Payments Associated With Loss Of Work Being Performed For Cessna

An arbitration panel has found in favor of Avcorp Industries in a reimbursement dispute with Cessna, and will require the Wichita planemaker to pay the airframe component manufacturer some $27.4 million.

Avcorp received the determination of an appointed arbitration panel which was charged with resolving outstanding issues relating to cost reimbursements and compensation payable to the company in connection with the transition of Cessna Aircraft Company ("Cessna") production work back to Cessna and other suppliers. The transition of Cessna production work was first announced by the Company on December 17, 2010 and immediately following notification by Cessna, the Company had attempted to negotiate compensation payments as contemplated by the Cessna Strategic Alliance Agreement (the "SAA"). Only when negotiations and mediation were unsuccessful did the Company refer the matter to binding arbitration.

The binding arbitration award, which was delivered to the Company on November 16, 2012, determined that the SAA was an exclusive agreement between Cessna and Avcorp, and Cessna could not unilaterally transition production work from Avcorp. The panel further found that Avcorp had fulfilled the requirements of the SAA, and suffered damages as a result of Cessna transitioning production work from Avcorp.

In addition, all counterclaims that were advanced by Cessna were denied. The quantum of damages was assessed by the arbitration panel at USD 27,391,372, which amount is payable to Avcorp within 30 days of the arbitration award.

FMI: www.avcorp.com