Document:

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                                                                   Exhibit 10.16

                              EMPLOYMENT AGREEMENT

                  This Employment Agreement (this "Agreement"), dated as of
December 16, 1999, is made and entered into by and between Aviall, Inc., a
Delaware corporation (the "Company") and Paul E. Fulchino (the "Executive").

                  WHEREAS, the Company desires to obtain the Executive's
management and executive services by engaging the Executive as its President and
Chief Executive Officer and by the Executive serving as a director of the
Company;

                  WHEREAS, in order to induce the Executive to serve in such
positions, the Company desires to provide the Executive with compensation and
other benefits on the terms and conditions set forth in this Agreement; and

                  WHEREAS, the Executive is willing to accept such employment
and perform services for the Company, on the terms and conditions hereinafter
set forth;

                  NOW THEREFORE, in consideration of the promises and of the
mutual covenants herein contained, it is agreed as follows:

         1. Employment, Positions and Duties.

                  1.1 The Company hereby agrees to employ the Executive and the
Executive hereby agrees to undertake employment with the Company upon the terms
and conditions herein set forth.

                  1.2 Effective as of January 1, 2000, and thereafter during the
Term (as hereafter defined), the Executive will serve in the positions of
President and Chief Executive Officer of the Company. As promptly as practicable
following the Start Date (as hereinafter defined), the Executive will be
appointed to fill an open position as a member of the Board of Directors of the
Company (the "Board") and appointed to serve as Chairman of the Board.
Throughout the Term, the Company will use its best efforts to cause the
Executive to be included in the management slate for election as a director at
every stockholders' meeting at which his term as a director would otherwise
expire.

                  1.3 During the Term, the Executive will devote substantially
all of his working time and efforts to the performance of services, duties and
responsibilities in accordance with this Agreement. The Executive will have such
duties, functions, responsibilities and authority as are (i) consistent with the
positions set forth in Section 1.2, (ii) assigned to his positions by the bylaws
of the Company or (iii) reasonably assigned to him by the Board. The Executive
will report directly to the Board.

                  1.4 Notwithstanding the foregoing, the Executive may (i)
subject to the approval of the Board, serve as the director of a noncompeting
company, and (ii) serve as an

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officer, director, trustee or otherwise participate in solely educational,
welfare, charitable, social, religious and civic organizations.

                  1.5 In connection with his employment during the Term, unless
otherwise agreed by the Executive and the Board, the Executive will be based at
the Company's principal executive offices in Dallas, Texas. The Executive will
undertake normal business travel on behalf of the Company, the reasonable
expenses of which will be paid by the Company pursuant to Section 5.

         2. Term of Employment. The Executive's term of employment under this
Agreement (the "Term") will commence on December 21, 1999 (the "Start Date")
and, subject to the provisions of this Agreement, will terminate on the earlier
of (i) December 31, 2002 or (ii) termination of the Executive's employment
pursuant to Section 7 of this Agreement (the "Termination Date").

         3. Compensation.

                  3.1 Salary. During the Term, the Company will pay the
Executive an annual base salary ("Base Salary") of not less than $450,000. Base
Salary will be payable at the times and in the manner consistent with the
Company's general policies regarding compensation of executive employees. Base
Salary may be increased (but not decreased) in the discretion of the Board.

                  3.2 Annual Incentive Compensation. The Executive will be
eligible to participate in the current and any future management incentive
program of the Company on terms commensurate with the Executive's position and
level of responsibility; provided, however, that the Executive's annual
incentive opportunity will be not less than 100% of Base Salary. Nothing in this
Section 3.2 will guarantee to the Executive any specific amount of incentive
compensation, or prevent the Board from establishing an additional enhanced
annual incentive compensation program with performance goals and compensation
targets applicable only to the Executive.

                  3.3 Other Compensation. Nothing in this Section 3 will
preclude the Board from authorizing such additional compensation to the
Executive, in cash or in property, as the Board may determine in its sole
discretion to be appropriate.

                  3.4 Annual Performance Review. The Executive will receive an
annual performance review by the Board within a reasonable time following the
close of the Company's fiscal year.

         4. Employee Benefits.

                  4.1 Employee Benefit Programs, Plans and Practices. (i) During
the Term, subject to Section 3 and this Section 4, the Company will provide the
Executive and his eligible dependents, subject to the terms and conditions of
the applicable plans, with the opportunity to participate in all
Company-sponsored employee benefit plans, including all employee retirement
income and welfare benefit policies, plans, programs or arrangements in which
senior executives of the Company participate, in a manner commensurate with his
position and level of responsibility in the Company.

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                           (ii) The Company will arrange for supplemental term
life insurance covering the Executive in the amount of $900,000.

                           (iii) The Company will arrange for a supplemental
disability policy such that, in the aggregate, the long-term disability benefits
provided to the Executive will be 60% of Base Salary.

                           (iv) The Company will pay, or reimburse the Executive
for, the reasonable cost of a physical examination each calendar year during the
Term.

                           (v) The Executive acknowledges that the Company's
obligations to provide the benefits contemplated pursuant to Sections 4.1(ii)
and 4.1(iii) are conditioned on the Executive taking and passing any required
physical and other related examinations.

                  4.2 Vacation and Fringe Benefits. Executive will be entitled
to three weeks' vacation per year, effective on the Start Date. In addition, the
Executive will be entitled to the perquisites and other fringe benefits made
available to senior executives of the Company, commensurate with his position
and level of responsibility with the Company.

                  4.3 Temporary Living Allowance. The Executive will be entitled
to reimbursement of reasonable temporary living expenses through March 31, 2000.

         5. Expenses. The Company will promptly reimburse the Executive for all
travel and other business expenses that the Executive incurs in the course of
the performance of his duties to the Company under this Agreement in a manner
commensurate with the Executive's position and level of responsibility with the
Company and in accordance with the Company's policies relating to the
reimbursement of such expenses.

         6. Stock Option.

                  6.1 The Company will grant to Executive, effective as of
December 21, 1999, an option (the "Option") to purchase 500,000 shares of the
Company's common stock. The Option will have a 10-year term and an exercise
price equal to the closing sales price of the Company's common stock as reported
on the New York Stock Exchange on December 21, 1999. The Option will become
exercisable with respect to one-third of the shares underlying the Option on
each of the first three anniversary dates of the Start Date.

                  6.2 The definitive terms of the grant of the Option will be as
set forth in an agreement previously provided to the Executive.

         7. Termination of Employment. Notwithstanding the Term specified in
Section 2, the termination of the Executive's employment hereunder will be
governed by the following provisions:

                  7.1 Death. The Executive's employment will terminate upon his
death during the Term. In the event of the Executive's death during the Term,
the Company will pay to the

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Executive's beneficiaries or estate, as appropriate, as soon as practicable
after the Executive's death, (i) the unpaid Base Salary to which the Executive
is entitled through the date of his death, and (ii) for any accrued and unused
vacation days. This Section 7.1 will not limit the entitlement of the
Executive's estate or beneficiaries to any death or other benefits then
available to the Executive under any life insurance, stock ownership, stock
options, or other benefit plan or policy that is maintained by the Company for
the Executive's benefit or otherwise.

                  7.2 Permanent Disability. If the Executive becomes totally and
permanently disabled (as defined in the Company's long-term disability benefit
plan available to senior executive officers as in effect at the time Executive's
disability is incurred) ("Permanent Disability") during the Term, the Company or
the Executive may terminate the Executive's employment on written notice thereof
and the Company will pay to the Executive as soon as practicable: (i) the unpaid
Base Salary to which the Executive is entitled through his Termination Date,
(ii) for any accrued and unused vacation days, and (iii) such payments under
applicable plans or programs, including but not limited to those referred to in
Section 4.1, to which the Executive is entitled pursuant to the terms of such
plans or programs.

                  7.3 Voluntary Termination by Executive; Discharge for Cause.
(i) During the Term, the Company may terminate the Executive's employment
hereunder for Cause (as defined below). In the event that during the Term the
Executive's employment is terminated by the Company for Cause or by the
Executive other than for Good Reason (as defined below) or other than as a
result of the Executive's Permanent Disability or death, the Company will pay as
soon as practicable to the Executive (or his representative) (a) the unpaid Base
Salary to which the Executive is entitled through his Termination Date, and (b)
for any accrued and unused vacation days. Executive will not be entitled, among
other things, to the payment of any bonus or other incentive compensation in
respect of all or any portion of the fiscal year in which such termination
occurs.

                           (ii) For purposes of this Agreement, "Cause" shall
mean (a) the willful breach or habitual neglect of assigned duties related to
the Company, including compliance with Company policies, and such breach or
neglect is materially detrimental to the Company; (b) conviction (including any
plea of nolo contendere) of the Executive of any felony or crime involving
dishonesty or moral turpitude; (c) any act of personal dishonesty knowingly
taken by the Executive in connection with his responsibilities as an employee
and intended to result in personal enrichment of the Executive or any other
person; (d) bad faith conduct that is materially detrimental to the Company; (e)
inability of the Executive to perform the Employee's duties due to alcohol or
illegal drug use; (f) the Executive's failure to comply with any material legal
written directive of the Board; (g) any act or omission of the Executive which
is of substantial detriment to the Company because of the Executive's
intentional failure to comply with any statute, rule or regulation, except any
act or omission believed by the Executive in good faith to have been in or not
opposed to the best interest of the Company (without intent of the Executive to
gain, directly or indirectly, a profit to which the Executive was not legally
entitled) and except that Cause shall not mean bad judgment or negligence other
than habitual neglect of duty; or (h) a material breach by the Executive of the
covenants set forth in Sections 10.1, 10.2 or 10.3.

                           (iii) The Company may not terminate the Executive's
employment for Cause under this Section 7.3 unless and until the Company
provides the Executive with written

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notice from the Company accompanied by a copy of a resolution duly adopted by
the affirmative vote of not less than a majority of the Board (excluding the
Executive) finding Cause and terminating Executive's employment for Cause. A
notice of termination for Cause given under this Section 7.3 must set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
such termination.

                  7.4 Involuntary Termination. During the Term, the Executive's
employment hereunder may be terminated by the Company for any reason other than
Cause by delivery to the Executive of a written notice of termination and a copy
of a resolution duly adopted by the affirmative vote of a majority of the full
number of directors constituting the Board at a meeting of the Board called and
held for the purpose of terminating Executive's employment. The Executive will
be treated for purposes of this Agreement as having been involuntarily
terminated other than for Cause if during the Term the Executive terminates his
employment with the Company prior to termination for Cause for any of the
following reasons (each, a "Good Reason"): without the Executive's written
consent, (a) the Company has breached any material provision of this Agreement
and within 30 days after notice thereof from the Executive, the Company fails to
cure such breach; (b) a successor or assign (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company fails to assume liability under the
Agreement; (c) the failure to elect or reelect or otherwise to maintain the
Executive as President, Chief Executive Officer and as a director of the Company
(or any successor entity by operation of law or otherwise); or (d) if the
employment of the Executive is terminated by reason of the failure of the
Company to renew or extend this Agreement at the end of the Term.

                  7.5 Termination Payments and Benefits.

                           (i) Form and Amount. Upon the Executive's involuntary
termination other than for Cause pursuant to Section 7.4, the Company will pay
to the Executive (a) the unpaid Base Salary to which the Executive is entitled
through his Termination Date, (b) for any accrued and unused vacation days, (c)
a severance payment in an amount equal to the greater of (1) the Base Salary for
the remaining of the then-current Term, or (2) two times the Base Salary.
Notwithstanding anything contained in this Agreement to the contrary, the
severance payment provided in Section 7.5(i)(c) shall be in lieu of any other
severance benefit provided under any other policy or program maintained by the
Company, provided, further, that if at the time at which the Executive's
employment with the Company is terminated, he is eligible to receive the
severance benefits intended to be provided under the Severance Agreement (as
hereinafter defined), the Executive shall receive the benefits under the
Severance Agreement in lieu of the benefits provided under this Section 7.5(i)
unless the Executive elects, by giving written notice to the Company within five
business days of his Termination Date, to receive the benefits under this
Section 7.5(i) in lieu of the benefits provided under the Severance Agreement.

                           (ii) Time and Manner of Payment. The amounts due to
Executive pursuant to Section 7.5(i)(a) and Section 7.1(i)(b) will be paid by
the Company within ten days after the Executive's Termination Date. The amounts
due to the Executive pursuant to Section 7.5(i)(c) will be paid by the Company
in equal monthly installments over a period of 24 months, or if longer, the
remainder of the Term.

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                  7.6 Release and Resignation. Immediately upon Executive's
termination of employment with the Company for any reason, Executive will resign
as a member of the Board and of the board of directors of each subsidiary of the
Company and from all other positions with the Company and its subsidiaries. The
Company's obligations to Executive under this Section 7 (other than Section 7.1)
will be conditioned on Executive furnishing such resignations and on the
Executive executing a release in a form satisfactory to the Company.

         8. Mitigation and Offset. The Executive is under no obligation to
mitigate damages or the amount of any payment or benefit provided for hereunder
by seeking other employment or otherwise and no amounts earned by the Executive,
whether from self-employment, as common-law employee or otherwise, will reduce
the amount of any payment or benefit under any provision of this Agreement.

         9. Change-in-Control Provisions.

                  9.1 The Executive will be offered the Company's form of
change-in-control severance agreement (the "Severance Agreement"), to be
effective as of the Start Date and continue throughout the Term.

                  9.2 The agreement evidencing the grant of the Options will
provide that upon the occurrence of a "Change in Control" (as defined in the
Severance Agreement), the Option will become fully vested and exercisable.

         10. Covenants.

                  10.1 Confidentiality. During the Term, the Company agrees that
it will disclose to Executive its confidential or proprietary information (as
defined in this Section 10.1) to the extent necessary for Executive to carry out
his obligations under this Agreement. The Executive hereby covenants and agrees
that he will not, without the prior written consent of the Board, during the
Term or thereafter intentionally and wrongfully disclose to any person not
employed by, representing, or engaged by, the Company or any of its
subsidiaries, or to any director of the Company or any of its subsidiaries, or
intentionally and wrongfully use in connection with engaging in competition with
the Company, any confidential or proprietary information of the Company. For
purposes of this Agreement, the term "confidential or proprietary information"
means all material information of a confidential and proprietary nature and in
any form that is owned by the Company and that is not publicly available (other
than by Executive's breach of this Section 10.1) or generally known to persons
engaged in businesses similar or related to those of the Company. Confidential
or proprietary information may include, without limitation, the Company's
financial matters, customers, employees, industry contracts, strategic business
plans, product development (or other proprietary product data), marketing plans,
and all other secrets and all other information of a confidential or proprietary
nature. The foregoing obligations imposed by this Section 10.1 will not apply
(i) during the Term, in the course of the business of and for the benefit of the
Company, (ii) if such confidential or proprietary information is or will have
become, through no fault of the Executive, known to the public or (iii) if the
Executive is required by law to make disclosure (after giving the Company notice
and an opportunity to contest such requirement).

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                  10.2 Covenant Against Competition. During the Term and for a
period of two years following the Termination Date, the Executive shall not,
without the prior written consent of the Board, directly or indirectly engage or
become a partner, director, officer, principal, employee, consultant, investor,
creditor or stockholder in any business, proprietorship, association, firm or
corporation not owned or controlled by the Company or its subsidiaries which is
engaged or proposes to engage or hereafter engages in a business competitive
directly with the business conducted by the Company or any of its subsidiaries
in any geographic area where such business of the Company or any of its
subsidiaries or affiliates is conducted; provided, however, that the Executive
is not prohibited from owning one percent or less of the outstanding capital
stock of any corporation whose stock is listed on a national securities
exchange.

                  10.3 Nonsolicitation. The Executive hereby covenants and
agrees that during the Term and for two years thereafter he will not, without
the prior written consent of the Board, on his own behalf or on behalf of any
person, firm or company, directly or indirectly, solicit or attempt to solicit
any employee of the Company or its subsidiaries to give up employment with the
Company or its subsidiaries.

                  10.4 Enforcement. The Executive and the Company agree that the
covenants contained in Sections 10.1, 10.2 and 10.3 are reasonable under the
circumstances, and further agree that if in the opinion of any court of
competent jurisdiction any such covenant is not reasonable in any respect, such
court will have the right, power and authority to excise or modify any provision
or provisions of such covenants as to the court will appear not reasonable and
to enforce the remainder of the covenants as so amended. The Executive
acknowledges and agrees that the remedy at law available to the Company for
breach of any of his obligations under Sections 10.1, 10.2 and 10.3 would be
inadequate and that damages flowing from such a breach may not readily be
susceptible to being measured in monetary terms. Accordingly, the Executive
acknowledges, consents and agrees that, in addition to any other rights or
remedies that the Company may have at law, in equity or under this Agreement,
upon adequate proof of his violation of any such provision of this Agreement,
the Company will be entitled to immediate injunctive relief and may obtain a
temporary order restraining any threatened or further breach, without the
necessity of proof of actual damage.

                  10.5 Post-termination Assistance. The Executive agrees that
after his employment with the Company has terminated he will provide, upon
reasonable notice, such information and assistance to the Company as may
reasonably be requested by the Company in connection with any litigation in
which it or any of its affiliates is or may become a party; provided, however,
that the Company agrees to reimburse the Executive for any related out-of-
pocket expenses, including travel expenses.

         11. Survival. The expiration or termination of the Term will not impair
the rights or obligations of any party hereto that accrue hereunder prior to
such expiration or termination, except to the extent specifically stated herein.
In addition to the foregoing, the Parties' rights and obligations under Sections
7, 10.1, 10.2, 10.3, 10.4, 10.5 and 12.1 will survive the expiration or
termination of this Agreement or termination of Executive's employment.

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         12. Miscellaneous Provisions.

                  12.1 Dispute Resolution. Any dispute between the parties under
this Agreement will be resolved (except as provided below) through arbitration
(located in the county in which the Company's principal executive offices are
based) by an arbitrator selected under the rules of the American Arbitration
Association ("AAA") and the arbitration will be conducted in that location under
the rules of the AAA. Each party will be entitled to present evidence and
argument to the arbitrator. The arbitrator will have the right only to interpret
and apply the provisions of this Agreement and may not change any of its
provisions. The arbitrator will permit reasonable pre-hearing discovery of
facts, to the extent necessary to establish a claim or a defense to a claim,
subject to supervision by the arbitrator. The determination of the arbitrator
will be conclusive and binding upon the parties and judgment upon the same may
be entered in any court having jurisdiction thereof. The arbitrator will give
written notice to the parties stating his or their determination, and will
furnish to each party a signed copy of such determination. The expenses of
arbitration will be borne equally by the Executive and the Company or as the
arbitrator otherwise equitably determines. Notwithstanding the foregoing, the
Company will not be required to seek or participate in arbitration regarding any
breach of the Executive's covenants contained in Sections 10.1 10.2 or 10.3, but
may pursue its remedies for such breach in a court of competent jurisdiction in
the county in which the Company's principal executive offices are located. Any
arbitration or action pursuant to this Section 12.1 will be governed by and
construed in accordance with the substantive laws of the State of Texas, without
giving effect to the principles of conflict of laws of such State.

                  12.2 Binding on Successors; Assignment. This Agreement will be
binding upon and inure to the benefit of the Company, the Executive and each of
their respective successors, assigns, personal and legal representatives,
executors, administrators, heirs, distributees, devisees, and legatees, as
applicable; provided, however, that neither this Agreement nor any rights or
obligations hereunder will be assignable or otherwise subject to hypothecation
by Executive (except by will or by operation of the laws of intestate
succession) or by the Company, except that the Company may assign this Agreement
to any successor (whether by merger, purchase or otherwise) to all or
substantially all of the stock, assets or businesses of the Company, if such
successor expressly agrees to assume the obligations of the Company hereunder.

                  12.3 Governing Law. This Agreement will be governed,
construed, interpreted and enforced in accordance with the substantive laws of
the State of Texas, without regard to the principles of conflict of laws of such
State.

                  12.4 Severability. Any provision of this Agreement that is
deemed invalid, illegal or unenforceable in any jurisdiction will, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions hereof
in such jurisdiction or rendering that or any other provisions of this Agreement
invalid, illegal, or unenforceable in any other jurisdiction. If any covenant
should be deemed invalid, illegal or unenforceable because its scope is
considered excessive, such covenant will be modified so that the scope of the
covenant is reduced only to the minimum extent necessary to render the modified
covenant valid, legal and enforceable.

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                  12.5 Notices. For all purposes of this Agreement, all
communications, including without limitation notices, consents, requests or
approvals, required or permitted to be given hereunder will be in writing and
will be deemed to have been duly given when hand delivered or dispatched by
electronic facsimile transmission (with receipt thereof confirmed), or five
business days after having been mailed by United States registered or certified
mail, return receipt requested, postage prepaid, or three business days after
having been sent by a nationally recognized overnight courier service such as
Federal Express, UPS, or Purolator, addressed to the Company (to the attention
of the Secretary of the Company) at its principal executive office and to the
Executive at his principal residence, or to such other address as any party may
have furnished to the other in writing and in accordance herewith, except that
notices of changes of address will be effective only upon receipt.

                  12.6 Counterparts. This Agreement may be executed in several
counterparts, each of which will be deemed to be an original, but all of which
together will constitute one and the same Agreement.

                  12.7 Entire Agreement. The terms of this Agreement are
intended by the parties to be the final expression of their agreement with
respect to the Executive's employment by the Company and may not be contradicted
by evidence of any prior or contemporaneous agreement. The parties further
intend that this Agreement will constitute the complete and exclusive statement
of its terms and that no extrinsic evidence whatsoever may be introduced in any
judicial, administrative or other legal proceeding to vary the terms of this
Agreement.

                  12.8 Amendments; Waivers. This Agreement may not be modified,
amended, or terminated except by an instrument in writing, approved by the
Company and signed by the Executive and the Company. Failure on the part of
either party to complain of any action or omission, breach or default on the
part of the other party, no matter how long the same may continue, will never be
deemed to be a waiver of any rights or remedies hereunder, at law or in equity.
The Executive or the Company may waive compliance by the other party with any
provision of this Agreement that such other party was or is obligated to comply
with or perform only through an executed writing; provided, however, that such
waiver will not operate as a waiver of, or estoppel with respect to, any other
or subsequent failure.

                  12.9 Headings and Section References. The headings used in
this Agreement are intended for convenience or reference only and will not in
any manner amplify, limit, modify or otherwise be used in the construction or
interpretation of any provision of this Agreement. All section references are to
sections of this Agreement, unless otherwise noted.

                  12.10 Withholding. The Company will be entitled to withhold
from payment any amount of withholding required by law.

                  12.11 Legal Fees and Expenses. The Company will reimburse the
Executive for all legal fees and expenses incurred by the Executive in
connection with the review and negotiation, prior to the execution thereof, of
this Agreement and the other agreements expressly contemplated by this
Agreement, but not in excess, in the aggregate, of $5,000.

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                  IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.

                                  AVIALL, INC.

                                  By: /s/ JEFFREY J. MURPHY
                                     -----------------------------------------
                                       Jeffrey J. Murphy, Senior Vice President
                                       and General Counsel

                                   /s/ PAUL E. FULCHINO
                                  --------------------------------------------
                                  Paul E. Fulchino

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                                                                  Exhibit 10.17

                      NON-QUALIFIED STOCK OPTION AGREEMENT

         This AGREEMENT (the "Agreement") is made as of December 21, 1999 (the
"Date of Grant") by and between Aviall, Inc., a Delaware corporation (the
"Company"), and Paul E. Fulchino (the "Optionee").

         1. CERTAIN DEFINED TERMS. As used in this Agreement, the terms listed
below have the respective meanings indicated.

         (a)      "BOARD" means the Board of Directors of the Company and to
                  the extent of any delegation by the Board to a committee (or
                  subcommittee thereof), such committee (or subcommittee).

         (b)      "CAUSE" means (a) the willful breach or habitual neglect of
                  assigned duties related to the Company, including compliance
                  with Company policies, and such breach or neglect is
                  materially detrimental to the Company; (b) conviction
                  (including any plea of nolo contendere) of the Optionee of
                  any felony or crime involving dishonesty or moral turpitude;
                  (c) any act of personal dishonesty knowingly taken by the
                  Optionee in connection with his responsibilities as an
                  employee and intended to result in personal enrichment of the
                  Optionee or any other person; (d) bad faith conduct that is
                  materially detrimental to the Company; (e) inability of the
                  Optionee to perform the Employee's duties due to alcohol or
                  illegal drug use; (f) the Optionee's failure to comply with
                  any material legal written directive of the Board; or (g) any
                  act or omission of the Optionee which is of substantial
                  detriment to the Company because of the Optionee's
                  intentional failure to comply with any statute, rule or
                  regulation, except any act or omission believed by the
                  Optionee in good faith to have been in or not opposed to the
                  best interest of the Company (without intent of the Optionee
                  to gain, directly or indirectly, a profit to which the
                  Optionee was not legally entitled) and except that Cause
                  shall not mean bad judgment or negligence other than habitual
                  neglect of duty.

         (c)      "CHANGE OF CONTROL" shall have the meaning provided in
                  Section 11 of this Agreement.

         (d)      "CODE" means the Internal Revenue Code of 1986, as amended
                  from time to time.

         (e)      "COMMON SHARES" means the shares of Common Stock, par value
                  $.01 per share of the Company or any security into which such
                  Common Shares may be changed by reason of any transaction or
                  event.

         (f)      "DIRECTOR" means a member of the Board of Directors of the
                  Company.

         (g)      "SUBSIDIARY" means a corporation, company or other entity (i)
                  more than 50 percent of whose outstanding shares or
                  securities (representing the right to vote generally in the
                  election of directors or other managing authority) are, or
                  (ii) which

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                  does not have outstanding shares or securities (as may be the
                  case in a partnership, joint venture or unincorporated
                  association), but more than 50 percent of whose ownership
                  interest representing the right generally to make decisions
                  for such other entity is, now or hereafter, owned or
                  controlled, directly or indirectly, by the Company.

         (h)      "VOTING POWER" means at any time, the total votes relating to
                  the then-outstanding securities entitled to vote generally in
                  the election of Directors.

2.       GRANT OF STOCK OPTION. Subject to and upon the terms, conditions, and
         restrictions set forth in this Agreement, the Company hereby grants to
         the Optionee as of the Date of Grant a stock option (the "Option") to
         purchase 500,000 Common Shares (the "Optioned Shares"). The price
         which the Optioned Shares may be purchased pursuant to this Option
         shall be $7.3125 per share subject to adjustment as hereinafter
         provided (the "Option Price").

3.       TERM OF OPTION. The term of the Option shall commence on the Date of
         Grant and, unless earlier terminated in accordance with Section 6
         hereof, shall expire ten (10) years from the Date of Grant.

4.       RIGHT TO EXERCISE. Subject to the expiration or earlier termination of
         the Option, on the first anniversary of the Date of Grant, 166,666 of
         the Optioned Shares specified in this Agreement shall become
         exercisable, on the second anniversary of the Date of Grant, 166,667
         of the Optioned Shares shall become exercisable, and on the third
         anniversary of the Date of Grant, 166,666 of the Optioned Shares
         specified in this Agreement shall become exercisable, on a cumulative
         basis until the Option is fully exercisable. To the extent the Option
         is exercisable, it may be exercised in whole or in part, but may not
         be exercised for less than one thousand (1,000) Optioned Shares unless
         such lesser number of Optioned Shares represents all of the remaining
         balance then exercisable. In no event shall the Optionee be entitled
         to acquire a fraction of one Optioned Share pursuant to this Option.
         The Optionee shall be entitled to the privileges of ownership with
         respect to Optioned Shares purchased and delivered to the Optionee
         upon the exercise of all or part of this Option.

5.       TRANSFERABILITY. (a) Except as provided in Section 5(b), the Option
         granted hereby shall be neither transferable nor assignable by the
         Optionee other than by will or by the laws of descent and distribution
         and may be exercised, during the lifetime of the Optionee, only by the
         Optionee, or in the event of his legal incapacity, by his guardian or
         legal representative acting on behalf of the Optionee in a fiduciary
         capacity under state law and court supervision.

         (b) Notwithstanding the provisions of Section 5(a), the Option shall
         be transferable by the Optionee, without payment of consideration
         therefor by the transferee, to any one or more members of the
         Optionee's Immediate Family (or to one or more trusts established
         solely for the benefit of one or more members of the Optionee's
         Immediate Family or to one or more partnerships in which the only
         partners are members of the Optionee's Immediate

                                       2
<PAGE>   3

         Family); provided, however, that (i) no such transfer shall be
         effective unless reasonable prior notice thereof is delivered to the
         Company and such transfer is thereafter effected in accordance with
         any terms and conditions that shall have been made applicable thereto
         by the Company or the Board and (ii) any such transferee shall be
         subject to the same terms and conditions hereunder as the Optionee.
         For this purpose, "Immediate Family" has the meaning ascribed thereto
         in Rule 16a-1(e) under the Securities and Exchange Act of 1934, as
         amended, as in effect from time to time (the "Exchange Act").

6.       NOTICE OF EXERCISE; PAYMENT. To the extent then exercisable, the
         Option may be exercised by written notice to the Company stating the
         number of Optioned Shares for which the Option is being exercised and
         the intended manner of payment. Payment equal to the aggregate Option
         Price of the Optioned Shares for which the Option is being exercised
         shall be tendered in full with the notice of exercise to the Company
         in cash in the form of currency, certified check or other cash
         equivalent acceptable to the Company. At the Company's option, the
         Optionee may also tender the Option Price by (a) the actual or
         constructive transfer to the Company of nonforfeitable, nonrestricted
         Common Shares that have been owned by the Optionee for (i) more than
         one year prior to the date of exercise and for more than two years
         from the date on which the option was granted, if they were originally
         acquired by the Optionee pursuant to the exercise of an incentive
         stock option, within the meaning of Section 422 of the Code or (ii)
         more than six months prior to the date of exercise, if they were
         originally acquired by the Optionee other than pursuant to the
         exercise of an incentive stock option, or (b) by any combination of
         the foregoing methods of payment, including a partial tender in cash
         and a partial tender in nonforfeitable, nonrestricted Common Shares.
         Within ten days thereafter, the Company shall direct the due issuance
         of the Optioned Shares so purchased. Nonforfeitable, nonrestricted
         Common Shares that are transferred by the Optionee in payment of all
         or any part of the Option Price shall be valued on the basis of their
         fair market value per Common Share (as determined in good faith by the
         Board). The requirement of payment in cash shall be deemed satisfied
         if the Optionee makes arrangements that are satisfactory to the
         Company with a bank or broker that is a member of the National
         Association of Securities Dealers, Inc. to sell on the exercise date a
         sufficient number of Optioned Shares that are being purchased pursuant
         to the exercise, so that the net proceeds of the sale transaction will
         at least equal the amount of the aggregate Option Price plus payment
         of any applicable withholding taxes, and pursuant to which the bank or
         broker undertakes to deliver to the Company the amount of the
         aggregate Option Price plus payment of any applicable withholding
         taxes, on a date satisfactory to the Company, but not later than the
         date on which the sale transaction will settle in the ordinary course
         of business. As a further condition precedent to the exercise of this
         Option, the Optionee shall comply with all regulations and
         requirements of any regulatory authority having control of, or
         supervision over, the issuance of Common Shares and in connection
         therewith shall execute any documents that the Board shall in its sole
         discretion deem necessary or advisable. The date of such notice shall
         be the exercise date.

7.       TERMINATION OF AGREEMENT. This Agreement and the Option granted hereby
         shall terminate automatically and without further notice on the
         earliest of the following dates:

                                       3
<PAGE>   4

         (a)      One year after the Optionee's death or permanent and total
                  disability, if the Optionee dies or becomes permanently and
                  totally disabled while in the employ of the Company or during
                  the ninety (90) day period specified in Section 7(c) hereof;

         (b)      One year after the Optionee's retirement under a retirement
                  plan of the Company or one of its Subsidiaries at or after
                  the earliest voluntary retirement age provided for in such
                  retirement plan or retirement at any earlier age with the
                  consent of the Board;

         (c)      Except as provided on a case-by-case basis, ninety (90)
                  calendar days after the Optionee ceases to be an employee of
                  the Company and its Subsidiaries for any reason other than as
                  described in Section 7(a) or 7(b) hereof; or

         (d)      Ten (10) years from the Date of Grant.

In the event that the Optionee's employment is terminated for Cause, the
Agreement shall terminate at the time of such termination notwithstanding any
other provision of this Agreement. This Agreement shall not be exercisable for
any number of Optioned Shares in excess of the number of Optioned Shares for
which this Agreement is then exercisable, pursuant to Sections 4 and 8 hereof,
on the date of termination of employment. For the purposes of this Agreement,
the continuous employment of the Optionee with the Company shall not be deemed
to have been interrupted, and the Optionee shall not be deemed to have ceased
to be an employee of the Company, by reason of the transfer of his employment
among the Company and its Subsidiaries or a leave of absence of not more than
ninety (90) days approved by the Board. For the purposes of this Agreement,
"permanent and total disability" shall be defined by Section 22(e)(3) of the
Code.

8.       ACCELERATION OF OPTION. The Option granted hereby shall become
         immediately exercisable in full in the event of (i) a Change of
         Control, (ii) the Optionee's permanent and total disability if the
         Optionee becomes permanently and totally disabled while an employee of
         the Company or one of its Subsidiaries, or (iii) the death of the
         Optionee if such death occurs while the Optionee is employed by the
         Company or one of its Subsidiaries.

9.       NO EMPLOYMENT CONTRACT. Nothing contained in this Agreement shall
         confer upon the Optionee any right with respect to continuance of
         employment by the Company, nor limit or affect in any manner the right
         of the Company to terminate the employment or adjust the compensation
         of the Optionee.

10.      TAXES AND WITHHOLDING. To the extent that the Company shall be
         required to withhold any federal, state, local or foreign taxes in
         connection with the exercise of the Option, and the amounts available
         to the Company for such withholdings are insufficient, it shall be a
         condition to the exercise of the Option that the Optionee shall pay
         such taxes or make provisions that are satisfactory to the Company for
         the payment thereof. The Optionee may elect to satisfy all or any part
         of any such withholding obligation by (a) surrendering to the Company
         a portion of the Optioned Shares that are issued or transferred to the
         Optionee upon the exercise of the Option, and the Optioned Shares so
         surrendered by the

                                       4
<PAGE>   5

         Optionee shall be credited against any such withholding obligation at
         the Fair Market Value per Common Share of such shares on the date of
         such surrender or (b) utilizing the bank or broker assistance
         arrangement provided in Section 6. The Company will pay any and all
         issue and other taxes in the nature thereof which may be payable by
         the Company in respect of any issue or delivery upon a purchase
         pursuant to this Option.

11.      FRACTIONAL SHARES. The Company shall not be required to issue any
         fractional Common Shares pursuant to this Agreement. The Board may
         provide for the elimination of fractions or for the settlement of
         fractions in cash.

12.      CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
         Control" shall mean if at any time any of the following events shall
         have occurred:

         (a)      The Company is merged or consolidated or reorganized into or
                  with another corporation or other legal person, and as a
                  result of such merger, consolidation or reorganization less
                  than a majority of the combined voting power of the
                  then-outstanding securities of such corporation or person
                  immediately after such transaction are held in the aggregate
                  by the holders of securities entitled to vote generally in
                  the election of Directors immediately prior to such
                  transaction;

         (b)      The Company sells or otherwise transfers all or substantially
                  all of its assets to any other corporation or other legal
                  person, and less than a majority of the combined voting power
                  of the then-outstanding securities of such corporation or
                  person immediately after such sale or transfer is held in the
                  aggregate by the holders of Common Shares immediately prior
                  to such sale or transfer;

         (c)      There is a report filed on Schedule 13D or Schedule 14D-1 (or
                  any successor schedule, form or report), each as promulgated
                  pursuant to the Exchange Act, disclosing that any person (as
                  the term "person" is used in Section 13(d)(3) or Section
                  14(d)(2) of the Exchange Act) has become the beneficial owner
                  (as the term "beneficial owner" is defined under Rule 13d-3
                  or any successor rule or regulation promulgated under the
                  Exchange Act) of securities representing 20% or more of the
                  Voting Power;

         (d)      The Company files a report or proxy statement with the
                  Securities and Exchange Commission pursuant to the Exchange
                  Act disclosing in response to Form 8-K or Section 14A (or any
                  successor schedule, form or report or item therein) that a
                  change in control of the Company has or may have occurred or
                  will or may occur in the future pursuant to any then-existing
                  contract or transaction; or

         (e)      If during any period of two consecutive years, individuals
                  who at the beginning of any such period constitute the
                  Directors cease for any reason to constitute at least a
                  majority thereof, unless the election, or the nomination for
                  election by the Company's stockholders, of each Director
                  first elected during such period was approved by a vote of at
                  least two-thirds of the Directors then still in office who
                  were Directors at the beginning of any such period.

                                       5
<PAGE>   6

         Notwithstanding the foregoing provisions of Sections 11(c) and (d)
         above, a "Change in Control" shall not be deemed to have occurred for
         purposes of this Agreement (i) solely because (A) the Company; (B) a
         Subsidiary; or (C) any Company-sponsored employee stock ownership plan
         or other employee benefit plan of the Company either files or becomes
         obligated to file a report or proxy statement under or in response to
         Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any
         successor schedule, form or report or item therein) under the Exchange
         Act, disclosing beneficial ownership by it of shares, whether in
         excess of 20% of the Voting Power or otherwise, or because the Company
         reports that a change of control of the Company has or may have
         occurred or will or may occur in the future by reason of such
         beneficial ownership or (ii) solely because of a change in control of
         any Subsidiary.

13.      COMPLIANCE WITH LAW. The Company will file a registration statement on
         Form S-8 with the Securities and Exchange Commission in order to
         register the Common Shares issuable upon exercise of the Option and
         shall use reasonable efforts to cause such registration statement to
         be declared effective and to remain effective during any period in
         which the Option is exercisable. The Company shall make reasonable
         efforts to comply with all applicable federal and state securities
         laws; provided, however, notwithstanding any other provision of this
         Agreement, the Option shall not be exercisable if the exercise thereof
         would result in a violation of any such law.

14.      ADJUSTMENTS. The Board may make or provide for such adjustments in the
         number of Optioned Shares covered by this Option, in the Option Price
         applicable to such Option, and in the kind of shares covered thereby,
         as the Board, in its sole discretion, exercised in good faith, may
         determine is equitably required to prevent dilution or enlargement of
         the Optionee's rights that otherwise would result from (a) any stock
         dividend, stock split, combination of shares, recapitalization, or
         other change in the capital structure of the Company, (b) any merger,
         consolidation, spin-off, split-off, spin-out, split-up,
         reorganization, partial or complete liquidation, or other distribution
         of assets or issuance of rights or warrants to purchase securities, or
         (c) any other corporate transaction or event having an effect similar
         to any of the foregoing. In the event of any such transaction or
         event, the Board, in its discretion, may provide in substitution for
         this Option such alternative consideration as it may determine to be
         equitable in the circumstances and may require in connection therewith
         the surrender of this Option.

15.      AVAILABILITY OF COMMON SHARES. The Company shall at all times until
         the expiration of the Option reserve and keep available, either in its
         treasury or out of its authorized but unissued Common Shares, the full
         number of Optioned Shares deliverable upon the exercise of this
         Option.

16.      AMENDMENTS. The Board and the Optionee may at any time and from time
         to time amend this Agreement in whole or in part; provided, however,
         that any amendment which must be approved by the stockholders of the
         Company in order to comply with applicable law or the rules of the New
         York Stock Exchange or, if the Common Shares are not traded on the New
         York Stock Exchange, the principal national securities exchange upon
         which the

                                       6
<PAGE>   7

         Common Shares are traded or quoted, shall not be effective unless and
         until such approval has been obtained.

17.      SEVERABILITY. In the event that one or more of the provisions of this
         Agreement shall be invalidated for any reason by a court of competent
         jurisdiction, any provision so invalidated shall be deemed to be
         separable from the other provisions hereof, and the remaining
         provisions hereof shall continue to be valid and fully enforceable.

18.      INTERPRETATION. The interpretation and construction by the Board of
         any provision of this Agreement and any determination by the Board
         pursuant to any provision of this Agreement shall be final and
         conclusive. No member of the Board shall be liable for any such
         determination made in good faith. The Board shall, except as expressly
         provided otherwise herein, have the right to determine any questions
         which arise in connection with this Option or its exercise. Any
         reference herein to a provision of a statute, rule or regulation shall
         also include any successor provision thereto.

19.      SUCCESSORS AND ASSIGNS. Without limiting Section 5 hereof, the
         provisions of this Agreement shall inure to the benefit of, and be
         binding upon, the successors, administrators, heirs, legal
         representatives and assigns of the Optionee, and the successors and
         assigns of the Company.

20.      GOVERNING LAW. The interpretation, performance, and enforcement of
         this Agreement shall be governed by the laws of the State of Texas,
         without giving effect to the principles of conflict of laws thereof.

21.      NOTICES. Any notice to the Company provided for herein shall be in
         writing to the Company, marked Attention: General Counsel, and any
         notice to the Optionee shall be addressed to the Optionee at his
         address on file with the Company. Except as otherwise provided herein,
         any written notice shall be deemed to be duly given if and when
         delivered personally or deposited in the United States mail, first
         class certified or registered mail, postage and fees prepaid, return
         receipt requested, and addressed as aforesaid. Any party may change
         the address to which notices are to be given hereunder by written
         notice to the other party as herein specified (provided that for this
         purpose any mailed notice shall be deemed given of the third business
         day following deposit of the same in the United States mail.

                                       7
<PAGE>   8

         IN WITNESS WHEREOF, The Company has caused this Agreement to be
executed on its behalf by its duly authorized officer and Optionee has also
executed this Agreement in duplicate, as of the day and year first above
written.

ATTEST                             AVIALL, INC.

                                    /s/ JEFFREY J. MURPHY
--------------------------         --------------------------------------------
                                   Jeffrey J. Murphy
                                   Senior Vice President and General Counsel

                         OPTIONEE

                          /s/ PAUL E. FULCHINO
                         ----------------------------------
                         Paul E. Fulchino
                         Social Security Number:
                                                 ----------

                                       8

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