exv10w1



 







Exhibit 10.1




Subject: Amendment No. 92 to Standard Aero Subcontract




     Reference: (1) KAC Subcontract No. LMKAC-98-0001


This amendment incorporates changes to the reference subcontract, as detailed below. These
changes supersede the existing contract terms and conditions and are effective upon execution by
both parties.




     BASIC TERMS AND CONDITIONS:


Section 2.1, Services to be Provided, is amended as follows:



A. EXCLUSIVE PROVIDER



Standard Aero shall be the sole and exclusive provider of all labor and material for the T56 PBA
work through February 2014, or the duration of the PBA program, whichever is longer. This
relationship shall not be modified except as provided herein.



B. PROGRAM SUMMARY



(STET)



 



Section 4.2, Option Periods, is replaced and amended to read as follows in its entirety:




     Subsequent to the initial ordering period, KAC agrees to exercise options for annual
increments in accordance with the Award Term Decisions and the Award Term Clause, H-900, of the
KAC/OC-ALC Contract, No. F34601-99-D-0002. Subsequent extensions shall be flowed down
automatically without further restrictions or conditions, and shall not be dependent upon
performance, provided that award terms are received by KAC. In the event that any previously
earned and awarded Award Term extensions or options are withdrawn by the Government, the parties
agree to adjust the length of the Subcontract accordingly.


 



Article 5, Payment, is amended to read as follows:



Payment terms shall be 30 days from receipt of a valid invoice by wire with a 1% interest
penalty per month (prorated by day) for any payment not received within 30 days. All other
payment terms are defined in Exhibit F.



 



Section 7.1 is renamed “Annual Fiscal Year Criteria for Award Term Performance Metrics,” replaced
and amended to read as follows in its entirety:










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1. The “End-of-Period” Evaluation for Product Quality and Schedule as determined by the USAF
for each fiscal year, commencing with FY07, will be flowed down to the KAC-Standard Aero
subcontract performance metrics.



2. Standard Aero Performance shall be evaluated annually. In that actual damages would be difficult
or impossible to ascertain, Standard Aero shall pay KAC Liquidated Damages (“LD” or “LDs”) for
unsatisfactory performance beginning in FY 2007. Schedule and Quality evaluations will be
determined per annual USAF ATRB determinations and applied to LDs as a percentage of the applicable
Award Conversion Scale for each sub-category. Management Responsiveness will be determined by and
reflected in an annual written review of Standard Aero’s performance from KAC to coincide with the
issuance of USAF ATRB results and applied on a percentage basis of unsatisfactory events/total
events. KAC shall also provide a detailed written report to SASA on its performance reflecting the
CPAR rating for the T56 Engine Work on the PBA Contract by December 31 of each year. Standard Aero
LDs will be determined in accordance with the following schedule.




     Table 1 — Annual Standard Aero Performance Evaluation 



	 	 	 	 	 	 	 
	EVALUATION AREA	 	EXCELLENT &	 	 
	(and Sub-Categories)	 	SATISFACTORY	 	UNSATISFACTORY
	 	 	 	 	Evaluation Criteria	 	 
	 	 	 	 	(Award % determination)	 	Liquidated Damages
	Schedule:
	 	 	 	Per ATRB Award	 	Calculation
	T56 EMM Schedule
	 	$0.00	 	0 (0%) to --5 (100%)	 	[/ \] x Award %
	T56 MISTR A Schedule
	 	$0.00	 	0 (0%) to --1 (100%)	 	[/ \] x Award %
	T56 MISTR B Schedule
	 	$0.00	 	0 (0%) to --1 (100%)	 	[/ \] x Award %
	Total:	 	$0.00	 	Max Schedule LD amount @ 100% = [/ \]
	Product Quality:
	 	 	 	Per ATRB Award	 	 
	T56 EMM Quality
	 	$0.00	 	0 (0%) to --5 (100%)	 	[/ \] x Award %
	T56 Component Quality
	 	$0.00	 	0 (0%) to --2 (100%)	 	[/ \] x Award %
	Total:	 	$0.00	 	Max Product Quality LD amount @ 100% = [/ \]
	Mgmt Responsiveness:
	 	 	 	Per KAC Evaluation	 	 
	Delivery of RFPs
	 	$0.00	 	% of (Unsat Events	 	[/ \] x Eval %
	 
	 	 	 	/Total Events)	 	 
	Delivery of TRD reports
	 	$0.00	 	% of (Unsat Events	 	[/ \] x Eval %
	 
	 	 	 	/Total Events)	 	 
	Shipment of Winnipeg
	 	$0.00	 	% of (Unsat Events	 	[/ \] x Eval %
	assets
	 	 	 	/Total Events)	 	 
	Total:	 	$0.00	 	Max Mgmt Resp. LD amount @ 100% = [/ \]
	MAX. TOTAL:	 	Maximum Total LDs @ 100% = $2,000,000.00






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     Table 2 — Evaluation Area Criteria 



	 	 	 
	SCHEDULE

	 	[/ \ / \]

	 

	 	 

	 

	 	 

	 

	 	 

	 
	PRODUCT QUALITY

	 	[/ \ / \]

	 

	 	 
	 

	 	 
	 
	MANAGEMENT RESPONSIVENESS

	 	[/ \ / \]

	• Evaluation of Standard Aero
performance in each sub-category by
KAC for annual FY events to coincide
with timing of USAF ATRB reviews.


	 	 
	 

	 	 
	• Based on working days; one day = 24 hours.
• Categorization of RFPs as
Simple or Complex will be mutually
agreed by KAC and Standard Aero on a
case by case basis.

	 	 [/ \ / \]

	 

	 	 
	 

	 	 
	 

	 	 
	 

	 	 
	 

	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	 

	 	[/ \ / \]

	 

	 	 
	 

	 	 
	 

	 	 





3. If any LDs are assessed, payment will be due from Standard Aero to KAC within 45 days of
Standard Aero’s notification by KAC of the USAF’s ATRB official rating to KAC.



4. LDs shall take effect commencing in FY07 for the duration of the PBA program.



5. In the event that an “Unsatisfactory” rating is awarded in two successive years in a specific
Evaluation Area sub-category (e.g., T56 EMM), the LD amount payable in that sub-category per
Table 1, Annual Standard Aero Performance Evaluation, will be doubled in the second
(2nd) year and will remain at the doubled level for successive years of unsat in
that Evaluation Area sub-category; but under no circumstances, will the annual LD payable ever
exceed this double amount.



6. Standard Aero shall have the right to dispute any imposition by KAC of LDs for Management
Responsiveness pursuant to Article 16 hereof under an arbitrary and capricious or abuse of
discretion standard of review. Standard Aero shall not have a right to dispute evaluations of
Schedule or Quality which shall be a pass through of such evaluations received by KAC under
the PBA Contract except Standard Aero may dispute such evaluations through KAC to the extent
KAC agrees to dispute such evaluation(s) under the PBA Contract.




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SEPARATELY WITH
THE COMMISSION.]







 






7. Notwithstanding any provision herein to the contrary, nothing shall impose upon Standard Aero
any LD for which Rolls-Royce is the sole or primary contributing cause.



8. KAC and Standard Aero agree to work together to ensure that the ATRB evaluation criteria
applied to the quality metric will continue to be based only on Standard Aero’s workmanship.
In no event shall Standard Aero be subject to financial penalties resulting from any defects
in Rolls-Royce supplied material. The warranty obligations of Standard Aero with respect to
labor and secondary damages shall remain as it currently is.



 




     Article 13, Delays, Default, Termination, is replaced and amended to read as follows in its
entirety



     The Parties’ rights and remedies regarding delays, default, and termination under this
Subcontract, shall be in accordance with FAR Clause 52.212-4, except that KAC may only terminate
the Subcontract for convenience if its Contract with OC-ALC, No. F34601-99-D-0002, is terminated
for convenience by the US Government, and then only to the same extent.


 




     Section 19.4.2, Government’s Rights in Data, is replaced and amended to read as follows in its
entirety:



     The Parties agree that the Government’s rights, if any, in data shall be governed by DFARS
Clause 252.227-7015, Technical Data—Commercial Items, which is specifically incorporated herein.
KAC will not impede efforts by Standard Aero to obtain the Government’s agreement to treat data
that originated solely with Standard Aero and that Standard Aero caused to be delivered to the
Government prior to Subcontract Amendment No. 92 as subject to DFARS 252.227-7015(b)(2), and to
correct any markings or notices on the documents accordingly, if necessary, at Standard Aero’s
expense. KAC will forward to the government any such request by Standard Aero. Standard Aero
shall hold KAC harmless for any and all damages, costs, causes of action, withholdings or expenses
arising out of or relating to (i) any treatment of Standard Aero data delivered to the Government
prior to Subcontract Amendment No. 92 as other than DFARS 252.277-7015(b)(2) data and (ii) Standard
Aero’s efforts to obtain treatment for such data under DFARS 252.227-7015(b)(2).


 



Exhibit L, incorporated into the Subcontract in Section 19.4.3, Proprietary Information Agreement,
is amended to add the following new paragraphs 5, 6 and 7 and renumbering the remaining paragraphs:



5. Except as specifically agreed to herein or subsequently in writing, KAC agrees to take the same
reasonable measures set forth above to prevent disclosure of Standard Aero’s Proprietary
Information to Rolls-Royce or its officers, directors, consultants or employees. KAC further
agrees that, except as agreed to herein or subsequently in writing, Rolls-Royce’s officers,
directors, consultants or employees shall not be permitted access to any work areas regularly used
by Standard Aero.




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6. Notwithstanding paragraph 5, if KAC in good faith determines that performance of the Prime
Contract requires limited disclosure of Standard Aero Proprietary Information to one or more of
Rolls-Royce’s officers, consultants or employees, KAC shall seek Standard Aero’s written permission
to permit disclosure to such specified individual. Standard Aero shall not unreasonably withhold
permission provided that (i) the designated individual is not involved in competitive
decisionmaking as defined in U.S. Steel Corp. v. United States, 730 F.2d 1465 (Fed. Cir. 1984);
(ii) the designated individual executes an Undertaking in the form set forth below; (iii) the total
number of such designated individuals at any time does not exceed six; and (iv) the request for
permission describes the Proprietary Information to which the individual will have access.




UNDERTAKING



I,                                                             , hereby certify as follows:



1. I am affiliated with the Rolls Royce Corporation (“RRC”) as follows:



 



 



 



2. I have read Paragraph 19.4.3 of the Contract between Kelly Aviation Center, LLC and Standard
Aero (San Antonio), Inc. (“Standard Aero”), and I agree to be bound by the provisions of that
paragraph (the “PIA”). I further agree that (i) I will only review Proprietary Information
produced by Standard Aero at KAC’s offices, (ii) I will not take copies of such information to
RRC’s offices or elsewhere, (iii) I will not disclose any such Proprietary Information to any other
RRC officer, director, employee or consultant, or any third party, and (iv) I will take all
reasonable measures to prevent such disclosure of Standard Aero’s Proprietary Information.



3. I am not involved in competitive decisionmaking as discussed in U.S. Steel Corp. v. United
States, 730 F.2d 1465 (Fed. Cir. 1984), for or on behalf of RRC or any other party or entity
that might gain a competitive advantage from access to any Proprietary Information disclosed
pursuant to the Contract. This means that I do not, for example, provide advice concerning or
participate in decisions about marketing or advertising strategies, product research and
development, product design or competitive structuring and composition of bids, offers, or
proposals with respect to which the use of such Proprietary Information could provide a competitive
advantage.




CERTIFICATION



By my signature, I certify that, to the best of my knowledge, the representations set forth above
(including any attached statements) are true and correct.




	 	 	 
	 
	 	 
	 

	 	 
	Signature

	 	Date Executed
	 
	 	 
	 
	 	 
	 	 	 
	 
	 	 
	Printed Name and Title
	 	 





 




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7. The provisions of sections 5 and 6 shall, at Standard Aero’s sole discretion, also apply to any
additional general or limited partners of KAC.



Article 23, Subcontract Administration Provisions, is amended to add the following:




23.4
PROTOCOL FOR STANDARD AERO DISCUSSIONS WITH KAC’S PBA
CUSTOMERS



1. Standard Aero shall not initiate any discussions related to PBA Work (technical or other)
directly with KAC’s PBA customers (USAF, NAVICP, USCG or their field and using command customers)
without KAC knowledge or involvement that is outside of the specific authorizations below. Nothing
herein shall affect Standard Aero’s rights to discuss with any person or entity non-PBA work.
[/ \]



2. Under the circumstances and allowances below (and only under these circumstances) Standard Aero
will continue to work directly with a PBA customer on/with:



a) Quarantined Parts — Direct discussions are permissible.



b) Quarantine Report — Direct discussions are permissible but ensure KAC’s Subcontractor Mgmt and
Program Office is copied.



c) AFTO 202s — These can continue to go directly to the USAF CEA with a copy KAC’s Subcontractor
Mgmt, Chief Engineer, KAC Technical Library and Program Office. The library will send a scanned
copy of all 202s to the KAC contact list below. Note: Any 202s or REIs that are requesting an MRB
disposition, for a condition that was the result of a Standard Aero workmanship error, or
discrepant PBA quality, should be brought to the attention of Standard Aero quality and then
coordinated with KAC Chief Inspector’s office before it is exposed to the PBA customers.



d) DCMA — In case DCMA directly calls Standard Aero on PBA technical issues, Standard Aero shall
treat it the same as above for the technical discussions (above), answer the question, and notify
the KAC Chief Inspector. If the call is to discuss a particular DR, DRs in general or quality
issues, Standard Aero shall either get the KAC Chief Inspector on the line or ask that they go
through KAC Quality. Standard Aero will not let a technical discussion turn into a quality
discussion. If DCMA comes over with questions or issues concerning PBA contract production or
quality, they will be redirected to KAC.



e) CEMS — Issues raised from field bases and OC-ALC program office personnel can be handled
directly. This includes: release of assets in CEMS, general maintenance of CEMS data, day-to-day
upkeep of CEMs records. If a conversation or issue turns into a systemic issue, an issue that will
impact Standard Aero’s ability to deliver, problems with the quality of our data in CEMS, adverse
trends or anything that sounds like an issue with PBA quality — Standard Aero shall stop and refer
the call to KAC quality and work the call/issue with KAC.




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f) Process Qualifications/Repair Development — Standard Aero can continue to work directly with
the PBA OC-ALC customer or their representative on these issues, provided that, KAC’s chief
engineer is consulted prior to any discussions. The Standard Aero Engineering Director will provide
to the KAC’s Engineering, Subcontract, Quality Assurance and Program Office a quarterly status of
the ongoing and outstanding process qualification packages.



g) Field Service Visits — These will be pre-coordinated with KAC Quality and the respective PBA
customer’s program offices before deploying resources to fix a PBA unit in the field. Standard
Aero quality shall get KAC Quality involved as soon as the call/notification comes in.



h) Technical Conferences — PBA Users Conf (USAF or USN), CIP, MPWG — As soon as Standard Aero
knows about these conferences, they will send an email to the KAC contact list below. Include the
dates, location, agenda and arrangements. KAC will participate with Standard Aero in these events.
Standard Aero shall not attend or discuss these events (excluding CIP) without KAC knowing in
advance what is expected to be briefed/discussed.



i) Non-technical Conferences or Meetings with PBA customers (Co- Forecasting, Award term review,
PMR and any performance evaluations directly related to Standard Aero’s PBA work) — KAC will
participate at all times unless it chooses not to do so.



j) PBA Customer Service Visits to Bases — These will be coordinated with KAC before hand.
Coordinate all potential visits with the KAC Program office.



k) PBA Customer requests (Program Office or Field Requests) for technical Info (email or phone) or
for Help/Trouble Shooting an engine problem — It is acceptable for Standard Aero to provide
non-protected/non-restricted shared technical experiences, its knowledge and any history it has on
a technical issue. Under no circumstances except as agreed herein should Standard Aero be
discussing PBA quality, contract or production issues. Ultimately, Standard Aero will let any
field users know that they need to call their respective DoD Program Offices for guidance,
coordination and authorization (i.e. OC-ALC/LPE, or the USN FST, NAVICP or the USCG C-130 Program
Office). If Standard Aero suspects that a PBA quality or contracts issue could arise from the
conversation, immediately email or call the KAC Chief Inspector/Quality office.



l) Request for info from the DML
PMS or Prog Mgmt functions —  Standard Aero shall direct them to
the KAC Contracts Mgr.



m) Expediting Parts directly with DLA — Standard Aero can go directly to DLA, but make sure that
KAC get the critical items list, and is informed of the items we are attempting to expedite
(potential work stoppage items). We must make sure that KAC is aware of any parts constraints
before their customer is aware. Err on the side of too much info in this area. Notify KAC Supply
Chain Management (attn: Joe Hernandez)



n) Expediting of GFM material — If GFM items need to be expedited due to production impacts;
Standard Aero will advise KAC Supply Chain Mgmt of such impacts, potential stoppages on the
shortage reports and comments column of production reports. Those expedite calls can be made to
insure that everything possible is done to alleviate work stoppage and sales impacts. Standard
Aero should make sure that KAC is aware of any parts constraints before their customer is aware.
Err on the side of too much info in this area.



o) Paint schemes and destination requests — Standard Aero will coordinate this info directly with
the PBA customer, but copy the KAC program office on all communications.




Page 7 of 12









 






p) DREAMS system input: Standard Aero will input the DRs on GFM material via DREAMS. A status
report from DREAMS is to be supplied to the KAC Subcontract Mgr to distribute as necessary.



3. Customer contact not covered above:



a) If a PBA customer contacts Standard Aero personnel directly regarding PBA work that is an issue
not covered by this Protocol list, Standard Aero shall call the KAC PBA program office who will in
turn notify the KAC responsible department.



b) In reference to purely technical discussions not covered above, KAC does not want to impede the
necessary technical dialogue from occurring between engineering departments, but at the same time
the discussions should be limited to technical discussions only. However, KAC should be advised of
any potential impacts or issues that affect the program. As the protocol has been from the
inception of the contract, the KAC Chief Engineer will be kept involved in all technical issues.
This can be done after the fact through phone calls and emails. If a technical discussion turns
into, or brings out, a quality issue (against the PBA contract) that has not been pre-coordinated
with KAC, stop the conversation. Notify Standard Aero quality and the Standard Aero PBA Program
office and reschedule the discussion with KAC contacts on the line.



c) All other conversations should not occur unless KAC is involved in the call or has provided
specific guidance to proceed without their involvement.



d) Below is the current contact list for key KAC personnel that Standard Aero should be
coordinating issues with:




	 	 	 
	[/ \]


KAC Chief Engineer

	 	[/ \]

	 
	 	 
	[/ \]


PBA Program Manager

	 	[/ \]

	 
	 	 
	[/ \]


Subcontracts Manager

	 	[/ \]

	 
	 	 
	[/ \]


Subcontracts Administrator

	 	[/ \]

	 
	 	 
	[/ \]


Contracts Manager

	 	[/ \]

	 
	 	 
	[/ \]


Chief Inspector

	 	[/ \]

	 
	 	 
	[/ \]


Quality Assurance Analyst

	 	[/ \]
 (Beeper [/ \]
) 






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SP. 7.0, Standard Aero’s Personnel, is amended to add the following:



5. Each party reserves the right to advertise for open positions but agrees not to target any
particular employees of the other for hire, without written consent, during the PBA Contract and
for one year thereafter, and for the duration of any subcontract awarded for Post-PBA T56 Work
pursuant to the terms of the Teaming Agreement. Nothing herein shall prohibit either party from
hiring a former employee of the other party one year or more after the prior employment was
terminated.



 



SP 10.0 is amended to add the following:



	(j) Notwithstanding the above, Standard Aero shall provide KAC annual price reductions as
follows:





     (i) FY 2007:
$[/ \]
 commencing October 1, 2006.



     (ii) FY 2008 through
end of PBA term: [/ \]
% of the annual TAP determined from the annual BEQs
excluding “over and above” work.


(k) The initial TAP for each year shall be the prior year’s TAP before application of the prior
year’s price reductions as depicted on the following Table:





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Note: All amounts are estimates for illustrative purposes. All figures in USD$000,000.




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Year	 	FY07	 	FY08	 	FY09	 	FY10	 	FY11	 	FY12	 	FY13	 	FY14
	[/ \ / \]

	 	$[/ \ / \]
	$[/ \ / \]
	$[/ \ / \]
	[/ \ / \]
	[/ \ / \]
	 	[/ \ / \]
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	[/ \ / \]

	 	$[/ \ / \]
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	[/ \ / \]

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	[/ \ / \]
	 	$[/ \ / \]
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	$[/ \ / \]
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 






	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Year	 	FY07	 	FY08	 	FY09	 	FY10	 	FY11	 	FY12	 	FY13	 	FY14
	[/ \ / \]

	 	$[/ \ / \]
	$[/ \ / \]
	$[/ \ / \]
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	[/ \ / \]

	 	 [/ \ / \]
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[/ \
/ \ INDICATES THAT CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED FOR THE DATA IN THIS COLUMN; IT HAS BEEN OMITTED AND FILED
SEPARATELY WITH
THE COMMISSION.]







 





FY07 Opening TAP = FY06 Unit Prices X FY07 BEQs

FY08 Opening TAP = FY07 August TAP Unit Prices X FY08 BEQs

FY09 Opening TAP = FY08 August TAP Unit Prices x FY09 BEQs

Price reduction in FY07 is fixed at $[/ \].

Price reduction in all other years is fixed at [/ \]% of actual TAP.




Per Section H-901 of F34601-99-D-0002

Economic Price Adjustment




* Material Index Use: Sept of each year




** Labor Index Use: 3rd Qtr of each year



(l) In determining proposed prices, Standard Aero shall apply
[/ \]


(m) Other than as set forth in subparagraph (j), KAC is not entitled to, and shall not seek, any
further pricing reductions from Standard Aero while this Subcontract is in effect.



 



SP 12.0, Establishment of DLA as a Direct, CFM Source of Supply for Kelly Aviation Center L.P
(KAC)(Aug. 2002), incorporated into the reference subcontract agreement through Amendment 36, is
amended as follows:



(i) Paragraph (a): Change “contractor” to “Standard Aero.” Delete: “and In Accordance With (IAW)
DLA/KAC L.P. Agreement 03-0001.” At the end of the paragraph, add: Notwithstanding this
authorization, Standard Aero may order parts from other approved US Government sources of supply
at Standard Aero’s discretion.



(ii) Paragraph (f): Amend paragraph to read:



“If Standard Aero chooses to acquire items from sources other than DLA, for those items converted
to CFM under this provision, Standard Aero shall notify KAC. If Standard Aero intends the change
to be permanent, Standard Aero will recompute its Exhibit “E” and “K” unit prices to reflect the
new prices and establish a new Exhibit “E” price. In no event shall the Exhibit “E” price exceed
the latest established Exhibit “E” price. Additionally, prior to any acquisition from vendors
other than DLA as a result of this permanent change, Standard Aero agrees to purchase the Depot
share of those affected DLA assets stocked to support the PBA contract (i.e, Standard Aero may
deplete the stocked assets on hand at the time of Standard Aero’s notice to KAC, or may make a
one-time buy of those assets on hand). If Standard Aero intends the change to be temporary due to
the inability of DLA to fill immediate requirements, an adjustment will be negotiated as deemed
necessary between Standard Aero and KAC on the one hand, and OC-ALC on the other. [/ \].”



(iii) Paragraphs (g) and (h): Change “KAC” to “Standard Aero.




	 	 	 	 	 



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[/ \ INDICATES THAT CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED AND THE HIGHLIGHTED INFORMATION HAS BEEN OMITTED AND FILED
SEPARATELY WITH
THE COMMISSION.]







 





	 	 	 	 	 
	Date: July, 11, 2006 	STANDARD AERO [SAN ANTONIO], INC.

 	 
	 	By:  	 /s/ Edward S. Richmond 
	 
	 	 	Edward S. Richmond 	 
	 	Title:  	Senior Vice President 	 
	 
	Date: July, 11, 2006 	KELLY AVIATION CENTER, LP

 	 
	 	By:  	 /s/
Marillyn Hewson 	 
	 	Name:  	Marillyn Hewson 	 
	 	Title:  	President 	 
	 




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