MEMORANDUM OF AGREEMENT
BETWEEN
GULFSTREAM AEROSPACE CORPORATION
AND
Leonard's Metal Inc.
PREAMBLE
This Memorandum of Agreement (" MOA") is executed on September 03, 2003, between
Gulfstream Aerospace Corporation ("GULFSTREAM") and Leonard's Metal Inc. ("LMI")
for the design, tool build, manufacture, delivery and product support of
G500/550 and GIV-X kitted skins package as described in this MOA.
TABLE OF CONTENTS
A. SCOPE OF MOA
B. PRICING, OPTIONS, AND PAYMENT
C. PERIOD OF PERFORMANCE
D. DELIVERIES
E. INSPECTION AND ACCEPTANCE
F. PACKAGING AND SHIPPING
G. WARRANTY
H. TITLE AND RISK OF LOSS
I. DESIGN CHANGES
J. DERIVATIVES
K. TERMINATION
L. INTELLECTUAL PROPERTY RIGHTS, TOOLING AND DATA OWNERSHIP
M. EXCUSABLE DELAYS
N. PATENT INDEMNITY
O. INDEMNITY BY LMI ENTERING GULFSTREAM PREMISES
P. GENERAL
A. SCOPE OF MOA
1. Product Description / Specification
a. General Description of System
Kitted Skins for G550 and G500 and GIV-X
b. Shipset Description
See "Pricing, Options, and Payment" section
c. Quantity
See "Pricing, Options, and Payment" section
2. Certification
a. LMI agrees to deliver products and parts hereunder that
will meet applicable FAA requirements as defined in the
current FAR, Part 21, and the JAA requirements as defined
in the JAR for LMI supplied products. Gulfstream shall be
responsible for maintaining FAA Certification and JAA
certifications as applicable, on the aircraft.
b. LMI will support Gulfstream in its efforts to obtain
Foreign Type Certificates as mutually agreed. Gulfstream
will provide reasonable advance notice to LMI of the
Foreign certifications that it intends to pursue and of the
requirements to be met. LMI agrees as long as any increase
in costs for obtaining foreign type certifications can be
negotiated between GAC and LMI Corp.
3. Integrated Logistics Support Requirements
a. LMI agrees to perform all work and provide all deliverables
as identified in the attached Gulfstream Document #GER-2011
entitled "Integrated Logistics Support Requirements" dated
September 4, 2001 at no cost to Gulfstream. These
requirements include Technical Publications, Manuals,
Technical and Product Support, Technical Training,
Reliability, Maintainability, Material Services/Ground
Support Equipment MSG3 and Warranty Administration and
other data requirements.
4. Supplier Performance
a. Performance Level
This MOA is predicated upon LMI maintaining a high level of
performance in all tasks required for commitment to the
program and timely satisfaction of all requirements
including without limitation performance in the areas of
Quality, Reliability, Product Support and on time
deliveries. If, during the life of this MOA, should
performance become unacceptable to Gulfstream, the pricing,
terms and conditions herein may be subject to further
negotiations.
b. Quality Assurance
1. Consistent with industry practice, Gulfstream has
developed Supplier Quality Assurance Requirements
SQAR-0003 dated 04/02 incorporated herein by reference
which address such things as Quality programs, onsite
evaluation inspection and testing of equipment and
supplies and failure analysis.
2. LMI to adhere to the requirements of SQAR-0003 dated
04/02 as may be amended from time to time. Gulfstream
will provide LMI with revisions to SQAR- 0003.
3. In addition, as a minimum the following special terms
and conditions as cited in Gulfstream Form GA270
(latest revision) may apply. Form GA270 may be amended
from time to time as required.
129, 131, 259, 304, 315, 334, 456, 463, 469A, 470A,
480, 481, and 921
c. FRACAS AND FAILURE ANALYSIS REPORTS
1. The performance, calculation, tracking and
administration of the warranty shall be performed by
LMI at no cost to Gulfstream consistent with
Gulfstream's reliability document (GER608)
incorporated herein by reference, which may be amended
from time to time, which shall include a Failure
Reporting Analysis and Corrective Action System
(FRACAS) report submitted on a quarterly basis when
requested by Gulfstream during the term of the MOA.
This report is due to Gulfstream no later than ten
(10) days following the end of each quarter.
2. In addition, LMI will provide failure analysis and
tear-down reports on defective units to Gulfstream no
later than 45 calendar days from receipt of the
defective unit at their Repair & Overhaul Facility.
d. Production Line Support
LMI will maintain a minimum of two (2) extra shipset of
hardware/assemblies in its production plan and on their
shelf to support abnormal production shortages. This
hardware and assemblies must be shipped within four hours
of Gulfstream's request from LMI Savannah Distribution
Center.
e. Aircraft on Ground (AOG) Support
1. LMI will provide 24 hours, 7 days a week, 365 days AOG
coverage, at no cost to Gulfstream. LMI will provide
Gulfstream a listing of individual AOG contacts with
E-Mail addresses, phone and fax numbers. The listing
will be maintained by LMI with any revisions being
provided Gulfstream prior to or at the time the
revision is implemented.
2. The standard AOG response time is as follows:
AOG Response 4 Hours
Critical Expedite Request 24 Hours
Expedite 7 Days
3. LMI will maintain an adequate AOG inventory of new and
used components, inclusive of Parts of Assemblies
(POA's), consumables and maintenance replacement units
as mutually agreed to offset any like assets
Gulfstream is required to provide its customers in
support of warranties for said components. *
* The text noted by asterisks has been redacted in connection with
a request to the Securities and Exchange Commission for
confidential treatment of such text. A copy of this Agreement
including the redacted information has been submitted to the
Securities and Exchange Commission as part of such request.
4. Defective components will be expeditiously returned to LMI
for verification of the failure. Upon verification that the
failure is covered under the warranty LMI at its cost agrees
to replace the failed unit within thirty (30) days after
receipt of the failed unit or Gulfstream may invoice LMI for
the actual purchase price of the unit plus a * (* %) percent
handling fee. In the event that the component is not
verified as a warranty failure, Gulfstream shall compensate
LMI within thirty (30) days, as mutually agreed, based on
the following options:
a. Return same component(s) and compensate LMI for
airworthiness test and recertification costs.
b. Return like airworthy components to LMI.
c. Exchange the failed core and compensate LMI for
repair and airworthiness test costs.
d. Procure unit at a mutually agreed to price based
upon unit flight hours.
* The text noted by asterisks has been redacted in connection with
a request to the Securities and Exchange Commission for
confidential treatment of such text. A copy of this Agreement
including the redacted information has been submitted to the
Securities and Exchange Commission as part of such request.
f. Parts Obsolescence
LMI agrees to continue all manufacturing capabilities
and/or provide alternate support for the form, fit and
functional requirements for the original configurations on
any/all of the "out-of-production" configurations,
modifications or enhancements, so long as the model
aircraft for which it was designed remains in service. LMI
further agrees to provide Gulfstream 90 days notification
for "last-time-buy" options for any obsolete end items and
parts of assemblies at the pricing set forth in this MOA
where applicable.
g. Local Distribution Center
0 LMI agrees to position it's Gulfstream Distribution
Center within a fifty (50) mile radius from
Gulfstream's Savannah facility.
0 LMI agrees to obtain a facility that will be
sufficient in size and functionality to support all
roles pertaining to this MOA such as but not limited
to:
o Warehousing minimum agreed upon shipsets of LMI
and Versaform parts.
o Capacity and reliable capability to perform
required processes in order to supply Gulfstream
with the highest possible quality kitted products
defined within this MOA.
o A facility adequately secure from natural
elements and outside influences.
h. Consigned Components
Upon award to LMI those part numbers incorporated in the
G500/550 and GIV-X Kitted Assemblies currently in finished
goods at Gulfstream will be consigned to LMI for inclusion
into the assemblies. The following guidelines apply to the
management and control of these components in the
fulfillment of this agreement.
0 That LMI will begin receiving from Gulfstream the
finished goods inventory for all components of the
G500/550 and GIV-X Kitted Assembly by 1 October 2003.
0 That LMI will be in position to deliver the first
kitted assembly by 1 November 2003.
0 That LMI will maintain at its Gulfstream Distribution
Center a finished good inventory of all consigned
components and its usage to support the kitting
program.
0 Invoicing procedures for consigned Gulfstream
inventory will be outlined by LMI and Gulfstream
jointly by October 01,2003 and become an addendum to
this agreement at a later date.
0 That there is an understanding that LMI is receiving a
consigned inventory that meets or exceeds Gulfstream's
latest engineering requirements. LMI is not
responsible for the inspection of these consigned
components, but is responsible for maintaining the
components in same condition as received.
0 LMI will ensure Gulfstream that the following minimum
insurance requirements are met in regards to the
consigned components:
o No acceptance and or approval of any insurance by
GULFSTREAM shall be construed as relieving or
excusing LMI or its agents or subcontractors of
any liability or obligation imposed upon any of
them by the provisions of the contract documents.
o All insurance policies required by this section,
or elsewhere in the contract documents, shall be
so endorsed as to provide that the insurance
carrier shall be responsible for giving sixty
(60) days prior notice to GULFSTREAM in the event
of cancellation or modification of the insurance
policy
o LMI's carrier shall list GULFSTREAM as additional
insured and loss payee under the Commercial
Liability policy.
B. PRICING, OPTIONS AND PAYMENT **
1. Supplies to be furnished
GIV-X
Part number Description Price Qty
----------- ----------- ----- ---
1159B47128-82-9 Skin Assembly $ * 1
1159B43131-29 Skin Assembly $ * 1
1159B47226-800-63 Skin Assembly $ * 1
1159B47226-800-9 Skin Assembly $ * 1
1159B47227-800-3 Skin Assembly $ * 1
1159B21201-800-7 Skin Assembly $ * 1
1159B21201-800-8 Skin Assembly $ * 1
1159B43132-7 Skin Assembly $ * 1
1159B21314-800-119 Skin Assembly $ * 1
1159B47318-800-3 Skin Assembly $ * 1
1159B41311-800-55 Skin Assembly $ * 1
1159B41311-800-56 Skin Assembly $ * 1
1159B31315-800-117 Skin Assembly $ * 1
115931316-800-101 Skin Assembly $ * 1
1159B47319-800-5 Skin Assembly $ * 1
1159B47320-800-3 Skin Assembly $ * 1
1159B41317-800-121 Skin Assembly $ * 1
1159B31321-803-89 Skin Assembly $ * 1
1159B47510-800-5 Skin Assembly $ * 1
1159B47513-800-7 Skin Assembly $ * 1
1159B47501-802-3 Skin Assembly $ * 1
1159B57111-800-33 Skin Assembly $ * 1
1159B57111-800-27 Skin Assembly $ * 1
1159B57110-800-21 Skin Assembly $ * 1
1159B57110-800-23 Skin Assembly $ * 1
1159B57827-800-75 Skin Assembly $ * 1
1159B57222-800-7 Skin Assembly $ * 1
1159B57223-800-5 Skin Assembly $ * 1
1159B57225-802-7 Skin Assembly $ * 1
Total shipset price GIV-X $ *
* The text noted by asterisks has been redacted in connection with
a request to the Securities and Exchange Commission for
confidential treatment of such text. A copy of this Agreement
including the redacted information has been submitted to the
Securities and Exchange Commission as part of such request.
G500/550
Part number Description Price Qty
----------- ----------- ----- ---
1159B51510-47 Skin Assembly $ * 1
1159B51513-800-95 Skin Assembly $ * 1
1159B53132-31 Skin Assembly $ * 1
1159B51314-800-57 Skin Assembly $ * 1
1159B51318-57 Skin Assembly $ * 1
1159B51311-801-49 Skin Assembly $ * 1
1159B51315-800-107 Skin Assembly $ * 1
1159B51993-801-35 Skin Assembly $ * 1
1159B51316-800-53 Skin Assembly $ * 1
1159B51320-800-57 Skin Assembly $ * 1
1159B51912-800-73 Skin Assembly $ * 1
1159B51321-800-91 Skin Assembly $ * 1
1159B52242-800-55 Skin Assembly $ * 1
1159B52242-800-53 Skin Assembly $ * 1
1159B57111-800-23 Skin Assembly $ * 1
1159B57111-800-31 Skin Assembly $ * 1
1159B57110-800-19 Skin Assembly $ * 1
1159B57110-800-17 Skin Assembly $ * 1
1159B57827-800-75 Skin Assembly $ * 1
1159B57222-800-7 Skin Assembly $ * 1
1159B57223-800-5 Skin Assembly $ * 1
1159B57225-802-7 Skin Assembly $ * 1
1159B57828-802-47 Skin Assembly $ * 1
1159B57226-800-53 Skin Assembly $ * 1
1159B57226-800-9 Skin Assembly $ * 1
1159B57227-801-43 Skin Assembly $ * 1
1159B53135-49 Skin Assembly $ * 1
1159B52212-800-10 Skin Assembly $ * 1
1159B52212-800-9 Skin Assembly $ * 1
Total shipset price G500/550 $ *
* The text noted by asterisks has been redacted in connection with
a request to the Securities and Exchange Commission for
confidential treatment of such text. A copy of this Agreement
including the redacted information has been submitted to the
Securities and Exchange Commission as part of such request.
** Part number revisions will be maintained at the purchase order
level.
Quantities per year for Production. Please note that the spare
requirements could be as high as the production requirements or as
few as zero. The quantities listed below are estimates only,
actually quantities will be given via purchase order.
GIV-X G500/550
----- --------
2003 TBD TBD
2004 6 27
2005 23 27
2006 23 27
2007 23 27
2008 TBD TBD
"Gulfstream is not obligated to procure any minimum number of
supplies, products or services to obtain the shipset pricing set
forth in this MOA.
2. Options
Program Review: Purpose of this program review is to assess the
progress of the implementation of the Gulfstream Distribution
Center, and to evaluate the cost structure of this program.
Schedule: There will be a scheduled program review every 6 months
for the first 24 months of this contract.
There will be two primary focuses of this review: 1) Determine the
effectiveness of the distribution center in the deliveries of
kitted assemblies to Gulfstream seeking avenues of improvement and
enhancement. 2) Evaluate the profitability and cost of the program
with regards to the GV/GIV Kitting Assembly package.
Evaluation of Cost and Profitability review: The following
milestone objectives will be measured and evaluated during the
program review.
0 At the 6-month review a study will be conducted between
Gulfstream and LMI to determine the profit margins for this
contract. LMI's 040 report generated from its MRP system will
constitute the primary source document for the evaluation, as
it captures cost and labor associated with this program. Once
the net profit is determined the following rules will apply:
o Any net profit that exceeds the *% will be shared equally
between Gulfstream and LMI.
o If, the net profit is less than the *% LMI will not seek
escalation of prices during the terms of this contract.
* The text noted by asterisks has been redacted in connection with
a request to the Securities and Exchange Commission for
confidential treatment of such text. A copy of this Agreement
including the redacted information has been submitted to the
Securities and Exchange Commission as part of such request.
3. All invoices, except as noted, shall be sent separately to:
Gulfstream Aerospace Corporation
Attn: Accounts Payable, M/S B-10
P.O.Box 2206
Savannah, GA 31402-2206
4. Payment: net 30
LMI will allow a discount of 1% net 10 days on payments of
invoices.
5. Spares
a. Spares pricing Agreement: *************************
* The text noted by asterisks has been redacted in connection with
a request to the Securities and Exchange Commission for
confidential treatment of such text. A copy of this Agreement
including the redacted information has been submitted to the
Securities and Exchange Commission as part of such request.
b. Sole Distribution Rights/Parts Manufacturing Authority
1. LMI acknowledges that all rights to the distribution of
any components designated for use on any Gulfstream
aircraft, belongs solely to Gulfstream and shall not
solicit the PMA from the FAA.
2. LMI shall provide all components to Gulfstream only,
for resale to Gulfstream customers through the
Gulfstream distribution network.
c. Spares
LMI and Gulfstream will be jointly responsible for providing
a Comprehensive Spares Requirement Forecast, based on past
spare usage to Gulfstream prior to the first Production
Aircraft delivery. LMI will provide a revised spares list,
if required based on Gulfstream's then estimated spares
usage, after the delivery of 5 production shipsets to
Gulfstream.
d. Spares Inventory
To the extent LMI has provided spares inventory, LMI shall
at its expense maintain the spares inventory to the latest
production configuration (1 shipset only). LMI agrees to
maintain spares inventory to latest production configuration
as long as LMI is compensated for any GAC engineering
changes that requires the existing spares inventory to be
pulled out of stock and re-worked to the latest production
configuration.
(Gulfstream will only be responsible for the 1 shipset.)
6. Taxes
a. With the exception of import and export duties (if any), LMI
agrees that the prices contained herein include any and all
taxed levies on LMI by the United States, and any state or
political subdivision thereof, in effect on the date of this
MOA, including, but not limited to:
1. State and Local Gross Receipts, Sales or Use Taxes on
property used or procured by LMI, irrespective of the
ownership of the property.
2. Ad Valorem Property Taxes on property; in the control,
custody, or possession of LMI, irrespective of the
ownership of the property.
3. Sales or Use Taxes on the sale of any item by LMI to
Gulfstream under this MOA; and
4. Manufacturer's and Retailer's Excise Taxes.
b. This section shall not be applicable to Social Security
Taxes, Income and Franchise taxes.
C. PERIOD OF PERFORMANCE
The period of performance for this MOA will be from August 1,
2003 through August 1, 2008. The pricing (and relevant provision
of this MOA) provided for shipsets will apply for orders placed
by Gulfstream prior to the end of the period of performance even
if the delivery and acceptance by Gulfstream occurs after the
period of performance. Time is of the essence in the performance
of obligations set out in this MOA.
D. DELIVERIES
1. Delivery Schedules
The delivery schedules in this MOA are estimated delivery
schedules. Gulfstream will issue purchase orders for the
supplies acquired under this MOA. Individual items ordered
will be identified on the purchase orders with Gulfstream's
part number. The required delivery schedule for supplies
will be established on purchase orders.
2. Just in time (JIT) deliveries
The JIT delivery schedule herein permits receipts no earlier
than one (1) hour prior to requested delivery time on the
Due-On-Dock date and not later than the Due-On-Dock date.
3. Delivery requirements change to the actual Delivery Schedule
Gulfstream will provide a minimum of 30 days notice to LMI
in the event of production schedule decelerations and/or
production schedule accelerations. Gulfstream will be
allowed to increase or decrease the delivery rate by up to 1
shipset per month (total of 12 shipsets per year) at no
additional cost. Gulfstream and LMI will work together on a
best effort basis to provide as much advance notice as
possible for schedule changes.
3. Late Delivery Penalties
In the advent that the supplier is late to deliver on the
scheduled due on dock date a penalty will be assessed
according to the amount of time finished product is late to
the established delivery date provided adequate lead time
for procurement of raw material and delivery is not affected
by Gulfstream design changes (i.e. tools) and a minimum six
month forecast is provided on all kits. The penalty scale is
as follows:
* % of Unit Price 1 (24 hours) to 3 Calendar days
* % of Unit Price 4 to 7 Calendar days
* % of Unit Price 8 to 14 Calendar days
* % of Unit Price 15 to 21 Calendar days
* % of Unit Price 22 to 28 Calendar days
* % of Unit Price 29 to 36 Calendar days
* % of Unit Price 37 and beyond Calendar days
Penalty cost can not exceed cost of finished product and
will only be assessed if purchase order is placed on or
before the agreed upon lead-time of 12 weeks.
Penalty is assessed to each individual finished product
starting on the day that individual finished product is due.
This penalty is assessed even if prior parts are still past
due.
* The text noted by asterisks has been redacted in connection with
a request to the Securities and Exchange Commission for
confidential treatment of such text. A copy of this Agreement
including the redacted information has been submitted to the
Securities and Exchange Commission as part of such request.
E. INSPECTION, ACCEPTANCE AND REMEDIES FOR NON-CONFORMING Kitted skins
package
1. Inspection and Acceptance of Supplies
a. Gulfstream has the right to perform an incoming
inspection on each kitted skins upon delivery prior to
acceptance. Acceptance of material ordered under this
MOA will occur at the designated Gulfstream facility as
soon as possible following delivery of material and all
required material documentation (i.e. 8130 forms,
etc.), but no more than sixty (60) days after delivery
to Gulfstream's facility.
b. Notwithstanding any prior inspection or test, payment,
or receiving documents, the leading edges are subject
to final inspection, test, and acceptance at
destination stated herein or at the Gulfstream Facility
which orders part(s).
2. Remedies for Non-Conforming Supplies
a. Gulfstream may, if the supplies are non-conforming, do
any or all of the following:
1. Reject or return such supplies upon failure to pass
inspection or meet warranty, respectively. As to
returned supplies (and as to rejected supplies but
only if Gulfstream so directs), LMI shall promptly
at its expense, and at Gulfstream's election,
repair or replace such supplies. Upon rejection or
failure to promptly repair or replace, Gulfstream
may cancel and/or effect cover by purchase or
otherwise. If notice of rejection or return is
given, incidental expenses and the risk of loss or
damage shall be borne by LMI until acceptance by
Gulfstream at destination.
2. Accept or retain non-conforming supplies and, at
its election, equitably reduce the price or repair
such supplies at LMI expense and recoup as in 3
below. Not to exceed original part price.
3. Require repayment or effect a setoff against any
amounts owed to LMI of any expenses incidental to
rejection or return and of any amount paid for such
supplies pending a conforming redelivery.
2. Acceptance of supplies previously rejected or returned, or
of used supplies, or of former government property may be
revoked if delivery is conforming but is not accompanied by
written notice that the supplies were previously rejected,
returned, used or government property.
3. Quality Assurance Inspections of Systems
a. LMI and LMI subcontractors, at their expense, will
maintain reasonable quality control and inspection
systems consistent with SQAR 0003 and will provide the
Supplier's Quality Organization a failure analysis and
corrective action program for all design, tooling, test
equipment, manufacturing and test operations supplied
to Gulfstream. Each type of non-conformance shall be
documented, investigated, and the appropriate
corrective action implemented by LMI and its
subcontractors. The supplier will have a method for
positive identification, recall, and replacement of
priority parts in the event of a nonconformance.
b. At all reasonable times, including the period of
manufacture, Gulfstream may inspect and test the end
products and inspect the involved plants of LMI and LMI
subcontractors. LMI and its subcontractors LMI will at
their expense provide Gulfstream with reasonable
assistance to effectively and efficiently conduct the
inspections and LMI and LMI will at their expense
promptly comply with written directions by Gulfstream
reasonably necessary to correct deficiencies in such
systems.
F. PACKAGING AND SHIPPING
1. Packing tickets
LMI will submit a packing ticket with each shipment. Packing
tickets shall include the following:
a. All packing tickets shall include purchase order
number(s), MRA/MRP release numbers, item number(s),
quantity, serial number(s) (as applicable), and
nomenclature exactly as it appears on the purchase
order.
b. All parts shall be identified per the Engineering
Drawing and Purchase Order Quality requirements
utilizing GAMPS 1105 and GAMPS 1106 as required.
c. All components, which are serialized must have the
serial numbers stated on the packing ticket.
d. The serial number on the packing ticket and the serial
number on the component must be identical. Copies of
functional test results must be included.
e. If for any reason, a kitted skin part ends up on the
problem file, LMI has one (1) week, from date of
notification to comply with the request from Gulfstream
to clear the problem file. If after a week, the request
has not been complied with, Gulfstream will return said
part back to LMI at LMI's expense to LMI Savannah
Distribution Center.
2. Shipping, Marking and Packing Instructions
Unless otherwise stated herein, all Shipping, Marking and
Packing instructions will be in accordance with Gulfstream
Document Number GA 75, 6/01 as amended from time to time. In
addition, LMI agrees to furnish reusable container and/or
rack to transport kitted skins to location of point of use.
After use is complete the container and/or rack along with
clecos will be returned to LMI.
3. Certification of country of manufacture
U.S. Customs has increased requirements for the
identification of foreign made items entering the United
States of America. Therefore, proof of Country of
Manufacture is required for all end items.
4. FOB
Point of origin is *.
* The text noted by asterisks has been redacted in connection with
a request to the Securities and Exchange Commission for
confidential treatment of such text. A copy of this Agreement
including the redacted information has been submitted to the
Securities and Exchange Commission as part of such request.
G. WARRANTY
1. General
Subject to the limitations and conditions hereinafter set
forth, LMI warrants that the leading edge and its components
supplied hereunder shall:
a. at the Date of Delivery, be free from:
i. defects in material or workmanship
ii. defects arising from the selection of material or
process of manufacture other than as specified by
Gulfstream or contained in Gulfstream's provided
design under the Product Description; or Gulfstream
approved design.
iii.defects inherent in the design thereof, in view of
the state of the art at the time of design thereof,
except for those portions which have been retained
from the prior GIV design or which are based upon
Gulfstream directed or furnished engineering
criteria but, only to the extent such criteria is
defective or incorrect.
b. at the Date of Delivery, and throughout the duration of
the warranty, be free from defects arising from the
failure to conform to the Type Design specifications
and drawings, as certified by the FAA or other
airworthiness authorities, developed by LMI pursuant to
the Product Description or the Engineering Statement of
Work.
2. Duration
The extent of LMI liability under this Section as to defects
in the kitted skin is limited to the repair of all such
defects in the kitted skin which are discovered within a
period of seventy eight (78) months from the date of
shipment, or seventy two (72) months from the date of
delivery to the GIV-SP and GIV-X aircraft to the operator
and while LMI retains the tooling and data necessary to
effect such repairs. Warranty duration calculations are
based upon the exclusion of any repair time spent at LMI
facilities.
3. Remedies
a. LMI obligation for a breach of a warranty provided
under this Section during the periods described in this
Section. shall be to promptly repair, replace or
correct (to include all costs associated with removal
and reinstallation) at LMI sole election and cost, the
defective part or condition with reasonable care and
dispatch. LMI will reimburse Gulfstream for the cost of
labor associated with the removal of defective units,
installation of the replacement unit and required
operational checks provided the work is performed by
Gulfstream, an Authorized Warranty Repair Facility or
by a facility as directed by Gulfstream. Reimbursement
will be based on standard hours applicable to the
removal and replacement of each unit.
4. Removal and Reinstallation of LMI Components
a. Gulfstream reserves the right to debit LMI account for
all direct and related tasks at any Gulfstream facility
or any Gulfstream authorized facility to effect the
removal and reinstallation of LMI components or parts
of assemblies inclusive of consumables and maintenance
replacement units. Gulfstream will debit LMI's account
only after Gulfstream has given LMI adequate time to
investigate and respond to the rejection that has taken
place.
b. Gulfstream will forward a periodic listing of items to
be debited to LMI and will include the following data:
1. The date component was identified and removed.
2. Part number description and serial number
3. Reason for removal
4. Aircraft serial number
5. Then actual labor hours if known or standard
published labor hours and any related labor hours
incurred
6. Labor rate at then published rates
7. Debit amount
c. LMI will have 30 days from the date of notification to
take exception to any item(s) submitted. Gulfstream
will only debit said account after LMI and Gulfstream
have worked in good faith to determine who the
responsible party is.
5. Guaranteed Mean Time Between Failure (MTBF)
a. The MTBF requirements for the component(s) herein are
as follows:
Description Guaranteed MTBF Design Goal
----------- --------------- -----------
b. LMI shall guarantee that the component(s) will achieve
the guaranteed MTBF noted above, with the calculation
as follows: MTBF equals Flight Hours divided by
confirmed failures. Where the flight hours are the
total number of (INSERT AIRCRAFT MODEL) flight hours
accumulated by the aircraft on which the component(s)
are installed. If at the end of the agreed to warranty
period, the guaranteed MTBF has not been achieved, LMI
agrees to extend the warranty period until such time as
the guaranteed MTBF is achieved.
c. The performance, calculation, tracking and
administration of this warranty and associated MTBF
guarantees will be carried out in accordance with
Gulfstream's Reliability Document (GER 608 Rev A). The
labor and material required to incorporate the
corrective actions as defined in said document will be
provided at no cost to Gulfstream or its customers.
6. Bad Actor Program
LMI will provide, at no cost to Gulfstream, a new
replacement component if it is verified that the rejected
part is the responsibility of LMI.
7. Disclaimer
THE WARRANTIES SET FORTH IN THIS MOA ARE EXCLUSIVE AND NO
OTHER WARRANTIES OF ANY KIND, WHETHER EXPRESS OR IMPLIED,
INCLUDING ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE, AND ALL WARRANTIES ARISING FROM THE
COURSE OF DEALING OR USAGE OF TRADE, SHALL APPLY. THE
REMEDIES SET FORTH IN THIS MOA ARE THE SOLE AND EXCLUSIVE
REMEDIES OF GULFSTREAM FOR ANY CLAIMS, EXPENSES, OR DAMAGE
ARISING OUT OF OR RELATED TO PRODUCTS DELIVERED UNDER THIS
MOA. IN NO EVENT SHALL LMI BE LIABLE IN TORT OR IN CONTRACT
FOR ANY INCIDENTAL, SPECIAL, INDIRECT, OR CONSEQUENTIAL
DAMAGES. THIS SECTION SHALL NOT BE INTERPRETED TO AFFECT IN
ANY WAY [INSERT SUPPLIER NAME) OBLIGATIONS WITH RESPECT TO
THIRD PARTY CLAIMS FOR PROPERTY DAMAGE, PERSONAL INJURY OR
WRONGFUL DEATH.
H. TITLE AND RISK OF LOSS
1. Title and Shipping Point
* All risks of loss or damage to property to be delivered by
LMI hereunder shall be upon LMI until title of such property
passes to Gulfstream.
* The text noted by asterisks has been redacted in connection with
a request to the Securities and Exchange Commission for
confidential treatment of such text. A copy of this Agreement
including the redacted information has been submitted to the
Securities and Exchange Commission as part of such request.
2. Risk of Loss
Notwithstanding the foregoing, LMI shall bear risk of loss
or damage to property subsequently rejected by Gulfstream
and placed on transport for return to LMI until such
property is redelivered to Gulfstream, except for the loss,
destruction of, or damage to such rejected property
resulting from the negligence of officers, agents or
employees of Gulfstream acting within the scope of their
employment.
a. If property is furnished by Gulfstream for performance
of this MOA all risks of loss or damage to such
property shall be upon LMI until the said property has
been redelivered to Gulfstream. LMI shall properly
segregate, identify and protect all such property.
b. Processing of claims relating to loss of or damage to
property to be furnished hereunder shall be
accomplished by the party responsible for risk of loss
or damage to such property at the time the claim
arises.
I. DESIGN CHANGES
1. Design Changes
a. Gulfstream may at any time make changes in drawings,
designs, specifications, materials, packaging, time and
place of delivery, method of transportation or other
terms of this MOA, which changes Gulfstream shall
document in writing and which LMI shall immediately
implement. If such changes cause an increase or
decrease in the cost of performance of this MOA or in
time required for performance, an equitable adjustment
shall be made, as applicable, to the price and/or the
delivery schedule of the affected performance and this
MOA shall be amended in writing accordingly. Any claim
by the LMI for an equitable adjustment under this
clause must be asserted within thirty (30) days from
the date of written order effecting the changes or
Gulfstream shall not be obligated to consider LMI's
claim for an equitable adjustment. In no event shall
Gulfstream be liable for any claim for an increase in
price after payment for the supplies. If property is
made obsolete as a result of a change, Gulfstream shall
have the right to prescribe the manner of disposition
of such property. Changes directed by Gulfstream which
are issued in order to improve fit and/or ease use by
Gulfstream production operations will be accepted at no
cost to Gulfstream and promptly acted upon as mutually
agreed. There will be no increase in price if the
changes incorporated do not impact the costs of
manufacturing the final component as agreed upon during
the onset of this program.
2. Class 1 & 2 Design Changes - Supplier Requested Changes
a. Class 1 changes are those that affect fit, form,
function, interchangeability, safety, strength,
performance, flight characteristics, weight, balance,
product qualifications, service life or installation of
the next assembly. These changes are required to be
submitted to and approved by Gulfstream Engineering
prior to incorporation.
b. Class 2 changes (those that do not affect fit, form,
function, interchangeability, safety, strength,
performance, flight characteristics, weight, balance,
product qualification, service life or installation of
the next assembly) must also be submitted for
Gulfstream Engineering's review and concurrence with
respect to classification prior to incorporation.
Gulfstream will respond with said concurrence or any
exceptions taken within 2 weeks after receipt of
supplier notification.
c. All Class 1 and Class 2 Design changes shall be
submitted in writing via a "Seller Engineering Memo"
(SEM) to Gulfstream Engineering with copies to
Gulfstream Purchasing and Quality Assurance.
3. Supplier Escapes
LMI will immediately notify Gulfstream, in writing, of any
material/component escapes. Escapes are any material/
component issue that may result in performance,
airworthiness, FAR non-compliance, or non-conformance as
defined below:
a. Material or component issues that might affect the
item's ability to perform to original specifications.
b. Airworthiness of the component or end use product in
question.
c. FAR non-compliance has been identified with components.
d. Non-conformance to original specification (component or
material does not conform to Engineering specification,
drawing or document).
Written notification must include:
1. Nature of the Issue
"What, why, how and when" information. Reference SQAR-0003,
Paragraph 19.
2. Inspections/Action
State if it is satisfactory to simply inspect for this
condition and what inspection methods are required. If the
item needs to be replaced, state NDT standards, tools, and
inspection resources available. Identify specific series (by
serial number, by date of manufacture, by location of
manufacture, etc.) if possible.
3. Compliance Time
State the urgency of the issue and recommended compliance
time.
4. Spares
State if replacement or return to supplier for repair is
required, whether or not adequate spares exist to either
replace outright, or to develop a rotable pool to keep in
service aircraft flying.
5. Remedy
If appropriate, recommend actions to preclude this event
from happening again, both short term and long term.
6. Suppliers identification of the issue
State if Airworthiness issue, Quality issue, FAR
non-compliance (or all of the above).
7. Service Bulletin
The above information is the basis of a Service Bulletin.
The LMI should provide a draft Service Bulletin at this time
if possible.
However, in those cases where LMI has the Material Review Board
(MRB) authority and the escape disposition meets type design,
then a separate submission, other than MRB with the component, is
not necessary.
J. DERIVATIVES
1. Derivative Aircraft
At any time during the term of this MOA, Gulfstream may
elect to build a derivative of the aircraft on which the
products purchased under this MOA are used. A derivative
aircraft is defined as an already type certified aircraft
that will undergo sufficient modification as to require
re-certification and issuance of a new type certificate.
2. Alternate Sources
If the products purchased under this MOA will not meet the
market requirements or technical specifications of the
derivative aircraft, Gulfstream may elect to develop
alternate sources for like products to be used on the
derivative aircraft in lieu of the products purchased under
this MOA. If an alternate source supplied product is
selected for use on the derivative aircraft, Gulfstream may
terminate this MOA in accordance with the terms delineated
herein.
K. TERMINATION
1. For default
a. Gulfstream may terminate this MOA or any part thereof,
by giving notice of default to LMI under any of the
following circumstances.
1. If LMI refuses or fails to make deliveries or
perform the services within the time specified in
this MOA.
2. If LMI fails to comply with any of the other
provisions of this MOA, or so fails to make
progress as to endanger performance of this MOA in
accordance with its terms, and does not cure any
such failure within a period of ten (10) days (or
such longer period as Gulfstream may authorize in
writing) after receipt of notice from Gulfstream
specifying such failure.
3. If LMI becomes insolvent or is subject to
proceedings under any law relating to bankruptcy,
insolvency or the relief of debtors.
b. In the event of such termination, Gulfstream may
purchase or manufacture similar product and/or require
LMI to transfer title and deliver to Gulfstream any or
all property produced or procured by LMI under this
MOA, and LMI shall be liable to Gulfstream for any
excess cost to Gulfstream; provided, however, LMI shall
not be liable to Gulfstream for such excess cost when
the default of LMI is due to causes beyond the control
and without the fault or negligence of LMI; provided
further, and LMI has exercised due diligence to remove
delay, LMI shall not be excused from liability unless
LMI has notified Gulfstream in writing of the existence
of such cause within ten (10) days from the beginning
thereof.
c. Gulfstream's liability in the event of a default
termination shall be limited to the agreed price of
items delivered and accepted, subject to downward
equitable adjustment if such product(s) are
nonconforming, and to the reasonable value of any
property, inclusive of tooling, design data, survival
of warranties and obligations thereunder that
Gulfstream may require to be delivered pursuant to b.
above.
2. For Convenience
Gulfstream may terminate this MOA, or any part thereof, by
giving written notice thereof to LMI. In the event of such
termination, Gulfstream shall pay to LMI costs incurred by
LMI, for supplies that have been ordered by Gulfstream,
determined in accordance with sound accounting practices
plus a reasonable allowance for profit earned thereon;
provided that LMI shall not be entitled to any profits with
respect to work and/or services not performed prior to
effective date of such termination, nor shall the total
termination sum payable to the LMI exceed the total agreed
to price for supplies that have been ordered by Gulfstream
as reduced by the amount of payments otherwise made, and as
further reduced by the agreed to price of work not
terminated; further provided, however, that if it appears
that LMI would have sustained a loss of the entire MOA had
it been completed, no profit shall be payable hereunder and
an appropriate adjustment shall be made reducing the amount
otherwise payable hereunder to reflect the indicated rate of
loss.
L. INTELLECTUAL PROPERTY RIGHTS, TOOLING AND DATA OWNERSHIP
1. Ownership of Design Drawings/Data
a. Title and rights to all design and design data
(drawings) created by LMI under this MOA are owned by
Gulfstream upon full payment for supplies.
b. In the supplies have been either originated or designed
by Gulfstream in accordance with specifications or
other data furnished by Gulfstream, all rights to
supplies or other data and the reproduction, use or
sale thereof are owned solely by Gulfstream.
2. Ownership of Tooling, Design and Data
a. All tooling whether designed by LMI, by Gulfstream or
by a third party, shall become, upon acquisition or
manufacture, the property of Gulfstream. LMI shall
deliver such tooling to Gulfstream or Gulfstream's
designees after performance is completed hereunder or
upon termination, unless such tooling is needed to fill
further orders from Gulfstream and retention by LMI of
such tooling has been consented to in writing by
Gulfstream.
b. The term "tooling" shall include, but not be limited
to, all tools, dies, jigs, fixtures, molds, patterns,
special taps, special gauges, special test equipment,
other special equipment and manufacturing aids, and
replacement thereof, acquired or manufactured by LMI
for the performance of this MOA, which are of such a
specialized nature that without substantial
modification or alteration, their use is limited to the
production of supplies or parts hereof, or the
performance of such services as are to be supplied to
Gulfstream hereunder. LMI agrees to comply with the
provisions of the Gulfstream Tooling Manual for
Subcontractors.
3. Disposition of Tools
a. LMI is wholly responsible for all Gulfstream tooling
located in its facility/facilities. When tooling is
deemed no longer necessary, LMI will receive, in
writing, from Gulfstream guidance on disposition for
said tools.
b. Upon completion of payments, all tooling shall be
properly marked to indicate its ownership by Gulfstream
in accordance with the mutually agreed to tooling
philosophy by Gulfstream and LMI. Gulfstream may file,
with the cooperation of LMI, a UCC Financing statement
confirming Gulfstream's ownership interest.
M. EXCUSABLE DELAYS
1. Neither party hereto shall be responsible for, nor deemed to
be in default, on account of delays in performance of the
MOA due to causes beyond its control and not occasioned by
its fault or negligence. Such causes include, but are not
limited to: acts of God, force majeure, action by the
Governments, delays in transportation, labor disputes or
strikes; provided, however, that the existence of such
causes shall not excuse the delaying party from the
resulting delay unless such party shall have given the other
party written notice on any excusable delays referred to
above, within 5 days (or such additional time as may be
approved by the other party) after the delaying party has
actual knowledge that such occurrences will result in a
delay in delivery and the delaying party.
3. In the event the delivery of any product from LMI is delayed
for any cause deemed excusable hereunder, so that the extent
of such delay in delivery of any product will exceed 1 month
from the date of scheduled delivery, the MOA, for the
undelivered delayed products, may be terminated by
Gulfstream upon written notice to LMI. Any termination under
this paragraph shall be treated as a termination for default
as described elsewhere in these terms and conditions.
3. In the event of a significant force majeure event, terrorist
act or other act or declaration of war that materially
impacts Gulfstream's aircraft backlog or sales activities,
Gulfstream may in addition to the other rights set forth in
this MOA reschedule or cancel deliveries effected by such an
event, as required (in Gulfstream's sole determination). In
the event Gulfstream determines a requirement to either
reschedule or cancel deliveries, Gulfstream will notify the
supplier in writing of the deliveries impacted by
Gulfstream's determination. The MOA will be modified
accordingly and all other deliveries, rights and obligations
under the MOA will remain unchanged and there shall be no
penalty, additional costs or liability assessed to
Gulfstream as a result of its cancellation or rescheduling
of deliveries under this section.
N. PATENT INDEMNITY
1. Unless the leading edge are made to the detailed design of
Gulfstream, LMI shall at its expense defend and indemnify
Gulfstream against any claim of patent infringement provided
timely notice of such claim be given LMI.
2. Gulfstream agrees to pay LMI all costs and expenses in its
defense and to pay LMI the amount of any judgement against
LMI in any suit proceeding against LMI, based upon a claim
of infringement resulting solely from Gulfstream connecting
any equipment purchased herein with any article or device
not manufactured or supplied by LMI, or from the sale or use
of any such combination by Gulfstream.
O. INDEMNITY BY LMI ENTERING GULFSTREAM PREMISES
LMI assumes the risk of all damage, loss, costs and expense, and
agrees to indemnify and hold harmless Gulfstream, its officers,
agents and employees from and against any and all liability,
damage, loss, cost and expense, including attorney's fees, which
may accrue to or be sustained by Gulfstream, its officers, agents
or employees on account of any claim, suit or action made or
brought against Gulfstream, its officers, agents or employees,
(including claims, suits or actions brought against Gulfstream
because of Gulfstream's own negligence) for the death of or
injury to employees, agents or subcontractors of LMI or
destruction of property of LMI, sustained in connection with LMI
performance of any activity under this MOA performed at a
Gulfstream facility, arising from any cause whatsoever
(including, without limitation, falls from scaffolding, ladders,
catwalks, beams or other high places; mishaps involving cranes,
booms, elevators, trucks or other equipment; injuries resulting
from electrical shock; and failure of or defect in any equipment,
instrument or device supplied by Gulfstream or its employees to
LMI, its employees, agents or representatives at the request of
LMI, its employees, agents or representatives), except for the
willful misconduct of Gulfstream or its employees acting within
the scope of their employment.
P. GENERAL
1. Disputes
Any controversy or claim between the parties arising out of
or relating to this MOA, or breach thereof, shall be
governed by the laws of the State of Georgia and shall be
settled by arbitration in Savannah, Georgia under the
Commercial Arbitration Rules of the American Arbitration
Association ("AAA") and administered by the AAA. Pending
settlement by agreement or a final judgement, LMI shall
proceed diligently with the performance hereof according to
Gulfstream's decision and instructions.
2. Substance Abuse Policy
LMI, its subcontractors, agent and employees acknowledges
and understands that:
a. The possession, sale, transfer, purchase and/or
presence in one's system of a controlled substance(s)
or alcohol by any person on Gulfstream property is
prohibited;
b. Entry onto Gulfstream property constitutes consent to
an inspection of any individual and their personal
effects when entering, on, or leaving Gulfstream
property;
c. Any individual found in violation of (1) above or who
refuses to permit an inspection may be removed and
barred from Gulfstream property at the discretion of
Gulfstream.
d. LMI agrees to abide by and to advise its
subcontractors, agents and its employees of the
provisions herein.
e. Gulfstream Aerospace Corporation's Substance Abuse
Policy (GA 3059) is enclosed and incorporated by
reference and will apply while LMI and/or any of its
subcontractors are on Gulfstream's premises.
3. TSO
The GIV-SP and GIV-X leading edge will be covered by TSO, if
applicable.
4. Press Releases
LMI shall not issue any press release, press conference or
similar announcements to the industry or the media (to
include securities analysts) without the prior written
consent of Gulfstream.
5. Marketing/Advertising Assistance
LMI agrees, at its expense, and upon the direction of
Gulfstream to provide reasonable and normal assistance in
support of the following:
a. Green Aircraft Sales
b. Customer/Options/Retrofits
c. Air Shows/Trade Shows
d. Gulfstream's Customer Workshops
e. Other Gulfstream sponsored activities
6. Assignment
Except as to the sale of the business to which this MOA
relates, the rights of the parties under this MOA may not be
assigned or transferred, in whole or in part, to any person,
firm, corporation, or subcontractors without the express
prior consent of the other party.
7. Entire Agreement
This MOA constitutes the entire understanding between the
parties and supersedes all previous understandings,
agreements, communications and representations, whether
written or oral, concerning the subject matter of the
agreement.
8. MOA Acceptance
Agreement by LMI to furnish materials or services hereby
ordered or partial performance hereunder or shipment of any
leading edge ordered hereby constitutes acceptance of the
terms and conditions of this MOA. The terms and conditions
set forth shall be the only applicable terms and conditions
for this purchase, unless changes or substitutions are
agreed to, in writing, by an authorized agent or
representative for Gulfstream and LMI.
9. Offset Credits
Any order placed by LMI with a sub-contractor outside the
United States may be used to satisfy Gulfstream's (including
its parent company, General Dynamics Corporation, and all
other affiliated entities) contractual obligations, current
and future to procure goods and/or services from firms in
said country to offset, in part, their sales of goods and
services into that country and their impact on that
country's balance-of-trade accounts. If Gulfstream requests
these offset credits, Gulfstream shall reimburse for any LMI
cost associated in implementing / obtaining these offset
credits.
10. Most Favored Customers
LMI shall warrant that prices, terms and warranties under
this MOA are at least as favorable as those being offered to
any other purchaser of similar products under the same or
similar circumstances.
11. Order of Precedence
In the event of conflict in terms, conditions or other
Gulfstream documents, the following order of precedence will
apply:
A. Memorandum of Agreement
B. Purchase Order Issues per MOA
C. Statement of Work
D. Design Specification
E. GV-GER-608, Rev. A, July 15, 1993
F. SQAR-0003 dated 04/02 Quality
G. GA 270 3/01 Additional Conditions
H. GA75 7/97 SHIPPING, MARKING AND PACKING INSTRUCTIONS
GULFSTREAM AEROSPACE CORPORATION LMI
/s/ Jim McQueeny /s/ Robert Grah
- ------------------------------------ --------------------------------------
Jim McQueeny Robert Grah
Director of Initial Phase Purchasing Vice President, LMI
/s/ Brian McCarthy /s/ Ed Campbell
- ------------------------------------ --------------------------------------
Brian McCarthy Ed Campbell
Purchasing Manager Director of Marketing
/s/ Todd Smiley /s/ Ron Llopis
- ------------------------------------ --------------------------------------
Todd Smiley Ron Llopis
Senior Buyer Manager Customer Relationship