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DISTRIBUTION SERVICES AGREEMENT

Distribution Agreement

DISTRIBUTION SERVICES AGREEMENT | Document Parties: AVIALL INC | AVIALL SERVICES, INC. | GENERAL ELECTRIC COMPANY | GE ENGINE SERVICES DISTRIBUTION LLC You are currently viewing:
This Distribution Agreement involves

AVIALL INC | AVIALL SERVICES, INC. | GENERAL ELECTRIC COMPANY | GE ENGINE SERVICES DISTRIBUTION LLC

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Title: DISTRIBUTION SERVICES AGREEMENT
Governing Law: New York     Date: 2/2/2005
Industry: Aerospace and Defense     Sector: Capital Goods

DISTRIBUTION SERVICES AGREEMENT, Parties: aviall inc , aviall services  inc. , general electric company , ge engine services distribution llc
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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:

 

 

(a)

Affiliate ” means, with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with such other Person. For


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.

 

 

(b)

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.

 

 

(c)

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.

 

 

(d)

ATA ” means the Air Transport Association.

 

 

(e)

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.

 

 

(f)

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

 

 

(g)

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.

 

 

(h)

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.

 

 

(i)

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.

 

 

(j)

Change of Control ” means a transaction in which a Person acquires Control of Service Provider or Parent.

 

 

(k)

Change of Ownership ” means becoming the of Beneficial Owner of voting securities of Parent or Service Provider, however accomplished.

 

 

(l)

Commencement Date ” means the date Service Provider begins selling Products directly to Customers, as determined in accordance with Section 2.05 hereof.

 

 

(m)

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.

 

 

(n)

Confidential Information ” shall have the meaning set forth in Section 13.01(c) hereof.

 

 

(o)

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.

 

Page 3


DISTRIBUTION SERVICES AGREEMENT

General Electric Company

 

 

(p)

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.

 

 

(q)

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.

 

 

(r)

Dollars ” and “ $ ” means the lawful currency of the United States of America.

 

 

(s)

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.

 

 

(t)

FAA ” means the Federal Aviation Administration of the United States of America.

 

 

(u)

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.

 

 

(v)

GE Data ” shall have the meaning set forth in Section 8.02 hereof.

 

 

(w)

“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.

 

 

(x)

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.

 

Page 4


DISTRIBUTION SERVICES AGREEMENT

General Electric Company

 

 

(y)

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.

 

 

(z)

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.

 

 

(aa)

Kit ” or “ Kits ” means a group of spare parts that are combined into a single product with a unique part number.

 

 

(bb)

Knowledge of GE ” means the actual knowledge of the persons listed on Exhibit B hereto.

 

 

(cc)

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.

 

 

(dd)

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.

 

Page 5


DISTRIBUTION SERVICES AGREEMENT

General Electric Company

 

 

(ee)

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.

 

 

(ff)

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).

 

 

(gg)

Notice of Proposed Sale ” shall have the meaning set forth in Section 2.03 hereof.

 

 

(hh)

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.

 

 

(ii)

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.

 

 

(jj)

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.

 

Page 6


DISTRIBUTION SERVICES AGREEMENT

General Electric Company

 

 

(kk)

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.

 

 

(ll)

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.

 

 

(mm)

PMA ” means Parts Manufacturing Approval.

 

 

(nn)

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.

 

 

(oo)

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.

 

Page 7


DISTRIBUTION SERVICES AGREEMENT

General Electric Company

 

 

(pp)

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.

 

 

(qq)

Territory ” means the entire world.

 

 

(rr)

Transition Period ” shall have the meaning set forth in Section 2.05 hereof.

 

 

(ss)

Transition Team ” shall have the meaning set forth in Section 2.05 hereof.

 

 

(tt)

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.

 

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

 

Page 8


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 .

 

 

(a)

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.

 

 

(b)

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.

 

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.

 

 

(a)

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.

 

 

(b)

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).

 

 

(c)

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.

 

Section 3.02 Representations and Warranties of GE . General Electric Company and GEESD hereby jointly and severally represent and warrant that:

 

 

(a)

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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DISTRIBUTION SERVICES AGREEMENT

General Electric Company

 

 

(b)

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.

 

 

(c)

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.

 

 

(d)

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.

 

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:

 

 

(a)

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.

 

 

(b)

appoint and maintain a qualified Product Manager dedicated exclusively to the Products and located on-site at GE throughout the Term.

 

 

(c)

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.

 

 

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.

 

 

(d)

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.

 

 

(e)

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.

 

 

(f)

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.

 

 

(g)

assume the primary distributing, forecasting, planning, warehousing and expediting role for Products.

 

 

(h)

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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DISTRIBUTION SERVICES AGREEMENT

General Electric Company

 

 

(i)

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.

 

 

(j)

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.

 

 

(k)

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.

 

 

(l)

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.

 

 

(m)

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.

 

 

(n)

package and ship all Products in accordance with ATA Specification 300 and any other procedures required by law or reasonably requested by GE.

 

 

Page 15


DISTRIBUTION SERVICES AGREEMENT

General Electric Company

 

 

(o)

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.

 

 

(p)

provide initial provisioning data obtained with GE’s assistance to Customers in accordance with applicable ATA specifications.

 

 

(q)

cooperate with GE to establish customer order lead times that are consistent with current market demands.

 

 

(r)

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.

 

Section 4.02 Use of Sales Representatives .

 

 

(a)

Service Provider hereby acknowledges receipt of a copy of GE’s Policy 20.4 and agrees to comply with such policy.

 

 

(b)

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.

 

Page 16


DISTRIBUTION SERVICES AGREEMENT

General Electric Company

 

 

(c)

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.

 

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:

 

 

(a)

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.

 

 

(b)

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.

 

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

 

 

(c)

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.

 

 

(d)

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.

 

 

(e)

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.

 

 

(f)

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.

 

 

(g)

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.

 

 

(h)

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

 

 

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.

 

 

(i)

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.

 

 

(j)

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.

 

 

(k)

provide Service Provider with the history of parts configuration for the Products from the GE Electronic Bill of Material (EBOM) system.

 

 

(l)

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.

 

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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