Exhibit 2.1
EXECUTION
DISTRIBUTION SERVICES AGREEMENT
by and among
AVIALL, INC.,
AVIALL SERVICES, INC.,
GENERAL ELECTRIC COMPANY,
and
GE ENGINE SERVICES DISTRIBUTION LLC
dated as of January 28, 2005
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY
AVIALL, INC. FOR CERTAIN PORTIONS OF THIS DOCUMENT. CONFIDENTIAL
PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS
DOCUMENT WITH “***”.
DISTRIBUTION SERVICES
AGREEMENT
THIS DISTRIBUTION SERVICES AGREEMENT
(“Agreement”) is entered into as of the 28
th
day of January, 2005
(the “ Closing Date ”) by and among Aviall
Services, Inc., a corporation organized under the laws of the State
of Delaware and having its principal office at 2750 Regent
Boulevard, DFW Airport, Texas 75261 (“ Service
Provider ”), Aviall, Inc., a corporation organized under
the laws of the State of Delaware and having its principal office
at 2750 Regent Boulevard, DFW Airport, Texas 75261 (“
Parent ,” and together with Service Provider, “
Aviall ”), General Electric Company, a corporation
organized under the laws of the State of New York, United States of
America, having offices at One Neumann Way, Mail Drop F125,
Cincinnati, Ohio, 45215, and GE Engine Services Distribution LLC, a
limited liability company organized under the laws of the State of
Delaware, United States of America, having offices at One Neumann
Way, Mail Drop F125, Cincinnati, Ohio, 45215 (“ GEESD
” and, together with General Electric Company, “
GE ”). Aviall and GE shall each be referred to herein
as a “ Party .” Aviall and GE shall collectively
be referred to herein as the “ Parties
.”
RECITALS
WHEREAS, GE is engaged in the
business of designing, manufacturing, distributing, marketing and
selling the Products;
WHEREAS, GE desires to appoint the
Service Provider as its exclusive distributor of the Products to
Customers in the Territory, and the Service Provider desires to be
so appointed by GE, all upon the terms and conditions set forth in
this Agreement; and
WHEREAS, GE and Aviall have entered
into a Parts Supply Agreement dated as of the date hereof (the
“ Parts Supply Agreement ”) which sets forth the
terms and conditions upon which Service Provider will sell Products
to GE and its Affiliates.
NOW, THEREFORE, in consideration of
the mutual agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions .
The following terms, as used in this Agreement, unless otherwise
specifically defined herein, shall have the following
meanings:
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(a)
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“
Affiliate ” means, with respect to any Person, any
Person directly or indirectly controlling, controlled by, or under
common control with such other Person. For
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DISTRIBUTION SERVICES AGREEMENT
General Electric Company
purposes of this definition,
“control” shall mean the possession, directly or
indirectly or as a trustee or executor, of the power to direct or
cause the direction of the affairs or management of a Person,
whether through the ownership of voting securities, as trustee or
executor, by contract or otherwise, including, without limitation,
the ownership, directly or indirectly, of securities having the
power to elect a majority of the board of directors or similar body
governing the affairs of such Person.
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(b)
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Airworthiness Directive ” or “ AD ”
shall mean a document issued by the FAA (or other equivalent
foreign aviation authority having jurisdiction over the Products),
identifying an unsafe condition relating to a Product and, as
appropriate, prescribing inspections and the conditions and
limitations, if any, under which a Product may continue to
operate.
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(c)
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Applicable Law ” means, with respect to any Party, any
statute, law, ordinance, rule, administrative action, regulation,
order, writ, injunction, judgment, decree, or other requirement of
any Governmental Authority applicable to such Party.
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(d)
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ATA ” means the Air Transport Association.
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(e)
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Bankruptcy Event ” shall mean if, with respect to any
Party, (i) such Party shall generally not pay such Party’s
debts as such debts become due, or shall admit in writing such
Party’s inability to pay such Party’s debts generally,
or shall make a general assignment for the benefit of such
Party’s creditors; or (ii) any proceeding shall be instituted
by or against such Party seeking to adjudicate such Party as
bankrupt or insolvent, or seeking liquidation, winding-up,
reorganization, rearrangement, adjustment, protection, relief, or
recomposition of such Party or such Party’s debts under any
Bankruptcy Law, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, or other similar official for
such Party or for any substantial part of such Party’s
property and, in the case of any such proceeding instituted against
such Party (but not instituted by such Party), shall not be
controverted within 30 days and shall remain undismissed or
unstayed for a period of 90 days after such proceeding is
filed.
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(f)
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“
Bankruptcy Law ” shall mean the United States
Bankruptcy Code, as amended, and any other jurisdictional
insolvency, reorganization, moratorium, fraudulent conveyance, or
similar law now or hereafter in effect.
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DISTRIBUTION SERVICES AGREEMENT
General Electric Company
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(g)
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“
Beneficial Owner ” shall have the meaning given in
Rule 13d-3 (or any successor rule) promulgated by the Securities
and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended.
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(h)
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“
Business Day ” means a day other than a Saturday,
Sunday, or other day on which commercial banks in New York, New
York, are authorized or required by law to close.
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(i)
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Catalog List Price ” means the list prices for the
Products and the Common Parts set forth in the then current parts
catalogs published by GE.
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(j)
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“
Change of Control ” means a transaction in which a
Person acquires Control of Service Provider or Parent.
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(k)
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“
Change of Ownership ” means becoming the of Beneficial
Owner of voting securities of Parent or Service Provider, however
accomplished.
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(l)
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“
Commencement Date ” means the date Service Provider
begins selling Products directly to Customers, as determined in
accordance with Section 2.05 hereof.
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(m)
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Common Parts ” means any part manufactured by GE, its
Affiliates or any third party under contract with GE or its
Affiliates that is used on (i) a CF6-50 and/or a CF6-80A engine,
and (ii) another GE Engine.
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(n)
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Confidential Information ” shall have the meaning set
forth in Section 13.01(c) hereof.
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(o)
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“
Control ” means, with respect to any entity, the
occurrence of one or more of the following events (i) the
acquisition or possession, directly or indirectly, of the power to
direct substantially all of the business operations of that entity,
(ii) the acquisition or possession, directly or indirectly, of the
power to elect a majority of the members of the Board of Directors
(or equivalent governing body), irrespective of how such power is
derived ( e.g. , whether by ownership of voting securities
or voting power or equity value, as trustee or executor, by
contract or credit arrangement, covenants and consent rights or
otherwise), (iii) any sale, lease, exchange, or other transfer of
ownership or control (in one transaction or a series of related
transactions) of all, or substantially all, of the operating assets
of such entity to any Person that was not an Affiliate of such
entity immediately prior to such sale, lease exchange, or transfer,
or (iv) any Person, including any Affiliate of such Person shall
have become the Beneficial Owner of fifty percent (50%) or more of
the equity interest of such entity.
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DISTRIBUTION SERVICES AGREEMENT
General Electric Company
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(p)
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“
Competing Entity ” means any Person that derives at
least 10% of its annual revenue from the business of the
manufacture, sale, maintenance, repair ( e.g. , any
maintenance or repair activity, including, but not limited to, the
inspection, disassembly, cleaning, part replacement, part repair,
re-assembly or testing) or overhaul of aircraft, marine or
industrial gas turbine engines or parts or components thereof, or
an Affiliate of such a Person.
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(q)
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Customer ” or “ Customers ” means
(i) the parties listed on Exhibit A hereto and any parties
added to such list from time to time by mutual agreement of the
Parties or in accordance with the provisions of Section 2.03
hereof, and (ii) GE and its current and future
Affiliates.
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(r)
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“
Dollars ” and “ $ ” means the
lawful currency of the United States of America.
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(s)
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“
Engine Specific Parts ” means all parts, components,
controls, accessories and modules of an aircraft engine that are
typically included in a finished new aircraft engine when shipped
from the OEM, including without limitation all parts listed in any
parts list or bill of materials for such an engine.
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(t)
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FAA ” means the Federal Aviation Administration of the
United States of America.
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(u)
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“
Governmental Authority ” means any domestic or
foreign, federal, territorial, state or local governmental
authority, instrumentality, court, commission or tribunal, or any
regulatory, administrative, or other agency, or any political or
other subdivision, department, or branch of any of the
foregoing.
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(v)
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“ GE
Data ” shall have the meaning set forth in Section 8.02
hereof.
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(w)
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“GE
Due Diligence Material ” means those items identified as such in
that certain letter agreement, dated as of the date hereof, by and
between Service Provider and GE.
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(x)
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“ GE
OEM Part ” means an OEM part manufactured by GE, an
Affiliate of GE or by a Person that manufactures OEM parts for sale
by GE and under contract with and on behalf of GE or any of its
Affiliates.
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Page 4
DISTRIBUTION SERVICES AGREEMENT
General Electric Company
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(y)
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“ GE
Engine ” means any aircraft engine manufactured by GE or
by an entity in which GE or one of its Affiliates owns at least a
25% equity interest.
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(z)
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Incapable Entity ” means (i) any Person that (A) does
not have both the resources and expertise to perform Service
Provider’s obligations under this Agreement, including such
factors as adequate technical expertise, sufficient trained and
capable personnel, professional and commercial qualifications,
experience with customers in the civil aerospace industry, and
financial resources, (B) does not obtain any lack of such
technical, operational and financial ability in connection with a
Change of Control (for example, by continuing the employment of
relevant and sufficient members of Parent’s or Service
Provider’s management team or by obtaining long-term
financing sufficient to provide adequate assurance that the Person
is sufficiently well capitalized to meet all performance and
financial obligations under this Agreement for the next three (3)
years) and (C) is not capable of obtaining all such technical,
operational, and financial resources within ninety (90) days after
a Change of Control, or (ii) any Person that has not in GE’s
good faith determination consistently demonstrated prior to the
Change of Control an commitment to integrity in its business
practices and does not possess a reputation in the marketplace for
sound business ethics and compliance with law.
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(aa)
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Kit ” or “ Kits ” means a group of
spare parts that are combined into a single product with a unique
part number.
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(bb)
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Knowledge of GE ” means the actual knowledge of the
persons listed on Exhibit B hereto.
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(cc)
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Liabilities ” means any and all debts, liabilities and
obligations, whether accrued or fixed, absolute or contingent,
matured or unmatured or determined or determinable, including,
without limitation, those arising under any Applicable Law and
those arising under any contract, agreement, arrangement,
commitment or undertaking.
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(dd)
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Manufacturing Lead Time ” means the time allocated to
manufacture a part in order to acquire raw material and convert to
a finished product and ship complete to Service Provider. The
current Manufacturing Lead Time for each of the Products is set
forth in Exhibit C hereto, and may be changed from time to
time by GE. GEESD will promptly notify Service Provider in writing
of any actual change to Manufacturing Lead Times, and shall use
reasonable efforts to inform Service Provider’s Program
Manager as soon as GEESD has reason to believe that such a
potential change may occur. After the occurrence thereof,
Exhibit C shall automatically be deemed to be amended to
include such new Manufacturing Lead Times.
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DISTRIBUTION SERVICES AGREEMENT
General Electric Company
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(ee)
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“
Material Breach ” means (i) any event specifically
defined as a “Material Breach” hereunder or (ii) an
unexcused failure by a Party to perform any material obligation,
covenant or undertaking of that Party hereunder or any materially
false representation or warranty by a Party, which obligation,
covenant, undertaking, representation or warranty is not otherwise
subject to clause (i) of this definition and which, in the case of
an unexcused failure by a Party to perform any obligation, covenant
or undertaking of that Party hereunder, if not cured in accordance
with the provisions of this Agreement, would deprive the
counterparty of a material benefit justifiably expected by the
counterparty under this Agreement, or (iii) a purported attempt by
a Party to unilaterally terminate this Agreement without complying
in all respects with Article XVI hereof unless this Agreement
specifically provides that the occurrence of a specified event
constitutes a Material Breach and permits a Party to terminate
without complying with Article XVI and such event has
occurred.
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(ff)
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“ New
Surplus Part ” means a new OEM Product that has been
previously sold into the market and is available from any source
other than GEESD (or any successor to GEESD as GE’s initial
distributor of new GE OEM Parts).
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(gg)
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“
Notice of Proposed Sale ” shall have the meaning set
forth in Section 2.03 hereof.
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(hh)
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“
Obsolete ” means a Product that is no longer useable
in any airworthy application for the CF6-50 or CF6-80A engine due
to a design change mandated by GE’s Product Control Board
(PCB) or the FAA.
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(ii)
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“
OEM ” means (i) a person who holds a Production
Certificate (PC) from the FAA for the manufacture of complete
aircraft engines and parts thereof, (ii) a person who holds a PMA
from the FAA for the manufacture of parts or specified items of an
aircraft engine that was obtained pursuant to an assist letter from
the Type Certificate holder or by otherwise receiving the
specifications and a part number for such part from the Type
Certificate holder, or (iii) a person who holds a Technical
Standard Order Authorization (TSOA) for the manufacture of
specified articles (articles means materials, parts, processes, or
appliances) used on civil aircraft that meet a specific Technical
Standard Order performance standard.
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(jj)
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“ On
Time Delivery ” means a delivery of a Product that is
made on or before a Customer’s requested delivery date as
specified in the applicable line item in the Customer’s
purchase order for such Product or as otherwise agreed between
Service Provider and Customer, subject to the provisions of
Exhibit D hereto.
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DISTRIBUTION SERVICES AGREEMENT
General Electric Company
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(kk)
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“ On
Time Delivery Performance ” means a percentage calculated
by dividing (i) the total number of line items on purchase orders
from Customers for which Service Provider made an On Time Delivery
of all Products in such line item, by (ii) the total number of line
items on purchase orders from Customers. The On Time Delivery
Standard shall be calculated on a monthly basis with reference to
all orders from Customers with a requested delivery date from
Service Provider in such month; provided , however ,
that any deliveries delayed by Service Provider as the result of
credit holds on Customers shall not be included in such
calculation. Set forth on Exhibit D hereto is a sample
calculation of On Time Delivery Performance.
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(ll)
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“
Person ” means an individual, corporation,
partnership, limited liability company, association, trust, or
other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
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(mm)
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PMA ” means Parts Manufacturing Approval.
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(nn)
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Products ” means (1) all new GE OEM Parts that are
unique to CF6-50 engines, (2) all new GE OEM Parts that are unique
to CF6-80A engines, (3) any new GE OEM Parts that are common only
to the CF6-50 and CF6-80A engines, and (4) all OEM new Kits, to the
extent such Kits consist of any part described in clauses (1)
– (3) above; provided , that any Common Parts in Kits
shall be sold to Service Provider in accordance with Section 6.07
hereof. In addition, the Products shall include any Superseding
Configurations of such parts, provided such Superseding
Configurations meet the descriptions set forth in clauses (1)
– (4) above. The current list of Products includes, but is
not limited to, the parts listed on Exhibit C
hereto.
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(oo)
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“
Subsidiary ” means, with respect to any Person, any
corporation, partnership, joint venture, association, limited
liability company, joint-stock company, trust or estate, or
unincorporated organization of which (or in which) more than 50%
of: (i) the issued and outstanding shares of capital stock having
ordinary voting power to elect a majority of the board of directors
of such corporation (irrespective of whether at the time shares of
capital stock of any other class or classes of such corporation
shall or might have voting power upon the occurrence of any
contingency), (ii) the interest in the capital or profits of such
partnership, joint venture or limited liability company, or (iii)
the beneficial interest in such trust or estate, is, at such time,
directly or indirectly owned or controlled by such Person, by such
Person and one or more of its other Subsidiaries, or by one or more
of such Person’s other Subsidiaries.
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DISTRIBUTION SERVICES AGREEMENT
General Electric Company
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(pp)
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“
Superseding Configuration ” means any future Product
improvements, replacements or substitutions, which are now, or,
during the Term of this Agreement are placed, on GE’s parts
catalog for the CF6-50 or the CF-80A engine, or are now or
hereafter manufactured, marketed or produced by GE, its Affiliates
or any third party under contract with GE or its
Affiliates.
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(qq)
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Territory ” means the entire world.
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(rr)
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“
Transition Period ” shall have the meaning set forth
in Section 2.05 hereof.
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(ss)
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“
Transition Team ” shall have the meaning set forth in
Section 2.05 hereof.
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(tt)
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“ Used
Serviceable Part ” means any Product that has been
previously placed in service and is subsequently removed from an
engine for scrap, overhaul, replacement or repair.
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ARTICLE II
DISTRIBUTORSHIP
TERMS
Section 2.01 Appointment and
Acceptance . Effective as of the Commencement Date, GE hereby
appoints the Service Provider as its exclusive distributor for each
of the Products to Customers in the Territory, and the Service
Provider hereby accepts such appointment, all upon the terms and
conditions set forth in this Agreement.
Section 2.02 Closing Payment
. In consideration of the appointment set forth in Section 2.01,
the purchase of inventory to take place on the Closing Date as
described in Section 4.03 and the other terms and conditions set
forth herein, Aviall shall pay to General Electric Company on the
Closing Date the amount of One Hundred Sixty Million, One Hundred
Twenty Five Thousand, Three Hundred and Ninety-Six US Dollars
(US$160,125,396) (the “ Closing Payment ”) in
immediately available funds via wire transfer to the account
designated by GE.
Section 2.03 Sale of Products to
Non-Customers . During the Term of this Agreement, Service
Provider shall not sell any Products to any parties who are not
previously identified as a Customer (a “ Potential
Customer ”). In the event Service Provider receives a
request from a Potential Customer to purchase a Product or
reasonably believes that a third party may become a
Potential
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DISTRIBUTION SERVICES AGREEMENT
General Electric Company
Customer, Service Provider shall promptly notify
GE in writing of such request and identify the Potential Customer
(a “ Notice of Proposed Sale ”). GE shall notify
Service Provider in writing within seven (7) Business Days of
receipt of such Notice of Proposed Sale if the Potential Customer
identified therein shall be added as an approved Customer under
this Agreement. In the event GE notifies Service Provider in
writing that the Potential Customer identified in a Notice of
Proposed Sale shall not be added as an approved Customer under this
Agreement, Service Provider shall not be entitled to sell the
Products to the Potential Customer and GE shall retain the sole and
exclusive authority to sell Products to such party; provided
, however , that if GE makes any sale of Products to any
such non-Customer, GE shall promptly pay to Service Provider ***%
of the Catalog List Price for each such Product sold. Service
Provider shall have the right upon reasonable notice and during
normal business hours to examine sales records and other data
relating to the sales or transfer activities of GE with Potential
Customers pursuant to the potential transactions contemplated by
this Section 2.03; provided , however , that any such
examination will be conducted in a manner that does not
unreasonably disrupt GE’s business operations;
provided , further , that nothing herein shall be
deemed to authorize or permit Service Provider access to sales
records and data that do not relate to the transactions
contemplated hereby. In the event GE does not respond to Service
Provider’s Notice of Proposed Sale within seven (7) Business
Days of receipt of such notice, Service Provider shall
automatically be deemed to be added as an approved Customer under
this Agreement.
Section 2.04 Exclusive
Distribution of OEM Parts . During the Term of this Agreement,
Service Provider shall not manufacture, license to a third party
technology to manufacture, sell or distribute any non-OEM parts
that are Engine Specific Parts and that compete with GE OEM Parts
for use on any GE Engines; provided , however , that
Service Provider may continue to sell any such parts (and any
superseding configurations thereto) for which it has active and
ongoing distribution arrangements as of the Closing Date, such
parts being identified on Exhibit E hereto. Notwithstanding
the foregoing, any other parts (and any superseding configurations
thereto) for which Service Provider obtains a distribution
arrangement during the Term shall be deemed to be automatically
added to Exhibit E as long as at the time the arrangement
begins (i) the part does not compete with a GE OEM Engine Specific
Part and (ii) the arrangement is entered into by Service Provider
in good faith and without the intention of avoiding its obligations
under this Section 2.04. Any violation by Service Provider of this
Section 2.04 shall be a Material Breach of this Agreement and, if
Service Provider does note cure such breach within ten (10) days of
receiving written notice from GE, shall be cause for immediate
termination of this Agreement by GE ( i.e., without any
further notice period or action under Section 9.02(a)
hereof).
Section 2.05 Transition
Period . Promptly after the Closing Date, the Parties shall
begin the process of transitioning responsibility for the sale of
all Products to Customers from GE to Service Provider and shall
cooperate to ensure a smooth transition for each of the Parties and
for the Customers. This period shall be known as the “
Transition Period ” and shall last until
the
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY
AVIALL, INC. FOR CERTAIN PORTIONS OF THIS DOCUMENT. CONFIDENTIAL
PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS
DOCUMENT WITH “***”.
Page 9
DISTRIBUTION SERVICES AGREEMENT
General Electric Company
Commencement Date (as defined herein). During
the Transition Period, the Parties shall cooperate to notify
Customers of the fact that GE will no longer sell the Products and
that all Products will be sold by Service Provider. Each of Service
Provider and GE shall form a “ Transition Team ”
consisting of appropriate personnel to identify and solve
implementation issues relating to the transitioning of sales
responsibilities to Service Provider, including information
technology requirements, logistical challenges, Customer issues and
other issues arising from the transitioning of sales from GE to
Service Provider. The date upon which the Transition Period ends
and Service Provider begins selling Products directly to Customers
(the “ Commencement Date ”) shall be determined
by mutual agreement of the Parties, acting through their
representatives on the Transition Teams. Each of the Parties shall
use reasonable efforts to minimize the length of the Transition
Period, and shall endeavor to have the commencement of direct sale
of Products by Service Provider be no later than six months from
the Closing Date.
Section 2.06 Sale of Products
During the Transition Period .
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(a)
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GE shall
continue to be responsible for the marketing, forecasting,
planning, distribution and sale of Products during the Transition
Period. During the Transition Period, GE will sell Products to
Customers and will provide by the fifteenth day of each month a
monthly payment equal to ***% of the Catalog List Price (at the
time the applicable purchase order was accepted by GE) of sales or
transfers of Products to Customers in the previous month during the
Transition Period. Service Provider shall have the right upon
reasonable notice and during normal business hours to examine sales
records and other data relating to the sales or transfer activities
of GE during the Transition Period pursuant to the potential
transactions contemplated by this Section 2.06(a); provided
, however , that any such examination will be conducted in a
manner that does not unreasonably disrupt GE’s business
operations; provided , further , that nothing herein
shall be deemed to authorize or permit Service Provider access to
sales records and data that do not relate to the transactions
contemplated hereby.
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(b)
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The Parties
acknowledge that during the Transition Period, Service Provider
will acquire Product inventory from GE, and that Service Provider
may desire to sell such inventory to Customers prior to the end of
the Transition Period. In such an event, Service Provider shall
notify the members of the Steering Committee of the desired sale,
and the Steering Committee shall meet in person or via
teleconference within three Business Days of such notification to
approve or disapprove the proposed sale. If the Steering Committee
fails to meet within the required time period, Service Provider
shall be authorized to conduct the proposed sale.
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY
AVIALL, INC. FOR CERTAIN PORTIONS OF THIS DOCUMENT. CONFIDENTIAL
PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS
DOCUMENT WITH “***”.
Page 10
DISTRIBUTION SERVICES AGREEMENT
General Electric Company
Section 2.07 Sale of Products by
GE to Customers . Notwithstanding anything in this Agreement to
the contrary, in the event GE determines, in its reasonable
discretion and good faith judgment, that Service Provider is not
satisfying the reasonable requirements of any Customer relating to
the sale of Products and Service Provider is unable or unwilling to
give adequate assurance that it is addressing any such issue, GE
shall be entitled to sell Products to such Customer until such time
as GE reasonably determines that Service Provider is able to
satisfy such Customer’s requirements, but only if GE has
given Service Provider not less than ten (10) days prior written
notice detailing the specific facts and circumstances of such
alleged failure and GE’s intention to sell to such Customer
under this Section 2.07. Service Provider shall be entitled to a
***% commission of the Catalog List Price for any sales made by GE
pursuant to this Section 2.07. Such commission shall be paid in the
same manner as payments are to be made pursuant to Section 2.06(a)
above. Refusal by Service Provider to sell to a Customer for credit
reasons or Customer dissatisfaction caused by GE’s failure to
deliver Product to Service Provider on the date specified on
Service Provider’s purchase order will not be grounds for GE
determining that Service Provider is not satisfying the reasonable
requirements of a Customer.
Section 2.08 Superseding
Configurations. In the event a Superseding Configuration
results in a spare part that previously met the definition of a
Product no longer being classified as such ( e.g. , if a
part that was a Product becomes common to an engine other than a
CF6-50 or CF6-80A), GE shall use reasonable efforts to promptly
notify Service Provider of its intent to produce such a part and
promptly begin to negotiate in good faith to provide Service
Provider an appropriate remedy to address the impact on Service
Provider. By way of example only, the appropriate remedy may be to
permit Service Provider to continue to distribute such part and
purchase at the applicable discount set forth herein or to revise
the discount set forth in Section 5.01 hereof to compensate Service
Provider for lost opportunities resulting from such Superseding
Configuration. The Steering Committee shall promptly review the
impact of any such Superseding Configurations at least quarterly
each year.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY
AVIALL, INC. FOR CERTAIN PORTIONS OF THIS DOCUMENT. CONFIDENTIAL
PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS
DOCUMENT WITH “***”.
Page 11
DISTRIBUTION SERVICES AGREEMENT
General Electric Company
ARTICLE III
REPRESENTATIONS AND
WARRANTIES
Section 3.01. Representations and
Warranties of the Parties . The representations and warranties
of Aviall and GE set forth in this Section 3.01 are made by each
Party as of the Closing Date on its behalf to the other relevant
Party.
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(a)
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Corporate
Existence and Power .
Each Party is duly incorporated or organized and validly existing
under the laws of the state or nation of its incorporation or
organization and has all requisite power and authority and all
governmental licenses, authorizations, permits, consents, and
approvals required to carry on its business now
conducted.
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(b)
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Corporate
Authorizations . The
execution, delivery, and performance by each Party and the
consummation by such Party of the transactions contemplated by this
Agreement are within its corporate or company powers and have been
duly authorized by all necessary corporate or company action on its
part. This Agreement constitutes a legal, valid, and binding
agreement of such Party enforceable against such Party in
accordance with its terms (i) except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other
similar laws now or hereafter in effect relating to or affecting
creditors’ rights generally, including the effect of
statutory and other laws regarding fraudulent conveyances and
preferential transfers, and (ii) subject to the limitations imposed
by general equitable principles (regardless of whether such
enforceability is considered in a proceeding at law or in
equity).
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(c)
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Non-Contravention . The execution, delivery, and performance by
each Party of this Agreement and the consummation by such Party of
the transactions contemplated this Agreement do not and will not
(i) contravene or conflict with such Party’s organizational
documents, (ii) assuming compliance with the matters referred to in
this Section 3.01(c), contravene or conflict with or constitute a
violation of any provision of any Applicable Law, (iii) assuming
compliance by the other relevant party with the matters relating to
such other party referred to in this Section 3.01(c), constitute a
material default under any material agreement, contract, or other
instrument binding upon such Party or by which any of its
properties or assets is or may be bound or any license, franchise,
permit, or similar authorization held by such Party.
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Section 3.02 Representations and
Warranties of GE . General Electric Company and GEESD hereby
jointly and severally represent and warrant that:
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(a)
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to the
Knowledge of GE, none of the GE Due Diligence Material contains an
untrue statement of material fact, or omits to state a material
fact necessary in order to make such GE Due Diligence Material, in
the light of the circumstances under which it was provided to
Aviall, not materially misleading.
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Page 12
DISTRIBUTION SERVICES AGREEMENT
General Electric Company
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(b)
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except as set
forth on Exhibit F hereto, to the Knowledge of GE, no event
has occurred that has resulted, and no event is presently pending,
presently threatened or presently contemplated by GE that is
reasonably likely to result in a material adverse effect on the
ability or intent of GE to manufacture, produce or deliver any
Product at a level and in a manner that such activities are being
conducted in the ordinary course of business prior to the execution
of this Agreement.
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(c)
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except as set
forth on Exhibit F hereto, to the Knowledge of GE, no event
has occurred that has resulted, and no event is presently pending
or presently threatened by a relevant airworthiness authority that
is reasonably likely to result, in a material adverse effect on the
ability of carriers and operators to operate the CF6-50 and CF6-80A
aircraft engines.
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(d)
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except as set
forth on Exhibit F hereto, to the Knowledge of GE, GE has
not received written notice from any of the Customers identified in
Exhibit F that any such listed Customer has terminated or
has invoked the termination process with respect to its contract
with GE for the purchase of Products.
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ARTICLE IV
SERVICE PROVIDER’S
OBLIGATIONS
Section 4.01 Service
Provider’s Obligations . Beginning on the Commencement
Date and during the Term of this Agreement, the Service Provider
shall:
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(a)
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use its
reasonable commercial efforts to establish and maintain an
effective sales force and to promote sales of the Products to
Customers throughout the Territory.
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(b)
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appoint and
maintain a qualified Product Manager dedicated exclusively to the
Products and located on-site at GE throughout the Term.
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(c)
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purchase the
Products exclusively from GE in accordance with the terms of this
Agreement. Service Provider shall submit all Purchase Orders
subject to the catalog unit pack quantity (UPQ) set forth in the
catalog and the Manufacturing Lead Times.
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Page 13
DISTRIBUTION SERVICES AGREEMENT
General Electric Company
Changes to delivery dates set forth
in the applicable purchase orders may only be made by Service
Provider if there is a design change to the subject Products or if
the order is subject to cancellation in accordance with Section
6.02 . Changes to delivery dates and order cancellations may
also be made by mutual agreement of the Parties.
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(d)
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make no
warranty or guaranty, orally or in writing, concerning any of the
Products, which might be perceived by a customer as in any way
binding GE, except for such warranties as are customarily made by
GE to a first retail purchaser of the Products and in accordance
with Article VII hereof.
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(e)
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at its own cost
and expense, procure and maintain in full force and effect during
the Term of this Agreement coverage for GE as an additional insured
under customary policies of insurance including, without
limitation, commercial general liability, product operations where
the Service Provider believes liabilities may exist warranting such
insurance. The Service Provider agrees to waive any right of
subrogation against GE in this or any other policy of insurance
carried by Service Provider, but only to the extent that Service
Provider may be obligated to indemnify GE pursuant to Article XII
of this Agreement.
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(f)
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procure,
implement and support the information technologies (IT)
infrastructure necessary to perform the services and conduct the
transactions contemplated by this Agreement, as determined by the
Steering Committee from time to time. Service Provider agrees to
use reasonable commercial efforts to implement the necessary IT
infrastructure agreed to by the Steering Committee to facilitate
electronic communications between the Parties and to
Customers.
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(g)
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assume the
primary distributing, forecasting, planning, warehousing and
expediting role for Products.
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(h)
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provide GE with
detailed, non-binding part number level forecasts for a rolling two
year time period in a mutually agreeable format and as reasonably
requested by GE from time to time, but no more often than once a
month. Such forecasts shall include, without limitation and upon
GE’s request, part number, lead part number, nomenclature,
on-hand inventory by site, current on-order, model applicability,
demand for the previous twelve months (or such shorter period for
which Service Provider has information) by month, forecast demand
and safety stock.
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Page 14
DISTRIBUTION SERVICES AGREEMENT
General Electric Company
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(i)
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maintain an
inventory management and traceability system that provides
serialized part information for parts identified in writing by GE
and provide such data to Customers and to GE upon its
request.
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(j)
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comply with all
statutes, laws, ordinances, rules, regulations, and any other
governmental authority in connection with its sale and distribution
of the Products, including but not limited to obtaining any
required export licenses and other authorizations in accordance
with the International Traffic in Arms Regulation (ITAR), economic
and trade sanctions administered by the United States Department of
Treasury Office of Foreign Asset Control, and the Export
Administration Regulations (EAR) to export any Product from the
United States, and maintaining compliance with all applicable FAA
and ATA regulations and guidelines. The Service Provider has the
sole responsibility for ensuring that it complies with all U.S.
Government export control laws and regulations.
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(k)
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provide to GE
upon GE’s request sales reports detailing sales to specific
Customers, including specific Products purchased, date of sales and
sales price. In addition, GE shall have the right upon reasonable
notice and during normal business hours to examine sales records
and other data relating to the activities of Service Provider
contemplated under this Agreement; provided , however
, that any such examination will be conducted in a manner that does
not unreasonably disrupt Service Provider’s business
operations; and, provided further , that nothing herein
shall be deemed to authorize or permit GE access to sales records
and data regarding sales of merchandise for third parties for which
Service Provider distributes merchandise or to non-public financial
data of Service Provider involving sales other than sales of the
Products.
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(l)
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comply with any
directives relating to the Products from GE’s Product Control
Board (PCB). GEESD shall notify Service Provider promptly upon
becoming aware of any proposed PCB directives.
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(m)
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provide to GE
information reasonably requested by GE in connection with proposed
design change implementation affecting a Product, including without
limitation information as to on-hand inventory for such
Product.
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(n)
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package and
ship all Products in accordance with ATA Specification 300 and any
other procedures required by law or reasonably requested by
GE.
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Page 15
DISTRIBUTION SERVICES AGREEMENT
General Electric Company
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(o)
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as requested by
GE from time to time, cooperate with and support GE in any programs
for Customers relating to the Products in which GE may offer
Customers prices on Products that are lower than Catalog List
Price. In such cases, Service Provider’s sale price to the
Customer for such Product shall not exceed the price agreed between
GE and Customer; provided , however , that in any
such case, GE shall provide Service Provider by the fifteenth day
of each month for sales made in the preceding month with a credit
in an amount equal to the difference between the price agreed
between GE and Customer and the Catalog List Price at the time of
such sale. Service Provider’s obligation under this paragraph
(o) is solely limited to selling Product at an adjusted price, and
any terms or conditions of such programs (for example, warranties,
training, or Product support) that would require Service Provider
to perform services for Customers beyond the scope of those
otherwise required of Service Provider under this Agreement are to
be provided and performed by GE.
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(p)
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provide initial
provisioning data obtained with GE’s assistance to Customers
in accordance with applicable ATA specifications.
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(q)
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cooperate with
GE to establish customer order lead times that are consistent with
current market demands.
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(r)
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comply with and
fulfill applicable requirements of the appropriate revision levels
of the ATA Specification 300, Packaging of Airline Supplies and
Specification 2000, International Specification for Integrated Data
Processing Supply. In addition, Service Provider shall subscribe
and conform to the general principles of the “World Airline
Suppliers’ Guide” and World Airline Technical
Operations Glossary (for definitions of standard industry terms)
published by ATA.
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Section 4.02 Use of Sales
Representatives .
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(a)
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Service
Provider hereby acknowledges receipt of a copy of GE’s Policy
20.4 and agrees to comply with such policy.
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(b)
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Except as set
forth on Exhibit G hereto, Service Provider agrees that it
will not engage any independent or third party non-employee sales
representatives, distributors, consultants, dealers or other
resellers (“ Sales Representatives ”), nor
modify or renew any existing agreement, to market, sell or
distribute the Products without GE’s prior written consent
subject to GE’s customary internal due diligence process for
Sales Representatives, which consent shall not be unreasonably
withheld with respect to geographic regions in the Territory where
the use of Sales Representatives is customary in Service
Provider’s business.
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Page 16
DISTRIBUTION SERVICES AGREEMENT
General Electric Company
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(c)
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In the event GE
has a reasonable basis to believe that any Sales Representative
that was previously approved by GE is engaging or has engaged in
any activity in violation of Applicable Law or any activity
contrary to the principles set forth in GE Policy 20.4, GE shall
give written notice to Service Provider and Service Provider shall
immediately cease using such Sales Representative to sell, market
or distribute Products in the future.
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Section 4.03 Purchase of Initial
Provisioning Inventory . Service Provider shall purchase from
GE at least *** ($***) worth of GE’s current inventory of
Products during the Transition Period. All such Products shall be
purchased pursuant to the terms and conditions set forth herein. In
addition, Service Provider shall purchase on the Closing Date the
inventory listed on Exhibit H hereto.
Section 4.04 Quality
Standards . Service Provider hereby represents that it is
registered by an accredited ISO Registrar to the requirements of
ISO 9001:2000 and is an FAA AC 00-56 accredited company. Service
Provider shall at all times during the Term of this Agreement
maintain these registrations and accreditations and shall operate
in accordance with their requirements as may be amended, replaced
or substituted from time to time, as long as such accreditations
and registrations remain generally accepted in Service
Provider’s business.
ARTICLE V
GE’S
OBLIGATIONS
Section 5.01 GE’s
Obligations . During the Term of this Agreement, GE
shall:
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(a)
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produce,
deliver, and sell the Products in the quantities ordered by Service
Provider at the price set forth in Section 6.01, using reasonable
efforts to deliver such Products within Manufacturing Lead Times.
GE shall not deliver orders more than five (5) Business Days prior
to the requested ship date without the Service Provider’s
prior written approval.
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(b)
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subject to
Sections 2.03, 2.06 and 2.07 hereof, refrain from selling and cause
its Affiliates to refrain from selling Products to any person
(including any Affiliate) other than the Service Provider;
provided , however , that nothing in this Agreement
shall prohibit or limit GE Aviation Materials LP or any other
Affiliate of GE from engaging in the purchase and sale of Used
Serviceable Parts or New Surplus Parts for CF6-50 or CF6-80A
engines.
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY
AVIALL, INC. FOR CERTAIN PORTIONS OF THIS DOCUMENT. CONFIDENTIAL
PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS
DOCUMENT WITH “***”.
Page 17
DISTRIBUTION SERVICES AGREEMENT
General Electric Company
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(c)
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purchase all of
GE’s (and its Affiliates) needs for Product, including but
not limited to Product to be used within GE’s (or its
affiliates) overhaul or maintenance facilities, from Service
Provider; provided , however , that nothing in this
Agreement shall in any way affect or limit the right or ability of
GE (and its Affiliates) from purchasing and utilizing Used
Serviceable Parts or New Surplus Parts for CF6-50 or CF6-80A
engines; provided further , that nothing in this Agreement
shall in any way affect the right of GE (and its Affiliates) to use
any material or parts provided by a customer in connection with
maintenance, repair and overhaul services provided by GE or its
Affiliates.
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(d)
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use reasonable
efforts to promptly refer to Service Provider all leads, prospects,
and related information which are directed to it or which it
receives from Customers regarding potential purchases of the
Products within the Territory.
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(e)
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provide to
Service Provider and its personnel appropriate training relating to
the Products, as mutually agreed from time to time by the Parties.
Each Party shall be solely responsible for its travel and living
expenses related to such training.
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(f)
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ensure that all
Products sold to Service Provider have all appropriate governmental
and regulatory approvals as required for installation on type
certified aircraft or engines, or on military aircraft.
Additionally, GE will provide Service Provider with all
certifications required by any Governmental Authority from the
manufacturer of the Products.
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(g)
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comply with all
statutes, laws, ordinances, rules, regulations and any other
Governmental Authority in connection with the manufacture of the
Products. GE shall promptly notify the Service Provider whenever it
receives any notice addressed to it by a Governmental Authority
concerning the application of any new rule, directive, regulation
or other governmental requirement concerning the sale of any
Product in the Territory.
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(h)
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at its own cost
and expense, procure and maintain in full force and effect during
the Term of this Agreement coverage for Service Provider as an
additional insured under a Broad Form Vendors Endorsement to
GE’s (and of any of the Affiliates of GE which may carry
insurance with regard to the design, production or sale of the
Products) liability insurance policy(ies) and GE (on its behalf and
on behalf of any
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Page 18
DISTRIBUTION SERVICES AGREEMENT
General Electric Company
Affiliate) agrees to waive any right
of subrogation against Service Provider in this or any other policy
of insurance carried by GE (or of any of the Affiliates of GE which
may carry insurance with regard to the design, production or sale
of the Products), but only to the extent that GE may be obligated
to indemnify Service Provider pursuant to ARTICLE XII of the
Agreement.
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(i)
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provide Service
Provider notice of any Products that will be superceded or modified
promptly after GEESD has received company internal documentation
(CID) relating to such proposed superceded or modified
Product.
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(j)
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procure,
implement and support the information technologies (IT)
infrastructure necessary to perform the services and conduct the
transactions contemplated by this Agreement, as determined by the
Steering Committee from time to time. GE agrees to use reasonable
commercial efforts to implement the necessary IT infrastructure to
facilitate electronic communications between the Parties and to
Customers.
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(k)
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provide Service
Provider with the history of parts configuration for the Products
from the GE Electronic Bill of Material (EBOM) system.
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(l)
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provide the
Service Provider’s Product Manager with an appropriate office
and other infrastructure ( e.g. , telephone, Internet
access, furniture, and copier and fax access) at GE’s
facility as may be reasonably requested from time to time by
Service Provider.
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ARTICLE VI
PURCHASE AND SALE OF
PRODUCTS
Section 6.01 Price . GE shall
sell the Products to the Service Provider at a purchase price equal
to ***% off the Catalog List Price. All such prices are F.O.B.
(Incoterms 2000) GE’s facility and include packing in
accordance with ATA Specification 300 commercial shipping practices
for aviation parts in effect at the time of shipment. The current
list prices for the Products are shown on Exhibit C hereto,
and GE shall maintain such list prices unless and until such prices
are changed in accordance with the provisions hereof. The Catalog
List Price is revised annually and new Catalog List Prices
typically become effective as of November 1 of each year. All spare
parts orders for reasonable replenishment quantities that are
received by GE prior to November 1 (or such other date that new
Catalog List Prices are effective), and scheduled for delivery
within thirty (30) days after November 1 (or such other date that
new Catalog List Prices are effective), will be accepted at the
Catalog List Price effective as of the time the order;
provided , however , that if the Parties agree to
extend the delivery date beyond such thirty (30) days period (other
than automatically pursuant to Section 6.05(b) below), the selling
price shall be the Catalog List Price at the time of
delivery.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY
AVIALL, INC. FOR CERTAIN PORTIONS OF THIS DOCUMENT.
CONFID
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