritten offering, if any, conducted pursuant to Section 6 hereof.

 

“NASD Rules” means the Rules of the National Association of
Securities Dealers, Inc., as amended from time to time.

 

“Notice and
Questionnaire” means a
Notice of Registration Statement and Selling Securityholder Questionnaire
substantially in the form of Appendix A hereto.

 

The
term “person”
means an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.

 

“Prospectus” means the prospectus (including, without
limitation, any preliminary prospectus, any final prospectus and any prospectus
that discloses information previously omitted from a prospectus filed as part
of an effective registration statement in reliance upon Rule 430A under
the Securities Act) included in the Shelf Registration Statement, as amended or
supplemented by any prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities covered by the Shelf
Registration Statement and by all other amendments and supplements to such
prospectus, including all material incorporated by reference in such prospectus
and all documents filed after the date of such prospectus by the Company under
the Exchange Act and incorporated by reference therein.

 

“Purchase
Agreement” means the
purchase agreement, dated as of January 29, 2004, between the Purchasers and
the Company relating to the Securities.

 

2

 

“Purchasers” means the Purchasers named in Schedule I to
the Purchase Agreement.

 

“Registrable
Securities” means all or
any portion of the Securities issued from time to time under the Indenture in
registered form and the shares of Common Stock issuable upon conversion of such
Securities; provided, however, that a security ceases to be a
Registrable Security when it is no longer a Restricted Security.

 

“Registration
Default” has the meaning
assigned thereto in Section 7(a) hereof.

 

“Restricted
Security” means any
Security or share of Common Stock issuable upon conversion thereof except any
such Security or share of Common Stock that (i) has been effectively
registered under the Securities Act and sold in a manner contemplated by the
Shelf Registration Statement, (ii) has been transferred in compliance with
Rule 144 under the Securities Act (or any successor provision thereto) or is
transferable pursuant to paragraph (k) of such Rule 144 (or any successor
provision thereto) or (iii) has otherwise been transferred and a new
Security or share of Common Stock not subject to transfer restrictions under
the Securities Act has been delivered by or on behalf of the Company in
accordance with Section 2.1 of the Indenture.

 

“Rules and
Regulations” means the
published rules and regulations of the Commission promulgated under the
Securities Act or the Exchange Act, as in effect at any relevant time.

 

“Securities
Act” means the United
States Securities Act of 1933, as amended.

 

“Shelf
Registration” means a
registration effected pursuant to Section 2 hereof.

 

“Shelf
Registration Statement”
means a “shelf” registration statement filed under the Securities Act providing
for the registration of, and the sale on a continuous or delayed basis by the
Holders of, all of the Registrable Securities pursuant to Rule 415 under the
Securities Act and/or any similar rule that may be adopted by the Commission,
filed by the Company pursuant to the provisions of Section 2 of this
Agreement, including the Prospectus contained therein, any amendments and
supplements to such registration statement, including post-effective
amendments, and all exhibits and all material incorporated by reference in such
registration statement.

 

“Suspension
Period” has the meaning assigned thereto in Section 2(c) hereof.

 

“Trust
Indenture Act” means the
Trust Indenture Act of 1939, or any successor thereto, and the rules,
regulations and forms promulgated thereunder, as the same shall be amended from
time to time.

 

The
term “underwriter”
means any underwriter of Registrable Securities in connection with an offering
thereof under a Shelf Registration Statement.

 

(b)           Wherever there is a reference in this Agreement to
a percentage of the “principal amount” of Registrable Securities or to a
percentage of Registrable Securities, Common Stock shall be treated as
representing the principal amount of Securities that was surrendered for
conversion or exchange in order to receive such number of shares of Common
Stock.

 

3

 

2.             Shelf Registration.

 

(a)           The Company shall, no later than 90 calendar days
following the Closing Date, file with the Commission a Shelf Registration
Statement relating to the offer and sale of the Registrable Securities by the
Holders from time to time in accordance with the methods of distribution
elected by such Holders and set forth in such Shelf Registration Statement and,
there­after, shall use its reasonable best efforts to cause such Shelf
Registration Statement to be declared effective under the Securities Act no
later than 180 calendar days following the Closing Date;  provided,
however,
that the Company may, upon written notice to all Holders, postpone having the
Shelf Registration Statement declared effective for a reasonable period not to
exceed 90 days if the Company possesses material non-public information, the
disclosure of which would have a material adverse effect on the Company and its
subsidiaries taken as a whole, if a pending transaction that would be material
to the Company and its subsidiaries, taken as a whole, could be materially
adversely affected as a result, or if the Company is unable to file financial
statements required to be included in a shelf registration statement as a
result of a pending litigation; provided, further, however, that no Holder
shall be entitled to be named as a selling securityholder in the Shelf
Registration Statement or to use the Prospectus forming a part thereof for
resales of Registrable Securities unless such Holder is an Electing Holder.

 

(b)           The Company shall use its reasonable best efforts:

 

(i)            to keep the Shelf Registration Statement con­tinuously
effective under the Securities Act in order to permit the Prospectus forming a
part thereof to be usable by Holders until the earliest of (1) the sale of all
Registrable Securities registered under the Shelf Registration Statement; (2)
the expiration of the period referred to in Rule 144(k) of the Securities Act
with respect to all Registrable Securities held by Persons that are not
Affiliates of the Company; and (3) two years from the date (the “Effective
Date”) such Shelf Registration Statement is declared effective (such period
being referred to herein as the “Effectiveness Period”);

 

(ii)           after the Effective Time of the Shelf Registration
Statement, promptly upon the request of any Holder of Registrable Securities
that is not then an Electing Holder, to take any action reasonably necessary to
enable such Holder to use the Prospectus forming a part thereof for resales of
Registrable Securities, including, without limitation, any action necessary to
identify such Holder as a selling securityholder in the Shelf Registration
Statement; provided,
however, that nothing in this subparagraph shall relieve such Holder
of the obligation to return a completed and signed Notice and Questionnaire to
the Company in accordance with Section 3(a)(ii) hereof; and

 

(iii)          if at any time the Securities, pursuant to Article
4.2 of the Indenture, are convertible into securities other than Common Stock,
to cause, or to cause any successor under the Indenture to cause, such
securities to be included in the Shelf Registration Statement no later than the
date on which the Securities may then be convertible into such securities.

 

The
Company shall be deemed not to have used its reasonable best efforts to keep
the Shelf Registration Statement effective during the requisite period if the
Company voluntarily takes any action that would result in Holders of
Registrable Securities covered thereby not being able to offer and sell any of
such Registrable Securities during that period, unless such action is (A)

 

4

 

required
by applicable law and the Company there­after promptly complies with the
requirements of paragraph 3(j) below or (B) permitted pursuant to Section 2(c)
below.

 

(c)           The Company may suspend the use of the Prospectus
for a period not to exceed 30 days in any 90-day period or an aggregate of 90
days in any 12-month period (each, a “Suspension Period”) if the Board of
Directors of the Company shall have determined in good faith that because of
valid business reasons (not including avoidance of the Company’s obligations
hereunder), including the acquisition or divestiture of assets, pending
corporate developments, public filings with the Commission and similar events,
it is in the best interests of the Company to suspend such use, and prior to
suspending such use the Company provides the Holders with written notice of
such suspension, which notice need not specify the nature of the event giving rise
to such suspension.

 

3.             Registration Procedures.  In connection with the Shelf
Registration Statement, the following provisions shall apply:

 

(a)           (i)            Not less
than 30 calendar days prior to the Effective Time of the Shelf Registration
Statement, the Company shall mail the Notice and Questionnaire to the Holders
of Registrable Securities.  No Holder
shall be entitled to be named as a selling securityholder in the Shelf
Registration Statement as of the Effective Time, and no Holder shall be
entitled to use the Prospectus forming a part thereof for resales of
Registrable Securities until such Holder has returned a completed and signed
Notice and Questionnaire to the Company; provided, however, to be included in the
Registration Statement as of the Effective Time, Holders of Registrable
Securities shall have at least 28 calendar days from the date on which the
Notice and Questionnaire is first mailed to such Holders to return a completed
and signed Notice and Questionnaire to the Company.

 

(ii)           After the Effective Time of the Shelf Registration
Statement, the Company shall, upon the request of any Holder of Registrable
Securities that is not then an Electing Holder, promptly send a Notice and
Questionnaire to such Holder.  From and
after the Effective Time of the Shelf Registration Statement, the Company shall
(A) as promptly as is practicable after the date a completed and signed
Notice and Questionnaire is delivered to the Company, and in any event within
ten Business Days after such date, prepare and file with the Commission (x) a
supplement to the Prospectus or, if required by applicable law, a
post-effective amendment to the Shelf Registration Statement and (y) any other
document required by applicable law, so that the Holder delivering such Notice
and Questionnaire is named as a selling securityholder in the Shelf
Registration Statement and is permitted to deliver the Prospectus to purchasers
of such Holder’s Registrable Securities in accordance with applicable law, and
(B) if the Company shall file a post-effective amendment to the Shelf
Registration Statement, use its reasonable best efforts to cause such
post-effective amendment to become effective under the Securities Act as
promptly as is practicable;  provided,
however, that if a Notice and Questionnaire is delivered to the
Company during a Suspension Period, the Company shall not be obligated to take
the actions set forth in this clause (ii) until the termination of such
Suspension Period.

 

(iii)          The term “Electing Holder” shall mean any Holder
of Registrable Securities that has returned a completed and signed Notice and
Questionnaire to the Company in accordance with Section 3(a)(i) or 3(a)(ii)
hereof.

 

5

 

(b)           The Company shall furnish to each Electing Holder,
prior to the Effective Time, a copy of the Shelf Registration Statement
initially filed with the Commission, and shall furnish to such Holders, prior
to the filing thereof with the Commission, copies of each amendment thereto and
each amend­ment or supplement, if any, to the Prospectus included therein, and
shall use its reasonable best efforts to reflect in each such docu­ment, at the
Effective Time or when so filed with the Commis­sion, as the case may be,
such  comments as such Holders and their
respective counsel reasonably may propose.

 

(c)           The Company shall promptly take such action as may
be necessary so that (i) each of the Shelf Registration Statement and any
amendment thereto and the Prospectus forming a part thereof and any amendment
or supplement thereto (and each report or other docu­ment incorporated therein
by reference in each case) complies in all material respects with the
Securities Act and the Exchange Act and the respective rules and regulations
thereunder, (ii) each of the Shelf Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the state­ments therein not misleading and (iii) each of the
Prospectus forming a part of the Shelf Registration Statement, and any
amendment or supplement to such Prospectus, does not at any time during the
Effectiveness Period include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.

 

(d)           The Company shall promptly advise each
Electing Holder, and shall confirm such advice in writing if so requested by
any such Electing Holder:

 

(i)            when a Shelf Registration Statement and any
amendment thereto has been filed with the Commission and when a Shelf
Registration State­ment or any post-effective amendment thereto has become
effective, in each case making a public announcement thereof by release made to
Reuters Economic Services and Bloomberg Business News;

 

(ii)           of any request by the Commission for amendments or
supplements to the Shelf Registra­tion Statement or the Prospectus included
therein or for additional information;

 

(iii)          of the issuance by the Commission of any stop
order suspending the effectiveness of the Shelf Registration Statement or the
initiation of any proceedings for such purpose;

 

(iv)          of the receipt by the
Company of any notification with respect to the suspension of the qualification
of the securities included in the Shelf Registration Statement for sale in any
jurisdiction or the initiation of any proceeding for such purpose; and

(v)           of the occurrence of
any event or the existence of any state of facts that requires the making of
any changes in the Shelf Registra­tion Statement or the Prospectus included
therein so that, as of such date, such Shelf Registration Statement and
Prospectus do not contain an untrue statement of a material fact and do not
omit to state a material fact required to be stated therein or necessary to
make the statements

 

6

 

therein (in the case of the Prospectus, in light of the circum­stances
under which they were made) not misleading (which advice shall be accompanied
by an instruc­tion to such Holders to suspend the use of the Prospectus until
the requisite changes have been made).

 

(e)           The Company shall use its reasonable best efforts
to prevent the issuance, and if issued to obtain the withdrawal at the earliest
possible time, of any order suspending the effectiveness of the Shelf
Registration Statement.

 

(f)            The Company shall furnish to each Electing Holder,
with­out charge, at least one copy of the Shelf Registra­tion Statement and all
post-effective amendments thereto, including financial statements and
schedules, and, if such Electing Holder so requests in writing, all reports,
other documents and exhibits that are filed with or incorpor­ated by reference
in the Shelf Registration Statement.

 

(g)           The Company shall, during the Effectiveness
Period, deliver to each Electing Holder, without charge, as many copies of the
Prospectus (including each prelim­inary Prospectus) included in the Shelf Registration
Statement and any amendment or supplement thereto as such Electing Holder may
reasonably request; and the Company consents (except during the periods
specified in Section 2(c) above or during the continuance of any event or the
existence of any state of facts described in Section 3(d)(v) above) to the use
of the Prospec­tus and any amend­ment or supplement thereto by each of the
Electing Holders in connection with the offering and sale of the Registrable
Securities covered by the Prospectus and any amendment or supple­ment thereto
during the Effectiveness Period.

 

(h)           Prior to any offering of Registrable Securities
pursuant to the Shelf Registration Statement, the Company shall (i) register or
qualify or cooperate with the Electing Holders and their respective counsel in
connection with the registration or quali­fication of such Registrable
Securities for offer and sale under the securities or “blue sky” laws of such
jurisdictions within the United States as any Electing Holder may reasonably
request, (ii) keep such registrations or qualifications in effect and comply
with such laws so as to permit the continuance of offers and sales in such
jurisdictions for so long as may be necessary to enable any Electing Holder or
underwriter, if any, to complete its distribution of Registrable Securities
pursuant to the Shelf Registration Statement, and (iii) take any and all other
actions necessary or advisable to enable the 
disposition in such jurisdictions of such Registrable Securities; provided,
however,
that in no event shall the Company be obligated to (A) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where it would not
otherwise be required to so qualify but for this Sec­tion 3(h) or (B) file any
general consent to service of process in any jurisdiction where it is not as of
the date hereof so subject.

 

(i)            Unless any Registrable Securities shall be in
book-entry only form, the Company shall cooperate with the Electing Holders to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold pursuant to the Shelf Registration Statement,
which certificates, if so required by any securities exchange upon which any
Registrable Securities are listed, shall be penned, lithographed or engraved,
or produced by any combination of such methods, on steel engraved borders, and
which certificates shall be free of any restrictive legends and in such
permitted denominations and registered in such names as Electing Holders may
request in connection with the sale of Registrable Securities pursuant to the
Shelf Registration Statement.

 

7

 

(j)            Upon the occurrence of any event or the existence
of any state of facts contemplated by paragraph 3(d)(v) above, the C­ompany
shall promptly prepare a post-effective amend­ment to any Shelf Registration
Statement or an amendment or supplement to the related Prospectus or file any
other required document so that, as thereafter delivered to purchasers of the
Registrable Securities included therein, the Prospectus will not include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. 
If the Company notifies the Electing Holders of the occurrence of any
event or the existence of any state of facts contemplated by paragraph 3(d)(v)
above, the Electing Holder shall suspend the use of the Prospectus until the
requisite changes to the Prospectus have been made.

 

(k)           Not later than the Effective Time of the Shelf
Registration Statement, the Company shall provide a CUSIP number for the
Registrable Securi­ties that are debt securities.

 

(l)            The Company shall use its reasonable best efforts
to comply with all applicable Rules and Regulations, and to make generally
available to its secu­rityholders as soon as practicable, but in any event not
later than eighteen months after (i) the effective date (as defined in Rule
158(c) under the Securities Act) of the Shelf Registration Statement,
(ii) the effective date of each post-effective amendment to the Shelf
Regis­tration Statement, and (iii) the date of each filing by the Company with
the Commission of an Annual Report on Form 10-K that is incor­porated by
reference in the Shelf Registration Statement, an earning statement of the
Company and its sub­sid­iaries complying with Section 11(a) of the
Securities Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158).

 

(m)          Not later than the Effective Time of the Shelf
Registration Statement, the Company shall cause the Indenture to be qualified
under the Trust Indenture Act; in connection with such qualification, the
Company shall cooperate with the Trustee under the Indenture and the Holders
(as defined in the Indenture) to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in accordance with the terms of
the Trust Indenture Act; and the Company shall execute, and shall use all
reasonable efforts to cause the Trustee to execute, all documents that may be
required to effect such changes and all other forms and documents required to
be filed with the Commission to enable such Indenture to be so qualified in a
timely manner.  In the event that any
such amendment or modification referred to in this Section 3(m) involves
the appointment of a new trustee under the Indenture, the Company shall appoint
a new trustee thereunder pursuant to the applicable provisions of the
Indenture.

 

(n)           In the event of an underwritten offering conducted
pursuant to Section 6 hereof, the Company shall, if requested, promptly include
or incorporate in a Prospectus supplement or post-effective amendment to the
Shelf Registration Statement such information as the Managing Underwriters
reasonably agree should be included therein and to which the Company does not
reasonably object and shall make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after it is noti­fied
of the matters to be included or incorporated in such Prospectus supplement or
post-effective amendment.

 

(o)           The Company shall enter into such customary
agreements (including an underwriting agreement in customary form in the event
of an underwritten offering conducted pursuant to Section 6 hereof) and take
all other appropriate action in order to expedite and facilitate the
registration and disposition of the Registrable Securities, and in connection

 

8

 

therewith, if an under­writing agreement is
entered into, cause the same to contain indemnification provisions and
procedures substantially identical to those set forth in Section 5 hereof with
respect to all parties to be indemnified pursuant to Section 5 hereof.

 

(p)           The Company shall:

 

(i)(A)      make reasonably available
for inspection by the Electing Holders, any underwriter participating in any
disposition pursuant to the Shelf Registration Statement, and any attorney, accountant
or other agent retained by such Electing Holders or any such underwriter all
relevant financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries, and (B) cause the Company’s
officers, directors and employees to supply all information reasonably
requested by such Electing Holders or any such underwriter, attorney,
accountant or agent in connection with the Shelf Registration Statement, in
each case, as is customary for similar due diligence exam­inations; provided,
however,
that all records, information and documents that are designated in writing by
the Company, in good faith, as confidential shall be kept confi­dential by such
Electing Holders and any such underwriter, attorney, accountant or agent,
unless such disclosure is made in connection with a court proceeding or
required by law, or such records, information or documents become available to
the public generally or through a third party without an accompanying
obligation of confidentiality; and provided further that, if the foregoing
inspection and information gathering would otherwise disrupt the Company’s
conduct of its business, such inspection and information gathering shall, to
the great­est extent possible, be coordinated on behalf of the Electing Holders
and the other parties entitled thereto by one counsel designated by and on
behalf of the Electing Holders and other parties;

 

(ii)           in connection with any
underwritten offering conducted pursuant to Section 6 hereof, make such
representations and warranties to the Electing Holders participating in such
underwritten offering and to the Managing Underwriters, in form, substance and
scope as are customarily made by the Company to underwriters in primary
underwritten offerings of equity and convertible debt securities and covering
matters including, but not limited to, those set forth in the Purchase
Agreement;

 

(iii)          in connection with any
underwritten offering conducted pursuant to Section 6 hereof, obtain opinions
of counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the Managing Underwriters)
addressed to each Electing Holder participating in such underwritten offering
and the underwriters, covering such matters as are customarily covered in
opinions requested in primary underwritten offerings of equity and convertible
debt securities and such other matters as may be reasonably requested by such
Electing Holders and underwriters (it being agreed that the matters to be
covered by such opinions shall include, without limitation, as of the date of
the opinion and as of the Effective Time of the Shelf Registration Statement or
most recent post-effective amendment thereto, as the case may be, the absence
from the Shelf Registration Statement and the Prospectus, including the
documents incorporated by reference therein, of an untrue statement of a
material fact or the omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading;

 

9

 

(iv)          in connection with any
underwritten offering conducted pursuant to Section 6 hereof, obtain “cold
comfort” letters and updates thereof from the independent public accountants of
the Company (and, if necessary, from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company for which
financial statements and financial data are, or are required to be, included in
the Shelf Registration Statement), addressed to each Electing Holder
participating in such underwritten offering (if such Electing Holder has
provided such letter, representations or documentation, if any, required for
such cold comfort letter to be so addressed) and the underwriters, in customary
form and covering matters of the type customarily covered in “cold comfort”
letters in connection with primary underwritten offerings;

 

(v)           in connection with any
underwritten offering conducted pursuant to Section 6 hereof, deliver such
documents and certificates as may be reasonably requested by any Electing
Holders participating in such underwritten offering and the Managing
Underwriters, if any, including, without limitation, certificates to evidence
compliance with Section 3(j) hereof and with any conditions contained in the
underwriting agreement or other agreements entered into by the Company.

 

(q)           The Company will use its reasonable best efforts
to cause the Common Stock issuable upon conversion of the Securities to be
listed on the New York Stock Exchange or other stock exchange or trading system
on which the Common Stock primarily trades on or prior to the Effective Time of
the Shelf Registration Statement hereunder.

 

(r)            In the event that any broker-dealer
registered under the Exchange Act shall be an “affiliate” (as defined in
Rule 2720(b)(1) of the NASD Rules (or any successor provision thereto)) of
the Company or has a “conflict of interest” (as defined in Rule 2720(b)(7)
of the NASD Rules (or any successor provision thereto)) and such broker-dealer
shall underwrite, participate as a member of an underwriting syndicate or
selling group or assist in the distribution of any Registrable Securities
covered by the Shelf Registration Statement, whether as a Holder of such
Registrable Securities or as an underwriter, a placement or sales agent or a
broker or dealer in respect thereof, or otherwise, the Company shall assist
such broker-dealer in complying with the requirements of the NASD Rules,
including, without limitation, by (A) engaging a “qualified independent
underwriter” (as defined in Rule 2720(b)(15) of the NASD Rules (or any
successor provision thereto)) to participate in the preparation of the
registration statement relating to such Registrable Securities, to exercise
usual standards of due diligence in respect thereto and to recommend the public
offering price of such Registrable Securities, (B) indemnifying such qualified
independent underwriter to the extent of the indemnification of underwriters
provided in Section 5 hereof, and (C) providing such information to such broker-dealer
as may be required in order for such broker-dealer to comply with the
requirements of the NASD Rules.

 

(s)           The Company shall use its reasonable best efforts
to take all other steps necessary to effect the registration, offering and sale
of the Registrable Securities covered by the Shelf Registra­tion Statement
contem­plated hereby.

 

4.             Registration Expenses.  Except as otherwise provided in
Section 3, the Company shall bear all fees and expenses incurred in connection
with the performance of its obligations under Sections 2, 3 and 6 hereof and
shall bear or reimburse the Electing Holders for the reasonable fees and
disbursements of a single counsel selected by a plurality of all

 

10

 

Electing Holders who own an aggregate of not less
than 25% of the Registrable Securities covered by the Shelf Registration
Statement to act as counsel therefore in connection therewith or if no counsel
is designated by such Electing Holders, one designated by the Purchasers.  Each Electing Holder shall pay all
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of such Electing Holder’s Registrable Securities
pursuant to the Shelf Registration Statement.

 

5.             Indemnification and Contribution.

 

(a)           Indemnification by the Company. Upon the registration of the Registrable
Securities pursuant to Section 2 hereof, the Company shall indemnify and hold
harmless each Electing Holder and each underwriter, selling agent or other
securities professional, if any, which facilitates the disposition of
Registrable Securities, and each of their respective officers and directors and
each person who controls such Electing Holder, underwriter, selling agent or other
securities professional within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act (each such person being sometimes referred to
as an “Indemnified Person”) against any losses, claims, damages or liabilities,
joint or several, to which such Indemnified Person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
any Shelf Registration Statement under which such Registrable Securities are to
be registered under the Securities Act, or any Prospectus contained therein or
furnished by the Company to any Indemnified Person, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company hereby
agrees to reimburse such Indemnified Person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such action or claim as such expenses are incurred; provided, however,
that the Company shall not be liable to any such Indemnified Person in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such Shelf Registration Statement or Prospectus, or
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by such Indemnified Person expressly for
use therein.

 

(b)           Indemnification by the Electing Holders and any Agents and
Underwriters.  Each Electing Holder agrees, as a
consequence of the inclusion of any of such Electing Holder’s Registrable
Securities in such Shelf Registration Statement, and each underwriter, selling
agent or other securities professional, if any, which facilitates the
disposition of Registrable Securities shall agree, as a consequence of
facilitating such disposition of Registrable Securities, severally and not
jointly, to (i) indemnify and hold harmless the Company, its directors,
officers who sign any Shelf Registration Statement and each person, if any, who
controls the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act, against any losses, claims, damages or
liabilities to which the Company or such other persons may become subject,
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
an untrue statement or alleged untrue statement of a material fact contained in
such Shelf Registration Statement or Prospectus, or any amendment or
supplement, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was

 

11

 

made in reliance upon and in conformity with
written information furnished to the Company by such Electing Holder,
underwriter, selling agent or other securities professional expressly for use
therein, and (ii) reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred.

 

(c)           Notices of Claims, Etc.  Promptly after receipt by an
indemnified party under subsection (a) or (b) above of notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party under this Section 5,
notify such indemnifying party in writing of the commencement thereof; but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party otherwise than under the
indemnification provisions of or contemplated by subsection (a) or (b)
above.  In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying party
of the commencement thereof, such indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who shall not, except with
the consent of the indemnified party, be counsel to the indemnifying party),
and, after notice from the indemnifying party to such indemnified party of its election
so to assume the defense thereof, such indemnifying party shall not be liable
to such indemnified party under this Section 5 for any legal expenses of other
counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written
consent of the indemnified party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or threatened
action or claim in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from
all liability arising out of such action or claim and (ii) does not include a
statement as to, or an admission of, fault, culpability or a failure to act, by
or on behalf of any indemnified party.

 

(d)           Contribution.  If the indemnification provided for in this
Section 5 is unavailable to or insufficient to hold harmless an indemnified
party under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and the
indemnified party in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities (or actions in respect thereof),
as well as any other relevant equitable considerations.  The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by such indemnifying party or by such indemnified party, and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. 
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation (even if the Electing Holders or any underwriters, selling agents or
other securities professionals or all of them were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations re­ferred to in this Section 5(d).  The

 

12

 

amount paid or payable by an indemnified party as
a result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above shall be deemed to include any legal or other fees
or expenses reasonably incurred by such indemni­fied party in connection with
investigating or defending any such action or claim.  No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.  The obligations of the Electing Holders and
any underwriters, selling agents or other securities professionals in this
Section 5(d) to contribute shall be several in proportion to the percentage of
principal amount of Registrable Securities registered or underwritten, as the
case may be, by them and not joint.

 

(e)           Notwithstanding any other provision of this
Section 5, in no event will any (i) Electing Holder be required to
undertake liability to any person under this Section 5 for any amounts in
excess of the dollar amount of the proceeds to be received by such Holder from
the sale of such Holder’s Registrable Securities (after deducting any fees,
discounts and commissions applicable thereto) pursuant to any Shelf
Registration Statement under which such Registrable Securities are to be
registered under the Securities Act and (ii) underwriter, selling agent or
other securities professional be required to undertake liability to any person
hereunder for any amounts in excess of the discount, commission or other
compensation payable to such underwriter, selling agent or other securities
professional with respect to the Registrable Securities underwritten by it and
distributed to the public.

 

(f)            The obligations of the Company under this Section
5 shall be in addition to any liability which the Company may otherwise have to
any Indemnified Person and the obligations of any Indemnified Person under this
Section 5 shall be in addition to any liability which such Indemnified
Person may otherwise have to the Company. 
The remedies provided in this Section 5 are not exclusive and shall
not limit any rights or remedies which may otherwise be available to an
indemnified party at law or in equity.

 

6.             Underwritten Offering.  Any Holder of Registrable
Securities who desires to do so may sell Registrable Securities (in whole or in
part) in an underwritten offering; provided that  (i) the Electing Holders of at least 33-1/3% in aggregate
principal amount of the Registrable Securities then covered by the Shelf
Registration Statement shall request such an offering and (ii) at least such
aggregate principal amount of such Registrable Securities shall be included in
such offering; and provided further that the Company shall
not be obligated to cooperate with more than one underwritten offering during
the Effectiveness Period.  Upon receipt
of such a request, the Company shall provide all Holders of Registrable
Securities written notice of the request, which notice shall inform such Holders
that they have the opportunity to participate in the offering.  In any such under­written offering, the
investment banker or bankers and manager or managers that will administer the
offering will be selected by, and the underwriting arrangements with respect
thereto (including the size of the offering) will be approved by, the holders
of a majority of the Registrable Securities to be included in such offering; provided,
however,
that such investment bankers and managers and underwriting arrangements must be
reasonably satisfactory to the Company. 
No Holder may participate in any underwritten offering contemplated
hereby unless (a) such Holder agrees to sell such Holder’s Registrable
Securities to be included in the underwritten offering in accordance with any
approved underwriting arrangements, (b) such Holder completes and executes all
reasonable questionnaires, powers of attorney, indemnities, underwriting
agreements, lock-up letters and other documents required under the terms of
such approved underwriting arrangements, and (c) if such Holder is not then an
Electing Holder, such Holder returns a completed and signed Notice and
Questionnaire to

 

13

 

the Company in accordance with Section 3(a)(ii)
hereof within a reasonable amount of time before such underwritten
offering.  The Holders participating in
any underwritten offering shall be responsible for any underwriting discounts
and commissions and fees and, subject to Section 4 hereof, expenses of their
own counsel.  The Company shall pay all
expenses customarily borne by issuers in an underwritten offering, including
but not limited to filing fees, the fees and disburse­ments of its counsel and
independent public accountants and any printing expenses incurred in connection
with such underwritten offering. 
Notwithstanding the foregoing or the provisions of Section 3(n) hereof,
upon receipt of a request from the Managing Underwriter or a representative of
holders of a majority of the Registrable Securities to be included in an
underwritten offering to prepare and file an amendment or supplement to the
Shelf Registration Statement and Prospectus in connec­tion with an underwritten
offering, the Company may delay the filing of any such amend­ment or supplement
for up to 90 days if the Board of Directors of the Company shall have
determined in good faith that the Company has a bona fide business reason for
such delay.

 

7.             Liquidated Damages.

 

(a)           Notwithstanding any postponement of effectiveness
permitted by Section 2(a) hereof, if (i) on or prior to the 90th day following
the Closing Date, a Shelf Registration Statement has not been filed with the
Commission or (ii) on or prior to the 180th day following the Closing Date,
such Shelf Registration Statement is not declared effective by the Commission
(each, a “Registration Default”), the Company shall be required to pay
liquidated damages (“Liquidated Damages”), from and including the day following
such Registration Default until such Shelf Registration Statement is either so
filed or so filed and subsequently declared effective, as applicable, at a rate
per annum equal to an additional one-quarter of one percent (0.25%) of the
principal amount of Registrable Securities, to and including the 90th day
following such Registration Default and one-half of one percent (0.50%) thereof
from and after the 91st day following such Registration Default.

 

(b)           In the event that (i) the Shelf Registration
Statement ceases to be effective, (ii) the Company suspends the use of the Prospectus
pursuant to Section 2(c) or 3(j) hereof, (iii) the Holders are not authorized
to use the Prospectus pursuant to Section 3(g) hereto or (iv) the Holders are
otherwise prevented or restricted by the Company from effecting sales pursuant
to the Shelf Registration Statement (an “Effective Failure”) for more than 30
days, whether or not consecutive, in any 90-day period, or for more than 90
days, whether or not consecutive, during any 12-month period, then the Company
shall pay Liquidated Damages at a rate per annum equal to an additional
one-half of one percent (0.50%) of the principal amount of Registrable
Securities from the 31st day of the applicable 90-day period or the
91st day of the applicable 12-month period, as the case may be, that any such
Effective Failure has existed until the earlier of (1) the time the Holders of
Registrable Securities are again able to make sales under the Shelf
Registration Statement or (2) the expiration of the Effectiveness Period.

 

(c)           Any amounts to be paid as Liquidated Damages
pursuant to paragraphs (a) or (b) of this Section 7 shall be paid in cash
semi-annually in arrears, with the first semi-annual payment due on the first
Interest Payment Date (as defined in the Indenture), as applicable, following
the date of such Registration Default or Effective Failure, as applicable.  Such Liquidated Damages will accrue
(1) in respect of the Securities at the rates set forth in paragraphs (a)
or (b) of this Section 7, as applicable, on the principal amount of the
Securities and (2) in respect of the Common Stock issued upon conversion
of the Securities, at the rates

 

14

 

set forth in paragraphs (a) or
(b) of this Section 7, as applicable, applied to the Conversion Price (as defined
in the Indenture) at that time.

 

(d)           Except as provided in Section 8(b) hereof,
the Liquidated Damages as set forth in this Section 7 shall be the exclusive
monetary remedy available to the Holders of Registrable Securities for such
Registration Default or Effective Failure. In no event shall the Company be
required to pay Liquidated Damages in excess of the applicable maximum amount
of one-half of one percent (0.50%) set forth above, regardless of whether one
or multiple Registration Defaults or Effective Failures exist.

 

8.             Miscellaneous.

 

(a)           Other Registration Rights.  The Company may grant
registration rights that would permit any person that is a third party the
right to piggy-back on any Shelf Registration  Statement, provided that if the Managing Underwriter
of any underwritten offering conducted pursuant to Section 6 hereof
notifies the Company and the Electing Holders that the total amount of
securities which the Electing Holders and the holders of such piggy-back
rights intend to include in any Shelf Regis­tration Statement is so large as to
materially threaten the success of such offering (including the price at which
such securities can be sold), then the amount, number or kind of securities to
be offered for the account of holders of such piggy-back rights will be
reduced to the extent necessary to reduce the total amount of securities to be
included in such offering to the amount, number and kind recommended by the Man­aging
Underwriter prior to any reduction in the amount of Registrable Securities to
be included in such Shelf Registration Statement.

 

(b)           Specific Performance.  The parties hereto acknowledge
that there would be no adequate remedy at law if the Company fails to perform
any of its obligations hereunder and that the Purchasers and the Holders from
time to time may be irreparably harmed by any such failure, and accordingly
agree that the Purchasers and such Holders, in addition to any other remedy to
which they may be entitled at law or in equity and without limiting the
remedies available to the Electing Holders under Section 7 hereof, shall be
entitled to compel specific performance of the obligations of the Company under
this Registration Rights Agreement in accordance with the terms and conditions
of this Registration Rights Agreement, in any court of the United States or any
State thereof having jurisdiction.

 

(c)           Amendments and Waivers.  This Agreement, including this
Section 8(c), may be amended, and waivers or consents to departures from the
provisions hereof may be given, only by a written instrument duly executed by
the Company and the holders of a majority in aggregate principal amount of
Registrable Securities then outstanding. 
Each Holder of Registrable Securities outstanding at the time of any
such amendment, waiver or consent or thereafter shall be bound by any
amendment, waiver or consent effected pursuant to this Section 8(c), whether or
not any notice, writing or marking indicating such amendment, waiver or consent
appears on the Registrable Securities or is delivered to such Holder.

 

(d)           Notices.  All notices and other communications
provided for or permitted hereunder shall be given as provided in the
Indenture.

 

(e)           Parties in Interest.  The parties to this Agreement
intend that all Holders of Registrable Securities shall be entitled to receive
the benefits of this Agreement and that any Electing Holder shall be bound by
the terms and provisions of this Agreement by reason of such

 

15

 

election with respect to the Registrable
Securities which are included in a Shelf Registration Statement.  All the terms and provisions of this
Agreement shall be binding upon, shall inure to the benefit of and shall be
enforceable by the respective successors and assigns of the parties hereto and
any Holder from time to time of the Registrable Securities to the aforesaid
extent.  In the event that any
transferee of any Holder of Registrable Securities shall acquire Registrable
Securities, in any manner, whether by gift, bequest, purchase, operation of law
or otherwise, such transferee shall, without any further writing or action of
any kind, be entitled to receive the benefits of and, if an Electing Holder, be
conclusively deemed to have agreed to be bound by and to perform all of the terms
and provisions of this Agreement to the aforesaid extent.

 

(f)            Counterparts.  This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

 

(g)           Headings.  The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

 

(h)           Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.

 

(i)            Severability.  In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties hereto shall be enforceable to the fullest extent permitted by law.

 

(j)            Survival.  The respective indemnities, agreements,
representations, warranties and other provisions set forth in this Agreement or
made pursuant hereto shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Electing Holder, any director, officer or partner of such Holder, any
agent or underwriter, any director, officer or partner of such agent or
underwriter, or any controlling person of any of the foregoing, and shall
survive the transfer and registration of the Registrable Securities of such
Holder.

 

16

 

Please
confirm that the foregoing correctly sets forth the agreement between the
Company and you.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  AAR CORP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ TIMOTHY J. ROMENESKO

  
	
   

  	
   

  	
  Name:

  	
  Timothy J. Romenesko

  
	
   

  	
   

  	
  Title: 

  	
  Vice President and

  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
  Accepted as of the date hereof:

  	
   

  	
   

  
	
  Goldman, Sachs & Co.

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ GOLDMAN, SACHS
  & CO

  	
   

  
	
   

  	
  (Goldman, Sachs &
  Co.)

  	
   

  
	
   

  	
  On behalf of each of
  the Purchasers

  	
   

  
						

 

17

 

Appendix A

 

AAR CORP.

Notice of
Registration Statement

and

Selling
Securityholder Questionnaire

 

 

[Date]

 

 

AAR CORP. (the “Company”) has filed with the United States
Securities and Exchange Commission (the “Commission”) a registration statement
on Form S-3 (the “Shelf Registration Statement”) for the registration
and resale under Rule 415 of the United States Securities Act of 1933, as
amended (the “Securities Act”), of the Company’s 2.875% Convertible Senior
Notes due February 1, 2024 (the “Securities”) and the shares of common
stock, par value $1.00 per share (the “Common Stock”), issuable upon conversion
thereof, in accordance with the Registration Rights Agreement, dated as of
February 3, 2004 (the “Registration Rights Agreement”), between
the Company and the purchasers named therein. 
A copy of the Registration Rights Agreement is attached hereto.  All capitalized terms not otherwise defined
herein shall have the meanings ascribed thereto in the Registration Rights
Agreement.

 

In order to have Registrable Securities included in the Shelf Registration
Statement (or a supplement or amendment thereto), this Notice of Registration
Statement and Selling Securityholder Questionnaire (“Notice and Questionnaire”)
must be completed, executed and delivered to the Company at the address set
forth herein for receipt ON OR BEFORE [DEADLINE FOR  RESPONSE].  Beneficial owners of Registrable Securities
who do not complete, execute and return this Notice and Questionnaire by such
date (i) will not be named as selling securityholders in the Shelf
Registration Statement and (ii) may not use the Prospectus forming a part
thereof for resales of Registrable Securities.

 

Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and related Prospectus.  Accordingly, holders and beneficial owners
of Registrable Securities are advised to consult their own securities law
counsel regarding the consequences of being named or not being named as a
selling securityholder in the Shelf Registration Statement and related
Prospectus.

 

18

 

The term “Registrable Securities” is defined in the Registration
Rights Agreement to mean all or any portion of the Securities issued from time
to time under the Indenture in registered form and the shares of Common Stock
issuable upon conversion of such Securities; provided, however,
that a security ceases to be a Registrable Security when it is no longer a
Restricted Security.

 

The term “Restricted Security” is defined in the Registration
Rights Agreement to mean any Security or share of Common Stock issuable upon
conversion thereof except any such Security or share of Common Stock that
(i) has been effectively registered under the Securities Act and sold in a
manner contemplated by the Shelf Registration Statement, or (ii) has been
transferred in compliance with Rule 144 under the Securities Act (or any
successor provision thereto) or is transferable pursuant to paragraph (k)
of such Rule 144 (or any successor provision thereto), or (iii) has
otherwise been transferred and a new Security or share of Common Stock not
subject to transfer restrictions under the Securities Act has been delivered by
or on behalf of the Company in 
accordance with the Indenture.

 

ELECTION

 

The
undersigned holder (the “Selling Securityholder”) of Registrable Securities
hereby elects to include in the Shelf Registration Statement the Registrable
Securities beneficially owned by it and listed below in Item (3).  The undersigned, by signing and returning
this Notice and Questionnaire, agrees to be bound with respect to such
Registrable Securities by the terms and conditions of this Notice and
Questionnaire and the Registration Rights Agreement, including, without
limitation, Section 6 of the Registration Rights Agreement, as if the undersigned
Selling Securityholder were an original party thereto.

 

Upon any sale of Registrable Securities pursuant to the Shelf Registration
Statement, the Selling Securityholder will be required to deliver to the
Company and the Trustee the Notice of Transfer (completed and signed) set forth
in Exhibit 1 to this Notice and Questionnaire.

 

The Selling Securityholder hereby provides the following information to
the Company and represents and warrants that such information is accurate and
complete:

 

19

 

QUESTIONNAIRE

 

	
  (1)

  	
  (a)

  	
  Full
  Legal Name of Selling Securityholder:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Full
  Legal Name of Registered Holder (if not the same as in (a) above) of
  Registrable Securities Listed in Item (3) Below:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Full
  Legal Name of DTC Participant (if applicable and if not the same as (b)
  above) Through Which Registrable Securities Listed in Item (3) Below are
  Held:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (2)

  	
   

  	
  Address
  for Notices to Selling Securityholder:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Telephone:

  
	
   

  	
   

  	
  Fax:

  
	
   

  	
   

  	
  Contact
  Person:

  
	
   

  	
   

  	
   

  
	
  (3)

  	
   

  	
  Beneficial
  Ownership of the Securities:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Except as set forth below in this
  Item (3), the undersigned Selling Securityholder does not beneficially
  own any Securities or shares of Common Stock issued upon conversion, repurchase
  or redemption of any Securities.

  
	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Principal
  amount of Registrable Securities (as defined in the Registration Rights
  Agreement) beneficially owned:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CUSIP
  No(s). of such Registrable Securities:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Number
  of shares of Common Stock (if any) issued upon conversion, repurchase or
  redemption of Registrable Securities:

  
	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Principal
  amount of Securities other than Registrable Securities beneficially owned:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CUSIP
  No(s). of such other Securities:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Number
  of shares of Common Stock (if any) issued upon conversion of such other
  Securities:

  
	
   

  	
   

  	
   

  

 

20

 

	
   

  	
  (c)

  	
  Principal
  amount of Registrable Securities which the undersigned wishes to be included
  in the Shelf Registration Statement:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CUSIP
  No(s). of such Registrable Securities to be included in the Shelf
  Registration Statement:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Number
  of shares of Common Stock (if any) issued upon conversion of Registrable
  Securities which are to be included in the Shelf Registration Statement:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (4)

  	
   

  	
  Beneficial
  Ownership of Other Securities of the Company:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Except as set forth below in this
  Item (4), the undersigned Selling Securityholder is not the beneficial
  or registered owner of any shares of Common Stock or any other securities of
  the Company, other than the Securities and shares of Common Stock listed
  above in Item (3).

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  State
  any exceptions here:

  
	
   

  	
   

  	
   

  
	
  (5)

  	
   

  	
  Relationships
  with the Company:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Except as set forth below, neither
  the Selling Securityholder nor any of its affiliates, officers, directors or
  principal equity holders (5% or more) has held any position or office or has
  had any other material relationship with the Company (or its predecessors or
  affiliates) during the past three years.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  State
  any exceptions here:

  
	
   

  	
   

  	
   

  
	
  (6)

  	
   

  	
  Nature
  of the Selling Securityholder:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (a)

  	
  Is
  the selling Securityholder a reporting company under the Securities Exchange
  Act, a majority owned subsidiary of a reporting company under the Securities
  Exchange Act or a registered investment company under the Investment Company
  Act?  If so, please state which one.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  If
  the entity is a majority owned subsidiary of a reporting company, identify
  the majority stockholder that is a reporting company.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  If
  the entity is not any of the above, identify the natural person or persons
  having voting and investment control over the Company’s securities that the
  entity owns.

  

 

21

 

	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Is
  the Selling Securityholder a registered broker-dealer?   Yes   o   No   o

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  State
  whether the Selling Securityholder received the Registrable Securities as
  compensation for underwriting activities and, if so, provide a brief
  description of the transaction(s) involved.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  State
  whether the Selling Securityholder is an affiliate of a broker-dealer and if
  so, list the name(s) of the broker-dealer affiliate(s).

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Yes    o        No    o

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If the answer
  is “Yes,” you must answer the following:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If
  the Selling Securityholder is an affiliate of a registered broker-dealer, the
  Selling Securityholder purchased, the Registrable Securities (i) in the
  ordinary course of business and (ii) at the time of the purchase of the
  Registrable Securities, had no agreements or understandings, directly or
  indirectly, with any person to distribute the Registrable Securities.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Yes    o        No    o

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If
  the answer is “No”, state any exceptions here:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If the answer
  is “No,” this may affect your ability to be included in the registration
  statement.

  
	
   

  	
   

  	
   

  
	
  (7)

  	
   

  	
  Plan
  of Distribution:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Except as set forth below, the
  undersigned Selling Securityholder intends to distribute the Registrable
  Securities listed above in Item (3) only as follows (if at all):  Such Registrable Securities may be sold
  from time to time directly by the undersigned Selling Securityholder or,
  alternatively, through underwriters, broker-dealers or agents.  Such Registrable Securities may be sold in
  one or more transactions at fixed prices, at prevailing market prices at the
  time of sale, at varying prices determined at the time of sale or at
  negotiated prices.  Such sales may be
  effected in transactions (which may involve crosses or block transactions)
  (i) on any national securities exchange or quotation service on which the
  Registrable Securities may be listed or quoted at the time of sale, (ii) in
  the over-the-counter market, (iii) in transactions otherwise than on such
  exchanges or services or in the over-the-counter market or (iv) through the
  writing of options.  In connection
  with sales of the Registrable Securities or otherwise, the Selling
  Securityholder may enter into transactions with broker-dealers, which may in
  turn engage in short sales of the Registrable Securities in the course of
  hedging the positions they assume. 
  The Selling Securityholder may also sell Registrable Securities short
  and deliver Registrable Securities to close out such short positions, or loan
  or pledge Registrable Securities to broker-dealers that in turn may sell such
  securities.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  State
  any exceptions here:

  

 

22

 

By signing below, the Selling Securityholder acknowledges that it
understands its obligation to comply, and agrees that it will comply, with the
prospectus delivery and other provisions of the Securities Act and the Exchange
Act and the rules and regulations thereunder, particularly Regulation M.

 

In the event that the Selling Securityholder transfers all or any portion
of the Registrable Securities listed in Item (3) above after the date on
which such information is provided to the Company, the Selling Securityholder
agrees to notify the transferee(s) at the time of the transfer of its rights
and obligations under this Notice and Questionnaire and the Registration Rights
Agreement.

 

By signing below, the Selling Securityholder consents to the disclosure of
the information contained herein in its answers to Items (1) through (6)
above and the inclusion of such information in the Shelf Registration Statement
and related Prospectus.  The Selling
Securityholder understands that such information will be relied upon by the
Company in connection with the preparation of the Shelf Registration Statement
and related Prospectus.

 

In accordance with the Selling Securityholder’s obligation under
Section 3(a) of the Registration Rights Agreement to provide such
information as may be required by law for inclusion in the Shelf Registration
Statement, the Selling Securityholder agrees to promptly notify the Company of
any inaccuracies or changes in the information provided herein which may occur
subsequent to the date hereof at any time while the Shelf Registration
Statement remains in effect.  All
notices hereunder and pursuant to the Registration Rights Agreement shall be
made in writing, by hand-delivery, first-class mail or air courier guaranteeing
overnight delivery as follows:

 

	
  (i)  To the Company:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Timothy
  J. Romenesko

  
	
   

  	
   

  	
  Vice
  President & Chief Financial Officer

  
	
   

  	
   

  	
  AAR
  CORP.

  
	
   

  	
   

  	
  One
  AAR Place

  
	
   

  	
   

  	
  1100
  North Wood Dale Road

  
	
   

  	
   

  	
  Wood
  Dale, IL  60191

  
	
   

  	
   

  	
   

  
	
  (ii)  With a copy to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Howard
  A. Pulsifer

  
	
   

  	
   

  	
  Vice
  President, General Counsel & Secretary

  
	
   

  	
   

  	
  AAR
  CORP.

  
	
   

  	
   

  	
  One
  AAR Place

  
	
   

  	
   

  	
  1100
  North Wood Dale Road

  
	
   

  	
   

  	
  Wood
  Dale, IL  60191

  

 

 

Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Company, the terms of this Notice and
Questionnaire, and the representations and warranties contained herein, shall
be binding on, shall inure to the benefit of and shall be enforceable by the
respective successors, heirs, personal representatives, and assigns of the
Company and the Selling Securityholder (with respect to the Registrable
Securities beneficially owned by such Selling Securityholder and listed in Item
(3) above).  This Agreement shall be
governed in all respects by the laws of the State of New York.

 

23

 

IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person or
by its duly authorized agent.

 

	
  Dated:

  	
   

  	
   

  
	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Selling
  Securityholder

  	
   

  
	
   

  	
  (Print/type
  full legal name of beneficial owner of Registrable Securities)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
							

 

 

PLEASE
RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON OR
BEFORE [DEADLINE
FOR RESPONSE] TO THE COMPANY AT:

 

Timothy J. Romenesko

Vice President & Chief Financial Officer

AAR CORP.

One AAR Place

1100 North Wood Dale Road

Wood Dale, IL  60191

 

24

 

Exhibit 1

to Appendix A

 

 

NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT

 

AAR
Corp.

One
AAR Place

1100
N. Wood Dale Road

Wood
Dale, Illinois 60191

 

Attention:  Howard A. Pulsifer

 

U.S.
Bank National Association

60
Livingston Avenue

St.
Paul, MN  55107

 

Attention:  Corporate Trust Services

 

Re:          AAR Corp. (the “Company”)

2.875% Convertible Notes due February 1, 2024 (the
“Notes”)

 

Dear
Sirs:

 

Please
be advised that
                             
has transferred $                      aggregate
principal amount of the above-referenced Notes or shares of the Company’s
common stock, issued upon conversion, repurchase or redemption of Notes,
pursuant to an effective Registration Statement on Form S-3 (File No. 333-            )
filed by the Company.

 

We
hereby certify that the prospectus delivery requirements, if any, of the
Securities Act of 1933, as amended, have been satisfied with respect to the
transfer described above and that the above-named beneficial owner of the Notes
or common stock is named as a selling securityholder in the Prospectus dated [date],
or in amendments or supplements thereto, and that the aggregate principal
amount of the Notes or number of shares of common stock transferred are a
portion of the Notes or shares of common stock listed in such Prospectus as
amended or supplemented opposite such owner’s name.

 

Dated:

 

	
   

  	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Name)

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  (Authorized
  Signature)

  

 

25

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