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Sample Business Contracts

Non-Qualified Stock Option Agreement - Aviall Inc. and Paul E. Fulchino

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                      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



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         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:



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         (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




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         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.



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         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



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         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.



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         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:
                                                 ----------









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