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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
------------ -----------
COMMISSION FILE NUMBER: 0-29490
HAWKER PACIFIC AEROSPACE
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3528840
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
11240 SHERMAN WAY, SUN VALLEY, CALIFORNIA 91352
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(818) 765-6201
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES NO X
-------- -------
The number of shares of the registrant's common stock outstanding on May
12, 1998 was 5,822,222 shares.
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<PAGE>
HAWKER PACIFIC AEROSPACE
Report on Form 10-Q
For the Quarter Ended March 31, 1998
Table of Contents
<TABLE>
<CAPTION>
Page
------
<S> <C>
Cover Page .............................................................. 1
Table of Contents........................................................ 2
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Condensed Balance Sheets............................. 3
Consolidated Condensed Statements of Income - Three Months........ 4
Consolidated Condensed Statements of Cash Flows................... 5
Consolidated Condensed Statements of Shareholder's Equity......... 6
Notes to Consolidated Condensed Financial Statements.............. 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 10
Part II - Other Information
Item 2 - Changes in Securities and Use of Proceeds.................. 13
Item 4 - Submission of Matters to a Vote of Security Holders........ 14
Item 6 - Exhibits and Reports on Form 8K............................ 15
Signatures............................................................... 16
Exhibit 27 - Financial Data Schedule
</TABLE>
2
<PAGE>
HAWKER PACIFIC AEROSPACE
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31 December 31
1998 1997
----------- ------------
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 552,000 $ 160,000
Accounts receivable 10,971,000 7,351,000
Other receivables 136,000 80,000
Inventories 18,183,000 14,814,000
Prepaid expenses and other current assets 633,000 240,000
----------- ------------
Total current assets 30,475,000 22,645,000
Equipment and leasehold improvements, net 9,229,000 5,083,000
Landing gear exchange, net 26,005,000 11,067,000
Goodwill, net 6,000 145,000
Deferred financing costs, net 510,000 262,000
Deferred offering costs - 766,000
Other assets 413,000 930,000
----------- ------------
$66,638,000 $40,898,000
----------- ------------
----------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 4,013,000 $ 6,946,000
Line of credit 5,050,000 8,529,000
Accrued liabilities 4,899,000 1,976,000
Current portion of long term debt 812,000 1,450,000
----------- ------------
Total current liabilities 14,774,000 18,901,000
----------- ------------
Long-term debt 28,688,000 17,700,000
Shareholders' equity 23,176,000 4,297,000
----------- ------------
Total Liabilities and Shareholders'
Equity $ 66,638,000 $40,898,000
----------- ------------
----------- ------------
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
3
<PAGE>
HAWKER PACIFIC AEROSPACE
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------------
1998 1997
----------- ------------
<S> <C> <C>
Revenues $13,667,000 $9,814,000
Cost of Revenues 10,470,000 7,531,000
----------- ------------
Gross Profit 3,197,000 2,283,000
Selling, General and Administrative Expenses 1,862,000 1,395,000
----------- ------------
Income from Operations 1,335,000 888,000
Interest expense (648,000) (579,000)
----------- ------------
Income Before Provision for Income Taxes 687,000 309,000
Provision for Income Taxes 259,000 114,000
----------- ------------
Net Income $ 428,000 $ 195,000
----------- ------------
----------- ------------
Earnings per common share $ .09 $ .06
----------- ------------
----------- ------------
Earnings per common share - assuming dilution $ .08 $ .06
----------- ------------
----------- ------------
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
4
<PAGE>
HAWKER PACIFIC AEROSPACE
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
---------------------------
1998 1997
----------- -----------
<S> <C> <C>
Operating Activities
Net income $ 428,000 $ 195,000
Adjustments to reconcile net income to net cash used in
operating activities:
Deferred income taxes 140,000 115,000
Depreciation and amortization 500,000 334,000
Other noncash Items 14,000 -
Changes in operating assets and liabilities:
Accounts receivable (3,660,000) (665,000)
Inventory (1,410,000) 235,000
Prepaid expenses and other current assets (216,000) (175,000)
Accounts payable (2,679,000) (831,000)
Deferred Revenue 1,014,000 (77,000)
Accrued liabilities 1,632,000 (248,000)
----------- -----------
Cash used in operating activities (4,237,000) (1,117,000)
Investing Activities
Purchase of British Airways' inventory (1,947,000) -
Purchase of equipment, and landing gear from British Airways (17,524,000) -
Purchase of equipment, leasehold improvements and landing gear (1,334,000) (304,000)
----------- -----------
Cash used in investing activities (20,805,000) (304,000)
Financing Activities
New borrowings:
Revolving credit line 5,050,000 750,000
Bank note 24,500,000 -
Net proceeds from equity offering 18,834,000 -
Debt reduction:
Notes payable (14,150,000) -
Revolving credit line (8,529,000) -
Deferred loan fees (271,000) -
----------- -----------
Cash provided by financing activities 25,434,000 750,000
----------- -----------
Increase (decrease) in cash 392,000 (671,000)
Cash, beginning of period 160,000 1,055,000
----------- -----------
Cash, end of period $ 552,000 $ 384,000
----------- -----------
----------- -----------
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
5
<PAGE>
HAWKER PACIFIC AEROSPACE
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
------------------- ----------------------- Other
Number of Retained Comprehensive
Shares Amount Shares Amount Earnings Income Total
------ ---------- ----------- -------- ---------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1997 400 $2,000,000 2,972,222 $1,040,000 $1,257,000 $ - $4,297,000
----------
Net Income - - - 428,000 - 428,000
Foreign currency
translation adjustment - - - - 383,000 383,000
----------
Comprehensive income - - - - 811,000
----------
Conversion of preferred stock (400) (2,000,000) 250,000 2,000,000 - - -
Issuance of common stock - - 2,600,000 18,068,000 - - 18,068,000
----- ----------- --------- ----------- ---------- --------- -----------
Balances at
March 31, 1998 - - 5,822,222 $21,108,000 $1,685,000 $383,000 $23,176,000
----- ----------- --------- ----------- ---------- --------- -----------
----- ----------- --------- ----------- ---------- --------- -----------
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
6
<PAGE>
HAWKER PACIFIC AEROSPACE
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
INTERIM CONDENSED FINANCIAL STATEMENTS
During interim periods, Hawker Pacific Aerospace (the "Company") follows the
accounting policies set forth in its Annual Report to Shareholders and applies
appropriate interim financial reporting standards, as indicated below. Users of
financial information produced for interim periods are encouraged to refer to
the notes contained in the Annual Report to Shareholders when reviewing interim
financial results.
Interim financial reporting standards require management to make estimates that
are based on assumptions regarding the outcome of future events and
circumstances not known at the present time, including the use of estimated
effective tax rates. Inevitably, some assumptions may not materialize and
unanticipated events and circumstances may occur which vary from those estimates
and such variations may significantly affect the Company's future results.
In the opinion of management, the accompanying unaudited consolidated condensed
financial statements of the Company have been prepared in accordance with the
Securities and Exchange Commission's requirements of form 10-Q and contain all
adjustments, of a normal and recurring nature, which are necessary to present
fairly the financial position of the Company as of March 31, 1998, and the
results of its operations and cash flows for the three month period ended March
31, 1998 and 1997.
CONTINGENCIES
The Company is party to various legal and environmental proceedings incidental
to its business. Certain claims, suits and complaints arising in the ordinary
course of business have been filed or are pending against the Company. Based on
facts now known to the Company, management believes all such matters are
adequately provided for, covered by insurance or, if not so covered or provided
for, are without merit, or involve such amounts that would not materially
adversely affect the consolidated results of operations and cash flows or
financial position of the Company.
EARNINGS PER SHARE
Basic earnings per share are based upon the weighted average number of common
shares outstanding including the 250,000 shares issued upon the automatic
conversion of the convertible preferred stock as if the conversion occurred at
the beginning of the periods presented. The weighted average common shares used
in calculating basic earnings per share were 5,013,333 and 3,120,603 for the
three months ended March 31, 1998 and 1997, respectively. Diluted earnings per
share is based on the number of shares used in the basic earnings per share
calculation plus the dilutive effects of stock options under the treasury stock
method. The weighted average of common and common equivalent shares used in
calculating diluted earnings per share were 5,091,457 and 3,120,603, for the
three months ended March 31, 1998 and 1997, respectively.
STOCK SPLITS
The information set forth herein reflects a 579.48618 for one stock split
effected in November 1997 and a one for .9907406 reverse stock split effected
in January 1998. All references in the accompanying financial statements
and notes to the number of shares of common stock and per common share
amounts have been retroactively adjusted to reflect the stock splits.
7
<PAGE>
HAWKER PACIFIC AEROSPACE
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
(Unaudited)
INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
March 31
1998 1997
----------- -----------
<S> <C> <C>
Purchased parts and assemblies $15,923,000 $11,961,000
Work-in-process 2,260,000 2,853,000
----------- -----------
$18,183,000 $14,814,000
----------- -----------
----------- -----------
</TABLE>
RECENTLY ISSUED ACCOUNTING STANDARDS
As of January 1, 1998, the Company adopted Statement 130, Reporting
Comprehensive Income. Statement 130 establishes new rules for the reporting and
display of comprehensive income and its components. However, the adoption of
this Statement had no impact on the Company's net income or shareholders'
equity. Under Statement 130, the Company has elected to report other
comprehensive income, which includes unrealized gains or losses on the Company's
foreign currency translation adjustments, within the Statement of Shareholder
Equity. Comprehensive income for the quarter ended March 31, 1997 was the same
as net income for the period.
During the first quarter of 1998, total comprehensive income amounted to
$811,000.
FORWARD LOOKING STATEMENTS
Statements included in this filing which are not historical in nature are
forward looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward looking statements regarding the
Company's future performance and financial results are subject to certain risks
and uncertainties that could cause actual results to differ materially from
those set forth in the forward looking statements due to a variety of factors.
Factors that may impact such forward looking statements include, among other,
changes in the condition of the industry, changes in general economic conditions
and the success of the Company's strategic operating plans.
2. ACQUISITIONS
On February 4, 1998, the Company completed the acquisition of certain assets
("BA Assets") of the British Airways plc landing gear operation (the "BA
Acquisition") for a purchase price of approximately $19.5 million, (including
acquisition related expenses) excluding one asset that is to be acquired during
the second quarter of fiscal 1998 for approximately $2.9 million.
3. NOTES PAYABLE
On January 23, 1998, the Company and Bank of America entered into the Amended
and Restated Business Loan Agreement (the "Amended Loan Agreement"), which
agreement increased the maximum amount of credit available to the Company from
$26.5 million to $45.5 million. The credit facilities of the Amended Loan
Agreement became available upon the completion of the Company's initial public
offering and consummation of the BA Acquisition. The Company used approximately
$9.2 million of the proceeds available under the Amended Loan Agreement to fund
a portion of the purchase price of the BA Assets. The Amended Loan Agreement
provides the Company with a $15.0 million revolving line of credit, a $24.5
million term loan, and a $6.0 million capital expenditure facility. The
revolving line of credit matures in January 2001, and the term loan and capital
expenditure facilities mature in January 2005. The Amended Loan Agreement is
secured by a lien on all of the assets of the Company, including the BA Assets.
At the Company's election, the rate of interest on each of the three facilities
8
<PAGE>
available under the Amended Loan Agreement is either Bank of America's reference
rate or the inter-bank eurodollar rates on either, at the Company's option, the
London market or the Cayman Islands market.
4. INITIAL PUBLIC OFFERING
On February 3, 1998, the Company completed an initial public offering (the
"Offering") of 2,766,667 shares of the Company's common stock ("Common Stock").
Of the 2,766,667 shares of Common Stock sold in the Offering, 2,600,000 shares
were sold by the Company and 166,667 shares were sold by a principal shareholder
of the Company. The principal shareholder sold 415,000 additional shares of
Common Stock pursuant to the exercise of an over allotment option granted to the
underwriters by the principal shareholder. The Company received net proceeds of
approximately $18.1 million net of expenses of approximately $2.7 million. The
Company used approximately $9.2 million of the net proceeds to fund a portion of
the purchase price for certain assets of British Airways as discussed in Note 3,
and approximately $7.6 million to repay a portion of the revolving and term debt
previously outstanding under the Company's credit facility. The balance of the
net proceeds has been used for working capital purposes.
9
<PAGE>
HAWKER PACIFIC AEROSPACE
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Quarterly Report contains forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995, such as statements of the Company's plans, objectives, expectations and
intentions, that involve risks and uncertainties that could cause actual results
to differ materially from those discussed in such forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in this Quarterly Report and in the Company's
various filings with the Securities and Exchange Commission, including without
limitation the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.
The following discussion and analysis should be read in conjunction with the
Company's financial statements and related notes thereto included herein and
with the information set forth under Management's Discussion and Analysis of
Financial Condition and Results of Operations of the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data for the
periods indicated:
<TABLE>
<CAPTION>
(unaudited)
For the Three Months
Ended March 31,
-------------------------
Increase
Summary of Sales by Product Line 1998 1997 Over 1997
------------ ----------- ----------
<S> <C> <C> <C>
Landing gear repairs $7,991,000 $4,361,000 83.2%
Hydromechanics repairs 4,862,000 4,513,000 7.7%
Spares & other 814,000 940,000 -13.4%
---------- ----------
Total revenue 13,667,000 9,814,000 39.3%
Gross profit 3,197,000 2,283,000 40.1%
Selling, general and administrative expense 1,862,000 1,395,000 33.4%
---------- ----------
Income from operations 1,335,000 888,000 50.3%
Interest expense (648,000) (579,000) 11.9%
---------- ----------
Income before provision for income taxes 687,000 309,000 122.3%
Provision for income taxes 259,000 114,000 127.1%
---------- ----------
Net income $ 428,000 $ 195,000 120.0%
---------- ----------
---------- ----------
</TABLE>
Net revenues increased 39.3 percent to $13.7 million for the first quarter of
the fiscal year ending December 31, 1998 ("fiscal 1998") compared to $9.8
million for the same period in 1997. 18.4 percent of this growth was due to
expansion of existing landing gear business through new contracts such as the
American Airlines 757 program. The remaining 20.9 percent increase resulted
from the revenues attributable to certain assets acquired from British Airways
in the first quarter of fiscal 1998.
10
<PAGE>
Gross profit for the first quarter of fiscal 1998 increased 40.1 percent to $3.2
million compared to $2.3 million for the same period in 1997. This increase in
gross profit is proportional to the increase in revenues. Gross profit as a
percentage of revenues increased slightly to 23.4 percent in the first quarter
of fiscal 1998 compared to 23.3 percent for the same period in 1997.
Selling, general and administrative expenses for the first quarter of fiscal
1998 increased 33.4 percent to $1.9 million from $1.4 million for the same
period in 1997. This increase is attributable to the addition of the new
subsidiary in the United Kingdom due to the acquisition of certain assets from
British Airways plc. Also, the Company incurred additional personnel costs,
professional services fees and travel expenses during the first quarter of
fiscal 1998 as a result of its recapitalization and acquisition activities. As
a percentage of sales, selling, general and administrative costs declined .6
percent to 13.6 percent of revenues during the first quarter of fiscal 1998 from
14.2 percent in 1997.
Income from operations increased 50.3 percent to $1.3 million during the first
quarter of fiscal 1998, compared to $.9 million during the first quarter of
1997. As a percentage of revenue, income from operations increased from 9.0
percent in the first quarter of 1997 to 9.8 percent in the first quarter of
fiscal 1998. This was a result of improved operating expense leverage on
selling, general and administrative expenses as noted above.
Interest expense increased 11.9 percent to $648,000 during the first quarter of
fiscal 1998 compared to $579,000 during the first quarter of 1997 due to
increased borrowing to fund expansion of existing business and costs related to
the recapitalization process. Interest expense is expected to continue to
increase as a result of increased borrowings.
The effective tax rate for the first quarter of fiscal 1998 was 37.7% compared
to 36.9% in the first quarter of 1997. The effective tax rate differs from the
statutory rates due to certain non deductible expenses. At March 31, 1998, the
Company had a valuation reserve of $519,000 for the deferred tax assets. If the
Company generates sufficient income in the future, this reserve may be reflected
as a reduction to the tax expense in the future periods.
The increases in gross profit and operating income more than offset the
increased tax rate to contribute to a 63 percent increase in net income as a
percent of sales from 1.9 percent to 3.1 percent. Net income during the first
quarter of fiscal 1998 increased 120 percent over the first quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operating activities was $4.2 million for the three months
ended March 31, 1998, compared to $1.1 million for the same period in 1997. The
increased use of cash relates to increases in accounts receivable and inventory.
Accounts receivable increased as a result of higher reserves and inventory was
increased to cover production requirements related to new contracts, including
contracts with American Airlines and Airbus landing gear contracts for Federal
Express.
On January 23, 1998, the Company and Bank of America entered into the Amended
and Restated Business Loan Agreement (the "Amended Loan Agreement"), which
agreement increased the maximum amount of credit available to the Company from
$26.5 million to $45.5 million. The credit facilities of the Amended Loan
Agreement became available upon the completion of the Company's initial public
offering and consummation of the acquisition of substantially all of the assets
of the landing gear repair and overhaul operations (the "BA Assets") of British
Airways plc. The Company used approximately $9.2 million of the proceeds
available under the Amended Loan Agreement to fund a portion of the purchase
price of the BA Assets. The Amended Loan Agreement provides the Company with a
$15.0 million revolving line of credit, a $24.5 million term loan, and a $6.0
million capital expenditure facility. The revolving line of credit matures in
January 2001, and the term loan and capital expenditure facilities mature in
January 2005. The Amended Loan Agreement is secured by a lien on all of the
assets of the Company, including the BA Assets. At the Company's election, the
rate of interest on each of the three facilities available under the Amended
Loan Agreement is either Bank of America's reference rate or the inter-bank
eurodollar rates on either, at the Company's option, the London market or the
Cayman Islands market.
11
<PAGE>
On February 3, 1998, the Company completed an initial public offering of
2,766,667 shares of Common Stock at an offering price of $8 per share. The
Company received net proceeds from the offering of $18.1 million. $9.2 million
of this amount, together with proceeds from the Company's amended loan agreement
were used to acquire British Airways' landing gear operation in the United
Kingdom for approximately $19.5 million. This acquisition was accounted for as
a purchase of assets. The balance of the net offering proceeds was used to pay
down existing indebtedness and for working capital.
Approximately $2.9 million is to be paid to British Airways plc during the
second quarter of fiscal 1998 as part of the acquisition described in Note 2.
to the Financial Statements. which will be funded by borrowings against the
revolving credit line and working capital.
Working capital and current ratio were $15.7 million and 2.06 for the quarter
ended March 31, 1998. This is an increase of $3.7 million and .86 respectively
from December 31, 1997. The ratio of total debt to equity improved to 1.5 for
the quarter ended March 31, 1998 from 6.4 at December 31, 1997. This
improvement is the result of the increased equity from the public offering
consummated in the first quarter of fiscal 1998.
The Company is currently working to resolve the potential impact of the year
2000 on the processing of date-sensitive information by the Company's
computerized information systems. The year 2000 problem is the result of
computer programs being written using two digits (rather than four) to define
the applicable year. Any of the Company's programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the
year 2000, which could result in miscalculation or system failures. Based on
preliminary information, costs of addressing potential problems are currently
not expected to have a material adverse impact on the Company's financial
position, results of operations or cash flows in future periods. However, if
the Company, its customers or vendors are unable to resolve such processing
issues in a timely manner, it could result in a material financial risk.
Accordingly, the Company plans to devote the necessary resources to resolve
all significant year 2000 issues in a timely manner.
12
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HAWKER PACIFIC AEROSPACE
PART II - OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds
RECENT SALES OF UNREGISTERED SECURITIES
In February 1998, pursuant to the Amended and Restated Articles of
Incorporation of the Company, 400 shares of Series A Preferred Stock held by
a principal shareholder of the Company were converted into an aggregate of
250,000 shares of Common Stock of the Company upon completion of the initial
public offering of the Company's Common Stock. The Company believes that the
conversion was exempt from registration under the Securities Act of 1933, as
amended, by virtue of Section 4(2) thereof as a transaction not involving a
public offering.
USE OF PROCEEDS
On January 29, 1998, the Company commenced the initial public offering of
2,766,667 shares of its Common Stock, pursuant to the Company's Registration
Statement (the "Offering") on Form S-1, as amended (the "Registration
Statement") (Registration No. 333-40295), which was declared effective under
the Securities Act of 1933, as amended, by the Securities and Exchange
Commission on January 29, 1998. The underwriters of the Offering were
represented by EVEREN Securities, Inc. and The Seidler Companies
Incorporated, acting as managing underwriters. All 2,600,000 shares of
Common Stock registered under the Registration Statement for the account of
the Company (consisting of an aggregate offering price of $20,800,000) and
all 166,667 shares registered for the account of the selling shareholder
(consisting of an aggregate offering price of $1,333,336) were sold in the
Offering. In addition, on February 24, 1998 the underwriters exercised their
option to purchase 415,000 additional shares of Common Stock to cover
over-allotments in connection with the Offering. All of the 415,000 shares
of Common Stock sold pursuant to the over-allotment option were registered
for the account of the selling shareholder of the Company (consisting of an
aggregate offering price of $3,320,000). The Offering has terminated.
The Company incurred the following expenses in connection with the Offering
(excluding expenses incurred by the selling shareholder):
<TABLE>
<CAPTION>
CATEGORY OF EXPENSE AMOUNT OF EXPENSE
- - ------------------- -----------------
<S> <C>
Underwriting discounts and commission $ 1,456,000
Finders' fees -0-
Expenses paid to or for underwriters 221,000
Other expenses 1,022,000
-----------
Total expenses $ 2,699,000
-----------
-----------
</TABLE>
The total expenses were originally estimated at $3,000,000 and reported as
such in the Company's Annual Report on Form 10-K for the year ended December
31, 1997. None of the expenses incurred by the Company in connection with
the Offering was paid to directors, officers, ten percent shareholders or
affiliates of the Company.
Of the total net proceeds in the amount of approximately $18.1 million
received by the Company from its sale of 2,600,000 shares of Common Stock in
the Offering, the following amounts were used from the date of the Offering
through March 12, 1998:
<TABLE>
<CAPTION>
CATEGORY OF USE AMOUNT OF USE
- - ------------------- --------------
<S> <C>
Acquisition of other businesses $9.2 million
Repayment of Indebtedness $7.6 million
Working capital $1.3 million
</TABLE>
None of the net proceeds to the Company of the Offering was paid to
directors, officers, ten percent shareholders or affiliates of the Company.
Other than the use of $9.2 million and $7.6 million of the net proceeds from
the Offering for the BA Acquisition and the repayment of indebtedness,
respectively, instead of $11 million and $6 million as described in the
Registration Statement, the foregoing use of proceeds does not represent a
material change from the use of proceeds as described in the Registration
Statement.
13
<PAGE>
ITEM 4. Submission of Matters to a Vote of Security Holders
During the quarter ended March 31, 1998, the shareholders of the Company
approved the following matters: (i) the ratification of the Amended and
Restated Articles of Incorporation of the Company which, among other things,
provided for the change in the Company's name, increased the number of
authorized shares of the Company's common and preferred stock and effectuated
a 579.481618 for one stock split of the outstanding Common Stock; (ii) an
amendment to the Company's 1997 Stock Option Plan to provide the maximum
number of options that may be granted to an eligible person during any
twelve-month period; and (iii) amendments to the Amended and Restated
Articles of Incorporation of the Company to provide for the conversion of
outstanding shares of preferred stock of the Company into the Company's
Common Stock upon completion of a bona fide underwritten public offering of
the Company's Common Stock and one for .9907406 reverse stock split of the
Company's issued and outstanding shares of Common Stock. Each of these
matters was approved by all of the Company's shareholders by unanimous
written consent before the completion of the Company's initial public
offering of its Common Stock.
14
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Exhibit Description
------- -------------------
<S> <C>
10.1 Underlease, dated February 4, 1998, by and among British Airways plc, Hawker
Pacific Aerospace Limited and the Company (1)
10.2 Bailment and Services Agreement, dated as of September 1, 1997, by and between
Federal Express Corporation and the Company (1)
10.3 First Amendment to Mergers and Acquisitions Agreement, dated as of January 23,
1998, by and between Unique Investment Corp. and the Company.
27 Financial Data Schedule
</TABLE>
___________________
(1) Portions of exhibits deleted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidentiality.
(b) Form 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended March 31, 1998.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HAWKER PACIFIC AEROSPACE
Date: May 12, 1998 By /s/ SCOTT W. HARTMAN
---------------------
Scott W. Hartman
CHAIRMAN OF THE BOARD
Date: May 13, 1998 By /s/ DAVID L. LOKKEN
---------------------
David L. Lokken
President and Chief Executive Officer
Date: May 13, 1998 By /s/ BRIAN S. AUNE
---------------------
Brian S. Aune
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
16
<PAGE>
THE [*] INDICATES THAT PORTIONS OF TEXT HAVE BEEN DELETED AND ARE
BEING FILED UNDER SEPARATE COVER WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
DATED 4th February 1998
BRITISH AIRWAYS PLC
- and -
HAWKER PACIFIC AEROSPACE LIMITED
- and -
HAWKER PACIFIC, AEROSPACE
UNDERLEASE
relating to
Part of Technical Block "A"
Heathrow Airport, London
LINKLATERS & PAINES
One Silk Street
London EC2Y 8HQ
TEL: (+44) 171 456 2000
Ref: RJTW
<PAGE>
UNDERLEASE
DATE: 4th February 1998
PARTIES: BA means: BRITISH AIRWAYS PLC of Speedbird
House Heathrow Airport London PO Box 10
Middlesex TW6 2JA.
HP means: HAWKER PACIFIC AEROSPACE
LIMITED of Number One London Road
Southampton SO15 2AE
GUARANTOR means: HAWKER PACIFIC, AEROSPACE whose
registered office is at 11240 Sherman Way Sun
Valley CA91352 USA
1 DEFINITIONS AND INTERPRETATION
In this Lease:
1.1 Unless the context otherwise requires, references to:-
"AIRPORT" means the land from time to time during the Term comprising
Heathrow Airport London;
"AIRPORT OPERATOR" means Heathrow Airport Limited or the body or
person which from time to time manages the Airport as defined in
Section 82(1) of the Airports Act 1986;
"AREA A" means the part of the Property coloured pink and hatched
black on Plan 1;
"AREA B" means the part of the Property coloured pink and hatched
green on Plan 1;
"AREA C" means the part of the Property coloured pink on Plan 1 and
Plan 2;
"BUILDING" means the building of which the Property comprises part and
each and every part thereof;
"COMMON PARTS" means the accessways roads entranceways halls landings
stairways lifts escapeways toilet facilities and any other areas
within the Building or the Site made available from time to time for
common use by the tenants and occupiers of the Building and those
authorised by them;
"CORE AREAS" means Area A, Area B and Area C and a reference to a Core
Area shall be construed accordingly;
"GIA ORIGINAL AREA" means the Gross Internal Area of the Property as
at the commencement of the Term;
"GIA RESIDUE PROPERTY" means the Gross Internal Area of the Residue
Property;
"GROSS INTERNAL AREA" means the Gross Internal Area agreed between BA
and HP or failing agreement determined on the application of either
party by an independent expert appointed by the President for the time
being of the Royal Institution of Chartered Surveyors who shall act as
expert and not as arbitrator.
"PLATING SHOP" means the area shown coloured pink and cross hatched
black on Plan 1 and Plan 2.
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1
<PAGE>
"PROPERTY" means the part of the Building shown coloured pink, pink
hatched black, pink hatched green and pink cross hatched black on Plan
1 and Plan 2 and each and every part thereof (and all additions and
alterations thereto) as described in Schedule 1 except tenant's
fixtures and fittings (including so far as applicable all windows and
doors, the plaster and other internal finishes only on the walls, the
floor boards, and other finishes on the floors and any false ceiling
or other finishes to the ceilings but excluding Service Media any
items of plant or equipment owned by BA and all structural and
exterior parts of the Building);
"SERVICE MEDIA" means the sewers drains gutters pipes ducts wires
cables and other conducting media in the Building;
"SITE" means the land and buildings shown edged red on Plan 3;
"BA" and "HP" includes their respective successors in title;
"INSURED RISK" means any risk against which BA (under the Head Lease)
is responsible for insuring the Property;
"HEAD LEASE" means the lease dated 31 December 1986 between Heathrow
Airport Limited (1) and BA(2) under which BA holds the Property and
the superior lease dated 1 April 1995 between Heathrow Airport Limited
(1) and BA and British Airways Associated Companies Limited (2);
"SUPERIOR LANDLORD" means BA's immediate reversioner from time to time
and the landlord under the lease dated 1 April 1995 referred to above;
"RELEVANT CORE VACATION DATE" means 15 March 1998 in respect of Area
A, 31 January 1999 in respect of Area B and 28 February 1999 in
respect of Area C;
"LEASE" means this underlease and all documents supplemental thereto;
"RENT" means:-
(a) [*] per month from and including the Rent Commencement Date
until 31 December 1998; and
(b) [*] per month from and including 1 January 1999 until 30
June 1999; and
(c) [*] per day from and including 1 July 1999 until the expiry
of the Term;
in each case payable monthly in advance the first such payment being
made on the Rent Commencement Date and thereafter on each monthly
anniversary of such date subject to Clause 7.3 and Clause 7.4;
"RENT COMMENCEMENT DATE" means 1 June 1998;
"REVISED RENT" means the following daily rent:
[*] Residue Property
GIA Original Area
"SALE OF BUSINESS AGREEMENT" means the agreement dated 20 December
1997 made between BA (1) HP (2) and the Guarantor (3)
"SERVICES AGREEMENT" means the landing gear services agreement
dated 4th February 1998 made between BA (1) HP (2) relating to
the provision of services to BA;
1.2 Obligations undertaken by more than a single person are joint and
several obligations;
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2
<PAGE>
1.3 Any covenant by HP not to do an act or thing shall be construed as if
it were a covenant not to do or permit or suffer such act or thing;
1.4 Clause headings and titles shall not affect the construction of this
Lease.
1.5 Any provision in this Lease requiring the consent or approval of BA
shall be construed as also requiring the consent (where necessary
under the Head Lease) of the Superior Landlord.
2 LETTING
BA LETS to HP the Property together with the rights set out in
Schedule 2 but except and reserving as mentioned in Schedule 3 for a
TERM ("the Term") from and including the date hereof to 31 December
1999 HP paying the Rent;
3 HP'S COVENANTS
HP COVENANTS with BA:-
3.1 RENT
To pay the Rent on the dates and in the manner referred to in Clause 1
hereof without any deduction or set-off;
3.2 INTEREST
Without prejudice to BA's other remedies to pay to BA on demand as
additional rent interest on any sum payable under this Lease which is
not paid within 7 days following the due date at the rate of 4% above
the base rate of Barclays Bank plc from the due date until payment is
received (both before and after any judgment);
3.3 VAT
Where HP is to pay to BA any sum or provide any consideration it shall
on the same due date (subject to prior receipt of a valid Value Added
Tax invoice) also pay Value Added Tax in respect of such sum or
consideration and where HP is to indemnify or reimburse or pay costs
incurred by BA it shall also pay Value Added Tax on such costs to the
extent that BA does not recover it;
3.4 REPAIR
(Without prejudice to the other obligations of HP herein contained or
obligations contained in the Services Agreement) To make good any
damage to the Property, save for any damage which arises as a result
of fair wear and tear or from the carrying on of the Permitted Use in
a similar manner to that which has been carried on prior to the date
hereof, caused by HP its servants or agents licensees or invitees
excluding damage by any Insured Risk except to the extent that the
insurance money is made irrecoverable through any knowing act or
default of HP or its servants agents licensees or invitees;
3.5 DECORATION
To decorate in a good and workmanlike manner any part of the Property
damaged by HP or its servants agents invitees or licensees;
3.6 CLEANING
In so far as appropriate having regard to the nature of the Property
and the Permitted Use to keep the Property clean and tidy and clear of
rubbish and whenever BA reasonably considers necessary in so far as
appropriate having regard to the nature of the property and the
Permitted Use to clean all internal surfaces and finishes of the
Property;
- - --------------------------------------------------------------------------------
3
<PAGE>
3.7 NOTICES TO REPAIR
To repair and make good all defects and disrepair for which HP is
liable under this Lease within two months (or sooner if necessary) of
written notice from BA and if HP defaults in so doing BA may enter the
Property to carry out such work and all cost so incurred by BA shall
be a debt repayable by HP to BA on demand;
3.8 TO PERMIT ENTRY
To permit the Landlord and all persons authorised by it at all times
to enter the Property to use or operate any items of plant or
equipment owned by BA in the Property, to inspect its condition to
take a schedule of BA's fixtures or of any dilapidations to exercise
any of the rights excepted and reserved out of this Lease or to carry
out any works or to remedy any breach of HP's obligations under this
Lease or to do anything necessary to prevent a forfeiture of the Head
Lease and the Landlord shall when exercising such right of entry cause
as little inconvenience as reasonably possible and shall make good
without delay to the reasonable satisfaction of HP all damage
occasioned to the Property by the exercise of such right of entry;
3.9 NOT TO PREJUDICE INSURANCE
Not to bring into or keep in the Property any thing which is or may
become dangerous nor to carry on any hazardous trade nor knowingly do
anything which might cause the insurance of the Property to be
vitiated or the premiums to be increased save that the use and storage
upon the Property of anything which has to date been used or stored
therein (or which has to date been used for the carrying on of any
trade therein) or the use of the Property by HP for the Permitted Use
shall not in any event be deemed to be a breach of this sub-clause;
3.10 OVERLOADING
Not to overload any part of the Property or its services;
3.11 UNDESIRABLE USES
Not to use the Property for any noisy offensive dangerous illegal or
immoral purpose nor to do on the Property any thing which in the
reasonable opinion of the Landlord may be a nuisance or cause damage
disturbance or inconvenience to or any owners or occupiers of any
neighbouring premises save that the use of the Property by HP for the
Permitted Use shall not in any event be deemed to be a breach of this
sub-clause;
3.12 PERMITTED USE
Not to use the Property otherwise than for the use current at the date
hereof and in connection with the performance and provision of
Services to BA (as that expression is defined in the Services
Agreement (the "Permitted Use");
3.13 STATUTORY REQUIREMENTS
Subject always to clause 6.5 hereof to comply with all statutes and
subordinate legislation from time to time in force and the
requirements of any competent authority relating to the Property and
its use and to execute at its own expense any work required to be
carried out (whether by owner or occupier) on the Property under such
statutes or by such authority;
3.14 IRRECOVERABLE INSURANCE MONIES
To pay to BA on demand the amount of any insurance monies in respect
of the Property which cannot be recovered by reason of any act or
default of HP or any person deriving title under HP or its or their
servants agents licensees or invitees and which act or default arises
otherwise than in the carrying on of the use of the Property for the
Permitted Use;
3.15 PLANNING
Not to apply for planning permission in respect of the Property;
- - --------------------------------------------------------------------------------
4
<PAGE>
3.16 ALTERATIONS
Not to make any other alterations or additions to the Property without
the Landlord's prior written consent which shall not be unreasonably
withheld or delayed;
3.17 SIGNS
Not to exhibit on the Property any sign notice mast aerial or
satellite dish visible from the outside of the Property without the
prior consent of the Landlord (not to be unreasonably withheld) but no
consent shall be required for unobjectionable and inoffensive trade
signs within the Property;
3.18 ALIENATION
Not to mortgage charge or grant any security interest over the
Property nor to assign nor underlet the whole or any part of the
Property nor to share or part with the possession or occupation of the
whole or any part of the Property;
3.19 COSTS
To pay to BA on demand as additional rent and as a debt all costs it
incurs in connection with or in contemplation of:-
3.19.1 the preparation and service of a notice or any proceedings
under Section 146 or 147 of the Law of Property Act 1925 or
under the Leasehold Property (Repairs) Act 1938 (even if
forfeiture is avoided);
3.19.2 the preparation and service of a schedule of dilapidations
at any time during or within 2 months after the termination
of the Term;
3.19.3 any applications for consent or approval whether or not
consent is properly refused or offered subject to a
proper condition or the application is withdrawn;
3.19.4 the remedying of any breach of HP's obligations under
this Lease;
3.20 APPLICATIONS FOR CONSENT
On applying for any consent or approval HP shall disclose to the
Landlord such information as the Landlord may reasonably require;
3.21 TO INFORM LANDLORD OF DAMAGE DEFECTS AND NOTICES
Forthwith upon becoming aware of the same to give full details to BA
of any damage to or any defect in the Property which may give rise to
a duty on the Landlord and of any notice or thing which may adversely
affect BA's interest in the Property;
3.22 TO INDEMNIFY LANDLORD
Subject always to the provisions of clause 6.5, to indemnify BA
against all actions proceedings costs claims and demands in respect of
any breach by HP of its obligations under this Lease;
3.23 YIELDING UP
Immediately before the end of the Term to remove all HP's fixtures and
fittings (including the Fixed Assets as defined in the Sale of
Business Agreement) and (unless the Landlord otherwise requires) all
alterations or additions made to the Property during the Term and in
each case to carry out any work of making good arising from the
removal of the said fixtures fittings alterations or additions at the
Property to BA's reasonable satisfaction and at the end of the Term
(howsoever determined) to yield up to BA the Property in accordance
with HP's obligations under this Lease;
3.24 TO OBSERVE COVENANTS
3.24.1 Not to do anything which would cause BA to be in breach of
its obligations under the Head Lease (save that the use and
storage upon the Property of anything which has to
- - --------------------------------------------------------------------------------
5
<PAGE>
date been used or stored therein (or which has to date been
used for the carrying on of any trade therein) or the use of
the Property by HP for the Permitted Use shall not in any
event be deemed to be a breach of this sub clause);
3.24.2 To comply with all reasonable regulations made by BA
regarding the Property and/or the Site and notified to HP
including without limitation security and safety regulations
and the recommendations and requirements of the insurers
relating to the use or occupation of the Property;
3.25 VACATION OF THE PROPERTY
To the extent that HP has not vacated the relevant Core Area by the
Relevant Core Vacation Date in accordance with HP's covenants and
obligations contained in this Lease it shall forthwith on each
Relevant Core Vacation Date vacate and yield up such relevant Core
Area in accordance with the said covenants and obligations.
4 LANDLORD'S COVENANTS
BA covenants with HP:-
4.1 QUIET ENJOYMENT
To permit HP peaceably to hold and enjoy the Property without any
lawful interruption by BA or any person lawfully claiming through
under or in trust for it;
4.2 INSURANCE
Unless such insurance shall be vitiated by any act or omission of HP
or any person deriving title under HP or any of its or their servants
agents licensees or invitees to procure compliance with the insurance
and reinstatement provisions in the Head Lease;
4.3 HEAD LEASE
4.3.1 To pay the rents reserved by and to perform and observe all
other covenants and conditions contained in the Head Lease
and to enforce compliance by the Superior Landlord with its
obligations under the Head Lease.
4.3.2 To maintain the Property in no worse a state or condition
than exists at the date hereof save where such maintenance
or other works may be required as a result of the Tenant's
or its servants' or agents' default.
4.3.3 Where the superior lease dated 1 April 1995 referred to
above imposes an obligation on BA to repair and maintain
Service Media and structural and exterior parts of the
Building BA shall repair and maintain the Service Media and
structural and exterior parts of the Building in accordance
with its repairing obligation in such superior lease
excluding damage by any Insured Risk and damage or disrepair
due to the default of HP or any person deriving title under
HP or its or their respective servants agents licensees or
invitees.
4.4 MAINTENANCE OF LIGHTING SYSTEM
To keep the Property lighted (including the repair and maintenance of
the lighting system) in the same manner as has been provided up to the
date hereof.
4.5 PAYMENT OF RATES AND OTHER OUTGOINGS
To pay general rates and sewerage rates and all other rates and
outgoings of any kind payable in respect of the Property (whether
alone or in conjunction with other property) during the Term
including, without prejudice to the generality of the foregoing, the
cost of supply of electricity, water, gas, telephone and all other
utilities to the Property, including meter rents.
- - --------------------------------------------------------------------------------
6
<PAGE>
5 FORFEITURE
IF:-
5.1 the rents or any other sum due under this Lease shall be in arrear for
twenty-one days (whether formally demanded or not); or
5.2 HP commits a material breach of its obligations under this Lease which
is not remedied within 30 days of written notice from BA; or
5.3 distress or other execution shall be levied on the Property or its
contents; or
5.4 a Bankruptcy Order or an Administration Order is made in respect of
HP; or
5.5 a resolution is passed or an Order is made to wind up HP (except for
the purposes of a solvent amalgamation or reconstruction); or
5.6 a receiver or administrative receiver is appointed over the whole or
any part of the property assets or undertaking of HP; or
5.7 HP is struck off the Register of Companies or is dissolved or
otherwise ceases to exist under the laws of the country or state of
its incorporation;
then the Landlord may determine this Lease by re-entering the Property
but without prejudice to its other remedies for any antecedent breach
of any of obligation.
6 OTHER MATTERS
6.1 NO IMPLIED EASEMENTS
Nothing in this Lease shall confer upon HP any easement right or
privilege whatsoever over or against any land adjoining or
neighbouring the Property which may now or subsequently belong to BA
nor impose any restriction on the use of any land not comprised in
this Lease save as expressly hereby granted or imposed.
6.2 NO COMPENSATION
The right of HP to compensation on quitting the Property is excluded
to the extent permitted by law.
6.3 CESSER OF RENT
If the Property shall be damaged or destroyed by any of the Insured
Risks so as to be unfit for occupation and use then (save to the
extent that the insurance money shall be irrecoverable by reason
solely or in part of any act or default of HP or any of its servants
agents licensees or invitees) all the rents hereby reserved or a fair
proportion according to the nature and extent of the damage shall be
suspended until the Property shall again be fit for occupation and
use.
6.4 EXCLUSION OF STATUTORY SECURITY
Pursuant to an Order of the Mayor's & City of London Court made on
28th January 1998 it is agreed that Sections 24 to 28 of the
Landlord and Tenant Act 1954 (as amended) shall not apply to
this tenancy.
6.5 CONFLICT WITH SERVICES AGREEMENT
If there is any conflict between the provisions of this Lease and
Clause 6 of the Services Agreement the provisions in the Services
Agreement shall prevail.
6.6 SECURITY OF PROPERTY
Subject to obtaining BA's prior written approval in accordance with
Clause 3.16 hereof, if so required by HP, HP may take such steps as it
reasonably considers necessary (including the
- - --------------------------------------------------------------------------------
7
<PAGE>
installation of doors and the like) in order to properly secure the
Property provided that if any such alterations shall (in the absolute
opinion of BA) adversely affect BA's or any other occupiers' continued
use and enjoyment of the Building or the rights reserved in Schedule 3
of this Lease the withholding of consent to such alterations shall be
deemed not to be unreasonable.
7 BREAK CLAUSE
7.1 If either BA or HP serve notice on the other pursuant to Clause 21.1,
21.2 or 21.3 of the Services Agreement terminating the Services
Agreement to such an extent that the Property or part of the Property
is no longer required for the Permitted Use this Lease shall cease and
determine but without prejudice to any claim by either party against
the other in respect of any antecedent breach of any covenant or
condition herein contained provided that if BA serves notice requiring
HP to comply with the obligations contained in Clause 22.4.1 of the
Services Agreement this Lease shall not cease and determine pursuant
to this clause until BA serves notice pursuant to Clause 22.4.1(i) or
22.4.1(ii) of the Services Agreement or until the expiration of the
eighteen month period referred to in Clause 22.4.1 (iii) of the
Services Agreement.
7.2.1 Subject to 7.2.2 if HP shall desire to determine the Term at
any time on or after 1 June 1998 and shall give to BA not
less than 8 weeks previous notice in writing of such its
desire and provided HP has given vacant possession of all
the Property then at the expiry of such notice this Lease
and everything herein contained shall cease and determine
but without prejudice to any claim by either party against
the other in respect of any antecedent breach of any
covenant or condition herein contained;
7.2.2 If HP desires to determine the Term prior to 1 July 1999 and
serves notice pursuant to 7.2.1 to this effect such notice
shall only be valid if on or before the expiry of such
notice HP has paid to BA as additional rent an amount equal
to the aggregate Rent for the period from the Rent
Commencement Date to and including 30 June 1999 less any
actual rent paid pursuant to the terms of this Lease;
7.3.1 Subject to BA's prior written consent (which shall not be
unreasonably withheld provided that failure to give consent
to any Surrender Notice which is due to expire prior to 1
July 1999 and which relates to the entirety of the Property
then remaining the subject of this demise shall not in any
event be deemed not to be reasonable and provided further
that such consent shall not be required if the Surrender
Notice expires on or after 1 July 1999 and relates to the
entirety of the Property then remaining the subject of this
demise) HP may at any time during the Term give to BA not
less than 8 weeks written notice (each a "Surrender
Notice") (or such shorter period as BA may agree in writing)
of its desire to vacate all or any part of the Property
("Surplus Property") and provided HP gives vacant possession
of all the Surplus Property the subject of the Surrender
Notice then at the expiry of the Surrender Notice this Lease
shall be deemed to have been surrendered in part in so far
as it relates to the Surplus Property and BA and HP's
obligations under this Lease shall cease and determine in so
far as they relate to the part surrendered but without
prejudice to any claim by either party against the other in
respect of any antecedent breach of any covenant or
condition herein contained.
7.3.2
(I) Notwithstanding the service of one or more
Surrender Notices this Lease shall continue
in full force and effect in relation to the
Property excluding any surrendered Surplus
Property ("Residue Property");
(II) If a partial surrender pursuant to Clause
7.3.1 takes place then from the later of (a)
the date of such partial surrender or (b) 1
July 1999 the Rent
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8
<PAGE>
shall forthwith be varied to the Revised Rent
which shall be payable from such later date.
BA and HP shall use reasonable endeavours
to agree the Revised Rent;
(III) For the avoidance of doubt, HP may serve one
or more Surrender Notices at the same or at
different times during the Term.
7.4 Unless notified in writing by BA that BA does not wish this clause 7.4
and clause 3.25 hereof to apply (but without prejudice to HP's right
to serve one or more surrender notices in respect of all or any part
or parts of each of the Core Areas at any time whether before or
after the Relevant Core Vacation Date pursuant to Clause 7.3 hereof):
7.4.1 HP shall surrender and yield up to BA the relevant part of
the Core Areas on or before the Relevant Core Vacation Date
and on such date this Lease shall be deemed to have been
surrendered in part in so far as it relates to the relevant
part of the Core Areas;
7.4.2 provided HP gives vacant possession of the relevant part of
the Core Areas on or before the Relevant Core Vacation Date
a Revised Rent shall apply to the Property that has not been
surrendered on or before the Relevant Core Vacation Date
(such Property being the "Residue Property" for the purposes
of the calculation of the Revised Rent applicable pursuant
to this Clause). BA and HP shall use reasonable endeavours
to agree the Revised Rent which shall be payable from 1
July 1999; and
7.4.3 BA and HP's obligations under this Lease shall cease and
determine in so far as they relate to the part surrendered
but without prejudice to any claim by either party against
the other in respect of any antecedent breach of any
covenant or condition herein contained.
8 GOVERNING LAW AND SUBMISSION TO JURISDICTION
This Lease shall be governed by and construed in accordance with
English law and the parties irrevocably agree that the courts of
England are to have non-exclusive jurisdiction to settle any disputes
which may arise out of or in connection with this Lease and such
documents.
9 NOTICES
9.1 Any notices or other communication requiring to be given or served
under or in connection with this Lease shall be in writing and shall
be sufficiently given or served if delivered or sent:
In the case of the Landlord to:
Speedbird House
PO Box 10
Heathrow Airport (London)
Hounslow
Middlesex TW6 2JA
Fax: 0181 562 3323
Attention: The Company Secretary and the General
Manager, Aircraft Maintenance Purchasing
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9
<PAGE>
In the case of HP:
Number One
London Road
Southampton SO15 2AE
Fax: 01703 631835
Attention: The Company Secretary
In the case of the Guarantor to:
Hawker Pacific Aerospace
11240 Sherman Way
Sun Valley
CA 91352 USA
Fax: 001 818 765 2416
Attention: The Company Secretary
9.2 Any such notice or other communication shall be delivered by hand or
sent by courier, fax or prepaid first class post. If sent by post such
notice or communication shall conclusively be deemed to have been
received two Business Days from the time of posting (whereby "Business
Day" shall mean any day on which banks are open for business in
England excluding Saturdays and Sundays and public holidays). If sent
by courier or fax and the notice is received after 4.00 pm. on any day
then the date of service shall be deemed to be the following working
day thereafter.
9.3 The Guarantor hereby appoints Paris Smith & Randall of Number One
London Road Southampton SO15 2AE or such other firm of solicitors in
England as may be notified in writing to BA as its agents to accept
service of all proceedings on its behalf and BA may serve any
proceedings on the Guarantor either by sending them by first class
post to the above named agents.
10 PARENT COMPANY GUARANTEE
10.1 In part consideration of BA entering into this Lease at the request of
the Guarantor and in consideration of the sum of L1 (receipt of which
is hereby acknowledged) the Guarantor hereby unconditionally and
irrevocably guarantees the full, prompt and complete performance and
observance by HP of all its obligations, commitments, undertakings,
warranties and indemnities under or pursuant to this Lease and any
document entered into pursuant to the terms of this Lease (the
"GUARANTEED OBLIGATIONS") which are stated to be binding on HP
including, without limitation, the due and punctual payment of all
sums now or subsequently payable by HP hereunder when the same shall
become due and the Guarantor undertakes with BA to indemnify BA
against all losses which BA may suffer through or arising from any
breach by HP. If and whenever HP defaults for any reason whatsoever in
the performance of any of the Guaranteed Obligations the Guarantor
shall forthwith upon demand unconditionally perform (or procure
performance of) and satisfy (or procure the satisfaction of) the
Guaranteed Obligations in regard to which such default has been made
in the manner prescribed by this Agreement and so that the same
benefits shall be conferred on BA as it would have received if the
Guaranteed Obligations had been duly performed and satisfied by HP.
10.2 The guarantee contained in Clause 10.1 is a continuing guarantee and
shall remain in force until all the Guaranteed Obligations have been
fully performed and all sums payable by HP have been fully paid. This
guarantee is in addition to and without prejudice to and not in
substitution for any
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10
<PAGE>
rights or security which BA may now or hereafter have or hold for the
performance and observance of the Guaranteed Obligations.
10.3 The obligations of the Guarantor shall not be affected by any act,
omission, matter or thing which, but for this provision, might operate
to release or otherwise exonerate the Guarantor from his obligations
or affect such obligations, including without limitation and whether
or not known to the Guarantor:
10.3.1 any time, indulgence, neglect, delay, waiver or consent at
any time given to HP or any other person;
10.3.2 any compromise or release of or absentation from perfecting
or enforcing any right or remedies against HP or any other
person;
10.3.3 any legal limitation, liability, disability, incapacity or
other circumstances relating to HP or any other person or
any amendment to or variation of the terms of the Guaranteed
Obligations;
10.3.4 any irregularity, unenforceability or invalidity of any
obligations of HP under this Agreement, or the dissolution,
amalgamation, reconstruction or insolvency of HP;
10.3.5 the surrender of part of the Property
and shall nevertheless be enforceable against and recoverable from the
Guarantor as though the same had been incurred by the Guarantor and
the Guarantor were the sole or principal obligor in respect thereof.
11 It is hereby acknowledged that the Rent payable from time to time
pursuant to Clause 3.1 includes [*] per day as payment to BA towards
expenses it shall incur in complying with its obligations as to
maintenance contained in Clause 4.
IN WITNESS whereof this document has been executed as a Deed the day
and year first before written.
SCHEDULE 1
DESCRIPTION OF THE PROPERTY
Offices storage and workshops within Technical Block "A" Heathrow
Airport London shown coloured pink, pink hatched black, pink hatched
green and pink cross-hatched black on Plan 1 and Plan 2.
SCHEDULE 2
EASEMENTS AND OTHER RIGHTS INCLUDED IN THIS LEASE
1 The rights in common with the Landlord and all others authorised by
the Landlord:
(a) of way on foot and, as appropriate, with or without vehicles and
equipment over and along and otherwise to use the Common Parts
for all purposes reasonably connected with the use and occupation
of the Property subject always to the right of the Landlord to
vary such areas made available provided suitable alternative
areas are made available;
(b) of free passage and running of water soil gas and electricity and
other services through the Service Media serving the Property.
2 Insofar as BA is able to grant such a right, the right in common with
BA, others authorised by BA, the Superior Landlord, the Airport
Operator and all others from time to time having similar rights:
- - --------------------------------------------------------------------------------
11
<PAGE>
2.1 of passage (for the purpose of access and egress only and not so as to
confer any right to carry on any trade of business within any part of
the Airport other than the Property or to supply any goods or services
to aircraft at the Airport other than those parked within the premises
demised to BA by the superior lease dated 1 April 1995) with or
without vehicles and equipment, as appropriate, over through and along
the roads access ways or tunnels (if any) giving direct access to the
Property from the public highway provided that:
2.1.1 HP shall comply and shall use its best endeavours to ensure
that anyone within its control shall comply with such
reasonable directions as may from time to time properly be
given by BA, the Superior Landlord or the Airport Operator
for the regulation and direction of traffic using the
Airport with a view to securing and facilitating their use
by all persons entitled to rights over them.
2.1.2 BA, the Superior Landlord or the Airport Operator may on
reasonable prior written notice to HP (except in the case of
emergency) close the said roads or access ways as often as
may be necessary and whether temporarily or permanently for
the purpose of carrying out any works to the Airport or for
the purpose of obtaining access to any services in the
Airport, or for any other proper purpose in connection with
the operation management refurbishment or redevelopment of
the Airport subject to there always being available to HP
reasonable alternative roads or access ways or other means
of access.
3 The right of support for the Property from the remainder of the
Building.
4 The right in common with BA and all others authorised by BA to use
parking spaces in such car parks as shall be designated by BA
("designated car parks") on a first come first served basis provided
that:
4.1 the number of car parking spaces used under this right does not exceed
the number used by BA employees whose place of work was at the
Property immediately before the grant of the Lease;
4.2 BA may alter modify or change the designated car parks at any time;
and
4.3 all persons who exercise this right shall comply at all times with any
proper regulations which may govern the use of the designated car
parks from time to time.
5 The right to park vehicles in the two parking spaces immediately
outside the Property in the approximate positions marked X on Plan 1
provided that in the exercise of such right HP shall not at any time
cause any obstruction or material inconvenience to BA or any other
occupiers of the Building.
6 The right to share occupation of the areas cross hatched white and
pink on Plan 1 (the "Common Area") with BA and others authorised by
BA subject at all times to HP complying with its covenants and
obligations contained herein as if the Common Area comprised part of
the Property.
SCHEDULE 3
EXCEPTIONS AND RESERVATIONS OUT OF THIS LEASE
To the Landlord and all others authorised by the Landlord or similarly
entitled:
1 the right to carry out or consent to the carrying out by any person of
any erection of a new building or the rebuilding demolition or
alteration of the Building other than the Property;
2 the right at all times to enter and remain upon the Property with or
without workmen with all necessary appliances and materials (making
good all damage occasioned thereby to the Property
- - --------------------------------------------------------------------------------
12
<PAGE>
to the reasonable satisfaction of HP and causing as little
inconvenience as reasonably possible) for all purposes in connection
with the carrying out of any works providing any services or
fulfilling the Landlord's obligations under this Lease and to share
occupation to enable the Landlord to use or operate any items of plant
or equipment owned by the Landlord situated from time to time in the
Property and causing as little inconvenience as reasonably possible;
3 the right of free passage and running of water soil gas and
electricity through the Service Media within the Property.
THE COMMON SEAL OF } [SEAL]
BRITISH AIRWAYS PLC was }
hereunto affixed in the presence of:}
/s/ [ILLEGIBLE]
----------------
ASSISTANT
SECRETARY
- - --------------------------------------------------------------------------------
13
<PAGE>
[LETTERHEAD]
THE [*] INDICATES THAT PORTIONS OF TEXT HAVE BEEN DELETED AND ARE BEING
FILED UNDER SEPARATE COVER WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
December 15, 1997
Mr. Brian Carr
Hawker Pacific, Inc.
11310 Sherman Way
Sun Valley, CA 91352
Dear Brian:
Please find enclosed for your files, one (1) fully executed copy of the
Amendment 002 to our Contract 95-0102. Should you have any questions, please
contact me at 901-224-4170.
Happy Holidays,
/s/ Tom Shelton
Tom Shelton
Sr. Supply Chain Specialist
AOD Category Management
TS/ps
<PAGE>
Contract No. 95-0102-002
BAILMENT AND SERVICES AGREEMENT
THIS BAILMENT AND SERVICES AGREEMENT (the "Agreement") made as of the 1st
day of September, 1997 (the "Effective Date") between FEDERAL EXPRESS
CORPORATION ("FedEx") and HAWKER PACIFIC, INC. ("Hawker Pacific").
RECITALS
WHEREAS, FedEx is an all-cargo carrier with a fleet of Boeing 727-100,
727-200, McDonnell Douglas DC10-10, DC10-30, MD-11, Airbus Industries A300-600F,
and A310-200 aircraft equipped landing gear assemblies; and
WHEREAS, FedEx and Hawker Pacific entered into that certain Maintenance
Services Agreement dated August 19, 1994, which was amended by an Amendment
dated January 23, 1996 (the "1994 Agreement"), in which Hawker Pacific agreed to
provide, among other things, maintenance and overhaul services on FedEx's
landing gear assemblies; and
WHEREAS, FedEx and Hawker Pacific desire to amend the 1994 Agreement to
allow FedEx to deliver various landing gear assemblies (the "Aircraft
Components") to Hawker Pacific for purposes of storage and shipping to FedEx,
as described herein, to engage Hawker Pacific to Restore, Modify, and
Overhaul the Aircraft Components for FedEx and supply Aircraft Components to
FedEx (collectively, storage, shipping, Restoring and Modifying shall be
referred to as the "Services") and to omit the information contained after
Exhibit 3 of the 1994 Agreement; and
WHEREAS, Hawker Pacific has the capacity, expertise, ability, and requisite
government certifications and Applicable Manuals to provide the Services for
FedEx and Hawker Pacific is willing and able to provide the Services in
accordance with the provisions of this Agreement.
FOR AND IN CONSIDERATION of the mutual covenants contained in this
Agreement, FedEx and Hawker Pacific (individually a "Party" and collectively the
"Parties") agree as follows:
ARTICLE 1
DEFINITIONS
In addition to words and terms defined elsewhere in this Agreement, the
following words and terms shall have the following meanings:
<PAGE>
2
"Acceptance" shall mean FedEx's accepting an Aircraft Component from Hawker
Pacific after it has been delivered or redelivered to FedEx in accordance with
the requirements specified herein.
"Aircraft Component" shall mean any unit, part, accessory, assembly, or
piece of aircraft equipment which is the subject of the Services provided
pursuant to this Agreement. Aircraft Components which are owned by FedEx and
delivered to Hawker Pacific for storage and disposition or for use by Hawker
Pacific in the performance of the Services are hereinafter referred to as "FedEx
Aircraft Components" and are listed on Exhibit "B"-"FedEx Aircraft Components To
Be Bailed to Hawker Pacific", attached hereto and made a part hereof by
reference. Aircraft Components which are owned by Hawker Pacific and supplied to
FedEx as part of the Services performed hereunder are hereinafter referred to as
"Hawker Pacific Aircraft Components."
"Airworthiness Directives" or "Advisory Directive" shall mean a regulatory
notice sent out by the FAA to the registered owner of an aircraft informing the
registered owner of a condition that must be corrected for the aircraft to
maintain its airworthiness status.
"Applicable Manuals" shall mean the Original Equipment Manufacturer ("OEM")
Manuals, Component Maintenance Manuals ("CMM"), FedEx's Specifications, and any
supplements or amendments thereto.
"Bench Check" shall mean a series of Inspections or tests made for the
purpose of discovering any faults or defects in an Aircraft Component.
"Beyond-Economical Repair" or "BER" shall mean the condition which exists
when an Aircraft Component requires Repairs which will cost more than sixty-five
percent (65%) of the Replacement Cost of the Aircraft Component.
"Date of Completion" shall mean the day that Hawker Pacific completes the
Restoration or Modification of an Aircraft Component and notifies FedEx that it
is Serviceable and ready for shipment to FedEx.
"Date of Delivery" shall mean the business day on which the Service Order
and the Aircraft Component is received by Hawker Pacific at its facility in Sun
Valley, California.
"Date of Redelivery" shall mean the date on which the Aircraft Component is
returned to FedEx from Hawker Pacific.
"Direct Damage" shall mean damage to an Aircraft Component that is
attributable to defective restoration and modification Services being provided
by Hawker Pacific on the Aircraft Component.
"Direct Material" shall mean all supplies and materials which are
incorporated into the Aircraft Component and become an integral part thereof.
<PAGE>
3
"Engineering Services" shall mean all engineering services necessary for
performance of the Services, including, but not limited to, engineering required
for the coordination of FedEx's Specifications with Hawker Pacific's maintenance
procedures, analyses of tests and Inspection, development of required Repair,
Maintenance, Modification, and Overhaul Services, and any other engineering
services related to and in support of the Services, including product
improvements.
"Equipment" shall mean the individual and collective description of FedEx's
landing gear assemblies, and their respective parts, components, and
accessories.
"FAA" shall mean the United States Federal Aviation Administration, or any
successor organization which shall have jurisdiction over airlines formed and
operated in the United States of America.
"Field Repair Services" shall mean any Repair Service that is requested by
FedEx to be performed at a location other than Hawker Pacific's facility.
"Functional Test" shall mean any test or check of an Aircraft Component by
FedEx or Hawker Pacific in its operating (or functioning) environment, using
test machinery, procedures, and limits specified in the Applicable Manuals, as
the same may be amended from time to time.
"Guaranteed Turntimes" shall mean Hawker Pacific's assurance that it will
ship or Restore and/or Modify the Aircraft Component within the timeframes
specified within this Agreement or the Exhibits hereto. Three (3) Guaranteed
Turntimes shall apply a) Hawker Pacific guarantees the in-house turn-times in
Exhibit "A", b) Hawker Pacific guarantees the Direct Ship Program turn-times as
defined in Exhibit "C" when a FedEx Aircraft Component is available, and c)
Hawker Pacific guarantees a Turntime of four (4) hours when there is an aircraft
on the ground if an Aircraft Component is available in stock and ready for
shipment.
"Indirect Material" shall mean all supplies and materials which do not
become an integral part of the Aircraft Component, for example lubricants,
solvents, wiping rags, emery cloths, abrasives, safety wire, plating materials,
or minor hardware.
"Inspection" shall mean a thorough examination of an Aircraft Component in
order to determine its Serviceability and/or proper installation.
"Inter-Changeable" shall mean any Aircraft Component that is identified by
an alternate part number or the same part number and is the same in terms of
form, fit, and function. If Hawker Pacific desires to ship an Aircraft Component
that is deemed to be Inter-Changeable, Hawker Pacific must obtain the approval
of the FedEx Representative prior to shipment.
"Life-Limited Aircraft Components" shall mean Aircraft Components that are
manufactured with a given Serviceable life.
<PAGE>
4
"Maintenance" shall mean the tasks necessary to preserve or improve the
condition of an Aircraft Component to a specified level, including but not
limited to, pre-induction testing, as required, cleaning, reworking, replacement
of Indirect Materials, replacement of Direct Materials, disassembling and
reassembling, lubricating, or adjusting, and final testing, as more fully
described in the Applicable Manuals.
"Maintenance Program" shall mean the Maintenance Program developed by
FedEx's Engineering Department specifying the work to be performed on the
Aircraft Components to increase their overall reliability and to assure their
long-term integrity.
"Manufacturers' Service Bulletins" shall mean documents issued by an OEM
outlining a Modification or Maintenance process to improve the performance of
such Aircraft Component.
"Modification" shall mean alterations to the delivery configurations for an
Aircraft Component which will cause it to conform to the redelivery
configurations required by FedEx's Specifications.
"Non-repairable" shall mean the classification of an item which is not
serviceable at the time of removal by repair in accordance with FedEx's or the
manufacturer's then current specifications.
"Obsolete" shall mean a Component or piece of Equipment which can no longer
be used as it was originally designed to be used.
"Out-of-Scope Services" shall mean Services which require unique operations
or tooling and are accomplished outside the scope of FedEx's Specifications
and/or the Applicable Manuals. These Services require FedEx approval prior to
beginning the performance of the Out-of-Scope Services.
"Outside Services or Sub-Contract Services" shall mean any Services
performed for Hawker Pacific by third-parties who have been approved by the FAA
and FedEx to perform such Services; it is understood between the Parties that
Peen-rite, Inc. and Metal Improvement, Inc. have been previously approved for
shot-peening and that Messier-Bugatti, as a teaming partner with Hawker Pacific,
has been previously approved for the repair and overhaul of A300-600 and A310
equipment.
"Overhaul" shall mean the tasks necessary to locate faults or defects and
return an Aircraft Component to an Overhauled condition, as more fully described
in the Applicable Manuals and Exhibit "D".
"Part" shall mean a constituent part of an Aircraft Component having no
function apart from the Aircraft Component.
"Repair" shall mean the tasks necessary to locate faults or defects in an
Aircraft Component, such fault having been reported by FedEx, or discovered by
Hawker Pacific during a Bench
<PAGE>
5
Check, Functional Test, or Inspection and to rectify the faults or defects
or as more fully described in the Applicable Manuals and Exhibit "D".
"Repairable" shall mean the classification of an Aircraft Component
that can be made Serviceable by Repairing it in accordance with the
Applicable Manual.
"Replacement Cost" shall mean the cost to replace a like Aircraft
Component based upon the market price or price listed in the current OEM
catalog, whichever Hawker Pacific has paid for the replacement Aircraft
Component.
"Representatives" shall mean any FedEx employee assigned to be on
Hawker Pacific's site, from time to time, in order to inspect or assess
Hawker Pacific's performance of the Services and/or to provide the
necessary approvals required under this Agreement.
"Restore" shall mean the Inspection, Repair, Overhaul, and/or
Maintenance action required in the Specifications to return the Aircraft
Component to a Serviceable condition.
"Schedule" shall mean a calendar setting forth FedEx's forecast for
the delivery of Aircraft Components by FedEx to Hawker Pacific, which
Schedule may be amended by FedEx from time to time throughout the Term of
this Agreement.
"Scrap" shall mean any discarded Aircraft Components which have little
or no value for their intended purpose.
"Serviceable" shall mean any Aircraft Component that meets all
specified standards for airworthiness following completion of the Services,
as defined by applicable Federal Aviation Regulations ("FAR") and FedEx's
Specifications.
"Services" shall mean all of the tasks to be performed by Hawker
Pacific as described in this Agreement. Services shall include, but not be
limited to, the non-exclusive Repair (including Field Repair Services),
Maintenance, Modification, and Overhaul Services, Out-of-Scope Services,
Engineering Services, lab-analysis, Sub-Contract Services, and all other
tasks which are the responsibility of Hawker Pacific pursuant to this
Agreement.
"Service Order" shall mean a document issued by FedEx authorizing the
Services to be performed on FedEx's Aircraft Components.
"Shop Work Document" shall mean a document used by Hawker Pacific to
record all Services of any type performed on an Aircraft Component.
"Specifications" or "FedEx's Specifications" shall mean FedEx's
written instructions for the performance of the Services, including, but
not limited to, the following:
(i) ENGINEERING AUTHORIZATION ("EA") - A document issued by
FedEx's Engineering Division providing immediate and specific instruction
and authorization for (1) a
<PAGE>
6
one-time major or minor Repair, (2) a one-time major or minor Modification,
(3) a one-time substitution of Direct Materials or Inter-Changeable
Components, or (4) an immediate revision of technical manuals.
(ii) ENGINEERING ORDERS ("EO") - A document issued by
FedEx's Engineering Division that (1) provides the rationale, instruction,
and authorization necessary to effect Modifications, special Inspections,
and Repairs to the Aircraft Component, (2) authorizes the accomplishment of
the Services, including evaluations, Airworthiness Directives or
Manufacturers' Service Bulletins, and (3) controls and documents the
Modification, Inspection, and Repair processes in lieu of FAA Form 337.
(iii) ENGINEERING REPORTS ("ER") - A document issued by
FedEx's Engineering Division that describes the procedures necessary to
effect Repairs, Overhauls, Modifications, or Maintenance on the Aircraft
Component.
(iv) COMPONENT MAINTENANCE MANUAL ("CMM") - A document
issued by the OEM describing the procedure and requirements for the
performance of Maintenance services on the Aircraft Components.
(v) OEM SERVICE LETTER - A document issued by the OEM
notifying the operator of changes in the specifications for the Aircraft
Components.
(vi) COMPONENT MAINTENANCE SPECIFICATION POLICY SHEETS, OSA,
CAR - Component Maintenance Specification Policy Sheets, Overhaul
Specifications Amendments ("OSA") and Component Approved Repairs ("CAR")
are documents issued by FedEx detailing specific Overhaul procedures for
FedEx's Aircraft Components.
(vii) Any drawings or other rendering issued by FedEx's
Engineering Division.
(viii) Any additional documents which provide instructions
regarding the Repair, Maintenance, Modification, or Overhaul of FedEx's
Aircraft Component.
"Standard Replacement Parts" shall mean parts that will be replaced
one hundred percent (100%) of the time at each Overhaul, ie. nuts, bolts,
screws, seals, and washers.
"Standard Replenishment Order(s)" shall mean when a FedEx line
station or stations requests an exchange Component by issuance of a
Service Order to Hawker Pacific, and Hawker Pacific has bailed FedEx
Aircraft Components in stock or is willing to provide a Hawker Pacific
Aircraft Component.
"Subcontractors" shall mean any suppliers or contractors who perform
any part of the Services or provide any aircraft components to Hawker
Pacific for its performance of Services, which Subcontractors shall be
approved by FedEx.
<PAGE>
7
"Turntime" shall mean the number of calendar days from the business day
following the Date of Delivery of the Aircraft Component to Hawker Pacific to
the Date of Completion; except in the case of the Direct Ship Program for which
turntime shall have the meaning set forth in Exhibit "C".
"Used-Serviceable-Zero-Time-Since-Overhauled Parts (other than Life Limited
Parts)" shall mean Serviceable parts that have not been used since their last
Overhaul and which have been restored to a condition meeting the established
overhaul tolerances and limits, which may, upon mutual agreement, be exchanged
for FedEx's like repairable Parts.
"Used Serviceable Life Limited Parts" shall mean Serviceable Parts
designated by the OEM or FedEx as having limited life in use (either in hours,
cycles, or calendar time), which are unused since their last Overhaul or which
are restored to a condition meeting established overhaul tolerances and limits,
and whose installations on Aircraft Components is subject to prior approval by
FedEx.
ARTICLE 2
TERM
SECTION 2.01. TERM. The term of this Agreement shall commence as of
the Effective Date and shall expire on August 31, 2007 (the "Termination Date").
In addition, FedEx shall have the option to extend the term of this Agreement
for an additional five (5) year term by giving Hawker Pacific not less than
thirty (30) days written notice of its intention to so extend.
SECTION 2.02. TERMINATION. During the first year of this Agreement,
the portion of this Agreement related to the Direct Ship Program can be
terminated by FedEx for any reason. As to all other provisions of the
Agreement, FedEx may terminate only for cause. The phrase "for cause" shall
mean that an Event Of Default has occurred and is continuing as set forth in
Article 14 hereof.
ARTICLE 3
SCOPE OF SERVICES
SECTION 3.01. STANDARD SERVICES. A. When requested in writing by
FedEx, Hawker Pacific shall perform the Standard Services and supply Aircraft
Components which have been Functionally Tested, Bench Checked, Inspected and/or
Repaired, Maintained, Modified, or Overhauled by Hawker Pacific in compliance
with the requirements set forth in this Agreement and for the charges set forth
in Exhibit A- "Schedule of Charges and In-House Turntimes". The scope of
Services for fixed prices for Bench Check, Repair, and Overhaul Services, at a
minimum, consists of those tasks and services defined herein within Article 3
and Exhibit "D", and which are included within the applicable FedEx
Specifications in effect at the time of the contract, as the same may be amended
from time to time. Hawker Pacific agrees to maintain and provide adequate
inventories of Aircraft Components as necessary to meet FedEx's requirements to
support the Services as set forth in Exhibit "D".
<PAGE>
8
B. Hawker Pacific shall provide Engineering Services for all
Aircraft Components and Services furnished to FedEx. In addition, Hawker
Pacific agrees to verify the actual Service Bulletin status of each Aircraft
Component sent to Hawker Pacific for Service to determine whether any further
Service to it is necessary because of a revision, amendment, or change in the
Service Bulletin.
C. (i) As more fully set forth in Exhibit "C" herein, at the
direction of FedEx, Hawker Pacific shall store and provide to FedEx the FedEx
Aircraft Components delivered to Hawker Pacific by FedEx for the purpose of
supplying Aircraft Components to FedEx. FedEx shall notify Hawker Pacific
whenever FedEx determines, in its absolute discretion, that it desires to
deliver FedEx Aircraft Components to Hawker Pacific under this Agreement.
Hawker Pacific shall ship such FedEx Aircraft Components to FedEx as necessary
to replace Aircraft Components sent by FedEx to Hawker Pacific for Functional
Test, Inspection, Repair, Maintenance, Modification, or Overhaul. Hawker
Pacific shall ship a Serviceable Aircraft Component to replace an Aircraft
Component sent to Hawker Pacific by FedEx for Repair, Maintenance, Modification,
or Overhaul. If the inventory of FedEx Aircraft Components maintained by Hawker
Pacific is depleted, then Hawker Pacific shall ship a Hawker Pacific Aircraft
Component to FedEx on an exchange basis, if available, or as otherwise agreed by
the Parties in writing. FedEx shall only be charged for the repair work
necessary to return the FedEx Aircraft Component to a Serviceable condition, not
for the cost of the Hawker Pacific Aircraft Component. If the inventory of
Hawker Pacific Aircraft Components also is depleted for such Aircraft Component,
Hawker Pacific shall promptly notify the Representative and send a notice, in
writing. Notwithstanding the foregoing, Hawker Pacific shall be bound by the
Turntimes contained within Exhibit "A".
(ii) If an exchange becomes necessary, Hawker Pacific shall
furnish the Aircraft Component under the terms and conditions contained in this
Agreement. In the event of an exchange of a Hawker Pacific Aircraft Component
(i.e. no FedEx Aircraft Component is available), title to exchanged Aircraft
Component(s) shall pass between Hawker Pacific and FedEx immediately upon
delivery of the FedEx Aircraft Component and the Hawker Pacific Aircraft
Component, respectively, to the other Party. Hawker Pacific Aircraft Components
shall be free of all liens and encumbrances at the time of exchange and Hawker
Pacific shall have all right, title, and lawful authority to provide and
transfer such Hawker Pacific Aircraft Components to FedEx. Hawker Pacific
Aircraft Components used by Hawker Pacific shall be of a component number and
modification status equal to or better than the FedEx Aircraft Component
removed. Any Substitutions must be agreed to by FedEx in writing. Hawker
Pacific shall warrant Hawker Pacific Aircraft Components against defects caused
by faulty workmanship or material and assign to FedEx all assignable warranties,
service life policies, and patent indemnities of manufacturers, suppliers, or
other third-parties.
(iii) Aircraft Components which are Beyond Economical Repair
will not be repaired unless authorized by FedEx after receipt of notification
from Hawker Pacific.
D. FedEx shall prepare and forward to Hawker Pacific an Inventory
Listing identifying (among other things) Inventory, FedEx Company Part Number
("CPN"),
<PAGE>
9
Manufacturer's Part Number ("MPN"), part manufacturer, quantity, and description
at or about the time it delivers Aircraft Components to Hawker Pacific. Hawker
Pacific shall notify FedEx immediately, in writing, in the event that Hawker
Pacific considers any FedEx Aircraft Component delivered to Hawker Pacific to be
inconsistent with the FedEx description thereof.
E. Hawker Pacific shall perform the Services in a good, workmanlike
manner in accordance with the standards of Hawker Pacific's profession and such
other accepted standards as may be applicable to Services of this kind. Hawker
Pacific shall perform the Services using qualified, careful, and efficient
employees, agents, or subcontractors. Hawker Pacific shall perform the Services
in accordance with applicable portions of the Specifications and all current
OEM, CMM (as revised from time to time by FedEx's Engineering Division), all
applicable FAR's and all other requirements of the FAA or any other agency or
governmental body having jurisdiction over the Services. It is a condition of
this Agreement that Hawker Pacific shall meet the technical and operational
requirements of an FAA-certified repair station authorized to perform the
Services and be approved by FedEx's Quality Assurance department. Copies of
revisions to the Specifications and FedEx's supplements to the OEM, CMM will be
promptly provided to Hawker Pacific.
F. Hawker Pacific shall obtain and maintain all permits and licenses
and, at its expense, pay all fees necessary for the lawful and proper
performance of the Services.
G. Hawker Pacific shall keep full and accurate Shop Work Documents
in connection with the performance of the Services, all of which records shall
be open to audit by FedEx or any authorized representative of FedEx during the
performance of the Services and until two (2) years following the expiration or
earlier termination of this Agreement.
H. FedEx may at any time, by written order, (copies of which shall
be promptly provided to Hawker Pacific) make changes within the general scope of
this Agreement in any one or more of the following requirements:
(1) FedEx drawings, designs, or Specifications when the Services are
to be performed for FedEx in accordance with those drawings, designs, or
Specifications, including but not limited to, the Maintenance Program and the
Component Maintenance Manual;
(2) Method of shipping or packing; or
(3) Place of delivery.
If any such change causes an increase or decrease in the cost of, or the
Turntime required for, performance of any part of the Services under this
Agreement, whether or not changed by the Agreement, Hawker Pacific shall be
entitled to an equitable adjustment in the contract price, the delivery
schedule, or both. Failure to agree to any adjustment shall be a dispute
between the Parties. However, nothing in this clause shall excuse Hawker
Pacific from proceeding with the Agreement as ordered by FedEx.
<PAGE>
10
I. Hawker Pacific shall verify that all Parts installed in a landing
gear assembly for DC-10 or MD-11 aircraft shall have not less than [*] cycles
remaining on the Part. The only exception shall be the MLG Torque Links, the
MLG Torque Link Bolts, and the MLG Torque Link Nuts. The MLG Torque Links, the
MLG Torque Link Bolts, and the MLG Torque Link Nuts may be installed with less
than [*] cycles remaining.
J. Hawker Pacific shall dedicate a complete shipset for A300-600
and A310-200 landing gear support as soon as the overhaul program for each
aircraft type begins. Hawker Pacific agrees to acquire an [*] for each
aircraft type.
K. FedEx may have Services on the Equipment performed in-house or by
a third party at any time without liability or obligation to Hawker. It is
FedEx's intent that no more than one (1) ship set of landing gear assemblies per
calendar quarter (except MD-11) will be serviced by a vendor other than Hawker,
exclusive of ship sets upon which Hawker is unable to perform the Services
within the time periods provided herein and subject to the provisions of theis
Agreement.
SECTION 3.02. GUARANTEED TURNTIMES AND PAYMENTS. Hawker Pacific agrees
that it shall maintain the Guaranteed Turntimes for Services to each Aircraft
Component as set forth in Exhibit "A". Such Guaranteed Turntimes shall be
maintained and shall be measured on a monthly, quarterly, and year-to-date basis
and shall be reported to FedEx as required by Section 15.01, except that
Out-of-Scope Services shall not be included in said report.
(a) If Hawker Pacific fails to meet the applicable Guaranteed Turntime for
Services,
1. the following remedial actions shall be taken
Upon THE FIRST OCCURRENCE of a failure to meet the Guaranteed
Turntime, FedEx shall expect the issues causing the problem to be resolved
immediately. Hawker Pacific agrees to provide FedEx with a detailed action plan
within [*] hours of the failure outlining the steps to be taken or
that have been taken to correct the problem and to keep the situation from
occurring again.
Upon THE SECOND OCCURRENCE of a failure to meet the Guaranteed
Turntime within a [*] day period, FedEx expects the issues causing the
problem to be resolved immediately. Hawker Pacific agrees to provide FedEx with
another detailed action plan within [*] hours outlining the steps
to be taken or that have been taken to correct the problem and to keep the
situation from occurring again and Hawker Pacific's Vice-President, Landing Gear
Business Unit, agrees to call FedEx's Manager of Category Management to discuss
the problems.
Upon THE THIRD OCCURRENCE within a [*] day period, FedEx
shall expect the issues causing the problem to be resolved immediately and
shall, at its option, [*].
In addition, FedEx [*]dollars. Additionally, if FedEx must have the
Aircraft Component overhauled
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11
by another party, because of Hawker Pacific's inability to meet FedEx's
required shipping date, Hawker Pacific agrees to reimburse FedEx for the
difference in the actual Repair/Overhaul cost sustained by FedEx and the cost
that Hawker Pacific would have charged for the same Services. All time
periods set forth in the provisions above may be waived or extended at the
sole discretion of FedEx. Any specific waiver or extension shall not imply
that a subsequent waiver or extension has or shall be granted.
(b) If Hawker Pacific fails to meet the applicable Guaranteed Turntime for
the Direct Ship Program,
1. the following remedial actions shall be taken
Upon the FIRST OCCURRENCE of a failure to meet the Guaranteed
Turntime, FedEx shall expect the issues causing the problem to be resolved
immediately. Hawker Pacific agrees to provide FedEx with a detailed action plan
within [*] hours of the failure outlining the steps to be taken or
that have been taken to correct the problem and to keep the situation from
occurring again.
Upon the SECOND OCCURRENCE within a [*] day period, FedEx
shall expect the issues causing the problem to be resolved immediately.
Hawker Pacific agrees to provide FedEx with another detailed action plan
within [*] hours outlining the steps to be taken or that have been taken to
correct the problem and to keep the situation from occurring again and Hawker
Pacific's Vice-President, Landing Gear Business Unit, agrees to call FedEx's
Manager of Category Management to discuss the problems.
Upon the THIRD OCCURRENCE within a [*] day period, FedEx
shall, have the option at its sole discretion, to [*].
In addition, FedEx [*] dollars. Additionally, if FedEx must have the
Aircraft Component overhauled by another party, because of Hawker Pacific's
inability to meet FedEx's required shipping date, Hawker Pacific agrees [*].
All time periods set forth in the provisions above may be waived or extended
at the sole discretion of FedEx. Any specific waiver or extension shall not
imply that a subsequent waiver or extension has or shall be granted.
(c) If for reasons not caused by FedEx or an Excusable Delay, Hawker
Pacific is unable to perform its obligations under this Agreement and FedEx
is faced with an aircraft-on-ground ("AOG") situation by reason of any such
non-performance, then Hawker Pacific [*]. Additionally, Hawker Pacific shall
pay [*] dollars [*]hereof. Hawker Pacific must show proof [*]. Also, in all
AOG situations, FedEx shall have
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12
the right to obtain the Aircraft Component from a third-party and charge Hawker
Pacific the exchange fee.
SECTION 3.03. OUT-OF-SCOPE SERVICES. Any Out-of-Scope Services
related to landing gear shall be specifically described in writing by Hawker
Pacific to FedEx. Prior to beginning the Out-of-Scope Services, FedEx shall
provide written approval of the Out-of Scope Services. Any request by FedEx for
Out-of-Scope Services shall set forth in detail in the appropriate
Specifications. As soon as practical, but no later than fifteen (15) days
following FedEx's request, Hawker Pacific shall notify FedEx of the charges and
Guaranteed Turntime, in accordance with Exhibit "D".
ARTICLE 4
COMPONENTS AND MATERIALS
SECTION 4.01. PROVISION OF PARTS BY HAWKER PACIFIC. Hawker Pacific
shall provide all Direct and Indirect Materials and Parts necessary for the
performance of the Services.
SECTION 4.02. INABILITY TO PROCURE PARTS. If Hawker Pacific is
unable to procure any Direct or Indirect Materials and Parts necessary for the
performance of the Services, Hawker Pacific shall notify FedEx and FedEx shall
use its commercially reasonable efforts to provide the Direct or Indirect
Materials to Hawker Pacific.
SECTION 4.03. FEDEX-SUPPLIED PARTS. FedEx reserves the right, at its
sole discretion, to furnish to Hawker Pacific any nonstandard replacement Parts
or Direct Materials. In the event that FedEx supplies the Parts or Direct
Materials, FedEx will deliver the Parts or Direct Materials to Hawker Pacific
within ten (10) days after FedEx's receipt of written request from Hawker
Pacific, unless the Parties agree otherwise. Hawker Pacific will not charge
FedEx, and FedEx shall have no obligation to pay, any handling, stocking or
other charges associated with the Parts or Direct Materials provided to Hawker
Pacific hereunder.
ARTICLE 5
HANDLING, STORAGE AND SHIPPING OF AIRCRAFT COMPONENTS
SECTION 5.01. STORAGE. Hawker Pacific shall set apart and store
FedEx Aircraft Components in Hawker Pacific's possession at Hawker Pacific's
premises. FedEx personnel shall have access to Hawker Pacific's premises and
FedEx Aircraft Components, at all times and for any purpose, with notification
to Hawker Pacific. Hawker Pacific shall maintain a material management system
adequately staffed with qualified personnel to handle the receiving, inventory,
warehousing, quality control, inspection, storage, transportation, packaging,
insurance and disposition of the Aircraft Components and Parts.
SECTION 5.02. U.C.C. FILINGS. FedEx Aircraft Components shall be
removed from Hawker Pacific's premises only to provide required Services for
FedEx as described in this Agreement or with FedEx's written authorization.
Hawker Pacific shall at all times maintain
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13
adequate records identifying the location of FedEx Aircraft Components. Hawker
Pacific shall keep all FedEx Aircraft Components and all other Aircraft
Components identified as the property of FedEx separate from any other goods or
property owned by or in the possession of Hawker Pacific and shall clearly mark
such goods as the property of FedEx. It shall be FedEx's responsibility (in its
sole discretion) to file any necessary documents in connection with FedEx's
ownership of the FedEx Aircraft Components, including documents required by
Article 9 of the Uniform Commercial Code ("U.C.C.") Hawker Pacific shall
cooperate fully with FedEx, including, without limitation, by executing any
financing statement or other document which FedEx reasonably determines
necessary to evidence FedEx's ownership of the Aircraft Components. FedEx may
require the return of FedEx Aircraft Components to FedEx at any time and Hawker
Pacific shall promptly return such FedEx Aircraft Components to FedEx.
SECTION 5.03. DUTIES OF HAWKER PACIFIC. Hawker Pacific shall store
and maintain FedEx Aircraft Components in accordance with the highest standards
for the storage of Aircraft Components and shall exercise all due care to
prevent damage or deterioration of such FedEx Aircraft Components.
SECTION 5.04. RIGHTS OF INSPECTION. FedEx shall have the right to
inspect the FedEx Aircraft Components at any time., FedEx or its
Representatives, may enter the premises at which FedEx Aircraft Components are
located after FedEx notifies Hawker Pacific.
SECTION 5.05. INVENTORY. After FedEx has delivered its initial
inventory pursuant to Article 3.01.D. above, it shall be the responsibility of
Hawker Pacific to maintain accurate and comprehensive records of all the
inventory of FedEx Aircraft Components. These records must identify (among
other things) Inventory lot number, FedEx Company Part Number ("CPN"), part
manufacturer, quantity, and description and shall be available for inspection by
FedEx at any time. Notwithstanding the foregoing, Hawker Pacific shall further
provide monthly reports to FedEx, to reflect (i) current inventories of FedEx
Aircraft Components and (ii) any changes to such inventories, (E.G., additions,
deletions, parts utilized for each month).
SECTION 5.06. RETURN OF FEDEX'S AIRCRAFT COMPONENTS. Upon expiration
or earlier termination of this Agreement, Hawker Pacific shall return the entire
inventory of FedEx Aircraft Components in Hawker Pacific's possession to FedEx
in the same or better condition than they were when they received and shall
cancel any applicable UCC filing or filings. Hawker Pacific shall be
responsible for any discrepancies in inventories or lost inventories upon
expiration or earlier termination of this Agreement and Hawker Pacific shall
reimburse FedEx in connection with such discrepancies or lost inventories.
FedEx shall reimburse Hawker Pacific for any documented costs associated with
labor and packaging costs to prepare the FedEx Aircraft Components for shipment
to FedEx, except if the termination is caused by a default or breach on the part
of Hawker Pacific.
SECTION 5.07. PACKAGING. Hawker Pacific shall deliver the Aircraft
Components in the same packaging (to the extent possible) in which such Aircraft
Components were shipped to Hawker Pacific by FedEx. Hawker Pacific shall ship
the Aircraft Components in packaging which meets ATA 300 specification
requirements or other packaging as requested by FedEx.
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14
SECTION 5.08. BEYOND ECONOMICAL REPAIR. Hawker Pacific shall tag as
unserviceable, accumulate, and store in a designated holding area all Aircraft
Components which are Beyond Economical Repair for an Inspection and review by
FedEx's Representative. Hawker Pacific shall notify FedEx, in writing, that
such Aircraft Components are being held. FedEx shall determine and inform
Hawker Pacific in writing as to the disposition of such Aircraft Components.
FedEx shall have the option of instructing Hawker Pacific to Repair the Aircraft
Component despite its being BER or sending it back to the Material Review Board
(MRB) or such other disposition as FedEx may determine.
SECTION 5.09. FAA AND REGULATORY COMPLIANCE. (a) In providing the
Services, Hawker Pacific shall utilize only FAA-approved procedures and Aircraft
Components which conform to the FedEx Specifications and all provisions of the
FAA and this Agreement. Hawker Pacific agrees to obtain Aircraft Components
only from sources that can trace their origin to an FAA-approved OEM. If Hawker
Pacific provides Overhaul/Serviceable Aircraft Components, with appropriate
overhaul records meeting the requirements specified in FAR 121.380, they may be
obtained only from FAA-approved repair facilities.
(b) Notwithstanding any other provision, and in addition to
other requirements of applicable law, Hawker Pacific shall:
1. perform all of the Services in compliance with the
requirements of all applicable law and FAR's, the FAA
and any other regulatory agency having jurisdiction
over the Services and Hawker Pacific shall at all times
meet the requirements of an FAA-Certificate Repair
Station authorized to perform the Services and shall
maintain an FAR Part 145 Certificate with applicable
ratings for performance of the Services;
2. certify to FedEx in writing that all completed
Services have been performed in accordance with
applicable FAR's FedEx's Specifications, and this
Agreement;
3. promptly report to FedEx any discrepancies between
FAA requirements and Hawker Pacific operations (where
applicable to the Agreement) as noted or reported to
Hawker Pacific by the FAA;
4. promptly correct any discrepancies or deficiencies
duly reported to FedEx or Hawker Pacific by the FAA in
a manner satisfactory to FedEx, the FAA, and consistent
with the requirements of this Agreement;
5. be responsible for completing and reporting
Malfunction or Defect Reports for all items required
under FAR 121.703 to its FAA
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15
Administrator per FAR 145.63 and shall provide one (1)
copy to FedEx's Maintenance Operations Control Center
("MOCC");
6. provide to FedEx records of all maintenance
transactions, discrepancies, defects, Aircraft
Component and piece part removals, along with the
related teardown findings as required by FedEx's
Specifications;
7. be responsible for preparing FAA Form 337 based
upon FAA-approved data or obtain other FAA approvals as
required for return to service to cover all "major
Repairs" and alterations accomplished during the
Services;
8. prepare FAA Form 337 per FAR Part 43, Appendix "B"
as follows:
(a) Execute FAA Forms 337, at least in duplicate;
(b) Provide a signed copy of the form to FedEx;
and
(c) Forward a copy of the form to the local FAA
District Office within forty-eight (48) hours
(or as agreed to with the local FAA).
9. classify major and minor Repairs in accordance with
the FARs and FedEx's Specifications;
10. maintain the necessary data and records to assist
FedEx in the preparation of alteration and repair
reports required by FAR 121.707;
11. not accomplish any Services or work other than the
Services specifically described in this Agreement
without prior written authorization from FedEx;
12. be responsible for accomplishing all
buy-backs/sign-off's for FedEx's Required Inspection
Items ("RII"s") as identified in FedEx's
Specifications;
13. provide service engineering or quality control
surveillance support to ensure that FedEx's
Specifications and requirements are completely and
accurately adhered to;
14. certify that all Aircraft Components either
utilized in the performance of the Services or provided
to FedEx in accordance with this Agreement are
manufactured in accordance with FAR 21.303 or that such
products qualify under FAR 21.303(b) Items 1,3 or 4.
In the
<PAGE>
16
event that such certification cannot be provided,
Hawker Pacific shall immediately provide FedEx with
written notification and FedEx shall be entitled to any
and all remedies available to it under this Agreement
or pursuant to applicable law; and
15. successfully complete and maintain a FedEx Quality
Audit or receive approval of FedEx's Quality Assurance
department prior to performance of Services.
ARTICLE 6
COSTS, EXPENSES AND PAYMENTS
SECTION 6.01. PRICES FOR REPAIRS, MODIFICATIONS, OVERHAULS AND
MAINTENANCE. All charges related to performing the Services hereunder shall be
as set forth in Exhibit "A" hereto. The Fixed Prices contained in Exhibit "A"
are all inclusive of any and all Services required to a) Bench Test, b) Repair,
and c) Overhaul the associated Aircraft Component. All costs and expenses
incident to or connected with the storage of FedEx Aircraft Components in Hawker
Pacific's possession shall be the sole responsibility of Hawker Pacific and
FedEx shall have no responsibility for the payment of any such costs or
expenses. All transportation of Aircraft Components shall be VIA FedEx service,
or such other carrier designated by FedEx, and the costs of such service will be
the responsibility of FedEx.
SECTION 6.02. TAXES. All taxes, excises, duties, and assessments
(except taxes levied or assessed against Hawker Pacific based upon Hawker
Pacific's gross receipts or net income or taxes imposed on Hawker Pacific for
the privilege of doing business or exercising a franchise) arising out of this
Agreement will be the responsibility of FedEx. FedEx will pay all applicable
taxes when due, unless FedEx elects in good faith to contest their validity or
application, or unless such taxes are levied or assessed upon Hawker Pacific, in
which case Hawker Pacific shall immediately notify FedEx of the levy or
assessment and FedEx will promptly pay such taxes, and, if Fedex requests,
Hawker Pacific will assist FedEx (including, but not limited to, permitting
FedEx to proceed in Hawker Pacific's name where permitted by law) at FedEx's
expense in contesting the validity or application of such taxes. If Hawker
Pacific receives a refund of all or part of any taxes (including interest and
penalties), Hawker Pacific shall promptly remit the refund to FedEx.
SECTION 6.03. INVOICES. A. At or following the Date of Completion,
Hawker Pacific shall submit an invoice to FedEx for all charges associated with
the performance of the Services on the Aircraft Component.
B. The original of each invoice shall be submitted to the following
address:
Federal Express Corporation
Vendor Services
Memphis, Tennessee 38194-2112
Attention: Vendor Services Manager
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17
with a copy to:
Federal Express Corporation
3131 Democrat Road, Building B
Mail Code 5423
Memphis, Tennessee 38118
Attention: Supplier Contract Manager
All invoices submitted by Hawker Pacific to FedEx shall include the
following information (and FedEx shall have no obligation to pay any materially
incomplete or inaccurate invoices):
(i) An identification of the Service Order ("SO") provided by FedEx
authorizing the Services performed by Hawker Pacific;
(ii) A separate identification of the Services performed on the
Aircraft Component, the CPN, the Date of Delivery, and the Date of Completion;
(iii) An identification of all Parts, Indirect Materials, and Direct
Materials used in performing the Services, including part number, serial number
(if serialized) and piece part unit price (if applicable);
(iv) A separate, itemized account of all charges associated with
performance of the Services, including direct labor (not associated with fixed
prices), man-hours expended, materials, fees, travel, the date(s) the Services
were performed, the nature of the Services performed, the location at which the
Services were performed, and FedEx's written authorization therefor; and
(v) Any additional items agreed upon by FedEx and Hawker Pacific
during the term of the Agreement.
C. Payments to Hawker Pacific shall be made in U.S. Dollars, and
shall be paid within thirty (30) days of receipt of Hawker Pacific's accurate
invoice date.
D. No Payment by FedEx shall be deemed an Acceptance of the Services
or any portion of the Services by FedEx. FedEx shall have the right to recover
any amounts previously paid in error or to withhold moneys from future payments
equal to the charges associated with Services not performed in accordance with
this Agreement.
E. FedEx shall pay Hawker Pacific upon Hawker Pacific's submission of
proper invoices, the Prices stipulated in this Agreement for Aircraft Components
Repaired, Overhauled, or Modified, delivered and Accepted, less any deductions
provided in this Agreement. Payment to Hawker Pacific shall be considered as
being made on the day a check or an electronic funds transfer is received.
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18
A prompt payment discount of [*] of the total invoice shall be taken by
FedEx if payment is made within [*] days after receipt of a proper invoice
(the "discount period"). For the purpose of computing the discount, payment
shall be considered to have been made as set forth above. FedEx shall be
entitled to the prompt payment discount even in the following circumstances,
which may cause FedEx to make payment beyond the discount period:
1. if the Price stated on Hawker Pacific's invoice to
FedEx does not match the Price in this Agreement or in any quotation provided by
Hawker Pacific;
2. where Hawker Pacific has billed for extra charges under
a later invoice for Services that should have been included in the original
invoice; and
3. if Hawker Pacific has failed to proved all necessary
paperwork with the invoice.
SECTION 6.04. PRICE ADJUSTMENTS. The Prices contained within
Exhibit "A" shall be firm until [*]. Thereafter the Prices shall be eligible
for adjustments each year. Labor prices and the changes thereto shall be
mutually agreed to and limited to no greater than the annual change posted in
the "Producer Price Index, Table 5, Aircraft parts and auxiliary equipment
SIC 3728, Aircraft Landing Gear for civilian aircraft product code 3728-242".
[*]
% LABOR % MATERIAL
------- ----------
[*] [*]
The application of the escalation for labor shall be to the direct labor
rate only, not to general and administrative ("G&A"), labor overhaul, profit,
which has been defined as [*] of the Fixed Price.
(a) For Standard Replacement Parts, material will be acquisition,
plus [*] not to exceed catalog.
(b) For items other than Standard Replacement Parts, escalation
will be Hawker's acquisition cost plus [*] not to exceed Manufacturer's OEM
Catalog, with a [*] per line item cap to apply to all material mark-ups.
SECTION 6.05. [*]
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19
Any inventory purchased by Hawker Pacific to cover the Direct Ship Program
shall be purchased by FedEx at the end of the one hundred eighty (180) day
notice period. In the event that FedEx removes an Aircraft Component from
the list of Aircraft Components for the specific reason that it is no longer
utilized by FedEx then FedEx and Hawker Pacific [*] if Hawker Pacific chooses
to sell it. [*] FedEx agrees to [*] this Agreement.
ARTICLE 7
SCHEDULING AND FORECASTING
FedEx shall furnish the Schedule to Hawker Pacific throughout the Term of
this Agreement, which schedule shall provide a twelve -month forecasting of
Standard Overhaul Services to FedEx's Aircraft Components based on FedEx's best
estimates. FedEx shall have the right to amend and periodically update the
Schedule and to add any Services to the Schedule at any time. It is expressly
agreed and understood that such Schedule is only an estimate, and FedEx may, in
its sole discretion, delete any item of Services contained in the Schedule, or
delay or cancel Delivery of any Aircraft Component for Services upon written
notice to Hawker Pacific, without obligation or penalty. Hawker Pacific shall
provide FedEx's Representative with a weekly status report of Hawker Pacific's
current Schedule which shall provide current information concerning all of the
Services provided by Hawker Pacific during the week preceding such status
report.
ARTICLE 8
TESTING, ACCEPTANCE, AND DELIVERY
SECTION 8.01. INSPECTIONS AND TESTS. Hawker Pacific shall conduct
Inspections of the Aircraft Component and perform Tests ("Tests") on a
repaired Aircraft Component sufficient to determine whether it conforms with
FedEx's Specifications and this Agreement. FedEx shall have the right to
observe Hawker Pacific's performance of the Inspections and Tests. FedEx's
observance of Hawker Pacific's performance shall not constitute an Acceptance
of the Services, nor shall it relieve Hawker Pacific of its obligations to
render the Services required in this Agreement. Hawker Pacific shall, upon
request by FedEx, make the necessary space available at its facility for a
FedEx on-site Quality Assurance representative. Hawker Pacific shall be
responsible for providing all the suitable, related office furniture and
equipment for such Quality Assurance representative.
SECTION 8.02. ACCEPTANCE AND DELIVERY. Any Acceptance of Services by
FedEx after delivery by Hawker Pacific shall not affect FedEx's right to reject
such Services during the warranty period described herein in the event it
discovers defects not discoverable by the Inspections and Tests performed by
Hawker Pacific prior to delivery. FedEx shall be afforded such additional time
as is necessary to confirm that all defects have been eliminated and that the
Services are acceptable to FedEx and conform to the Agreement and the
Specifications. FedEx
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20
shall promptly notify Hawker Pacific, in writing, when it becomes aware of a
defect in any of the Services. Hawker Pacific shall promptly correct all such
defects.
SECTION 8.03. SHIPMENT REQUIREMENTS. Unless delayed by special
circumstances (i.e., holidays, weekends, etc.), FedEx intends to ship any
Aircraft Component removed from an aircraft so that Hawker Pacific receives the
Aircraft Component in two (2) business days. Hawker Pacific will be responsible
for monitoring compliance with this requirement, following-up if it is aware
that an Aircraft Component is overdue, and reporting on compliance at quarterly
review meetings held by Hawker Pacific and FedEx. All Aircraft Components will
be packaged per ATA Spec 300 or higher level as mutually agreed by the Parties.
Hawker Pacific will ship the Repaired/Overhauled Aircraft Component to any
location as specified by FedEx at FedEx's expense and in accordance with FedEx
shipping instructions. FedEx shall use its best efforts to utilize the same
type of containers in which it received the replacement part.
ARTICLE 9
WARRANTY
SECTION 9.01. WARRANTIES. In addition to the warranties provided
elsewhere in this Agreement, Hawker Pacific warrants that the Aircraft
Components are and shall be free from defects caused by their workmanship or any
materials furnished by Hawker Pacific or its Subcontractors for the respective
periods set forth as follows:
[*] years from the Date of Redelivery or [*] cycles, whichever
comes first.
For [*] year from the Date of Redelivery or [*]cycles, whichever
comes first.
In addition, where an Aircraft Component has been Overhauled by Hawker
Pacific, whether or not defects apply to workmanship introduced during Hawker
Pacific's overhaul work, shall be warranted for [*].
Hawker Pacific shall provide a warranty review and monthly report to
FedEx's Component Hawker Pacific Maintenance Department.
SECTION 9.02. REMEDIES. A. Hawker Pacific's liability under the
warranties set forth herein shall be to replace or Repair, subject to FedEx's
approval, at Hawker Pacific's expense, the Aircraft Component or to correct all
or any portion of the Services. Hawker Pacific shall be responsible for any
reasonable transportation charges incurred by FedEx for return of defective
Aircraft Components, or otherwise in connection with a defect in the Services.
In order to expedite the return to service of defective Aircraft Components
which Hawker Pacific is obligated to Repair or replace pursuant to this
provision, Hawker Pacific and FedEx agree that such Repairs or replacements may
be performed by FedEx or another of FedEx's authorized vendor's , at FedEx's
option.
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21
B. Upon receipt of FedEx's claim of reimbursement with respect to
Repairs performed pursuant to Section 9.02 A., Hawker Pacific shall Promptly
reimburse FedEx for the costs invoiced to FedEx for such Repair or replacement
(excluding any modification kits, parts, and materials which may be furnished to
FedEx at no charge to FedEx), plus any transportation costs incurred in
connection therewith. No such payments shall be due in circumstances where
no-fault is found in the Aircraft Component.
SECTION 9.03. ASSIGNMENT OF WARRANTIES. For all Aircraft Components
which Hawker Pacific re-delivers to FedEx, Hawker Pacific shall assign and
hereby does assign to FedEx any and all warranties to the extent that they are
assignable, service life policies, and patent indemnities of Subcontractors,
and, upon FedEx's request, Hawker Pacific shall give FedEx reasonable assistance
in enforcing FedEx's rights under such warranties, service life policies, and
patent indemnities. Upon FedEx's request, Hawker Pacific shall give notice to
any such Subcontractors of the assignment of such warranties, service life
policies, and patent indemnities.
SECTION 9.04. CLAIMS. The identification and processing of warranty
claims against Subcontractors shall be Hawker Pacific's responsibility. FedEx
shall assist Hawker Pacific in warranty identification, but in no event shall
FedEx's failure to identify warranty claims relieve Hawker pacific of its
responsibility to do so.
SECTION 9.05. MILLENNIUM COMPLIANCE FOR SYSTEMS AND SOFTWARE.
(A) Hawker Pacific represents and warrants that any software which may be
included in any Aircraft Component covered by this Agreement is "Millennium
Compliant" (hereinafter defined) and that the systems it uses in connection with
the provision of any Services are also Millennium Complaint. This warranty
shall be perpetual and survive any other expiration of warranty period or the
termination of this Agreement. For the purposes of this Agreement "Millennium
Complaint" means:
(i) the functions, calculations, and other computing
processes of the software and/or systems (collectively,
the "Process") perform in a consistent manner,
regardless of the date in time on which the Processes
are actually performed and regardless of the date input
to the software, whether before on or after January 1,
2000 and whether or not the dates are affected by
leap years (collectively the "Millennial Dates");
(ii) the software and/or systems accept, calculate, compute,
compare, sort, extract, sequence, and otherwise
processes date inputs and date values (whether forward
or backward), and return, generate process, and display
date output and date values, accurately and in a
consistent manner (without errors or omissions),
regardless of the Millennial Dates used;
(iii) the software and/or systems will function without
interruptions, errors, or omissions caused by the date
in time on which the Process are actually performed or
by the Millennial Dates input to the software;
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(iv) the software and/or systems accept and respond to
two-digit year-date input in a manner that resolve any
ambiguities as to the century in a defined,
predetermined, and appropriate manner; and
(v) the software and/or systems store, process, and display
date information (including, without limitation, in
user interfaces and data fields) in ways that are
unambiguous as to the determination of the century in a
defined, predetermined and appropriate manner.
(B) Hawker Pacific represents and warrants that the software and systems
have been tested by Hawker Pacific to determine that they are Millennium
Compliant. Upon FedEx's written request, Hawker Pacific shall deliver to FedEx
documentation on the method of date manipulation, format of date elements,
changes affecting previous coding practices, examples of systems, as well as any
other related information reasonably requested by FedEx. Upon FedEx's written
request, Hawker Pacific agrees to participate in additional tests of the
software and systems, at no charge to FedEx, to determine Millennium Compliance.
Hawker Pacific shall notify FedEx immediately of the results of any tests or any
claim or other information that indicates the software or the systems are not
Millennium Compliant.
(C) Hawker Pacific further represents and warrants that any modifications
made to the software or the systems to cause it to be Millennium Compliant (as
well as any maintenance services) will not corrupt any data of FedEx or
introduce any viruses into FedEx's network or applications.
(D) In the event that the software or the systems are not in conformity to
the above warranties, Hawker Pacific shall, within thirty (30) days after
notification or discovery thereof and at no expense to FedEx, remedy such
non-conformity or replace such non-conforming software with equivalent
conforming software or remedy such non-conformity in the systems.
ARTICLE 10
TITLE AND RISK OF LOSS
SECTION 10.01. TITLE. FedEx shall retain ownership of FedEx Aircraft
Components and Parts and all title thereto, even though hawker Pacific may have
possession and control of such FedEx Aircraft Components. Hawker Pacific shall
utilize the FedEx Aircraft Components only in accordance with this Agreement and
for the benefit of FedEx.
SECTION 10.02. NO SECURITY INTEREST. Hawker Pacific shall not assign,
dispose of, or grant a security interest or lien in, or execute any financial or
financing statement in favor of any person or entity, other than FedEx, covering
any FedEx Aircraft Component or Part delivered to Hawker Pacific by FedEx for
storage, Repair, Overhaul, Modification, or otherwise. Hawker Pacific shall
notify FedEx, prior to any delivery of FedEx Aircraft Components to Hawker
Pacific, of any security interest or lien in Hawker Pacific's Aircraft
Components. Hawker Pacific represents and warrants that its has not made any
assignments, dispositions, or grants of security
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23
interests in or executed any financing statements that cover or could be deemed
to cover the FedEx Aircraft Components prior to execution of this Agreement.
SECTION 10.03. RISK OF LOSS. Hawker Pacific shall bear the risk of
loss of or damage to the FedEx Aircraft Components in Hawker Pacific's
possession or control on Hawker Pacific's premises or otherwise. FedEx
Aircraft Components in transit from one Party to the other shall be deemed to
be in the possession and control of the Party initiating the shipment and
that Party shall bear the risk of loss with respect to such FedEx Aircraft
Components; provided, however, if such FedEx Aircraft Components shall be
deemed to be in Hawker Pacific's possession and control until released to
FedEx.
ARTICLE 11
INDEMNIFICATION
Hawker Pacific agrees to indemnify, defend and hold harmless FedEx, its
directors, officers, agents, and employees from any and all liabilities,
damages, losses, expenses, demands, claims, suits, or judgments, including
reasonable attorney's fees and expenses, (i) in connection with the death of or
bodily injury to any person and for the loss of, damage to or destruction of any
property in any manner arising out of the negligent or intentional acts or
omissions of Hawker Pacific, its agents, employees, or any person for whose acts
or omissions Hawker Pacific my by responsible, (ii) in connection with the
Failure by Hawker Pacific to comply with any of its obligations pursuant to this
Agreement, or (iii) arising out of the breach by Hawker Pacific of any
covenants, warranties, or representations contained in this Agreement.
FedEx agrees to indemnify, defend and hold harmless Hawker Pacific, its
directors, officers, agents, and employees from any and all liabilities,
damages, losses, expenses, demands, claims, suits, or judgments, including
reasonable attorney's fees and expenses, in connection with the death of or
bodily injury to any person and for the loss of, damage to or destruction of any
property in any manner arising out of the negligent or intentional acts or
omissions of FedEx, its agents, employees, or any person for whose acts or
omissions FedEx may be responsible.
ARTICLE 12
INSURANCE
SECTION 12.01. INSURANCE REQUIRED. Hawker Pacific shall maintain
in full force and effect, at Hawker Pacific's expense, insurance as required
below. Hawker Pacific shall furnish to FedEx a certificate verifying that
such policies of insurance are in full force and effect, and FedEx shall be
given thirty (30) days prior notice by the insurers in the event that either
the insurers or Hawker Pacific desires to cancel or change such policies of
insurance. The certificate of insurance holder shall be in the following
name and address:
Federal Express Corporation
2007 Corporate Avenue
Third Floor
<PAGE>
24
Memphis, Tennessee 38132
Attn: Risk Management
SECTION 12.02. ENDORSEMENTS. Hawker Pacific shall maintain
insurance with the following endorsements:
1. A Comprehensive General Liability Insurance with a combined
single limit of liability of not less than [*] Dollars [*] for Comprehensive
Bodily Injury, Property Damage, Completed Operations Coverage, Premises
Operations Liability, and Contractual Liability;
2. Workmen's Compensation Insurance with statutory limits and
Employer's Liability Insurance in an amount not less than [*] dollars [*]; and
3. All Risks Property Insurance on a replacement cost basis
covering non-owned property in the care, custody, or control of Hawker
Pacific.
ARTICLE 13
FORCE MAJEURE/EXCUSABLE DELAY
SECTION 13.01. FORCE MAJEURE. Hawker Pacific shall be excused from
performance of the Services to the extent that such performance is actually
delayed by an Act of God or by direct acts or omissions of FedEx not caused
by the fault or negligence of Hawker Pacific such as, but not limited to, the
late delivery of the Aircraft Components, acceleration or additions to the
schedule which render Hawker's provision or capacity inadequate, the delivery
of Federal-Supplied Parts in an unusable or unserviceable condition or in
insufficient quantities, or the late delivery of documents such as, but not
limited to, approvals required from FedEx's engineering staff to proceed with
repairs that FedEx is required to furnish prior to the performance of the
Services ("Excusable Delays") and not caused by the fault or negligence of
Hawker Pacific. Local strikes, local lock-outs and non-availability of local
labor will not be considered cause for Excusable Delays. OEM material and
engineering lead-time delays out of Hawker's control will be considered
excusable delays.
SECTION 13.02. NOTICE REQUIRED OF EXCUSABLE DELAY. Hawker Pacific
shall promptly notify FedEx upon the occurrence of an Excusable Delay,
specifying the cause of the delay and estimating the duration of the delay.
Hawker Pacific shall use its best efforts to resume the performance of the
Services as soon as possible following the cessation of an event of Excusable
Delay.
ARTICLE 14
DEFAULTS AND REMEDIES
SECTION 14.01. EVENTS OF DEFAULT. Except as otherwise provided in
this Agreement, if any one or more of the following events of default (the
"Events of Default") shall happen, then this Agreement may, in addition to
the remedies set forth below, be terminated at the option of
<PAGE>
25
the Party not in default, provided that the non-defaulting Party's option to
terminate shall not be deemed an election of remedies:
(i) If either Party shall fail in the performance of any of the
material obligations contained in this Agreement, which failure shall
continue uncured for a period of thirty (30) days following written notice
from the other Party;
(ii) If either Party becomes insolvent; or
(iii) If any representation or warranty made by any Party herein or
made in any statement required hereunder, or in connection with the execution
and delivery of this Agreement proves untrue in any material respect as of
the date of the making thereof.
SECTION 14.02. REMEDIES. Upon the occurrence of an Event of
Default by either Hawker or FedEx, either Party shall be entitled to all
remedies available at law or equity in addition to those set forth in this
Agreement, which remedies shall be cumulative and not exclusive, and which
shall include, but not be limited to, the right to terminate this Agreement
immediately.
ARTICLE 15
INDEPENDENT CONTRACTOR
SECTION 15.01. INDEPENDENT CONTRACTOR. The Parties intend that an
independent contractor relationship will be created by this Agreement. FedEx
is interested only in the results of Hawker Pacific's Services and shall not
exercise any control over the performance of the Services or the means of
their performance. Hawker Pacific shall have full responsibility for the
payment of all Federal, state, and local taxes and contributions, including
penalties and interest, imposed pursuant to unemployment insurance, social
security, income tax, workers' compensation, or any other similar statute,
and Hawker Pacific shall be solely responsible for any liability to
third-parties resulting from the negligent or intentional acts or omissions
of Hawker Pacific, its agents, employees, or Subcontractors arising from or
occurring in the course of the Services.
SECTION 15.02. OUTSIDE SERVICE PROVIDERS. It is a condition of
this Agreement that all Hawker Pacific Outside Services or Sub-Contract
Services shall be performed in compliance with the requirements of this
Agreement, the FAA and any other agency or governmental body having
jurisdiction over the Outside Services or Sub-Contract Services and that at
all times during the term of this Agreement all sub-contractors shall meet
the technical and operation requirements of an FAA certified repair station
authorized to perform such services.
SECTION 15.03. MINORITY AND WOMEN OWNED BUSINESS DEVELOPMENT.
FedEx is dedicated to promoting and assisting in the successful development
of small and disadvantaged business. As such Hawker Pacific shall report on
a quarterly basis all expenditures it makes with minority and women-owned
businesses which are related to FedEx's business. A copy of such report
shall go to Patricia Milan Shores at Federal Express Corporation, 2600
Nonconnah
<PAGE>
26
Boulevard, Suite 307, Memphis, Tennessee 38132. The Parties hereto recognize
that Hawker is a "small" business.
ARTICLE 16
DISCLOSURE OF INFORMATION
Hawker Pacific adknowledges that certain of FedEx's valuable, confidential,
and proprietary information may come into Hawker Pacific's possession.
Accordingly, Hawker Pacific agrees that all such information furnished to Hawker
Pacific by FedEx shall remain the exclusive property of FedEx, and agrees to
hold all information it obtains from or about FedEx in strictest confidence, not
to use such information other than for the performance of the Services, and to
cause any of its employees or Subcontractors to whom such information is
transmitted to be bound to the same obligation of confidentiality to which
Hawker Pacific is bound. Hawker Pacific shall ont communicate FedEx's
information in any form to any third-party without FedEx's prior written
consent. In the event of any violation of this violation of this provision,
FedEx shall be entitled to preliminary and permanent injunctive relief, as well
as an equitable accounting of all profits or benefits arising out of such
violation, which remedy shall be inaddition to any other rights or remedies to
which FedEx may be entitled.
ARTICLE 17
COMPLIANCE WITH LAWS
SECTION 17.01. COMPLIANCE WITH LAWS. Hawker Pacific agrees that it
will comply with all applicable federal, state, and local laws, regulations, and
codes in the performance of this Agreement, including, but not limited to, the
requirements of the FAA. To the extent applicable to Hawker Pacific, it agrees
to comply with the affirmative action requirements applicable to contracts with
government contractors, as set forth in Title 41 of the Code of Federal
Regulations and incorporated into this Agreement by reference.
SECTION 17.02. ANTI-DRUG PROGRAM. Hawker Pacific represents and
warrants that it has in place an Anti-Drug Program for its employees and
Subcontractors if required to do so under Title 14 of the Code of Federal
Regulations and Appendix I thereto. Failure to comply with this provision shall
constitute an event of default and shall entitle FedEx to terminate this
Agreement immediately and to take all other action available to it at law or in
equity.
SECTION 17.03. INDEMNIFICATION. Hawker pacific agrees to indemnify,
defend and hold harmless FedEx, its officers, directors, and employees from and
against any and all claims, losses, demands, actions, administrative
proceedings, liabilities, and judgments, including reasonable attorneys' fees
and expenses, arising from Hawker Pacific's or its subcontractor's failure to
comply with the provisions of this Section.
ARTICLE 18
RECORDS
<PAGE>
27
SECTION 18.01. RECORDS. Hawker pacific shall maintain the following
records on the Services and shall provide to FedEx such records on forms
supplied by FedEx or in a format developed by Hawker Pacific and approved by
FedEx:
A. Tear down findings report;
B. FAA Form 337-including modification status and Airworthiness
Directives compliance; or a serviceable tag and maintenance release completed in
accordance with the applicable FAR's
C. Rotable/repairable parts disposition and usage FAA Form 8130.
D. Test and Inspection data;
E. Photographs of unusual conditions or catastrophic failures;
F. Service Bulletin audit sheet;
G. Workscope sign-off;
H. Record of production man-hours, by task, expended in performance
of Additional Services; and
I. Life limited or items specified by the Engineering Reports.
SECTION 18.02. COPIES OF RECORDS. Hawker Pacific shall supply FedEx
with a copy of the records necessary for the operation and installation of the
Aircraft Components at the Date of Completion of the Services on the Aircraft
Components, including, but not limited to the following, TDR, FAA 8130 Tag.
In addition, Hawker Pacific shall provide to FedEx, Shop Work Documents in
a format acceptable to FedEx.
A. The Shop Work Documents shall include all work steps required to
accomplish the Overhaul and FedEx Engineering Orders and/or Service Bulletin
accomplishment. The Shop Work Documents shall also list the post-disassembly
Inspection results, including all dimensions measured as required by FedEx's
Specification and contain CPN and serial number of Parts included in the
Services.
B. Individual step signoffs and production personnel signature or
operator number stamps are required on all Shop Work Documents. Personnel
initials are unacceptable unless a current historical master signature sheet is
maintained by Hawker Pacific. If signatures are used, signatures must be
legible. Inspection stamps are required. Signatures are unacceptable in lieu
of an inspection stamp.
<PAGE>
28
C. Hawker Pacific shall provide post-Inspection reports that will
include dimensions measured as required by FedEx's Specification as mutually
agreed upon by FedEx and Hawker Pacific.
SECTION 18.03. RECORD RETENTION. Upon termination of this Agreement,
Hawker Pacific shall retain all original records and documents related to the
Services performed under this Agreement and notify FedEx before disposal.
SECTION 18.04. BAILED INVENTORY RECORDS. Record requirements
regarding FedEx inventory components consigned to Hawker Pacific are as follows:
FedEx shall provide a FedEx serviceable parts tag with each Aircraft
Component. FedEx will maintain all supplemental documentation associated with
the aircraft.
ARTICLE 19
GENERAL PROVISIONS
A. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Tennessee.
B. ASSIGNMENT. Neither Party may assign or otherwise transfer its
rights and obligations under this Agreement to any of its subsidiaries, and/or a
successor in interest by merger, operation of law, assignment, purchase or
otherwise, without the prior written agreement of the other Party.
C. EXHIBITS. All exhibits described in this Agreement shall be
deemed to be incorporated in and made a part of this Agreement.
D. MODIFICATION. Except as otherwise provided, this Agreement shall
not be modified except by written agreement signed on behalf of FedEx and Hawker
Pacific by their respective authorized officers. Notwithstanding the foregoing,
FedEx may increase or delete the particlular line items contain in Exhibit A
upon written notification to Hawker Pacific.
E. LEGALITY OF PROVISIONS. If any provision of this Agreement is
held to be invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall in no way be affected or
impaired.
F. WAIVER. The failure of either Party at any time to require
performance by the other of any provision of this Agreement, shall in no way
affect that Party's right to enforce such provision, nor shall the waiver by
either Party of any breach of any provision of the Agreement be taken or held to
be a waiver of any further breach of the same provision or any other provision.
<PAGE>
29
G. DISCLOSURE. Hawker Pacific shall in each instance obtain prior
written approval of FedEx concerning exact text and timing of news releases,
articles, brochures, advertisements, prepared speeches, and other information
releases concerning this Agreement.
H. COMMUNICATIONS. All notices, invoices, approvals, requests, consents,
and other communications given pursuant to this Agreement shall be in writing
and shall be effective when received, if hand delivered, FedEx Express service,
or sent by United States first class mail addressed as follows:
If to FedEx: FedEx Express Corporation
3131 Democrat
Memphis, Tennessee 38194-5423
Attn: CVM Manager
If to Hawker Pacific: Hawker Pacific, Inc.
Attn: Landing Gear Business Unit
Sales Manager
11310 Sherman Way
Sun Valley, California 91352
I. NOTIFICATION OF SHIPMENT. FedEx and Hawker Pacific shall utilize
FedEx Powership for notification of shipment on all Aircraft Components shipped
by FedEx Express service, providing airbill number tracking to the other Party.
J. SECTION HEADINGS. All section headings and captions used in this
Agreement are purely for convenience and shall not affect the interpretation of
this Agreement.
K. ENTIRE AGREEMENT. This Agreement supersedes all prior understandings,
representations, negotiations, and correspondence between the Parties,
constitutes the entire agreement between them with respect to the matters
described, and shall not be modified or affected by any course of dealing,
course of performance, or usage of trade.
L. CHANGE OF CONTROL. In addition to such other rights as FedEx may
have, FedEx shall have the right to terminate this Agreement immediately, in
FedEx's reasonable discretion, upon any change in the majority ownership or
voting control of the capital stock, business, or assets of Hawker Pacific.
Hawker Pacific shall promptly notify FedEx in writing of any such change in
control.
M. FURTHER ASSURANCES. Each Party agrees that it will take such actions,
provide such documents, do such things, and provide such further assurances as
may reasonably be requested by the other Party during the term of this
Agreement. Hawker Pacific agrees to provide to FedEx, from time to time, such
financial information as FedEx may reasonably request to determine Hawker
Pacific's ability to perform its obligations under this Agreement.
<PAGE>
30
N. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each fully executed counterpart shall be deemed an original.
O. SECURITY. FedEx may provide to Hawker Pacific, as FedEx deems
necessary in FedEx's sole discretion, limited and controlled access to FedEx's
E-Mail system and other systems during the term of this Agreement. Hawker
Pacific will comply with all registration requirements and rules of FedEx's Data
Protection Department and all other rules and regulations of FedEx pertaining to
Hawker Pacific's access and use of FedEx's E-Mail and other systems.
ARTICLE 20
DISASTER RECOVERY
Disaster Recovery is an integral part of Hawker Pacific's ability to
perform Services for FedEx, FedEx and Hawker Pacific will jointly develop and
implement a mutually acceptable Disaster Recovery Plan. If no Disaster Recovery
Plan is agreed upon between FedEx and Hawker Pacific prior to July 1, 1998,
FedEx shall have the right in its reasonable discretion to terminate this
Agreement by providing Hawker Pacific notice of its intention to so terminate by
no later than January 31, 1999. FedEx agrees to cooperate with Hawker Pacific in
developing the Disaster Recovery Plan, including meeting with Hawker Pacific's
designated Vice President on or before March 31, 1998 and agreeing to meet with
said Vice President on more than one consecutive days, if necessary, and to
schedule any subsequent meetings.
ARTICLE 21
VALIDITY OF AGREEMENT
This Agreement shall not be valid nor binding upon FedEx unless it shall
have been executed by an officer of FedEx and approved by its Legal Department.
IN WITNESS WHEREOF, the Parties hereto represent and warrant to each that
each has the right and power to enter into this Agreement and have executed this
Agreement as of the date first above written.
HAWKER PACIFIC, INC. FEDERAL EXPRESS CORPORATION
By:/s/ DAVID L. LOKKEN By:/s/[illegible]
------------------------------ ---------------------------------
Title: President/CEO Title: Vice-President
--------------------------- ------------------------------
("Hawker Pacific") ("FedEx")
APPROVED
AS TO LEGAL FORM
SWR 11/20/97
-------------------
LEGAL DEPT.
resubmitted by vendor
<PAGE>
EXHIBIT A
to that certain
Bailment/Service Agreement
between
Federal Express Corporation
("FedEx")
and
Hawker Pacific, Inc.
("Hawker Pacific")
- - -------------------------------------------------------------------------------
SCHEDULE OF CHARGES AND
IN-HOUSE TURN TIMES
<PAGE>
LANDING GEAR PRICING SCHEDULE
[*]
<TABLE>
<CAPTION>
FEC CPN DESCRIPTION [*] PRICE [*] PER LEG TAT
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
B727-161
B27-32-014-01 NLG ASSY $[*]
B27-32-012-01 NLG DRAG BRACE ASSY $[*]
B27-32-013-01 NLG DRAG PIN ASSY $[*]
NLG TOTAL NTE $[*] 50 days
B27-32-017-05 MLG ASSY L/H (161) $[*]
B27-32-015-01 MLG SIDE STRUT ASSY L/H (170) $[*]
B27-32-016-05 MLG FWD TRN BRG ASSY L/H (161) $[*]
65-57153-13 MLG ACTUATOR BEAM L/H $[*]
L/H MLG NTE $[*] 50 days
B27-32-017-06 MLG ASSY R/H (161) $[*]
B27-32-015-02 MLG SIDE STRUT ASSY R/H (170) $[*]
B27-32-016-06 MLG FWD TRN BRG ASSY R/H (161) $[*]
65-57153-13 MLG ACTUATOR BEAM R/H $[*]
R/H MLG NTE $[*] 50 days
B727-161 [*] $[*]
--------
</TABLE>
<TABLE>
<CAPTION>
FEC CPN DESCRIPTION [*] PRICE [*] PER LEG TAT
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
B727-170
B27-32-014-01 NLG ASSY $[*]
B27-32-012-01 NLG DRAG BRACE ASSY $[*]
B27-32-013-01 NLG DRAG PIN ASSY $[*]
NLG TOTAL NTE $[*] 50 days
B27-32-017-01 MLG ASSY L/H (170) $[*]
B27-32-015-01 MLG SIDE STRUT ASSY L/H (170) $[*]
B27-32-016-01 MLG FWD TRN BRG ASSY L/H (170) $[*]
65-57153-13 MLG ACTUATOR BEAM L/H $[*]
L/H MLG NTE $[*] 50 days
B27-32-017-02 MLG ASSY R/H (161) $[*]
B27-32-015-02 MLG SIDE STRUT ASSY R/H (170) $[*]
B27-32-016-02 MLG FWD TRN BRG ASSY R/H (170) $[*]
65-57153-13 MLG ACTUATOR BEAM R/H $[*]
R/H MLG NTE $[*] 50 days
B727-170 [*] $[*]
--------
</TABLE>
Page 1 of 7
<PAGE>
LANDING GEAR PRICING SCHEDULE
[*]
<TABLE>
<CAPTION>
FEC CPN DESCRIPTION [*] PRICE [*] PER LEG TAT
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
B727-191
B27-32-014-01 NLG ASSY $[*]
B27-32-012-01 NLG DRAG BRACE ASSY $[*]
B27-32-013-01 NLG DRAG PIN ASSY $[*]
NLG TOTAL NTE $[*] 50 days
B27-32-017-07 MLG ASSY L/H (191) $[*]
B27-32-015-05 MLG SIDE STRUT ASSY L/H (191) $[*]
B27-32-016-05 MLG FWD TRN BRG ASSY L/H (161) $[*]
65-57153-13 MLG ACTUATOR BEAM L/H $[*]
L/H MLG NTE $[*] 50 days
B27-32-017-08 MLG ASSY R/H (191) $[*]
B27-32-015-06 MLG SIDE STRUT ASSY R/H (191) $[*]
B27-32-016-06 MLG FWD TRN BRG ASSY R/H (161) $[*]
65-57153-13 MLG ACTUATOR BEAM R/H $[*]
R/H MLG NTE $[*] 50 days
B727-191 [*] $[*]
--------
</TABLE>
<TABLE>
<CAPTION>
FEC CPN DESCRIPTION [*] PRICE [*] PER LEG TAT
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
B727-210
B27-32-014-01 NLG ASSY $[*]
B27-32-012-01 NLG DRAG BRACE ASSY $[*]
B27-32-013-01 NLG DRAG PIN ASSY $[*]
NLG TOTAL NTE $[*] 50 days
B27-32-017-03 MLG ASSY L/H (210) $[*]
B27-32-015-03 MLG SIDE STRUT ASSY R/H (210) $[*]
B27-32-016-03 MLG FWD TRN BRG ASSY L/H (210) $[*]
65-57153-13 MLG ACTUATOR BEAM L/H $[*]
L/H MLG NTE $[*] 50 days
B27-32-017-04 MLG ASSY R/H (210) $[*]
B27-32-015-04 MLG SIDE STRUT ASSY R/H (210) $[*]
B27-32-016-04 MLG FWD TRN BRG ASSY R/H (210) $[*]
65-57153-13 MLG ACTUATOR BEAM R/H $[*]
R/H MLG NTE $[*] 50 days
B727-210 [*] $[*]
--------
</TABLE>
Page 2 of 7
<PAGE>
LANDING GEAR PRICING SCHEDULE
[*]
<TABLE>
<CAPTION>
FEC CPN DESCRIPTION [*] PRICE [*] PER LEG TAT
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DC10-10/MD10
D10-32-005-01 NLG ASSY $[*]
D10-32-006-01 NLG DRAG BRACE ASSY $[*]
NLG TOTAL NTE $[*] 65 days
D10-32-001-01 MLG ASSY L/H $[*]
D10-32-002-01 MLG SIDE STRUT ASSY L/H $[*]
L/H MLG NTE $[*] 65 days
D10-32-001-02 MLG ASSY R/H $[*]
D10-32-002-02 MLG SIDE STRUT ASSY R/H $[*]
R/H MLG NTE $[*] 65 days
[*] $[*]
--------
</TABLE>
<TABLE>
<CAPTION>
FEC CPN DESCRIPTION [*] PRICE [*] PER LEG TAT
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DC10-30
D10-32-005-02 NLG ASSY $[*]
D10-32-006-02 NLG DRAG BRACE ASSY $[*]
NLG TOTAL NTE $[*] 65 days
D10-32-001-03 MLG ASSY L/H $[*]
D10-32-002-03 MLG SIDE STRUT ASSY L/H $[*]
L/H MLG NTE $[*] 65 days
D10-32-001-04 MLG ASSY R/H $[*]
D10-32-002-04 MLG SIDE STRUT ASSY R/H $[*]
R/H MLG NTE $[*] 65 days
D10-32-003-01 CLG ASSY $[*]
D10-32-004-01 CLS DRAG BRACE ASSY $[*]
R/H MLG NTE $[*] 65 days
[*] $[*]
--------
</TABLE>
Page 3 of 7
<PAGE>
LANDING GEAR PRICING SCHEDULE
[*]
<TABLE>
<CAPTION>
FEC CPN DESCRIPTION [*] PRICE [*] PER LEG TAT
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MD11
D10-32-005-() NLG ASSY $[*]
D10-32-006-() NLG DRAG BRACE ASSY $[*]
NLG TOTAL NTE $[*] Not Applicable
D10-32-001-() MLG ASSY L/H $[*]
D10-32-002-() MLG SIDE STRUT ASSY L/H $[*]
L/H MLG NTE $[*] Not Applicable
D10-32-001-() MLG ASSY R/H $[*]
D10-32-002-() MLG SIDE STRUT ASSY R/H $[*]
R/H MLG NTE $[*] Not Applicable
D10-32-003-() CLG ASSY $[*]
D10-32-004-() CLG DRAG BRACE ASSY $[*]
CLG NTE $[*] Not Applicable
[*] $[*]
--------
</TABLE>
<TABLE>
<CAPTION>
MD11 EXCHANGE FEE PRICE SCHEDULE
FEC CPN DESCRIPTION EXCHANGE EXCH PER LEG
- - ----------------------------------------------------------------------------
<S> <C> <C> <C>
MD11
D10-32-005-() NLG ASSY $[*]
D10-32-006-() NLG DRAG BRACE ASSY $[*]
NLG EXCHANGE FEE $[*]
D10-32-001-() MLG ASSY L/H $[*]
D10-32-002-() MLG SIDE STRUT ASSY L/H $[*]
L/H MLG EXCHANGE FEE $[*]
D10-32-001-() MLG ASSY R/H $[*]
D10-32-002-() MLG SIDE STRUT ASSY R/H $[*]
R/H MLG EXCHANGE FEE $[*]
D10-32-003-() CLG ASSY $[*]
D10-32-004-() CLG DRAG BRACE ASSY $[*]
CLG EXCHANGE FEE $[*]
SHIPSET EXCHANGE FEE $[*]
-------
</TABLE>
* FEC CPN's shown are derived from FEC Engineering "D10" Landing Gear Drawings
and are used here for reference only.
Correct part numbers will be inserted when issued by FEC Engineering.
Page 4 of 7
<PAGE>
LANDING GEAR PRICING SCHEDULE
[*]
<TABLE>
<CAPTION>
FEC CPN DESCRIPTION [*] PRICE [*] PER LEG TAT
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A300-600
C23137XXX NLG ASSY $[*]
C23109XXX NLG TELESCOPIC STRUT $[*]
NLG TOTAL NTE $[*] Not Applicable
D22497XXX MLG ASSY L/H $[*]
C23111XXX MLG BRACE ASSY L/H $[*]
L/H MLG NTE $[*] Not Applicable
D22498XXX MLG ASSY R/H $[*]
D23112XXX MLG BRACE ASSY R/H $[*]
R/H MLG NTE $[*] Not Applicable
[*] $[*]
--------
</TABLE>
<TABLE>
<CAPTION>
A300-600 EXCHANGE FEE PRICE SCHEDULE
FEC CPN DESCRIPTION EXCHANGE EXCH PER LEG
- - ----------------------------------------------------------------------------
<S> <C> <C> <C>
A300-600
C23137XXX NLG ASSY $[*]
C23109XXX NLG DRAG BRACE ASSY $[*]
NLG EXCHANGE FEE $[*]
D22497XXX MLG ASSY L/H $[*]
C23111XXX MLG BRACE ASSY L/H $[*]
L/H MLG EXCHANGE FEE $[*]
D22498XXX MLG ASSY R/H $[*]
D23112XXX MLG BRACE ASSY R/H $[*]
R/H MLG EXCHANGE FEE $[*]
SHIPSET EXCHANGE FEE $[*]
--------
</TABLE>
*FEC CPN's shown are listed as OEM part numbers for reference only.
Correct part numbers will be inserted when issued by FEC Engineering.
Page 5 of 7
<PAGE>
LANDING GEAR PRICING SCHEDULE
[*]
<TABLE>
<CAPTION>
FEC CPN DESCRIPTION NTE PRICE NTE PER LEG TAT
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A310-200
C23137XXX NLG ASSY $[*]
C23109XXX NLG TELESCOPIC STRUT $[*]
NLG TOTAL NTE $[*] Not Applicable
D22121XXX MLG ASSY L/H $[*]
D22129XXX MLG BRACE ASSY L/H $[*]
L/H MLG NTE $[*] Not Applicable
D22122XXX MLG ASSY R/H $[*]
D22130XXX MLG BRACE ASSY R/H $[*]
R/H MLG NTE $[*] Not Applicable
[*] $[*]
--------
</TABLE>
<TABLE>
<CAPTION>
A310-200 EXCHANGE FEE PRICE SCHEDULE
FEC CPN DESCRIPTION EXCHANGE EXCH PER LEG
- - ----------------------------------------------------------------------------
<S> <C> <C> <C>
A310-200
C23137XXX NLG ASSY $[*]
C23109XXX NLG DRAG BRACE ASSY $[*]
NLG EXCHANGE FEE $[*]
D22497XXX MLG ASSY L/H $[*]
C23111XXX MLG BRACE ASSY L/H $[*]
L/H MLG EXCHANGE FEE $[*]
D22498XXX MLG ASSY R/H $[*]
D23112XXX MLG BRACE ASSY R/H $[*]
R/H MLG EXCHANGE FEE $[*]
SHIPSET EXCHANGE FEE $[*]
--------
</TABLE>
* FEC CPN's shown are listed as OEM part numbers for reference only.
Correct part numbers will be inserted when issued by FEC Engineering.
Page 6 of 7
<PAGE>
LANDING GEAR PRICING SCHEDULE
[*]
Conditions to the [*] for each Landing Gear Pricing Schedule are
provided as follows:
1) [*] pricing shown in each schedule includes all labor, all bushings and all
materials with a manufacturer's list price of less than:
$[*] for 727 Aircraft Components
$[*] for DC10 and MD10 Aircraft Components
$[*] for MD11 Aircraft Components
$[*] for A300 Aircraft Components
$[*] for A310 Aircraft Components
2) [*] or [*] will be [*] for [*] for [*] respectively.
3) Material pricing for materials invoiced above the [*] price for all
aircraft types, will be based on acquisition price. Material markup will
be [*] of [*] price, not to exceed $[*] for any one line item.
Page 7 of 7
<PAGE>
EXHIBIT B
to that certain
Bailment/Service Agreement
between
Federal Express Corporation
("FedEx")
and
Hawker Pacific, Inc.
("Hawker Pacific")
FEDEX AIRCRAFT COMPONENTS LIST TO BE
BAILED TO HAWKER PACIFIC
- - -------------------------------------------------------------------------------
Exhibit "B" is dated as of September 1, 1997. On or before January
15, 1998, the column entitled FedEx Inventory Transfer Quantity will be updated
to reflect the actual amounts of Aircraft Components Bailed to Hawker Pacific.
The Parties agree that a new Exhibit "B" may be substituted at that time without
changing any other provisions of the Agreement.
<PAGE>
FEDEX INVENTORY TO BE BAILED TO HAWKER PACIFIC, INC. EXHIBIT "B"
95-0102-002
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------
FEDEX
INVENTORY
ITEM FEDEX P/N MFG. P/N KEYWORD DESCRIPTION BAILMENT
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------
1 3200002 D10-32-005-01 NLG ASSY DC10-10 ACG7306-5535 1
- - ----------------------------------------------------------------------------------------------------------
2 3200004 65-57153-13 ASSY ACTUATOR BEAM 12
- - ----------------------------------------------------------------------------------------------------------
3 3200018 D10-32-002-01 BRACE DC10-10 LH MLG SIDE 1
- - ----------------------------------------------------------------------------------------------------------
4 3200042 D10-32-003-01 GEAR AY DC10-30 CENTER LANDING 1
- - ----------------------------------------------------------------------------------------------------------
5 3200046 D10-32-004-01 KIT ASSY DC10-30 CLG DRAG BRACE 1
- - ----------------------------------------------------------------------------------------------------------
6 3200121 B27-32-017-03 GEAR AY LH MAIN LANDING (210,000) 3
- - ----------------------------------------------------------------------------------------------------------
7 3200122 B27-32-017-01 GEAR AY LH MAIN LANDING (170,000) 3
- - ----------------------------------------------------------------------------------------------------------
8 3200123 D10-32-001-03 GEAR AY DC10-30 LH MAIN LANDING 1
- - ----------------------------------------------------------------------------------------------------------
9 3200124 B27-32-015-03 STRUT AY -200 LH MLG SIDE(210,000) 4
- - ----------------------------------------------------------------------------------------------------------
10 3200125 B27-32-016-05 SUPPORT LH MLG TRUNION 1
- - ----------------------------------------------------------------------------------------------------------
11 3200126 B27-32-016-01 SUPPORT LH MLG TRUNION 3
- - ----------------------------------------------------------------------------------------------------------
12 3200127 B27-32-016-03 SUPPORT LH MLG TRUNION 4
- - ----------------------------------------------------------------------------------------------------------
13 3200129 B27-32-017-05 GEAR AY LH-MAIN LANDING (161,000) 3
- - ----------------------------------------------------------------------------------------------------------
14 3200134 D10-32-002-03 BRACE DC10-30 LH MLG SIDE 1
- - ----------------------------------------------------------------------------------------------------------
15 3200141 ARG7322-1 BRACE LOWER SIDE 1
- - ----------------------------------------------------------------------------------------------------------
16 3200169 D10-32-001-01 GEAR AY DC10-10 LH MAIN LANDING 1
- - ----------------------------------------------------------------------------------------------------------
17 3200170 D10-32-001-02 GEAR AY DC10-10 RH MAIN LANDING 1
- - ----------------------------------------------------------------------------------------------------------
18 3200174 AYG750-5505 VALVE MLG CONTROL 1
- - ----------------------------------------------------------------------------------------------------------
19 3200185 B27-32-015-01 STRUT AY 727-100 MLG LH SIDE 4
- - ----------------------------------------------------------------------------------------------------------
20 3200191 ARG7025-5523 CYLINDER MLG RETRACT 2
- - ----------------------------------------------------------------------------------------------------------
21 3200193 B27-32-015-02 STRUT AY 727-100 MLG RH SIDE 4
- - ----------------------------------------------------------------------------------------------------------
22 3200195 65-57904-16 LINK AY MLG RH TRUNNION 1
- - ----------------------------------------------------------------------------------------------------------
23 3200206 ARG7076-507 CYLINDER MLG TRIM 2
- - ----------------------------------------------------------------------------------------------------------
24 3200206 ARG7076-5509 CYLINDER MLG TRIM
- - ----------------------------------------------------------------------------------------------------------
25 3200206 ARG7076-5511 CYLINDER MLG TRIM
- - ----------------------------------------------------------------------------------------------------------
26 3200208 65-84405-6 SUPPORT MLG TRUNION 6
- - ----------------------------------------------------------------------------------------------------------
27 3200232 B27-32-012-01 BRACE AY NLG DRAG 1
- - ----------------------------------------------------------------------------------------------------------
28 3200233 D10-32-006-01 BRACE DC10-10 NLG DRAG 1
- - ----------------------------------------------------------------------------------------------------------
29 3200234 D10-32-006-02 KIT ASSY DC10-30 NLG DRAG BRACE 1
- - ----------------------------------------------------------------------------------------------------------
30 3200236 B27-32-013-01 PIN ASSY NLG DRAG BRACE 3
- - ----------------------------------------------------------------------------------------------------------
31 3200256 ACG7144-5501 CYLINDER NLG STEERING 1
- - ----------------------------------------------------------------------------------------------------------
32 3200256 ACG7144-5503 CYLINDER NLG STEERING
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 1
<PAGE>
FEDEX INVENTORY TO BE BAILED TO HAWKER PACIFIC, INC. EXHIBIT "B"
95-0102-002
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------
FEDEX
INVENTORY
ITEM FEDEX P/N MFG. P/N KEYWORD DESCRIPTION BAILMENT
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------
33 3200256 ACG7144-5505 CYLINDER NLG STEERING
- - ----------------------------------------------------------------------------------------------------------
34 3200256 AGC7144-5509 CYLINDER NLG STEERING
- - ----------------------------------------------------------------------------------------------------------
35 3200256 ACG7439-5501 CYLINDER NLG STEERING
- - ----------------------------------------------------------------------------------------------------------
36 3200256 ACG7429-5503 CYLINDER NLG STEERING
- - ----------------------------------------------------------------------------------------------------------
37 3200267 B27-32-014-01 ASSY NOSE GEAR 5
- - ----------------------------------------------------------------------------------------------------------
38 3200271 ACG7330-5501 CYLINDER NOSE GEAR LOCK 1
- - ----------------------------------------------------------------------------------------------------------
39 3200274 D10-32-005-02 GEAR AY DC10-30 NOSE LANDING 1
- - ----------------------------------------------------------------------------------------------------------
40 3200276 ACG7440-5501 CYLINDER NOSE STEERING 1
- - ----------------------------------------------------------------------------------------------------------
41 3200276 ACG7440-5503 CYLINDER NOSE STEERING
- - ----------------------------------------------------------------------------------------------------------
42 3200297 B27-32-017-02 GEAR AY RH MAIN LANDING (170,000) 3
- - ----------------------------------------------------------------------------------------------------------
43 3200298 B27-32-017-04 GEAR AY RH MAIN LANDING (210,000) 3
- - ----------------------------------------------------------------------------------------------------------
44 3200299 D10-32-001-04 GEAR AY DC10-30 RH MAIN LANDING 1
- - ----------------------------------------------------------------------------------------------------------
45 3200300 B27-32-017-06 GEAR AY RH MAIN LANDING (161,000) 3
- - ----------------------------------------------------------------------------------------------------------
46 3200301 65-17653-16 STRUT AY RH MLG DRAG 1
- - ----------------------------------------------------------------------------------------------------------
47 3200302 B27-32-015-04 STRUT AY -200 RH MLG SIDE(210,000) 4
- - ----------------------------------------------------------------------------------------------------------
48 3200303 B27-32-016-04 SUPPORT RH MLG TRUNION 4
- - ----------------------------------------------------------------------------------------------------------
49 3200304 B27-32-016-06 SUPPORT RH MLG TRUNION 1
- - ----------------------------------------------------------------------------------------------------------
50 3200305 B27-32-016-02 SUPPORT RH MLG TRUNION 3
- - ----------------------------------------------------------------------------------------------------------
51 3200307 D10-32-002-04 BRACE DC10-30 RH MLG SIDE 1
- - ----------------------------------------------------------------------------------------------------------
52 3200322 D10-32-002-02 BRACE DC10-10 RH MLG SIDE 1
- - ----------------------------------------------------------------------------------------------------------
53 3200325 ACG7011-1 COLLAR STEERING 1
- - ----------------------------------------------------------------------------------------------------------
54 3200337 ARG7007-501 LINK TORQUE 1
- - ----------------------------------------------------------------------------------------------------------
55 3200345 65-17654-37 LINK AY TRUNNION LH MLG(161/170) 1
- - ----------------------------------------------------------------------------------------------------------
56 3200421 65-57904-29 LINK ASY TRUNION LINK -200 1
- - ----------------------------------------------------------------------------------------------------------
57 3200433 ACG7348-1 DRAG LIN NLG UPPER 1
- - ----------------------------------------------------------------------------------------------------------
58 3210449 ARG7013-517 BRACE AS MLG DRAG STRUT 10/10 1
- - ----------------------------------------------------------------------------------------------------------
59 3210759 65-17653-15 STRUT AY LH MLG DRAG 1
- - ----------------------------------------------------------------------------------------------------------
60 3211157 C23113010 BRACE LH MLG STRUT 2
- - ----------------------------------------------------------------------------------------------------------
61 3211158 C23114010 BRACE RH MLG STRUT 2
- - ----------------------------------------------------------------------------------------------------------
62 3211159 C23115010 LOCK LH STRUT BRACE LINK 1
- - ----------------------------------------------------------------------------------------------------------
63 3211160 C23116010 LOCK RH STRUT BRACE LINK 1
- - ----------------------------------------------------------------------------------------------------------
64 3211253 D22655000-2 DAMPER MLG BOGIE BEAM PITCH 1
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 2
<PAGE>
FEDEX INVENTORY TO BE BAILED TO HAWKER PACIFIC, INC. EXHIBIT "B"
95-0102-002
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------
FEDEX
INVENTORY
ITEM FEDEX P/N MFG. P/N KEYWORD DESCRIPTION BAILMENT
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------
65 3211272 A25452001-3 UPLOCK RH MAIN LANDING GEAR 2
- - ----------------------------------------------------------------------------------------------------------
66 3211273 A25451001-3 UPLOCK LH MAIN LANDING GEAR 2
- - ----------------------------------------------------------------------------------------------------------
67 3211274 A25421001-2 UPLOCK NOSE LANDING GEAR 2
- - ----------------------------------------------------------------------------------------------------------
68 3211524 B27-32-015-05 STRUT AY -200 LH MLG SIDE(191,000) 1
- - ----------------------------------------------------------------------------------------------------------
69 3211525 B27-32-015-06 STRUT AY -200 RH MLG SIDE(191,000) 1
- - ----------------------------------------------------------------------------------------------------------
70 3212584 C23036-4 STRUT A310 NLG TELESCOPIC (T) 1
- - ----------------------------------------------------------------------------------------------------------
71 3212768 C23037-402 STRUT AY A310 ONLY NLG TELESCOPIC 1
- - ----------------------------------------------------------------------------------------------------------
72 321769 C23110-108 STRUT NLG TELESCOPIC 2
- - ----------------------------------------------------------------------------------------------------------
73 3212773 C23109-1109 STRUT AY NLG TELESCOPIC 1
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 3
<PAGE>
EXHIBIT C
to that certain
Bailment/Service Agreement
between
Federal Express Corporation
("FedEx")
and
Hawker Pacific, Inc.
("Hawker Pacific")
- - -------------------------------------------------------------------------------
In accordance with the Bailment and Services Agreement dated as of
September 1, 1997 between FedEx and Hawker Pacific, Hawker Pacific shall comply
with the following in providing the Services:
BAILMENT PROGRAM
1. Hawker Pacific shall provide a Serviceable Aircraft Component upon FedEx's
request to replace an Aircraft Component sent to Hawker Pacific by FedEx for
services. To the extent possible, Hawker Pacific shall ship a Serviceable
Component "same day" to a designated FedEx location provided Hawker Pacific is
notified prior to 5:00 p.m. Notification after 5:00 p.m. will result in shipment
the following business day. For all standard orders received after 5:00 p.m.,
Hawker Pacific shall, to the extent possible, create an airbill in the FedEx
system and shall provide a serviceable Component for shipment the next day.
EXCEPTION: For items requiring FedEx "heavyweight shipment", as defined
within the FedEx Service Guide, or which requires shipment "over road",
Hawker Pacific shall have [*] hours to make the Component available for
shipment from the time it receives notification from FedEx.
2. Hawker Pacific shall maintain and perform all Services necessary to
maintain the inventory of FedEx Components delivered to Hawker Pacific to
support FedEx.
3. Hawker Pacific shall notify FedEx promptly if the inventory of FedEx
Aircraft Components appears to be inadequate to support Hawker Pacific's ability
to meet same or next day shipping of a Serviceable Component requirement.
4. Hawker Pacific must maintain the FedEx serviceable part tags as required by
law on all FedEx Aircraft Components within FedEx's inventory pool.
5. Hawker Pacific shall obtain prior FedEx approval before substituting any
serial number (from original received unit) for a Serviceable Component.
<PAGE>
6. Hawker Pacific shall provide [*] hour, [*] day a week emergency service
to FedEx. The maximum acceptable response time to ship Aircraft on Ground
("AOG") orders shall be no more than [*] hours after receipt of an order from
FedEx. Transportation arrangements will be the responsibility of Hawker
Pacific per AOG desk instructions. Transportation charges for AOG service
will the responsibility of FedEx.
DIRECT SHIP PROGRAM
INSTALLATION/REPLENISHMENT PROCESS
In order to initiate the process by which Hawker Pacific directly ships a
piece of Equipment to FedEx, the following steps must take place:
FEDEX 1. Completes the Install Transaction Form in MAXI-MERLIN. This
PERSONNEL will generate an Automatic Replenishment order at Hawker
Pacific's facility.
HAWKER PACIFIC 2. A Pick Ticket prints at Hawker Pacific's facility.
3. If Notification is received by Hawker Pacific on or before 5:00
p.m. (Local), Hawker Pacific ships the Consigned Equipment or
Hawker Pacific Pool Equipment the same day.
4. If Notification is received by Hawker Pacific after 5:00 p.m.
(Local), Hawker Pacific will ship Consigned Equipment or Hawker
Pacific Pool Equipment the following Working Day.
5. If replacement stock is available, pulls unit from stock
according to Pick ticket requirement and verifies manufacture
part number and serial number on unit against serviceable tag.
5.1 If no discrepancy, completes transaction MSIS.
5.2 If a discrepancy is found, contacts the FedEx Program
Manager immediately by fax or Email. FedEx Program Manager
shall
a. report the discrepancy to FedEx's Asset Management
Department or its successor;
b. instruct Hawker Pacific to ship an alternative
Consigned Equipment (if one is available);
c. work with Hawker Pacific, Asset Management, to resolve
discrepancy.
<PAGE>
6. Ships replacement unit with proper documentation via FedEx
Services.
7. If there is no Consigned Equipment available and/or Hawker
Pacific elects not to provide Equipment it described in the
Agreement in Section ___, the following steps must take
place:
7.1 Hawker Pacific completes transaction known as MSIS in
the MAXI-MERLIN System, Enters Pick Ticket Document
Number, Enters Quantity of Zero, Press PF4.
NOTE: This will put the unit on backorder and set the NIS
(Not In Stock) flag.
FedEx shall receive replacement unit and verifies
documents and part are correct.
8.1 Completes Receipt Transaction (MSTR)
<PAGE>
EXHIBIT D
TASKS AND SERVICES
I. STANDARD BENCH CHECK, REPAIR, AND OVERHAUL SERVICES, OUT-OF-SCOPE SERVICES,
AND MODIFICATIONS:
A. When requested in writing by FedEx, Hawker Pacific shall, for the
charges set forth on Exhibit A, provide labor, facilities, parts, Indirect
Materials, inspection, tools and all other items or services necessary to
perform the Services.
B. Hawker Pacific will be the primary Service provider for FedEx's Aircraft
Components listed in Exhibit A, excluding those for MD-11 aircraft.
C. Bench Check, Repair, and Overhaul Services related to Aircraft
Components shall, at a minimum, consist of:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------
BENCH CHECK REPAIR OVERHAUL
<S> <C> <C> <C> <C> <C>
/ / Perform a detailed test of / / Tear down Aircraft / / Teardown Aircraft
the Aircraft Component Component Component
according to the OEM's / / Inspect Aircraft / / Inspect Aircraft
recommended procedure Component Component
and FedEx's / / Replace only the defective / / Replace all Components as
Specifications. Components necessary to required by OEM and
/ / If the Aircraft Component return Aircraft Component FedEx's Specifications
successfully completes the to airworthy status. Aircraft with new Components
required test, issue Component Time Since meeting FedEx's
airworthiness certificate for Overhaul (TSO) will not Specifications.
the Aircraft Component be returned to zero time. / / Reassemble Aircraft
/ / If the Aircraft Component / / If the Aircraft Component Component.
does not successfully passes bench check and / / Bench check and test.
complete the required test, test, airworthiness / / After successfully
airworthiness certificate is certificate will be issued completing the overhaul,
NOT issued and an / / If the Aircraft Component the Aircraft Component
unserviceable tag is does not successfully Time Since Overhaul
attached. complete bench check and (TSO) may be returned to
/ / Unserviceable Aircraft test, an airworthiness "Zero".
Component shall be certificate is NOT issued and / / Issue airworthiness
- - -------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------
<PAGE>
- - -------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------
serviced or handled further an unserviceable tag is certificate.
in accordance with written attached to Aircraft
instructions provided by Component stating the
FedEx. reason for failure.
/ / Unserviceable Aircraft
Component are
dispositioned per FedEx
instructions.
/ / When a repaired Aircraft
Component passes a bench
check, a "Maintenance
Release Tag" is issued
attesting to its'
airworthiness.
- - -------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------
</TABLE>
II. HAWKER PACIFIC EXCHANGE PROGRAM.
A. Aircraft Components shall be a part of the Bailment Program and the
Direct Ship Programs described in Exhibit "C".
B. The FedEx line station requiring an exchange Aircraft Component will
request the exchange in writing by issuance of a Service Order to the
appropriate Hawker Pacific facility.
C. The Hawker Pacific will ship an exchange Aircraft Component that has
been serviced according to this Agreement to the applicable FedEx line station.
D. The Aircraft Component removed from the FedEx aircraft will be returned
to the Hawker Pacific.
E. Every Aircraft Component so removed will be a Bench-Checked, Repaired,
or Overhauled, as appropriate, and will be placed in the Hawker Pacific Pool.
FedEx will then be invoiced for the applicable service according to the prices
set forth on Exhibit "A". Additionally, FedEx will be invoiced for any
Out-of-Scope Repairs, or Modifications performed at that time.
III. GUARANTEED TURNTIME SERVICE PROGRAM.
A. The Hawker Pacific agrees to maintain the Turntimes for Services set
forth on Exhibit "A".
<PAGE>
B. For Aircraft Components being provided pursuant to the Direct Ship
Program, the Guaranteed Turntime shall be one (1) Working Day as set forth in
Exhibit "C".
C. For Aircraft Components being provided in the situation where there is
an aircraft on the ground, the Guaranteed Turntime shall be four (4) hours.
IV. Charges for Out-of-Scope Services
A. Out-of-Scope Services provided by the Hawker Pacific will be invoiced to
FedEx based on a [*].
B. Modifications that are outside of this Agreement are not included in
the standard pricing provided in Exhibit "A". When additional Modifications
are performed by the Hawker Pacific, said Modifications will be invoiced on
[*].
C. [*] pricing for Out-of-Scope Repairs, Modifications, and Missing
Parts is outlined in the table below:
<TABLE>
<CAPTION>
----------------------------------------------
----------------------------------------------
TIME AND MATERIAL PRICING FOR
------------------------------
<S> <C>
----------------------------------------------
Labor Rate $[*]
----------------------------------------------
Material Markup [*] to a cap of $[*]
----------------------------------------------
----------------------------------------------
</TABLE>
<PAGE>
FIRST AMENDMENT TO MERGERS AND ACQUISITIONS AGREEMENT
This First Amendment (this "Amendment") is entered into as of January
23, 1998 by and between Unique Investment Corp., a California corporation
("Unique"), and Hawker Pacific Aerospace (the "Company"), in order to amend
that certain Mergers and Acquisitions Agreement, dated September 2, 1997 (the
"Agreement"), between Unique and the Company as herein set forth:
1. The first sentence of the second paragraph of the Agreement is
hereby amended to add the following at the end of the sentence:
"(the "Acquisition Closing Date"), which amount shall be reduced by the
aggregate amount of payments made to Unique by the Company beginning January
1, 1998 through the Acquisition Closing Date, pursuant to that certain
Management Agreement dated as of March 1, 1997 by and between Unique and the
Company and any successor agreement thereto."
No changes are being made to the remainder of the paragraph or to the
rest of the Agreement.
IN WITNESS WHEREOF, Unique and the Company have entered into this
Amendment effective as of the date set forth above.
UNIQUE INVESTMENT CORP.
By: /s/ Scott W. Hartman
------------------------------
Scott Hartman
Chief Operating Officer
HAWKER PACIFIC AEROSPACE
By:/s/ David Lokken
------------------------------
David Lokken
Chief Executive Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF HAWKER PACIFIC AEROSPACE FOR THE QUARTER ENDED MARCH 31, 1998
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 552,000
<SECURITIES> 0
<RECEIVABLES> 11,136,000
<ALLOWANCES> 165,000
<INVENTORY> 18,183,000
<CURRENT-ASSETS> 30,475,000
<PP&E> 36,910,000
<DEPRECIATION> 1,676,000
<TOTAL-ASSETS> 66,638,000
<CURRENT-LIABILITIES> 14,774,000
<BONDS> 0
0
0
<COMMON> 21,108,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 66,638,000
<SALES> 13,667,000
<TOTAL-REVENUES> 13,667,000
<CGS> 10,470,000
<TOTAL-COSTS> 10,470,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 18,000
<INTEREST-EXPENSE> 648,000
<INCOME-PRETAX> 687,000
<INCOME-TAX> 259,000
<INCOME-CONTINUING> 428,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 428,000
<EPS-PRIMARY> .09
<EPS-DILUTED> .08
</TABLE>
