-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uo8BjwZb02bogsxnw6NkdJgokHJleXV/sGRIxLM0dEcARBvOqk1UA2mP9u/fcwy1 PBveGDlpJDs3uT6dhHGlPw== 0000899243-96-001005.txt : 19960812 0000899243-96-001005.hdr.sgml : 19960812 ACCESSION NUMBER: 0000899243-96-001005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960809 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FEDERAL EXPRESS CORP CENTRAL INDEX KEY: 0000230211 STANDARD INDUSTRIAL CLASSIFICATION: AIR COURIER SERVICES [4513] IRS NUMBER: 710427007 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07806 FILM NUMBER: 96606765 BUSINESS ADDRESS: STREET 1: 2005 CORPORATE AVE CITY: MEMPHIS STATE: TN ZIP: 38132 BUSINESS PHONE: 9013693600 MAIL ADDRESS: STREET 1: 2005 CORPORATE AVE CITY: MEMPHIS STATE: TN ZIP: 38132 10-K 1 FORM 10-K =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (MARK ONE) /x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED MAY 31, 1996. OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) FOR THE TRANSITION PERIOD FROM ______________ TO ______________. COMMISSION FILE NUMBER 1-7806 FEDERAL EXPRESS CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 71-0427007 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2005 CORPORATE AVENUE, MEMPHIS, TENNESSEE 38132 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (901) 369-3600 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ------------------- ------------------------ Common Stock, par value $.10 per share New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K ((S) 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / As of July 31, 1996, 56,944,841 shares of the Registrant's Common Stock were outstanding and the aggregate market value of the voting stock held by non- affiliates of the Registrant (based on the average bid and asked prices of such stock on the New York Stock Exchange) was approximately $4,030,802,040. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Stockholders for the fiscal year ended May 31, 1996 are incorporated by reference into Parts II and IV. Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held October 1, 1996 are incorporated by reference into Part III. =============================================================================== TABLE OF CONTENTS
PAGE ---- PART I ITEM 1. Business......................................................... 1 ITEM 2. Properties....................................................... 11 ITEM 3. Legal Proceedings................................................ 13 ITEM 4. Submission of Matters to a Vote of Security Holders.............. 14 Executive Officers of the Registrant............................. 15 PART II ITEM 5. Market for the Registrant's Common Stock and Related Stockholder Matters.......................................................... 18 ITEM 6. Selected Financial Data........................................... 18 ITEM 7. Management's Discussion and Analysis.............................. 18 ITEM 8. Financial Statements and Supplementary Data....................... 18 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............................ 18 PART III ITEM 10. Directors and Executive Officers of the Registrant.............. 18 ITEM 11. Executive Compensation.......................................... 19 ITEM 12. Security Ownership of Certain Beneficial Owners and Management.. 19 ITEM 13. Certain Relationships and Related Transactions.................. 19 PART IV ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.... 19 FINANCIAL STATEMENT SCHEDULE INDEX Report of Independent Public Accountants on Financial Statement Schedule.... S-1 SCHEDULE II Valuation and Qualifying Accounts............................. S-2 EXHIBIT INDEX............................................................... E-1
PART I ITEM 1. BUSINESS INTRODUCTION AND RECENT DEVELOPMENTS - ------------------------------------ Federal Express Corporation (the "Company") was incorporated in Delaware on June 24, 1971 and began operations in 1972. The Company offers a wide range of express services for the time-definite transportation of documents, packages and freight throughout the world using an extensive fleet of aircraft and vehicles and leading-edge information technologies. During fiscal year 1996, the Company continued to expand and improve its global network of aviation, ground and information links between the major trading centers of the Americas, Europe and Asia. The most significant expansion was the launch of the Company's FedEx AsiaOne/R/ network. With FedEx AsiaOne, the Company now connects Asia's major cities with late-in-the day pickups and door-to-door, next-business-day deliveries, and provides Asia-to- North America daily all-cargo flights. The Company also allocated larger aircraft to its three daily trans-Atlantic flights, added a fifth daily trans- Pacific flight and became the only U.S. all-cargo carrier authorized to fly into and out of the People's Republic of China. In September 1995, the Company unveiled FedEx First Overnight,/SM/ an 8:00 a.m. next business day delivery service from almost anywhere in the U.S. to more than 90 major U.S. markets and, in March 1996, began FedEx International First,/SM/ an 8:00 a.m. one to two business day delivery service for import shipments to more than 90 U.S. cities from 18 business centers around the world. The Company also added new Airbus A300 aircraft and introduced new innovative technologies aimed at improving customer satisfaction while reducing the resources required to serve customer needs, including the introduction of shipment status tracking on the Company's World Wide Web page (http://www.fedex.com). FEDEX SERVICES - -------------- The Company offers four U.S. domestic overnight delivery services: FedEx First Overnight, FedEx Priority Overnight,/R/ FedEx Standard Overnight/R/ and FedEx/R/ Overnight Freight. Overnight document and package service extends to virtually the entire United States population and overnight freight service covers all major and most medium-size metropolitan areas. Packages and documents are either picked up from shippers by Company couriers or are dropped off by shippers at Company facilities, FedEx World Service Centers,/R/ FedEx/R/ Drop Boxes, FedEx ShipSites/R/ or FedEx Authorized ShipCenters/SM/ strategically located throughout the country. The Company's newest overnight delivery service is FedEx First Overnight. This next business day service offers scheduled delivery by 8:00 a.m. to over 90 U.S. cities from anywhere in the United States (except Hawaii) for packages weighing up to 150 pounds. FedEx Priority Overnight, scheduled for delivery in most communities no later than 10:30 a.m. local time the following business day, is designed for packages weighing up to 150 pounds. Also available are Saturday delivery service and Saturday pick-up for delivery the following Monday. FedEx Standard Overnight is similar to, though more economical than, FedEx Priority Overnight with delivery scheduled no later than 3:00 p.m. local time the following business day in most communities. Company-provided packaging (FedEx Letter Envelope, FedEx Pak, FedEx Box, FedEx Tube and FedEx Diagnostic Specimen Envelope) is provided as part of these overnight services. FedEx Overnight Freight is scheduled for delivery by noon or 4:30 p.m. the following business day, depending on the recipient's location, and is designed for individual shipments weighing 151 to 750 pounds. Shipments exceeding 750 pounds will be accepted if advance approval is obtained. Two U.S. domestic second-day services are available for less urgent shipments: FedEx 2Day/SM/ and FedEx 2Day Freight./SM/ FedEx 2Day is designed for packages weighing up to 150 pounds. FedEx 2Day shipments are scheduled for delivery in most communities no later than 4:30 p.m. (7:00 p.m. for shipments destined for private residences) the second business day following pick-up. FedEx 2Day Freight is a time-definite U.S. domestic freight service for individual shipments weighing 151 to 1,500 pounds. Shipments exceeding 1,500 pounds will be accepted if advance approval is obtained. Shipments are scheduled for delivery no later than 4:30 p.m. the second business day in all major and most medium-size metropolitan areas. U.S. domestic overnight and second-day services are primarily used by customers for shipment of time-sensitive documents and goods, high-value machines and machine parts, computer parts, software and consumer items from manufacturers, distributors and retailers and to retailers, manufacturers and consumers. Company employees handle virtually every shipment from origin to destination. The Company's Collect On Delivery (C.O.D.) service provides the fastest payment return in the express industry. C.O.D. payments are returned to shippers within one or two business days compared to competitors' services which can take as long as 45 days. Like the Company's other domestic services, C.O.D. service offers money-back guarantees on timely delivery and on the Company's ability to track and provide the status of any package in its system. FedEx SameDay/SM/ service is for urgent shipments to virtually any U.S. destination. This service is available seven days a week, 24 hours a day, where available, and is designed for packages weighing up to 70 pounds that cannot wait until the next day to be delivered. The Company introduced FedEx Express Saver/SM/ Freight in 1996, a distance- based, one, two or three business-day, time-definite service. FedEx Express Saver Freight shipments are committed for delivery by 4:30 p.m. to virtually all locations in the continental United States. This service is designed as an express alternative to time-indefinite "less-than-truckload" shipments. In addition to the services discussed above, the Company offers various international document and package delivery services and international freight services. FedEx International First/SM/is the Company's fastest international service with delivery of import shipments by 8:00 a.m. within one to two business days to more than 90 U.S. cities from 18 business centers around the world. Customs clearance is included as part of this service. FedEx International Priority/R/ ("IP") is a time-definite service for documents and packages weighing up to 150 pounds. Customs clearance is included as part of this service. The broker selection option for IP service permits customers to designate their own customs broker for clearance. Pick-up and delivery are provided from any point in the Company's global network. Delivery is generally scheduled within one to three business days depending on the origin and destination of the shipment and commodity limitations imposed by authorities in the destination country. Size, weight and commodity limitations vary according to destination. FedEx International Priority/R/ Freight is an expansion of IP service and is a time-definite service for international shipments weighing 151 to 1,500 pounds. Customs clearance is included as part of this service or customers are permitted to designate their own customs broker for clearance where not 2 prohibited by destination country laws. Pick-up and delivery are provided from many points in the Company's domestic and international network around the world. Delivery is generally scheduled within one to three business days depending on the origin and destination of the shipment and commodity limitations imposed by authorities in the destination country. Size, weight and commodity limitations vary according to destination. FedEx International Priority Plus/R/ is an overnight service for packages (up to 70 pounds) and documents shipped from New York City to Amsterdam, Brussels, Buenos Aires, Dublin, Frankfurt (documents only), Geneva, London, Madrid (documents only), Milan (documents only), Paris, Rio De Janeiro (documents only), Rome (documents only), Sao Paulo (documents only) and Zurich. IP Plus shipments must be picked up or dropped off in most locations by 3:00 p.m. for delivery the next business day. EXPRESSfreighter/R/ routing, discussed below, allows overnight service from major locations in Europe and Asia to be scheduled for 10:30 a.m. delivery on the next business day to many United States destinations and to major business centers in Canada and Mexico. More economical than IP service, FedEx International Priority Direct Distribution/SM/ is a time-definite service for larger bulk shipments destined to several different recipients in one country. Once the bulk shipment arrives in the destination country and the entire shipment clears, the individual packages are separated and delivered to the recipients. Weight and size restrictions are the same as for IP service, with transit time one to two days longer. FedEx International MailService/R/ provides for the pick-up, transportation and sorting of nondutiable, printed material and certain low- value, dutiable items which are tendered for delivery to postal services throughout the world. Generally, material sent by FedEx International MailService for premium service is delivered to recipients within four to seven days, while receipt of material sent by FedEx International MailService for standard service takes seven to eleven days. FedEx International Economy/SM/ is a deferred, customs-cleared service for shipments of unlimited weight (except individual boxes within the shipment may not exceed 150 pounds). This service is available Monday through Friday only between the United States and Canada with a delivery commitment of two to three business days by 5:00 p.m. This service offers customers cost-effective rates, customs clearance, package tracking and the Company's money-back guarantee on service commitments. FedEx International Express Freight,/R/ a freight service for shipments of nearly any weight, size or shape, is available between major markets in North America, Asia, Australia, Europe and South America. This service, providing scheduled delivery from one to three business days depending on destination, is designed for shippers desiring time-definite, committed delivery with the option of customs clearance provided by the Company. Commodity limitations vary according to destination. FedEx International Airport-to-Airport/SM/ is an international airfreight service designed for freight forwarders and agents who do not require a time- definite, committed delivery. Space-available service is offered to and from virtually any airport around the world for airfreight shipments of nearly any weight, size or shape, with arrival at the destination airport from two to four days after tender of the shipment. If the Company's aircraft do not serve the destination airport, another carrier's services are used pursuant to an "interline" agreement or other arrangement with such carrier. Commodity limitations vary according to destination. 3 CHARTER SERVICES AND CRAF PARTICIPATION - --------------------------------------- The Company offers commercial and military charter services which supplement the utilization of aircraft capacity when not needed in the Company's scheduled operations. In addition to providing these charter services, the Company participates in the Civil Reserve Air Fleet ("CRAF") program. Under this program, the Department of Defense may requisition for military use certain of the Company's wide-bodied aircraft in the event of a declared need, including a national emergency. The Company is compensated for the operation of any aircraft requisitioned under the CRAF program at standard contract rates established each year in the normal course of awarding contracts. Through its participation in the CRAF program, the Company is entitled to bid on peacetime military cargo charter business. The Company, together with a consortium of other carriers, currently contracts with the U.S. Government for charter flights. The Company, while continuing to participate in the CRAF program and continuing to bid on military charters with respect to the carriage of cargo, discontinued military passenger flights at the end of September 1992. During fiscal 1996, revenues from charter operations accounted for approximately 0.9% of the Company's total revenues and approximately 1.2% and 1.3% of total revenues during fiscal 1995 and 1994, respectively. LOGISTICS, ELECTRONIC COMMERCE AND CATALOG - ------------------------------------------ Logistics, Electronic Commerce and Catalog ("LECC"), formerly FedEx Logistics Services, is a division of the Company which offers a full range of global and regional logistics, information and marketing solutions as well as other innovative services. LECC focuses on markets where delivering high-speed, time-definite, information-intensive solutions provide significant customer value. In 1996, LECC expanded its information systems focus to solutions that enable customers to do business electronically -- ranging from order-entry to after-sales support. The combination of these electronic commerce capabilities and the Company's global transportation and information network will allow the Company's customers to redesign their supply chains to reduce cost and improve service to their customers. LECC solutions include FedEx PowerPartner,/R/ an electronic order entry system, FedEx interNetShip,/SM/ FedEx Ship/R/ and the FedEx POWERSHIP/R/ options discussed below, FedEx Express Distribution Center/SM/ facilities and services such as EMerge,/R/ FedEx Repair and Return and FedEx International Priority DirectDistribution. FedEx Express Distribution Center facilities are part of LECC's inventory management and warehouse service. LECC customers warehouse their time-sensitive goods in the Company's distribution facilities, and the Company in turn accepts and fills customer orders and delivers the goods to the end user through the Company's global transportation network. EMerge is designed for customers that source components in multiple locations. EMerge consolidates shipments en route so that components from different U.S. locations are delivered the same day. FedEx Repair and Return is a domestic door-to-door, fast cycle repair service where the Company manages the pickup, repair and return of defective computers and other electronics products. Woven throughout these solutions and services is the Marketing Advantage Program. Through this consulting program, LECC offers advice to catalogers and direct marketers regarding customized promotional strategies, telemarketing training, operational support and international mailing services. This program helps the Company's customers improve their businesses by marketing their use of FedEx value-added logistics and electronic commerce services to their customers. 4 LECC has offices and operating locations in Memphis and other key U.S. cities, the United Kingdom, Belgium, France, the Netherlands, the United Arab Emirates, Singapore, Hong Kong, the Philippines and Japan to serve its customers globally. PRICING - ------- The Company periodically publishes list prices in its Service Guides for the majority of its services. In general, domestic shipping rates are based on the service selected, weight, size, any ancillary service charge and whether or not the shipment is picked up by a Company courier or dropped off by the customer at a Company location. International rates are based on the type of service provided and vary with size, weight and destination. The Company offers its customers volume discounts generally based on actual or potential average daily revenue produced. Discounts are determined by reference to several local and national revenue bands developed by the Company. In general, the more revenue a particular customer produces, the greater the discount. Of the more than two million current customers of the Company, a significant portion participates in its discount program. SERVICE REVENUES - ---------------- The following table shows the amount of revenues generated for each class of service offered for the fiscal years ending May 31 (amounts in thousands): 1996 1995 1994 ----------- ---------- ---------- FedEx Priority Overnight $ 4,170,254 $3,908,837 $3,737,022 FedEx Standard Overnight 1,616,538 1,374,440 1,178,628 FedEx 2Day 1,365,430 1,284,297 1,110,543 Domestic freight services 132,122 132,672 115,365 International priority services 1,996,827 1,679,830 1,338,795 International freight services 554,143 580,315 504,738 Charter 92,389 115,062 113,446 LECC and other* 345,916 316,620 380,919 ----------- ---------- ---------- Total $10,273,619 $9,392,073 $8,479,456 =========== ========== ========== *Includes revenues generated by the specialized services summarized above under "Logistics, Electronic Commerce and Catalog." Also, includes revenues from sales of aircraft engine noise-reduction kits, non-U.S. intra-country operations and Warren Transport, Inc. (sold September 1993). SEASONALITY OF BUSINESS - ----------------------- The Company's express package business and international airfreight business are both seasonal in nature. Historically, the domestic package business experiences an increase in late November and December. International business, particularly in the Asia to U.S. markets, peaks in October and November due to domestic holiday sales. The latter part of the Company's third fiscal quarter and late summer, being post-winter holiday and summer vacation seasons, have historically exhibited lower volumes relative to other periods. 5 OPERATIONS - ---------- The Company's global transportation and distribution services are provided through an extensive worldwide network consisting of numerous aviation and ground transportation operating rights and authorities, 559 aircraft, approximately 36,900 vehicles, sorting facilities, FedEx World Service Centers, FedEx Drop Boxes, FedEx ShipSites, FedEx Authorized ShipCenters and sophisticated package tracking, billing and communications systems. The Company's primary U.S. domestic sorting facility, the SuperHub located in Memphis, serves as the center of the Company's multiple hub-and-spokes U.S. domestic system. A second national hub is located in Indianapolis. In addition to these national hubs, the Company operates regional hubs in Newark and Oakland and major metropolitan sorting facilities in Los Angeles and Chicago. Facilities in Anchorage, Alaska and Subic Bay, the Philippines, serve as sorting facilities for express package and freight traffic moving to and from Asia, Europe and North America. Major sorting and freight handling facilities are located at Narita Airport in Japan, Charles de Gaulle Airport in Paris and Stansted Airport outside London. The Company's EXPRESSfreighter flights provide faster international service through direct flights between major markets in Asia, Europe and North America. For example, EXPRESSfreighter flights from Hong Kong, Osaka, Singapore, Taipei and Tokyo to the Company's facility in Anchorage and from there to the SuperHub in Memphis allow for next business day delivery by 10:30 a.m. in the United States and to major business centers in Canada, Mexico and the Caribbean. Cargo on EXPRESSfreighter flights bound for Europe is flown for second-day delivery to sixteen European cities. Westbound from Europe, EXPRESSfreighter service is available from Amsterdam, Antwerp, Basel, Brussels, Frankfurt, London, Luxembourg, Milan, Paris and Zurich for 10:30 a.m. next-day delivery in most of North America. Throughout its worldwide network, the Company operates city stations and employs a staff of customer service agents, cargo handlers and couriers who pick up and deliver shipments in the station's service area. In some cities, the Company operates FedEx World Service Centers which are staffed, store-front facilities located in high-traffic, high-density areas. Unmanned FedEx Drop Boxes provide customers the opportunity to drop off packages at locations in office buildings, shopping centers and corporate or industrial parks. The Company has also formed alliances with certain retailers to extend this customer convenience network to over 7,000 drop-off sites in retail stores. In international regions where low package traffic makes the Company's direct presence less economical, Global Service Participants have been selected to complete deliveries. The Company has an advanced package tracking and billing system, FedEx Cosmos, that utilizes hand-held electronic scanning equipment and computer terminals. This system provides proof of delivery information, an electronically reproduced airbill for the customer and information regarding the location of a package within the Company's system. For international shipments, the Company has developed FedEx ExpressClear, a worldwide electronic customs clearance system, which speeds up customs clearance by allowing customs agents in destination countries to review information about shipments before they arrive. The Company has 16 computerized telephone customer service centers in the United States which handle thousands of customer calls daily. In general, the Company's international locations handle customer calls locally. The Company provides many of its customers FedEx PowerShip/R/ 2, a computer system, which provides package tracking, produces shipping labels, calculates shipping charges, invoices the customer daily and produces customized reports. For customers that ship 100 or more packages a day, the Company 6 offers FedEx PowerShip Plus software, which performs the same functions as FedEx PowerShip 2 but can be integrated with the customer's own computer systems for customer service, accounting, inventory control and financial analysis purposes. FedEx PowerShip PassPort is an automated shipping system which is automatically updated with the Company's system information, such as routing codes and rates. FedEx PowerShip 3 enables customers who ship as few as three packages per day to enjoy the advantage of automated shipping. The Company also offers FedEx Ship software, free of charge, that can be used on a personal computer. FedEx Ship allows customers to generate plain- paper airbills on a laser printer, track shipments, order FedEx pickups and maintain a database of shipping addresses and activity using modems and their own personal computers. In 1996, the Company introduced shipment status tracking on its World Wide Web page. From the Web site, shippers can retrieve precise details on the status of their shipments any time of day from anywhere in the world. In July 1996, the Company introduced FedEx interNetShip which provides shipment processing capability on the World Wide Web. FUEL SUPPLIES AND COSTS - ----------------------- During 1996 the Company purchased aviation fuel from various suppliers under contracts which vary in length from 12 to 36 months and which provide for specific amounts of fuel to be delivered. Certain of these contracts extend through May 1999. The fuel represented by these contracts is purchased at market price which may fluctuate daily. The Company believes that, barring a substantial disruption in supplies of crude oil, these agreements will ensure the availability of an adequate supply of fuel for the Company's needs for the immediate future. However, a substantial reduction of oil supplies from oil producing regions or refining capacity, or other events causing a substantial reduction in the supply of aviation fuel, could have a significant adverse effect on the Company. The Company has also entered into contracts which are designed to limit its exposure to fluctuations in jet fuel prices. Under these contracts, the Company makes (or receives) payments based on the difference between a specified lower (or upper) limit and the market price of jet fuel, as determined by an index of spot market prices representing various geographic regions. The difference is recorded as an increase or decrease in fuel expense. At May 31, 1996, the Company had contracts with various financial institutions covering a total notional volume of 365.3 million gallons (approximately 54% of the Company's annual jet fuel consumption), with some contracts extending through May 1997. During 1996, the Company received $1,977,000 under jet fuel contracts. The following table sets forth the Company's costs for aviation fuel and its percentage of total operating expense for the previous five fiscal years: TOTAL COST PERCENTAGE OF TOTAL FISCAL YEAR (IN THOUSANDS) OPERATING EXPENSE - ------------- -------------- -------------------- 1996 $461,401 4.8% 1995 394,225 4.5 1994 374,561 4.7 1993 403,597 5.4 1992 414,481 5.5 Approximately 40% of the Company's requirement for vehicle fuel is purchased in bulk. The remainder of the Company's requirement is satisfied by retail purchases with various discounts. The 7 percentage of total operating expense for vehicle fuel purchases for each of the last five fiscal years has not exceeded 1.5%. COMPETITION - ----------- The U.S. domestic express market is highly competitive and sensitive to both price and service. Competitors in this market include other express package concerns, principally United Parcel Service and Airborne Express, passenger airlines offering package express services, regional express delivery concerns, airfreight forwarders and the United States Postal Service. The international express package and freight markets are also highly competitive. Ability to compete effectively internationally depends principally upon price, frequency and capacity of scheduled service, extent of geographic coverage and reliability. The Company currently holds certificates of authority to serve more foreign countries than any other United States all-cargo air carrier and its extensive, scheduled international route system allows it to offer single-carrier service to many points not offered by its principal all- cargo competitors. This international route system, combined with an integrated air and ground network, enables the Company to offer international customers more extensive single-carrier service to a greater number of domestic points than can be provided currently by competitors. However, many of the Company's competitors in the international market are government owned, controlled, or subsidized carriers which may have greater resources, lower costs, less profit sensitivity and more favorable operating conditions than the Company. The Company's principal competitors in the international market are foreign national air carriers, United States passenger airlines and all-cargo airlines and other express package companies including United Parcel Service and DHL. REGULATION - ---------- Air Under the Federal Aviation Act of 1958, as amended, both the Department of Transportation ("DOT") and the Federal Aviation Administration ("FAA") exercise regulatory authority over the Company. The DOT's authority relates primarily to economic aspects of air transportation. The DOT's jurisdiction extends to aviation route authority, pricing oversight and to other regulatory matters, including the transfer of route authority between carriers. The Company holds various certificates of public convenience and necessity issued by the DOT, authorizing the Company to engage in domestic and international air transportation of property and mail on a worldwide basis. The Company's international authority permits it to carry cargo and mail from several points in its domestic route system to numerous points throughout the world. The DOT regulates international routes, fares, rates and practices and is authorized to investigate and take action against discriminatory treatment of United States air carriers abroad. The right of a United States carrier to serve foreign points is subject to the DOT's approval and generally requires a bilateral agreement between the United States and the foreign government. The carrier must then be granted the permission of such foreign government to provide specific flights and services. The regulatory environment for global aviation rights may from time to time impair the ability of the Company to operate its air network in the most efficient manner. The FAA's regulatory authority relates primarily to safety aspects of air transportation, including aircraft standards and maintenance, personnel and ground facilities. The Company holds an operating certificate granted by the FAA pursuant to Part 121 of the Federal Aviation Regulations. This certificate is of unlimited duration and remains in effect so long as the Company maintains its standards of safety and meets the operational requirements of the regulations. 8 Ground The ground transportation performed by the Company is integral to its air transportation services. Prior to January 1996, the Company conducted its interstate motor carrier operations pursuant to common and contract carrier authorities issued by the Interstate Commerce Commission ("ICC"). The ICC Termination Act of 1995 abolished the ICC and transferred responsibility for interstate motor carrier registration to the Federal Highway Administration of the DOT ("FHA"). Carriers already holding ICC authority were not required to register with the FHA. The Bureau of Motor Carrier Safety of the FHA regulates the safety aspects of the Company's motor vehicle operations. The enactment of the Federal Aviation Administration Authorization Act of 1994 abrogated the authority of states to regulate the rates, routes or services of intermodal all-cargo air carriers and most motor carriers. States may now only exercise jurisdiction over safety and insurance. The Company is registered in those states that require registration. Communication Because of the extensive use of radio and other communication facilities in its aircraft and ground transportation operations, the Company is subject to the Federal Communications Commission Act of 1934, as amended. Additionally, the Federal Communications Commission regulates and licenses the Company's activities pertaining to satellite communications. Environmental Pursuant to the Federal Aviation Act, the FAA, with the assistance of the Environmental Protection Agency, is authorized to establish standards governing aircraft noise. The Company's present aircraft fleet is in compliance with current noise standards of the Federal Aviation Regulations. The Company's aircraft are also subject to, and are in compliance with, the regulations limiting the level of engine smoke emissions. In addition to federal regulation of aircraft noise, certain airport operators have local noise regulations which limit aircraft operations by type of aircraft and time of day. These regulations have had a restrictive effect on the Company's aircraft operations in some of the localities where they apply but do not have a material effect on any of the Company's significant markets. Congress' passage of the Airport Noise and Capacity Act of 1990 established a National Noise Policy which enabled the Company to plan for noise reduction and better respond to local noise constraints. Certain regulations under the Clean Water Act, the Clean Air Act and the Resource Conservation and Recovery Act impact the Company's operations. The Company is most directly affected by regulations pertaining to underground storage tanks, hazardous waste handling, vehicle and equipment emissions and the discharge of effluents from properties and equipment owned or operated by the Company. EMPLOYEES - --------- At July 1, 1996, the Company employed approximately 70,692 permanent full- time and 43,516 permanent part-time employees, of which approximately 22% are employed in Memphis. Employees of the Company's international branches and subsidiaries in the aggregate comprise approximately 11% of all employees. The Company believes its relationship with its employees is excellent. Following the Company's flight crewmembers' decision to form a collective bargaining unit, the Company and the Air Line Pilots Association ("ALPA") began negotiations toward a comprehensive 9 collective bargaining agreement in 1993. In October 1994, ALPA petitioned the National Mediation Board (the "NMB") to provide mediation to assist in contract negotiations, and the NMB appointed two mediators. In October 1995, the NMB released the parties from mediation and the parties entered a "cooling off" period. No agreement was reached during the "cooling off" period so the parties instituted "self-help" activities. In January 1996, ALPA voluntarily suspended all self-help activities and a tentative agreement was reached on March 18, 1996. However, in June 1996, the ALPA membership, pursuant to a vote, did not ratify the tentative agreement. In July 1996, the FedEx Pilots Association, an independent collective bargaining organization, filed an application with the NMB seeking an election to determine the collective bargaining representative for the Company's flight crewmembers. The NMB has ruled on this application for election and has ordered an election to be held during September and October 1996. Attempts by other labor organizations to organize certain other groups of employees have been initiated. Although the Company cannot predict the outcome of these labor activities or their effect on the Company or its employees, if any, the Company is responding to these organization attempts. FINANCIAL INFORMATION ABOUT FOREIGN AND U.S. DOMESTIC OPERATIONS - ---------------------------------------------------------------- For information concerning financial results for U.S. domestic and international operations for the three years ended May 31, 1996, 1995 and 1994, refer to Note 10 of Notes to Consolidated Financial Statements contained in the Company's 1996 Annual Report to Stockholders, which Note is incorporated herein by reference. 10 ITEM 2. PROPERTIES The Company's principal owned or leased properties include its aircraft, vehicles, national, regional and metropolitan sorting facilities, administration buildings, FedEx World Service Centers, FedEx Drop Boxes and data processing and telecommunications equipment. AIRCRAFT AND VEHICLES - --------------------- The Company's aircraft fleet at July 1, 1996 consisted of the following: MAXIMUM GROSS STRUCTURAL PAYLOAD DESCRIPTION NUMBER (POUNDS PER AIRCRAFT)** - ----------- ------ ----------------------- Boeing B747-200 3* 250,000 McDonnell Douglas MD11 19* 198,500 McDonnell Douglas DC10-30 22* 172,000 McDonnell Douglas DC10-10 13* 142,000 Airbus A300-600 17* 117,700 Airbus A310-200 26* 74,200 Boeing B727-200 95* 59,500 Boeing B727-100 68* 38,000 Fokker F27-500 24 14,000 Fokker F27-600 8 12,500 Cessna 208B 254 3,500 Cessna 208A 10 3,000 --- Total 559 - ------------------------- *3 B747-200, 18 MD11, 17 DC10-30, 4 DC10-10, 17 A300, 16 A310, 13 B727-200 and 5 B727-100 aircraft are subject to operating leases. **Maximum gross structural payload includes revenue payload and container weight. The A300s and A310s are two-engine, wide-bodied aircraft which have a longer range and more capacity than B727s. The MD11s are three-engine, wide- bodied aircraft which have a longer range and larger capacity than DC10s. The DC10s are three-engine, wide-bodied aircraft which have been specially modified to meet the Company's cargo requirements. The B747s are four-engine, wide- bodied aircraft. The B727s are three-engine aircraft configured for cargo service. The Company's Fokker F27 and Cessna 208 turbo-prop aircraft are leased to unaffiliated operators to support Company operations in areas where demand does not justify use of a larger aircraft. An inventory of spare engines and parts is maintained for each aircraft type. In addition, the Company "wet leases" approximately 44 smaller piston- engine and turbo-prop aircraft which feed packages to and from airports served by the Company's larger jet aircraft. The wet lease agreements call for the owner-lessor to provide flight crews, insurance and maintenance, as well as fuel and other supplies required to operate the aircraft. The Company's wet lease agreements are for terms not exceeding one year and are generally cancelable upon 30 days notice. 11 At July 1, 1996, the Company operated approximately 36,900 ground transport vehicles, including pick-up and delivery vans, larger trucks called container transport vehicles and over-the-road tractors and trailers. AIRCRAFT PURCHASE COMMITMENTS - ----------------------------- At July 1, 1996, the Company was committed under various contracts to purchase eight Airbus A300, 11 Airbus A310 and nine McDonnell Douglas MD11 aircraft to be delivered through 2000. In addition, the Company may be required to purchase seven MD11 aircraft for delivery beginning no later than 2000 under a put option agreement. SORTING AND HANDLING FACILITIES - ------------------------------- At July 1, 1996, the Company operated the following sorting and handling facilities:
SORTING LEASE SQUARE CAPACITY EXPIRATION LOCATION ACRES FEET (PER HOUR)* LESSOR YEAR -------- ----- ------- ----------- ------ ---------- NATIONAL - -------- Memphis, Tennessee 395 2,742,196 491,000 Memphis-Shelby County Airport 2014 Authority Indianapolis, Indiana 120 645,000 153,000 Indianapolis Airport 2016 Authority REGIONAL - -------- Newark, New Jersey 56 554,000 108,000 Port Authority of New 2010 York and New Jersey Oakland, California 21 191,000 50,000 City of Oakland 2011 METROPOLITAN - ------------ Los Angeles, California 25 130,000 53,000 City of Los Angeles 2009 Chicago, Illinois 55 419,000 47,000 City of Chicago 2018 Anchorage, Alaska+ 42 208,000 3,600 Alaska Department of 2013 Transportation and Public Facilities Subic Bay, 11 169,800 16,000 Subic Bay 2002 The Philippines++ Metropolitan Authority
- ------------------------ * Documents and packages + Handles international express package and freight shipments to and from Asia, Europe and North America. ++ Handles intra-Asia express package and freight shipments. 12 The Company's facilities at the Memphis International Airport also consist of aircraft hangars, flight training and fuel facilities, administrative offices and warehouse space. The Company leases these facilities from the Memphis- Shelby County Airport Authority under several leases. The leases cover land, the administrative and sorting buildings, other facilities, ramps and certain related equipment. The Company has the option to purchase certain equipment (but not buildings or improvements to real estate) leased under such leases at the end of the lease term for a nominal sum. The leases obligate the Company to maintain and insure the leased property and to pay all related taxes, assessments and other charges. The leases are subordinate to, and the Company's rights thereunder could be affected by, any future lease or agreement between the Authority and the United States Government. In addition to the facilities noted above, the Company has major international sorting and freight handling facilities located at Narita Airport in Japan, Charles de Gaulle Airport in Paris, France and Stansted Airport outside London, England. The Company is also developing a regional sorting hub in Fort Worth, Texas which is expected to become operational in 1998. ADMINISTRATIVE AND OTHER PROPERTIES AND FACILITIES - -------------------------------------------------- The Company has facilities housing administrative and technical operations on approximately 200 acres adjacent to the Memphis International Airport. Of the seven buildings located on this site, four are subject to long-term leases, and the other three are owned by the Company. The Company also leases 65 facilities in the Memphis area for its corporate headquarters, warehouse facilities and administrative offices. The Company owns 16 and leases 789 facilities for city station operations in the United States. In addition, 122 city stations are owned or leased throughout the Company's international network. The majority of these leases are for terms of five to ten years. The Company believes that suitable alternative facilities are available in each locale on satisfactory terms, if necessary. As of July 1, 1996, the Company leased space for 405 FedEx World Service Centers in the United States and had placed approximately 33,604 Drop Boxes. The Company also owns stand-alone mini-centers located on leaseholds in parking lots adjacent to office buildings, shopping centers and office parks of which 231 were operating at July 1, 1996. Internationally, the Company leases space for 14 FedEx World Service Centers and has approximately 662 FedEx Drop Boxes. The Company leases central processing units and most of the disk drives, printers and terminals used for data processing. Owned equipment consists primarily of Digitally Assisted Dispatch Systems ("DADS") terminals used in communications between dispatchers and couriers, computerized routing, tracing and billing equipment used by customers and mobile radios used in the Company's vehicles. The Company also leases space on C-Band and Ku-Band satellite transponders for use in its telecommunications network. ITEM 3. LEGAL PROCEEDINGS On May 14, 1996, a class-action suit was filed by customers of the Company in the United States District Court for the District of Minnesota. The complaint generally alleges that the Company breached its contract with the plaintiffs in transporting packages shipped by them by continuing to collect a 6.25% federal excise tax on the transportation of property shipped by air after the tax expired on December 31, 1995. The plaintiffs assert that the benefit to the Company is believed to be in excess of $30,000,000. The plaintiffs seek certification as a class action, damages, an injunction to enjoin the Company from 13 continuing to collect the excise tax referred to above and an award of attorneys fees and costs. Other customers of the Company filed two separate lawsuits, one in California state court during April 1996 and one in Minnesota state court during June 1996, containing substantially similar allegations and requests for relief. During June 1996, the Company reached an agreement with the plaintiffs in all three lawsuits to consolidate the three lawsuits in the United States District Court for the District of Minnesota. The plaintiffs are in the process of filing the necessary motions to accomplish this consolidation. The Company intends to vigorously defend itself in these cases. No amount has been reserved for these contingencies. In November 1987, The Flying Tiger Line Inc. ("Flying Tigers"), a company acquired by the Company in 1989, received a notice from the United States Environmental Protection Agency ("EPA") identifying Flying Tigers as a potentially responsible party ("PRP") in connection with a "Superfund" site located in Monterey Park, California. The site is a 190-acre landfill which operated from 1948 through 1984. In June 1985, the EPA began a remedial investigation of the site to identify the extent of contamination. The EPA estimates that approximately .1% of the waste disposed at the site is attributable to Flying Tigers. Flying Tigers participated in a partial settlement relating to remedial actions for management of contamination and site control. Partial consent decrees were entered in the United States District Court for the Central District of California in 1989 and 1992, which provided, in part, for payments of $109,000 and $230,000, respectively, by Flying Tigers and Federal Express to the partial-settlement escrow account. However, the Company does not expect all outstanding issues to be resolved for several years. Due to several variables which are beyond the Company's control, it is impossible to accurately estimate the Company's potential share of the remaining costs, but based on Flying Tigers' relatively insignificant contribution of waste to the site, the Company believes that its remaining liability will not be material. The Company is subject to other legal proceedings and claims which arise in the ordinary course of its business. In the opinion of management, the aggregate liability, if any, with respect to these other actions will not materially adversely affect the financial position or results of operations of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year ended May 31, 1996. 14 EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding executive officers of the Company is as follows (included herein pursuant to Instruction 3 to Item 401(b) of Regulation S-K and General Instruction G(3) of Form 10-K): OFFICER, YEAR FIRST ELECTED AS OFFICER AGE POSITIONS HELD WITH COMPANY ------------------- --- --------------------------- FREDERICK W. SMITH 51 Chairman, President and Chief Executive 1971 Officer since April 1983; Chief Executive Officer since April 1977; Chairman since February 1975; and President from June 1971 to February 1975. Founder of the Company. ALAN B. GRAF, JR. 42 Executive Vice President and Chief Financial 1987 Officer since February 1996; Senior Vice President and Chief Financial Officer from December 1991 to February 1996; Vice President and Treasurer from August 1987 to December 1991; and various management positions in finance and a senior financial analyst from 1980 to 1987. KENNETH R. MASTERSON 52 Executive Vice President, General Counsel and 1980 Secretary since February 1996; Senior Vice President, General Counsel and Secretary from September 1993 to February 1996; Senior Vice President and General Counsel from February 1981 to September 1993; and Vice President - Legal from January 1980 to February 1981. THEODORE L. WEISE 52 Executive Vice President - Worldwide 1977 Operations since February 1996; Senior Vice President - Air Operations from August 1991 to February 1996; Senior Vice President - United States and Canada from June 1990 to August 1991; Senior Vice President - Domestic Ground Operations from March 1987 to June 1990; Senior Vice President - Central Support Services from October 1986 to March 1987; Senior Vice President/General Manager - FedEx World Service Centers from March 1983 to October 1986; Senior Vice President - Operations Planning from March 1979 to March 1983; Vice President - Operations Resource and Corporate Planning from September 1978 to March 1979; Vice President - Special Projects and Advanced Planning from April 1977 to September 1978; and Director of Special Projects from 1972 to 1977. DAVID J. BRONCZEK 42 Senior Vice President - Europe, Middle East 1987 and Africa since June 1995; Senior Vice President - Europe, Africa and Mediterranean from June 1993 to June 1995; Vice President - Canadian Operations from February 1987 to March 1993; and several sales and operations managerial positions from 1976 to 1987. 15 MICHAEL L. DUCKER 42 Senior Vice President - Asia and Pacific 1991 since October 1995; Vice President - South Pacific from June 1992 to October 1995; Vice President - Italy and Southeast Europe from November 1991 to June 1992; and various operating management positions and a package sorter and checker from 1975 to 1991. LEONARD B. FEILER 40 Senior Vice President - Central Support 1991 Services since February 1996; Vice President - Global Operations Planning and Control from January 1995 to February 1996; Vice President - Systems Form Planning and Engineering from July 1992 to January 1995; Vice President - Finance - FEDEX Aeronautics Corporation from September 1991 to July 1992; various management positions in finance and a senior financial analyst from 1979 to 1991. T. MICHAEL GLENN 40 Senior Vice President - Marketing, Customer 1985 Service and Corporate Communications since June 1994; Senior Vice President - Marketing and Corporate Communications from December 1993 to June 1994; Senior Vice President - Worldwide Marketing, Catalog Services and Corporate Communications from June 1993 to December 1993; Senior Vice President - Catalog and Remail Services from September 1992 to June 1993; Vice President - Marketing from August 1985 to September 1992, various management positions in sales and marketing and senior sales specialist from 1981 to 1985. DENNIS H. JONES 44 Senior Vice President and Chief Information 1986 Officer since December 1991; Vice President - Customer Automation and Invoicing from December 1986 to December 1991; and various management positions in finance and a financial analyst from 1975 to 1986. JOSEPH C. MCCARTY, III 51 Senior Vice President - Latin America and 1983 Caribbean since October 1995; Senior Vice President - Asia Pacific from June 1995 to October 1995; Senior Vice President - Asia, Pacific and Middle East from November 1991 to June 1995; Vice President - International Legal from March 1987 to November 1991; Vice President - Properties & Facilities from November 1984 to March 1987; and Vice President - Legal from February 1983 to November 1984. GILBERT D. MOOK 53 Senior Vice President - Air Operations since 1985 February 1996; Senior Vice President - Central Support Services from November 1994 to February 1996; Vice President - Properties and Facilities from March 1988 to November 1994; Vice President - Satellite Systems from June 1985 to March 1988; Director - Satellite Systems from 1983 to 1985. JAMES A. PERKINS 52 Senior Vice President and Chief Personnel 1979 Officer since June 1979 and various personnel managerial positions from 1974 to 1979. 16 DAVID F. REBHOLZ 43 Senior Vice President - Global Sales and 1988 Trade Services since June 1993; Vice President - Central Region - Americas and Caribbean from October 1991 to June 1993; Vice President - Customer Service from December 1988 to October 1991; and Regional Sales Director-Western Region and various operating management positions from 1976 to 1988. TRACY G. SCHMIDT 39 Senior Vice President - Air Ground Terminals 1990 and Transportation since July 1994; Vice President - Corporate Financial Planning from January 1990 to July 1994; and various management positions in finance from 1980 to 1990. MARY ALICE TAYLOR 46 Senior Vice President - United States and 1985 Canada since October 1995; Senior Vice President - Americas and Caribbean from October 1994 to October 1995; Senior Vice President - Central Support Services from September 1991 to October 1994; Regional Vice President - Ground Operations - Southern Region from May 1988 to September 1991; Vice President - Logistics and Publishing Services from November 1985 to May 1988. Various management positions in finance and management information consultant from 1980 to 1985. LAURIE A. TUCKER 39 Senior Vice President - Logistics, Electronic 1991 Commerce and Catalog since April 1996; Vice President - Customer Automation and Invoicing from December 1991 to April 1996; and various management positions and financial analyst from 1978 to 1991. JAMES S. HUDSON 47 Vice President, Controller and Chief 1992 Accounting Officer since December 1994; Vice President - Finance - Europe, Africa and Mediterranean from July 1992 to December 1994; various management positions in finance from 1974 to 1992. Officers are elected by, and serve at the discretion of, the Board of Directors. There is no arrangement or understanding between any officer and any person, other than a director or executive officer of the Company acting in his or her official capacity, pursuant to which any officer was selected. There are no family relationships between any executive officer and any other executive officer or director of the Company. There has been no event involving any executive officer under any bankruptcy act, criminal proceeding, judgment or injunction during the past five years. 17 PART II Information for Items 5 through 8 of this Report appears in the Company's 1996 Annual Report to Stockholders as indicated in the following table and is incorporated herein by reference. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Information regarding market information, stockholders and dividends is contained in the Corporate Information section of the Company's 1996 Annual Report to Stockholders, on page 44 under the headings, "Stock Listing," "Stockholders" and "Market Information" and is incorporated herein by reference. No cash dividends have been declared. PAGE IN ANNUAL REPORT TO STOCKHOLDERS --------------- ITEM 6. SELECTED FINANCIAL DATA Selected Consolidated Financial Data........... 40 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 18 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated Statements of Income.............. 23 Consolidated Balance Sheets.................... 24 Consolidated Statements of Cash Flows.......... 26 Consolidated Statements of Changes in Common Stockholders' Investment............... 27 Notes to Consolidated Financial Statements..... 28 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS NOT ON ACCOUNTING AND FINANCIAL DISCLOSURE APPLICABLE PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding members of the Company's Board of Directors is presented in sections "Voting Securities and Principal Holders Thereof -Security Ownership of Management and Certain Beneficial Owners," "Election of Directors," "Meetings and Committees," "Compensation of Directors," and "Transactions with Management and Others". On pages 1 through 7 and page 14 of the Definitive Proxy 18 Statement for the Company's 1996 Annual Meeting of Stockholders which will be held October 1, 1996 and is incorporated herein by reference. Information regarding executive officers of the Company is included above in Part I of this Form 10-K under the caption "Executive Officers of the Registrant" pursuant to Instruction 3 to Item 401(b) of Regulation S-K and General Instruction G(3) of Form 10-K. Information required by Item 405 of Regulation S-K is presented in "Section 16(a) Beneficial Ownership Reporting Compliance" on page 16 of the Definitive Proxy Statement and is incorporated herein by reference. Information for Items 11 through 13 of this Report appears in the Definitive Proxy Statement for the Company's 1996 Annual Meeting of Stockholders to be held on October 1, 1996, as indicated in the following table and is incorporated herein by reference. PAGE IN PROXY STATEMENT ------------- ITEM 11. EXECUTIVE COMPENSATION Compensation Information............................ 8 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Voting Securities and Principal Holders Thereof...... 2 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Transactions with Management and Others.............. 14 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. FINANCIAL STATEMENTS The consolidated financial statements of the Company, together with the report thereon of Arthur Andersen LLP, dated July 1, 1996, are presented on pages 23 through 39 of the Company's 1996 Annual Report to Stockholders and are incorporated herein by reference. With the exception of the aforementioned information and the information incorporated by reference in Items 5, 6, 7 and 8 hereof, the Company's 1996 Annual Report to Stockholders is not to be deemed as filed as part of this Report. 19 2. FINANCIAL STATEMENT SCHEDULE PAGE NUMBER IN FORM 10-K ------------ Report of Independent Public Accountants on Financial Statement Schedule......................................................... S-1 Schedule II - Valuation and Qualifying Accounts.................... S-2 All other financial statement schedules have been omitted because they are not applicable or the required information is included in the consolidated financial statements, or the notes thereto, contained in the Company's 1996 Annual Report to Stockholders and incorporated herein by reference. 3. EXHIBITS The documents attached hereto as Exhibits 3.1, 3.2, 4.1 through 4.26, 10.1 through 10.88, 11, 12, 13, 21, 23 and 24 are being filed in connection with this Report and incorporated herein by reference. The Exhibit Index on pages E-1 through E-12 is incorporated herein by reference. (b) REPORTS ON FORM 8-K During the last quarter of the period covered by this Report on Form 10-K, the Registrant filed two Current Reports on Form 8-K. The first Current Report was dated March 14, 1996 and contained Registrant's press release dated March 14, 1996 and Appendix A to a preliminary official statement. The second Current Report was dated April 30, 1996 and contained a discussion of legal proceedings. These reports were filed as Item 5 or Item 7 Current Reports. 20 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. FEDERAL EXPRESS CORPORATION (Registrant) BY: /s/ JAMES S. HUDSON -------------------------------------- James S. Hudson Vice President and Controller (Principal Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. SIGNATURE CAPACITY DATE --------- -------- ---- /s/ FREDERICK W. SMITH* Chairman, President and - ---------------------------- Chief Executive Officer Frederick W. Smith and Director (Principal Executive Officer) /s/ ALAN B. GRAF, JR.* Executive Vice President and - ---------------------------- Chief Financial Officer Alan B. Graf, Jr. (Principal Financial Officer) /s/ JAMES S. HUDSON Vice President and Controller August 8, 1996 - ---------------------------- (Principal Accounting Officer) James S. Hudson /s/ ROBERT H. ALLEN * Director - ---------------------------- Robert H. Allen /s/ HOWARD H. BAKER, JR.* Director - ---------------------------- Howard H. Baker, Jr. /s/ ROBERT L. COX * Director - ---------------------------- Robert L. Cox /s/ RALPH D. DENUNZIO * Director - ---------------------------- Ralph D. DeNunzio SIGNATURE CAPACITY DATE --------- -------- ---- /s/ JUDITH L. ESTRIN * Director - ---------------------------- Judith L. Estrin /s/ PHILIP GREER * Director - ---------------------------- Philip Greer /s/ J. R. HYDE, III * Director - ---------------------------- J. R. Hyde, III /s/ CHARLES T. MANATT * Director - ---------------------------- Charles T. Manatt /s/ GEORGE J. MITCHELL * Director - ---------------------------- George J. Mitchell /s/ JACKSON W. SMART, JR.* Director - ---------------------------- Jackson W. Smart, Jr. /s/ JOSHUA I. SMITH * Director - ---------------------------- Joshua I. Smith /s/ PETER S. WILLMOTT * Director - ---------------------------- Peter S. Willmott *By: /s/ JAMES S. HUDSON August 8, 1996 ---------------------- James S. Hudson Attorney-in-Fact S-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To Federal Express Corporation: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Federal Express Corporation's 1996 Annual Report to Stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated July 1, 1996. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The financial statement schedule on page S-2 is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. The financial statement schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ ARTHUR ANDERSEN LLP ----------------------------------------- ARTHUR ANDERSEN LLP Memphis, Tennessee, July 1, 1996 S-2 SCHEDULE II FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED MAY 31, 1996, 1995 AND 1994 (In thousands)
ADDITIONS ---------------------- BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING COSTS AND OTHER END OF DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS(A) YEAR - ----------- ---------- ---------- ---------- ------------- ---------- Allowance for Doubtful Accounts - ------------------- 1996............... $31,173 $38,963 $1,700 $41,027 $30,809 ======= ======= ====== ======= ======= 1995............... $33,933 $36,334 - $39,094 $31,173 ======= ======= ====== ======= ======= 1994............... $31,308 $45,763 - $43,138 $33,933 ======= ======= ====== ======= =======
(A) Accounts written off net of recoveries. EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 3.1 Restated Certificate of Incorporation of Registrant as amended (Filed as Exhibit 3.1 to Registrant's FY95 Third Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 3.2 By-laws of Registrant (Filed as Exhibit 3.2 to Registrant's FY93 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 4.1 Indenture dated as of April 1, 1987 between Registrant and The Bank of New York ("BONY"), as Trustee, relating to Registrant's 10% Senior Notes due April 15, 1999. (Filed as Exhibit 10.36 to Registrant's FY88 Annual Report on Form 10- K, Commission File No. 1-7806, and incorporated herein by reference.) 4.2 Supplemental Indenture No. 2 dated as of April 18, 1989 between Registrant and BONY, relating to Registrant's 10% Senior Notes due April 15, 1999. (Filed as Exhibit 4(a) to Registrant's Current Report on Form 8-K dated April 25, 1989, Commission File No. 1-7806, and incorporated herein by reference.) 4.3 Supplemental Indenture No. 3 dated as of April 21, 1989 between Registrant and BONY and form of note relating to Registrant's 10% Senior Notes due April 15, 1999. (Filed as Exhibit 4(b) to Registrant's Current Report on Form 8-K dated April 25, 1989, Commission File No. 1-7806, and incorporated herein by reference.) 4.4 Indenture dated as of May 15, 1989 between Registrant and BONY relating to Registrant's unsecured debt securities. (Filed as an exhibit to Registrant's Registration Statement No. 33-28796 on Form S-3 and incorporated herein by reference.) 4.5 Supplemental Indenture No. 2 dated as of August 11, 1989 between Registrant and BONY. (Filed as Exhibit 4.2 to Registrant's Registration Statement No. 33-30415 on Form S-3 and incorporated herein by reference.) 4.6 Supplemental Indenture No. 3 dated as of October 15, 1989 between Registrant and BONY relating to Registrant's 9 5/8% Sinking Fund Debentures due October 15, 2019. (Filed as Exhibit 4.2 to Registrant's Current Report on Form 8-K dated October 16, 1989, Commission File No. 1-7806, and incorporated herein by reference.) 4.7 Supplemental Indenture No. 5 dated as of August 15, 1990 between Registrant and BONY. (Filed as Exhibit 4(c) to Registrant's Current Report on Form 8-K dated August 28, 1990, Commission File No. 1-7806, and incorporated herein by reference.) 4.8 Indenture dated May 15, 1989 including Supplemental Indenture Nos. 2, 3 and 5 dated as described above, between Registrant and BONY, relating to Registrant's Medium-Term Notes, Series B, the last of which is due August 15, 2006, Registrant's 9 7/8% Notes due April 1, 2002, Registrant's 9.65% Notes due June 15, 2012 and Registrant's 6 1/4% Notes due April 15, 1998. (Filed as described above.) E-1 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 4.9 Form of Fixed Rate Medium-Term Note, Series B, the last of which is due August 15, 2006. (Filed as Exhibit 4.4 to Registrant's Registration Statement No. 33-40018 on Form S-3 and incorporated herein by reference.) 4.10 Form of Floating Rate Medium-Term Note, Series B, the last of which is due August 15, 2006. (Filed as Exhibit 4.5 to Registrant's Registration Statement No. 33-40018 on Form S-3 and incorporated herein by reference.) 4.11 Form of 9 7/8% Note due April 1, 2002. (Filed as Exhibit 4.1 to Registrant's Current Report on Form 8-K dated March 23, 1992, Commission File No. 1-7806, and incorporated herein by reference.) 4.12 Form of 9.65% Note due June 15, 2012. (Filed as Exhibit 4.1 to Registrant's Current Report on Form 8-K dated June 18, 1992, Commission File No. 1-7806, and incorporated herein by reference.) 4.13 Form of 6 1/4% Note due April 15, 1998. (Filed as Exhibit 4.1 to Registrant's Current Report on Form 8-K dated April 21, 1993, Commission File No. 1-7806, and incorporated herein by reference.) 4.14 Indenture dated as of July 1, 1996 between the Registrant and The First National Bank of Chicago, as Trustee, relating to Registrant's unsecured debt securities. 4.15 Pass Through Trust Agreement dated as of February 1, 1993, as amended and restated as of October 1, 1995, between Registrant and BONY, as Pass Through Trustee, relating to Registrant's 1993 Pass Through Certificates, Series A1, A2, B1, B2, C1 and C2, 1995 Pass Through Certificates, Series A1, A2, B1, B2 and B3 and 1996 Pass Through Certificates, Series A1 and A2. (Filed as Exhibit 4.a.1 to Registrant's Current Report on Form 8-K dated October 26, 1995, Commission File No. 1-7806, and incorporated herein by reference.) 4.16 Form of 8.04% and 8.76% 1993 Pass Through Certificates, Series A1 and A2 due November 22, 2007 and May 22, 2015, respectively. (Filed as Exhibit 4(a)(2) to Registrant's Current Report on Form 8-K dated February 4, 1993, Commission File No. 1-7806, and incorporated herein by reference.) 4.17 Form of 6.68% and 7.63% 1993 Pass Through Certificates, Series B1 and B2 due January 1, 2008 and January 1, 2015, respectively. (Filed as Exhibit 4.a.2 to Registrant's Current Report on Form 8-K dated September 23, 1993, Commission File No. 1-7806, and incorporated herein by reference.) 4.18 Form of 7.15% and 7.96% 1993 Pass Through Certificates, Series C1 and C2 due September 28, 2012 and March 28, 2017, respectively. (Filed as Exhibit 4.a.2 to Registrant's Current Report on Form 8-K dated December 2, 1993, Commission File No. 1-7806, and incorporated herein by reference.) E-2 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 4.19 Form of 7.63% and 8.06% 1995 Pass Through Certificates, Series A1 and A2 due January 5, 2014 and January 5, 2016, respectively. (Filed as Exhibit 4.a.2 to Registrant's Current Report on Form 8-K dated August 16, 1995, Commission File No. 1-7806, and incorporated herein by reference.) 4.20 Form of 6.05%, 7.11% and 7.58% 1995 Pass Through Certificates, Series B1, B2 and B3 due March 19, 1996, January 2, 2014 and July 2, 2019, respectively. (Filed as Exhibit 4.a.2 to Registrant's Current Report on Form 8-K dated October 26, 1995, Commission File No. 1-7806, and incorporated herein by reference.) 4.21 Form of 7.85% and 8.17% 1996 Pass Through Certificates, Series A1 and A2 due January 30, 2015 and January 30, 2018, respectively. (Filed as Exhibit 4.a.2 to Registrant's Current Report on Form 8-K dated June 5, 1996, Commission File No. 1- 7806, and incorporated herein by reference.) 4.22 Pass Through Trust Agreement dated as of March 1, 1994 between Registrant and BONY, as Pass Through Trustee, relating to Registrant's 1994 Pass Through Certificates, Series A310-A1, A310-A2 and A310-A3. (Filed as Exhibit 4.a.1 to Registrant's Current Report on Form 8-K dated March 16, 1994, Commission File No. 1-7806, and incorporated herein by reference.) 4.23 Form of 7.53%, 7.89% and 8.40% 1994 Pass Through Certificates, Series A310-A1, A310-A2 and A310-A3 due September 23, 2006, September 23, 2008 and March 23, 2010, respectively. (Filed as Exhibit 4.a.2 to Registrant's Current Report on Form 8-K dated March 16, 1994, Commission File No. 1-7806, and incorporated herein by reference.) 4.24 Pass Through Trust Agreement dated as of June 1, 1996 between Registrant and State Street Bank and Trust Company, as Pass Through Trustee. (Filed as Exhibit 4(a)(1) to Registrant's Registration Statement No. 333-07691 on Form S-3 and incorporated herein by reference.) 4.25 Loan Agreement dated March 27, 1995, between Registrant and certain lenders relating to the financing of Airbus A310 aircraft. A copy of this loan agreement will be furnished to the Commission upon request pursuant to Regulation S-K Item 601(4)(iii)(A). (Filed as Exhibit 4.23 to Registrant's FY95 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 4.26 Facility Agreement dated as of April 1, 1996 between Registrant and Morgan Guaranty Trust Company of New York, as agent. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. 10.1 Indenture dated as of August 1, 1979 between the Memphis Shelby County Airport Authority (the "Authority") and BONY, as Trustee. (Refiled as Exhibit 10.1 to Registrant's FY90 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) E-3 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 10.2 Second Supplemental Indenture dated as of May 1, 1982 between the Authority and BONY relating to 8.30% Special Facilities Revenue Bonds, Series 1982B due September 1, 2012. (Refiled as Exhibit 10.2 to Registrant's FY93 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.3 Third Supplemental Indenture dated as of November 1, 1982 between the Authority and BONY. (Refiled as Exhibit 10.3 to Registrant's FY93 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.4 Fourth Supplemental Indenture dated as of December 1, 1984 between the Authority and BONY relating to 7 7/8% Special Facilities Revenue Bonds, Series 1984 due September 1, 2009. (Refiled as Exhibit 10.4 to Registrant's FY95 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.5 Fifth Supplemental Indenture dated as of July 1, 1992 between the Authority and BONY relating to 6 3/4% Special Facilities Revenue Bonds, Refunding Series 1992 due September 1, 2012. (Filed as Exhibit 10.5 to Registrant's FY92 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.6 Guaranty dated as of August 1, 1979 from Registrant to BONY. (Refiled as Exhibit 10.5 to Registrant's FY90 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.7 Reaffirmation of Guaranty dated as of May 1, 1982 from Registrant to BONY relating to Special Facilities Revenue Bonds, Series 1982B. (Refiled as Exhibit 10.7 to Registrant's FY93 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.8 Reaffirmation of Guaranty dated as of December 1, 1984 from Registrant to BONY relating to Special Facilities Revenue Bonds, Series 1984. (Refiled as Exhibit 10.10 to Registrant's FY93 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.9 Reaffirmation of Guaranty dated as of July 30, 1992 from Registrant to BONY relating to Special Facilities Revenue Bonds, Refunding Series 1992. (Filed as Exhibit 10.11 to Registrant's FY92 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.10 Consolidated and Restated Lease Agreement dated as of August 1, 1979 between the Authority and Registrant. (Refiled as Exhibit 10.11 to Registrant's FY90 Annual Report on Form 10- K, Commission File No. 1-7806, and incorporated herein by reference.) 10.11 First Supplemental Lease Agreement dated as of April 1, 1981 between the Authority and Registrant. (Filed as Exhibit 10.13 to Registrant's FY92 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) E-4 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 10.12 Second Supplemental Lease Agreement dated as of May 1, 1982 between the Authority and Registrant. (Refiled as Exhibit 10.14 to Registrant's FY93 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.13 Third Supplemental Lease Agreement dated November 1, 1982 between the Authority and Registrant. (Filed as Exhibit 28.22 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.14 Fourth Supplemental Lease Agreement dated July 1, 1983 between the Authority and Registrant. (Filed as Exhibit 28.23 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.15 Fifth Supplemental Lease Agreement dated February 1, 1984 between the Authority and Registrant. (Filed as Exhibit 28.24 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.16 Sixth Supplemental Lease Agreement dated April 1, 1984 between the Authority and Registrant. (Filed as Exhibit 28.25 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.17 Seventh Supplemental Lease Agreement dated June 1, 1984 between the Authority and the Registrant. (Filed as Exhibit 28.26 to Registrant's FY93 Second Quarter Report on Form 10- Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.18 Eighth Supplemental Lease Agreement dated July 1, 1988 between the Authority and Registrant. (Filed as Exhibit 28.27 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.19 Ninth Supplemental Lease Agreement dated July 12, 1989 between the Authority and Registrant. (Filed as Exhibit 28.28 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.20 Tenth Supplemental Lease Agreement dated October 1, 1991 between the Authority and Registrant. (Filed as Exhibit 28.29 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.21 Eleventh Supplemental Lease Agreement dated as of July 1, 1994 between the Authority and Registrant. 10.22 Twelfth Supplemental Lease Agreement dated July 1, 1993 between the Authority and Registrant. (Filed as Exhibit 10.23 to Registrant's FY93 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.23 Thirteenth Supplemental Lease Agreement dated as of June 1, 1995 between the Authority and Registrant. E-5 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 10.24 Fourteenth Supplemental Lease Agreement dated as of January 1, 1996 between the Authority and Registrant. 10.25 Special Facility Lease Agreement dated as of August 1, 1979 between the Authority and Registrant. (Refiled as Exhibit 10.15 to Registrant's FY90 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.26 First Special Facility Supplemental Lease Agreement dated as of May 1, 1982 between the Authority and Registrant. (Filed as Exhibit 10.25 to Registrant's FY93 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.27 Second Special Facility Supplemental Lease Agreement dated as of November 1, 1982 between the Authority and Registrant. (Filed as Exhibit 10.26 to Registrant's FY93 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.28 Third Special Facility Supplemental Lease Agreement dated as of December 1, 1984 between the Authority and Registrant. (Refiled as Exhibit 10.25 to Registrant's FY95 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.29 Fourth Special Facility Supplemental Lease Agreement dated as of July 1, 1992 between the Authority and Registrant. (Filed as Exhibit 10.20 to Registrant's FY92 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.30 Special Facility Lease Agreement dated as of July 1, 1993 between the Authority and Registrant. (Filed as Exhibit 10.29 to Registrant's FY93 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.31 Special Facility Ground Lease Agreement dated as of July 1, 1993 between the Authority and Registrant. (Filed as Exhibit 10.30 to Registrant's FY93 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.32 Indenture dated as of July 1, 1993 between the Authority and BONY, as Trustee, relating to 6.20% Special Facility Revenue Bonds, Series 1993, due July 1, 2014. (Filed as Exhibit 10.31 to Registrant's FY93 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.33 Guaranty dated as of July 1, 1993 from Registrant to BONY relating to 6.20% Special Facility Revenue Bonds, Series 1993. (Filed as Exhibit 10.32 to Registrant's FY93 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.34 Ground Lease dated as of February 27, 1979 between the City of Los Angeles and The Flying Tiger Line Inc. ("FTL"). (Filed as Exhibit 28.1 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) E-6 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 10.35 First Amendment dated September 18, 1979, to Ground Lease, dated February 27, 1979, between the City of Los Angeles and FTL. (Filed as Exhibit 28.2 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.36 Second Amendment dated March 9, 1983 to Ground Lease, dated February 27, 1979, between the City of Los Angeles and FTL. (Filed as Exhibit 28.3 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.37 Interim Exchange Agreement dated as of September 11, 1990 between the City of Los Angeles and Registrant. (Filed as Exhibit 28.4 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.38 Lease Agreement dated as of May 7, 1985 between the City of Oakland and Registrant. (Filed as Exhibit 28.5 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.39 Affirmative Action Agreement dated as of May 14, 1985, to Lease Agreement dated May 7, 1985, between the City of Oakland and Registrant. (Filed as Exhibit 28.6 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.40 First Supplemental Agreement dated August 5, 1986, to Lease Agreement dated May 7, 1985, between the City of Oakland and Registrant. (Filed as Exhibit 28.7 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1- 7806, and incorporated herein by reference.) 10.41 Second Supplemental Agreement dated February 17, 1987, to Lease Agreement dated May 7, 1985, between the City of Oakland and Registrant. (Filed as Exhibit 28.8 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.42 Third Supplemental Agreement dated February 1989, to Lease Agreement dated May 7, 1985, between the City of Oakland and Registrant. (Filed as Exhibit 28.9 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1- 7806, and incorporated herein by reference.) 10.43 Amendment dated August 1, 1989, to Lease Agreement dated May 7, 1985, between the City of Oakland and Registrant. (Refiled as Exhibit 10.40 to Registrant's FY95 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.44 Lease and First Right of Refusal Agreement dated July 22, 1988 between the State of Alaska, Department of Transportation and Public Facilities and Registrant. (Filed as Exhibit 28.10 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.45 Development Agreement dated July 22, 1988, to Lease and First Right of Refusal Agreement dated July 22, 1988, between the State of Alaska, Department of Transportation and Public Facilities and Registrant. (Filed as Exhibit 28.11 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) E-7 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 10.46 Supplement No. 1 dated May 19, 1989, to Development Agreement dated July 22, 1988, between the State of Alaska, Department of Transportation and Public Facilities and Registrant. (Filed as Exhibit 28.12 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.47 Supplement No. 1 dated July 19, 1989, to Lease and First Right of Refusal Agreement dated July 22, 1988, between the State of Alaska, Department of Transportation and Public Facilities and Registrant. (Filed as Exhibit 28.13 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.48 Right-of-Way Agreement dated September 19, 1989, to Lease and First Right of Refusal Agreement dated July 22, 1988, between the State of Alaska, Department of Transportation and Public Facilities and Registrant. (Filed as Exhibit 28.14 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.49 Supplement No. 2 dated April 23, 1991, to Lease and First Right of Refusal Agreement dated July 22, 1988, between the State of Alaska, Department of Transportation and Public Facilities and the Registrant. (Filed as Exhibit 28.15 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.50 Lease Agreement dated October 1, 1983 between The Port Authority of New York and New Jersey and Registrant. (Filed as Exhibit 28.16 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.51 Supplement No. 1, dated October 1, 1983 to Lease Agreement dated October 1, 1983 between The Port Authority of New York and New Jersey and Registrant. (Filed as Exhibit 28.17 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.52 Supplement No. 2 dated September 1, 1985 to Lease Agreement dated October 1, 1983 between The Port Authority of New York and New Jersey and Registrant. (Filed as Exhibit 28.18 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.53 Supplement No. 3 dated June 1, 1992 to Lease Agreement dated October 1, 1983 between The Port Authority of New York and New Jersey and Registrant. (Filed as Exhibit 28.19 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.54 Supplement No. 4 dated March 1, 1993 to Lease Agreement dated October 1, 1983 between The Port Authority of New York and New Jersey and Registrant. (Filed as Exhibit 10.51 to Registrant's FY95 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) E-8 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 10.55 Supplement No. 5 dated February 1, 1994 to Lease Agreement dated October 1, 1983 between The Port Authority of New York and New Jersey and Registrant. (Filed as Exhibit 10.52 to Registrant's FY95 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.56 Amended and Restated Airport Use Agreement and Terminal Facilities Lease dated as of January 1, 1985 between the City of Chicago and FTL. (Filed as Exhibit 28.20 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.57 Cargo Building Site Lease dated September 23, 1987 between the City of Chicago and FTL. (Filed as Exhibit 28.21 to Registrant's FY93 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.58 Amended and Restated Land Lease Agreement dated August 1993 between Registrant and the Indianapolis Airport Authority. (Filed as Exhibit 10.52 to Registrant's FY94 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.59 Indenture dated as of September 1, 1993 between the City of Indianapolis, Indiana and NBD Bank, N.A., as Trustee, relating to the City of Indianapolis Airport Facility Revenue Refunding Bonds, Series 1994, due April 1, 2017. (Filed as Exhibit 10.1 to Registrant's FY94 First Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.60 Loan Agreement between the City of Indianapolis and Registrant. (Filed as Exhibit 10.2 to Registrant's FY94 First Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.61 Form of Promissory Note to the City of Indianapolis. (Filed as Exhibit 10.3 to Registrant's FY94 First Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.62 Indenture dated as of October 1, 1994 between Indianapolis Airport Authority and NBD Bank, N. A., as Trustee, relating to 7.10% Special Facilities Revenue Bonds, Series 1994 due January 15, 2017. (Filed as Exhibit 10.1 to Registrant's FY95 Second Quarter Report on Form 10-Q, Commission File No. 1- 7806, and incorporated herein by reference.) 10.63 Guaranty dated as of October 1, 1994 from Registrant to NBD Bank, N.A. relating to 7.10% Special Facilities Revenue Bonds, Series 1994 due January 15, 2017. (Filed as Exhibit 10.2 to Registrant's FY95 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.64 Land and Special Facilities Lease Agreement dated as of October 1, 1994 between Registrant and the Indianapolis Airport Authority relating to 7.10% Special Facilities Revenue Bonds, Series 1994 due January 15, 2017. (Filed as Exhibit 10.3 to Registrant's FY95 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) E-9 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 10.65 Lease Agreement dated October 9, 1994 between the Registrant and Subic Bay Metropolitan Authority. (Filed as Exhibit 10.62 to Registrant's FY95 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.66 Indenture dated as of April 1, 1996 between AllianceAirport Authority, Inc. and The First National Bank of Chicago, as Trustee, relating to AllianceAirport Authority, Inc. Special Facilities Revenue Bonds, Series 1996 (Federal Express Corporation Project) due April 1, 2021. 10.67 Guaranty dated as of April 1, 1996 from Registrant to The First National Bank of Chicago relating to AllianceAirport Authority, Inc. Special Facilities Revenue Bonds, Series 1996 (Federal Express Corporation Project) due April 1, 2021. 10.68 Land and Special Facilities Lease Agreement dated as of April 1, 1996 between Registrant and AllianceAirport Authority, Inc. relating to AllianceAirport Authority, Inc. Special Facilities Revenue Bonds, Series 1996 (Federal Express Corporation Project) due April 1, 2021. 10.69 Assignment and Assumption Agreement dated April 10, 1996 between AllianceAirport Authority, Inc. and the City of Fort Worth, Texas relating to AllianceAirport Authority, Inc. Special Facilities Revenue Bonds, Series 1996 (Federal Express Corporation Project) due April 1, 2021. 10.70 1980 Stock Incentive Plan and Form of Stock Option Agreement pursuant to 1980 Stock Incentive Plan, as amended. (Filed as Exhibit 10.59 to Registrant's FY93 Annual Report on Form 10- K, Commission File No. 1-7806, and incorporated herein by reference.) 10.71 1983 Stock Incentive Plan and Form of Stock Option Agreement pursuant to 1983 Stock Incentive Plan, as amended. (Filed as an exhibit to Registrant's Registration Statement No. 2-95720 on Form S-8 and incorporated herein by reference.) 10.72 1984 Stock Incentive Plan and Form of Stock Option Agreement pursuant to 1984 Stock Incentive Plan, as amended. (Filed as an exhibit to Registrant's Registration Statement No. 2-95720 on Form S-8 and incorporated herein by reference.) 10.73 1987 Stock Incentive Plan and Form of Stock Option Agreement pursuant to 1987 Stock Incentive Plan, as amended. (Filed as an exhibit to Registrant's Registration Statement No. 33- 20138 on Form S-8 and incorporated herein by reference.) 10.74 1989 Stock Incentive Plan and Form of Stock Option Agreement pursuant to 1989 Stock Incentive Plan, as amended. (Filed as Exhibit 10.26 to Registrant's FY90 Annual Report on Form 10- K, Commission File No. 1-7806, and incorporated herein by reference.) 10.75 1993 Stock Incentive Plan and Form of Stock Option Agreement pursuant to 1993 Stock Incentive Plan, as amended. (1993 Stock Incentive Plan was filed as Exhibit A to Registrant's FY93 Definitive Proxy Statement, Commission File No. 1-7806, and incorporated herein by reference, and the form of stock option agreement was filed as Exhibit 10.61 to Registrant's FY94 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) E-10 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 10.76 Amendment to Registrant's 1980, 1983, 1984, 1987 and 1989 Stock Incentive Plans. (Filed as Exhibit 10.27 to Registrant's FY90 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.77 Amendment to Registrant's 1983, 1984, 1987, 1989 and 1993 Stock Incentive Plans. (Filed as Exhibit 10.63 to Registrant's FY94 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.78 1995 Stock Incentive Plan and Form of Stock Option Agreement pursuant to 1995 Stock Incentive Plan. (1995 Stock Incentive Plan was filed as Exhibit A to Registrant's FY95 Definitive Proxy Statement, Commission File No. 1-7806, and incorporated herein by reference, and the form of stock option agreement was filed as Exhibit 99.2 to Registrant's Registration Statement No. 333-03443 on Form S-8, and incorporated herein by reference.) 10.79 1986 Restricted Stock Plan and Form of Restricted Stock Agreement pursuant to 1986 Restricted Stock Plan. (Filed as Exhibit 10.28 to Registrant's FY90 Annual Report on Form 10- K, Commission File No. 1-7806, and incorporated herein by reference.) 10.80 1995 Restricted Stock Plan and Form of Restricted Stock Agreement pursuant to 1995 Restricted Stock Plan. (1995 Restricted Stock Plan filed as Exhibit B to Registrant's FY95 Definitive Proxy Statement, Commission File No. 1-7806, and incorporated herein by reference.) 10.81 Registrant's Retirement Parity Pension Plan. (Filed as Exhibit 10.67 to Registrant's FY93 Annual Report on Form 10- K, Commission File No. 1-7806, and incorporated herein by reference.) 10.82 First Amendment to Registrant's Retirement Parity Pension Plan. (Filed as Exhibit 10.1 to Registrant's FY95 First Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.83 Management Performance Bonus Plan. (Description of the performance bonus plan contained in the Definitive Proxy Statement for Registrant's 1996 Annual Meeting of Stockholders, under the heading "Report on Executive Compensation of the Compensation Committee of the Board of Directors" is incorporated herein by reference.) 10.84 Registrant's Retirement Plan for Outside Directors. (Filed as Exhibit 10.30 to Registrant's FY90 Annual Report on Form 10- K, Commission File No. 1-7806, and incorporated herein by reference.) 10.85 Long-term Performance Bonus Plans. (Description of the long- term performance bonus plans contained in the Definitive Proxy Statement for Registrant's 1996 Annual Meeting of Stockholders, under the heading "Long-term Incentive Plans - Awards in Last Fiscal Year" is incorporated herein by reference.) E-11 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 10.86 Amended and Restated Credit Agreement dated May 12, 1995 among Registrant and The First National Bank of Chicago, individually and as agent, and certain lenders. (Filed as Exhibit 10.77 to Registrant's FY95 Annual Report on Form 10- K, Commission File No. 1-7806, and incorporated herein by reference.) 10.87 Purchase Agreement between AVSA and Registrant for purchase of Airbus A300 aircraft. Confidential treatment has been granted for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. (Filed as Exhibit 10.36 to Registrant's FY91 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.88 Sales Agreement dated April 7, 1995 between Registrant and American Airlines, Inc. for the purchase of MD11 aircraft. Confidential treatment has been granted for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. (Filed as Exhibit 10.79 to Registrant's FY95 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 11 Statement re Computation of Earnings Per Share. 12 Statement re Computation of Ratio of Earnings to Fixed Charges. 13 Registrant's Annual Report to Stockholders for the fiscal year ended May 31, 1996. 21 Subsidiaries of Registrant. 23 Consent of Independent Public Accountants. 24 Powers of Attorney. E-12 EX-4.14 2 INDENTURE DATED JULY 1, 1996 Exhibit 4.14 Execution Copy ================================================================================ TRUST INDENTURE _______________ Dated as of July 1, 1996 between FEDERAL EXPRESS CORPORATION, as Issuer and THE FIRST NATIONAL BANK OF CHICAGO, as Trustee _______________ DEBT SECURITIES ================================================================================ Reconciliation and tie between Trust Indenture Act of 1939 (the "Trust Indenture Act") and Indenture
TRUST INDENTURE ACT SECTION INDENTURE SECTION - ------------------------------ (S) 310 (a)(1)............... 609 (a)(2)..................... 609 (b)........................ 610 (S) 311(b)(4)................. 613 (b)(6)..................... 613 (S) 312 (a).................. 701 (b)........................ 702 (c)........................ 702 (S) 313 (a).................. 703 (b)(2)..................... 703 (c)........................ 703 (d)........................ 703 (S) 314 (a).................. 704 (c)(1)..................... 102 (c)(2)..................... 102 (e)........................ 102 (f)........................ 102 (S) 316 (a) (last sentence).. 101 (a)(1)(A).................. 502, 512 (a)(1)(B).................. 513 (b)........................ 508 (S) 317 (a)(1)............... 503 (a)(2)..................... 504 (b)........................ 1003 (S) 318 (a).................. 107
_________________________ This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. NOTE: Section 318(c) of the Trust Indenture Act provides that the provisions of Sections 310-317 are a part of and govern every qualified indenture, whether or not physically contained therein. TABLE OF CONTENTS PAGE ---- Parties................................................................. 1 Recitals of the Company................................................. 1 ARTICLE ONE Definitions and Other Provisions of General Application Section 101. Definition: Act................................................................ 2 Additional Amounts................................................. 2 Affiliate.......................................................... 2 Authenticating Agent............................................... 2 Board of Directors................................................. 2 Board Resolution................................................... 2 Business Day....................................................... 3 Commission......................................................... 3 Company............................................................ 3 Company Request; Company Order..................................... 3 Conversion Event................................................... 3 Corporate Trust Office............................................. 3 Corporation........................................................ 3 Currency........................................................... 3 CUSIP Number....................................................... 3 Defaulted Interest................................................. 3 Depository......................................................... 4 Dollars............................................................ 4 ECU................................................................ 4 European Monetary System........................................... 4 European Union..................................................... 4 Event of Default................................................... 4 Foreign Currency................................................... 4 Global Security.................................................... 4 Government Obligations............................................. 4 Holder............................................................. 5 Indenture.......................................................... 5 Indexed Security................................................... 5 Interest........................................................... 5 Interest Payment Date.............................................. 5 - ------------------------- NOTE: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. PAGE ---- Maturity........................................................... 5 Officer's Certificate.............................................. 5 Opinion of Counsel................................................. 5 Original Issue Discount Security................................... 5 Outstanding........................................................ 5 Paying Agent....................................................... 7 Person............................................................. 7 Place of Payment................................................... 7 Predecessor Security............................................... 7 Redemption Date.................................................... 7 Redemption Price................................................... 7 Regular Record Date................................................ 7 Responsible Officer................................................ 7 Securities......................................................... 7 Security Register and Security Registrar........................... 7 Special Record Date................................................ 8 Stated Maturity.................................................... 8 Subsidiary......................................................... 8 Trustee............................................................ 8 Trust Indenture Act................................................ 8 Vice President..................................................... 8 Section 102. Compliance Certificates and Opinions.................... 8 Section 103. Form of Documents Delivered to Trustee.................. 9 Section 104. Acts of Holders......................................... 9 Section 105. Notices, Etc. to Trustee and Company.................... 10 Section 106. Notice to Holders; Waiver............................... 10 Section 107. Conflict with Trust Indenture Act....................... 11 Section 108. Effect of Headings and Table of Contents................ 11 Section 109. Successors and Assigns.................................. 11 Section 110. Separability Clause..................................... 11 Section 111. Benefits of Indenture................................... 11 Section 112. Governing Law........................................... 12 Section 113. Legal Holidays.......................................... 12 Section 114. Language of Notices..................................... 12 Section 115. Counterparts............................................ 12 ARTICLE TWO Security Forms Section 201. Forms Generally........................................... 12 Section 202. Form of Trustee's Certificate of Authentication........... 13 Section 203. Global Securities......................................... 13 ii PAGE ---- ARTICLE THREE The Securities Section 301. Amount Unlimited; Issuable in Series...................... 14 Section 302. Denominations............................................. 17 Section 303. Execution, Authentication, Delivery and Dating............ 18 Section 304. Temporary Securities...................................... 19 Section 305. Registration, Transfer and Exchange....................... 20 Section 306. Mutilated, Destroyed, Lost and Stolen Securities.......... 22 Section 307. Payment of Interest; Interest Rights Preserved............ 23 Section 308. Persons Deemed Owners..................................... 25 Section 309. Cancellation.............................................. 25 Section 310. Computation of Interest................................... 25 ARTICLE FOUR Satisfaction and Discharge Section 401. Satisfaction and Discharge of Indenture................... 26 Section 402. Application of Trust Money................................ 27 ARTICLE FIVE Remedies Section 501. Events of Default......................................... 27 Section 502. Acceleration of Maturity; Rescission and Annulment........ 29 Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee......................... 30 Section 504. Trustee May File Proofs of Claim.......................... 30 Section 505. Trustee May Enforce Claims Without Possession of Securities......................... 31 Section 506. Application of Money Collected............................ 32 Section 507. Limitation on Suits....................................... 32 Section 508. Unconditional Right of Holders to Receive Principal Premium and Interest................ 33 Section 509. Restoration of Rights and Remedies........................ 33 Section 510. Rights and Remedies Cumulative............................ 33 Section 511. Delay or Omission Not Waiver.............................. 33 Section 512. Control by Holders........................................ 34 iii PAGE ---- Section 513. Waiver of Past Defaults................................... 34 Section 514. Undertaking for Costs..................................... 34 Section 515. Waiver of Stay or Extension Laws.......................... 35 ARTICLE SIX The Trustee Section 601. Certain Duties and Responsibilities...................... 35 Section 602. Notice of Defaults........................................ 36 Section 603. Certain Rights of Trustee................................. 37 Section 604. Not Responsible for Recitals or Issuance of Securities.... 38 Section 605. May Hold Securities....................................... 38 Section 606. Money Held in Trust....................................... 38 Section 607. Compensation and Reimbursement............................ 38 Section 608. Intentionally Left Blank.................................. 39 Section 609. Corporate Trustee Required; Eligibility................... 39 Section 610. Resignation and Removal; Appointment of Successor......... 40 Section 611. Acceptance of Appointment by Successor.................... 41 Section 612. Merger, Conversion, Consolidation or Succession to Business............................... 43 Section 613. Preferential Claims....................................... 43 Section 614. Appointment of Authenticating Agent....................... 43 ARTICLE SEVEN Holders' Lists and Reports By Trustee and Company Section 701. Company to Furnish Trustee Names and Addresses of Holders............................................... 45 Section 702. Preservation of Information; Communications to Holders.... 46 Section 703. Reports by Trustee........................................ 47 Section 704. Reports by Company........................................ 47 ARTICLE EIGHT Consolidation, Merger, Conveyance, Transfer or Lease Section 801. Company May Consolidate, Etc. on Certain Terms............ 48 Section 802. Successor Corporation Substituted......................... 49 iv PAGE ---- ARTICLE NINE Supplemental Indentures Section 901. Supplemental Indentures Without Consent of Holders........ 49 Section 902. Supplemental Indentures with Consent of Holders........... 50 Section 903. Execution of Supplemental Indentures...................... 51 Section 904. Effect of Supplemental Indentures......................... 52 Section 905. Conformity with Trust Indenture Act....................... 52 Section 906. Reference in Securities to Supplemental Indentures........ 52 ARTICLE TEN Covenants Section 1001. Payment of Principal, any Premium, Interest and Additional Amounts................................. 52 Section 1002. Maintenance of Office or Agency.......................... 52 Section 1003. Money for Securities Payments to be Held in Trust........ 53 Section 1004. Corporate Existence...................................... 54 Section 1005. Statement as to Default.................................. 55 Section 1006. Additional Amounts....................................... 55 ARTICLE ELEVEN Redemption of Securities Section 1101. Applicability of Article................................. 56 Section 1102. Election to Redeem; Notice to Trustee.................... 56 Section 1103. Selection by Trustee of Securities to be Redeemed........ 56 Section 1104. Notice of Redemption..................................... 57 Section 1105. Deposit of Redemption Price.............................. 58 Section 1106. Securities Payable on Redemption Date.................... 58 Section 1107. Securities Redeemed in Part.............................. 58 ARTICLE TWELVE Intentionally Left Blank v PAGE ---- ARTICLE THIRTEEN Defeasance and Covenant Defeasance Section 1301. Applicability of Article; Company's Option to Effect Defeasance or Covenant Defeasance............ 59 Section 1302. Defeasance and Discharge................................ 59 Section 1303. Covenant Defeasance..................................... 60 Section 1304. Conditions to Defeasance or Covenant Defeasance......... 60 Section 1305. Deposited Money and Government Obligations to be Held in Trust; Other Miscellaneous Provisions.......... 62 ARTICLE FOURTEEN Sinking Funds Section 1401. Applicability of Article................................ 63 Section 1402. Satisfaction of Sinking Fund Payments with Securities... 63 Section 1403. Redemption of Securities for Sinking Fund............... 64 ARTICLE FIFTEEN Securities in Foreign Currencies Section 1501. Applicability of Article................................. 64 SCHEDULE I Supplemental Indenture.................................... EXHIBIT A Form of Debt Security..................................... vi TRUST INDENTURE --------------- INDENTURE, dated as of July 1, 1996, between Federal Express Corporation, a Delaware Corporation (the "Company") and The First National Bank of Chicago, a national banking association organized under the laws of the United States of America, as trustee (the "Trustee"). RECITALS WHEREAS, the Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its senior unsecured debentures, bonds, notes or other evidences of indebtedness (herein called the "Securities"), unlimited as to principal amount, to bear such rates of interest, to mature at such time or times, to be issued in one or more series and to have such other provisions as shall be fixed as hereinafter provided; WHEREAS, the Company has duly authorized the execution and delivery of this Indenture. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done; and WHEREAS, this Indenture is subject to the provisions of the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder that are required to be part of this Indenture and, to the extent applicable, shall be governed by such provisions. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders (as herein defined) thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities or of any series thereof, as follows: ARTICLE ONE Definitions and Other Provisions of General Application Section 101. Definitions. ------------ For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" or "GAAP" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States of America as of the date of such computation; and (4) the words "herein," "hereof," "hereto" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Certain terms used principally in certain Articles hereof are defined in those Articles. "Act" when used with respect to any Holder, has the meaning specified in Section 104. "Additional Amounts" means any additional amounts which are required hereby or by any Security, under circumstances specified herein or therein, to be paid by the Company in respect of certain taxes, assessments or other governmental charges imposed on Holders specified therein and which are owing to such Holders. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Authenticating Agent" means any Person authorized by the Trustee to act on behalf of the Trustee to authenticate Securities of one or more series. "Board of Directors" means the board of directors of the Company or any duly authorized committee of the board of directors of the Company. "Board Resolution" means a copy of one or more resolutions certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, delivered to the Trustee. 2 "Business Day" means any day other than Saturday, Sunday or other day on which banking institutions in New York, Illinois or Tennessee are authorized or obligated by law to close. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, as amended, or, if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Company" means Federal Express Corporation or any successor Corporation which shall have become such under this Indenture. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its President or any Vice President and delivered to the Trustee. "Conversion Event" means the cessation of use of (i) a Foreign Currency both by the government of the country or the confederation which issued such Foreign Currency and for the settlement of transactions by a central bank or other public institutions of or within the international banking community, (ii) the ECU both within the European Monetary System and for the settlement of transactions by public institutions of or within the European Union or (iii) any currency unit or composite currency other than the ECU for the purposes for which it was established. "Corporate Trust Office" means the principal corporate trust office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of original execution of this Indenture is located at One First National Plaza, Suite 0126, Chicago, Illinois 60670-0126. "Corporation" includes corporations and limited liability companies and, except for purposes of Article Eight, associations, companies and business trusts. "Currency," with respect to any payment, deposit or other transfer in respect of the principal of or any premium or interest on or any Additional Amounts with respect to any Security, means Dollars or the Foreign Currency, as the case may be, in which such payment, deposit or other transfer is required to be made by or pursuant to the terms hereof or such Security and, with respect to any other payment, deposit or transfer pursuant to or contemplated by the terms hereof or such Security, means Dollars. "CUSIP Number" means the alphanumeric designation assigned to a Security by Standard & Poor's Ratings Group, CUSIP Service Bureau. "Defaulted Interest" has the meaning specified in Section 307. 3 "Depository" means, with respect to the Securities of any series issuable upon original issuance in whole or in part in the form of one or more Global Securities, the clearing agency registered under the Securities Exchange Act of 1934, as amended, specified for that purpose as contemplated by Section 301. "Dollars" means a dollar or other equivalent unit of legal tender for payment of debts in the United States of America. "ECU" means the European Currency Units as defined and revised from time to time by the Counsel of the European Community. "European Monetary System" means the European Monetary System established by the Resolution of December 5, 1978 of the Council of the European Community. "European Union" means the European Community, the European Coal and Steel Community and the European Atomic Energy Community. "Event of Default" has the meaning specified in Section 501. "Foreign Currency" means any currency, currency unit or composite currency, including, without limitation, the ECU, issued by the government of one or more countries other than the United States or by any recognized confederation or association of such governments. "Global Security" means a Security bearing the legend specified in Section 203 evidencing all or part of a series of Securities, issued to the Depository with respect to such series or its nominee and registered in the name of such Depository or nominee. "Government Obligations" means securities which are (x) direct obligations of the United States of America or the other government or governments in the confederation which issued the Foreign Currency in which the principal of or any premium or interest on any Security or any Additional Amounts in respect thereof shall be payable, in each case where the payment or payments thereunder are supported by the full faith and credit of such government or governments, or (y) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America or such other governments or governments, in each case where the payment or payments thereunder are unconditionally guaranteed as a full faith and credit obligation by the United States of America or such other governments or governments, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank as custodian with respect to any such Government Obligation or a specific payment of principal of or interest on any such Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such 4 depository receipt from any amount received by the custodian in respect to the Government Obligation or the specific payment of principal of or interest on the Government Obligation evidenced by such depository receipt. "Holder" means a Person in whose name a Security is registered in the Security Register. "Indenture" means this instrument as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of each particular series of Securities established as contemplated by Section 301. "Indexed Security" means a Security the terms of which provide that the principal amount thereof payable at Stated Maturity may be more or less than the principal face amount thereof at original issuance. "Interest," with respect to any Original Issue Discount Security which by its terms bears interest only after Maturity, means interest payable after Maturity and, when used with respect to a Security which provides for the payment of Additional Amounts pursuant to Section 1006, includes such Additional Amounts. "Interest Payment Date," with respect to any Security, means the Stated Maturity of an installment of interest on such Security. "Maturity," with respect to any Security, means the date on which the principal of such Security, or an installment of principal, becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, notice of redemption or repurchase or otherwise and includes the Redemption Date. "Officer's Certificate" means a certificate signed by the Chairman of the Board, the President or any Vice President of the Company, and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel, who may be an employee of or of counsel to the Company, or other counsel reasonably satisfactory to the Trustee. "Original Issue Discount Security" means any Security issued pursuant to this Indenture which provides for declaration of an amount less than the principal face amount thereof to be due and payable upon acceleration of the Maturity pursuant to Section 502. "Outstanding," when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: 5 (i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment at the Maturity thereof money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; (iii) Securities for whose payment or redemption money or Government Obligations as contemplated by Section 1304 in the necessary amount have been theretofore deposited with the Trustee (or another trustee satisfying the requirements of Section 609) in trust for the Holders of such Securities in accordance with Section 1305; and (iv) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, unless there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, (i) the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding shall be equal to the amount of the principal thereof that would be due and payable as of the date of such determination upon acceleration of the Maturity thereof pursuant to Section 502, (ii) the principal amount of any Indexed Security that may be counted in making such determination and that shall be deemed outstanding for such purpose shall be equal to the principal face amount of such Indexed Security at original issuance, unless otherwise provided in this Indenture, (iii) the principal amount of a Security denominated in a Foreign Currency shall be the Dollar equivalent, determined on the date of original issuance of such Security, of the principal amount (or, in the case of an Original Issue Discount Security, the Dollar equivalent on the date of original issuance of such Security of the amount determined as provided in (i) above) of such Security, and (iv) Securities owned by the Company or any other obligor or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor or any Affiliate of the Company or of such other obligor. 6 "Paying Agent" means any Person authorized by the Company to pay the principal of (and premium, if any) or interest on any Securities on behalf of the Company. "Person" means any individual, Corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment," with respect to the Securities of any series, means the place where the principal of (and premium, if any), interest on, and Additional Amounts with respect to, the Securities of that series are payable as provided in or pursuant to this Indenture or such Securities. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Redemption Date," with respect to any Security or portion thereof to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture or such Security. "Redemption Price," with respect to any Security or portion thereof to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture or such Security. "Regular Record Date" for the interest payable on any Interest Payment Date on the Securities of any series means the date specified in or pursuant to this Indenture or such Security as the "Regular Record Date." "Responsible Officer," means any officer of the Trustee in its Corporate Trust Office and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of knowledge of and familiarity with the particular subject. "Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Securities authenticated and delivered under this Indenture, provided, however, that if at any time there is more than one Person acting as Trustee under this Indenture, "Securities" with respect to any such Person shall mean securities authenticated and delivered under this Indenture, exclusive, however, of Securities of any series as to which such Person is not Trustee. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. 7 "Special Record Date" for the payment of any Defaulted Interest on any Security means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity," with respect to any Security or any installment of principal thereof or interest thereon or any Additional Amounts, means the date established by or pursuant to this Indenture or such Security as the fixed date on which the principal of such Security or such installment of principal or interest is, or such Additional Amounts are, due and payable. "Subsidiary" means any Corporation of which at the time of determination the Company or one or more Subsidiaries owns or controls, directly or indirectly, more than 50% of the shares of voting stock. For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "Trustee" means the Person named as the "Trustee" in the first paragraph of this Indenture until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder. If at any time there is more than one such Person, "Trustee" shall mean such Person and as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of such series. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, as in force at the date as of which this instrument was executed, except as provided in Section 905. "Vice President," when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president." Section 102. Compliance Certificates and Opinions. ------------------------------------- Except as otherwise expressly provided in this Indenture, upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officer's Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with or an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents or any of them is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Any Officer's Certificate will comply with Section 314(e) of the Trust Indenture Act. 8 Section 103. Form of Documents Delivered to Trustee. --------------------------------------- In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon an Opinion of Counsel, unless such officer knows, or in the exercise of reasonable care should know, that the opinion with respect to the matters upon which the certificate or opinion is based are erroneous. Any such Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture or any Security, they may, but need not, be consolidated and form one instrument. Section 104. Acts of Holders. ---------------- (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved in any reasonable manner which the Trustee deems sufficient and in accordance with such reasonable rules as the Trustee may determine; and the Trustee may in any instance require further proof with respect to any of the matters referred to in this Section. 9 (c) The ownership of Securities shall be proved by the Security Register. (d) If the Company shall solicit from the Holders of Securities of any series any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, fix in advance a record date for the determination of Holders of Securities entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. Any such record date shall be fixed at the Company's discretion. If such a record date is fixed, such request, demand, authorization, direction, notice, consent and waiver or other Act may be sought or given before or after the record date, but only the Holders of Securities of record at the close of business on such record date shall be deemed to be Holders of Securities for the purpose of determining whether Holders of the requisite proportion of Securities of such series Outstanding have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Securities of such series Outstanding shall be computed as of such record date. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee, any Security Registrar, any Paying Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Security. Section 105. Notices, Etc. to Trustee and Company. ------------------------------------- Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with: (1) the Trustee by any Holder or the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office; or (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company at 2007 Corporate Avenue, Memphis, Tennessee 38132, attention Vice President and Treasurer, or at any other address previously furnished in writing to the Trustee by the Company. Section 106. Notice to Holders; Waiver. -------------------------- Where this Indenture or any Security provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein or in such 10 Security expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at the Holder's address as it appears in the Security Register, not later than the latest date, or not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given or provided. Where this Indenture or any Security provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. Section 107. Conflict with Trust Indenture Act. ---------------------------------- If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control. Section 108. Effect of Headings and Table of Contents. ----------------------------------------- The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 109. Successors and Assigns. ----------------------- All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. Section 110. Separability Clause. -------------------- In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 111. Benefits of Indenture. ---------------------- Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and 11 the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 112. Governing Law. -------------- This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of Tennessee. Section 113. Legal Holidays. --------------- In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal (and premium, if any) or any Additional Amounts need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, and no interest shall accrue with respect to such payments for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, to the next succeeding Business Day. Section 114. Language of Notices. -------------------- Any request, demand, authorization, direction, notice, consent, election or waiver required or permitted under this Indenture shall be in the English language, except that, if the Company so elects, any published notice may be in an official language of the country of publication. Section 115. Counterparts. ------------- This Indenture may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. ARTICLE TWO Security Forms Section 201. Forms Generally. ---------------- The Securities of each series shall be in substantially the form attached hereto as Exhibit A as shall be established by or pursuant to a Board Resolution or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. 12 If any form of Securities of any series is established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at the same time as or prior to the delivery of the Company Order contemplated by Section 303 for the authentication and delivery of such Securities. The definitive Securities may be produced in any manner determined by the officers executing such Securities, as evidenced by their execution of such Securities. Unless otherwise provided in or pursuant to this Indenture or any Securities, the Securities shall be issuable in registered form without coupons and shall not be issuable upon the exercise of warrants. Section 202. Form of Trustee's Certificate of Authentication. ------------------------------------------------ This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. The First National Bank of Chicago, as Trustee By: ___________________________ Authorized Officer Section 203. Global Securities. ------------------ Unless otherwise provided in or pursuant to this Indenture or any Securities, the Securities shall be issued in global form. Any such Security may provide that it or any number of such Securities shall represent the aggregate amount of all Outstanding Securities of such series (or such lessor amount as is permitted by the terms thereof) from time to time endorsed thereon and may also provide that the aggregate amount of Outstanding Securities represented thereby may from time to time be increased or reduced to reflect exchanges. Any endorsement of any Security in global form to reflect the amount, or any increase or decrease in the amount, or changes in the rights of Holders, of Outstanding Securities represented thereby shall be made in such manner and by such Person as shall be specified therein or in the Company Order to be delivered pursuant to Section 303 or 304 with respect thereto. Subject to the provisions of Section 303 and, if applicable, Section 304, the Trustee shall deliver and redeliver any Security in permanent global form in the manner and upon instructions given by the Person specified therein or in the applicable Company Order. If a Company Order pursuant to Section 303 or 304 has been, or simultaneously is, delivered, any instructions by the Company with respect to a 13 Security in global form shall be in writing but need not be accompanied by or contained in an Officer's Certificate and need not be accompanied by an Opinion of Counsel. Notwithstanding the provisions of Section 307, unless otherwise specified in or pursuant to this Indenture or any Securities, payment of principal of, any premium and interest on, and any Additional Amounts in respect of, any Security in global form shall be made to the Person specified therein. Notwithstanding the provisions of Section 308 and except as provided in the preceding paragraph, the Company, the Trustee and any agent of the Company and the Trustee shall treat as the Holder, the holder of such global Security in registered form. Any Global Security authenticated and delivered hereunder shall bear a legend in substantially the following form: "This Security is a Global Security within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depository or a nominee of a Depository. This Security is exchangeable for Securities registered in the name of a Person other than the Depository or its nominee only in the limited circumstances described in the Indenture, and no transfer of this Security (other than a transfer of this Security as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository) may be registered except in such limited circumstances." ARTICLE THREE The Securities Section 301. Amount Unlimited; Issuable in Series. ------------------------------------- The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series. There shall be established in or pursuant to a Board Resolution and (subject to Section 303) set forth in an Officer's Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series (subject to the last paragraph of this Section 301): (1) the title of the Securities and the series in which such Securities shall be included (which shall distinguish the Securities of the series from all other Securities); 14 (2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 304, 305, 306, 906 or 1107 and except for any Securities which, pursuant to Section 303 are deemed never to have been authenticated and delivered hereunder); (3) the date or dates on which the principal of the Securities of the series is payable; (4) the Person to whom any interest on any Security of the series shall be payable if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, the rate or rates, which may be fixed or variable, at which the Securities of the series shall bear interest, if any, if the rate is variable, the manner of calculation thereof, the date or dates from which such interest shall accrue, the Interest Payment Dates on which such interest shall be payable and the Regular Record Date for the interest payable on any Interest Payment Date; (5) the place or places where the principal of (and premium, if any) and interest, if any, on Securities of the series shall be payable; (6) the date or dates on which, the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company; (7) the obligation, if any, of the Company to redeem or purchase Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the date or dates on which, the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation and any provisions for the remarketing of such securities so redeemed or purchased; (8) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which Securities of the series shall be issuable; (9) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 502 or the method by which such portion is to be determined; (10) the application, if any, of either or both of Section 1302 and Section 1303 to the Securities of the series; 15 (11) if other than Dollars, the Foreign Currency in which payment of the principal of, any premium or interest on or any Additional Amounts with respect to any of such Securities shall be payable; (12) if the principal of (and premium, if any) or interest, if any, on the Securities of that series are to be payable, at the election of the Company or a holder thereof, in a currency (including a composite currency) other than that in which the Securities are stated to be payable, the date or dates on which, the period or periods within which, and the terms and conditions upon which, such election may be made; (13) if the amount of payments of principal of (and premium if any) or interest, if any, on the Securities of the series may be determined with reference to an index, formula or other method or methods based on a currency (including a composite currency) other than that in which the Securities are stated to be payable, the terms and conditions upon which and the manner in which such amounts shall be determined and paid or payable; (14) if the amount of payments of principal of, any premium or interest on the Securities of the series may be determined with reference to an index, the manner in which such amounts shall be determined; (15) whether any Securities of the series are to be issuable upon original issuance in the form of one or more Global Securities and, if so, (i) the Depository with respect to such Global Security or Securities and (ii) the circumstances under which any such Global Security may be exchanged for Securities registered in the name of, and any transfer of such Global Security may be registered to, a Person other than such Depository or its nominee, if other than as set forth in Section 305; (16) whether and under what circumstances Additional Amounts on such Securities or any of them shall be payable; (17) the notice, if any, to Holders regarding the determination of interest on a floating rate Security and the manner of giving such notice, and the basis upon which interest shall be calculated if other than that of a 360- day year of twelve 30-day months; (18) intentionally left blank; (19) any deletions from, modifications of or additions to the Events of Default or covenants of the Company with respect to any Securities, whether or not such Events of Default or covenants are consistent with the Events of Default or covenants set forth herein; (20) if any of such Securities are to be issuable in global form and are to be issuable in definitive form (whether upon original issue or upon exchange of a temporary Security) only upon receipt of certain certificates or other documents or 16 satisfaction of other conditions, then the form and terms of such certificates, documents or conditions; (21) if there is more than one Trustee, the identify of the Trustee and, if not the Trustee, the identity of each Security Registrar, Paying Agent or Authenticating Agent with respect to such Securities; and (22) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture) and any deletions from or modifications or additions to this Indenture in respect of such series. All Securities of any one series shall be substantially identical except as to denomination, currency, rate of interest, or method of determining the rate of interest, if any, Maturity, and the date from which interest, if any, shall accrue and except as may otherwise be provided in or pursuant to such Board Resolution referred to above and (subject to Section 303) set forth in the Officer's Certificate referred to above or in any indenture supplemental hereto. If any of the terms of the series are established by action taken pursuant to a Board Resolution, a copy of the Board Resolution shall be delivered to the Trustee at the same time as or prior to the delivery of the Officer's Certificate setting forth the terms of the series. Notwithstanding any contrary terms of this Section 301, the terms of the Securities of any series may provide, without limitation, that the Securities shall be authenticated and delivered by the Trustee on original issue from time to time upon telephonic or written order of Persons designated in the Officer's Certificate or supplemental indenture and that such Persons are authorized to determine, consistent with such Officer's Certificate or any supplemental indenture, such terms and conditions of the Securities of such series as are specified in such certificate or supplemental indenture. All Securities of any one series may be reopened for issuances of additional Securities of such series or to establish additional terms of such series of Securities. Section 302. Denominations. -------------- Unless otherwise provided in or pursuant to this Indenture, the principal of, any premium and interest on and any Additional Amounts with respect to the Securities shall be payable in Dollars. The Securities of each series shall be issuable only in fully registered form without coupons in such denominations as shall be specified pursuant to Section 301. In the absence of any such provision with respect to the Securities of any series, the Securities of such series shall be issuable in denominations of $1,000 and any integral multiple thereof. Securities not denominated in Dollars shall be issuable in such denominations as are established with respect to such Securities in or pursuant to this Indenture. 17 Section 303. Execution, Authentication, Delivery and Dating. ----------------------------------------------- The Securities shall be executed on behalf of the Company by its President or any Vice President, under its corporate seal reproduced thereon attested by its Secretary or any Assistant Secretary. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were the proper officers of the Company when their signatures were affixed to such Securities shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities. If the form or terms of the Securities of the series have been established in or pursuant to one or more Board Resolutions or indentures supplemental hereto as permitted by Sections 201 and 301, in authenticating such Securities and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon: (1) an Opinion of Counsel to the effect that: (a) if the form of such Securities has been established by or pursuant to Board Resolution as permitted by Section 201, that such form has been established in conformity with the provisions of this Indenture; (b) if the terms of such Securities have been established by or pursuant to Board Resolution as permitted by Section 301, that such terms have been established in conformity with the provisions of this Indenture; (c) this Indenture has been qualified under the Trust Indenture Act; and (d) that such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general applicability relating to or affecting the enforcement of creditors' rights and to general equity principles and will entitle the Holders thereof to the benefits of this Indenture; and 18 (2) an Officer's Certificate stating that, to the best knowledge of the Person executing such certificate, no event which is, or after notice or lapse of time would become, an Event of Default with respect to any of the Securities shall have occurred and be continuing. Notwithstanding the provisions of Section 301 and of the preceding paragraph, if all Securities of a series are not to be originally issued at one time, it shall not be necessary to deliver an Opinion of Counsel, Officer's Certificate or the Company Order otherwise required at or prior to the time of authentication of each Security of such series if such documents are delivered at or prior to the time of authentication upon original issuance of the first Security of such series to be issued. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by, or on behalf of, the Trustee or by the Authenticating Agent by manual signature. Such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 309 together with a written statement (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall not be entitled to the benefits of this Indenture. The Trustee shall not be required to authenticate or to cause an Authentication Agent to authenticate any Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. Section 304. Temporary Securities. --------------------- Pending the preparation of definitive Securities of any series, the Company may execute and deliver to the Trustee, and, upon Company Order, the Trustee shall authenticate and deliver in the manner provided in Section 303, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers of the Company executing such Securities may determine, as evidenced by their execution of such Securities. Such temporary Securities may be in global form. 19 If temporary Securities of any series are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of the same series and of like tenor of authorized denomination containing terms and provisions that are identical to those of any temporary Securities. Until so exchanged the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of the same series. Section 305. Registration, Transfer and Exchange. ------------------------------------ The Company shall cause to be kept at the Corporate Trust Office a register (the register maintained in such office and in any other office or agency of the Company in a Place of Payment being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. The Company shall have the right to remove and replace from time to time the Security Registrar for any series of Securities; provided that no such -------- removal or replacement shall be effective until a successor Security Registrar with respect to such series of Securities shall have been appointed by the Company and shall have accepted such appointment by the Company. In the event that the Trustee shall not be or shall cease to be Security Registrar with respect to a series of Securities, it shall have the right to examine the Security Register for such series at all reasonable times. There shall be only one Security Register for each series of Securities. Upon surrender for registration of transfer of any Security of any series at the office or agency of the Company in a Place of Payment for such series, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor containing identical terms and provisions. At the option of the Holder, Securities of any series may be exchanged for other Securities of the same series containing identical terms and provisions in any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. 20 All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or the Holder's attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906 or 1107 not involving any transfer. Except as otherwise provided herein, the Company shall not be required (i) to issue, register the transfer of or exchange Securities of any series during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities of such series selected for redemption under Section 1103 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. Notwithstanding the foregoing, except as otherwise specified as contemplated by Section 301, any Global Security of any series shall be exchangeable for definitive Securities only if: (a) such Depository is unwilling, unable or ineligible to continue as Depository with respect to such Global Security and a successor depository is not appointed by the Company within 90 days or if at any time the Depository with respect to such Global Security ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, or (b) the Company executes and delivers to the Trustee a Company Order providing that such Global Security shall be so exchangeable and the transfer thereof so registrable. If the beneficial owners of interests in a Global Security are entitled to exchange such interests for definitive Securities as the result of an event described in the preceding sentence, then without unnecessary delay but in any event not later than the earliest date on which such interests may be so exchanged, the Company shall deliver to the Trustee definitive Securities in such form and denominations as are required by or pursuant to this Indenture, and of the same series, containing identical terms and in aggregate principal amount equal to the principal amount of such Global Security, executed by the Company. On or after the earliest date on which such interests may be so exchanged, such Global Security shall be surrendered from time to time by the Depository and in accordance with instructions given to the Trustee and the Depository (which instructions shall be in writing but need not be contained in 21 or accompanied by an Officers Certificate or be accompanied by an Opinion of Counsel), as shall be specified in the Company Order with respect thereto to the Trustee, as the Company's agent for such purpose, to be exchanged, in whole or in part, for definitive Securities as described above without charge. The Trustee shall authenticate and make available for delivery, in exchange for each portion of such surrendered Global Security, a like aggregate principal amount of definitive Securities of the same series of authorized denominations and of like tenor as the portion of such Global Security to be exchanged, which shall be in the form of Securities, as shall be specified by the beneficial owner thereof, provided, however, that no such exchanges may ----------------- occur during a period beginning at the opening of business 15 days before any selection of Securities of the same series to be redeemed and ending on the relevant Redemption Date. Promptly following any such exchange in part, such global Security shall be returned by the Trustee to such Depository in accordance with the instructions of the Company referred to above. If a Security is issued in exchange for any portion of a Global Security after the close of business at the office or agency for such Security where such exchange occurs on or after (i) any Regular Record Date for such Security and before the opening of business at such office or agency on the next Interest Payment Date, or (ii) any Special Record Date for such Security and before the opening of business at such office or agency on the related proposed date for payment of interest or Defaulted Interest, as the case may be, interest shall not be payable on such Interest Payment Date or proposed date for payment, as the case may be, in respect of such Security, but shall be payable on such Interest Payment Date or proposed date for payment, as the case may be, only to the Person to whom interest in respect of such portion of such Global Security shall be payable in accordance with the provisions of this Indenture. Section 306. Mutilated, Destroyed, Lost and Stolen Securities. ------------------------------------------------- If (i) any mutilated Security is surrendered to the Trustee or if there shall be delivered to the Company and the Trustee evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) there shall be delivered to the Company and the Trustee such indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon its request the Trustee shall authenticate and deliver, in lieu of any such mutilated, destroyed, lost or stolen Security, a new Security of the same series containing identical terms and of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. 22 Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute a separate obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of the same series duly issued hereunder. The provisions of this Section, as amended or supplemented pursuant to this Indenture, are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 307. Payment of Interest; Interest Rights Preserved. ----------------------------------------------- Unless otherwise provided as contemplated by Section 301 with respect to any series of Securities, interest on and any Additional Amounts with respect to any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on, and any Additional Amounts with respect to, any Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Person in whose name the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment. Such money when deposited will be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and 23 not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Securities of such series at the Holder's address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2). (2) The Company may make payment of any Defaulted Interest on the Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee. Unless otherwise provided in or pursuant to this Indenture or the Securities of any particular series pursuant to the provisions of this Indenture, at the option of the Company, interest on Securities may be paid by mailing a check to the address of the Person entitled thereto as such address shall appear in the Security Register or by transfer to an account maintained by the payee with a bank located in the United States. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. 24 Section 308. Persons Deemed Owners. ---------------------- Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any) and (subject to Sections 305 and 307) interest on and any Additional Amounts with respect to such Security and for all other purposes whatsoever, whether or not any payment with respect to such Security shall be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. No Holder of any beneficial interest in any Global Security held on its behalf by a Depository shall have any rights under this Indenture with respect to such Global Security, and such Depository may be treated by the Company, the Trustee, and any agent of the Company or the Trustee as the owner of such Global Security for all purposes whatsoever. None of the Company, the Trustee, any Paying Agent or the Security Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Section 309. Cancellation. ------------- All Securities surrendered for payment, redemption, registration of transfer, exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever and may deliver to the Trustee (or to an Authenticating Agent for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be disposed of as directed by a Company Order. Section 310. Computation of Interest. ------------------------ Except as otherwise specified pursuant to Section 301 for Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months. 25 ARTICLE FOUR Satisfaction and Discharge Section 401. Satisfaction and Discharge of Indenture. ---------------------------------------- This Indenture shall upon Company Request cease to be of further effect with respect to any series of Securities specified in such Company Request (except as to rights of registration of transfer or exchange of Securities), and the Trustee on receipt of the Company Request, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture as to such series, when: (1) either (A) all Securities of such series theretofore authenticated and delivered (other than (i) Securities of such series which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (ii) Securities of such series for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation: (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) if redeemable at the option of the Company are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest and any Additional Amounts to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be. 26 (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officer's Certificate or an Opinion of Counsel, stating that all conditions precedent herein relating to the satisfaction and discharge of this Indenture with respect to such Securities have been complied with. In the event there are Securities of two or more series hereunder, the Trustee shall be required to execute an instrument acknowledging satisfaction and discharge of this Indenture only if requested to do so with respect to Securities of such series as to which it is Trustee and if the other conditions thereto are met. Notwithstanding the satisfaction and discharge of this Indenture with respect to the Securities of any series, the obligations of the Company to the Trustee under Section 607, the obligations of the Trustee to any Authenticating Agent under Section 614 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations under Sections 304, 305, 306, 1002 and 1003, and the obligation to pay Additional Amounts, if any, with respect to such Securities as contemplated by Section 1006 (but only to the extent that any Additional Amounts payable with respect to such Securities exceed the amount deposited in respect of such Additional Amounts pursuant to Section 401(1)(B), shall survive. Section 402. Application of Trust Money. --------------------------- Subject to the provisions of the penultimate paragraph of Section 1003, all money and Government Obligations deposited with the Trustee pursuant to Section 401 and Article 13 shall be held in trust and applied by it, in accordance with the provisions of the Securities of the series for which such deposit was made and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any), interest and Additional Amounts for whose payment such money and Government Obligations has been deposited with the Trustee; but such money and Government Obligations need not be segregated from other funds except to the extent required by law. ARTICLE FIVE Remedies Section 501. Events of Default. ------------------ "Event of Default," wherever used herein with respect to the Securities of any series, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any 27 order, rule or regulation of any administrative or governmental body), unless such event is specifically deleted or modified in or pursuant to the supplemental indenture, Board Resolution or Officer's Certificate establishing the terms of such series pursuant to this Indenture: (1) default in the payment of any interest upon any Security of such series when it becomes due and payable, and continuance of such default for a period of 30 days; (2) default in the payment of the principal of (or premium, if any, on) any Security of such series at its Maturity; (3) default in the performance, or breach, of any covenant, agreement or warranty of the Company in this Indenture (other than a covenant, agreement or warranty a default in whose performance is elsewhere in this Section specifically dealt with or which has expressly been included in this Indenture solely for the benefit of series of Securities other than such series) and continuance of such default for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 50% in principal amount of the Outstanding Securities of such series a written notice specifying such default and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; (4) default in the deposit of any sinking fund payment when and as due by the terms of a Security of such series; (5) the entry by a court having jurisdiction of a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under federal bankruptcy law or any other applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; (6) the commencement by the Company of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the commencement of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under federal bankruptcy law or any other applicable federal or state law, or the consent by it to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, or the making by it of a general assignment for the benefit of creditors, or the admission by it in writing of its inability to pay 28 its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action; or (7) any other Event of Default provided pursuant to Section 301 with respect to Securities of such series. Section 502. Acceleration of Maturity; Rescission and Annulment. --------------------------------------------------- If an Event of Default with respect to Securities of any series at the time Outstanding occurs and is continuing, then in every such case the Trustee or the Holders of not less than 50% in principal amount of the Outstanding Securities of such series may declare the principal amount of all the Securities of such series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount shall become immediately due and payable. At any time after such a declaration of acceleration with respect to Securities of any series has been made and before the Stated Maturity thereof, the Holders of a majority in principal amount of the Outstanding Securities of such series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if: (1) the Company has paid or deposited with the Trustee a sum sufficient to pay: (A) all overdue installments of interest on and any Additional Amounts with respect to all Securities of such series; (B) the principal of (and premium, if any on) any Securities of such series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities of such series and any Additional Amounts; (C) to the extent that payment of such interest or Additional Amounts is lawful, interest upon overdue interest or Additional Amounts at the rate borne by the Securities of such series; and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default with respect to the Securities of such series, other than the non-payment of the principal of Securities of such series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. 29 No such rescission shall affect any subsequent default or impair any right consequent thereon. Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee. ---------------------------------------------------------------- The Company covenants that if: (1) default is made in the payment of any interest on any Securities when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Securities at the Maturity thereof, the Company will, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal (and premium, if any) and on any overdue interest, at the rate borne by the Securities and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sum so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Securities, wherever situated. If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of the Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. Section 504. Trustee May File Proofs of Claim. --------------------------------- In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the 30 Trustee shall have made any demand on the Company for the payment of overdue principal (and premium, if any) or interest or Additional Amounts) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest and Additional Amounts owing and unpaid in respect of the Securities and to file such other papers and documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 505. Trustee May Enforce Claims Without Possession of Securities. ------------------------------------------------------------ All rights of action and claims under this Indenture or the Securities may be prosecuted by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. 31 Section 506. Application of Money Collected. ------------------------------- Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any), interest or Additional Amounts, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: First: To the payment of all amounts due the Trustee under Section 607; Second: To the payment of the amounts then due and unpaid for principal of (and premium, if any), interest and Additional Amounts on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal (and premium, if any), interest and Additional Amounts, respectively; and Third: To the payment of the remainder, if any, to the Company or any other Person lawfully entitled thereto. Section 507. Limitation on Suits. -------------------- No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of such series; (2) the Holders of not less than 50% in principal amount of the Outstanding Securities of such series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceedings; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of such series. It being understood and intended that no one or more Holders of Securities shall have any right in any manner whatever by virtue of, or by availing of, any provision of this 32 Indenture to affect, disturb or prejudice the right of any other such Holders of Securities of such series, or to obtain or to seek to obtain priority or preference over any other such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders of Securities. Section 508. Unconditional Right of Holders to Receive Principal, Premium and ---------------------------------------------------------------- Interest. --------- Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any, on) and (subject to Section 307) interest on, and any Additional Amounts with respect to, such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment and such rights shall not be impaired without the consent of such Holder. Section 509. Restoration of Rights and Remedies. ----------------------------------- If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceedings has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. Section 510. Rights and Remedies Cumulative. ------------------------------- Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 511. Delay or Omission Not Waiver. ----------------------------- No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may 33 be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 512. Control by Holders. ------------------- The Holders of a majority in principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Securities of such series, provided that: -------------- (1) such direction shall not be in conflict with any rule of law or with this Indenture or with such Securities; (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction; and (3) subject to Section 601, the Trustee need not take any action which might be prejudicial to the Holders of such series not consenting. Section 513. Waiver of Past Defaults. ------------------------ The Holders of not less than a majority in principal amount of the Outstanding Securities of any series may on behalf of the Holders of all the Securities of such series waive any past default hereunder with respect to such series and its consequences, except a default: (1) in the payment of the principal of (or premium, if any) or interest on any Security of such series, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected. Upon any such waiver, such default shall cease to exist with respect to such series, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. Section 514. Undertaking for Costs. ---------------------- All parties to this Indenture agree, and each Holder of any Security by acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable 34 costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities of any series, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security on or after the respective Stated Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date). Section 515. Waiver of Stay or Extension Laws. --------------------------------- The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE SIX The Trustee Section 601. Certain Duties and Responsibilities. ------------------------------------ (a) Except during the continuance of an Event of Default, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. 35 (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct; except that: (1) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Securities of any series relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Securities of such series; and (4) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. Section 602. Notice of Defaults. ------------------- Within 90 days after the occurrence of any default hereunder with respect to the Securities of any series, the Trustee shall transmit by mail to all Holders of Securities of such series, as their names and addresses appear in the Security Register, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest on any Security, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders of Securities of such series; and provided, further, that in the case of any default of the character specified in Section 501(3) with respect to the Securities of such series no such notice to Holders shall be given until at least 60 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series. 36 Section 603. Certain Rights of Trustee. -------------------------- Subject to the provisions of Section 601: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer's Certificate; (d) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. 37 Section 604. Not Responsible for Recitals or Issuance of Securities. ------------------------------------------------------- The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee or any Authenticating Agent assume no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Securities and perform its obligations hereunder and that the statements made by it in a Statement of Eligibility and Qualification on Form T-1 supplied to the Company are true and accurate, subject to the qualifications set forth therein. The Trustee or any Authenticating Agent shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. Section 605. May Hold Securities. -------------------- The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Section 613, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent. Section 606. Money Held in Trust. -------------------- Except as otherwise provided herein, money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. Section 607. Compensation and Reimbursement. ------------------------------- The Company agrees: (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder; (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the 38 trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent that any such loss, liability or expense was due to the Trustee's negligence or bad faith. Section 608. Intentionally Left Blank ------------------------ Section 609. Corporate Trustee Required; Eligibility. ---------------------------------------- (1) There shall at all times be a Trustee hereunder which shall: (i) be a Corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia authorized under such laws to exercise corporate trust powers; (ii) be eligible under Section 310(a) of the Trust Indenture Act to act as trustee under an indenture qualified under the Trust Indenture Act; and (iii) have a combined capital and surplus of at least $100,000,000 and subject to supervision or examination by federal or state authority. If such Corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. (2) The following Indenture shall be considered specifically described herein for purposes of clause (i) of the proviso contained in Section 310(b)(1) of the Trust Indenture Act: Indenture between AllianceAirport Authority Inc. (the "Authority") and The First National Bank of Chicago, as trustee, dated as of April 1, 1996 relating to the Authority's Special Facilities Revenue Bonds (Federal Express Corporation Project), Series 1996. 39 Section 610. Resignation and Removal; Appointment of Successor. -------------------------------------------------- (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 611. (b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (c) The Trustee may be removed at any time with respect to the Securities of any series by the Company or by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series, delivered to the Trustee, and to the Company in the case of an Act of the Holders. (d) If at any time: (1) the Trustee shall fail to comply with the obligations imposed upon it under Section 310(b) of the Trust Indenture Act with respect to the Securities after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months; (2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such Holder; or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company may remove the Trustee with respect to all Securities or the Securities of such series, or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of such Holder and all other similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities of such series and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Securities of one or more series, the Company shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those Series (it 40 being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series). If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of 75% in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 611, become the successor Trustee with respect to the Securities of such series and supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 611, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of such Holder and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series by mailing written notice of such event by first-class mail, postage prepaid, to all Holders of Securities of such series as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. Section 611. Acceptance of Appointment by Successor. --------------------------------------- (a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which, 41 (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee. It being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee. Upon the execution and delivery of such supplemental indenture, the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. (c) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) or (b) of this Section, as the case may be. (d) No successor Trustee shall accept its appointment unless at the time of such a acceptance such successor Trustee shall be qualified and eligible under this Article. 42 Section 612. Merger, Conversion, Consolidation or Succession to Business. ------------------------------------------------------------ Any Corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any Corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such Corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. Section 613. Preferential Claims. -------------------- Reference is made to Section 311 of the Trust Indenture Act. For purposes of Section 311(b)(4) and (6) of such Act: (1) "cash transaction" means any transaction in which full payment for goods or securities sold is made within seven days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand; and (2) "self-liquidating paper" means any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Company for the purpose of financing the purchase, processing, manufacturing, shipment, storage or sale of goods, wares or merchandise and which is secured by documents evidencing title to, possession of, or a lien upon, the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor relationship with the Company arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation. Section 614. Appointment of Authenticating Agent. ------------------------------------ At any time when any of the Securities remain Outstanding the Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon original issuance, exchange, registration of transfer or partial redemption thereof or pursuant to Section 306, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in the Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be 43 deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a Corporation organized and doing business under the laws of the United States of America, any state thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by federal or state authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any Corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any Corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any Corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided that such Corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving 30 days' written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provision of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall mail written notice of such appointment by first-class mail, postage prepaid, to all Holders of Securities of the series with respect to which such Authenticating Agent will serve, as their names and addresses appear in the Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provision of this Section. The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payments, subject to the provisions of Section 607. 44 If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication in the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. THE FIRST NATIONAL BANK OF CHICAGO, as Trustee By _______________________________ As Authenticating Agent By _______________________________ Authorized Officer ARTICLE SEVEN Holders' Lists and Reports by Trustee and Company Section 701. Company to Furnish Trustee Names and Addresses of Holders. ---------------------------------------------------------- The Company will furnish or cause to be furnished to the Trustee with respect to the Securities of each series: (a) semi-annually, not later than each Interest Payment Date for such series (or, in the case of any series not having semi-annual Interest Payment Dates, semi-annually, not later than the dates determined pursuant to Section 301 for such series) a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of the preceding Regular Record Date (or as of such other date determined pursuant to Section 301 for such series) therefore, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; 45 provided, however, that so long as the Trustee is the Security Registrar no such - ----------------- list shall be required to be furnished. Section 702. Preservation of Information; Communications to Holders. ------------------------------------------------------- (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders of the Securities of each series contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of such Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list of the Holders of Securities of any series furnished to it as provided in Section 701 upon receipt of a new list of such Holders. (b) If three or more Holders of Securities of any series (herein referred to as "applicants") apply in writing to the Trustee, and furnish to the Trustee reasonable proof that each such applicant has owned a Security of such series for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders of Securities of such series with respect to their rights under this Indenture or under the Securities of such series and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall, within five Business Days after the receipt of such application, at its election, either: (i) afford such applicants access to the information preserved at the time by the Trustee in accordance with Section 702(a) with respect to the Securities of such series, or (ii) inform such applicants as to the approximate number of Holders of Securities of such series whose names and addresses appear in the information preserved at the time by the Trustee in accordance with Section 702(a), and as to the approximate cost of mailing to such Holders the form of proxy or other communication, if any, specified in such application. If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Holder of Securities of such series whose name and address appear in the information preserved at the time by the Trustee in accordance with Section 702(a) a copy of the form or proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender the Trustee shall mail to such applicants and file with the Commission, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interest of the Holders or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If the Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the 46 entry of an order sustaining one or more of such objections, the Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Holders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Section 702(b), regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 702(b). Section 703. Reports by Trustee. ------------------- (a) Within 60 days after May 1 of each year commencing with the year 1997, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, such brief report dated as of such May 1, if any, as may be required by Section 313(a) of the Trust Indenture Act. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when any Securities are listed on any stock exchange. Section 704. Reports by Company. ------------------- The Company shall: (1) file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934; or, if the Company is not required to file information, documents or reports pursuant to either of said Sections, then it shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by 47 the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and (3) transmit by mail to all Holders, as their names and addresses appear in the Security Register, within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs (1) and (2) of this Section as may be required by rules and regulations prescribed from time to time by the Commission. ARTICLE EIGHT Consolidation, Merger, Conveyance, Transfer or Lease Section 801. Company May Consolidate, Etc. on Certain Terms. ----------------------------------------------- Nothing contained in this Indenture or in any of the Securities shall prevent any consolidation or merger of the Company with or into any other Person, or successive consolidations or mergers in which the Company or its successor or successors shall be a party or parties, or shall prevent any conveyance, transfer or lease of the property of the Company as an entirety or substantially as an entirety, to any Person, unless: (1) in case the Company shall consolidate with or merge into another Corporation or convey, transfer or lease its properties and assets as, or substantially as, an entirety to any Person, the Corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer, or lease the properties and assets of the Company, as, or substantially as, an entirety shall be a Corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any), interest on and any Additional Amounts with respect to all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction, no Event of Default, or event which after notice or lapse of time, or both, would become an Event of Default, shall have occurred and be continuing; and (3) the Company shall have delivered to the Trustee an Officer's Certificate or an Opinion of Counsel, stating that such consolidation, merger, conveyance, transfer or lease and such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. 48 Section 802. Successor Corporation Substituted. ---------------------------------- Upon any consolidation by the Company with or merger by the Company into any other Corporation or any conveyance, transfer or lease of the properties and assets of the Company as, or substantially as, an entirety to any Person in accordance with Section 801, the successor Corporation formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Corporation has been named as the Company herein, and thereafter, except in the case of a lease to another Person, the predecessor Corporation shall be relieved of all obligations and covenants under this Indenture and the Securities. ARTICLE NINE Supplemental Indentures Section 901. Supplemental Indentures Without Consent of Holders. --------------------------------------------------- Without the consent of any Holders, the Company and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; (2) to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and, if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company; (3) to add any additional Events of Default with respect to Securities of any or all series; (4) to change or eliminate any of the provisions of this Indenture, provided that any such change or elimination shall become effective only when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision; (5) to secure the Securities of any or all series; (6) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this 49 Indenture, provided such action shall not adversely affect the interests of the Holders of Securities of any series in any material respect; (7) to add to or change any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the issuance of Securities in bearer form, registrable or not registrable as to principal, and with or without interest coupons; (8) to establish the form or terms of Securities of any series as permitted by Sections 201 and 301; (9) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 611(b); (10) to add to, delete from or revise the conditions, limitations and restrictions on the authorized amount, terms or purposes of issue, authentication and delivery of Securities, as herein set forth; (11) to supplement any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the defeasance and discharge of any series of Securities pursuant to Article 13, provided that -------- no such supplement shall materially adversely affect the interest of the Holders of any Securities then Outstanding; or (12) to amend or supplement any provision contained herein or in any supplemental indenture, provided that no such amendment or supplement shall -------- materially adversely affect the interest of the Holders of any Securities then Outstanding. Section 902. Supplemental Indentures with Consent of Holders. ------------------------------------------------ With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities of each series affected by such supplemental indenture, by Act of said Holders delivered to the Company and the Trustee, the Company and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities of such series under this Indenture; provided, however, that no such supplemental indenture ----------------- shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) change the Stated Maturity of the principal of, or any installment of interest on, any such Security, or reduce the principal amount thereof or any 50 interest thereon or any premium payable upon the redemption thereof, or reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502, or change any Place of Payment where, or the currency in which, any such Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date); (2) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of those Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture; or (3) modify any of the provisions of this Section or Section 513, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby. A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or the provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities or any other series. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. Section 903. Execution of Supplemental Indentures. ------------------------------------- In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. 51 Section 904. Effect of Supplemental Indentures. ---------------------------------- Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 905. Conformity with Trust Indenture Act. ------------------------------------ Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. Section 906. Reference in Securities to Supplemental Indentures. --------------------------------------------------- Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. ARTICLE TEN Covenants Section 1001. Payment of Principal, any Premium, Interest and Additional ---------------------------------------------------------- Amounts. -------- The Company covenants and agrees for the benefit of the Holders of each series of Securities that it will duly and punctually pay the principal of (and premium, if any) and interest on and any Additional Amounts with respect to the Securities of that series in accordance with the terms of the Securities and this Indenture. Section 1002. Maintenance of Office or Agency. -------------------------------- The Company will maintain in each Place of Payment for any series of Securities an office or agency where Securities of such series may be presented or surrendered for registration or transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of such series and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices 52 and demands may be made or served at the Corporate Trust Office of Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission ----------------- shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Unless otherwise specified with respect to any Securities pursuant to Section 301, if and so long as the Securities of any series (i) are denominated in a Foreign Currency or (ii) may be payable in a Foreign Currency, or so long as it is required under any other provision of this Indenture, then the Company will maintain with respect to each such series of Securities, or as so required, at least one exchange rate agent. Section 1003. Money for Securities Payments to be Held in Trust. -------------------------------------------------- If the Company shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Securities of such series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for any series of Securities, it will, on or before each due date of the principal of or interest on any Securities of such series, deposit with a Paying Agent a sum sufficient to pay the principal (or premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. The Company will cause each Paying Agent for any series of Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities of such series in trust for the benefit 53 of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Company (or any other obligor upon the Securities of such series) in the making of any payment of principal (and premium, if any) or interest on the Securities of such series; and (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or received by the Trustee (or another trustee satisfying the requirements of Section 609) in respect of Government Obligations deposited with the Trustee (or such other trustee) pursuant to Section 1304, or then held by the Company, in trust for the payment of the principal of (and premium, if any) or interest on any Security of any series and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust. The Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease. The Trustee or such Paying Agent, before being required to make any such repayment, may publish, in the English language, in a newspaper customarily published on each Business Day and of general circulation in the City of New York, New York, or to be mailed to such Holder or both, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the earlier of the date of such publication or such mailing, any unclaimed balance of such money then remaining will be repaid to the Company. Section 1004. Corporate Existence. -------------------- Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchises; provided, however, ------------------ that the foregoing shall not obligate the Company to preserve any such right or franchise if the Company 54 shall determine that the preservation thereof is no longer desirable in the conduct of its business and that the loss thereof is not disadvantageous in any material respect to any Holder. Section 1005. Statement as to Default. ------------------------ The Company will deliver to the Trustee, within 120 days after the end of each fiscal year, an Officer's Certificate, stating as to each signer thereof that he or she is familiar with the affairs of the Company and whether or not to such officer's knowledge the Company is in compliance (without regard to any period of grace or requirement of notice) with all conditions and covenants of this Indenture. The officer executing such certificate shall be the Company's principal executive, finance or accounting officer and such certificate need not comply with Section 314(e) of the Trust Indenture Act. Section 1006. Additional Amounts ------------------ If any Securities of a series provide for the payment of Additional Amounts, the Company agrees to pay to the Holder of any such Security Additional Amounts as provided in or pursuant to this Indenture or such Securities. Whenever in this Indenture there is mentioned, in any context, the payment of the principal of or any premium or interest on, or in respect of, any Security of any series or the net proceeds received on the sale or exchange of any Security of any series, such mention shall be deemed to include mention of the payment of Additional Amounts provided by the terms of such series established hereby or pursuant hereto to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof pursuant to such terms, and express mention of the payment of Additional Amounts (if applicable) in any provision hereof shall not be construed as excluding Additional Amounts in those provisions hereof where such express mention is not made. Except as otherwise provided in or pursuant to this Indenture or the Securities of the applicable series, if the Securities of a series provide for the payment of Additional Amounts, at least 10 days prior to the first Interest Payment Date with respect to such series of Securities (or if the Securities of such series shall not bear interest prior to Maturity, the first day on which a payment of principal is made), and at least 10 days prior to each date of payment of principal or interest if there has been any change with respect to the matters set forth in the below-mentioned Officer's Certificate, the Company shall furnish to the Trustee and the Paying Agent, if other than the Trustee, an Officer's Certificate instructing the Trustee and such Paying Agent whether such payment of principal of an premium, if any, or interest on the Securities of such series shall be made to Holders of Securities of such series who are United States aliens without withholding for or on account of any tax, assessment or other governmental charge described in the Securities of such series. If any such withholding shall be required, then such Officer's Certificate shall specify by country the amount, if any, required to be withheld on such payments to such Holders of Securities, and the Company agrees to pay to the Trustee or such Paying Agent the Additional Amounts required by the terms of such Securities. 55 ARTICLE ELEVEN Redemption of Securities Section 1101. Applicability of Article. ------------------------- Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified pursuant to Section 301 for Securities of any series) in accordance with this Article. Section 1102. Election to Redeem; Notice to Trustee. -------------------------------------- In case of any redemption of less than all the Securities of any series, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities of such series to be redeemed and, if applicable, of the tenor of the Securities to be redeemed. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officer's Certificate evidencing compliance with such restriction. Section 1103. Selection by Trustee of Securities to be Redeemed. -------------------------------------------------- If less than all the Securities of any series are to be redeemed (unless all of the Securities of a specified tenor are to be redeemed), the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series subject to such redemption and not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of that series and tenor or any integral multiple thereof) of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of that series. If less than all of the Securities of such series and of a specified tenor are to be redeemed, the particular Securities to be redeemed shall be selected not more than 45 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series and specified tenor not previously called for redemption in accordance with the preceding sentence. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any 56 Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. Section 1104. Notice of Redemption. --------------------- Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed. Failure to give notice by mailing in the manner herein provided to the Holder of any Securities designated for redemption as a whole or in part, or any defect in the notice to any such Holder, shall not affect the validity of the proceedings for the redemption of any other Securities or portion thereof. All notices of redemption shall state: (1) the Redemption Date; (2) the Redemption Price; (3) if less than all the Outstanding Securities of any Series and tenor are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Securities to be redeemed; (4) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and that interest thereon will cease to accrue on and after said date; (5) the place or places where such Securities are to be surrendered for payment of the Redemption Price; (6) that the redemption is for a sinking fund, if such is the case; (7) in case any Security is to be redeemed in part only, the notice which relates to such Security shall state that on and after the Redemption Date, upon surrender of such Security, the Holder of such Security will receive, without charge, a new Security or Securities of authorized denominations for the principal amount thereof remaining unredeemed; and (8) the CUSIP Number or the Euroclear or the Cedel Bank reference numbers of such Securities, if any (or any other numbers used by a Depository to identify such Securities). Notice of redemption of Securities to be redeemed shall be given by the Company or, on Company Request, by the Trustee at the expense of the Company. 57 Section 1105. Deposit of Redemption Price. ---------------------------- On or before any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date. Section 1106. Securities Payable on Redemption Date. -------------------------------------- Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that installments of interest whose Stated ----------------- Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Regular or Special Record Dates according to their terms and the provisions of Section 307. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate borne by the Security. Section 1107. Securities Redeemed in Part. ---------------------------- Any Security which is to be redeemed only in part shall be surrendered at an office or agency of the Company at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or the Holder's attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities of the same series and of like tenor of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. If a Global Security is so surrendered, the Company shall execute, and the Trustee shall authenticate and deliver to the Depository, without service charge, a new Global Security in a denomination equal to and in exchange for the unredeemed portion of the principal of the Global Security so surrendered. 58 ARTICLE TWELVE Intentionally Left Blank ARTICLE THIRTEEN Defeasance and Covenant Defeasance Section 1301. Applicability of Article; Company's Option to Effect Defeasance --------------------------------------------------------------- or Covenant Defeasance. ----------------------- If pursuant to Section 301 provision is made for either or both of (a) defeasance of the Securities of a series under Section 1302 or (b) covenant defeasance of the Securities of a series under Section 1303 to apply to Securities of any series, then the provisions of such Section or Sections, as the case may be, together with the other provisions of this Article Thirteen, shall be applicable to the Securities of such series, and the Company may at its option, at any time, with respect to the Securities of such series, elect to have either Section 1302 (if applicable) or Section 1303 (if applicable) be applied to the Outstanding Securities of such series upon compliance with the conditions set forth below in this Article Thirteen. Section 1302. Defeasance and Discharge. ------------------------- Upon the Company's exercise of the above option applicable to this Section, the Company shall be deemed to have been discharged from its obligations with respect to the Outstanding Securities of such series on the date the conditions set forth below are satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the Outstanding Securities of such series and to have satisfied all its other obligations under such Securities and this Indenture insofar as such Securities are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of Outstanding Securities of such series to receive, solely from the trust fund described in Section 1304 and as more fully set forth in such Section, payments in respect of the principal of (and premium, if any) and interest, if any, on and Additional Amounts, if any, with respect to, such Securities when such payments are due; (B) the Company's obligations with respect to such Securities under Sections 304, 305, 306, 607, 1002, 1003 and 1006 (but only to the extent that any Additional Amounts payable exceed the amount deposited in respect of such Additional Amounts pursuant to Section 1304(1) below); 59 (C) the rights, powers, trusts, duties and immunities and other provisions in respect of the Trustee hereunder; and (D) this Article Thirteen. Subject to compliance with this Article Thirteen, the Company may exercise its option under this Section 1302 notwithstanding the prior exercise of its option under Section 1303 with respect to the Securities of such series. Section 1303. Covenant Defeasance. -------------------- Upon the Company's exercise of the above option applicable to this Section, the Company shall be released from its obligations under Sections 801, 1005, 501(3) (as to Sections 801 and 1005), 501(5), 501(6) and 501(7) (if Section 501(7) is specified as applicable to the Securities of such series) with respect to the Outstanding Securities of such series on and after the date the conditions set forth below are satisfied (hereinafter, "covenant defeasance"). For this purpose, such covenant defeasance means that, with respect to the Outstanding Securities of such series, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section, whether directly or indirectly by reason of any reference elsewhere herein to any such Section or by reason of any reference in any such Section to any other provision herein or in any other document, but the remainder of this Indenture and such Securities shall be unaffected thereby. Following a covenant defeasance, payment of the Securities of such series may not be accelerated because of an Event of Default specified above in this Section 1303. Section 1304. Conditions to Defeasance or Covenant Defeasance. ------------------------------------------------ The following shall be the conditions to application of either Section 1302 or Section 1303 to the Outstanding Securities of such series. (1) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 609 who shall agree to comply with the provisions of this Article Thirteen applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities, (A) an amount in Dollars or in such Foreign Currency in which such Securities are then specified as payable at Stated Maturity, or (B) Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, on the due date of any payment, money in an amount, or (C) a combination thereof, sufficient, without reinvestment, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and 60 which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge, (i) the principal of (and premium, if any, on) and each installment of principal of (and premium, if an) and interest on the Outstanding Securities of such series on the Stated Maturity of such principal or installment of principal or interest and (ii) any mandatory sinking fund payments or analogous payments applicable to the Outstanding Securities of such series on the day on which such payments are due and payable in accordance with the terms of this Indenture and of such Securities. Before such a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of any series of Securities at a future date in accordance with any redemption provisions contained in the Supplemental Indenture relating to such series, which shall be given effect in applying the foregoing. (2) No Event of Default or event with which notice of lapse of time or both would become an Event of Default with respect to the Securities of such series shall have occurred and be continuing on the date of such deposit and, with respect to defeasance only, at any time during the period ending on the 123rd day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period). (3) Such defeasance or covenant defeasance shall not cause the Trustee for the Securities of such series to have a conflicting interest for purposes of the Trust Indenture Act with respect to any securities of the Company. (4) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound. (5) Such defeasance or covenant defeasance shall not cause any Securities of such series then listed on any registered national securities exchange under the Securities Exchange Act of 1934, as amended, to be deleted. (6) In the case of an election under Section 1302, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (y) since the date of this Indenture there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Outstanding Securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred. 61 (7) In the case of an election under Section 1303, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Outstanding Securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred. (8) Such defeasance or covenant defeasance shall be effected in compliance with any additional terms, conditions or limitations which may be imposed on the Company in connection therewith pursuant to Section 301. (9) The Company shall have delivered to the Trustee an Officer's Certificate or an Opinion of Counsel, stating that all conditions precedent provided for in the Indenture relating to either the defeasance under Section 1302 or the covenant defeasance under Section 1303 (as the case may be) have been complied with. Section 1305. Deposited Money and Government Obligations to be Held in Trust; --------------------------------------------------------------- Other Miscellaneous Provisions. ------------------------------- Subject to the provisions of the last paragraph of Section 1003, all money and Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee -- collectively, for purposes of this Section 1305, the "Trustee") pursuant to Section 1304 in respect of the Outstanding Securities of such series shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (but not including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities, of all sums due and to become due thereon in respect of principal (and premium, if any) and interest and Additional Amounts, if any, but such money need not be segregated from other funds except to the extent required by law. Unless otherwise specified in or pursuant to this Indenture or any Security, if after a deposit referred in Section 1302 has been made, (a) Holder of a Security in respect of which such deposit was made is entitled to, and does, elect pursuant to Section 301 or the terms of such Security to receive payment in a Currency other than that in which the deposit pursuant to 1302 has been made in respect of such Security, or (b) a Conversion Event occurs in respect of the Foreign Currency in which the deposit pursuant to Section 1302 has been made, the indebtedness represented by such Security shall be deemed to have been, and will be, fully discharged and satisfied through the payment of the principal of (and premium, if any), and interest, if any, on and Additional Amounts, if any, with respect to, such Security as the same becomes due out of the proceeds yielded by converting (from time to time as specified below in the case of any such election) the amount or other property deposited in respect of such Security into the Currency in which such Security becomes payable as a result of such election or Conversion Event based on 62 (x) in the case of payments made pursuant to clause (a) above, the applicable market exchange rate for such Currency in effect on the second Business Day prior to each payment date, or (y) with respect to a Conversion Event, the applicable market exchange rate for such Foreign Currency in effect (as nearly as feasible) at the time of the Conversion Event. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the Government Obligations deposited pursuant to Section 1304 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Securities of such series. Anything in this Article Thirteen to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or Government Obligations held by it as provided in Section 1304 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance. ARTICLE FOURTEEN Sinking Funds Section 1401. Applicability of Article. ------------------------- The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of a series, except as otherwise permitted or required in or pursuant to this Indenture or any Security of such series issued pursuant to this Indenture. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "mandatory sinking fund payment," and any payment in excess of such minimum amount provided for by the terms of Securities of such series is herein referred to as an "optional sinking fund payment." If provided for by the terms of Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 1402. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series and this Indenture. Section 1402. Satisfaction of Sinking Fund Payments with Securities. ------------------------------------------------------ The Company may (1) deliver Outstanding Securities of a series (other than any of such Securities previously called for redemption) and (2) apply as a credit Securities of such series which have been redeemed either at the election of the Company pursuant to the terms of such series of Securities, or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, 63 in each case in satisfaction of all or any part of any sinking fund payment required to be made pursuant to the terms of such Securities, as provided by the terms of such Securities, provided that such have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such required sinking fund payment shall be reduced accordingly. Section 1403. Redemption of Securities for Sinking Fund. ------------------------------------------ Not less than 75 days prior to each sinking fund payment date for any series of Securities, the Company will deliver to the Trustee an Officer's Certificate specifying the amount of the next ensuing mandatory sinking fund payment for such series pursuant to the terms of such series, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of that series pursuant to Section 1402, and the optional amount, if any, to be added in cash to the next ensuing mandatory sinking fund payment, hereof and will also deliver to the Trustee any Securities to be so delivered. Not less than 45 days prior to each such sinking fund payment date, the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given the name of and at the expense of the Company in the manner provided in Section 1104. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 1106 and 1107. ARTICLE FIFTEEN Securities in Foreign Currencies Section 1501. Applicability of Article. ------------------------- Whenever this Indenture provides for (i) any action by, or the determination of any of the rights of, Holders of Securities of any series in which not all of such Securities are denominated in the same Currency, or (ii) any distribution to Holders of Securities, in the absence of any provision to the contrary in this Indenture or the Securities, any amount in respect of any Security denominated in a Currency other than Dollars shall be treated for any such action or distribution as that amount of Dollars that could be obtained for such amount on such reasonable basis of exchange and as of the record date with respect to Securities of such series (if any) for such action, determination of rights or distribution (or, if there shall be no applicable record date, such other date reasonably proximate to the date of such action, determination of rights or distribution) as the Company may specify in a written notice to the Trustee or, in the absence of such written notice, as the Trustee may determine. 64 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed and attested, all as of the day and year first above written. FEDERAL EXPRESS CORPORATION, Issuer Attest: /s/ SCOTT E. HANSEN By /s/ BURNETTA B. WILLIAMS Name: Scott E. Hansen Name: Burnetta B. Williams Title: Assistant Secretary Title: Assistant Treasurer and Managing Director - Corporate Finance THE FIRST NATIONAL BANK OF CHICAGO, as Trustee Attest: /s/ A. MOVITZ By /s/ JOHN R. PRENDIVILLE Name: A. Movitz Name: John R. Prendiville Title: Trust Officer Title: Vice President 65 SCHEDULE I FEDERAL EXPRESS CORPORATION AND THE FIRST NATIONAL BANK OF CHICAGO, as Trustee __________________________________________________________________ Supplemental Indenture No. __ Dated as of _____________, ______ __________________________________________________________________ ___% Notes due __________________, ______ SUPPLEMENTAL INDENTURE NO. ___, dated as of __________, _____ between Federal Express Corporation, a Delaware Corporation (the "Company") and The First National Bank of Chicago, a national banking association organized under the laws of the United States of America (herein called the "Trustee") as Trustee (the "Trustee"). RECITALS OF THE COMPANY The Company and the Trustee have executed and delivered an Indenture dated as of July 1, 1996, as amended or supplemented (the "Indenture") to provide for the issuance from time to time of the Company's Securities. Sections 201 and 301 of the Indenture provide that the form and terms of Securities of any series may be established pursuant to an indenture supplemental to the Indenture. All things necessary to make the Securities, when executed by the Company and authenticated and delivered hereunder and under the Indenture and duly issued by the Company and to make this Supplemental Indenture No. ___ a valid agreement of the Company, in accordance with their and its terms, have been done. NOW, THEREFORE, this Indenture witnesseth: For and in consideration of the premises and the purchase of the Securities by the holders hereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of the holders of the Securities of the series hereby established, as follows: ARTICLE ONE Relation to the Indenture; Definitions and Other Provisions of General Application Section 1.01. Relation to the Indenture. This Supplemental Indenture ------------------------- No. ___ constitutes an integral part of the Indenture. Section 1.02. Definitions and Other Provisions of General ------------------------------------------- Application. For all purposes of this Supplemental Indenture No. ___ unless - ------------ otherwise specified herein: (a) all terms defined in this Indenture which are used and not otherwise defined herein shall have the meanings they are given in the Indenture; and (b) the provisions of general application stated in Section 101 of the Indenture shall apply to this Supplemental Indenture No. __, except that the words "herein," "hereof," "hereto" and "hereunder" and other words of similar import refer to this Supplemental Indenture as a whole and not to the Indenture or any particular Article, Section or other subdivision of the Indenture or this Supplemental Indenture No. ___. ARTICLE TWO The Series of Notes Section 2.01. Title. ------ There shall be a series of Securities designated the "___% Notes due __________, __________" (the "Notes"). Section 2.02. Principal Amount. ----------------- The aggregate principal amount of the Notes which may be authenticated and delivered under this Supplemental Indenture shall not exceed $__________ (except for Notes which may be authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes pursuant to Sections 304, 305, 306, 906 or 1107 of the Indenture). Section 2.03. Maturity. --------- The date on which the principal of the Notes shall be payable shall be __________. Section 2.04. Interest. --------- [The Notes shall bear interest at the rate of [ ]% per annum. Interest shall accrue from __________, _____ or from the most recent Interest Payment Date to which interest has been paid or provided for. Accrued interest shall be payable on _________, _____ and on each _____ and _____ thereafter, to the persons in whose names the Notes are registered at the close of business on the preceding _____ or _____, as the case may be.] [Insert other interest provisions if necessary] Section 2.05. Place of Payment. ----------------- [The Place of Payment for the Notes shall be at the Corporate Trust office of the Trustee at ____________ or such other office of the Paying Agent as the Paying Agent may reasonably request by notice to the Company and the Trustee (if the Paying Agent is not the Trustee).] 2 Section 2.06. Redemption. ----------- [Insert redemption terms] The provisions of Article Thirteen of the Indenture [shall/shall not] apply to the Notes. Section 2.08. Intentionally left blank. Section 2.09. Form of Notes. -------------- The Notes shall be in the form of Exhibit A attached hereto. Section 2.10 Currency. --------- [Insert currency terms.] Section 2.11 Sinking Fund. ------------- [Insert sinking fund terms.] Section 2.13 Additional Amounts. ------------------- The provisions of Section 1006 of the Indenture [shall/shall not] apply to the Notes. ARTICLE THREE Miscellaneous Provisions Section 3.01. Supplemental Indenture. ----------------------- The Indenture, as supplemented and amended by this Supplemental Indenture No. __, is in all respects hereby adopted, ratified and confirmed. Section 3.02. Counterparts. ------------- This Supplemental Indenture No. __ may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. 3 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture No. __ to be duly executed, as of the day and year first written above. FEDERAL EXPRESS CORPORATION Attest: _______________________________ By ___________________________ Name: Name: Title: Title: THE FIRST NATIONAL BANK OF CHICAGO Attest: ______________________________ By __________________________ Name: Name: Title: Title: 4 Exhibit A to Indenture ------------ REGISTERED No._____________________ PRINCIPAL AMOUNT: $________________ CUSIP NO. ____________________ FEDERAL EXPRESS CORPORATION _______ % Note due_____________ , _____ UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (THE "DEPOSITORY") (55 WATER STREET, NEW YORK, NEW YORK), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY, AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. UNLESS AND UNTIL THIS NOTE IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR DEPOSITORY. FEDERAL EXPRESS CORPORATION, a Delaware Corporation, (the "Company" which term includes any successor Person under the Indenture referred to on the reverse hereof), for value received, hereby promises to pay CEDE & CO. C/O THE DEPOSITORY TRUST COMPANY 55 WATER STREET NEW YORK, NEW YORK 10041 or registered assigns, the principal sum of DOLLARS on ________________ , _______ (the "Maturity Date") and to pay interest thereon from _________________ , _____ or from the most recent "Interest Payment Date" to which interest has been paid or duly provided for, semi-annually on ____________________________ and ______________ of each year, commencing,________________,__________________, and on the Maturity Date, at the rate of % per annum, until the principal hereof is paid or duly provided for. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on the "Regular Record Date" for such interest, which shall be the __________ or ______________(whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the registered Holder on such Regular Record Date and may either be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee referred to on the reverse hereof, notice of which shall be given to Holders of Notes of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The Company will at all times appoint and maintain a Paying Agent (which may be the Trustee) authorized by the Company to pay the principal of and interest on any Notes of this series on behalf of the Company and having an office or agency in Chicago, Illinois and in such other cities, if any, as the Company may designate in writing to the Trustee (the "Place of Payment") where Notes of this series may be presented or surrendered for payment and where notices, designations or requests in respect for payments with respect to Notes of this series may be served. The Company has initially appointed The First National Bank of Chicago as such Paying Agent. Interest payments on this Note will be computed and paid on the basis of a 360-day year of twelve 30-day months. Interest payable on this Note on any Interest Payment Date and on the Maturity Date will include interest accrued from and including the most recent Interest Payment Date to which interest has been paid or duly provided for (or from and including __________ , ________, if no interest has been paid on this Note) to but excluding such Interest Payment Date or the Maturity Date, as the case may be. If any Interest Payment Date or the Maturity Date falls on a day that is not a Business Day (as defined below), principal or interest payable with respect to such Interest Payment Date or Maturity Date, as the case may be, will be paid on the next succeeding Business Day with the same force and effect as if it were paid on the date such payment was due, and no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date or the Maturity Date, as the case may be. "Business Day" means any day other than Saturday, Sunday or other day on which banking institutions in New York, Illinois or Tennessee are obligated or authorized by law to close. The principal and interest payable on this Note will be made by wire transfer of immediately available funds to the Holder hereof in such currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the Certificate of Authentication hereon has been executed by the Trustee by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. 2 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. FEDERAL EXPRESS CORPORATION By:_______________________________ Name: Title: Attest: _______________________________ Name: Title: CERTIFICATE OF AUTHENTICATION ----------------------------- This is one of the Notes of the series designated therein referred to in the within-mentioned Indenture. THE FIRST NATIONAL BANK OF CHICAGO, As Trustee By:____________________________ Authorized Signatory Dated:__________________________ 3 FEDERAL EXPRESS CORPORATION ______% Note due______________ , _________ This Note is one of a duly authorized issue of securities of the Company (herein called the "Notes"), limited in aggregate principal amount to $ - ---------------- (except as otherwise provided in the Indenture), issued and to be issued as one series of debt securities of the Company under an Indenture, dated as of July __, 1996, as amended and supplemented from time to time (the "Indenture"), between the Company and The First National Bank of Chicago, as Trustee (the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Notes and of the terms upon which the Notes are, and are to be, authenticated and delivered. In addition to the Notes, the Company is authorized to issue an unlimited amount of debt securities in one or more series (herein collectively with the Notes called the "Debt Securities") under the Indenture. This Note is not redeemable at the option of the Company or at the option of the Holder prior to the Maturity Date [and is not subject to any sinking fund]. In case an Event of Default with respect to the Notes of this series shall occur and be continuing, the principal of the Notes of this series may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture contains provisions for defeasance at any time of (i) the entire indebtedness of this Note or (ii) certain respective covenants and Events of Default with respect to this Note, in each case upon compliance with certain conditions set forth therein, which provisions apply to the Notes. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Debt Securities or each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of a majority in principal amount of each series of Debt Securities to be affected if less than all series are to be affected by such modification or amendment. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Debt Securities of each series at the time Outstanding, on behalf of the Holders of all Debt Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note or Notes issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, places and rate, and in the currency herein prescribed. As provided in the Indenture and subject to certain limitations herein and therein set forth, the transfer of this Note is registerable in the Security Register, upon 4 surrender of this Note for registration of transfer at the office or agency of the Company in the Place of Payment, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar, duly executed by, the Holder hereof or its attorney duly authorized in writing, and thereupon one or more new Notes of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. As provided in the Indenture and subject to certain limitations herein and therein set forth, Notes of this series issued in definitive registered form are exchangeable for the same aggregate principal amount of Notes of this series and of like tenor and authorized denominations, as requested by the Holder surrendering the same. The Notes of this series are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple of $1,000 in excess thereof. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. No recourse under or upon any obligation, covenant or agreement of the Corporation in the Indenture or any indenture supplemental thereto or in any Note, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, officer or director, as such, of the Corporation or of any successor Corporation, either directly or through the Corporation or any successor Corporation, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance hereof and as part of the consideration for the issue hereof. At the option of the Corporation and upon satisfaction of certain conditions specified in the Indenture, either (a) the Corporation shall be deemed to have paid and discharged the entire indebtedness on the Notes or (b) the Corporation need not comply with certain covenants contained in the Indenture, in each case upon the deposit by the Corporation with the Trustee in trust for the Holders of the Notes of an amount of funds or obligations issued or guaranteed by the United States of America sufficient to pay and discharge upon the stated maturity thereof the entire indebtedness evidenced by the Notes, all as provided in the Indenture. This Note shall be governed by and construed in accordance with the laws of the State of Tennessee. All terms used in this Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture. 5 ABBREVIATIONS ------------- The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT ______________ Custodian ______________ (Cust) (Minor) under Uniform Gifts to Minors Act _________________________________ (State) Additional abbreviations may also be used though not in the above list. __________________________________ 6 ASSIGNMENT ---------- FOR VALUE RECEIVED, the undersigned hereby sell(s), assigns(s) and transfer(s) unto ________________________________________________________________________________ ________________________________________________________________________________ PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE _____________________________ /____________________________/ ________________________________________________________________________________ ________________________________________________________________________________ (Please Print or Type Name and Address Including Postal Zip Code of Assignee) ________________________________________________________________________________ the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints ________________________________________________________________________________ ______________________________________________________________________________to transfer said Note on the books of the Company, with full power of substitution in the premises. Dated:_____________________________ Signature Guaranteed _______________________________________ NOTICE: Signature must be guaranteed NOTICE: The signature to this by a member firm of the New York Stock assignment must correspond with Exchange or a commercial bank or trust the name as written upon the face company. of the within Note in every particular, without alteration or enlargement or any change whatever. 31335.doc. 7 EX-4.26 3 FACILITY AGREEMENT EXHIBIT 4.26 Confidential commercial and financial information has been omitted from the exhibit and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. Exhibit 4.26 EXECUTION COPY ************************************************* FEDERAL EXPRESS CORPORATION _____________________________ FACILITY AGREEMENT Dated as of April 1, 1996 ______________________________ MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent ************************************************* TABLE OF CONTENTS This Table of Contents is not part of the Agreement to which it is attached but is inserted for convenience of reference only.
Page ---- Section 1. Definitions............................. 1 Section 2. Commitments and Loans................... 5 2.01 Loans and Loan Certificates............. 5 2.02 Borrowings.............................. 5 2.03 Changes of Maximum Commitments.......... 6 2.04 Fees.................................... 6 2.05 Lending Offices......................... 7 2.06 Several Obligations..................... 7 2.07 Pro Rata Treatment...................... 7 2.08 Certain Notices......................... 8 2.09 Maximum Amounts......................... 8 Section 3. Conditions Precedent.................... 8 Section 4. Representations and Warranties.......... 9 4.01 Corporate Existence..................... 9 4.02 Authorization........................... 9 4.03 Enforceability.......................... 9 4.04 No Conflicts............................ 9 Section 5. The Agent............................... 9 5.01 Appointment, Powers and Immunities...... 9 5.02 Reliance by Agent....................... 10 5.03 Defaults, Etc........................... 11 5.04 Rights as a Bank........................ 11 5.05 Indemnification......................... 11 5.06 Non-Reliance on Agent and Other Banks... 12 5.07 Failure to Act.......................... 12 5.08 Resignation or Removal of Agent......... 12 Section 6. Funding Agreement and Indemnity......... 13 Section 7. Miscellaneous........................... 16 7.01 Waiver.................................. 16 7.02 Notices................................. 16 7.03 Expenses, Etc........................... 16
-2- 7.04 Amendments, Etc......................... 17 7.05 Successors and Assigns.................. 17 7.06 Assignments and Participations.......... 18 7.07 Captions................................ 19 7.08 Counterparts............................ 19 7.09 Governing Law........................... 19 7.10 Severability............................ 19
Schedule 2.08 - Form of Notice of Borrowing Exhibit A - Term Sheet Exhibit B - Form of Trustee's Letter -3- FACILITY AGREEMENT dated as of April 1, 1996 (as amended or supplemented from time to time, this "Agreement"), among FEDERAL EXPRESS CORPORATION, a corporation duly organized and validly existing under the laws of the State of Delaware (the "Company"); each of the financial institutions that is a signatory hereto identified under the caption "BANKS" on the signature pages hereto or which, pursuant to Section 7.06(b) hereof, shall become a "Bank" hereunder (individually, a "Bank" and, collectively, the "Banks"); and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as agent for the Banks (in such capacity, together with its successors in such capacity, the "Agent"). The Company has requested the Banks to provide a facility under which the Banks will make loans in an aggregate principal amount not exceeding $[ * ], of which the aggregate principal amount outstanding at any one time shall not exceed $[ * ] (as such amounts may be reduced from time to time pursuant to Section 2.03 hereof), to the respective owner trustees designated by the Company under leveraged lease transactions to finance a portion of the purchase price by such owner trustees of one or more of the six Aircraft (as hereinafter defined), each to be concurrently leased by such relevant owner trustee to the Company. Each such Aircraft shall at the time the respective loans are made hereunder be a new addition to the Company's fleet. To induce the Banks to make such loans, the Company, the Banks and the Agent propose to enter into this Agreement pursuant to which the Banks will make a revolving credit facility available and to execute and deliver certain other Operative Agreements in connection therewith. Accordingly, the parties hereto agree as follows: Section 1. Definitions. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in Exhibit A hereto or, when used in respect of a particular Aircraft or any Loans made to finance a portion of the purchase price thereof or the transactions otherwise related thereto, in Schedule II to the Indenture entered into in connection with the making of such Loans. In addition, as used herein, the following terms shall have the following meanings (all terms defined in this Section 1 or in other provisions of this Agreement in the singular to have the same meanings when used in the plural and vice versa): "Aggregate Maximum Exposure" shall mean the sum of the Maximum Commitment of each Bank (as such amounts may be reduced from time to time pursuant to Section 2.03 hereof). Initially such sum is $[ * ]. ____________________ *Blank space contained confidential information which has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. -4- "Aircraft" shall mean, individually, each of the six aircraft referred to in the Term Sheet, in each case as more fully described in the Indenture and the Indenture Supplement relating to such aircraft, and, collectively, all of such aircraft. "Applicable Lending Office" shall mean, for each Bank and for each Type of Loan, the "Lending Office" of such Bank (or of an affiliate of such Bank) designated for such Type of Loan on the signature pages hereof or such other office of such Bank (or of an affiliate of such Bank) as such Bank may from time to time specify to the Agent and the Company as the office by which its Loans of such Type are to be made and maintained. "Base Rate Loans" shall mean Loans that bear interest at rates based upon the Base Rate. "Business Day" shall mean any day (a) on which commercial banks are not authorized or required to close in New York City and (b) on which dealings in Dollar deposits are carried out in the London interbank market. "Closing Date" shall mean April 18, 1996, or such later date occurring on or before April 30, 1996 as the parties may agree on which this Agreement is executed and delivered by the parties hereto. "Commitment" shall mean, with respect to each Aircraft and for each Bank, the obligation of such Bank in connection with the Company's entering into a Leveraged Lease Transaction with respect to such Aircraft to make a Loan to the relevant Owner Trustee to finance the purchase of such Aircraft in an amount up to but not exceeding the amount set opposite the name of such Bank on the signature pages hereof under the caption "Commitment for each Aircraft"; provided, however, that no Bank shall be obligated to make any Loan that would result in the sum of the aggregate principal amount of Loans made by such Bank then outstanding exceeding such Bank's Maximum Commitment. The sum of the aggregate principal amount of all Loans for all of the Banks that may be outstanding at any one time is the Aggregate Maximum Exposure. The aggregate principal amount of the Commitments with respect to each Aircraft for all of the Banks is $[ * ]. "Commitment Termination Date" shall mean the first to occur of (i) April 17, 1997, and (ii) the termination of the Commitments of all of the Banks with respect to all of the Aircraft pursuant hereto. ____________________ *Blank space contained confidential information which has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. -5- "Delivery Date" shall mean, for any Loan, the date on which an Aircraft to be purchased with the proceeds of such Loan is delivered under the relevant Participation Agreement. "Dollars" and "$" shall mean lawful money of the United States of America. "Floating Rate Loans" shall mean Loans that bear interest at rates based upon LIBOR or the Treasury Rate. "Indenture" shall mean each Trust Indenture, Mortgage and Security Agreement between the respective Owner Trustee and the Indenture Trustee entered into in connection with the making of any Loans, and any amendment or supplement thereto from time to time entered into. "Indenture Event of Default" shall mean an Indenture Event of Default as defined in any Indenture. "Indenture Trustee" shall mean State Street Bank and Trust Company, a Massachusetts trust company, or such other bank or trust company designated as such by the Company and satisfactory to the Agent, as Indenture Trustee under an Indenture, and its successors and permitted assigns as trustee thereunder. "Interest Period" shall have the meaning assigned to such term in the Term Sheet. "Leveraged Lease Transaction" with respect to an Aircraft, shall mean a transaction in which, among other things, the Owner Trustee with respect to such Aircraft purchases such Aircraft utilizing funds provided by the relevant Owner Participant and the proceeds of secured Loans from the Banks pursuant to the facility under this Agreement and the Owner Trustee immediately thereupon leases such Aircraft to the Company pursuant to a triple net lease (the "Lease" with respect to such Aircraft) for a basic rental at least sufficient to service such Loans. "Loans" shall mean the loans provided for by Section 2.01 hereof. "Majority Banks" shall mean, subject to the last paragraph of Section 7.04 hereof, Banks having at least 51% of the aggregate amount of the Commitments or, if the Commitments shall have terminated, Banks holding at least 51% of the aggregate unpaid principal amount of the Loans. "Maximum Commitment" shall mean, for any Bank, the amount set opposite the name of such Bank on the signature pages hereof under the caption "Maximum Commitment" (in each case as the same may be reduced from time to time pursuant to Section 2.03 hereof). -6- "Morgan" shall mean Morgan Guaranty Trust Company of New York. "Operative Agreements" shall mean, collectively, with respect to each Aircraft, the Participation Agreement, the Indenture and the Lease with respect to such Aircraft and all other agreements entered into pursuant to the Leveraged Lease Transaction contemplated thereby and designated therein as an Operative Agreement. "Owner Trustee" with respect to an Aircraft shall mean First Security Bank of Utah, National Association, or such other bank or trust company designated by the Company and satisfactory to the Agent, as the trustee of a grantor trust created by the initial equity investor (together with its successors and permitted assigns, the "Owner Participant" with respect to such Aircraft) with respect to such Aircraft, in its capacity as such trustee, and its successors and permitted assigns as such trustee. "Participation Agreement" shall mean, with respect to any Aircraft, the Participation Agreement among the Company, the relevant Owner Participant, the relevant Owner Trustee, the Banks, the Agent and the Indenture Trustee entered into in connection with the purchase of such Aircraft, as amended or supplemented from time to time. "Permitted Investments" shall include each of the following (provided it shall mature within ninety (90) days of the date of purchase thereof by the Trustee or the Agent, as the case may be): (i) direct obligations of the United States of America; or (ii) obligations fully guaranteed by the United States of America; or (iii) certificates of deposit issued by, or bankers' acceptances of, or time deposits or a deposit account with, any bank, trust company or national banking association incorporated or doing business under the laws of the United States of America or one of its States, having a combined capital and surplus of at least $500,000,000 and having a rating of "A" or better from Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Group ("S&P"); or (iv) commercial paper rated A-1/P-1 by S&P or Moody's, respectively (or if neither such organization shall rate such commercial paper at any time, a rating by any nationally recognized statistical rating organization in the United States of America equal to the highest rating assigned by such rating organization). "Person" shall mean any individual, corporation, company, voluntary association, partnership, joint venture, trust, unincorporated organization or government (or any agency, instrumentality or political subdivision thereof). -7- "Term Sheet" shall mean the summary of terms and conditions entitled "Federal Express Corporation, Interim Debt Financing For Aircraft Leveraged Leases, Summary of Financial Terms and Conditions," attached hereto as Exhibit A. "Trustee" at any time shall mean the entity acting as Owner Trustee at such time in its capacity as trustee for the Banks hereunder as evidenced by its execution of a letter to the Agent in the form set forth as Exhibit B hereto. "Type" shall mean a Floating Rate Loan or a Base Rate Loan. -8- Section 2. Commitments and Loans. 2.01 Loans and Loan Certificates. Each Bank severally agrees, on the terms and conditions of this Agreement and the Term Sheet (which are incorporated herein by this reference and made a part hereof) in connection with the Company's entering into one or more Leveraged Lease Transactions, to make Loans to the respective Owner Trustees in Dollars on or before the Commitment Termination Date in an amount with respect to each Aircraft up to but not exceeding the amount of the Commitment of such Bank for such Aircraft; provided, however, that the sum of the aggregate amount of such Loans made by such Bank outstanding at any one time shall not exceed such Bank's Maximum Commitment. The respective Owner Trustee (or the Company on its behalf) may elect to borrow either Floating Rate Loans or Base Rate Loans, provided that all Loans in respect of the same Aircraft shall at all times be of the same Type. For each Aircraft each Bank will make only one Loan hereunder. Each Loan to be made by a Bank hereunder shall be made on the Delivery Date of the Aircraft to be purchased with the proceeds of such Loan. The relevant Owner Trustee (or the Company on its behalf) may convert Floating Rate Loans made in respect of the same Aircraft into Base Rate Loans and vice versa in accordance with the terms of the related Indenture. To the maximum extent practicable the Company will cause all Loans for all Aircraft outstanding at the same time to be of the same Type and the then current Interest Periods therefor to end on the same day. 2.02 Borrowings. The Company shall give or cause the relevant Owner Trustee to give the Banks and the Agent a Notice of Borrowing with respect to each borrowing hereunder as provided in Section 2.08 hereof. Not later than 10:00 a.m. New York time on the date specified for each borrowing hereunder, each Bank shall make the amount of the Loan to be made by it on such date available (a) if the Trustee has executed and delivered to the Agent a letter in the form of Exhibit B hereto, to the Trustee, at the account specified in such letter, or (b) otherwise to the Agent, at account number [ * ] (Reference Fed Ex Air, For Credit to: Loan Department) maintained by the Agent with Morgan (ABA # [ * ] in New York, NY, in either case in immediately available funds. The amount so received by the Trustee or the Agent shall, subject to the fulfillment to the Agent's satisfaction of the terms and conditions of this Agreement (including the Term Sheet) and of the relevant Participation Agreement, be made available to the relevant Owner Trustee in the manner specified in the relevant Participation Agreement. ____________________ *Blank space contained confidential information which has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. -9- 2.03 Changes of Maximum Commitments. (a) The aggregate unused amount of the Maximum Commitments of all of the Banks with respect to all of the Aircraft shall be automatically reduced to zero upon (i) the Commitment Termination Date, (ii) the Delivery Date of the sixth Aircraft (but after the making of any Loans hereunder in respect thereof on such date), or (iii) the occurrence and continuance of any Indenture Event of Default and, in the case of clause (iii) above, the giving by any Bank to the Company of notice that such Bank is terminating its Commitments, but without protest or other notice or other action of any kind on the part of the Banks or the Agent or any of them, all of which are hereby waived. (b) The Company shall have the right at any time or from time to time to terminate or reduce the aggregate unused amount of the Maximum Commitments of the Banks, provided that (i) the Company shall give notice of each such termination or reduction as provided in Section 2.08 hereof and each such termination or reduction shall be applied as provided in Section 2.07 hereof, and (ii) each partial reduction shall be in an aggregate amount at least equal to $[ * ] or in multiples of $[ * ] in excess thereof. (c) The Maximum Commitments once terminated or reduced may not be reinstated. 2.04 Fees. (a) The Company shall pay, or cause the relevant Owner Trustee to pay, to the Agent for the account of each Bank with respect to each Aircraft (other than the sixth Aircraft) a commitment-related fee equal to $[ * ]. Such fees with respect to each Aircraft shall be payable on the Delivery Date of such Aircraft. ____________________ *Blank space contained confidential information which has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. -10- (b) Promptly following the earliest date on which the Loans with respect to any of the first three Aircraft are refinanced or prepaid in full (the "Adjustment Date") the Company and the Agent will, if after consideration of the Delivery Dates and refinancing or prepayment date for the first three Aircraft and the then anticipated Delivery Dates for the remaining Aircraft they mutually believe that absent any adjustment to the amount of the commitment- related fees for each of the fourth and fifth Aircraft under subsection (a) of this Section 2.04 the fees payable to the Banks under subsection (c) of this Section 2.04 will be different than the amount for an Aircraft under such subsection (a), adjust the fees under such subsection (a) for the fourth and fifth Aircraft by such amount as they then mutually believe necessary in order that, as so adjusted, the fees for each of the remaining Aircraft under such subsections (a) and (c) will be equal to one another. (c) On the earlier of the Delivery Date of the sixth Aircraft and the Commitment Termination Date (the "Final Fee Date") the Company shall pay, or cause to be paid, to the Agent for the account of each Bank a fee equal to the amount, if any, by which (i) a hypothetical commitment fee for such Bank calculated on the daily amount of such Bank's Maximum Commitment for the period from and including the Closing Date to but not including the Final Fee Date at a rate per annum equal to 1/10 of 1% exceeds (ii) the aggregate fees theretofore paid to such Bank under subsection (a) (as the same may have been adjusted pursuant to subsection (b) above) of this Section 2.04. (d) For purposes of this Section 2.04, computations shall be made on the basis of a year of 360 days and actual days elapsed. (e) In addition, the Company shall pay, or cause the respective Owner Trustee to pay, to the Agent for the Agent such additional fees as specified in a letter agreement between the Company and the Agent dated April 5, 1996, as the same may be supplemented and amended from time to time. 2.05 Lending Offices. The Loans of each Type made by each Bank shall be made and maintained at such Bank's Applicable Lending Office for Loans of such Type except as such Bank may otherwise designate from time to time. 2.06 Several Obligations. The failure of any Bank to make any Loan to be made by it on the date specified therefor shall not relieve any other Bank of its obligation to make its Loan on such date, but neither any Bank nor the Agent shall be responsible for the failure of any other Bank to make a Loan to be made by such other Bank, and no Bank shall have any obligation to the Agent or any other Bank for the failure by such Bank to make any Loan required to be made by such Bank. 2.07 Pro Rata Treatment. Except to the extent otherwise provided herein, each borrowing of Loans from the Banks under Section 2.01 hereof shall be made from the Banks, each payment of fees under Section 2.04 hereof in respect of Commitments or Loans, as the case may be, shall be made for the account of -11- the Banks, and each termination or reduction of the amount of the Maximum Commitments under Section 2.03 hereof shall be applied to the respective Maximum Commitments of the Banks, in each case pro rata according to the amounts of their respective Maximum Commitments or Loans at the time outstanding. 2.08 Certain Notices. Notices by the Company to the Banks and the Agent of terminations or reductions of the Maximum Commitments and of borrowings shall be irrevocable and shall be effective only if received by the Banks and the Agent not later than 10:00 a.m. New York time on the date that is the number of days or Business Days prior to the date of the relevant termination, reduction or borrowing specified below: Number of Days or Notice Business Days Prior ------ ------------------- Termination or reduction of Commitments 10 days Borrowing of Floating 3 Business Days Rate Loans Borrowing of Base 1 Business Day Rate Loans Each such notice of termination or reduction shall specify the amount of unused Maximum Commitments to be terminated or reduced. Each such notice of borrowing (a "Notice of Borrowing") shall be substantially in the form of Schedule 2.08 hereto (or may be in the form, if any, specified by the relevant Participation Agreement) and shall specify the Owner Trustee and the Aircraft with respect to which the relevant Loans are to be made, whether such Loans shall be Floating Rate Loans or Base Rate Loans, the Interest Period therefor (if Floating Rate Loans), the aggregate amount (subject to Section 2.09 hereof) of the Loans to be made and the date of borrowing (which shall be a Business Day and the Delivery Date for such Aircraft). -12- 2.09 Maximum Amounts. Anything in this Agreement to the contrary notwithstanding, in no event shall (a) the aggregate principal amount of the Loans to be made hereunder with respect to any Aircraft exceed the least of [ * ]. Section 3. Conditions Precedent. The obligation of any Bank to make its Commitment with respect to an Aircraft available hereunder is subject (a) to receipt by such Bank of due notice with respect to such borrowing pursuant to Section 2.02 hereof, (b) to the payment by the Company of such fees and other costs and expenses then or theretofore due as the Company shall have agreed to pay hereunder or pursuant to the Term Sheet including, without limitation, any fees and other costs and expenses payable pursuant to Section 2.04 or Section 7.03 hereof, and (c) to the fulfillment to the satisfaction of the Agent of the other conditions specified in the Term Sheet and the relevant Participation Agreement. Section 4. Representations and Warranties. The Company represents and warrants to the Agent and the Banks that: 4.01 Corporate Existence. The Company (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with its principal place of business and chief executive office in Memphis, Tennessee, and (b) has full power, authority and legal right to conduct its current business and operations as currently conducted and to own or hold under lease its properties and to enter into and perform its obligations under this Agreement. 4.02 Authorization. The execution, delivery and performance by the Company of this Agreement have been duly authorized by all necessary corporate action of the Company. ____________________ *Blank space contained confidential information which has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. -13- 4.03 Enforceability. This Agreement has been duly and validly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms except as such enforcement may be limited by applicable bankruptcy, insolvency or other similar laws affecting creditor's rights generally. 4.04 No Conflicts. Neither the execution, delivery or performance by the Company of this Agreement nor compliance with the terms and provisions hereof conflicts or will conflict with or results or will result in a breach or violation of any of the terms, conditions or provisions of, or will require any consent or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of the Company or any order, writ, injunction or decree of any court or governmental authority against the Company or by which it or any of its properties or other assets is bound or any indenture, mortgage or contract or other agreement or instrument to which the Company is a party or by which it or any of its properties or other assets is bound, or constitutes or will constitute a default thereunder or results or will result in the imposition of any Lien upon any of its Properties. Section 5. The Agent. 5.01 Appointment, Powers and Immunities. Each Bank hereby irrevocably appoints and authorizes the Agent to act as its agent hereunder and under the other Operative Agreements with respect to each Aircraft with such powers as are specifically delegated to the Agent by the terms of this Agreement and of the other Operative Agreements, together with such other powers as are reasonably incidental thereto. In addition, each Bank hereby agrees that, notwithstanding any provision of this Agreement or any other Operative Agreement to the contrary, the Agent, on behalf of such Bank, shall retain possession of any Loan Certificate delivered to the Agent on behalf of such Bank pursuant to Article 2 of any Indenture unless and until such Bank shall direct the Agent in writing to deliver such Loan Certificate to it or to such other Person as it may specify in such direction, and that any references in this Agreement or in any other Operative Agreement to the respective Owner Trustee's delivering any such Loan Certificate to such Bank shall be satisfied by such Owner Trustee's delivering such Loan Certificate to the Agent on behalf of such Bank. The Agent (which term as used in this sentence and in Section 5.05 and the first sentence of Section 5.06 hereof shall include reference to its affiliates and its own and its affiliates' officers, directors, employees and agents): (a) shall have no duties or responsibilities except those expressly set forth in this Agreement and in the other Operative Agreements, and shall not by reason of this Agreement or any other be a trustee for any Bank (except as expressly provided in Section 6 hereof); (b) shall not be responsible to the Banks for any recitals, statements, representations or warranties contained in this Agreement or in any other Operative Agreement, or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement or any other Operative Agreement, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, any -14- Loan Certificate or any other Operative Agreement or any other document referred to or provided for herein or therein or for any failure by the Company or any other Person to perform any of its obligations hereunder or thereunder; (c) shall not be required to initiate or conduct any litigation or collection proceedings hereunder or under any other Operative Agreement; and (d) shall not be responsible for any action taken or omitted to be taken by it hereunder or under any other Operative Agreement or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or willful misconduct. The Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. The Agent may deem and treat the payee of any Loan Certificate as the holder thereof for all purposes hereof unless and until a notice of the assignment or transfer thereof shall have been filed with the Agent, together with the consent of the Company to such assignment or transfer (to the extent provided in Section 7.06 hereof). 5.02 Reliance by Agent. The Agent shall be entitled to rely upon any certification, notice or other communication (including, without limitation, any thereof by telephone, telecopy, telex, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Agent. As to any matters not expressly provided for by this Agreement or any other Operative Agreement, the Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in accordance with instructions given by the Majority Banks or, if provided herein, in accordance with the instructions given by all of the Banks as is required in such circumstance, and such instructions of such Banks and any action taken or failure to act pursuant thereto shall be binding on all of the Banks. 5.03 Defaults, Etc. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Indenture Event of Default unless the Agent has received notice from a Bank or the Company specifying such Indenture Event of Default and stating that such notice is a "Notice of Indenture Event of Default". In the event that the Agent receives such a notice of the occurrence of any Indenture Event of Default, the Agent shall give prompt notice thereof to the Banks. The Agent shall (subject always to the provisions of the applicable Indenture and to Section 5.07 hereof) take such action with respect to such Indenture Event of Default as shall be directed by the Majority Banks, provided that, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Indenture Event of Default as it shall deem advisable in the best interest of the Banks except to the extent that this Agreement or the related Indenture expressly requires that such action be taken, or not be taken, only with the consent or upon the authorization of the Majority Banks or all of the Banks. -15- 5.04 Rights as a Bank. With respect to its Commitments and the Loans made by it, Morgan (and any successor acting as Agent) in its capacity as a Bank hereunder shall have the same rights and powers hereunder as any other Bank and may exercise the same as though it were not acting as the Agent, and the term "Bank" or "Banks" shall, unless the context otherwise indicates, include the Agent in its individual capacity. Morgan (and any successor acting as Agent) and its affiliates may (without having to account therefor to any Bank) accept deposits from, lend money to, make investments in and generally engage in any kind of banking, trust or other business with the Company (and any of its subsidiaries or affiliates) as if it were not acting as the Agent, and Morgan and its affiliates may accept fees and other consideration from the Company for services in connection with this Agreement or otherwise without having to account for the same to the Banks. 5.05 Indemnification. The Banks agree to indemnify the Agent (to the extent not reimbursed under Section 7.03 hereof, but without limiting the obligations of the Company under said Section 7.03) ratably in accordance with their respective Commitments or Loans at the time outstanding, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against the Agent (including by any Bank) arising out of or by reason of any investigation in or in any way relating to or arising out of this Agreement or any other Operative Agreement or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (including, without limitation, the costs and expenses that the Company is obligated to pay under Section 7.03 hereof, but excluding, unless any Indenture Event of Default has occurred and is continuing, normal administrative costs and expenses incident to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents, provided that no Bank shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the party to be indemnified. 5.06 Non-Reliance on Agent and Other Banks. Each Bank agrees that it has, independently and without reliance on the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement and the related Operative Agreements. The Agent shall not be required to keep itself informed as to the performance or observance by the Company of this Agreement or any of the other Operative Agreements or any other document referred to or provided for herein or therein or to inspect the Properties or books of the Company. Except for notices, reports and other documents and information expressly required to be furnished to the Banks by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Bank with any -16- credit or other information concerning the affairs, financial condition or business of the Company or any of its Subsidiaries (or any of their Affiliates) that may come into the possession of the Agent or any of its affiliates. 5.07 Failure to Act. Except for action expressly required of the Agent hereunder and under the other Operative Agreements, the Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction from the Banks of their indemnification obligations under Section 5.05 hereof against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. 5.08 Resignation or Removal of Agent. Subject to the appointment and acceptance of a successor Agent as provided below, the Agent may resign at any time by giving notice thereof to the Banks, the Company and the Indenture Trustee, and the Agent may be removed at any time with or without cause by the Majority Banks. Upon any such resignation or removal, the Majority Banks shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Majority Banks and shall have accepted such appointment within 30 days after the retiring Agent's giving of notice of resignation or the Majority Banks' removal of the retiring Agent, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which successor Agent shall be a bank that has an office in New York, New York. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Section 5 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Agent. Section 6. Funding Agreement and Indemnity. (a) If any Bank shall deliver any funds to the Trustee or the Agent pursuant to Section 2.02 hereof, the Trustee or the Agent, as the case may be, shall hold such funds in trust for the exclusive benefit of such Bank until the Agent or such Bank authorizes the Trustee or the Agent, as the case may be, to apply such funds in satisfaction of such Bank's obligation to make a Loan to the Owner Trustee pursuant to the relevant Participation Agreement. If the Agent or such Bank notifies the Trustee or the Agent, as the case may be, on or prior to the scheduled Delivery Date for the relevant Aircraft that the Operative Agreements will not be entered into and/or the conditions precedent set forth in such Participation Agreement to the making of such Loan by such Bank are not satisfied on such scheduled Delivery Date, the Trustee shall, on such scheduled Delivery Date, cause such funds to be (a) held by the Trustee or the Agent, as the case may be, in the account specified in clause (a) or (b), as the case may be, of Section 2.02 hereof or paid into an account (either of such accounts, which need not be segregated, being called herein the "Account") with the Trustee or the Agent, as the case may be, the -17- funds so held or paid to be held by the Trustee or the Agent, as the case may be, in trust for such Bank solely as trustee hereunder and (b) invested by the Trustee or the Agent, as the case may be, pursuant to subsection (c) of this Section 6. (b) The Company shall pay interest to such Bank on the amounts in respect of such Bank in the Account for the period from and including such scheduled Delivery Date to but excluding the earlier of (i) the date such Aircraft is actually delivered under the Operative Agreements or (ii) the date such funds are returned to such Bank under subsection (e) of this Section 6. Such interest shall accrue on the amounts in the Account at a rate per annum equal to (i) LIBOR for the initial Interest Period (as defined in the Indenture with respect to such Aircraft or, if not executed, in the last draft thereof provided to such Bank prior to such scheduled Delivery Date) [ * ]% (computed on the basis of actual days elapsed and a year of 360 days), as determined by the Agent two Business Days prior to such scheduled Delivery Date or (ii) if a Base Rate Loan was specified in the Notice of Borrowing with respect to such amounts, at the Base Rate as in effect from time to time (computed on the basis of actual days elapsed and a year of 365 or 366 days) as determined by the Agent. Such interest shall be due and payable to the Lender on the earlier of the last day of such initial Interest Period referred to above (or, if accruing at the Base Rate, within 10 Business Days of the date specified in clause (i) of the preceding sentence) and the date specified in clause (ii) of the preceding sentence. (c) The Trustee or the Agent, as the case may be, will invest and reinvest the amounts in the Account at the sole discretion, for the account, and at the risk of the Company, in any Permitted Investment or other investments agreed upon by the parties hereto; provided that, in the absence of instructions, the Trustee or the Agent, as the case may be, shall invest the amount of any funds so paid or the proceeds thereof in overnight Permitted Investments selected by it pending receipt of directions from the Company. Upon the Company's written instructions following payment in full by the Company of all amounts payable under subsection (b) or (e) of this Section 6, as the case may be, earnings on any such investments shall be paid by the Trustee or the Agent, as the case may be, to the Company in the manner specified in such instructions. (d) The Company shall reimburse the Account on demand of the Trustee, the Agent or such Bank for any loss incurred by the Account as a result of the investment of funds by the Trustee or the Agent, as the case may be, in accordance with the terms hereof. Further, the Company shall indemnify the Agent and the Trustee and hold it harmless from and against any loss, cost or expense such Bank, the Agent or the Trustee may incur as a result of any investment or transfer of funds referred to herein. ____________________ *Blank space contained confidential information which has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. -18- (e) If for any reason (i) the Operative Agreements in respect of the Aircraft shall not be entered into on or prior to the Commitment Termination Date, (ii) the actual delivery date of the Aircraft under the Operative Agreements shall not occur (whether by reason of a failure to meet a condition precedent thereto set forth in the Participation Agreement or otherwise) on or prior to the earlier of the Commitment Termination Date and the last day of the initial Interest Period for the Loans for such Aircraft as specified in the Notice of Borrowing with respect thereto or as contemplated by subsection (b) of this Section 6 (or, if a Base Rate Loan was so specified, within 10 Business Days after the scheduled Delivery Date), or (iii) the full amount of the Loans for the Aircraft shall not be applied to the financing thereof, then the Company hereby irrevocably agrees that (a) each Bank may cancel or terminate any financial arrangements it may have made to fund the Loans for the Aircraft (or the unutilized portion thereof), and each Bank may direct that funds paid by it to the Trustee or the Agent pursuant to Section 2.02 hereof (or the unutilized portion thereof) be returned to it, and (b) to the extent not theretofore reimbursed under the Operative Agreements, the Company shall reimburse each Bank on demand for Break Funding Costs (as defined in the relevant Indenture or, if not executed, in the latest draft thereof delivered to such Bank prior to the scheduled Delivery Date) on the amount of the returned funds calculated as of the date of return as if prepaid on such date, and the Agent for any and all out-of-pocket costs and expenses (including legal fees and expenses) relating to the negotiation, execution and delivery of the Operative Agreements. (f) The duties of the Trustee or the Agent, as the case may be, under this Section 6 are limited to those specifically set forth in this Section 6. Neither the Trustee nor the Agent shall incur any liability hereunder except for its gross negligence or willful misconduct or its simple negligence relating to the holding or disposing of funds hereunder. The Trustee or the Agent, as the case may be, shall hold the funds as escrow agent for the Banks and shall give such funds the degree of care it gives other similar property held in such a capacity. Neither the Trustee nor the Agent shall have any responsibility to determine the authenticity or validity of any written notice, instruction, request or other document delivered to it and shall be protected in acting or refraining from acting upon any written notice, instruction or request furnished to it hereunder and believed by it to be genuine and purporting to have been signed by the proper party or parties. Without limiting the generality of the foregoing, neither the Trustee nor the Agent shall have any responsibility for any loss allocable to the Account from any investment made by the Trustee or the Agent, as the case may be, in accordance with subsection (e) of this Section 6. Upon making payment of the whole of the Account or any portion thereof in any manner provided in this Agreement, the Trustee and the Agent shall have no further liability under this Section 6 for such paid amount so delivered. The Company hereby agrees to pay the Trustee's fee for the services to be rendered hereunder and to promptly pay or reimburse the Trustee or the Agent upon request for all reasonable expenses, including reasonable attorneys' fees, incurred or made by either of them in connection with carrying out its duties hereunder. The Company hereby agrees to indemnify the Trustee and the Agent -19- for, and to hold the Trustee and the Agent harmless against, any loss, liability or expense incurred without gross negligence or willful misconduct on the part of the Trustee or the Agent arising out of or in connection with the Trustee's or the Agent's carrying out its duties hereunder or without simple negligence on the part of the Trustee or the Agent, as the case may be, relating to the holding or disposing of funds hereunder. In the event that the Trustee or the Agent is uncertain as to the application of any provision of this Section 6, or such provision appears to be in conflict with any other applicable provisions hereof, the Trustee or the Agent, as the case may be, may seek instructions from the relevant Bank (or, in the case of the Trustee, the Agent) and shall not be liable to the Company or any other Person to the extent that it acts in good faith in accordance with the instructions of the relevant Bank (or, in the case of the Trustee, the Agent). Neither the Trustee nor the Agent shall be obligated to take any action under this Section 6 which may, in its reasonable judgment, involve it in any liability unless it shall have been furnished with indemnity reasonably satisfactory to it in amount, form and substance. Section 7. Miscellaneous. 7.01 Waiver. No failure on the part of the Agent or any Bank to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. 7.02 Notices. Unless otherwise expressly specified or permitted by the terms of this Agreement, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Agreement to be made, given, furnished or filed shall be in writing, mailed by certified mail, postage prepaid, return receipt requested or delivered by hand or by FedEx service or other delivery service of established reputation or by confirmed telex or facsimile to the intended recipient at the "Address for Notices" specified below its name on the signature pages hereof; or, as to any party, at such other address as shall be designated by such party in a notice to each other party. Any notice given pursuant to this Section 7.02 shall be deemed given, and such requirement shall be deemed satisfied, when such notice is received, if such notice is mailed by certified mail, postage prepaid or is delivered by hand or FedEx service or other delivery service of established reputation, or is sent by confirmed telex, telecopy or facsimile (if, in the case of a facsimile, transmitted on a Business Day and during normal business hours of the recipient, and otherwise on the next Business Day following transmission), in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid. 7.03 Expenses, Etc The Company agrees to pay or reimburse the Agent for paying all reasonable out-of-pocket costs and expenses of the Agent -20- (including, without limitation, the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special New York counsel for the Banks), in connection with (i) the negotiation, preparation, execution and delivery of this Agreement and (ii) any modification, supplement or waiver of any of the terms of this Agreement. 7.04 Amendments, Etc. Except as otherwise expressly provided in this Agreement, any provision of this Agreement may be amended, modified or supplemented only by an instrument in writing signed by the Company, the Agent and the Majority Banks, or by the Company and the Agent acting with the consent of the Majority Banks, and any provision of this Agreement may be waived by the Majority Banks or by the Agent acting with the consent of the Majority Banks; provided that: (a) no amendment, modification, supplement or waiver shall, unless by an instrument signed by all of the Banks affected or by the Agent acting with the consent of all of the Banks affected: (i) increase, or extend the term of any of the Commitments or Maximum Commitments, or extend the time or waive any requirement for the reduction or termination of any of the Commitments or Maximum Commitments, (ii) reduce the margin over LIBOR or the Treasury Rate in determining the interest rate for any Loan, (iii) modify the definition of the term "Majority Banks", or modify in any other manner the number or percentage of the Banks required to make any determinations or waive any rights hereunder or to modify any provision hereof, (iv) waive any of the conditions precedent set forth in Section 3 hereof or (v) reduce the rate specified in Section 2.04(c)(i) utilized to compute the fee due on the Final Fee Date; and (b) any modification or supplement of Section 5 or 6 hereof shall require the consent of the Agent. Anything in this Agreement to the contrary notwithstanding, if at a time when the conditions precedent set forth in Section 3 hereof to the making of Commitments hereunder are, in the opinion of the Majority Banks, satisfied, any Bank shall fail to fulfill its obligations to make such Commitments then, for so long as such failure shall continue, such Bank shall (unless the Majority Banks, as the case may be, determined as if such Bank were not a "Bank" hereunder, shall otherwise consent in writing) be deemed for all purposes relating to amendments, modifications, waivers or consents under this Agreement or any of the other Operative Agreements (including, without limitation, under this Section 7.04) to have no Loans, shall not be treated as a "Bank" hereunder when performing the computation of Majority Banks and shall have no rights under the preceding paragraph of this Section 7.04; provided that any action taken by the other Banks with respect to the matters referred to in clause (a) of the preceding paragraph shall not be effective as against such Bank. 7.05 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. -21- 7.06 Assignments and Participations. (a) The Company may not assign any of its rights or obligations hereunder without the prior consent of all of the Banks and the Agent. (b) Subject to satisfaction of the conditions to assignment or transfer provided in the Operative Agreements with respect to such Aircraft, each Bank may assign any of its Loans and the Loan Certificates and its Commitments, but only with the consent of the Company, which consent shall not be unreasonably withheld, and, in the case of any assignment of a Commitment, the consent of the Agent; provided that (i) prior to December 26, 1996, no such assignment shall be made by any Bank other than to an affiliate of such Bank or to another Bank, (ii) no such consent by the Company or the Agent shall be required in the case of any assignment to another Bank, (iii) no such consent of the Company shall be required at any time that any Indenture Event of Default shall have occurred and be continuing (but the transferor or the transferee shall give notice of such transfer to the Company), (iv) each such assignment by a Bank of its Loans and the Loan Certificates or Commitments shall be made in such manner so that the same portion of its Loans and the Loan Certificates and Commitments is assigned to the respective assignee, and (v) each such assignment by a Bank of its Loans and the Loan Certificates and/or its Commitments shall, unless otherwise consented to by the Agent, be in an aggregate principal amount at least equal to $[ * ]. Upon execution and delivery by the assignee to the Company and the Agent of an instrument in writing pursuant to which such assignee agrees to become a "Bank" hereunder (if not already a Bank) having the Commitment(s) and Loans specified in such instrument, and upon consent thereto by the Company and the Agent, to the extent required above, the assignee shall have, to the extent of such assignment (unless otherwise provided in such assignment with the consent of the Company and the Agent), the obligations, rights and benefits of a Bank hereunder holding the Commitment(s) and Loans (or portions thereof) assigned to it (in addition to the Commitment(s) and Loans theretofore held by such assignee) and the assigning Bank shall, to the extent of such assignment, be released from the Commitment(s) (or portion(s) thereof) so assigned. (c) A Bank may sell or agree to sell to one or more other Persons a participation in all or any part of any Loans and the Loan Certificates evidencing the same held by it, or in its Commitments, provided that each purchaser of a participation (a "Participant") shall not have any rights or benefits under this Agreement or any Loan Certificate or any other Operative Agreement (the Participant's rights against such Bank in respect of such participation to be those set forth in the agreements executed by such Bank in favor of the Participant). ____________________ *Blank space contained confidential information which has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. -22- (d) In addition to the assignments and participations permitted under the foregoing provisions of this Section 7.06, any Bank may assign and pledge all or any portion of its Loans and its Loan Certificates evidencing the same to any Federal Reserve Bank as collateral security pursuant to Regulation A and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Bank from its obligations hereunder. (e) Anything in this Section 7.06 to the contrary notwithstanding, no Bank may assign or participate any interest in any Loan and Loan Certificates evidencing the same held by it hereunder to the Company or any of its Affiliates or Subsidiaries without the prior written consent of each other Bank. 7.07 Captions. The table of contents and captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. 7.08 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Agreement by signing any such counterpart. 7.09 Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York. 7.10 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. -23- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. FEDERAL EXPRESS CORPORATION By /s/ ROBERT D. HENNING ---------------------- Name: Robert D. Henning Title: Asst. Treasurer/Managing Dir. Structured Finance Address for Notices: 2007 Corporate Avenue Memphis, TN 38132 Attention: Vice President and Treasurer Telecopier: 901-395-4758 Telex: 534684 (Answerback: FEDEX INT MFS) with a copy to: 1980 Nonconnah Drive Memphis, TN 38132 Attention: Senior Vice President and General Counsel -24- Commitment for each MORGAN GUARANTY TRUST COMPANY Aircraft: OF NEW YORK $[ * ]* Maximum Commitment: By /s/ STEPHEN B. KING -------------------- Name: Stephen B. King $[ * ] Title: Vice President Lending Office for all Loans: 60 Wall Street, 22nd Floor New York, NY 10260 Address for Notices: 60 Wall Street, 22nd Floor New York, NY 10260 Attention: Stephen B. King, Vice President Telephone No.: (212) 648-7415 Telecopier No.: (212) 648-5336 (with a copy to: J.P. Morgan Services Inc. 500 Stanton Christiana Road Newark, DE 19713 Attention: Andrew Lipsett Telephone No.: (302) 634-8177 Telecopier No.: (302) 634-1091) ____________________ *Blank space contained confidential information which has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. ____________________ * In the event that the Owner Participant for any Leveraged Lease Transaction may be an Affiliate of a Bank and as a result the Commitment of such Bank for the related Aircraft must be reduced, the documentation will be modified to provide for Morgan to cover such reduction (up to $14,025,000 on only one such occasion) and for appropriate related adjustments including, without limitation, as to allocating to Morgan an appropriate portion of the fee otherwise payable to such Bank with respect to such Aircraft under Section 2.04. -25- Commitment for each BANK OF AMERICA NATIONAL TRUST Aircraft: AND SAVINGS ASSOCIATION $[ * ] *Maximum Commitment: By /s/ TIMOTHY C. HINTZ -------------------- Name: Timothy C. Hintz $[ * ] Title: Managing Director Lending Office for all Loans: Bank of America National Trust and Savings Association GPO Account Admin. #5693 1850 Gateway Blvd. Concord, CA 94520 Address for Notices: Bank of America National Trust and Savings Association GPO Account Admin. #5693 1850 Gateway Blvd. Concord, CA 94520 Attention: Ms. Marianne Runyan Telex No.: 67652 (Answerback: BANKAMERSFO) Telephone No.: (510) 675-7719 Telecopier No.: (510) 675-7531 _______________________ *This commitment supersedes the commitment of $43,400,000 contained in Bank of America's letter to J.P. Morgan Securities, Inc. dated April 11, 1996, which commitment is no longer effective. ____________________ *Blank space contained confidential information which has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. -26- Commitment for each THE CHASE MANHATTAN BANK Aircraft: (NATIONAL ASSOCIATION) $[ * ] Maximum Commitment: By /s/ MATTHEW H. MASS ---------------------- Name: Matthew H. Massie $[ * ] Title: Vice President Lending Office for all Loans: 1 Chase Manhattan Plaza New York, NY 10081 Address for Notices: 1 Chase Manhattan Plaza, 3rd Floor New York, NY 10081 Attention: Matthew H. Massie Telephone No.: (212) 552-3005 Telecopier No.: (212) 552-5879 (with a copy to: 2 Chase Manhattan Plaza, 5th floor New York, NY 10081 Attention: Carlos Morales Telephone No: 212-552-4517 Telecopy No: 213-552-4455) ____________________ *Blank space contained confidential information which has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. -27- Commitment for each COMMERZBANK AG, ATLANTA AGENCY Aircraft: $[ * ] Maximum Commitment: By /s/ ANDREAS K. BREMER ----------------------- Name: Andreas K. Bremer $[ * ] Title: Senior Vice President & Manager By /s/ HARRY P. YERGEY --------------------- Name: Harry P. Yergey Title: Vice President Lending Office for all Loans: Promenade 2 Suite 3500 1230 Peachtree Street Atlanta, GA 30309 Address for Notices: Promenade 2 Suite 3500 1230 Peachtree Street Atlanta, GA 30309 Attention: Telephone No.: (404) 888-6500 Telecopier No.: (404) 888-6539 ____________________ *Blank space contained confidential information which has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. Commitment for each NATIONSBANK, N.A. (SOUTH) Aircraft: $[ * ] Maximum Commitment: By /s/ STEVE L. DALTON --------------------- Name: Steve L. Dalton $[ * ] Title: Vice President Lending Office for all Loans: One NationsBank Plaza, 5th Floor Nashville, TN 37239-1697 Address for Notices: One NationsBank Plaza, 5th Floor Nashville, TN 37239-1697 Attention: Corporate Finance Telephone No.: (615) 749-4228 Telecopier No.: (615) 749-4640 ____________________ *Blank space contained confidential information which has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. -29- MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent By /s/ STEPHEN B. KING --------------------- Name: Stephen B. King Title: Vice President Address for Notices to Morgan as Agent: 60 Wall Street, 22nd Floor New York, NY 10260 Attention: Stephen B. King, Vice President Telephone No.: (212) 648-7415 Telecopier No.: (212) 648-5336 (with a copy to: J.P. Morgan Services Inc. 500 Stanton Christiana Road Newark, DE 19713 Telephone No.: (302) 634-8177 Telecopier No.: (302) 634-1091) Schedule 2.08 NOTICE OF BORROWING _____________ __, 199_ Morgan Guaranty Trust Company of New York Attention: Ladies and Gentlemen: Reference is made to the Facility Agreement dated as of April 1, 1996 (the "Facility Agreement") between Federal Express Corporation ("Federal"), Morgan Guaranty Trust Company of New York, as Agent, and the Banks named therein. Capitalized terms used herein, unless otherwise defined herein, are used herein as used or defined in the Facility Agreement. Pursuant to Sections 2.02 and 2.08 of the Facility Agreement, Federal hereby gives you irrevocable notice of its request that the Banks make [Floating/Base] Rate Loans to [First Security Bank of Utah, National Association], as Owner Trustee, in the aggregate amount of $[___________] (the "Loan Amount") with respect to the Aircraft bearing manufacturer's serial number [_______], on _______ __, 199 , which date is a Business Day and the scheduled Delivery Date for such Aircraft. [The initial Interest Period in respect of such Floating Rate Loan shall be a [___-month/one-week] period, commencing on such Delivery Date and ending __________ __, 199 .]* Federal hereby represents and warrants to you and the Banks that the Loan Amount does not exceed the maximum amount permitted with respect to such Aircraft pursuant to Section 2.09. Please make the proceeds of the Loan available as provided in Section 2.02 of the Facility Agreement and Section __ of the Participation Agreement with respect to the Aircraft. Very truly yours, FEDERAL EXPRESS CORPORATION By_________________________ Name: Title: __________________________ * To be included in Notice of Borrowing for Floating Rate Loan only. Exhibit A to the Facility Agreement (Please see attached term sheet.) JPMORGAN FEDERAL EXPRESS CORPORATION INTERIM DEBT FINANCING FOR AIRCRAFT LEVERAGED LEASES SUMMARY OF FINANCIAL TERMS AND CONDITIONS Aircraft: Four new A300s and two used MD11s. The airframes together with the associated engines are referred to herein, individually or collectively as the context may require as the "Aircraft." Lessor(s): To be determined. Lessee: Federal Express Corporation ("FedEx") pursuant to a lease or leases from the Lessor(s) (the "Leases"). Arranger: J. P. Morgan Securities Inc. Administrative Agent: Morgan Guaranty Trust Company of New York. Lenders: A syndicate of banks acceptable to FedEx and the Administrative Agent. To the extent that any of the Lenders or their affiliates is also a Lessor of an Aircraft, the other Lenders will provide (on a pro rata basis or such other basis as the Lenders may agree) that portion of the debt financing which the affected Lender is unable to provide. Facility Description: A revolving credit facility (the "Facility") to provide the debt portion of U.S. leveraged lease financings involving the Aircraft. The Facility will be available on or before April 19, 1996 (the "Effective Date"). Loans drawn under the Facility (the "Loans") may be borrowed, repaid and reborrowed within 364 days of the Effective Date. Facility Amount: $[ * ], with the amount available for any individual Aircraft to be limited to the lesser of (a) $[ * ] or (b) [ * ]% of the Lessor's purchase price, which purchase price will not ____________________ *Blank space contained confidential information which has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. April 5, 1996 1 exceed the fair market value determined by an appraisal from a firm of internationally recognized appraisers mutually acceptable to FedEx and the Administrative Agent (it being agreed that BK Associates, Inc. is acceptable). All appraisal costs shall be for the account of FedEx. Drawings under the Facility will reduce the available Facility Amount, while refinancings and principal repayments will replenish availability under the Facility. Term and Amortization of Loans: The maximum term of the Loans shall be 24.5 years from the dates they are incurred (the "Funding Dates"). The Loans will amortize in accordance with an amortization schedule provided by the Lessor and acceptable to the Administrative Agent and FedEx (the average life of such Loans to be agreed to by the parties, but in no event to exceed 16 years). If rent is payable semiannually, interest shall be rolled up and capitalized at the end of each Interest Period that ends on a date other than a semiannual lease payment date. Reoptimization of the Loans may be effected by FedEx once, and by the Lessor once following a change in tax rate, following the closing date of the leveraged lease so long as the average life is not increased by more than six months from the initial amortization schedule, the principal amount of such Loans is not increased, the amount of principal to be paid on the last day of the then current Interest Period is not changed and the final maturity of such Loans is not changed to a later date. Interest Rate: The Interest rate on Loans under the Facility shall be as follows: (1) For the first twelve months following their Funding Dates: (a) LIBOR [ * ]% per annum, or (b) the Base Rate. ____________________ *Blank space contained confidential information which has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. April 5, 1996 2 (2) For months thirteen through eighteen following their Funding Dates: (a) LIBOR [ * ]% per annum, or (b) the Base Rate. (3) Thereafter, the higher of (a) LIBOR or (b) the Treasury Rate plus, in either case, [ * ]% per annum. FedEx (or the Lessor) shall have the option, exercisable at least three business days prior to the commencement of each Interest Period to select interest rates based on LIBOR, if applicable, for interest periods (the "Interest Periods") of one week (provided that such option may not be selected more than three times per Loan) or one, three or six months, provided that no Interest Period shall commence before and end after any principal amortization date of such Loan under the Facility. If FedEx or the Lessor has not selected an interest rate based on LIBOR (if applicable), the Base Rate option will apply. There shall be only one Interest Period per Loan at any one time. "LIBOR" means, for a given Interest Period, an annual rate equal to the London Interbank Offered Rate for the corresponding deposits of U.S. Dollars as displayed on Telerate Page 3750 or, if unavailable on Telerate Page 3750, the average of the rates quoted on Reuters Page LIBO or, if neither service displays any such quote, as quoted by two reputable dealers selected by the Administrative Agent, in either case two business days' prior to the start of each Interest Period. LIBOR will be adjusted for Regulation D reserve requirements. "Treasury Rate" means, as of the first day of any Interest Period, the weighted average yield to maturity of, and resulting from the bidding for, the most recently auctioned United States Treasury securities with maturities most closely corresponding to (interpolating between the maturities next succeeding and next preceding) ____________________ *Blank space contained confidential information which has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. April 5, 1996 3 the remaining maturity of the affected Loans (such yield to be rounded, if necessary to the nearest 1/100 of 1% with any figure of 1/200 of 1% or above rounded upward) as displayed on the applicable Telerate Page or, is such service no longer displays any such quote, as quoted by two reputable dealers in United States Treasury securities selected by the Administrative Agent, in either case at approximately 11:00 a.m. New York time on such day. "Base Rate" means, for any day, the higher of (i) the Federal funds rate (as published by the Federal Reserve Bank of New York) plus [ * ]% per annum or (ii) the Administrative Agent's prime rate, as announced from time to time at its head office. Each change in any interest rate provided for herein based upon the Base Rate resulting from a change in the Base Rate shall take effect at the time of such change in the Base Rate. All calculations of interest based on LIBOR and all other amounts (other than interest at the Treasury Rate or the prime rate) shall be made on the basis or a year of 360 days and actual days elapsed. Interest based on the Treasury Rate shall be calculated on the basis of a year of twelve 30-day months. Interest based on the prime rate shall be calculated on the basis of a year of 365/366 days and actual days elapsed. Commitment Fee: FedEx shall pay the Lenders the equivalent of on the available (unused) Facility Amount from the Effective Date to the date the Facility is terminated. Commitment Termination: FedEx shall have the right to terminate or reduce on a pro rata basis the Facility Amount (in an aggregate amount, in each case, of at least $[ * ] or in multiples of $[ * ] in excess thereof) upon not less than three business days' notice to the Administrative Agent (which notice shall be irrevocable and shall be effective only upon receipt by the Administrative Agent). Amounts which are terminated or reduced may not be reinstated. ____________________ *Blank space contained confidential information which has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. April 5, 1996 4 Prepayment: The Loans shall be prepaid or paid (as the case may be) in their entirety (except in the case of an event which applies to a specific Aircraft, in which case only the relevant Loan will be prepaid or paid), together with accrued interest, Break Amount, fees, and all other amounts payable under the relevant Indenture, prior to stated maturity in the following events: (1) Upon an event of loss if the affected Aircraft is not replaced (provided that so long as FedEx is not in default under the transaction documents, such prepayment may (at FedEx's option) be postponed until the end of the then current Interest Period in respect of LIBOR-based Loans for such Aircraft). (2) If, at any time, the Lease terminates with respect to an Aircraft for any reason whatsoever. (3) At any time upon any sale of an Aircraft. (4) Upon acceleration subsequent to an Event of Default. (5) Upon the refinancing of the Loans by FedEx. Break Amount: Upon any payment, prepayment, conversion or purchase of any principal of any Loan on a day other than the last day of an Interest Period with respect thereto, or upon any failure to borrow, pay, prepay, convert or purchase any principal of any Loan on the scheduled date therefor (whether by acceleration or otherwise), FedEx or the Lessor shall pay to each Lender such amount as shall be determined by such Lender to be the amount required to compensate such Lender for any loss, cost or expense which it may incur as a result of such failure to borrow, payment, prepayment, conversion or purchase or such failure to pay, prepay, convert or purchase. Security: All amounts payable on or in respect of each Loan (including all indemnity payments and all fees) must be at all times secured by: (1) a first lien of record on the relevant Aircraft; April 5, 1996 5 (2) an assignment of the Leases; and (3) additional customary security, including, without limitation, an assignment of airframe and engine manufacturers' warranties, insurance and requisition proceeds. Section 1110: All Loans shall be structured so as to ensure that the Lenders shall be entitled to the benefits of Section 1110 of the Bankruptcy Code, and the Lenders shall receive an opinion of counsel to FedEx at each Loan closing to the effect that such Loans will be entitled to such benefits. Indenture Trustee: An institution to be determined, satisfactory to the Administrative Agent. Conditions Precedent: Conditions precedent to each Loan (or, in the case of clause (3) below, the initial Loan only) shall include, without limitation: (1) the execution of documentation satisfactory in form and substance to all parties that will reflect the terms and conditions contained herein; (2) the obtaining of all necessary governmental approvals and comments relating to the transaction documentation; (3) no material adverse change in the principal business or financial condition of FedEx taken as a whole in any case from that pertaining on February 29, 1996. (4) obtaining satisfactory legal (including as to Section 1110 of the Bankruptcy Code) and FAA opinions; and (5) no Event of Default or event that with notice and/or lapse of time or both would become an Event of Default. Events of Default: Events of Default under the Facility shall include, without limitation: (1) failure to pay principal of, Break Amount or interest on the Loans or any fee payable to the Lenders, the April 5, 1996 6 Administrative Agent or the Indenture Trustee within five business days of the due date therefor or failure to pay any other amount payable to the Lenders, the Administrative Agent or the Indenture Trustee within 30 days after demand therefor; (2) an Event of Default that occurs under the Leases (a "Lease Event of Default"); (3) breach of representation or warranty that is material at the time made and continues to be material where such breach remains unremedied for 30 days after written notice; (4) breach of covenant by FedEx or the Lessor that remains unremedied for 30 days after written notice; provided that in the event such breach is curable and so long as (but for no longer than 150 days after such 30-day period) FedEx shall have promptly undertaken such cure, which undertaking shall be diligently and continuously pursued using FedEx's best efforts, such breach shall not constitute an Event of Default; (5) failure to maintain the Aircraft free of all liens other than customarily permitted liens; (6) either FedEx or the Lessor shall (i) file or consent to a voluntary bankruptcy, (ii) make an assignment for the benefit of creditors or (iii) consent to the appointment of a custodian, receiver or trustee; or (7) involuntary bankruptcy filed against FedEx or the Lessor and not dismissed or stayed within 60 days. Quiet Enjoyment: The documentation will contain provisions that so long as no Lease Event of Default has occurred and is continuing, no party shall take or cause to be taken any action contrary to FedEx's right to quiet enjoyment and the continuing possession, use and operation of the Aircraft. April 5, 1996 7 Indemnities: Subject to customary exceptions acceptable to FedEx and the Administrative Agent, FedEx will hold the Lenders, the Administrative Agent and the Indenture Trustee harmless against any loss, liability, claim or expense incurred as a result of the purchase, ownership, use, lease or operation of the Aircraft or the failure to FedEx to perform any of its obligations under any of the operative documents or relating to any claims associated with the issuance or sale of the equity interest in connection with the proposed leveraged lease financing. Increased Costs, etc.: In accordance with customary practice, FedEx shall pay to each Lender such additional amounts as shall be necessary to compensate such Lender for any costs of making or maintaining its Commitment or Loans including without limitation as a result of any tax imposed by any taxing authority of or in Tennessee, or as result of any change after the date of the Facility in any (including any new) law, rule or regulation or interpretation thereof that changes the basis of taxation of any amounts payable to such Lender or imposes or modifies reserve or similar requirements or imposes other conditions affecting its Commitment or Loans, or attributable to maintenance of capital following any changes referred to above or implementing any risk-based or other capital guidelines or requirements (whether or not compliance therewith is required by law), in any case to the extent related to the transactions contemplated hereby and without duplication of any amounts already included in the interest rate on the Loans. Use, Maintenance, and Insurance of Aircraft: In accordance with customary practice in FedEx aircraft financings. Reregistration and Subleasing: FedEx may sublease and/or reregister the Aircraft at any time in accordance with customary practice in FedEx aircraft financings. Debt-Equity Issues: To be negotiated in good faith by the parties. Transfers and Participants: On or after December 26, 1996, the Lenders will have the right to transfer, assign, participate or otherwise dispose of all or any part of their Loans or their commitments under the Facility April 5, 1996 8 subject, unless (i) an Event of Default shall have occurred and be continuing or (ii) the transfer is to another Lender, or (iii) the transfer is by participation, to FedEx's approval (which shall not be unreasonably withheld). Prior thereto, the Lenders may transfer their Loans or Commitments in whole or in part to an affiliate and may discount any of their Loans with the Federal Reserve. Expenses: FedEx will pay all reasonable legal expenses of Milbank, Tweed, Hadley and McCloy, counsel to the Administrative Agent, and other reasonable and customary out-of-pocket expenses incurred by the Administrative Agent and related to this transaction and by the Lenders related to any subsequent amendments or waivers (including, without limitation, the costs associated with the filing of any Uniform Commercial Code ("UCC") financing statements, except for UCC financing statements in Tennessee with respect to a Lease, that the Administrative Agent may deem reasonably advisable). Documentations: Documentation will include but not be limited to representations, covenants and other provisions customary to transactions of this type. The transaction documents shall be in form and substance satisfactory to FedEx and the Administrative Agent and shall be governed by New York law. April 5, 1996 9 Exhibit B to the Facility Agreement [Letterhead of Entity acting as Owner Trustee] [date] Morgan Guaranty Trust Company of New York, as Agent 60 Wall Street, 22nd Floor New York, NY 10260 Dear Sirs: We have reviewed the provisions of Sections 2.02 and 6 of the Facility Agreement dated as of April 1, 1996 among Federal Express Corporation, each of the financial institutions signatory thereto as Banks, and Morgan Guaranty Trust Company of New York as agent for the Banks and agree to act as, and perform the duties of, the Trustee as provided therein with the same effect as if we were a party to the Facility Agreement. The account referred to in Section 2.02(a) of the Facility Agreement is account number [ * ] maintained by us at The First National Bank of Chicago, ABA No. [ * ], Attention: Margaret Kennelly, Reference: Federal Express. [NAME OF SUCH ENTITY] By______________________________ Name: Title: ____________________ *Blank space contained confidential information which has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. EX-10.21 4 11TH SUPPLEMENTAL LEASE AGREEMENT Exhibit 10.21 EXECUTION COPY XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX ELEVENTH SUPPLEMENTAL LEASE AGREEMENT by and between MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY and FEDERAL EXPRESS CORPORATION Dated as of July 1, 1994 AMENDING THE CONSOLIDATED AND RESTATED LEASE AGREEMENT DATED AS OF AUGUST 1, 1979 BETWEEN THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY AND FEDERAL EXPRESS CORPORATION. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX TABLE OF CONTENTS
SECTION PAGE - ------- ---- 1 Definitions...................................... 6 2 Granting Leasehold............................... 6 3 Term; Delivery and Acceptance of Possession...................................... 10 4 Rental........................................... 10 5 Lease Agreement Still in Effect; Provisions Thereof Applicable to this Eleventh Supplemental Lease Agreement................................. 11 6 Descriptive Headings............................. 11 7 Effectiveness of this Eleventh Supple- mental Lease Agreement.......................... 11 8 Execution of Counterparts........................ 11 Notary........................................... 13 Leased Parcel Summary............................ 14 Rental Summary................................... 16
2 ELEVENTH SUPPLEMENTAL LEASE AGREEMENT ------------------------------------- THIS ELEVENTH SUPPLEMENTAL LEASE AGREEMENT, made and entered into as of the first day of July 1, 1994, by and between MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY (herein sometimes referred to as "Authority"), a public and governmental body politic and corporate of the State of Tennessee, and FEDERAL EXPRESS CORPORATION (herein sometimes referred to as "Tenant"), a corporation duly organized and existing under the laws of the State of Delaware and qualified to do business in the State of Tennessee, W I T N E S S E T H: WHEREAS, Authority and Tenant on October 3, 1979 entered into a Consolidated and Restated Lease Agreement dated as of August 1, 1979; WHEREAS, Authority and Tenant on April 7, 1981 entered into a First Supplemental Lease Agreement dated as of April 1, 1981 (the "First Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land, buildings and equipment to be included in the Project as defined in the Lease Agreement all as set forth therein (such additional land, buildings and equipment being defined therein and hereinafter referred to as the "1981 Federal Express Project"), all as set forth therein; and 3 WHEREAS, the Authority and Tenant on May 6, 1982 entered into a Second Supplemental Lease Agreement dated as of January 1, 1982 (the "Second Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in the Project, all as set forth therein; and WHEREAS, Authority and Tenant on December 9, 1982, entered into a Third Supplemental Lease Agreement dated as of November 1, 1982 (the "Third Supplemental Lease Agreement") so as to release certain items consisting of Buildings and Leased Equipment in the 1981 Federal Express Project; and WHEREAS, Authority and Tenant on September 29, 1983 entered into a Fourth Supplemental Lease Agreement dated as of July 1, 1983 (the "Fourth Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in the Project, all as set forth therein; and WHEREAS, Authority and Tenant on April 23, 1984 entered into a Fifth Supplemental Lease Agreement dated as of February 1, 1984 (the Fifth Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in this Project, all as set forth therein; and WHEREAS, Authority and Tenant on November 19, 1984 entered into a Sixth Supplemental Lease Agreement dated as of April 1, 1984 (the "Sixth Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in this Project, all as set forth therein; and 4 WHEREAS, Authority and Tenant on November 19, 1984 entered into a Seventh Supplemental Lease Agreement dated as of June 1, 1984 (the "Seventh Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in this Project, all as set forth therein; and WHEREAS, Authority and Tenant on November 4, 1988, entered into a Eighth Supplemental Lease Agreement dated as of July 1, 1988, (the "Eighth Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in this Project, all as set forth therein; and WHEREAS, Authority and Tenant on July 12, 1989, entered into a Ninth Supplemental Lease Agreement dated as of June 1, 1989, (the "Ninth Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in this Project, all as set forth therein; and WHEREAS, Authority and Tenant on October 1, 1991, entered into a Tenth Supplemental Lease Agreement dated as of October 1, 1991, (the "Tenth Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in this Project, all as set forth therein; and WHEREAS, the said Consolidated and Restated Lease Agreement dated as of October 3, 1979, together with the First through the Tenth Supplemental Lease Agreements is herein referred to as the "Lease Agreement" and 5 WHEREAS, Authority and Tenant have agreed to further supplement the Lease Agreement so as to lease to Tenant certain additional land under this Eleventh Supplemental Lease Agreement; NOW THEREFORE, for and in consideration of the mutual promises, covenants and agreements hereinafter contained to be kept and performed by the parties hereto and upon the provisions and conditions hereinafter set forth, Authority and Tenant do hereby covenant and agree, and each for itself does hereby covenant and agree, as follows: SECTION 1. DEFINITIONS. Except as otherwise provided herein, and unless the context shall clearly require otherwise, all words and terms used in this Eleventh Supplemental Lease Agreement which are defined in the Lease Agreement, shall, for all purposes of this Eleventh Supplemental Lease Agreement, have the respective meanings given to them in the Lease Agreement. SECTION 2. GRANTING OF LEASEHOLD. In addition to the lease and demise to Tenant of the Land in the Lease Agreement, the Authority hereby leases and demises to Tenant, and Tenant hereby takes and hires from Authority, subject to the provisions and conditions set forth in the Lease Agreement and this Eleventh Supplemental Lease Agreement, the additional land designated as new Parcels 27 West A, 27 West B and Southwest Ramp which is located on the Memphis-Shelby County Airport Authority property situated in Memphis, Shelby County, Tennessee, and being more particularly described as follows: 6 DESCRIPTION OF PART OF THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY PROPERTY IN MEMPHIS, TENNESSEE: (SOUTHWEST RAMP) Beginning at a point being located north 55 degrees 28 minutes 13 seconds west, 640.42 feet from airport control point #23, said point being 132 feet east of new taxiway 'S' and 132 feet north of new taxiway 'V' as measured at right angles thereto; thence north 13 degrees 58 minutes 49 seconds west with a line that is 132 feet east of and parallel to the centerline of new taxiway 'S' 122.39 feet to a point; thence north 01 degrees 56 minutes 55 seconds east with a line that is 132 feet east of and parallel to the centerline of taxiway 'S', 196.87 feet to a point, said point being 132 feet north of old taxiway 'V' as measured at right angles thereto; thence south 60 degrees 43 minutes 53 seconds east with a line that is 132 feet north of and parallel to the old centerline of taxiway 'V', 612.85 feet to a point of curve; thence southeastwardly on a curve to the left having a radius of 580.50 feet, delta angle of 24 degrees 57 minutes 59 seconds, chord distance of 250.95 feet, chord bearing of south 73 degrees 12 minutes 53 seconds east and with a line that is 132 feet north of and parallel to the centerline of old taxiway 'V' a curve distance of 252.95 feet to a point, said point being 132 feet north of new taxiway 'V' as measured at right angles thereto; thence north 85 degrees 41 minutes 52 seconds west with a line that is 132 feet north of and parallel to the centerline of new taxiway 'V', 754.12 feet to the point of beginning and containing 2.350 acres of land. 7 DESCRIPTION PARCEL 27 WEST-A Being part of the west part of Parcel 27 of the Memphis-Shelby County Airport (M.S.C.A.A.) property located south of the Tennessee Air National Guard (T.A.N.G.) parcel, situated in Memphis, Shelby County, Tennessee, and to be known for the purposes of this description as Parcel 27 West-A of said M.S.C.A.A. property and more particularly described as follows: Commencing at an iron pin in the west line of Tchulahoma Road (106 foot R.O.W.) at the intersection of said west line with the eastwardly projection of the centerline of Runway 27; thence run north 88 degrees 01'00" west along said projection and centerline 7393.18 feet to a point; thence run north 01 degrees 59' 00" east and perpendicular to said centerline 929.07 feet to a point 134.00 feet of the centerline of Runway Sierra being the true point of beginning; thence north 00 degrees 18' 37" west and parallel to the said centerline of Runway Sierra 1415.51 feet to a point; thence south 87 degrees 55' 51" east a distance of 132.57 feet to a point; thence south 00 degrees 17' 40" east a distance of 1257.40 feet to a point; thence south 40 degrees 34' 21" west a distance of 201.84 feet to the point of beginning containing 176,777 square feet or 4.058 acres more or less. 8 DESCRIPTION PARCEL 27 WEST-B Being part of the west part of Parcel 27 of the Memphis-Shelby County Airport Authority (M.S.C.A.A.) property located south of the Tennessee Air National Guard (T.A.N.G.) Parcel, situated in Memphis, Shelby County, Tennessee, and to be known for the purposes of this description as Parcel 27 West-B of said M.S.C.A.A. property and more particularly described as follows: Commencing at an iron pin in the west line of Tchulahoma Road (106 foot R.O.W.) at the intersection of said west line with the eastwardly projection of the centerline of Runway 27; thence run north 88 degrees 01'00" west along said projection and centerline 7388.77 feet to a point; thence run north 01 degrees 59' 00" east and perpendicular to said centerline 819.15 feet to the true point of beginning and lying on the southward projection of the west line of Parcel 27 West-A of said M.S.C.A.A. property; thence north 00 degrees 18' 37" west along said southward projection 110.00 feet to the southwest corner of said Parcel 27 West-A; thence north 40 degrees 34' 21" east along the southerly line of said parcel 201.84 feet to the southeast corner of said parcel; thence north 00 degrees 17' 40" west along the east line of said parcel 1257.40 feet to the south line of the above said T.A.N.G. parcel; thence south 87 degrees 55' 51" east along said south line 151.90 feet to the northwest corner of the east part of Parcel 27; thence south 00 degrees 23' 07" east along the west line of said east part of Parcel 27 and along the west line of said east part of Parcel 27 and along the west line of part 5-B Parcel 9 (M.S.C.A.A. Property) a distance of 1279.32 feet to a point; thence south 26 degrees 24' 30" west a distance of 339.19 feet; thence north 63 degrees 06' 03" west a distance of 150.00 feet to the point of beginning containing 248,533 square feet or 5.706 acres more or less. 9 SECTION 3. TERM; DELIVERY AND ACCEPTANCE OF POSSESSION. The terms of this Eleventh Supplemental Lease Agreement shall commence on 12:01 A.M. on January 1, 1993, for the parcels described as 27 West A and 27 West B, it shall commence for the parcel described as Southwest Ramp on December 1, 1993 and each of the aforemention parcels shall expire at such time as the Lease Agreement shall expire, to-wit: August 31, 2012 or upon such earlier termination, extension or otherwise as provided therein. Authority shall deliver to Tenant sole and exclusive possession of that portion of the Land, leased hereby as of the date commencement of the term hereof, subject however, to Authority's right-of-entry set forth in Section 21 of the Lease Agreement. SECTION 4. RENTAL. In addition and supplemental to the rentals required to be paid to the Authority pursuant to Section 5 of the Lease Agreement (including all prior supplement lease agreements), during the term of this Eleventh Supplemental Lease Agreement, Tenant shall pay to the Authority in advance on the first business day of each month $4,291.77 in equal installments beginning July 1, 1994, a total rental payment of $51,501.18 per year, which the parties hereto agree is based upon an aggregate of 527,676 square feet of area at an annual rental rate of ($0.0976) per square foot. Tenant also agrees to pay a one-time rental fee of $68,093.48 which is rental payment for the time period tenant used the 527,676 area before the July 1, 1994, starting date which is more specifically described in Section 3. 10 SECTION 5. LEASE AGREEMENT STILL IN EFFECT; PROVISIONS THEREFORE APPLICABLE TO THIS SUPPLEMENTAL LEASE AGREEMENT. All of the terms, provisions, conditions, covenants and agreements of the Lease Agreement, as supplemented shall continue in full force and effect as supplemented hereby, and shall be applicable to each of the provisions of this Eleventh Supplemental Lease Agreement during the term hereof with the same force and effect as though the provisions hereof were set forth in the Lease Agreement. SECTION 6. DESCRIPTIVE HEADINGS. The descriptive headings of the sections of this Eleventh Supplemental Lease Agreement are inserted for convenience of reference only and do not constitute a part of this Eleventh Supplemental Lease Agreement and shall not affect the meaning, construction, interpretation or effect of this Eleventh Supplemental Lease Agreement. SECTION 7. EFFECTIVENESS OF THIS SUPPLEMENTAL LEASE AGREEMENT. This Eleventh Supplemental Lease Agreement shall become effective at 12:01 a.m. on July 1, 1994. SECTION 8. EXECUTION OF COUNTERPARTS. This Eleventh Supplemental Lease Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 9. SUMMARIES. For the convenience of both parties a leased parcel summary and a rental summary are attached to this lease agreement. 11 IN WITNESS WHEREOF, THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY AND FEDERAL EXPRESS CORPORATION have caused this Eleventh Supplemental Lease Agreement to be duly executed in their respective behalfs, as of the day and date first above written. MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY /s/ J. MCMICHAEL ---------------------------- Executive Vice President WITNESS: /s/ RICK - ----------------------- APPROVED AS TO FORM AND LEGALITY: /s/ R. GRATTAN BROWN, JR - -------------------------- Airport Authority Attorney FEDERAL EXPRESS CORPORATION By /s/ GILBERT MOOK ------------------------- Title Vice President ---------------------- WITNESS: APPROVED AS TO LEGAL FORM By /s/ ANN HOFF /s/ SWM 10/21/94 ----------------------- -------------------- Title Project Coord. --------------------- 12 STATE OF TENNESSEE ) COUNTY OF SHELBY ) On this 11th day of November, 1994 before me appeared Jerry L. McMichael, to me personally know, being by me duly sworn (or affirmed) did say that he is the Executive Vice President of Memphis-Shelby County Airport Authority, and that the seal affixed to the foregoing instrument is the corporate seal of said Authority, and that said instrument was signed and sealed in behalf of said Authority, by authority of its Board of commissioners and said Jerry L. McMichael acknowledged said instrument to be the free act and deed of such Authority. MY COMMISSION EXPIRES Sept. 17, 1997 /s/ CAROL D. WOLFE - -------------------------------- ------------------------------- Notary Public (seal) STATE OF TENNESSEE ) COUNTY OF SHELBY ) On this 25th day of October, 1994, before me appeared Gilbert D. Mook, to me personally known, who, being by me duly sworn (or affirmed) did say that he is a Vice President of Federal Express Corporation, and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation, by authority of its Board of Commissioners and said Gilbert D. Mook acknowledged said instrument to be the free act and deed of such corporation. MY COMMISSION EXPIRES Sept. 1, 1995 /s/ SANDRA Y. SWELL - -------------------------------- ------------------------------- Notary Public (seal) 13 FEDERAL EXPRESS LEASED PARCELS SUMMARY
PARCEL EFFECTIVE LEASE ACRES SQUARE FEET AGREEMENT DATE - ----- ----- ----------- --------- --------- BASE-LEASE ---------- Revised 9 128.469 Consolidated & 08/01/79 Restated 10 1.612 70,200 Consolidated & 08/01/79 Restated 11 1.044 45,359 Consolidated & 08/01/79 Restated
PREVIOUS SUPPLEMENTS --------------------
12 2.707 117,915 First 04/01/81 Supplemental 13 6.860 298,830 Second 01/01/82 Supplemental 14 14.586 635,377 Fourth 07/01/83 Supplemental 15 12.689 552,723 Fourth 07/01/83 Supplemental Rev 16 18.281 (19.685) 796,312 Fifth 02/01/84 Supplemental Rev 17 119.616 (124.992) 5,210,477 Sixth 04/01/84 Supplemental 18 2.717 118,353 Sixth 04/01/84 Supplemental 19 41.606 1,812,352 Seventh 06/01/84 Supplemental 25 0.435 18,933 Eighth 07/01/88 Supplemental 20 11.275 491,127 Ninth 06/01/89 Supplemental 27 11.192 487,512 Tenth 10/01/91 Supplemental 32 (removed) 22.972 1,000,681 Twelfth 07/01/93 Supplemental
14 THIS SUPPLEMENT ---------------
27 A 4.058 176,777 Eleventh 07/01/94 (West) Supplemental 27 B 5.706 248,533 Eleventh 07/01/94 (West) Supplemental Southwest Ramp 2.350 102,366 Eleventh 07/01/94 Supplemental OPTIONS ------- 21 19.134 833,476 Option, Expires 5/31/94 22 6.521 284,068 Option, Expires 5/31/94 ASSIGNMENTS ----------- 23 5.923 258,008 Graber Assignment, Expires 12/31/00 Invoice FEC Next Increase 12/31/90 24 9.964 434,030 Southwide Assignment Expires 5/14/13 Invoice FEC Next Increase 5/15/93 26 9.532 415,213 BICO Assignment, Expires 7/31/20,21 Invoice FEC Next Increase 8/01/96 28 10.68 465,221 Equitable Life Assignment Expires 5/14/2013 Invoice FEC Next Increase 5/15/93
15 RENTAL - FEDERAL EXPRESS Effective July 1, 1994
Annual Category Number of Rent Rate Annual of Space Square Feet Per Sq. Ft. Rental - -------- ----------- ----------- ------------ Bldg. T-376 1,240 1.221 1,514.04 Unimproved Ground 4,494,042 .098 440,416.11 Improved Apron 2,395,802 .122 292,287.84 Hangar Proper 108,139 .903 97,649.52 Hangar Office 42,000 1.465 61,530.00 International Park 8,721,224 .171 1,491,329.30 ---------- ----- ------------ 16,763,128 .1422 2,384,726.81
BREAKDOWN OF SPACE ------------------
Sq. Ft. Sq. Ft. ------- ------- Bldg. T-376 Parcel 4 1,240 ----- - ----------- 1,240 Unimproved Ground Parcel 1 130,900 - ----------------- Parcel 2 50,000 Parcel 3 192,400 Parcel 4 32,540 Parcel 6 89,700 Parcel 9 1,167,337 Parcel 19 1,812,362 Parcel 20 491,127 Parcel 27A 176,777 Parcel 27B 248,533 Southwest Ramp 102,366 --------- 4,494,042 Improved Apron Parcel 1 850,250 - -------------- Parcel 2 226,900 Parcel 7 577,540 Parcel 9 253,600 Parcel 27 487,512 --------- 2,395,802
16
Hangar Proper Parcel 1 66,504 - ------------- Parcel 2 41,635 ------ 108,139 Hangar Office Parcel 1 33,600 - -------------------- Parcel 2 8,400 42,000 ------ Sq. Ft. Sq. Ft. ------- ------- International Park Parcel 5 24,000 - -------------------- Parcel 8 247,254 Parcel 9 1,586,172 Parcel 10 70,200 Parcel 11 45,359 Parcel 12 117,915 Parcel 13 298,830 Parcel 14 556,334 Parcel 15 552,723 Parcel 16 796,312 Parcel 17 4,288,839 Parcel 18 118,353 Parcel 25 18,933 --------- 8,721,224 ---------- Total 15,762,447
34636 17 EX-10.23 5 13TH SUPPLEMENTAL LEASE AGREEMENT Exhibit 10.23 EXECUTION COPY ________________________________________________________________________ THIRTEENTH SUPPLEMENTAL LEASE AGREEMENT by and between MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY and FEDERAL EXPRESS CORPORATION Dated as of June 1, 1995 AMENDING THE CONSOLIDATED AND RESTATED LEASE AGREEMENT DATED AS OF AUGUST 1, 1979 BETWEEN THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY AND FEDERAL EXPRESS CORPORATION. ________________________________________________________________________ TABLE OF CONTENTS
SECTION PAGE - ------- ---- 1 Definitions................................................... 6 2 Granting Leasehold............................................ 6 3 Release of Certain Land....................................... 8 4 Term; Delivery and Acceptance of Possession.................. 8 5 Rental........................................................ 8 6 Lease Agreement Still in Effect; Provisions Thereof Applicable to this Thirteenth Supplemental Lease Agreement............... 9 7 Descriptive Headings.......................................... 9 8 Effectiveness of this Thirteenth Supplemental Lease Agreement. 9 9 Execution of Counterparts..................................... 9 10 Notary........................................................ 11 11 Leased Parcel Summary......................................... 12 12 Rental Summary................................................ 14
THIRTEENTH SUPPLEMENTAL LEASE AGREEMENT THIS THIRTEENTH SUPPLEMENTAL LEASE AGREEMENT, made and entered into as of the first day of June 1, 1995, by and between MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY (herein sometimes referred to as "Authority"), a public and governmental body politic and corporate of the State of Tennessee, and FEDERAL EXPRESS CORPORATION (herein sometimes referred to as "Tenant"), a corporation duly organized and existing under the laws of the State of Delaware and qualified to do business in the State of Tennessee, W I T N E S S E T H: WHEREAS, Authority and Tenant on October 3, 1979 entered into a Consolidated and Restated Lease Agreement dated as of August 1, 1979; WHEREAS, Authority and Tenant on April 7, 1981 entered into a First Supplemental Lease Agreement dated as of April 1, 1981 (the "First Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land, buildings and equipment to be included in the Project as defined in the Lease Agreement all as set forth therein (such additional land, buildings and equipment being defined therein and hereinafter referred to as the "1981 Federal Express Project"), all as set forth therein; and WHEREAS, the Authority and Tenant on May 6, 1982 entered into a Second Supplemental Lease Agreement dated as of January 1, 1982 (the "Second Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in the Project, all as set forth therein; and WHEREAS, Authority and Tenant on December 9, 1982, entered into a Third 3 Supplemental Lease Agreement dated as of November 1, 1982 (the "Third Supplemental Lease Agreement") so as to release certain items consisting of Buildings and Leased Equipment in the 1981 Federal Express Project; and WHEREAS, Authority and Tenant on September 29, 1983 entered into a Fourth Supplemental Lease Agreement dated as of July 1, 1983 (the "Fourth Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in the Project, all as set forth therein; and WHEREAS, Authority and Tenant on April 23, 1984 entered into a Fifth Supplemental Lease Agreement dated as of February 1, 1984 (the Fifth Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in this Project, all as set forth therein; and WHEREAS, Authority and Tenant on November 19, 1984 entered into a Sixth Supplemental Lease Agreement dated as of April 1, 1984 (the "Sixth Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in this Project, all as set forth therein; and WHEREAS, Authority and Tenant on November 19, 1984 entered into a Seventh Supplemental Lease Agreement dated as of June 1, 1984 (the "Seventh Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in this Project, all as set forth therein; and WHEREAS, Authority and Tenant on November 4, 1988, entered into a Eighth Supplemental Lease Agreement dated as of July 1, 1988, (the "Eighth Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of 4 additional land to be included in this Project, all as set forth therein; and WHEREAS, Authority and Tenant on July 12, 1989, entered into a Ninth Supplemental Lease Agreement dated as of June 1, 1989, (the "Ninth Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in this Project, all as set forth therein; and WHEREAS, Authority and Tenant on October 1, 1991, entered into a Tenth Supplemental Lease Agreement dated as of October 1, 1991, (the "Tenth Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in this Project, all as set forth therein; and WHEREAS, Authority and Tenant on July 1, 1994, entered into a Eleventh Supplemental Lease Agreement dated July 1, 1994, (the Eleventh Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in this Project, all as set forth therein; and WHEREAS, Authority and Tenant on July 1, 1993, entered into a Twelfth Supplemental Lease Agreement dated July 1, 1993, (the Twelfth Supplemental Lease Agreement")so as to release a certain parcel of land from the 1981 Federal Express Project as described on Exhibit 1 attached thereto; and WHEREAS, the said Consolidated and Restated Lease Agreement dated as of October 3, 1979, together with the First through the Twelfth Supplemental Lease Agreements is herein referred to as the "Lease Agreement" and WHEREAS, Authority and Tenant have agreed to further supplement the Lease Agreement so as to lease to Tenant certain additional land under this Thirteenth 5 Supplemental Lease Agreement; NOW THEREFORE, for and in consideration of the mutual promises, covenants and agreements hereinafter contained to be kept and performed by the parties hereto and upon the provisions and conditions hereinafter set forth, Authority and Tenant do hereby covenant and agree, and each for itself does hereby covenant and agree, as follows: SECTION 1. DEFINITIONS. Except as otherwise provided herein, and unless the context shall clearly require otherwise, all words and terms used in this Thirteenth Supplemental Lease Agreement which are defined in the Lease Agreement, shall, for all purposes of this Thirteenth Supplemental Lease Agreement, have the respective meanings given to them in the Lease Agreement. SECTION 2. GRANTING OF LEASEHOLD. In addition to the lease and demise to Tenant of the Land in the Lease Agreement, the Authority hereby leases and demises to Tenant, and Tenant hereby takes and hires from Authority, subject to the provisions and conditions set forth in the Lease Agreement and this Thirteenth Supplemental Lease Agreement, the additional land designated as new Lease Parcels 33 and 36 which is located on the Memphis-Shelby County Airport Authority property situated in Memphis, Shelby County, Tennessee, and being more particularly described as follows: 6 PARCEL 33 (FEEDER RAMP & GSE STORAGE AREA) BEING A DESCRIPTION OF PART OF THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY PROPERTY, LOCATED IN MEMPHIS, SHELBY COUNTY, TENNESSEE AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS: Commencing at the intersection of the centerline of Taxiway C and Taxiway Z, said point being N01 54'35"E a distance of 735.04 feet from the intersection of the centerline of said Taxiway C with the centerline of Runway 9/27 as measured along said Taxiway C; thence N01 54'35"E along the centerline of said Taxiway C a distance of 122.72 feet to a point; thence S88 05'25"E a distance of 129.50 feet to the point of beginning; thence N01 54'35"E along a line which is 129.50 feet east of and parallel to said taxiway C a distance of 1429.08 feet to a point; thence S88 05'25"E a distance of 233.58 feet to a point; thence S01 54'35"W a distance of 466.00 feet to a point; thence S88 05'25"E a distance of 240.39 feet to a point, said point being 129.50 feet west of the centerline of Taxiway S; thence S01 55'59"W and parallel to said Taxiway S a distance of 451.83 feet; thence N88 05'25"W a distance of 339.81 feet to a point; thence S01 54'35"W a distance of 518.46 feet to a point, said point being 129.50 feet north of the centerline of said Taxiway Z; thence N85 00'41"W and parallel to said Taxiway Z a distance of 134.17 feet to the point of beginning and containing 391,942 square feet or 8.998 acres. PARCEL 36 (FEDEX GSE STORAGE AREA) BEING PART OF THE MEMPHIS-SHELBY AIRPORT AUTHORITY PROPERTY, LOCATED AT THE MEMPHIS INTERNATIONAL AIRPORT IN MEMPHIS, SHELBY COUNTY, TENNESSEE AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS: Beginning at a point on the west line of Tchulahoma Road (106.00 Foot Right-of-Way), said point being the intersection of said west line with the north line of the approach slope for Runway 29; thence following said west line along a curve to the right having a radius of 1390.00 feet, an arc length of 376.98 feet (Chord S07 20'19"E - 375.82 feet) to a point; thence N85 43'11"W a distance of 322.06 feet to a point on the east line of a service drive; thence following said east line along a curve to the left having a radius of 380.00 feet, an arc length of 416.54 feet (Chord N38 26'02"W - 395.99 feet) to a point on the north line of said approach slope; thence N85 45'32"E along said north line a distance of 520.74 feet to the point of beginning and containing 132,837 square feet or 3.050 acres. 7 SECTION 3. RELEASE OF CERTAIN LAND. The Tenant and the Authority have agreed that it is desirable to release from the Lease Agreement that portion of the Land identified as Hangar 8 in the following manner: delete 36,046.33 square feet from the Hangar Property at a rental rate of $.903 per square foot and 14,000 square feet from the Hangar Office Space at a rental rate of $1.465 thereby creating a total annual reduction of $53,059.84. SECTION 4. TERM; DELIVERY AND ACCEPTANCE OF POSSESSION. The terms of this Thirteenth Supplemental Lease Agreement shall commence on 12:01 A.M. on June 1, 1995, for the parcels described as 33 and 36 and shall expire at such time as the Lease Agreement shall expire, to-wit: August 31, 2012 or upon such earlier termination, extension or otherwise as provided therein. Authority shall deliver to Tenant sole and exclusive possession of that portion of the Land, leased hereby as of the date commencement of the term hereof, subject however, to Authority's right-of-entry set forth in Section 21 of the Lease Agreement. Accordingly, the Authority and Tenant mutually agree that the portion of land as described and set forth in Section 3 of this Thirteenth Supplemental Agreement is released from the Lease Agreement and from and after the effective date of this Thirteenth Supplemental Lease Agreement shall no longer be or be deemed to be a part of the Land leased thereunder. SECTION 5. RENTAL. In addition and supplemental to the rentals required to be paid to the Authority pursuant to Section 5 of the Lease Agreement (including all prior supplement lease agreements), during the term of this Thirteenth Supplemental Lease Agreement, Tenant shall pay to the Authority in advance on the first business day of each month $4,268.20 in equal installments beginning June 1, 1995, a total rental payment of $51,218.43 per year, which the parties hereto agree is based upon an aggregate of 524,779 8 square feet of area at an annual rental rate of ($0.0976) per square foot. SECTION 6. LEASE AGREEMENT STILL IN EFFECT; PROVISIONS THEREFORE APPLICABLE TO THIS SUPPLEMENTAL LEASE AGREEMENT. All of the terms, provisions, conditions, covenants and agreements of the Lease Agreement, as supplemented shall continue in full force and effect as supplemented hereby, and shall be applicable to each of the provisions of this Thirteenth Supplemental Lease Agreement during the term hereof with the same force and effect as though the provisions hereof were set forth in the Lease Agreement. SECTION 7. DESCRIPTIVE HEADINGS. The descriptive headings of the sections of this Thirteenth Supplemental Lease Agreement are inserted for convenience of reference only and do not constitute a part of this Thirteenth Supplemental Lease Agreement and shall not affect the meaning, construction, interpretation or effect of this Thirteenth Supplemental Lease Agreement. SECTION 8. EFFECTIVENESS OF THIS SUPPLEMENTAL LEASE AGREEMENT. This Thirteenth Supplemental Lease Agreement shall become effective at 12:01 a.m. on June 1, 1995. SECTION 9. EXECUTION OF COUNTERPARTS. This Thirteenth Supplemental Lease Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 10. SUMMARIES. For the convenience of both parties a leased parcel summary and a rental summary are attached to this lease agreement. 9 IN WITNESS WHEREOF, THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY AND FEDERAL EXPRESS CORPORATION have caused this Thirteenth Supplemental Lease Agreement to be duly executed in their respective behalfs, as of the day and date first above written. WITNESS: MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY /s/ RICK BY: /s/ LARRY D. COX - ------------------------------ ------------------------------------ Title: Director of Properties TITLE: PRESIDENT ------------------------------------ Approved as to Form and Legality: /s/ R. GRATTAN BROWN JR., ATTY - ---------------------------------- Attorney for the Airport Authority WITNESS: FEDERAL EXPRESS CORPORATION /s/ ANN HOFF BY: /s/ D. M. HURTADO - ----------------------------- --------------------------------- Title: Proj. Coord. - ----------------------------- TITLE: Managing Director, Real Estate ------------------------------ APPROVED AS TO LEGAL FORM /s/ PGA 8/24/95 ---------------- 10 (STATE OF TENNESSEE ) COUNTY OF SHELBY ) On this 21st day of Sept., 1995 before me appeared LARRY D. COX, to me personally known, who, being by me duly sworn (or affirmed), did say that he is the President of the Memphis-Shelby County Airport Authority, the within named Lessor, and that he as such President, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the Authority by himself as such President. MY COMMISSION EXPIRES 4/30/96 /s/ PAT STANFILL - ----------------------------- ------------------------------------ Notary Public (seal) STATE OF TENNESSEE ) COUNTY OF SHELBY ) On this 7 day of September, 1995, before me appeared David M. Hurtado, to me personally known, who, being by me duly sworn (or affirmed), did say that he is a Managing Director, Real Estate of Federal Express Corporation, the within named Lessee, and that he as such __________, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the Corporation by himself as such Managing Director, Real Estate. MY COMMISSION EXPIRES Dec. 7, 1998 /s/ LEANNA M. JOHNSON - ---------------------------- ----------------------------------- Notary Public (seal) 11 FEDERAL EXPRESS LEASED PARCELS SUMMARY
PARCEL EFFECTIVE LEASE ACRES SQUARE FEET AGREEMENT DATE - ----- ----- ----------- --------- ---- BASE-LEASE ---------- Revised 9 128.469 Consolidated & 08/01/79 Restated 10 1.612 70,200 Consolidated & 08/01/79 Restated 11 1.044 45,359 Consolidated & 08/01/79 Restated
PREVIOUS SUPPLEMENTS --------------------
12 2.707 117,915 First 04/01/81 Supplemental 13 6.860 298,830 Second 01/01/82 Supplemental 14 14.586 635,377 Fourth 07/01/83 Supplemental 15 12.689 552,723 Fourth 07/01/83 Supplemental Rev 16 18.281 (19.685) 796,312 Fifth 02/01/84 Supplemental Rev 17 119.616 (124.992) 5,210,477 Sixth 04/01/84 Supplemental 18 2.717 118,353 Sixth 04/01/84 Supplemental 19 41.606 1,812,352 Seventh 06/01/84 Supplemental 25 0.435 18,933 Eighth 07/01/88 Supplemental 20 11.275 491,127 Ninth 06/01/89 Supplemental 27 11.192 487,512 Tenth 10/01/91 Supplemental 32 (removed) 22.972 1,000,681 Twelfth 07/01/93 Supplemental 27 A(West) 4.058 176,777 Eleventh 07/01/94 Supplemental 27 B(West) 5.706 248,533 Eleventh 07/01/94 Supplemental
12
PARCEL EFFECTIVE LEASE ACRES SQUARE FEET AGREEMENT DATE - ----- ----- ----------- --------- ---- Southwest Ramp 2.350 102,366 Eleventh 07/01/94 Supplemental
THIS SUPPLEMENT ---------------
33 8.998 391,942 Thirteenth 06/01/95 Supplemental 36 3.050 132,837 Thirteenth 06/01/95 Supplemental Hangar 8 (removed) 36,946,33 Thirteenth 06/01/95 Supplemental
OPTIONS ------- 21 19.134 833,476 Option, Expires 5/31/99 22 3.521 153,394 Option, Expires 5/31/99
ASSIGNMENTS -----------
23 5.923 258,008 Graber Assignment, Expires 12/31/00 Invoice FEC Next Increase 12/31/90 24 9.964 434,030 Southwide Assignment Expires 5/14/13 Invoice FEC Next Increase 5/15/93 26 9.532 415,213 BICO Assignment, Expires 7/31/20,21 Invoice FEC Next Increase 8/01/96 28 10.68 465,221 Equitable Life Assignment Expires 5/14/2013 Invoice FEC Next Increase 5/15/93
13 RENTAL - FEDERAL EXPRESS Effective June 1, 1995
Annual Category Number of Rental Rate Annual of Space Square Feet Per Sq. Ft. Rental - -------- ------------- ----------- ------ Bldg. T-376 1,240 $1.221 $ 1,514.04 Unimproved Ground 5,018,821 0.098 491,844.46 Improved Apron 2,395,802 0.122 292,287.84 Hangar Property 72,092.67 0.903 65,099.68 Hangar Office 28,000 1.465 41,020.00 International Park 8,721,224 0.171 1,491,329.30 ------------- ------ ------------- 16,237,179.67 $.1422 $2,383,095.32
BREAKDOWN OF SPACE ------------------
Sq. Ft. Sq. Ft. ------- ------- Bldg. T-376 Parcel 4 1,240 1,240 Unimproved Ground Parcel 1 130,900 Parcel 2 50,000 Parcel 3 192,400 Parcel 4 32,540 Parcel 6 89,700 Parcel 9 1,167,337 Parcel 19 1,812,362 Parcel 20 491,127 Parcel 27A 176,777 Parcel 27B 248,533 Southwest Ramp 102,366 Parcel 33 391,942 Parcel 36 132,837 --------- 5,018,821 Improved Apron Parcel 1 850,250 Parcel 2 226,900 Parcel 7 577,540 Parcel 9 253,600 Parcel 27 487,512 --------- 2,395,802
14
Sq. Ft. Sq. Ft. ------- ------- Hangar Property Parcel 1 44,336 Parcel 2 27,756.67 --------- 72,092.67 Hangar Office Parcel 1 22,400 Parcel 2 5,600 ------ 28,000
International Park Parcel 5 24,000 Parcel 8 247,254 Parcel 9 1,586,172 Parcel 10 70,200 Parcel 11 45,359 Parcel 12 117,915 Parcel 13 298,830 Parcel 14 556,334 Parcel 15 552,723 Parcel 16 796,312 Parcel 17 4,288,839 Parcel 18 118,353 Parcel 25 18,933 --------- 8,721,224 --------- TOTAL 16,237,179.67
34637 15 EX-10.24 6 14TH SUPPLEMENTAL LEASE AGREEMENT EXHIBIT 10.24 EXECUTION COPY ________________________________________________________________________ FOURTEENTH SUPPLEMENTAL LEASE AGREEMENT by and between MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY and FEDERAL EXPRESS CORPORATION Dated as of January 1, 1996 AMENDING THE CONSOLIDATED AND RESTATED LEASE AGREEMENT DATED AS OF AUGUST 1, 1979 BETWEEN THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY AND FEDERAL EXPRESS CORPORATION. ________________________________________________________________________ TABLE OF CONTENTS
SECTION PAGE - --------- ---- 1 Definitions................................................... 6 2 Granting Leasehold............................................ 6 3 Term; Delivery and Acceptance of Possession.................. 7 4 Rental........................................................ 7 5 Lease Agreement Still in Effect; Provisions Thereof Applicable to this Fourteenth Supplemental Lease Agreement............... 8 6 Descriptive Headings.......................................... 8 7 Effectiveness of this Fourteenth Supplemental Lease Agreement. 8 8 Execution of Counterparts..................................... 8 9 Notary........................................................ 10 10 Leased Parcel Summary......................................... 11 11 Rental Summary................................................ 13
FOURTEENTH SUPPLEMENTAL LEASE AGREEMENT THIS FOURTEENTH SUPPLEMENTAL LEASE AGREEMENT, made and entered into as of the first day of December, 1995, by and between MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY (herein sometimes referred to as "Authority"), a public and governmental body politic and corporate of the State of Tennessee, and FEDERAL EXPRESS CORPORATION (herein sometimes referred to as "Tenant"), a corporation duly organized and existing under the laws of the State of Delaware and qualified to do business in the State of Tennessee, W I T N E S S E T H: WHEREAS, Authority and Tenant on October 3, 1979 entered into a Consolidated and Restated Lease Agreement dated as of August 1, 1979; WHEREAS, Authority and Tenant on April 7, 1981 entered into a First Supplemental Lease Agreement dated as of April 1, 1981 (the "First Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land, buildings and equipment to be included in the Project as defined in the Lease Agreement all as set forth therein (such additional land, buildings and equipment being defined therein and hereinafter referred to as the "1981 Federal Express Project"), all as set forth therein; and WHEREAS, the Authority and Tenant on May 6, 1982 entered into a Second Supplemental Lease Agreement dated as of January 1, 1982 (the "Second Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in the Project, all as set forth therein; and WHEREAS, Authority and Tenant on December 9, 1982, entered into a Third 3 Supplemental Lease Agreement dated as of November 1, 1982 (the "Third Supplemental Lease Agreement") so as to release certain items consisting of Buildings and Leased Equipment in the 1981 Federal Express Project; and WHEREAS, Authority and Tenant on September 29, 1983 entered into a Fourth Supplemental Lease Agreement dated as of July 1, 1983 (the "Fourth Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in the Project, all as set forth therein; and WHEREAS, Authority and Tenant on April 23, 1984 entered into a Fifth Supplemental Lease Agreement dated as of February 1, 1984 (the Fifth Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in this Project, all as set forth therein; and WHEREAS, Authority and Tenant on November 19, 1984 entered into a Sixth Supplemental Lease Agreement dated as of April 1, 1984 (the "Sixth Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in this Project, all as set forth therein; and WHEREAS, Authority and Tenant on November 19, 1984 entered into a Seventh Supplemental Lease Agreement dated as of June 1, 1984 (the "Seventh Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in this Project, all as set forth therein; and WHEREAS, Authority and Tenant on November 4, 1988, entered into a Eighth Supplemental Lease Agreement dated as of July 1, 1988, (the "Eighth Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of 4 additional land to be included in this Project, all as set forth therein; and WHEREAS, Authority and Tenant on July 12, 1989, entered into a Ninth Supplemental Lease Agreement dated as of June 1, 1989, (the "Ninth Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in this Project, all as set forth therein; and WHEREAS, Authority and Tenant on October 1, 1991, entered into a Tenth Supplemental Lease Agreement dated as of October 1, 1991, (the "Tenth Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in this Project, all as set forth therein; and WHEREAS, Authority and Tenant on July 1, 1994, entered into a Eleventh Supplemental Lease Agreement dated July 1, 1994, (the Eleventh Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in this Project, all as set forth therein; and WHEREAS, Authority and Tenant on July 1, 1993, entered into a Twelfth Supplemental Lease Agreement dated July 1, 1993, (the Twelfth Supplemental Lease Agreement") so as to release a certain parcel of land from the 1981 Federal Express Project as described on Exhibit 1 attached thereto; and WHEREAS, Authority and Tenant on June 1, 1995, entered into a Thirteenth Supplemental Lease Agreement dated June 1, 1995, (the Thirteenth Supplemental Lease Agreement") so as to provide for the lease by Tenant from Authority of additional land to be included in this Project and so as to release a certain parcel of land from the 1981 Federal Express Project, all as set forth therein; and 5 WHEREAS, the said Consolidated and Restated Lease Agreement dated as of October 3, 1979, together with the First through the Thirteenth Supplemental Lease Agreements is herein referred to as the "Lease Agreement" and WHEREAS, Authority and Tenant have agreed to further supplement the Lease Agreement so as to lease to Tenant certain additional land under this Fourteenth Supplemental Lease Agreement; NOW THEREFORE, for and in consideration of the mutual promises, covenants and agreements hereinafter contained to be kept and performed by the parties hereto and upon the provisions and conditions hereinafter set forth, Authority and Tenant do hereby covenant and agree, and each for itself does hereby covenant and agree, as follows: SECTION 1. DEFINITIONS. Except as otherwise provided herein, and unless the context shall clearly require otherwise, all words and terms used in this Fourteenth Supplemental Lease Agreement which are defined in the Lease Agreement, shall, for all purposes of this Fourteenth Supplemental Lease Agreement, have the respective meanings given to them in the Lease Agreement. SECTION 2. GRANTING OF LEASEHOLD. In addition to the lease and demise to Tenant of the Land in the Lease Agreement, the Authority hereby leases and demises to Tenant, and Tenant hereby takes and hires from Authority, subject to the provisions and conditions set forth in the Lease Agreement and this Fourteenth Supplemental Lease Agreement, the additional land designated as new Lease Parcel 34 which is located on the Memphis-Shelby County Airport Authority property situated in Memphis, Shelby County, Tennessee, and being more particularly described as follows: 6 PARCEL 34 (PARCEL WEST OF HANGAR 11) BEING A DESCRIPTION OF PART OF THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY PROPERTY, LOCATED IN MEMPHIS, SHELBY COUNTY, TENNESSEE AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS: Beginning at a point on the north line of Winchester Road, said point being S85 43'52"E a distance of 40.00 feet from the intersection of said north line of Winchester Road with the easterly face of the Hurricane Creek vertical wall channel; thence N02 12'44"E along the western most east line of the Northwest Airlink Maintenance Facility Lease Parcel a distance of 150.19 feet to a point; thence N04 08'27"E and continuing along said east line a distance of 427.19 feet to a point on the south line of said Lease Parcel; thence S85 46'02"E along said south line of said Lease Parcel a distance of 365.00 feet to the southeast corner of said Lease Parcel; thence N04 08'27"E along the east line of said Lease Parcel a distance of 550.00 feet to a point; thence S85 46'02"E along a line 191.00 feet south of and parallel to Taxiway "A" a distance of 85.20 feet to the northwest corner of the property shown on the Final Plan of the Aviation Facilities P.D. as recorded in Plat Book 145, Page 37, at the Shelby County Register's Office; thence S03 58'23"W along the west line of the said Aviation Facilities property a distance of 386.06 feet to a point; thence S40 18'14"E a distance of 284.48 feet to a point; thence S04 40'50"W and continuing along the west line of the said Aviation Facilities property a distance of 534.87 feet to a point on the north line of said Winchester Road; thence N85 43'52"W along the north line of said Winchester Road a distance of 47.61 feet to a point; thence S49 16'08"W a distance of 5.66 feet to a point; thence N85 43'52"W and continuing along the north line of said Winchester Road a distance of 588.82 feet to the point of beginning and containing 433,461 square feet or 9.951 acres. SECTION 3. TERM; DELIVERY AND ACCEPTANCE OF POSSESSION. The terms of this Fourteenth Supplemental Lease Agreement shall commence on 12:01 A.M. on January 1, 1996, for the parcel described as 34 and shall expire at such time as the Lease Agreement shall expire, to-wit: August 31, 2012 or upon such earlier termination, extension or otherwise as provided therein. Authority shall deliver to Tenant sole and exclusive possession of that portion of the Land, leased hereby as of the date commencement of the term hereof, subject however, to Authority's right-of-entry set forth in Section 21 of the Lease Agreement. SECTION 4. RENTAL. In addition and supplemental to the rentals required to be paid to the Authority pursuant to Section 5 of the Lease Agreement (including all prior supplement lease agreements), during the term of this Fourteenth 7 Supplemental Lease Agreement, Tenant shall pay to the Authority in advance on the first business day of each month $3,525.48 in equal installments beginning January 1, 1996, a total rental payment of $42,305.79 per year, which the parties hereto agree is based upon an aggregate of 433,461 square feet of area at an annual rental rate of ($0.0976) per square foot. SECTION 5. LEASE AGREEMENT STILL IN EFFECT; PROVISIONS THEREFORE APPLICABLE TO THIS SUPPLEMENTAL LEASE AGREEMENT. All of the terms, provisions, conditions, covenants and agreements of the Lease Agreement, as supplemented shall continue in full force and effect as supplemented hereby, and shall be applicable to each of the provisions of this Fourteenth Supplemental Lease Agreement during the term hereof with the same force and effect as though the provisions hereof were set forth in the Lease Agreement. SECTION 6. DESCRIPTIVE HEADINGS. The descriptive headings of the sections of this Fourteenth Supplemental Lease Agreement are inserted for convenience of reference only and do not constitute a part of this Fourteenth Supplemental Lease Agreement and shall not affect the meaning, construction, interpretation or effect of this Fourteenth Supplemental Lease Agreement. SECTION 7. EFFECTIVENESS OF THIS SUPPLEMENTAL LEASE AGREEMENT. This Fourteenth Supplemental Lease Agreement shall become effective at 12:01 a.m. on January 1, 1996. SECTION 8. EXECUTION OF COUNTERPARTS. This Fourteenth Supplemental Lease Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 9. SUMMARIES. For the convenience of both parties a leased parcel summary and a rental summary are attached to this lease agreement. 8 IN WITNESS WHEREOF, THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY AND FEDERAL EXPRESS CORPORATION have caused this Fourteenth Supplemental Lease Agreement to be duly executed in their respective behalfs, as of the day and date first above written. WITNESS: MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY /s/ J. MCMICHAEL BY: /s/ LARRY D. COX - -------------------------------- -------------------------------- Title: Secretary TITLE: PRESIDENT Approved as to Form and Legality: /s/ R. GRATTAN BROWN, JR. - --------------------------------- Attorney for the Airport Authority WITNESS: FEDERAL EXPRESS CORPORATION /s/ Ann Hoff BY: /s/ D. M. Hurtado - -------------------------------- ----------------------------------- Title: Proj. Coord. TITLE: Managing Director, Real Estate APPROVED AS TO LEGAL FORM /s/ pga 02/1/96 ---------------- LEGAL DEPT. 9 (STATE OF TENNESSEE ) COUNTY OF SHELBY ) On this 15 day of February, 1996, before me appeared LARRY D. COX, to me personally known, who, being by me duly sworn (or affirmed), did say that he is the President of the Memphis-Shelby County Airport Authority, the within named Lessor, and that he as such President, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the Authority by himself as such President. MY COMMISSION EXPIRES April 30, 1996 /s/ PAT STANFILL - ------------------------------------ --------------------------------- Notary Public (seal) STATE OF TENNESSEE ) COUNTY OF SHELBY ) On this 5th day of February, 1996, before me appeared David M. Hurtado, to me personally known, who, being by me duly sworn (or affirmed), did say that he is a Managing Director of Federal Express Corporation, the within named Lessee, and that he as such Mng. Director, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the Corporation by himself as such Mng. Director. MY COMMISSION EXPIRES 10-1-96 /s/ SANDRA C. WAITS - ------------------------------- ------------------------------ Notary Public (seal) 10 FEDERAL EXPRESS LEASED PARCELS SUMMARY
PARCEL EFFECTIVE LEASE ACRES SQUARE FEET AGREEMENT DATE - ------------ ------- ----------- -------------- --------- BASE-LEASE ----------- Revised 9 128.469 Consolidated & 08/01/79 Restated 10 1.612 70,200 Consolidated & 08/01/79 Restated 11 1.044 45,359 Consolidated & 08/01/79 Restated PREVIOUS SUPPLEMENTS 12 2.707 117,915 First 04/01/81 Supplemental 13 6.860 298,830 Second 01/01/82 Supplemental 14 14.586 635,377 Fourth 07/01/83 Supplemental 15 12.689 552,723 Fourth 07/01/83 Supplemental Rev 16 18.281 (19.685) 796,312 Fifth 02/01/84 Supplemental Rev 17 119.616(124.992) 5,210,477 Sixth 04/01/84 Supplemental 18 2.717 118,353 Sixth 04/01/84 Supplemental 19 41.606 1,812,352 Seventh 06/01/84 Supplemental 25 0.435 18,933 Eighth 07/01/88 Supplemental 20 11.275 491,127 Ninth 06/01/89 Supplemental 27 11.192 487,512 Tenth 10/01/91 Supplemental 32 (removed) 22.972 1,000,681 Twelfth 07/01/93 Supplemental 27 A(West) 4.058 176,777 Eleventh 07/01/94 Supplemental 27 B(West) 5.706 248,533 Eleventh 07/01/94 Supplemental
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PARCEL EFFECTIVE LEASE ACRES SQUARE FEET AGREEMENT DATE - -------------------- ----- ----------- ------------ --------- Southwest Ramp 2.350 102,366 Eleventh 07/01/94 Supplemental 33 8.998 391,942 Thirteenth 06/01/95 Supplemental 36 3.050 132,837 Thirteenth 06/01/95 Supplemental Hangar 8 (removed) 36,946,33 Thirteenth 06/01/95 Supplemental THIS SUPPLEMENT --------------- 34 9.951 433,461 Fourteenth 01/01/96 Supplemental OPTIONS ------- 21 19.134 833,476 Option, Expires 5/31/99 22 3.521 153,394 Option, Expires 5/31/99 ASSIGNMENTS ----------- 23 5.923 258,008 Graber Assignment, Expires 12/31/2000 Invoice FEC Next Increase 1/1/2001 24 9.964 434,030 Southwide Assignment Expires 5/14/2013 Invoice FEC Next Increase 5/15/98 26 9.532 415,213 BICO Assignment, Expires 7/31/2021 Invoice FEC Next Increase 8/01/96 28 10.68 465,221 Equitable Life Assignment Expires 5/14/2013 Invoice FEC Next Increase 5/15/98
12 RENTAL - FEDERAL EXPRESS Effective January 1, 1996
Annual Category Number of Rental Rate Annual of Space Square Feet Per Sq. Ft. Rental - -------------------- ------------- ----------- ------ Bldg. T-376 1,240 1.221 $ 1,514.04 Unimproved Ground 5,452,282 0.098 534,323.64 Improved Apron 2,395,802 0.122 292,287.84 Hangar Property 72,092.67 0.903 65,099.68 Hangar Office 28,000 1.465 41,020.00 International Park 8,721,224 0.171 1,491,329.30 ------------- ------ ------------- 16,670,640.67 $.1422 $2,425,574.50
BREAKDOWN OF SPACE
Sq. Ft. Sq. Ft. ------- ------- Bldg. T-376 Parcel 4 1,240 - ---------------- --------- 1,240 Unimproved Ground Parcel 1 130,900 Parcel 2 50,000 Parcel 3 192,400 Parcel 4 32,540 Parcel 6 89,700 Parcel 9 1,167,337 Parcel 19 1,812,362 Parcel 20 491,127 Parcel 27A 176,777 Parcel 27B 248,533 Southwest Ramp 102,366 Parcel 33 391,942 Parcel 36 132,837 Parcel 34 433,461 --------- 5,452,282 Improved Apron Parcel 1 850,250 Parcel 2 226,900 Parcel 7 577,540 Parcel 9 253,600 Parcel 27 487,512 --------- 2,395,802
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Sq. Ft. Sq. Ft. ------- ------- Hangar Property Parcel 1 44,336 Parcel 2 27,756.67 --------- 72,092.67 Hangar Office Parcel 1 22,400 Parcel 2 5,600 --------- 28,000 International Park Parcel 5 24,000 Parcel 8 247,254 Parcel 9 1,586,172 Parcel 10 70,200 Parcel 11 45,359 Parcel 12 117,915 Parcel 13 298,830 Parcel 14 556,334 Parcel 15 552,723 Parcel 16 796,312 Parcel 17 4,288,839 Parcel 18 18,353 Parcel 25 18,933 --------- 8,721,224 --------- TOTAL: 16,670,640.67
34638 14 EX-10.66 7 INDENTURE DATED APRIL 1, 1996 Exhibit 10.66 EXECUTION COPY TRUST INDENTURE BETWEEN ALLIANCEAIRPORT AUTHORITY, INC. AND THE FIRST NATIONAL BANK OF CHICAGO Dated as of April 1, 1996 ------------ ALLIANCEAIRPORT AUTHORITY, INC. SPECIAL FACILITIES REVENUE BONDS, SERIES 1996 (FEDERAL EXPRESS CORPORATION PROJECT) ------------ TRUST INDENTURE TABLE OF CONTENTS (This Table of Contents appears here for convenience only and shall not be considered part of the Indenture.)
PAGE ---- Parties 1 Recitals 1 Granting Clause 2 ARTICLE I. Acceptance of Trust; Instruments of Further Assurance; Recording (A) Acceptance of Trust 2 (B) Instruments of Further Assurance 2 (C) Protection of Lien 2 (D) Continuation Statements 2 (E) Assignment of Special Facilities Rentals 3 ARTICLE II. The Bonds (A) Designation, Initial Date, Denominations, Numbers and Maturities of Bonds 3 (B) DTC Book-Entry 3 (C) Interest 4 (D) Redemption 4 (E) Characteristics of the Bonds 8 (F) Form of Bonds 10 (G) Damaged, Mutilated, Lost, Stolen or Destroyed Bonds 10 (H) Effect of Exchange or Transfer 11 (I) Covenants Regarding Tax Exemption 11
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ARTICLE III. Establishment of Construction Fund, Debt Service Fund and Special Rebate Fund (A) Proceeds from Delivery of the Bonds 11 (B) Construction Fund 11 (C) Payments from Special Facilities Construction Allowance Account 11 (D) Surplus Construction Funds 12 (E) Debt Service Fund 13 (F) Special Rebate Fund 14 (G) Net Proceeds Account 15 (H) Investments 15 (I) Security for Funds 16 ARTICLE IV. Accounts and Records (A) Separate Records 16 (B) Report of Trustee 16 (C) Inspection 17 (D) Registration Books 17 ARTICLE V. Enforcement of Rights in Case of Default (A) Trustee is Agent 17 (B) Restriction on Bondholder's Action 17 (C) Events of Default 17 (D) Acceleration 18 (E) Action by Trustee 18 (F) Remedies Nonexclusive 18 (G) Trustee's Discretion 18 (H) Disposition of Money 18 (I) Intervention by Trustee 19 (J) Possession of Bonds Unnecessary 19 (K) Bondholder's Directions 19 (L) Trustee's Notice of Default 19 (M) Bonds Owned by Authority or Company 19 (N) Trustee's Standard of Conduct with Respect to
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Event of Default 20 (O) Bondholder Remedy - Ongoing Disclosure Under Rule 15c2-12 20 ARTICLE VI. Concerning the Trustee (A) Negligence or Misconduct 20 (B) Accountability for Funds 21 (C) Reliance on Communications 21 (D) Proof of Facts 21 (E) Limited Responsibilities 21 (F) Performance through Attorneys, Accountants, Agents, Receivers or Employees 21 (G) Trustee as Bondholder 22 (H) Execution of Documents 22 (I) Fees 22 (J) Recitals 22 (K) Responsibility of Trustee Generally 22 (L) Additional Rights of Trustee 22 ARTICLE VII. Successor Trustee (A) Resignation and Removal of Trustee 23 (B) Appointment of Successor 23 (C) Qualification of Successor 24 (D) Merger or Consolidation of Trustee 24 ARTICLE VIII.Release of Indenture (A) Satisfaction of Indebtedness and Release of Indenture 24 (B) Payment, Advance Funding and Defeasance 25 (C) Reinvestment 25 (D) Use of Moneys and Government Obligations Set Aside 26 (E) No Amendment 26 (F) Additional Conditions to Defeasance and Reinvestment 26 ARTICLE IX. Amendments (A) Amendments without Bondholder Consent 26 (B) Consent of Majority of Bondholders 27
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(C) Consent of All Bondholders 27 (D) Effective Date of Amendment 27 (E) Opinion of Bond Counsel 28 ARTICLE X. Miscellaneous Provisions (A) Proof of Execution 28 (B) Proof of Ownership 28 (C) Action Binding on Successor 28 (D) Nonpresentment and Unclaimed Funds 28 (E) Destruction of Bonds 29 (F) No Third-Party Beneficiaries 29 (G) Severability 29 (H) Governing Law 29 (I) Addresses 29 (J) Notice to Department of Commerce 29 (K) Counterparts 29 (L) Captions 29 (M) Company Direction 30 SIGNATURES Exhibit A Form of Bond
v TRUST INDENTURE THE STATE OF TEXAS : ALLIANCEAIRPORT AUTHORITY, INC. : THIS TRUST INDENTURE (hereinafter called the "Indenture"), dated as of April 1, 1996, executed by and between ALLIANCEAIRPORT AUTHORITY, INC. (hereinafter called the "Authority"), a nonstock, nonprofit industrial development corporation, created to act on behalf of the CITY OF FORT WORTH, TEXAS, a home- rule city and a political subdivision of the State of Texas (the "City"), pursuant to the Constitution and laws of the State of Texas, including particularly Article 5190.6, V.A.T.C.S., as amended (hereinafter called the "Act"), and THE FIRST NATIONAL BANK OF CHICAGO, a national banking association organized and existing under the laws of the United States of America, and having its Designated Trust Office in Chicago, Illinois, as Trustee (hereinafter called the "Trustee"); WITNESSETH THAT WHEREAS, a Land and Special Facilities Lease Agreement dated as of April 1, 1996 (hereinafter called the "Facilities Agreement"), has been duly executed between the Authority and FEDERAL EXPRESS CORPORATION, a corporation organized and existing under the laws of the State of Delaware, and duly qualified to do business under the laws of the state of texas (hereinafter called the "Company"); WHEREAS, the capitalized terms of this Indenture shall have the same meanings, and shall be defined, as set forth in the Facilities Agreement; WHEREAS, the Board of Directors of the Authority duly adopted a "RESOLUTION AUTHORIZING THE ISSUANCE OF ALLIANCEAIRPORT AUTHORITY, INC. SPECIAL FACILITIES REVENUE BONDS, SERIES 1996 (FEDERAL EXPRESS CORPORATION PROJECT), THE EXECUTION OF A LAND AND SPECIAL FACILITIES LEASE AGREEMENT, A TRUST INDENTURE AND AN UNDERWRITING AGREEMENT, AND THE USE OF A PRELIMINARY OFFICIAL STATEMENT AND AN OFFICIAL STATEMENT" (hereinafter called the "Bond Resolution"); WHEREAS, the Bond Resolution authorized the issuance of ALLIANCEAIRPORT AUTHORITY, INC. SPECIAL FACILITIES REVENUE BONDS, SERIES 1996 (FEDERAL EXPRESS CORPORATION PROJECT) IN THE AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $250,000,000 (the "Bonds"); WHEREAS, a certified copy of the Bond Resolution has been duly filed with the Trustee; WHEREAS, pursuant to authority granted in the Bond Resolution, the Bonds were sold to Goldman, Sachs & Co., on its behalf and as representative for Morgan Keegan & Company, Inc., Morgan Stanley & Co. Inc., Pryor, McClendon, Counts & Co., Inc., BA Securities, Inc., and J.P. Morgan Securities Inc. (collectively, the "Underwriters"), in accordance with the terms and conditions of an Underwriting Agreement by and between the Authority and the Underwriters (the "Underwriting Agreement"), a Letter of Representations executed by the Company pursuant to the terms and conditions of the Underwriting Agreement and the Bond Resolution; WHEREAS, the Bonds, and the interest thereon, are and shall be payable from and secured by a first lien on and pledge of the payments to be made by the Company pursuant to the Facilities Agreement, designated as the "Special Facilities Rentals", which Special Facilities Rentals shall be in amounts sufficient to pay and redeem, and provide for the payment of the principal of, premium, if any, and interest on the Bonds, when due; WHEREAS, to induce the Authority to issue the Bonds, and the Underwriters to purchase the Bonds, the Company and the Trustee have entered into a Guaranty of even date herewith (the "Guaranty") pursuant to which the Company unconditionally guarantees the payment of the principal of, premium, if any, and interest on the Bonds when due; and WHEREAS, the Trustee has accepted the trusts created by this Indenture, and in evidence thereof has joined in the execution hereof. NOW, THEREFORE, THIS TRUST INDENTURE WITNESSETH: That the Authority, in consideration of the premises and the acceptance by the Trustee of the trusts hereby created, and of the purchase and acceptance of the Bonds by the registered owners thereof, and for other good and valuable consideration, the receipt of which is hereby acknowledged, and for the purpose of securing the payment of the principal of, premium, if any, and interest on the Bonds at any time issued and outstanding, has granted, assigned, transferred, pledged, set over, and confirmed, and by these presents does grant, assign, transfer, pledge, set over, and confirm unto the Trustee, and to its successor or successors in the said trust, and to its or their assigns, all and singular, a first lien on and pledge of (i) the interest of the Authority in the Construction Fund and the Debt Service Fund created herein, and (ii) all of its right, title and interest in and to the Facilities Agreement relating to the Bonds (other than the Authority's rights to fees, expenses and indemnification pursuant to the terms of the Facilities Agreement), including specifically all of its right, title and interest in and to the Special Facilities Rentals under the Facilities Agreement (the "Trust Estate"), and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes hereinafter expressed. The Authority and the Trustee have agreed, and they hereby agree and covenant with the respective registered owners from time to time of the Bonds then Outstanding, as follows, to-wit: ARTICLE I ACCEPTANCE OF TRUST; INSTRUMENTS OF FURTHER ASSURANCE; RECORDING (A) Acceptance of Trust. The Trustee hereby accepts the trusts, duties, obligations, and requirements imposed on it by this Indenture, and agrees, subject to the terms and provisions of Article VI hereof, to carry out and perform, punctually and effectively, such trusts, duties, obligations, and requirements, including the duties as paying agent and as bond registrar for the Bonds, for the benefit of the Authority and the Bondholders. (B) Instruments of Further Assurance. The Authority covenants that it will do, execute, acknowledge, and deliver, or cause to be done, executed, acknowledged, and delivered, such indenture or indentures supplemental hereto and such further acts, instruments, and transfers as the Trustee may reasonably require for the better assigning, pledging, and confirming unto the Trustee the trusts, duties, obligations, and requirements imposed on it by this Indenture and the revenues pledged hereunder. (C) Protection of Lien. The Authority covenants that (1) upon the execution and delivery of this Indenture and thereafter, from time to time, it shall cause the Facilities Agreement and this Indenture, and each amendment and supplement to each of such instruments (or a memorandum with respect to such instrument, amendment, or supplement) to be maintained for inspection, filed, registered, and recorded and to be maintained for inspection, refiled, reregistered, and rerecorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect the lien of this Indenture and to publish notice of and to protect the validity of the Facilities Agreement and of the rights and security of the Bondholders and the rights of the Trustee hereunder and thereunder and (2) it shall perform or cause to be performed from time to time any other act as required by law, and it will execute or cause to be executed any and all instruments of further assurance (including financing statements with respect to any of such instruments) that may be necessary for such publication and protection. (D) Continuation Statements. The Trustee agrees that, at the expense of the Company, it will execute and file all continuation statements at such times and in such places as may be prescribed by the Texas Uniform Commercial Code and any other instruments necessary to maintain, protect, or preserve the interests of the Authority assigned to the Trustee under this Indenture. (E) Assignment of Special Facilities Rentals. The Trustee hereby acknowledges that all of the rights, title and interests of the Authority in and to the Special Facilities Rentals have been assigned to the Trustee, and the Authority hereby acknowledges that in connection with the performance of its duties, obligations, and requirements imposed on it by this Indenture, the Trustee may exercise any rights or remedies available to the Trustee under the terms of the Facilities Agreement or the Guaranty. ARTICLE II THE BONDS (A) Designation, Initial Date, Denominations, Numbers, and Maturities of Bonds. (1) Initially there shall be issued, sold and delivered hereunder fully registered Bonds, known as "ALLIANCEAIRPORT AUTHORITY, INC. SPECIAL FACILITIES REVENUE BONDS, SERIES 1996 (FEDERAL EXPRESS CORPORATION PROJECT)", in the aggregate principal amount of $249,540,000, without interest coupons, dated April 1, 1996, in the denomination of $5,000 or any integral multiple thereof, numbered consecutively from R-1 upward, and said Bonds shall mature and be payable on April 1, 2021. (2) The Bonds shall be executed on behalf of the Authority with the manual or facsimile signature of the President or Vice President and the Secretary of the Board of Directors of the Authority and shall have impressed or imprinted thereon the official seal of the Authority or a facsimile thereof. All authorized facsimile signatures shall have the same force and effect as if manually signed. In case any official whose signature or a facsimile of whose signature shall appear on the Bonds shall cease to be such official before the delivery of such Bonds, such signature or such facsimile shall nevertheless be valid and sufficient for all purposes, the same as if such official had remained in office until delivery. The Bonds may be signed on behalf of the Authority by such persons who, at the time of the execution of such Bonds, are duly authorized or hold the appropriate office of the Authority although on the date of the authentication and delivery of the Bonds such persons were not so authorized or did not hold such offices. (3) The obligation to pay the principal of, premium, if any, and interest on the Bonds is a special obligation of the Authority, and is payable solely from the Special Facilities Rentals to be made by the Company pursuant to the terms of the Facilities Agreement. No other public entity, including the State of Texas, any other political subdivisions thereof, or any other public body, is obligated, directly, indirectly, contingently, or in any other manner to pay such principal, premium, if any, or interest from any source whatsoever. The Bonds shall not be considered general obligations of the Board of Directors of the Authority (either individually or collectively), the City, the State of Texas, or any other political subdivision thereto. The registered owners of the Bonds shall never have the right to demand payment of the Bonds out of any funds raised or to be raised by taxation, or from any other funds except the sources described herein. No property shall be encumbered by any lien or security interest for the benefit of the registered owners of the Bonds. (4) Upon the execution and delivery of this Indenture, the Authority shall execute and deliver to the Trustee the Bonds and the Trustee shall deliver the Bonds to the Underwriters as directed by the Authority. Prior to the delivery of any of the Bonds to the Underwriters there shall be filed with the Trustee an opinion of Bond Counsel to the effect that interest on the Bonds is excludable from the gross income of the owners thereof for federal income tax purposes (other than any owner who is a "substantial user" or "related person" of such substantial user, within the meaning of the Code), other than any interest which may be includable as a preference item or an adjustment item in computing any minimum tax. Delivery of the Bonds shall be done in a manner consistent with the provisions of Paragraph (B) below. (B) DTC Book-Entry. The Bonds shall be initially issued in the name of Cede & Co., as nominee of DTC, as registered owner of the Bonds, and held in the custody of DTC. Two certificates will be issued and delivered to DTC for the Bonds. One of the certificates will be issued in the principal amount of $200,000,000; the other certificate will be issued in the principal amount equal to the difference between $249,540,000 and $200,000,000. Beneficial owners of Bonds will not receive physical delivery of Bond certificates except as provided hereinafter. For so long as DTC shall continue to serve as securities depository for the Bonds as provided herein, all transfers of beneficial ownership interests will be made by book-entry only, and no investor or other party purchasing, selling or otherwise transferring beneficial ownership of Bonds is to receive, hold or deliver any Bond certificate, and Cede & Co. shall be deemed the registered owner of the Bonds for all purposes under this Indenture. The Authority and the Trustee may treat DTC (or its nominee) as the sole and exclusive owner of the Bonds registered in its name for the purpose of payment of the principal of or interest or premium, if any, on the Bonds, giving any notice permitted or required to be given to Bondholders hereunder, registering the transfer of Bonds, obtaining any consent or other action to be taken by Bondholders and for all other purposes whatsoever, and shall not be affected by any notice to the contrary. The Authority and the Trustee shall not have any responsibility or obligation to any Direct Participant, Indirect Participant, any person claiming a beneficial ownership interest in the Bonds under or through DTC or any Direct Participant, Indirect Participant, or any other person which is not shown on the Registration Books of the Authority (kept by the Trustee as Registrar) as being a Bondholder, with respect to: the accuracy of any records maintained by DTC or any Direct Participant or Indirect Participant; the payment by DTC or any Direct Participant or Indirect Participant of any amount in respect of the principal of or interest or premium, if any, on the Bonds; any notice which is permitted or required to be given to Bondholders thereunder or under the conditions to transfers or exchanges adopted by the Authority or the Trustee; or any consent given or other action taken by DTC as a Bondholder. Replacement Bonds may be issued directly to beneficial owners of Bonds other than DTC, or its nominee, but only in the event that (i) DTC determines, after reasonable notice given to the Authority, the Company and the Trustee, not to continue to act as securities depository for the Bonds; or (ii) the Authority (at the request of the Company) has advised DTC of the Company's determination (which determination is conclusive as to DTC and beneficial owners of the Bonds) that DTC is incapable of discharging its duties as securities depository for the Bonds; or (iii) the Company has determined (which determination is conclusive as to DTC and the beneficial owners of the Bonds) that it is in the best interest of the Company or the beneficial owners of the Bonds to discontinue such book- entry only system of transfer. Upon occurrence of any of the events specified in clauses (i) or (ii), the Company may attempt to locate another qualified securities depository. If the Company is unable to locate another qualified securities depository to replace DTC or determines not to seek such a replacement, or upon the occurrence of the event specified in clause (iii) above, the Company shall notify the Authority, the Trustee and the beneficial owners of Bonds by mailing an appropriate notice to DTC, and the Trustee shall cause to be authenticated and delivered replacement Bonds, in certificate form, to the Direct Participants as shown on the records of DTC and provided to the Trustee. Notwithstanding the foregoing, neither the Company nor the Authority undertakes any obligation to make any investigation to determine the occurrence of any events that would permit the Company to make any such determination. Whenever, so long as the Bonds are outstanding, the beneficial ownership thereof is determined by a book entry at DTC or another qualified securities depository, the requirements in this Indenture of holding, delivering or transferring Bonds shall be deemed modified to require the appropriate Person to meet the requirements of DTC or another qualified securities depository as to registering or transferring the book entry to produce the same effect. As used herein, the term "Direct Participants" shall mean those securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations which deposit securities with DTC; and the term "Indirect Participants" shall mean those securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship, either directly or indirectly, with a Direct Participant. If at any time, DTC ceases to hold the Bonds, all references herein to DTC shall be of no further force or effect. (C) Interest. The Bonds shall bear interest from their date, as described in Paragraph (A) above, to their respective date or dates of maturity or redemption prior to maturity at a fixed rate of 6.375% per annum. Interest on the unpaid principal amount of the Bonds will be payable on October 1, 1996 and on each April 1 and October 1 thereafter until maturity or redemption prior to maturity. (D) Redemption. The Bonds shall be subject to optional and mandatory redemption in the manner described below. (1) Optional Redemption. The Bonds are subject to optional redemption by the Authority, at the direction of the Company, on and after April 1, 2006, at any time and from time to time, in whole or in part, upon written notice of the exercise of the option to redeem delivered to the Authority and the Trustee by the Company, at the redemption price (expressed as a percentage of principal amount) applicable to such redemption date as set forth in the table below plus accrued interest to the date fixed for redemption:
Redemption Period (all dates inclusive) Redemption Price (%) --------------------- -------------------- April 1, 2006 to March 31, 2007 102 April 1, 2007 to March 31, 2008 101 April 1, 2008 and thereafter 100
(2) Extraordinary Optional Redemption. The Bonds are subject to redemption by the Authority, at the direction of the Company, at any time and from time to time, in whole or in part as described below, at a redemption price equal to 100% of the principal amount thereof, without premium, plus accrued interest thereon to the date fixed for redemption, upon the occurrence of any of the following events: (a) the Company shall have determined, as evidenced by a resolution adopted by the Company's board of directors, that the continued operation of the Special Facilities is impractical, uneconomical or undesirable for any reason, including, without limitation, the imposition upon the Company with respect to the Special Facilities or the operation thereof of unreasonable burdens or excessive liabilities, which shall be deemed to include, without limitation, the imposition or substantial increase of ad valorem property taxes or taxes on the leasing or use of the Special Facilities or on amounts payable with respect thereto; or (b) all or substantially all of the Special Facilities shall have been damaged, destroyed, condemned or taken by eminent domain; or (c) the construction or operation of the Special Facilities shall have been enjoined or prevented or shall have otherwise been prohibited by, or shall conflict with, any order, decree, rule or regulation of any court or of any federal, state or local regulatory body, administrative agency or other governmental body. To exercise any such option the Authority, at the direction of the Company, shall give written notice to the Trustee, which notice shall specify a redemption date, which date may not be more than 120 days nor less than 45 days after said notice is given, and shall further specify that, as determined by the Company, one or more of such events has occurred or one or more of such conditions is continuing, and such determination shall be conclusive. (3) Extraordinary Mandatory Redemption. The Bonds shall be redeemed by the Authority in whole at a redemption price equal to 100% of the principal amount thereof, without premium, plus accrued interest to the redemption date, within 90 days following receipt by the Trustee of written notice from a current or former registered owner thereof or the Company of (a) the issuance of a published or private ruling or a technical advice memorandum by the Internal Revenue Service in which the Company has participated or has been given the opportunity to participate, and which ruling or memorandum the Company, in its discretion, does not contest or from which no further right of judicial review or appeal exists, or (b) a final determination from which no further right of appeal exists of any court of competent jurisdiction in the United States in a proceeding in which the Company has participated or has been a party, or has been given the opportunity to participate or be a party (either such event being a "Determination of Taxability"), in either case, to the effect that, as a result of a failure to observe any covenant or agreement in the Facilities Agreement or the inaccuracy of any representation or warranty therein, the interest payable on the Bonds is included in the gross income of the holders thereof for federal income tax purposes, other than a person who is a "substantial user" or a "related person" of such substantial user within the meaning of the Code; provided, however, that no such Determination of Taxability shall be considered to exist unless (i) the registered owner or former registered owner of the Bond involved in such proceeding or action (a) gives the Company and the Trustee prompt notice of the commencement thereof and (b) (if the Company agrees to pay all expenses in connection therewith) offers the Company the opportunity to control unconditionally the defense thereof and (ii) either (a) the Company does not agree, within 30 days of receipt of such offer, to pay such expenses and liabilities and to control such defense or (b) the Company shall exhaust or choose not to exhaust all available proceedings for the contest, review, appeal or rehearing of such decree, judgment or action which the Company determines to be appropriate. No Determination of Taxability described above will result from the inclusion of interest on any Bond in the computation of minimum or indirect taxes. All of the Bonds shall be redeemed upon a Determination of Taxability as described above, unless, if in the opinion of Bond Counsel, or such other nationally recognized bond counsel as may be mutually acceptable to the Authority and the Company, a copy of which shall be delivered to the Trustee, redemption of a portion of the Bonds, the amount of such portion being specified in said opinion, would have the result that interest payable on the remaining Bonds Outstanding after such redemption would not be so included in any such gross income, in which case only such portion shall be redeemed. (4) [Intentionally Omitted]. ------------------------- (5) Redemption Notice. (a) At least thirty (30) days but not more than sixty (60) days before the redemption date of any Bonds, whether such redemption be in whole or in part, the Trustee on behalf of the Authority shall cause a notice of any such redemption signed by the Trustee to be mailed, postage prepaid, to all Bondholders owning Bonds to be redeemed in whole or in part. Such notice shall also be sent by first-class mail, postage prepaid, by facsimile transmission, or by overnight delivery service, at least thirty-five (35) days prior to redemption to registered securities depositories and two or more nationally recognized municipal bond services designated by the Authority to the Trustee. Such notice shall be mailed a second (2nd) time to any Bondholder owning Bonds that have been called for redemption if such Bondholder has not presented such Bonds for payment of the redemption price within sixty (60) days after the redemption date. Failure to mail any such notice to any Bondholder or aforementioned depositories and municipal bond services, or any defect in any notice so mailed shall not affect the validity of the proceedings for the redemption of the Bonds of any other Bondholders. Each such notice shall set forth: the CUSIP numbers and bond certificate numbers of the Bonds to be redeemed, the interest rate of the Bonds to be redeemed, the date and the date of issuance of the Bonds to be redeemed, the date fixed for redemption, the redemption price to be paid, the maturity of the Bonds to be redeemed and, in the case of Bonds to be redeemed in part only, the portion of the principal amount thereof to be redeemed and, in the case that less than the entire principal amount of any one bond certificate is redeemed, the portion of the principal amount thereof to be redeemed, the address and phone number of the Trustee, the date of the redemption notice, the date of publication of the notice referred to in subparagraph (b) (iii) hereof, that on the redemption date the Bonds called for redemption will be payable at the Designated Trust Office of the Trustee, that from that date interest will cease to accrue and be payable and that no representation is made as to the accuracy or correctness of the CUSIP numbers printed therein or on the Bonds. If any Bond is to be redeemed in part only, the notice of redemption shall state also that on or after the redemption date, upon surrender of such Bond, a new Bond in principal amount equal to the unredeemed portion of such Bond will be issued. (b) The Trustee shall also take the following actions with respect to such notice of redemption: (i) At least two (2) Business Days before the date of publication required by subparagraph (b) (iii) hereof, such notice shall be given by (A) registered or certified mail, postage prepaid, (B) telephonically confirmed facsimile transmission or (C) overnight delivery service to each of the following securities depositories at the address and transmission numbers given, or such other address or transmission number as may have been delivered in writing to the Trustee for such purpose not later than the close of business on the day before such notice is given: 1. The Depository Trust Company 711 Stewart Avenue Garden City, New York 11530 Facsimile transmission: (516) 227-4039 (516) 227-4190 2. Philadelphia Depository Trust Company Reorganization Division 1900 Market Street Philadelphia, Pennsylvania 19103 Facsimile transmission: (215) 496-5058 (ii) At least two (2) Business Days before the date of publication required by subparagraph (b) (iii) hereof, such notice shall be given by (A) registered or certified mail, postage prepaid, (B) facsimile transmission or (C) overnight delivery service to at least two (2) of the following services selected by the Trustee: 1. Financial Information, Inc's Daily Called Bond Service; 2. Kenny Information Service's Called Bond Service; 3. Moody's Municipal and Government Called Bond Record; or 4. Standard & Poor's Corporation Called Bond Record. (iii) At least thirty (30) days prior to the redemption date, such notice shall be published one (1) time in The Bond Buyer or, if such publication is no longer in existence, in some other financial newspaper or journal which regularly carries notices of redemption of other obligations similar to the Bonds. (c) Neither failure to receive any notice nor any defect in such notice so given shall affect the sufficiency of the proceedings for the redemption of such Bonds. Each check or other transfer of funds issued by the Trustee for the purpose of redeeming Bonds shall bear, to the extent practicable, the CUSIP number identifying the Bonds being redeemed with the proceeds of such check or other transfer. (d) Notice of redemption of Bonds shall be given by the Trustee, at the expense of the Company. (e) Failure by the Trustee to give notice pursuant to subparagraph (b) (i) or (b) (ii) hereof to any one (1) or more of the securities depositories or information services named therein shall not affect the sufficiency of the proceedings for redemption. Failure of the Trustee to give notice to a Bondholder or any defect in such notice shall not affect the validity of the proceedings for redemption of any other Bonds. (f) By the date fixed for any such redemption, due provision shall be made with the Trustee for the payment of the principal amount of the Bonds which are to be so redeemed, accrued interest thereon to the date fixed for redemption, and any premium. If notice of redemption is given to the registered owners described in subparagraph (a) above as provided herein and if sufficient funds are on deposit with the Trustee to provide for the payment of the principal of, premium, if any, and interest on the Bonds to be so redeemed, the Bonds which are to be redeemed thereby automatically shall be deemed to have been redeemed prior to their scheduled maturity, and they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being Outstanding except for the right of the registered owner to receive the principal amount of the Bonds which are to be so redeemed, accrued interest thereon to the date fixed for redemption, and any required premium from the Trustee out of the funds provided for such payment. If any Bond called for redemption shall not be paid upon surrender thereof for redemption, as a result of the Trustee not having received funds sufficient to pay the redemption price of the Bonds, such Bond shall continue to bear interest until paid and, to the extent permitted by law, interest on any overdue payment of principal of, premium, if any, or interest on such Bond shall be paid at the rate borne by such Bond. If a portion of any Bond shall be redeemed, a substitute Bond or Bonds having the same maturity date, bearing interest at the same rate, in any denomination or denominations in any integral multiple of $5,000, at the written request of the registered owner, and in aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon the surrender thereof for cancellation, at the expense of the Company, all as provided below. (6) Funds Available for Redemption. With respect to any optional redemption of the Bonds, as described above, unless moneys sufficient to pay the principal of and premium, if any, and interest on the Bonds to be redeemed shall have been received by the Trustee prior to the giving of such notice of redemption, such notice shall state that said redemption shall be conditional upon the receipt of such moneys by the Trustee on or prior to the date fixed for such redemption. If such moneys are not received, such notice shall be of no force and effect, the Authority shall not redeem such Bonds and the Trustee shall give notice, in the manner in which the notice of redemption was given, that such moneys were not so received and that such Bonds shall not be so redeemed. (7) Partial Redemption. If less than all of the Bonds are to be called for redemption under any redemption provision set forth herein permitting such partial redemption, the particular Bonds to be redeemed shall be selected by the Trustee by lot or such other customary method chosen by the Trustee, in the principal amounts (in integral multiples of $5,000) designated to the Trustee by the Company on behalf of the Authority. The foregoing notwithstanding, during any period in which ownership of the Bonds is determined only by a book-entry at a securities depository for the Bonds, the particular Bonds to be so redeemed shall be selected in accordance with the arrangements between the Authority and the securities depository. (E) Characteristics of the Bonds. (1) Registration and Transfer. The Authority shall keep or cause the Trustee, acting as registrar, to keep and maintain a register of the registered owners of the Bonds (the "Registration Books"), and the Authority hereby appoints the Trustee as its registrar and transfer agent to keep such books or records and make such transfers and registrations under such reasonable regulations as the Authority and Trustee may prescribe; and the Trustee shall make such transfers and registrations as herein provided. The Trustee agrees to cause to be maintained in Texas a current copy of the Registration Books. The Trustee shall obtain and record in the Registration Books the address of the registered owner of each Bond to which payments with respect to the Bonds shall be mailed, as herein provided; but it shall be the duty of each registered owner to notify the Trustee in writing of the address to which payments shall be mailed, and such interest payments shall be mailed to such address which has been given to the Trustee by each such registered owner. The Authority, the Company and the registered owners of not less than 25% in aggregate principal amount of Bonds at any time Outstanding shall have the right, upon reasonable notice and subject to reasonable regulations established in writing by the Trustee, to inspect the Registration Books during regular business hours of the Trustee, but otherwise the Trustee shall keep the Registration Books confidential and, unless otherwise required by law, shall not permit their inspection by any other entity. Registration of each Bond may be transferred in the Registration Books only upon presentation and surrender of such Bond to the Designated Trust Office of the Trustee for transfer of registration and cancellation, together with proper written instruments of assignment, in form and with a guarantee of signatures satisfactory to the Trustee, evidencing the assignment of the Bond, or any portion thereof in any integral multiple of $5,000, to the new registered owner(s) thereof. Such assignment may be presumptively evidenced by the due execution of the form of assignment to be printed or endorsed on each Bond which shall be executed by the registered owner or its duly authorized attorney or representative to evidence an assignment thereof. Upon the assignment and transfer of any Bond or any portion thereof, a new substitute Bond or Bonds shall be issued in conversion and exchange therefor in the manner herein provided. Each Bond issued and delivered in conversion of and exchange for any Bond or portion thereof shall be in any denomination or denominations of any integral multiple of $5,000 (subject to the requirement hereinafter stated that each substitute Bond shall have a single stated principal maturity date), shall be in the form prescribed in the FORM OF BOND attached hereto as Exhibit A, and shall have the characteristics, and may be assigned, transferred, and converted as provided in this Indenture. Each Bond issued in exchange therefor shall have a single stated principal maturity date corresponding to the maturity date of the principal of the Bond for which the substitute Bond is being exchanged; and each such Bond shall bear interest at the single rate applicable to and borne by the Bond for which it is being exchanged. Upon surrender of any Bonds or any portion or portions thereof for transfer of registration, an authorized representative of the Trustee shall record such transfer in the Registration Books, and shall deliver a new fully registered substitute Bond or Bonds, having the characteristics herein described, payable to such new registered owner(s) (and to the previous registered owner in case only a portion of a Bond is being assigned and transferred), all in conversion of and exchange for said assigned Bond or Bonds or any portion or portions thereof, in the same form and manner, and with the same effect, as provided in subparagraph (4) below, for the conversion and exchange of Bonds by any registered owner of a Bond. The Company shall pay the Trustee's standard or customary fees and charges for making such transfer and delivery of a substitute Bond or Bonds, but the Person requesting such transfer shall pay any taxes or other governmental charges required to be paid with respect thereto. The Trustee shall not be required to make transfers of registration of any Bond or any portion thereof called for redemption prior to maturity, (a) within 45 days prior to its redemption date or (b) during the 15 day period preceding the mailing of notice of redemption of the Bonds of the same maturity. (2) Ownership of Bonds. The Person in whose name any Bond shall be registered in the Registration Books at any time shall be deemed and treated as the absolute owner thereof for all purposes of this Indenture, whether or not such Bond shall be overdue, and the Authority, the Company, and the Trustee shall not be affected by any notice to the contrary; and payment of, or on account of, the principal of, premium, if any, and interest on any such Bond shall be made only to such registered owner. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid. (3) Payment of Bonds and Interest. The Authority hereby further appoints the Trustee to act as the paying agent for paying the principal of, premium, if any, and interest on the Bonds, as such payments are scheduled to occur or upon the redemption of any of the Bonds, all as provided in this Indenture. The Trustee shall keep proper records of all payments made by the Company on behalf of the Authority into the Debt Service Fund created in Article III hereof, and all payments made by the Trustee with respect to the Bonds, and of all conversions and exchanges of Bonds, and all replacements of Bonds, as provided in this Indenture. Payment of principal of, premium, if any, and interest on the Bonds shall be paid by check or draft mailed to the registered owner thereof at his address as it appears on the Registration Books at the close of business on the Record Date. Upon written request of a registered owner of at least $1,000,000 in principal amount of Bonds, all payments of the principal of, premium, and interest on the Bonds shall be paid by wire transfer in immediately available funds to an account in the continental United States designated by such registered owner; provided, that no such payment shall be made by wire transfer unless the Trustee has on file such a written request executed by such registered owner. If the date payment of principal, premium, if any, or interest on the Bonds is due is not a Business Day, then such payment shall be made on the next succeeding Business Day and no additional interest shall accrue as a result thereof. The foregoing notwithstanding, for so long as the Bonds are held in the custody of DTC, the payment of the principal of, premium, if any, and interest on the Bonds shall be governed by the requirements of DTC. (4) Conversion and Exchange or Replacement; Authentication. Each Bond issued and delivered pursuant to this Indenture, to the extent of the unpaid or unredeemed principal balance or principal amount thereof, upon surrender of such Bond at the Designated Trust Office of the Trustee, together with a written request therefor duly executed by the registered owner, or their duly authorized attorneys or representatives, with guarantee of signatures satisfactory to the Trustee, may, at the option of the registered owner, be converted into and exchanged for fully registered bonds, without interest coupons, in the form prescribed in the FORM OF BOND attached hereto as Exhibit A, in the denomination of $5,000 or any integral multiple thereof, as requested in writing by such registered owner, in an aggregate principal amount equal to the unpaid or unredeemed principal balance or principal amount of any Bond or Bonds so surrendered, and payable to the appropriate registered owner. If any Bond is assigned and transferred or converted, each substitute Bond issued in exchange for such Bond or any portion thereof shall have a single stated principal maturity date corresponding to the maturity date of the principal of the Bond for which the substitute Bond is being exchanged; and each such Bond shall bear interest at the rate applicable to and borne by the Bond for which it is being exchanged. If a portion of any Bond shall be redeemed prior to its scheduled maturity, the Trustee shall issue to the registered owner a substitute Bond or Bonds having the same maturity date, bearing interest at the same rate, in the denomination or denominations of any multiple of $5,000 at the request of the registered owner, and in an aggregate principal amount equal to the unredeemed portion thereof, upon surrender thereof for cancellation. Each substitute Bond shall bear a letter and/or number to distinguish it from each other Bond. It is specifically provided that any Bond authenticated in conversion of and exchange for or replacement of another Bond on or prior to the first scheduled Record Date for the Bonds initially issued and delivered pursuant to this Indenture shall bear interest from the date of the Bonds initially issued and delivered pursuant to this Indenture, but each substitute Bond so authenticated after such first scheduled Record Date shall bear interest from the interest payment date next preceding the date on which such substitute Bond was so authenticated, unless such Bond is authenticated after any Record Date but on or before the next following interest payment date, in which case it shall bear interest from such next following interest payment date; provided, however, that if at the time of delivery of any substitute Bond the interest on the Bond for which it is being exchanged is due but has not been paid, then such Bond shall bear interest from the date to which such interest has been paid in full. Except as otherwise provided in subparagraph (5) below, on each of the Bonds initially issued and delivered hereunder and on each substitute Bond issued in conversion of and exchange for or replacement of any Bond or Bonds issued hereunder there shall be printed a Trustee's Authentication Certificate, in the form set forth in the FORM OF BOND attached hereto as Exhibit A. An authorized representative of the Trustee shall, before the delivery of any such substitute Bond, date and manually sign said Authentication Certificate, and no such substitute Bond shall be deemed to be issued or Outstanding unless said Authentication Certificate is so executed. The Trustee promptly shall cancel all Bonds surrendered for conversion and exchange or replacement. No additional ordinances, orders, or resolutions need be passed or adopted by the governing body of the Authority or any other body or person so as to accomplish the foregoing conversion and exchange or replacement of any Bond or portion thereof, and the Trustee shall provide for the preparation, execution, and delivery of the substitute Bonds. Pursuant to Vernon's Ann. Tex. Civ. St. Art. 717k-6, and particularly Section 6 thereof, the duty of conversion and exchange or replacement of Bonds as aforesaid is hereby imposed upon the Trustee, and, upon the execution of said Authentication Certificate, the converted and exchanged or replaced Bond shall be valid, incontestable, and enforceable in the same manner and with the same effect as the Bonds which initially were issued and delivered pursuant to this Indenture. (5) Initial Bond(s) Registered. Notwithstanding any other provision hereof, the Bond or Bonds initially delivered pursuant to the terms hereof shall be approved by the Attorney General of the State of Texas and thereafter registered with the Comptroller of Public Accounts of the State of Texas. If so registered by the Comptroller of Public Accounts, said Bond or Bonds need not contain the Trustee's Authentication Certificate referred to in subparagraph (4) above, and if such Authentication Certificate does appear on said Bonds, it need not be authenticated by the Trustee if the Comptroller's Registration Certificate has been executed by the Comptroller of Public Accounts of the State or the designee thereof. (F) Form of Bonds. The form of the Bonds, including the form of Trustee's Authentication Certificate, the form of Assignment and, if applicable, the form of Registration Certificate of the Comptroller of Public Accounts of the State of Texas to be attached to the Bonds initially issued and delivered pursuant to this Indenture, shall be, respectively, substantially as set forth in the FORM OF BOND attached hereto as Exhibit A. (G) Damaged, Mutilated, Lost, Stolen, or Destroyed Bonds. (1) In the event any Bond is damaged, mutilated, lost, stolen or destroyed, the Trustee shall cause to be prepared, executed and delivered a new Bond of the same principal amount, maturity and interest rate, as the damaged, mutilated, lost, stolen or destroyed Bond, in replacement for such Bond in the manner hereinafter provided. (2) Application for exchange and substitution of damaged, mutilated, lost, stolen, or destroyed Bonds shall be made to the Trustee. In every case, the applicant for a substitute Bond shall furnish to the Authority and to the Trustee such security or indemnity as may be required by them to save each of them harmless. In every case of loss, theft, or destruction of a Bond, the applicant shall also furnish to the Authority and to the Trustee evidence to their satisfaction of the loss, theft, or destruction of such Bond. In the case of damage or mutilation of a Bond, the applicant shall surrender the Bond so damaged or mutilated to the Trustee. (3) Notwithstanding the foregoing provisions of this Paragraph (G), in the event any such Bond shall have matured, and no default has occurred which is then continuing in the payment of the principal of, premium, if any, or interest on such Bond, the Authority may authorize the payment of the same (without surrender thereof except in the case of a damaged or mutilated Bond) instead of issuing a substitute Bond provided security or indemnity is furnished as above provided in this Paragraph (G). (4) Upon the issuance of any such substitute Bond, the Authority and the Trustee shall charge the registered owner of such Bond with all expenses in connection therewith. Every substitute Bond issued pursuant to the provisions of this Section by virtue of the fact that any Bond is lost, stolen, or destroyed shall constitute a contractual obligation of the Authority, whether or not the lost, stolen, or destroyed Bond shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionally with any and all other Bonds duly issued under this Indenture. (5) In accordance with Section 6 of Art. 717k-6 of Vernon's Ann. Tex. Civ. St., this Indenture shall constitute sufficient authority for the issuance of any such substitute Bond without necessity of further action by the Board of Directors of the Authority or any other body or person, and the issuance of such substitute Bonds by the Trustee is hereby authorized, notwithstanding any other provisions of this Indenture. (H) Effect of Exchange or Transfer. Each Bond delivered pursuant to any provision of this Indenture in exchange or substitution for, or upon the transfer of, another Bond shall carry all of the rights to interest accrued and unpaid and to accrue which were carried by such other Bond, and notwithstanding anything contained in this Indenture, such Bond shall be so dated or bear such notation, that neither gain nor loss in interest shall result from any such exchange, substitution, or transfer. (I) Covenants Regarding Tax Exemption. The Authority covenants to refrain from any action which would adversely affect, or to take such action reasonably available to the Authority to assure, the treatment of the Bonds as obligations described in section 103(a) of the Code, the interest on which is not includable in the "gross income" of the holder (other than the income of a "substantial user" of the Special Facilities or a "related person" to such substantial user, within the meaning of the Code) for purposes of federal income taxation. It is the understanding of the parties hereto that the covenants contained herein are intended to assure compliance with the provisions of the Code and any regulations or rulings promulgated by the U.S. Department of the Treasury pursuant thereto pertaining to obligations described in section 103(a) of the Code. In the event that regulations or rulings are hereafter promulgated which modify or expand provisions of the Code, as applicable to the Bonds, the parties hereto will not be required to comply with any covenant contained herein to the extent that such modification or expansion, in the opinion of Bond Counsel, will not adversely affect the exemption from federal income taxation of interest on the Bonds under section 103 of the Code. In the event that regulations or rulings are hereafter promulgated which impose additional requirements which are applicable to the Bonds, the parties hereto agree to comply with the additional requirements to the extent necessary, in the opinion of Bond Counsel, to preserve the exemption from federal income taxation of interest on the Bonds under section 103 of the Code. ARTICLE III ESTABLISHMENT OF CONSTRUCTION FUND, DEBT SERVICE FUND AND SPECIAL REBATE FUND (A) Proceeds from Delivery of the Bonds. The net proceeds from the sale of the Bonds shall be deposited by the Trustee to the credit of the funds and accounts created herein as follows: (1) $397,704.38, representing accrued interest, to the Debt Service Fund; (2) $29,571,555.18, representing capitalized interest, to the Capitalized Interest Account of the Construction Fund; and (3) the balance of the proceeds to the Special Facilities Construction Allowance Account of the Construction Fund. (B) Construction Fund. A separate and special trust fund called the "Construction Fund" (consisting of three accounts, the "Capitalized Interest Account", the "Special Facilities Construction Allowance Account", and the "Net Proceeds Account", respectively) is hereby created and established by the Authority with the Trustee. The Trustee shall transfer moneys on deposit in the Capitalized Interest Account to pay interest coming due on the Bonds, as provided in Paragraph (E) below. The Trustee shall draw on and use the Special Facilities Construction Allowance Account and the Net Proceeds Account solely for the purposes provided below. (C) Payments from Special Facilities Construction Allowance Account. (1) Concurrently with, or as soon as practicable after, the delivery of the Bonds, the Trustee shall make an initial payment, if requested by the Company in the manner described below for payments from the Special Facilities Construction Allowance Account of the Construction Fund, to reimburse the Company or its designee for any cost of acquisition, construction, equipment and furnishing of the Land and the Special Facilities, paid, or provided to the Authority, by the Company on or after January 4, 1994, and prior to such date of delivery. The Trustee shall make such initial payment, if requested, and shall make any subsequent payments, from the Special Facilities Construction Allowance Account of the Construction Fund for any Cost of the Special Facilities, from time to time upon receipt by the Trustee of a Disbursement Request signed by an Authorized Lessee Representative. (2) The Trustee and the Authority shall rely fully on any such Disbursement Request delivered by the Company and shall not be required to make any investigation in connection therewith; provided, however, that within a reasonable time after the submission of any such Disbursement Request and after payment of the amounts requested, the duly authorized representatives of the Authority may inspect the invoices and statements which are the basis for payment requested by the Company. If amounts paid by the Trustee with respect to any portion of the Special Facilities exceed the cost thereof, the Company shall promptly repay such overpayment into the Construction Fund. (D) Surplus Construction Funds. (1) If, upon the completion of the Special Facilities, as evidenced by the delivery to the Trustee and the Authority of the certificate executed by an Authorized Company Representative described in Section 305 of the Facilities Agreement, there shall be any surplus funds remaining in the Special Facilities Construction Allowance Account of the Construction Fund not required to provide for the payment of the Costs of the Special Facilities, such funds shall, upon the written request of the Authorized Company Representative, either be applied, in whole or in part, (a) to purchase Bonds for cancellation at such times, prices and amounts as determined by the Authorized Company Representative, which price, however, shall not exceed the principal amount thereof plus accrued interest thereon; or (b) if the Bonds are then subject to redemption, to redeem Bonds in such amounts and at such times as directed by an Authorized Company Representative; provided that prior to any such application under clause (a) above, the Authority and the Trustee shall have been furnished with an unqualified opinion of Bond Counsel, to the effect that the expenditure of monies from the Special Facilities Construction Allowance Account of the Construction Fund for such purpose will not impair the exclusion of interest on the Bonds from the gross income of the holders thereof for federal income tax purposes. Any of such surplus funds not to be applied for the purposes set forth in clauses (a) or (b) above shall be deposited in an escrow account (outside the Debt Service Fund) and moneys on deposit in such escrow account shall be applied to pay the principal of Bonds upon redemption thereof on the earliest possible redemption date; provided that any moneys held in such escrow account may not be invested to produce a yield greater than the yield on the Bonds. The Trustee shall be entitled to rely upon a written certificate executed by an Authorized Company Representative which sets forth the yield on the Bonds. In lieu of treating the Construction Fund surpluses as set forth above, upon the written request of the Authorized Company Representative such funds shall either be deposited or disbursed in any manner designated in writing by the Authorized Company Representative if, in the opinion of Bond Counsel, such deposit or disbursement will not impair the exclusion of interest on any Bonds from the gross income of the holders thereof for federal income tax purposes and is permissible under the Act. (2) If the Trustee shall declare the principal of the Bonds and the interest accrued thereon immediately due and payable as the result of an Event of Default specified in this Indenture, or if the Bonds shall be redeemed as a whole in accordance with their terms, or if the Facilities Agreement is terminated in accordance with its terms prior to the completion of the Special Facilities, to the extent the Company does not otherwise direct, any proceeds of the Bonds remaining in the Special Facilities Construction Allowance Account of the Construction Fund shall, subject to the provisions of subparagraph (5) of Paragraph (F) and Article V(H) below, be immediately deposited into the Debt Service Fund and used by the Trustee for the purpose of paying principal of, premium, if any, and interest on the Bonds when due. In connection with release of this Indenture under the terms hereof, any proceeds of the Bonds remaining in the Special Facilities Construction Allowance Account of the Construction Fund shall be either (a) immediately deposited by the Trustee into the Debt Service Fund and shall be applied to reduce the amount of the next succeeding Special Facilities Rentals by the Company if, in the opinion of Bond Counsel, such application will not adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Bonds, or (b) upon the written request of the Company, applied to the purchase, at a price not in excess of the principal amount thereof, of Bonds in the open market, which Bonds shall thereupon be cancelled. The Trustee shall have the right to take appropriate action by judicial proceedings or otherwise to enforce this Paragraph (D). (E) Debt Service Fund. (1) A separate and special trust fund called the "Debt Service Fund" is hereby created and established by the Authority with the Trustee, and shall be maintained as provided in this Indenture, as long as any Bond is Outstanding and unpaid. (2) Pursuant to the Facilities Agreement, the Authority has directed the payment by the Company to the Trustee of the Special Facilities Rentals, all as described in the Facilities Agreement, which shall be deposited by the Trustee to the credit of the Debt Service Fund. The Trustee shall deposit such Special Facilities Rentals into the Debt Service Fund as follows, upon the receipt thereof from the Company on the dates set forth below: (i) On or before each date on which interest is due and payable on the Bonds, an amount which, together with any other amounts then on deposit therein and available for such purpose, will be sufficient to pay the interest coming due on the Bonds on such date; and (ii) On or before each date on which principal of the Bonds is scheduled to mature, an amount which, together with any other amounts then on deposit therein and available for such purpose, will be sufficient to pay the principal of the Bonds scheduled to mature on such date; and (iii) On or before any date on which Bonds shall have been called for redemption and subject to the conditions specified in this Indenture, an amount which, together with any other amounts then on deposit and available for such purposes, will be sufficient to pay the principal, premium, if any, and accrued interest, specified therein; and (iv) On any date on which the Bonds are declared to be immediately due and payable pursuant to Article V of this Indenture, an amount which, together with any other amounts then on deposit and available for such purposes, will be sufficient to pay the principal of all Bonds then Outstanding, any applicable premium thereon, the interest accrued thereon and interest due on overdue principal or premium, if any, or (to the extent permitted by law) interest. In addition, upon the receipt of a Disbursement Request executed by an Authorized Company Representative, the Trustee shall transfer from the Capitalized Interest Account to the Debt Service Fund moneys sufficient from time to time to make the payments described in clause (i) above. (3) On or before the tenth Business Day prior to each date upon or before which each payment is required by the Facilities Agreement to be paid to the Trustee by the Company for deposit into the Debt Service Fund, the Trustee shall give written notice to the Company, by first class mail, postage prepaid, by Federal Express priority delivery, or by hand delivery, at such address as the Company shall from time to time designate and file in writing with the Trustee, of the amount, if any, of each such payment required to be made to the Trustee by the Company and deposited by the Trustee into the Debt Service Fund on or before such date. Such notice shall give a brief statement of the manner in which the amount or amounts due were calculated, including a showing of all credits on account of earnings from the time deposit or investment of the Debt Service Fund. If such payment required to be paid by the Company under the Facilities Agreement is not received by the Trustee on the date such payment is required to be made in accordance with the terms of the Facilities Agreement, then the Trustee promptly shall give telephone notice to the Company, confirmed in writing in the manner provided above, of such failure to receive such payment from the Company. The failure of the Trustee to give, or of the Company to receive, any such notice shall not relieve the Company of its unconditional duty and obligation to make to the Trustee all deposits or payments of such payments, as required by the Facilities Agreement. (4) The moneys on deposit in the Debt Service Fund shall be used by the Trustee to pay the principal of, premium, if any, and interest on the Bonds, when due; and the Trustee shall make available to itself, in its capacity as paying agent, out of the Debt Service Fund, the amounts required to pay or redeem the principal of, premium, if any, and interest on the Bonds when due, as well as such other amounts described in Article V(D) hereof. (5) In any case where the date for any scheduled Special Facilities Rentals to be deposited to the credit of the Debt Service Fund shall not be a Business Day, then the date for payment of such Special Facilities Rentals shall be the next succeeding day which is a Business Day, and no additional interest shall accrue as a result. (6) In addition to the foregoing, all funds received by the Trustee under the Guaranty shall be deposited to the credit of the Debt Service Fund, for use as herein provided. (F) Special Rebate Fund. A separate and special trust fund to be designated and known as the "Special Rebate Fund" is hereby established by the Authority with the Trustee for the benefit of the United States of America and of the Company, as their interests may appear pursuant to this Indenture and the Facilities Agreement, and maintained as provided herein, as long as any of the Bonds, or interest thereon, is Outstanding and unpaid. (1) Payments into the Special Rebate Fund. The Trustee shall pay into the Special Rebate Fund all payments received from the Company pursuant to Section 615 of the Facilities Agreement. To the extent that, following any disbursements of amounts from the Special Rebate Fund in accordance with subparagraph (2) following, the amount then on deposit in the Special Rebate Fund exceeds the Tentative Rebate Amount (hereinafter defined) determined as of the computation date immediately preceding such disbursement (adjusted for the amount then disbursed), the Trustee shall transfer such excess (i) to the Debt Service Fund, or (ii) directly to the Company, as the Company shall direct. (2) Disbursement of the Special Rebate Fund. The amounts in the Special Rebate Fund shall be used solely for the payment to the United States of amounts described under section 148(f) of the Code, and the Regulations thereunder, all as may be applicable to the Bonds. Such payment shall be made by the Trustee in accordance with written instructions from an Authorized Company Representative, and the requirements of section 148(f)(3) of the Code, and the Regulations, the first installment of such payment to be made by the Trustee within thirty days after the fifth anniversary of the date of issuance of the Bonds, with each subsequent installment of such payment to be made within thirty days following each successive five year anniversary of the date of issuance of the Bonds, and with the last installment of such payment to be made within thirty days after the final retirement of the Bonds. (3) Company Determination. The amounts to be paid, deposited or disbursed hereunder shall be determined by the Company. Within thirty days following each fifth anniversary date of the date of issuance of the Bonds, the Company shall furnish to the Trustee and the Authority a copy of computations made in accordance with the provisions of section 148(f) of the Code and the Regulations promulgated thereunder, showing the amount (the "Tentative Rebate Amount" in respect of such anniversary date) which would be payable to the United States pursuant to section 148(f)(3) of the Code were the Bonds to have been finally retired on such anniversary. (4) Special Rebate Fund Records. The Trustee shall maintain a record of all investments and disbursements from the funds, and of the periodic determinations by the Company of the Tentative Rebate Amount, for a period beginning on the fifth anniversary date of the issuance of the Bonds and ending on the date six years after the final retirement of the Bonds. Such records shall state each such anniversary date and summarize the manner in which the Tentative Rebate Amount, if any, was determined. In addition, upon request, the Trustee will provide to the Company all investment records and other information required by the Company for the making of such determinations. (5) Disposition of Construction Fund upon Acceleration and Redemption. If the Trustee shall declare the principal of the Bonds and the interest accrued thereon immediately due and payable as the result of an Event of Default specified in this Indenture, or if the Bonds are mandatorily redeemed prior to maturity as a whole in accordance with their terms, any amounts remaining in the Construction Fund shall be transferred to the Special Rebate Fund to the extent that the amount therein is less than the Tentative Rebate Amount computed by the Company as of the date of such acceleration or redemption. (6) Deemed Satisfaction of Rebate Requirements; Penalties in Lieu of Rebate. Anything contained herein to the contrary notwithstanding, the requirements of Article III(F)(1), (2), (3) and (5) hereof shall be deemed satisfied if the Company delivers to the Trustee and the Authority a certificate, together with an opinion of Bond Counsel stating that based on the representations in the certificate, the requirements of section 148(f)(2) of the Code need not be met with respect to the Bonds by reason of any of the exceptions afforded a tax- exempt issue under section 148(f) of the Code. (G) Net Proceeds Account. Any Net Proceeds generated as a result of damage to or destruction of, or the condemnation of, all or any part of the Special Facilities, all as provided in Sections 1101 and 1102 of the Facilities Agreement, shall be deposited to the credit of the Net Proceeds Account. The Trustee shall disburse any moneys on deposit in the Net Proceeds Account upon the written direction of the Company, as approved in writing by the Authority, for the purposes described in Sections 1101 and 1102 of the Facilities Agreement. Any moneys held by the Trustee in the Net Proceeds Account shall be invested in accordance with the provisions of Paragraph (H) below. The Company shall forthwith pay to the Trustee the amount of any net losses with respect to principal in such investments. (H) Investments. (1) The Authority hereby directs the Trustee to invest or reinvest such moneys in the manner provided below. Money in the Construction Fund and the Debt Service Fund, respectively, held by the Trustee may be invested or reinvested by the Trustee at the telephonic direction of the Company (such oral direction subsequently confirmed in writing by the Company) in Qualified Investments, defined below (provided that the Company shall not be entitled to direct that any investment be made in violation of any applicable law), in such a manner as will, in the opinion and within the discretion of the Company, produce the maximum yield reasonably obtainable (subject to the provisions of Article VIII of this Indenture). Money so invested or reinvested shall be invested or reinvested in accordance with the laws of the State of Texas. (2) The securities purchased with the moneys in the Debt Service Fund or the Construction Fund, respectively, shall be deemed a part of such respective Fund, and, for the purpose of determining the amount of money therein, the securities therein shall be valued at their cost or market value, whichever is lower. The value of such securities shall be established annually during the last month of each fiscal year of the Company. The income and profits, including realized discount on securities purchased, received on all such securities (after deduction for accrued interest and premium paid therefrom at the time of purchase) shall be deposited in or credited to the Debt Service Fund or the Construction Fund, respectively, and all losses thereon shall be charged against the Debt Service Fund or the Construction Fund, respectively. Neither the Authority nor the Trustee shall be liable or responsible for any loss resulting from any such investment as herein authorized, such liability and responsibility to be that of the Company. If at any time it shall become necessary that some or all of the securities purchased with the moneys in the Debt Service Fund or the Construction Fund be redeemed or sold to raise moneys necessary to comply with the provisions of this Indenture, the Trustee may, after consultation with an Authorized Company Representative, effect such redemption or sale, employing, in the case of a sale, any commercially reasonable method of effecting the same, including, without limitation, the sale thereof to the Company upon its written request. (3) As used in this Indenture, the term "Qualified Investments" shall mean (i) obligations of the United States or its agencies and instrumentalities; direct obligations of the State of Texas or its agencies and instrumentalities; collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States (the underlying security for which is guaranteed by an agency or instrumentality of the United States); other obligations, the principal and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of Texas or the United States or their respective agencies and instrumentalities; and obligations of states, agencies, counties, cities and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent (collectively herein "Government Obligations"); (ii) certificates of deposit (1) issued by a state or national bank or a savings and loan association domiciled in Texas, and (2) guaranteed or insured by the Federal Deposit Insurance Corporation or its successor, secured by Government Obligations or secured in any other manner and amount provided by law for deposits of the Trustee; (iii) fully collateralized repurchase agreements which (1) have a defined termination date, (2) are secured by obligations of the United States or its agencies and instrumentalities, (3) require the securities being purchased by the Trustee to be pledged to the Trustee, held in the Trustee's name and deposited at the time the investment is made with the Trustee or with a third party selected and approved by the Trustee, and (4) are placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in Texas, provided that, the term of any reverse security repurchase agreement may not exceed 90 days after the date the reverse security repurchase agreement is delivered and, provided further, that "repurchase agreement" means a simultaneous agreement to buy, hold for a specified time and sell back at a future date obligations of the United States or its agencies and instrumentalities at a market value at the time the funds are disbursed of not less than the principal amount of the funds disbursed; (iv) bankers' acceptances which (1) have a stated maturity of 270 days or fewer from the date of issuance, (2) will be liquidated in full at maturity, (3) are eligible for collateral for borrowing from a Federal Reserve Bank, and (4) are accepted by a bank organized and existing under the laws of the United States or any state, if the short-term obligations of the bank, or of a bank holding company of which the bank is the largest subsidiary, are rated not less than A-1 or P-1 or an equivalent rating by at least one nationally recognized credit rating agency; (v) commercial paper which (1) has a stated maturity of 270 days or fewer from the date of its issuance and (2) is rated not less the A-1 or P-1 or an equivalent rating by at least two nationally recognized credit rating agencies, or one nationally recognized credit rating agency and is fully secured by an irrevocable letter of credit issued by a bank organized and existing under the laws of the United States or any state; and (vi) no-load money market mutual funds which (1) are regulated by the Securities and Exchange Commission, (2) have a dollar-weighted average stated maturity of 90 days or fewer, and (3) include in the investment objectives of such mutual fund the maintenance of a stable net asset value of $1 of each share, provided however, that the Trustee is not authorized to invest in the aggregate more than 80% of its monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service, in money market mutual funds or to invest an amount that would exceed 10% of the total assets of any such mutual fund. (4) The Trustee, when authorized by the Company, may trade with itself in the purchase and sale of securities for such investment. Although the Authority recognizes that it may obtain a broker confirmation or written statement containing comparable information at no additional cost, the Authority hereby agrees that confirmations of investments made by the Trustee pursuant to this Paragraph (H) are not required to be issued by the Trustee for each month in which a monthly statement is rendered. No such statement need be rendered pursuant to the provisions hereof if no activity occurred in the fund or account during such preceding month. (I) Security for Funds. All Funds created by this Indenture shall be secured in the manner required by Texas law for the security of public funds, and such Funds shall be used only for the purposes and in the manner permitted or required by this Indenture and the Facilities Agreement. ARTICLE IV ACCOUNTS AND RECORDS (A) Separate Records. The Trustee shall keep proper books of records and accounts, separate from all other records and accounts, in which complete and correct entries shall be made of all transactions relating to the receipt of the Special Facilities Rentals to be made by the Company to pay the principal of, premium, if any, and the interest on the Bonds, the Construction Fund, the Debt Service Fund and the Special Rebate Fund. The Trustee shall furnish to the Authority and the Company no less often than monthly a copy of such records and transactions as hereinabove described. (B) Report of Trustee. Within 90 days after the close of each calendar year, the Trustee shall furnish to the Authority, the Company, and the Bondholders who may so request, a copy of a report by the Trustee covering such calendar year, showing the following information: (1) A detailed statement concerning the receipt and disposition of all Special Facilities Rentals to be made by the Company under the terms of the Facilities Agreement to pay the principal of, premium, if any, and the interest on the Bonds; (2) A detailed statement concerning the disposition of the amounts in the Construction Fund (until the Construction Fund shall have been fully disposed of); and (3) An asset statement of the Debt Service Fund as of the end of said calendar year. (C) Inspection. The Authority, the Bondholders owning 25% or more of the Outstanding principal amount of Bonds (as shown in the Registration Books) and the Company shall have the right at all reasonable times pursuant to the reasonable regulations established in writing by the Trustee to inspect all records, accounts, and data of the Trustee relating to the Debt Service Fund, and to obtain copies of the same at the expense of such inspecting party. (D) Registration Books. So long as any of the Bonds shall remain Outstanding, the Trustee shall maintain Registration Books for the registration and transfer of Bonds upon the terms and subject to the conditions contained herein. ARTICLE V ENFORCEMENT OF RIGHTS IN CASE OF DEFAULT (A) Trustee is Agent. The Trustee is hereby irrevocably appointed the special agent and representative of the Bondholders and vested with full power to act on their behalf to effect and enforce the Facilities Agreement, the Guaranty and this Indenture, for their benefit as provided herein; but anything in this Indenture contained to the contrary notwithstanding, Bondholders of a majority in principal amount of the Bonds then Outstanding, in case of any existing Event of Default (hereinafter defined), shall have the right from time to time to direct and control the Trustee in connection with the enforcement of any of the provisions of the Facilities Agreement, the Guaranty and this Indenture, and any other proceedings taken by virtue of any provisions of the aforesaid instruments, including the right to have withdrawn and discontinued at any stage thereof any proceedings taken hereunder by the Trustee, provided that the Event of Default upon which such proceedings were based and all other Events of Default hereunder shall have been remedied and made good. Anything contained in this Indenture to the contrary notwithstanding, each Bondholder shall have a right of action to enforce the payment of the principal of, premium, if any, and interest on any Bond owned thereby on or after the same shall have become due at the place, from the sources, and in the manner expressed in Article III hereof. (B) Restriction on Bondholders' Action. Except as otherwise provided in this Article V, all rights of action with respect to this Indenture shall be exercised only by the Trustee and no Bondholder shall have any right to institute any suit, action, or proceeding at law or equity for the appointment of a receiver or for any other remedy hereunder or by reason hereof unless and until, in addition to the fulfillment of all other conditions precedent specified in this Indenture, the Trustee shall have received the written request of Bondholders of not less than 25% in principal amount of the Bonds then Outstanding to institute such suit, action, or proceeding and shall have been offered reasonable indemnity and shall have refused, or for 30 days thereafter neglected, to institute such suit, action, or proceeding; and it is hereby declared that the making of such request and the furnishing of such indemnity are in each case conditions precedent to the execution and enforcement by any Bondholder of the powers and remedies given to the Trustee hereunder and to the institution and maintenance by any Bondholder of any action or cause of action for the appointment of a receiver or for any other remedy hereunder; but the Trustee may, in its discretion, or when thereunto duly requested in writing by Bondholders of not less than 25% in principal amount of the Bonds then Outstanding, and upon being furnished indemnity satisfactory to the Trustee against expenses, charges, and liability, forthwith shall, take such appropriate action by judicial proceedings or otherwise to enforce the covenants of the Company or the Authority as the Trustee may deem expedient in the interest of the Bondholders. (C) Events of Default. Any one or more of the following events shall constitute and hereinafter shall be called "Events of Default": (1) Failure to pay when due, at maturity or upon redemption, the principal of or, premium, if any, on any Bond; (2) Failure to pay interest on any Bond on the Business Day immediately following the date such payment of interest is scheduled to be due; (3) The occurrence of an "Event of Default" as defined in Section 1401 of the Facilities Agreement; (4) A default in the performance or observance of any other of the covenants, agreements or conditions on the part of the Authority in this Indenture and the continuance thereof for a period of 60 days after written notice thereof is given to the Authority and the Company by the Trustee, provided, however, that no Event of Default shall be deemed to have occurred if the Company or the Authority is diligently proceeding to cure or correct such default; and (5) The occurrence of a "Guaranty Event of Default" as defined in Section 2.4(a) of the Guaranty. (D) Acceleration. Upon the occurrence and continuation of any Event of Default as defined in this Indenture (except as described in Article V(C)(3) hereof), the Trustee may, and upon the written request of the registered owners of not less than 25% in aggregate principal amount of Bonds then Outstanding, the Trustee shall, by notice in writing delivered to the Company with a copy of such notice being sent to the Authority, declare the principal of all Bonds then Outstanding and the interest accrued thereon immediately due and payable, and such principal and interest thereon shall thereupon become and be immediately due and payable. If, after the principal of all Bonds then Outstanding shall have been so declared to be due and payable, all arrears of interest upon such Bonds, and interest on overdue installments of principal or premium, if any, and interest (to the extent permitted by law) at the rate borne by the Bonds, and the principal of and premium, if any, on all Bonds then Outstanding that shall have become due and payable otherwise than by acceleration, and all other sums payable under this Indenture other than the principal of and interest on the Bonds which by such declaration of acceleration shall have become due and payable, shall have been paid by or on behalf of the Authority, together with the reasonable fees and expenses of the Trustee and of the registered owners of the Bonds, including reasonable attorneys' fees and expenses paid or incurred, and all other defaults then existing hereunder shall have been cured or waived in accordance with the provisions hereof, then and in every such case, the Trustee shall annul such declaration of maturity and its consequence, which annulment shall be binding upon all registered owners of Bonds; provided, however, that if the registered owners of not less than 25% in aggregate principal amount of the Bonds then Outstanding shall have made the written request as described above directing the Trustee to declare such acceleration of maturity, the Trustee shall not annul such declaration and its consequences without the prior consent of the registered owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding, and provided further that no such annulment shall extend to or affect any subsequent default or impair any right or remedy consequent thereon. (E) Action by Trustee. Upon the happening of any Event of Default, the Trustee may, in its discretion, or, upon the written request of Bondholders of not less than 25% in principal amount of the Bonds then Outstanding, and upon being indemnified to the satisfaction of the Trustee, shall take such appropriate action by judicial proceedings or otherwise to cure the Event of Default and to require the Company or the Authority to carry out its or their covenants and obligations hereunder and with respect to the Facilities Agreement, including, but without limitation, the use and filing of actions for specific performance and mandamus proceedings in any court of competent jurisdiction, against the Authority or the Company, and to obtain judgments against the Company for, or seek the appointment of a receiver in equity to collect, any Special Facilities Rentals due but unpaid into the Debt Service Fund, or for any other amounts due hereunder or under the Facilities Agreement, including all of the principal amount of the Bonds then outstanding if declared due and payable as provided herein, premium, if any, and interest on such Bonds and interest on overdue payments of principal, premium, and interest, as further provided herein. (F) Remedies Nonexclusive. No remedy herein conferred upon or reserved to the Trustee is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under the Bonds, or now and hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon the happening of any Event of Default continuing as aforesaid shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or acquiescence therein, and every such right and power may be exercised from time to time and so often as may be deemed expedient. (G) Trustee's Discretion. In the event the Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Bondholders, each representing less than a majority of the principal amount of Bonds then Outstanding, the Trustee in its sole discretion may determine what action, if any, shall be taken. (H) Disposition of Money. All money collected by the Trustee pursuant to the exercise of the remedies and powers in this Article V, together with all other sums which then may be held by the Trustee under any provision of this Indenture as security for the Bonds, shall be applied as follows: FIRST: to the payment of the costs and expenses of the proceedings whereunder such money was collected, including a reasonable compensation to the Trustee, its agents, attorneys, and all other necessary or proper expenses, liabilities, and advances incurred or made by the Trustee under this Indenture relating to such collection. SECOND: to the payment of matured interest on the Bonds and interest on overdue interest (to the extent permitted by law). THIRD: to the payment of principal of and premium, if any, on the Bonds which have become due pursuant to their terms as permitted or required by this Indenture as provided thereby. FOURTH: to the payment of any amounts due the Authority under the Facilities Agreement. FIFTH: to the payment of the surplus, if any, to the Company, or as a court of competent jurisdiction may otherwise direct. If in making distribution pursuant to the order above stated, the amount available for distribution in a particular classification is insufficient to pay in full all of the items in such classification, the amount available for distribution to items in such classification shall be prorated among such items in the proportion that the amount of each item bears to the total of all such items. (I) Intervention by Trustee. In any judicial proceeding in which the Authority is a party and which, in the opinion of the Trustee and its counsel, has a substantial bearing on the interests of the Bondholders, the Trustee, if permitted by the court having jurisdiction over such proceeding, may, in its discretion, or, upon the written request of Bondholders of not less than 25% in principal amount of the Bonds then Outstanding, and upon being indemnified to the satisfaction of the Trustee, shall intervene on behalf of the Bondholders to assert the rights of the Bondholders. (J) Possession of Bonds Unnecessary. All rights of action or other rights under this Indenture or otherwise may be enforced by the Trustee without the possession of any of the Bonds, or the production thereof on the trial or other proceedings relative thereto. (K) Bondholder's Directions. It is expressly provided, however, that Bondholders of a majority in principal amount of the Bonds then Outstanding, or a committee representing, pursuant to a written appointment filed with the Trustee, Bondholders of a majority in principal amount of the Bonds then Outstanding, shall have the right, at any time, by an instrument or instruments, in writing executed and delivered to the Trustee, to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of the Trustee's rights and remedies under the Facilities Agreement or the Guaranty, or the Bondholders' or the Trustee's rights and remedies under this Indenture, and may exercise any right or perform any action hereunder with the same effect as the Trustee under this Indenture, provided, that such direction shall not be otherwise than in accordance with the provisions of law and of this Indenture, and provided that the Trustee shall be indemnified to its satisfaction. (L) Trustee's Notice of Default. The Trustee shall not be required to take notice nor be deemed to have notice of any Event of Default specified in this Indenture, except for those Events of Default specified in subparagraphs (1) and (2) of Paragraph (C) above, or the occurrence of an Act of Bankruptcy, unless specifically notified in writing of such Event of Default by the Authority, the Company, or Bondholders of not less than 25% in principal amount of the Bonds then Outstanding. At such time as the Trustee has or is deemed to have notice of any Event of Default specified in this Indenture, the Trustee shall notify the registered owners of such Event of Default. With respect to an Event of Default as described in Article V(C)(3), such notice shall contain language to the effect that the remedy of acceleration is not available. Notice shall be given in the same manner as is required with respect to giving notice of redemption pursuant to Article II(C)(5). (M) Bonds Owned by Authority or Company. In determining whether the Bondholders of a requisite aggregate principal amount of Bonds then Outstanding have concurred in any request, demand, authorization, direction, notice, consent, or waiver under this Indenture, Bonds owned by or for the account of the Company or the Authority, or any person controlled by, controlling, or under common control of either of them, shall be disregarded and deemed not to be outstanding for the purpose of any such determination, except to the extent that the Company owns all of the Bonds then Outstanding; provided, however, that for the purpose of determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent, or waiver, only Bonds of which the Trustee has actual knowledge of such ownership shall be so disregarded. (N) Trustee's Standard of Conduct with Respect to Event of Default. (1) Except during the continuance of an Event of Default, (a) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (b) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and certificates or opinions furnished to it and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (2) Notwithstanding any other provisions of this Article V, the Trustee shall, during the existence of an Event of Default known to the Trustee, and upon receipt of indemnification reasonably satisfactory to the Trustee, exercise such of the rights and powers vested in it by this Indenture and use the same degree of skill and care in their exercise as a prudent person in a like situation would ordinarily use and exercise under the circumstances; provided, that nothing contained herein shall be construed to entitle the Trustee to demand indemnification as a condition precedent to the exercise of its duties under Article V(D) above. (3) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (a) this subparagraph shall not be construed to limit the effect of subparagraph (1) of this Paragraph (N); (b) the Trustee shall not be liable for any error of judgment made in good faith thereby, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Bondholders in principal amount of the Bonds, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Bonds. (O) Bondholder Remedy - Ongoing Disclosure Under Rule 15c2-12. In addition to the foregoing, a Bondholder or a beneficial owner of a Bond demonstrating ownership for the purpose of this Paragraph (O) in accordance with Section 616 of the Facilities Agreement may institute any suit, action or proceeding at law or in equity for the enforcement of any covenant contained in such Section 616 or for any remedy for breach thereof, as specified in and subject to the limitations of Section 616 of the Facilities Agreement, with respect to compliance with the Rule. Neither the Authority, the City nor the Trustee has assumed or will assume any responsibility with respect to any covenant contained in Section 616 of the Facilities Agreement or said Rule. ARTICLE VI CONCERNING THE TRUSTEE The Trustee accepts the trust imposed upon it by this Indenture, but only upon and subject to the following express terms and conditions: (A) Negligence or Misconduct. In no event shall the Trustee be liable except for its negligence or willful misconduct in relation to its duties under this Indenture. The Trustee shall not be responsible for any recitals herein, in the Bonds, the Facilities Agreement, or for the sufficiency of the security for the Bonds, or for monitoring compliance by the Company of its obligations under the Facilities Agreement, or for reviewing and approving any required insurance coverage as described in the Facilities Agreement. The Trustee shall have no responsibility hereunder except to the extent of the duties placed upon the Trustee to hold, administer, deposit, secure, invest, and use the Construction Fund, the Debt Service Fund and the Special Rebate Fund as required, to the extent funds for such purposes are received by the Trustee, and to perform the other express covenants and agreements made by the Trustee under the provisions of this Indenture. (B) Accountability for Funds. The Trustee shall not be accountable for the use of any of the proceeds of such Bonds except the portion thereof deposited with the Trustee, and the Trustee shall not be liable for any loss from the investment (made in accordance with the terms of this Indenture) of any funds it holds pursuant to this Indenture. (C) Reliance on Communications. The Trustee shall not be liable in acting in accordance with the provisions of this Indenture upon any notice, requisition, request, consent, certificate, order, affidavit, letter, telegram, or other paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and the Trustee shall not be bound to recognize any person as a Bondholder or to take any action at his request, unless the ownership of such Bond or Bonds is indicated in the Registration Books. Any action taken by the Trustee pursuant to this Indenture upon the request or authority or consent of any person who, at the time of making such request, or giving such authority or consent, is the Bondholder of any Bond secured hereby, shall be conclusive and binding upon all future Bondholders of the same Bond or any Bond issued in substitution or replacement therefor. (D) Proof of Facts. Notwithstanding anything elsewhere in this Indenture contained, the Trustee shall have the right, but shall not be required, to demand before the disbursement of any cash or in respect of any action whatsoever within the purview of this Indenture, any showings, certificates, opinions, appraisals, or other information, or action or evidence thereof, in addition to that required by the terms hereof which the Trustee believes to be necessary or desirable. (E) Limited Responsibilities. The responsibilities of the Trustee elsewhere set forth herein shall be further limited as follows: FIRST: The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with a direction of Bondholders pursuant to any provision of this Indenture relating to the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture. SECOND: No provision of this Indenture shall require the Trustee (1) to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it, nor (2) to take any action, whether or not directed to take such action by any Bondholder, pursuant to this Indenture, which in the judgment of the Trustee would conflict with any rule of law, or with the terms of this Indenture, or would be unjustly prejudicial to the Bondholders not taking part in such direction. When acting pursuant to the direction of any Bondholder pursuant to this Indenture, the Trustee may take other action deemed proper by the Trustee which is not inconsistent with such direction; provided, however, that the terms of this subparagraph SECOND shall not impose any additional duties or responsibilities upon the Trustee and shall not be construed to limit the effect of subparagraph FIRST of this Paragraph (E). (F) Performance through Attorneys, Accountants, Agents, Receivers or Employees. (1) The Trustee may execute any of the trusts or powers hereof and perform the duties required of it hereunder by or through attorneys, accountants, agents, receivers or employees and shall be entitled to advice of counsel concerning all matters of trust hereof and its duties hereunder, and may in all cases pay such reasonable compensation as it shall deem proper to all such persons as reasonably may be required and employed in connection with the trusts hereof. (2) The Trustee shall not be liable for the default or misconduct of any such attorney, agent, accountant or employee selected by it with reasonable care. (3) The Trustee may act upon the opinion or advice of any attorney selected by it with reasonable care, and the Trustee shall not be responsible for anything done or not done in good faith in accordance with any such opinion or advice. (G) Trustee as Bondholder. The Trustee may become the Bondholder of any of the Bonds secured by this Indenture with the same rights which it would have if not the Trustee. Nothing herein contained shall be construed to prohibit the Trustee, either as principal or agent, from engaging in or being interested in any financial or other transaction with the Authority or the Company or from acting as depository, trustee, or agent for any committee or body of Bondholders of the Bonds or of other obligations of the Authority as freely as if it were not the Trustee. (H) Execution of Documents. The Trustee agrees to execute any documents reasonably requested by the Company in connection with any action taken by the Company under the Facilities Agreement. (I) Fees. The fees and expenses of the Trustee incurred in connection with its performance hereunder shall be payable by the Company, as set forth in Section 615 of the Facilities Agreement. (J) Recitals. The recitals, statements and representations in the documents executed to facilitate the issuance of the Bonds except only the Trustee's authentication of the Bonds and the Trustee's representations of trust powers and the Trustee's acceptance of the trusts hereunder, shall not be taken as made by the Trustee, and the Trustee does not assume any responsibility for the correctness thereof. The foregoing notwithstanding, the Trustee does represent and warrant that it is duly qualified under Texas law to administer the trusts created hereunder. (K) Responsibility of Trustee Generally. No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties under the documents executed to facilitate the issuance of the Bonds except at the direction of the registered owners pursuant to any provision of this Indenture and upon receipt of indemnification satisfactory to the Trustee; provided, that nothing contained herein shall be construed to enable the Trustee to demand indemnification as a condition precedent to the exercise of its duties under Article V(D) above. (L) Additional Rights of Trustee. (1) The Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. (2) Any request or direction of the Company mentioned herein shall be sufficiently evidenced by an instrument executed by an Authorized Company Representative and any resolution of the Company may be sufficiently evidenced by a certified copy executed by the Secretary or an Assistant Secretary of the Board of Directors of the Company. (3) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Bondholders pursuant to this Indenture, unless such Bondholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. (4) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney. ARTICLE VII SUCCESSOR TRUSTEE (A) Resignation and Removal of Trustee. (1) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Paragraph (B) below. (2) The Trustee may resign at any time, with or without reason, by giving written notice thereof to the Authority and the Company, and to each of the Bondholders. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee, at the expense of the Company, may petition any court of competent jurisdiction for the appointment of a successor Trustee. (3) The Trustee may be removed at any time by the registered owners of at least a majority in principal amount of the Outstanding Bonds, by a written request for removal delivered to the Authority and the Company. (4) If at any time: (a) The Trustee shall cease to be eligible under Paragraph (B) below and shall fail to resign after written request therefor by the Authority, or by any Bondholder who has been a bona fide holder of a Bond for at least 6 months, or (b) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (x) the Authority may remove the Trustee, or (y) any Bondholder who has been a bona fide holder of a Bond for at least 6 months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (5) So long as there is no Event of Default under the Facilities Agreement or this Indenture, the Trustee may be removed at any time, for any reason, by an instrument in writing, executed by the Company, and delivered to the Trustee and the Authority. The Company shall mail to all Bondholders notice of such removal and, subject to the provisions of clause (1) of this Paragraph (A), such removal shall be effective 60 days after such notice is mailed unless 25% in aggregate principal amount of the Bondholders object in writing to such removal. (6) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Authority shall promptly appoint a successor Trustee. If no successor Trustee shall have been so appointed by the Authority and accepted appointment in the manner hereinafter provided, any Bondholder who has been a bona fide holder of a Bond for at least 6 months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (7) The successor Trustee shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee (other than pursuant to Paragraph (D) below) by mailing written notice of such event to the holders of the Bonds and to the parties to the documents relating to the Bonds. Each notice shall include the name of the successor Trustee and the address of its principal corporate trust office. (B) Appointment of Successor. In case the Trustee hereunder shall resign or be removed, or be dissolved, or shall be in course of dissolution or liquidation, or otherwise become incapable of acting hereunder, or in case the Trustee shall be taken under the control of any public officer or officers, or of a receiver appointed by a court, a successor shall be appointed by the Authority by an instrument executed by authority of a resolution of its Board, signed by the President or Vice President and by the Secretary of the Board of Directors of the Authority. The foregoing notwithstanding, so long as the Company is not in default under the terms of the Facilities Agreement, the Company may appoint any successor Trustee, by delivering to the Authority an instrument executed on behalf of the Company by an Authorized Company Representative. In the selection of any such successor Trustee, the Company shall advise and consult with the Authority and shall give due consideration to suggestions and input which may be offered by the Authority prior to the Company making the final decision with respect to such selection. Every such successor Trustee shall be a trust company or bank in good standing, located in the United States of America, and having a capital and surplus of not less than One Hundred Million Dollars ($100,000,000), if there be such a trust company or bank willing, qualified, and able to accept the trust upon reasonable or customary terms. In the event that no appointment of a successor Trustee shall be made pursuant to the foregoing provisions of this Article within 60 days after a vacancy in the office of Trustee shall have occurred, any Bondholder or any retiring Trustee may apply to any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice, if any, as it shall deem proper, prescribe or appoint a successor Trustee. Within 30 days of the resignation or removal of a Trustee and the appointment of a successor, such successor Trustee shall cause a written notice of such occurrence to be (i) published one time in each of two consecutive weeks in a financial newspaper or journal which is of general circulation in the Borough of Manhattan in The City of New York, New York, and is customarily published at least once a day for at least five days in each calendar week; and (ii) mailed, postage prepaid, to each registered owner of Bonds, at its address appearing in the Registration Books. (C) Qualification of Successor. Every successor Trustee appointed hereunder shall execute, acknowledge, and deliver to its predecessor, the Authority and the Company, an instrument in writing accepting such appointment hereunder, and thereupon such successor Trustee, without any further act, deed, or conveyance, shall become fully vested with all the estates, rights, powers, trusts, duties, and obligations hereunder and under the Guaranty of its predecessor; but such predecessor shall nevertheless, on the written request of the Authority, execute and deliver instruments, including, without limitation any statement of assignment permitted to be filed by the Texas Uniform Commercial Code, transferring to such successor Trustee all the estates, rights, powers, and trusts of such predecessor hereunder; and every predecessor Trustee shall deliver all securities and money held by it to its successor; provided, however, that before any such delivery is required or made, all reasonable, customary, and legally accrued fees, advances, and expenses of such predecessor Trustee shall be paid in full. Should any deed, assignment, or instrument in writing from the Authority be required by any successor Trustee for more fully and certainly vesting in such Trustee the estates, rights, powers, and duties hereby vested or intended to be vested in the predecessor Trustee, any and all such deeds, assignments, and instruments in writing shall, on request, be executed, acknowledged, and delivered by the Authority. (D) Merger or Consolidation of Trustee. Any corporation or association into which the Trustee, or any successor to it in the trusts created by this Indenture, may be merged or converted or with which it or any successor to it may be consolidated, or any corporation or association resulting from any merger, conversion, or consolidation to which the Trustee or any successor to it shall be a party, shall be the successor Trustee under this Indenture without the execution or filing of any paper or any other act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. ARTICLE VIII RELEASE OF INDENTURE (A) Satisfaction of Indebtedness and Release of Indenture. If the Authority shall pay or cause to be paid to the registered owner of any Bond secured hereby the principal of, premium, if any, and interest due and payable, and thereafter to become due and payable, upon such Bond, or any portion of such Bond in a principal amount equal to the minimum denomination then authorized under this Indenture or any integral multiple thereof, such Bond or portion thereof shall cease to be entitled to any lien, benefit or security under this Indenture. If the Authority shall pay or cause to be paid to the registered owners of all the Bonds secured hereby the principal of, premium, if any, and interest due and payable, and thereafter to become due and payable, thereon, and shall pay or cause to be paid all other sums payable hereunder by the Authority, and all accrued fees and expenses of the Trustee, then, and in that case, the right, title and interest of the Trustee in and to the Trust Estate shall thereupon cease, terminate and become void and this Indenture and the lien hereby created shall be discharged and satisfied. In such event, the Trustee shall assign, transfer and turn over to the Company the Trust Estate, including, without limitation, any surplus funds then held by the Trustee hereunder. Upon the discharge and satisfaction of this Indenture and the termination of the Trust Estate, the Bonds shall no longer be subject to redemption pursuant to Article II(C) hereof (other than any redemption as described in Article VIII(B)(i), which shall survive any such discharge and termination). (B) Payment, Advance Funding, and Defeasance. All or any portion of Outstanding Bonds, or portions of Outstanding Bonds in principal amounts equal to the minimum denomination, then authorized under this Indenture or any integral multiple thereof, shall prior to the maturity or redemption date thereof be deemed to have been paid within the meaning and with the effect expressed in this Article VIII when: (i) in the event said Bonds or portions thereof have been selected for redemption, the Trustee shall have given, or the Company shall have given to the Trustee in form satisfactory to it, irrevocable instructions to give notice of redemption of such Bonds or portions thereof in accordance with the provisions of this Indenture; (ii) there shall have been deposited with the Trustee either moneys in an amount which shall be sufficient, or Government Obligations (a) which shall not contain provisions permitting the redemption thereof at the option of the issuer thereof, (b) which mature no later than the earlier of (1) the date fixed for the redemption of the Bonds or (2) the maturity date of the Bonds, and (c) the principal of and the interest on which, when due, and without any regard to reinvestment thereof, will provide moneys which, together with the moneys, if any, deposited with or held by the Trustee, shall be sufficient, to pay when due, the principal of, premium, if any, and interest due and to become due on said Bonds or portions thereof on and prior to the redemption date or maturity date thereof, as the case may be; and (iii) in the event said Bonds or portions thereof do not mature and are not to be redeemed within the next succeeding sixty (60) days, the Company shall have given the Trustee in form satisfactory to it irrevocable instructions to give, as soon as practicable in the same manner as a notice of redemption is given, a notice to the registered owners of said Bonds or portions thereof that the deposit required by clause (ii) above has been made with the Trustee and that said Bonds or portions thereof are deemed to have been paid in accordance with this Article VIII and stating the maturity or redemption date upon which moneys are to be available for the payment of the principal of and premium, if any, and interest on said Bonds or portions thereof. As used in this Indenture, the term "Government Obligations" shall mean noncallable, direct general obligations of, or obligations the full and timely payment of the principal of and interest on which are unconditionally guaranteed by, the United States of America; provided, that said term may include noncallable, indirect obligations of the United States of America if, in the opinion of Bond Counsel, such indirect obligations are eligible under State law to discharge obligations such as the Bonds; and provided further, if, in the opinion of Bond Counsel, such obligations hereinafter described are eligible under State law to discharge obligations such as the Bonds, that said term may include obligations described in clause (xii) of Article III (H)(3) hereof that are noncallable obligations and that bear a rating in the highest rating category by Standard & Poor's Ratings Group or Moody's Investors Service. In addition, upon the defeasance of the Bonds, any rights to redeem the Bonds not exercised prior to such defeasance shall be extinguished. (C) Reinvestment. Neither the Government Obligations nor moneys deposited with the Trustee pursuant to this Article VIII nor principal or interest payments on any such Government Obligations shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal of, premium, if any, and interest on said Bonds or portions thereof; provided, that, any cash received from such principal or interest payments on such Government Obligations deposited with the Trustee, if not then needed for such purpose, may, to the extent practicable, be invested in Government Obligations of the type and tenor described in clause (ii) of Paragraph (B) of this Article VIII and interest earned from such reinvestments shall be paid over to the Company, as received by the Trustee, free and clear of any trust, lien or pledge. The foregoing notwithstanding, the agreement pursuant to which such cash and/or Government Obligations are held by the Trustee may provide for the ability to sell or otherwise dispose of all or part of the Government Obligations and the reinvestment of the proceeds thereof, together with all or any part of any cash held thereunder, in Government Obligations. (D) Use of Moneys and Government Obligations Set Aside. Notwithstanding any provision of any other Article of this Indenture which may be contrary to the provisions of this Article VIII, all money or Government Obligations set aside and held in trust pursuant to the provisions of this Article VIII for the payment of Bonds, the premium, if any, and interest thereon, shall be applied to and used solely for the payment of the particular Bonds, the premium, if any, and interest thereon with respect to which such money or Government Obligations have been so set aside in trust. (E) No Amendment. Notwithstanding anything elsewhere contained in this Indenture, if money or Government Obligations have been deposited or set aside with the Trustee pursuant to this Article VIII for the payment of Bonds and such Bonds shall not have in fact been actually paid in full, no amendment to the provisions of this Article VIII shall be made without the consent of each Bondholder affected thereby. (F) Additional Conditions to Defeasance and Reinvestment. Prior to any defeasance being deemed to have occurred hereunder, or prior to any reinvestment of Government Obligations, as described in Paragraphs (B) and (C) above, the Trustee shall receive the following: (1) an opinion by an independent certified public accountant that after such reinvestment the principal amount of substituted securities, together with the interest thereon and any other available cash held by the Trustee, will be sufficient to pay the principal of, and interest on, the Bonds which have not previously been paid, and (2) an unqualified opinion of Bond Counsel to the effect that (i) such investment will not cause the Bonds to be "arbitrage bonds" within the meaning of section 148 of the Code, and the Regulations in effect on the date of such investment, or otherwise make the interest on the Bonds subject to Federal income taxation, and (ii) such reinvestment is not inconsistent with the laws of the State of Texas and with all relevant documents relating to the issuance of the Bonds. ARTICLE IX AMENDMENTS (A) Amendments without Bondholder Consent. With the consent of the Trustee (unless such consent specifically is not required by the Facilities Agreement), the parties to the Guaranty or the Facilities Agreement may, and the parties to this Indenture, with the consent of the Company, may, without the consent of, or notice to, any of the registered owners of the Bonds, enter into any amendments to the Guaranty or the Facilities Agreement or enter into any indentures supplemental to this Indenture for any one or more of the following purposes: (1) to cure any ambiguity, formal defect, omission or inconsistent provision herein or therein; (2) to grant to the Trustee for the benefit of the registered owners of the Bonds any additional revenues, properties or collateral, or any additional rights, remedies, powers or authority that may lawfully be granted to the registered owners of the Bonds or the Trustee; (3) to add to the covenants and agreements of the parties hereto or thereto other covenants and agreements of, or conditions or restrictions upon, such parties or to eliminate any right or power conferred upon the Company; (4) to evidence any succession otherwise permitted hereunder or thereunder to any parties hereto or thereto and the assumption by such successor of the covenants and agreements of its predecessor hereunder or thereunder; (5) to modify the Facilities Agreement to amend the definition of "Special Facilities" therein, or to modify this Indenture to amend the definition of "Qualified Investments" as set forth in Article III herein, which modification does not, in the opinion of the Trustee, materially and adversely affect the interest of the registered owners of the Bonds; (6) to modify, amend or supplement this Indenture or any indenture supplemental hereto in such manner as to permit the qualification hereof and thereof under the Trust Indenture Act of 1939 or any similar federal statute hereafter in effect or to permit the qualification of the Bonds for sale under the securities laws of the United States of America or any of the states of the United States of America, and to add to this Indenture or any indenture supplemental thereto such other terms, conditions and provisions as may be permitted by said Trust Indenture Act of 1939 or similar federal statute; (7) to modify or amend such provisions herein or therein in a manner in which, in the opinion of Bond Counsel, is necessary in order to assure the exclusion from gross income of interest on the Bonds pursuant to section 103(a) of the Code; or (8) to make any other change herein or therein which does not, in the opinion of the Trustee, materially and adversely affect the interest of the registered owners of the Bonds, except that any such change to the Guaranty will not be effective unless, in the opinion of counsel delivered to the Trustee, such change will not materially and adversely affect the interest of the registered owners of the Bonds. (B) Consent of Majority of Bondholders. With the consent of the Company, the parties to this Indenture may, or with the consent of the Trustee, the parties to the Facilities Agreement may, at any time, enter into indentures supplemental to this Indenture or amendments to this Indenture or the Facilities Agreement amending, modifying, adding to or eliminating any of the provisions hereof or thereof but, if such supplement or amendment is not of the character described in Paragraph (A) above, only with the consent of the registered owners of not less than a majority of the aggregate principal amount of the Outstanding Bonds. (C) Consent of All Bondholders. Notwithstanding the foregoing, no supplement or amendment to this Indenture or amendment to the Guaranty or the Facilities Agreement shall, without the consent of the registered owner of each Outstanding Bond so affected, (i) extend the maturity date of any Bond, or reduce the rate or extend the time of payment of interest thereon, or reduce the principal amount thereof, or reduce any premium payable upon the redemption thereof, or extend or reduce the amount of any mandatory redemption requirement, or change the method of calculation of interest on the Bonds, (ii) deprive such registered owner of the lien hereof on the revenues pledged hereunder and on the Trust Estate, (iii) decrease the amounts payable by the Company under Section 502 of the Facilities Agreement or under the terms of the Guaranty, (iv) reduce the aggregate principal amount of Bonds the registered owners of which are required to approve any such supplement to this Indenture or amendment to this Indenture or the Facilities Agreement or the Guaranty, (v) increase the percentage of the aggregate principal amount of Bonds the registered owners of which are required to direct the Trustee to accelerate the maturity of the Bonds, or (vi) provide a privilege or priority of any Bond over any other Bond. In addition to the foregoing, this Indenture shall not be amended in contravention of the provisions of Article VIII(E) hereof. (D) Effective Date of Amendment. The Trustee shall establish a record date for purposes of approval of any such amendment or supplement described in Paragraphs (B) and (C) of this Article, and shall cause notice of such record date and such proposed amendment to be given in the same manner as notices of redemption are given by the Trustee. Such notice shall briefly set forth the nature of the proposed amendment and shall state that copies thereof are on file at the Designated Trust Office for inspection by all registered owners. If, within 60 days (or such longer period as shall be prescribed by the Company) following the mailing of such notice, the registered owners of the requisite aggregate principal amount of the Bonds Outstanding at the time of the record date established for such purpose shall have consented to and approved such amendment, no registered owner of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the parties to such amendment from adopting the same or from taking any action pursuant to the provisions thereof. Upon receipt of the consent of the registered owners of the requisite aggregate principal amount of the Bonds Outstanding, the relevant parties may execute such amendment. The consent of a registered owner shall be evidenced by an instrument executed by such registered owner, delivered to the Trustee, which instrument shall refer to the proposed amendment described in said notice and shall specifically consent to and approve such amendment. Any consent given by a registered owner as of such record date shall be irrevocable for a period of six months from the date such consent is given, and shall be conclusive and binding upon all future registered owners of the same Bond during such period. Such consent may be revoked at any time after six months from the date such consent was given by such registered owner, or by a successor in title, by filing notice thereof with the Authority, the Company and the Trustee, but such revocation shall not be effective if the registered owners of the requisite aggregate principal amount of the Bonds Outstanding have, prior to the attempted revocation, consented to and approved such amendment. (E) Opinion of Bond Counsel. Prior to executing any amendment to this Indenture, the Trustee shall receive an opinion of Bond Counsel substantially to the effect that such amendment (i) does not violate the laws of the State of Texas and (ii) will not materially adversely affect the treatment of the interest on the Bonds as excludable from the gross income of the Bondholders under applicable provisions of the Code. ARTICLE X MISCELLANEOUS PROVISIONS (A) Proof of Execution. Any request, direction, consent, or other instrument required by this Indenture to be signed or executed by Bondholders may be in any number of concurrent writings of similar tenor and may be signed or executed by such Bondholders in person or by an agent appointed in writing. Proof of the execution of any such instrument, or of the writing appointing such agent, if made in the following manner, shall be sufficient for any purpose of this Indenture and shall be conclusive in favor of the Trustee with regard to any action taken by it under such instrument. The fact, date, and due authorization of the execution by any person of any such instrument may be proved by the certificate of any officer in any jurisdiction, who, by the laws thereof, has power to take acknowledgments within such jurisdiction, to the effect that the person signing such instrument acknowledged before him the execution thereof, or by an affidavit of a witness to such execution. (B) Proof of Ownership. The fact of ownership of the Bonds by any Bondholder, the amount and numbers of such Bonds, and the date of his holding same shall be conclusively proved by the appropriate entries in the Registration Books. (C) Action Binding on Successor. Unless otherwise provided in this Indenture, any request or consent of any Bondholder shall bind every future Bondholder of the same Bond, or any Bond issued in substitution or replacement therefor, in respect of anything done by the Trustee in pursuance of such request or consent. In the event of the dissolution of the Authority, all of the covenants, stipulations, promises, and agreements in this Indenture contained by, on behalf of, or for the benefit of the Authority, shall bind or inure to the benefit of the successor or successors of the Authority from time to time and any officer, board, or commission to whom or to which any power or duty affecting such covenants, stipulations, promises, and agreements shall be transferred by or in accordance with law. (D) Nonpresentment and Unclaimed Funds. If any Bond shall not be presented for payment when the principal thereof becomes due, either at maturity or at the date fixed for redemption thereof or otherwise, all liability of the Authority and the Company to the owners thereof and to the Trustee for the payment of such Bond shall forthwith cease, determine, and be completely discharged whenever funds sufficient to pay for the principal of, premium, if any, and interest on such Bond shall be paid, or caused to be paid to the Trustee by the Company as provided in this Indenture, and such funds shall be segregated by the Trustee and held in trust for the benefit of the registered owner of such Bond, who shall thereafter be restricted exclusively to such funds for the satisfaction of any claim of whatever nature relating to such Bond. Any money deposited with the Trustee in trust for the payment of the principal of, premium, if any, or interest on any Bond remaining unclaimed for three years after such principal of, premium, if any, or interest on such Bond has become due and payable shall, subject to any unclaimed property laws of the State of Texas, and upon receipt of indemnification reasonably satisfactory to the Trustee, be paid to the Company; provided, however, that before the Trustee shall be required to make any such repayment, the Trustee may at the expense of the Company cause to be published at least once, in a financial newspaper or journal which is of general circulation in the Borough of Manhattan in The City of New York, New York, and is customarily published at least once a day for at least five days in each calendar week, a notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. After the payment of such unclaimed moneys to the Company, the owner of such Bond shall thereafter look (to the extent of any amount so repaid to the Company) only to the Company for the payment thereof, and all liability of the Trustee with respect to such money shall thereupon cease, and the Company shall not be liable for any interest thereon and shall not be regarded as a trustee of such moneys. (E) Destruction of Bonds. Upon the surrender to the Trustee of any Bonds acquired or redeemed or paid at maturity by the Authority, the same shall forthwith be cancelled and destroyed by the Trustee in accordance with its customary procedures, and the Trustee shall, from time to time, deliver its certificate of such destruction to the Authority and the Company. (F) No Third-Party Beneficiaries. Except as herein otherwise expressly provided, nothing in this Indenture express or implied is intended or shall be construed to confer upon any person, firm, or corporation other than the Company, the Authority, the Trustee, and the Bondholders, any right, remedy, or claim, legal or equitable, under or by reason of this Indenture or any covenant, condition, or stipulation contained herein. (G) Severability. In case any one or more of the provisions of this Indenture or of the Bonds shall be held to be invalid or ineffective as to any person or circumstance, the remainder thereof and the application of such provision to persons or circumstances other than those as to which it is held invalid shall not be affected thereby. (H) Governing Law. The validity, interpretation, and performance of this Indenture shall be governed by the laws of the State of Texas. (I) Addresses. All notices, certificates, requests, or other communications hereunder shall be sufficiently given and shall be deemed given, unless otherwise required by this Indenture, when delivered by United States mail, first-class, postage prepaid, or Federal Express overnight priority delivery, or such other method as may be agreed upon by the parties to such notice, addressed as follows: if to the Authority, 1000 Throckmorton, Fort Worth, Texas 76102, Attention: City Manager; if to the City, 1000 Throckmorton, Fort Worth, Texas 76102, Attention: City Attorney; if to the Company, Federal Express Corporation, 2007 Corporate Avenue, Memphis, Tennessee 38132, Attention: Vice President and Treasurer, with a copy of such notice to be sent in the same manner to Federal Express Corporation, 1980 Nonconnah Blvd., Memphis, Tennessee 38132, Attention: Legal Department, Managing Director, Contracts and Business Transactions, and to Federal Express Corporation, 2003 Corporate Avenue, Memphis, Tennessee 38132, Attention: Vice President, Properties; and if to the Trustee, One First National Plaza, Suite 0126, Chicago, Illinois 60670-0126, Attention: Corporate Trust Services Division. A duplicate copy of each notice, certificate, request, or other communication given hereunder to the Authority, the City, the Company, or the Trustee shall also be given to the others. The Company, the City, the Authority, and the Trustee may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates, requests or other communications shall be sent. (J) Notice to Department of Commerce. If (i) the Company fails to timely make or pay any Special Facilities Rental under the Facilities Agreement, (ii) an Event of Default has occurred, or (iii) upon receiving notice that the interest on the Bonds is, or may be, subject to federal income taxation, the Trustee promptly shall inform the Department of such an occurrence, by sending written notice to the following address: Texas Department of Commerce Attention: Executive Director P. O. Box 12728 Austin, Texas 78711 or the latest address specified by the Department. (K) Counterparts. This Indenture may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. (L) Captions. In this Indenture, unless the context otherwise requires: (1) The terms "hereby", "hereof", "hereto", "hereunder", and any similar terms, as used in this Indenture, refer to this Indenture, and the term "hereafter" shall mean after, and the "heretofore" shall mean before the date of this Indenture. (2) Words of the masculine gender shall mean and include correlative words of the feminine and neuter genders and words importing the singular number shall mean and include the plural number and vice versa. (3) Any headings preceding the texts of the several Articles and Paragraphs of this Indenture, and any table of contents appended hereto, shall be solely for convenience of reference and shall not constitute a part of this Indenture, nor shall they affect its meaning, construction or effect. (4) All references herein to particular Articles or Paragraphs are references to the Articles or Paragraphs of this Indenture, and reference herein to any exhibit means an exhibit attached to this Indenture. (5) Reference to any documents means that document as amended or supplemented from time to time in accordance with its terms and, where applicable, the Facilities Agreement, and reference to any party to a documents means that party and its permitted successors and assigns. (M) Company Direction. Whenever, so long as there is no Event of Default which has occurred and is continuing under the Facilities Agreement, after a reasonable request by the Company, the Authority shall fail, refuse or neglect to give any direction to the Trustee or to require the Trustee to take any other action that the Authority is required to have the Trustee take pursuant to the provisions of the Facilities Agreement or this Indenture, the Company instead of the Authority may give any such direction to the Trustee or require the Trustee to take any such action. Upon receipt by the Trustee of a written notice signed by an Authorized Company Representative stating that the Company has made reasonable request of the Authority, and that the Authority has failed, refused or neglected to give any direction to the Trustee or to require the Trustee to take any such action, the Trustee is hereby irrevocably empowered and directed to accept such direction from the Company as sufficient for all purposes of this Indenture. Except with respect to the Authority's rights to fees, expenses and indemnification pursuant to Section 901 of the Facilities Agreement, the Company shall have the direct right to cause the Trustee to comply with any of the Trustee's obligations under this Indenture to the same extent that the Authority is empowered so to do, and the Trustee shall incur no liability for action taken by it in good faith in accordance with the Company's directions pursuant to this Paragraph. [THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY] IN WITNESS WHEREOF, the Authority, acting through its Board of Directors, has caused this Indenture to be executed in its name, and for and on its behalf, by the President or Vice President of the Authority and attested by the Secretary of the Authority, and its corporate seal to be hereunto affixed; and the Trustee, to evidence its acceptance of the trusts hereby created and vested in it, has caused this Indenture to be executed in its name, and for and on its behalf by an Assistant Vice President, all as of the date first above written. ALLIANCEAIRPORT AUTHORITY, INC., ISSUER By /s/ James Lane -------------------------------- President ATTEST: /s/ Jewel Woods ---------------------------- Secretary (SEAL) THE FIRST NATIONAL BANK OF OF CHICAGO, TRUSTEE By /s/ Leland Hansen --------------------------------- Title: Assistant Vice President EXHIBIT A FORM OF BOND NO. R-_____________ PRINCIPAL AMOUNT $_______ UNITED STATES OF AMERICA STATE OF TEXAS ALLIANCEAIRPORT AUTHORITY, INC. SPECIAL FACILITIES REVENUE BOND, SERIES 1996 (FEDERAL EXPRESS CORPORATION PROJECT) INTEREST RATE DATED DATE MATURITY DATE CUSIP NO. - ------------- ---------- ------------- --------- _______% APRIL 1, 1996 ______________ __________ ON THE MATURITY DATE specified above, ALLIANCEAIRPORT AUTHORITY, INC. (the "Authority"), being a nonstock, nonprofit industrial development corporation organized and existing under the laws of the State of Texas, including particularly the Development Corporation Act of 1979, Article 5190.6, V.A.T.C.S., as amended (the "Act"), and acting on behalf of the City of Fort Worth, Texas (the "City") hereby promises to pay to (hereinafter called the "registered owner") the principal amount of DOLLARS and to pay interest on the unpaid principal amount hereof from the Dated Date set forth above, on October 1, 1996 and semiannually thereafter on each April 1 and October 1 to the Maturity Date specified above, or the date fixed for redemption prior to maturity, and on such Maturity Date, at the Interest Rate per annum specified above; except that if the date of the authentication of this Bond is later than the first Record Date (hereinafter defined), such principal amount shall bear interest from the interest payment date next preceding the date of authentication, unless such date of authentication is after any Record Date but on or before the next following interest payment date, in which case such unpaid principal amount shall bear interest from such next following interest payment date. Interest on this Bond shall be calculated on the basis of a year of 360 days and twelve 30-day months. THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON this Bond are payable in lawful money of the United States of America, without exchange or collection charges. Payment of principal of, premium, if any, interest on this Bond shall be made by The First National Bank of Chicago (the "Trustee") in its capacity as the paying agent for this Bond to the registered owner hereof appearing on the Registration Books, as hereinafter described, on the fifteenth day of the month next preceding each such interest payment date (the "Record Date"), by check or draft mailed, to such registered owner, at its address as it appears on the Registration Books kept by the Trustee, in its capacity as registrar for this Bond, as hereinafter described, at the close of business on the Record Date; provided, however, upon the written request of any registered owner of at least $1,000,000 in principal amount of Bonds, given in accordance with the terms of the hereinafter defined Indenture, all payments of principal, premium, if any, and interest on the Bonds shall be paid by wire transfer in immediately available funds to an account in the continental United States designated by the registered owner. It shall be the duty of each registered owner to notify the Trustee in writing of the address to which payment shall be mailed. For so long as the registered owner of a Bond is determined in accordance with the book- entry-only system of The Depository Trust Company ("DTC"), payments of principal, premium, if any, and interest on the Bond shall be made in accordance with the arrangements between DTC and the Authority, all in accordance with the terms of the Indenture. If the registered owner of a Bond is determined to be any other securities depository, payments of principal, premium, if any, and interest on the Bonds shall be made in accordance with the arrangements between such securities depository and the Authority, all in accordance with the terms of the Indenture. THIS BOND is one of a Series of bonds dated as of the Dated Date (the "Bonds"), authorized and issued in an aggregate principal amount of $___,000,000 FOR THE PURPOSE OF PROVIDING A PORTION OF THE COST OF THE ACQUISITION, CONSTRUCTION, EQUIPPING AND FURNISHING OF AN EXPRESS CARGO PACKAGE SORTING AND DISTRIBUTION FACILITY AT ALLIANCE AIRPORT (THE "SPECIAL FACILITIES") WITHIN THE BOUNDARIES OF THE CITY FOR USE BY FEDERAL EXPRESS CORPORATION, A DELAWARE CORPORATION (THE "COMPANY"). THE OBLIGATION to pay the principal of, premium, if any, and interest on this Bond from the sources described below is solely and exclusively a special obligation of the Authority. No other public entity, including the State of Texas, or any other political subdivision of the State of Texas, or any other public body, is obligated, directly, indirectly, contingently, or in any other manner, to pay such principal, premium, or interest from any source whatsoever and that neither the full faith and credit nor the taxing power of the State of Texas, the City, or any other political subdivision of the State of Texas, is pledged to the payment of the principal or the interest on the Bonds. The registered owner hereof shall never have the right to demand payment of this Bond or the interest hereon out of any funds raised or to be raised by taxation, or from any other funds, and no representation is made herein with respect to the anticipated sufficiency of such sources. No property is encumbered by any lien or security interest for the benefit of the registered owner of this Bond. THE BONDS are subject to optional redemption by the Authority, at the direction of the Company, on and after April 1, 2006, at any time and from time to time, in whole or in part, upon written notice of the exercise of the option to redeem delivered to the Authority and the Trustee by the Company, at the redemption price (expressed as a percentage of principal amount) applicable to such redemption date as set forth in the table below plus accrued interest to the date fixed for redemption:
Redemption Period (all dates inclusive) Redemption - ------------------------------------ ------------ Price (%) ------------ April 1, 2006 to March 31, 2007 102 April 1, 2007 to March 31, 2008 101 April 1, 2008 and thereafter 100
THE BONDS are subject to redemption by the Authority, at the direction of the Company, at any time and from time to time, in whole or in part as described below, at a redemption price equal to 100% of the principal amount thereof, without premium, plus accrued interest thereon to the date fixed for redemption, upon the occurrence of any of the following events: (a) the Company shall have determined, as evidenced by a resolution adopted by the Company's Board of Directors, that the continued operation of the Special Facilities is impractical, uneconomical or undesirable for any reason, including, without limitation, the imposition upon the Company with respect to the Special Facilities or the operation thereof of unreasonable burdens or excessive liabilities, which shall be deemed to include, without limitation, the imposition or substantial increase of ad valorem property taxes or taxes on the leasing or use of the Special Facilities or on amounts payable with respect thereto; (b) all or substantially all of the Special Facilities shall have been damaged, destroyed, condemned or taken by eminent domain; or (c) the construction or operation of the Special Facilities shall have been enjoined or prevented or shall have otherwise been prohibited by, or shall conflict with, any order, decree, rule or regulation of any court or of any Federal, state or local regulatory body, administrative agency or other governmental body. To exercise any such option the Authority, at the direction of the Company, shall give written notice to the Trustee, which notice shall specify a redemption date, which date may not be more than 120 days nor less than 45 days after said notice is given, and shall further specify that, as determined by the Company, one or more of such events has occurred or one or more of such conditions is continuing, and such determination shall be conclusive. THE BONDS shall be redeemed by the Authority in whole at a redemption price equal to 100% of the principal amount thereof, without premium, plus accrued interest to the redemption date, within 90 days following receipt by the Trustee of written notice from a current or former registered owner thereof or the Company of (a) the issuance of a published or private ruling or a technical advice memorandum by the Internal Revenue Service in which the Company has participated or has been given the opportunity to participate, and which ruling or memorandum the Company, in its discretion, does not contest or from which no further right of judicial review or appeal exists, or (b) a determination from which no further right of appeal exists of any court of competent jurisdiction in the United States in a proceeding in which the Company has participated or has been a party, or has been given the opportunity to participate or be a party (either such event being a "Determination of Taxability"), in either case, to the effect that, as a result of a failure to observe any covenant or agreement in the Facilities Agreement (hereinafter defined) or the inaccuracy of any representation or warranty therein, the interest payable on the Bonds is included in the gross income, of the holders thereof for federal income tax purposes, other than a person who is a "substantial user" or a "related person" of such substantial user within the meaning of the Internal Revenue Code of 1986, as amended (the "Code"); provided, however, that no such Determination of Taxability shall be considered to exist unless (i) the registered owner or former registered owner of the Bond involved in such proceeding or action (a) gives the Company and the Trustee prompt notice of the commencement thereof and (b) (if the Company agrees to pay all expenses in connection therewith) offers the Company the opportunity to control unconditionally the defense thereof and (ii) either (a) the Company does not agree within 30 days of receipt of such offer to pay such expenses and liabilities and to control such defense or (b) the Company shall exhaust or choose not to exhaust all available proceedings for the contest, review, appeal or rehearing of such decree, judgment or action which the Company determines to be appropriate. No Determination of Taxability described above will result from the inclusion of interest on any Bond in the computation of minimum or indirect taxes. All of the Bonds shall be redeemed upon a Determination of Taxability as described above, unless, if in the opinion of Bond Counsel, or such other nationally recognized bond counsel as may be mutually acceptable to the Authority and the Company, redemption of a portion of the Bonds would have the result that interest payable on the remaining Bonds outstanding after the redemption would not be so included in any such gross income, only such portion shall be redeemed. PRIOR TO THE DATE FIXED FOR ANY REDEMPTION of Bonds prior to their scheduled maturity, the Trustee shall cause a notice of such redemption to be given in the manner described in the Indenture. WITH RESPECT TO any optional redemption of the Bonds, as described above, unless moneys sufficient to pay the principal of, premium, if any, and interest on the Bonds to be redeemed shall have been received by the Trustee prior to the giving of such notice of redemption, such notice shall state that said redemption shall be conditional upon the receipt of such moneys by the Trustee on or prior to the date fixed for such redemption. If such moneys are not received, such notice shall be of no force and effect, the Authority shall not redeem such Bonds and the Trustee shall give notice, in the manner in which the notice of redemption was given, that such moneys were not so received and that the Bonds were not so redeemed. IF LESS THAN ALL the Bonds are to be called for redemption under any redemption provision set forth herein permitting such partial redemption, the particular Bonds to be redeemed shall be selected by the Trustee by lot or such other customary method chosen by the Trustee, in the principal amounts (in integral multiples of $5,000) designated to the Trustee by the Company on behalf of the Authority or otherwise required by the Indenture. IF THE DATE FOR THE PAYMENT of the principal of, premium, if any, or interest on this Bond shall be a Sunday, a Saturday, a legal holiday, or a day on which banking institutions in the City of New York, New York, the City of Memphis, Tennessee, or the city where the Designated Trust Office of the Trustee is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a day; payment on such date shall have the same force and effect as if made on the scheduled date of payment; and no interest shall accrue and be payable in respect of such payment from the scheduled date of payment to such date. THIS BOND OR ANY PORTION OR PORTIONS HEREOF IN ANY INTEGRAL MULTIPLE OF $5,000 may be assigned and shall be transferred only in the Registration Books upon the terms and conditions set forth in the Indenture. Among other requirements for such assignment and transfer, this Bond must be presented and surrendered to the Trustee at its Designated Trust Office, together with proper instruments of assignment, in form and with guarantee of signatures satisfactory to the Trustee, evidencing assignment of this Bond or any portion or portions hereof in any integral multiple of $5,000 to the assignee or assignees in whose name or names this Bond or any such portion or portions hereof is or are to be transferred and registered. The form of Assignment printed or endorsed on this Bond shall be executed by the registered owner, or its duly authorized attorney or representative, and may be deemed to conclusively evidence the assignment hereof. A new Bond or Bonds payable to such assignee or assignees, or to the previous registered owner in the case of the assignment and transfer of only a portion of this Bond, may be delivered by the Trustee in conversion of and exchange for this Bond, all in the form and manner as provided in the next paragraph hereof for the conversion and exchange of other Bonds. The registered owner of this Bond shall be deemed and treated by the Authority, the Company, and the Trustee as the absolute owner hereof for all purposes, including payment and discharge of liability upon this Bond to the extent of such payment, and the Authority, the Company and the Trustee shall not be affected by any notice to the contrary. ALL BONDS OF THIS SERIES are issuable solely as fully registered bonds, without interest coupons, in the denomination of any integral multiple of $5,000. As provided in the Indenture, this Bond, or any unredeemed portion hereof, may, at the request of the registered owner or the assignee or assignees hereof, be converted into and exchanged for a like aggregate principal amount of fully registered bonds, without interest coupons, payable to the appropriate registered owner, assignee, or assignees, as the case may be, having the same maturity date, and bearing interest at the same rate, in any denomination or denominations in any integral multiple of $5,000 as requested in writing by the appropriate registered owner, assignee, or assignees, as the case may be, upon surrender of this Bond to the Trustee for cancellation, all in accordance with the form and procedures set forth in the Indenture. The Company shall pay the Trustee's standard or customary fees and charges for transferring, converting, and exchanging any Bond or portion thereof, but the one requesting such transfer, conversion, or exchange shall pay any taxes or governmental charges required to be paid with respect thereto as a condition precedent to the exercise of such privilege of transfer, conversion or exchange. The Trustee shall not be required to make any such transfer, conversion, or exchange with respect to any Bond or any portion thereof called for redemption prior to maturity, within 45 days prior to its redemption date. WHENEVER the beneficial ownership of this Bond is determined by a book entry at a securities depository for the Bonds, the foregoing requirements of holding, delivering or transferring this Bond shall be modified to require the appropriate person or entity to meet the requirements of the securities depository as to registering or transferring the book entry to produce the same effect. IN THE EVENT any Trustee for the Bonds is removed, resigns, or otherwise ceases to act as such, the Indenture provides procedures for the appointment of a successor therefor, and for written notice thereof to be mailed to the registered owners of the Bonds. IT IS HEREBY certified and covenanted that this Bond has been duly and validly authorized, issued, and delivered; that all acts, conditions, and things required or proper to be performed, exist, and be done precedent to or in the authorization, issuance, and delivery of this Bond have been performed, existed, and have been done in accordance with law; that this Bond is a special revenue obligation of the Authority, with the principal of, premium, if any, and interest on this Bond being payable solely from (except to the extent payable from amounts attributable to proceeds of the Bonds), and secured by a first lien on and pledge of, the Trust Estate, as defined in the Indenture, including specifically the payments (the "Special Facilities Rentals") to be made by the Company pursuant to the Land and Special Facilities Lease Agreement between the Authority and the Company, dated as of April 1, 1996 (the "Facilities Agreement") and held under the Indenture. The Company has agreed and is unconditionally obligated to make Special Facilities Rentals to the Trustee for deposit into the Debt Service Fund created pursuant to the Indenture in amounts sufficient to pay and redeem, or provide for the payment and redemption of, the principal of, premium, if any, and interest on this Bond, and the Series of which it is a part. THE BONDS are secured by a Trust Indenture, dated as of April 1, 1996 (the "Indenture"), whereunder the Trustee, or its successor, is custodian of the Debt Service Fund and is obligated to enforce the rights of the owners of the Bonds and to perform other duties in the manner and under the conditions stated in the Indenture and in the Resolution. In case an "Event of Default", as defined in the Indenture, shall occur, the principal of the Bonds then outstanding may be declared to be due and payable immediately upon the conditions and in the manner provided in the Indenture. The registered owner of this Bond shall have no right to enforce the provisions of the Indenture, or to institute an action, suit, or proceeding at law or in equity to enforce the covenants therein, or to institute, appear in, or defend any action, suit, or proceeding with respect thereto, except as provided in the Indenture. Anything in the Indenture to the contrary notwithstanding, the registered owner of this Bond shall have a right of action to enforce the payment of the principal of, premium, if any, and interest on this Bond on or after the same shall have become due at the place, from the sources, and in the manner expressed in the Indenture. In addition, the registered owners shall be entitled to the benefits of a Guaranty from the Company to the Trustee, dated as of April 1, 1996 (the "Guaranty"). Reference is hereby made to the Indenture for the provisions with respect to the nature and extent of the security for the Bonds; the rights, duties, and obligations of the Authority, the Trustee, the Company, and the registered owners of the Bonds; the terms upon which such Bonds are issued and secured; and the modification of any of the foregoing. BY BECOMING the registered owner of this Bond, the registered owner thereby acknowledges all of the terms and provisions of the Indenture, agrees to be bound by such terms and provisions, acknowledges that the Facilities Agreement, the Guaranty and the Indenture are available for inspection at the Designated Trust Office in Chicago, Illinois of the Trustee, and agrees that the terms and provisions of this Bond, the Facilities Agreement and the Indenture constitute a contract between each registered owner hereof and the Authority. THE AUTHORITY has reserved the right to amend the Indenture and the Facilities Agreement, and the Guaranty may be amended by the parties thereto, with the approval in some, but not all circumstances, of the registered owners of at least a majority in aggregate principal amount of the outstanding Bonds secured by the Indenture, all as provided in and subject to the provisions of the Indenture. IN WITNESS WHEREOF, this Bond has been signed with the (manual) (facsimile) signature of the President or Vice President of the Board of Directors of the Authority, and countersigned with the (manual) (facsimile) signature of the Secretary of the Board of Directors of the Authority, and the official seal of the Authority has been duly impressed, or placed in facsimile, on this Bond. ____________________________ ______________________________ Secretary, President, Board of Directors Board of Directors (Authority's Seal) FORM OF TRUSTEE'S AUTHENTICATION CERTIFICATE -------------------------------------------- TRUSTEE'S AUTHENTICATION CERTIFICATE It is hereby certified that this Bond has been issued under the provisions of the Indenture described in the text of this Bond; and that this Bond has been issued in conversion of and exchange for or replacement of a Bond, Bonds, or a portion of a Bond or Bonds of an issue authorized by the Indenture described in the text of this Bond; and that the Indenture authorizing this Bond and other proceedings relating thereto were approved by the Attorney General of the State of Texas. Dated The First National Bank of Chicago, as Trustee _________________ By ____________________________ Authorized Representative FORM OF COMPTROLLER'S REGISTRATION CERTIFICATE ---------------------------------------------- TO BE ATTACHED TO INITIAL BONDS ------------------------------- COMPTROLLER'S REGISTRATION CERTIFICATE: REGISTER NO.________ I hereby certify that there is on file and of record in my office a certificate to the effect that this Bond has been examined, certified as to validity, and approved by the Attorney General of the State of Texas, and further that this Bond has been registered by the Comptroller of Public Accounts of the State of Texas. Witness my signature and seal this ___________________. ________________________________ Comptroller of Public Accounts of the State of Texas (Comptroller's Seal) FORM OF ASSIGNMENT ------------------ ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto: ________________________________________________________________________ (Please insert Social Security or Taxpayer Identification Number of Transferee) ________________________________________________________________________ (Please print or typewrite name and address, including zip code of Transferee) ________________________________ the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints __________________________________, attorney, to register the transfer of the within Bond on the books kept for registration thereof, with full power of substitution in the premises. Dated: Signature Guaranteed:
________________________________________________ ______________________________________________________ NOTICE: Signature(s) must be guaranteed by an NOTICE: The signature above must correspond "eligible guarantor institution" meeting the require- with the name of the registered owner as it appears ments of the Trustee, which requirements include upon the front of this Bond in every particular, with- membership or participation in STAMP or such other out alteration or any change. "signature guaranty program" as may be determined by the Trustee in addition to or in substitution for STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
THE FOLLOWING LEGEND SHALL BE PLACED ON THE BONDS AS THE AGGREGATE PRINCIPAL AMOUNT OF THE BONDS EXCEEDS $200 MILLION: Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. EX-10.67 8 GUARANTY FROM FEDERAL EXPRESS CORP. Exhibit 10.67 EXECUTION COPY ______________________________________________________________ GUARANTY FROM FEDERAL EXPRESS CORPORATION, as Guarantor TO THE FIRST NATIONAL BANK OF CHICAGO, as Trustee Dated as of April 1, 1996 AllianceAirport Authority, Inc. Special Facilities Revenue Bonds, Series 1996 (Federal Express Corporation Project) ______________________________________________________________ ARTICLE I REPRESENTATIONS AND WARRANTIES OF GUARANTOR Section 1.1 Guarantor Representations and Warranties.. 1 ARTICLE II COVENANTS AND AGREEMENTS Section 2.1 Obligations Guaranteed.................. 2 Section 2.2 Obligations Unconditional............... 2 Section 2.3 No Waiver or Set-Off.................... 4 Section 2.4 Guaranty Event of Default............... 4 Section 2.5 Waiver of Notice; Expenses.............. 4 Section 2.6 Dissolution or Merger of the Guarantor.. 4 Section 2.7 Benefit and Enforcement................. 5 ARTICLE III NOTICES Section 3.1 Notices................................. 5 ARTICLE IV MISCELLANEOUS Section 4.1 Effective Date; Termination............. 5 Section 4.2 Remedies Not Exclusive.................. 5 Section 4.3 Amendments.............................. 5 Section 4.4 Entire Agreement; Counterparts.......... 5 Section 4.5 Severability............................ 5 Section 4.6 Reinstatement........................... 5 Section 4.7 Governing Law........................... 6
GUARANTY THIS GUARANTY made and entered into as of April 1, 1996 from FEDERAL EXPRESS CORPORATION, a corporation duly organized and existing under the laws of the State of Delaware and having its principal office at 2005 Corporate Avenue, Memphis, Tennessee 38132 (the "Guarantor"), to THE FIRST NATIONAL BANK OF CHICAGO, a banking association duly organized and existing under the laws of the United States of America, and having its principal corporate trust office in Chicago, Illinois, as trustee (the "Trustee"), under the Indenture referred to below. WITNESSETH: WHEREAS, the AllianceAirport Authority, Inc., a nonprofit industrial development corporation created and existing under the laws of the State of Texas (the "Authority") intends to issue its Special Facilities Revenue Bonds, Series 1996 (Federal Express Corporation Project), in the aggregate principal amount of $249,540,000 (the "Bonds") under and pursuant to a Trust Indenture (the "Indenture"), dated as of April 1, 1996, between the Authority and the Trustee; WHEREAS, the proceeds derived from the issuance and sale of the Bonds are to be used to finance all or part of the cost of acquiring, constructing, equipping and furnishing certain facilities described in the hereinafter defined Facilities Agreement to be located at an airport commonly known as "Alliance Airport", which facilities are to be leased by the Authority to the Guarantor under a Land and Special Facilities Lease Agreement of even date herewith (the "Facilities Agreement") by and between the Authority and the Guarantor; WHEREAS, the Guarantor desires that the Authority issue the Bonds and apply the proceeds as aforesaid and is willing to enter into this Guaranty in order to induce the Authority to issue the Bonds, to enhance the marketability of the Bonds and thereby achieve interest cost and other savings thereto, and in order to provide an inducement to the purchase of the Bonds by all who shall at any time become the registered owners of the Bonds (collectively, the "Bondholders"); and WHEREAS, all terms used in this Guaranty which are defined in the Facilities Agreement have the same meanings in this Guaranty which are assigned to such terms in the Facilities Agreement. NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guarantor does hereby represent, warrant, covenant and agree with the Trustee for the benefit of the Bondholders as follows: 1 ARTICLE I REPRESENTATIONS AND WARRANTIES OF GUARANTOR Section 1.1 Guarantor Representations and Warranties. The Guarantor does hereby represent and warrant that it is a corporation duly incorporated and in good standing under the laws of the State of Delaware, has the power to enter into and perform this Guaranty and to own its corporate property and assets, has duly authorized the execution and delivery of this Guaranty by proper corporate action and neither this Guaranty, the authorization, execution, delivery and performance hereof will violate in any material respect any provision of law, any order of any court or agency of government or any agreement, indenture or other instrument to which the Guarantor is a party or by which it or its property is bound, or in any material aspect be in conflict with or result in a breach of or constitute a default under any indenture, agreement or other instrument or any provision of its restated certificate of incorporation, bylaws, or any other requirement of law applicable to the Guarantor. This Guaranty constitutes the legal, valid and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms, except as the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general equitable principles. ARTICLE II COVENANTS AND AGREEMENTS Section 2.1 Obligations Guaranteed. (a) The Guarantor hereby unconditionally guarantees to the Trustee for the benefit of the Bondholders the full and prompt payment of the principal of, premium, if any, and interest on the Bonds and, to the extent permitted by law, interest on overdue interest or premium, when and as the same shall become due and payable as provided in the Indenture, whether at the stated maturity thereof, by acceleration, call for redemption or otherwise. All payments by the Guarantor hereunder shall be paid in lawful money of the United States of America. Each and every default in payment of the principal of, premium, if any, or interest on any Bond, or interest on overdue interest or premium, shall give rise to a separate cause of action hereunder and separate suits may be brought hereunder as each cause of action arises. (b) The Guarantor further agrees that this Guaranty constitutes an absolute, unconditional, present and continuing guaranty of payment and not of collection, and waives any right to require that any resort be had by the Trustee or the Bondholders to pursue (1) the Trustee's or any Bondholder's rights against any 2 other party, (2) any other right or remedy available to the Trustee or any Bondholder by contract, applicable law or otherwise or (3) any security (other than moneys on deposit in the Funds or Accounts held by the Trustee under the Indenture) held by or for the benefit of the Bondholders for payment of the principal of, premium, if any, or interest on the Bonds, or interest on overdue interest or premium on the Bonds. Section 2.2 Obligations Unconditional. The obligations of the Guarantor under this Guaranty shall be absolute, unconditional and immediately enforceable, subject to the provisions of Section 2.4 herein, when each payment of principal, premium, if any, and interest is due and shall remain in full force and effect on the Guarantor and any successors thereof until the entire principal of, premium, if any, and interest on the Bonds and, to the extent permitted by law, interest on overdue interest and premium, shall have been paid in full or duly provided for in accordance with the Indenture and, to the extent permitted by law, such obligations shall not be affected, modified, released or impaired by any state of facts or the happening from time to time of any event, including, without limitation, any of the following, whether or not with notice to, or the consent of, the Guarantor: (a) the waiver, compromise, settlement, release or termination of any or all of the obligations, covenants or agreements of the Authority contained in the Indenture, or of the payment, performance or observance thereof, or the impossibility of performance or unenforceability of any of such obligations, covenants or agreements; (b) the failure to give notice to the Guarantor of the occurrence of an Event of Default under the terms and provisions of this Guaranty, the Indenture or the Facilities Agreement; (c) the transfer, assignment or mortgaging of all or any part of the interest of the Authority or the Guarantor in the Special Facilities or any failure of title with respect to the Authority's or the Guarantor's interest in the Special Facilities or the invalidity, unenforceability or termination of the Facilities Agreement; (d) the assignment of any of the obligations, covenants and agreements contained in this Guaranty; (e) the waiver, compromise, settlement, release or termination of the Authority's obligations, covenants or agreements contained in the Facilities Agreement, or of the payment, performance or observance thereof, or the impossibility of performance or unenforceability of any of such obligations, covenants or agreements; 3 (f) the waiver, compromise, settlement, release or termination of any of the obligations, covenants or agreements of the Guarantor under the Facilities Agreement, or of the payment, performance or observance thereof; (g) the extension of the time for payment of any principal of and premium, if any, or interest on any Bond, owing or payable on such Bond or of the time for performance of any obligations, covenants or agreements under or arising out of the Facilities Agreement or the Indenture or the extension or the renewal of either thereof; (h) the modification or amendment (whether material or otherwise) of any obligation, covenant or agreement set forth in the Facilities Agreement or the Indenture; (i) the taking or the omission to take any of the actions referred to in the Facilities Agreement, the Indenture, the Bonds or this Guaranty; (j) any failure, omission or delay on the part of the Authority or the Trustee to enforce, assert or exercise any right, power or remedy conferred on the Trustee, the Authority or any other person in this Guaranty, the Facilities Agreement or the Indenture, or any other act or acts on the part of the Trustee, the Authority or any of the Bondholders; (k) the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all the assets, marshalling of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition with creditors or readjustment of, or other similar proceedings affecting the Guarantor or the Authority or any or all of the assets of either of them, or any allegation or contest of the validity of this Guaranty, the Indenture or the Facilities Agreement, or the disaffirmance of this Guaranty, the Indenture or the Facilities Agreement in any such proceeding; it being specifically understood, consented and agreed to that this Guaranty shall remain and continue in full force and effect and shall be enforceable against the Guarantor to the same extent and with the same force and effect as if such proceedings had not been instituted, and it is the intent and purpose of this Guaranty that the Guarantor shall and does hereby waive all rights and benefits which might accrue to the Guarantor by reason of any such proceedings; (l) to the extent permitted by law, any event or action that would, in the absence of this clause, result in the release or discharge by operation of law of the Guarantor from the performance or observance of any obligation, covenant or agreement contained in this Guaranty; 4 (m) the default or failure of the Guarantor fully to perform any of its obligations set forth in this Guaranty; (n) the damage to, or condemnation, destruction, redelivery, repossession or surrender of, all or a portion of the Special Facilities or the abandonment, non-completion or curtailment of the Special Facilities, or the release, substitution or replacement of any property comprising all or a portion of the Special Facilities; (o) the release, substitution or replacement of any security pledged under the Indenture; (p) any determination of the illegality, irregularity, invalidity or unenforceability of, or any defect in, the Bonds, the Facilities Agreement or the Indenture or any of the provisions thereof; (q) any present or future law or order of any government (de jure or de facto) or of any agency thereof, purporting to reduce, amend or otherwise affect the Bonds or to vary any terms of payment thereof; (r) any claim of immunity on behalf of the Authority or any other obligor on the Bonds or with respect to any property of the Authority or any other obligor on the Bonds; or (s) any other circumstances which might otherwise constitute a legal or equitable discharge or defense of a surety or a guarantor. Section 2.3 No Waiver or Set-Off. (a) Nothing in this Guaranty shall be construed as a waiver by the Guarantor of any rights or claims it may have against the Authority or the Trustee under this Guaranty or otherwise, but any recovery upon such rights and claims shall be had from the Authority or the Trustee separately. (b) No act of commission or omission of any kind or at any time on the part of the Authority or the Trustee, or their successors and assigns, in respect of any matter whatsoever shall in any way impair the rights of the Trustee to enforce any right, power or benefit under this Guaranty, and no set-off, counterclaim, reduction, or diminution of any obligation, or any defense of any kind or nature (other than performance by the Guarantor of its obligations hereunder), which the Guarantor has or may have against the Authority or the Trustee or any assignee or successor thereof shall be available hereunder to the Guarantor. 5 Section 2.4 Guaranty Event of Default. (a) A "Guaranty Event of Default" shall exist if the Guarantor defaults in any guarantee referred to in Section 2.1(a) hereof and such default continues for one Business Day from the date such payment was due. At such time as the Trustee has notice of a Guaranty Event of Default hereunder, the Trustee shall notify the registered owners of such Guaranty Event of Default in the same manner as is provided in the Indenture. (b) Upon an event of default in payment of principal of or premium, if any, on any Bond when and as the same shall become due, whether at the stated maturity thereof, by acceleration, call for redemption or otherwise, or in the event of a default in the payment of any interest on any Bond when and as the same shall become due, the Trustee shall have the right to proceed first and directly against the Guarantor under this Guaranty without resorting to any security (other than moneys on deposit in the Funds or Accounts held by the Trustee under the Indenture) held by the Authority or the Trustee under the Indenture. (c) All moneys received by the Trustee pursuant to any right given or action taken under the provisions of this Guaranty shall, after payment of accrued fees and expenses of the Trustee and the cost and expenses of the proceedings resulting in the collection of such moneys and of the expenses, liabilities and advances incurred or made by the Trustee, be deposited in the Debt Service Fund (as established in the Indenture) for the benefit of the Bondholders and such moneys shall be applied in accordance with the terms of the Indenture. (d) The Trustee shall be under no obligation to institute any suit or to take any remedial action under this Guaranty, or to enter any appearance or in any way defend in any suit in which it may be made defendant, or to take any steps in the enforcement of any rights and powers under this Guaranty, until it shall be indemnified to its satisfaction by the Bondholders against any and all liability (including, without limitation, reasonable compensation for services, costs and expenses, outlays, and counsel fees and expenses and other disbursements) not due to its negligence or willful misconduct for any action so taken. Section 2.5 Waiver of Notice; Expenses. The Guarantor hereby expressly waives notice from the Trustee and the Bondholders of their acceptance and reliance on this Guaranty. The Guarantor agrees to pay all reasonable costs, expenses and fees, including all reasonable attorneys' fees and expenses which are incurred by the Trustee in enforcing this Guaranty or protecting the rights of the Trustee or the Bondholders following a Guaranty Event of Default on the part of the Guarantor, whether the same shall be enforced by suit or otherwise. Section 2.6 Dissolution or Merger of the Guarantor. Except as hereinafter provided, the Guarantor agrees that during the term of this Guaranty it will not 6 dissolve or otherwise dispose of all or substantially all of its assets and will not consolidate with or merge into another Person unless the surviving or transferee Person, as applicable, is, and after such transaction shall be, a solvent Person qualified to do business in the State and, concurrently with such transaction, irrevocably and unconditionally assumes in writing, by means of an instrument which is delivered to the Authority and the Trustee, all of the obligations of the Guarantor herein. Section 2.7 Benefit and Enforcement. This Guaranty shall not be deemed to create any right, or to be in whole or in part for the benefit of any person other than the Trustee, the Guarantor, the Bondholders, and their permitted successors and assigns. This Guaranty is entered into by the Guarantor for the benefit of the registered owners from time to time of the Bonds under the Indenture and may be enforced by or on behalf of the registered owners of the Bonds only by the Trustee by such actions, suits and proceedings, at law or in equity, as it may be advised shall be necessary or expedient to preserve and protect its interest and the interests of the Bondholders hereunder. However, the Trustee shall proceed to enforce this Guaranty on behalf of the Bondholders upon written request of the registered owners of not less than 25% in aggregate principal amount of the Bonds then outstanding and upon being indemnified for its expenses and any liability to be incurred by the Trustee other than liability arising from its willful misconduct or negligence in connection with any action so taken. ARTICLE III NOTICES Section 3.1 Notices. The provisions of Article X(I) of the Indenture shall govern the giving of any notice hereunder. ARTICLE IV MISCELLANEOUS Section 4.1 Effective Date; Termination. The obligations of the Guarantor hereunder shall arise absolutely and unconditionally upon the Closing Date. This Guaranty shall terminate on such date as the Indenture is discharged and satisfied in accordance with Article VIII of the Indenture. Section 4.2 Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Guaranty or now or hereafter 7 existing at law or in equity. No delay or omission to exercise any right or power accruing upon any Guaranty Event of Default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Trustee to exercise any remedy reserved to it in this Guaranty, it shall not be necessary to give any notice. In the event any provision contained in this Guaranty should be breached, and thereafter duly waived, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. No waiver, amendment, release or modification of this Guaranty shall be established by conduct, custom or course of dealing, but solely by an instrument in writing duly executed by the parties to this Guaranty. Section 4.3 Amendments. This Guaranty may be amended by the Guarantor and the Trustee only in accordance with the provisions of Article IX of the Indenture. Section 4.4 Entire Agreement; Counterparts. This Guaranty constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and may be executed simultaneously in several counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. Section 4.5 Severability. The invalidity or unenforceability of any one or more phrases, sentences, clauses or sections contained in this Guaranty shall not affect the validity or enforceability of the remaining portions of this Guaranty, or any part thereof. Section 4.6. Reinstatement. This Guaranty shall continue to be effective, or be reinstated, as the case may be, in respect of any of the obligations guaranteed hereunder if at any time payment or any part thereof, of such obligations is rescinded or must otherwise be restored or returned by any Bondholder or the Trustee on behalf of any Bondholder upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Authority or the Guarantor, or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Authority or the Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made. Section 4.7 Governing Law. THIS GUARANTY SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF TENNESSEE. 8 [THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY] 9 IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed in its name and behalf by its duly authorized officer as of the date first above written. FEDERAL EXPRESS CORPORATION, as Guarantor By: /s/ CHARLES M. BUCHAS, JR. ---------------------------- Name: Charles M. Buchas, Jr. ---------------------- Title: Vice President and Treasurer ---------------------------- THE FIRST NATIONAL BANK OF CHICAGO, as Trustee By: /s/ LELAND HANSEN ------------------ Name: Leland Hansen ------------- Title: Assistant Vice President ------------------------ 10 EX-10.68 9 LAND FACILITIES LEASE AGREEMENT Exhibit 10.68 EXECUTION COPY LAND AND SPECIAL FACILITIES LEASE AGREEMENT By and Between FEDERAL EXPRESS CORPORATION and ALLIANCEAIRPORT AUTHORITY, INC. Dated as of April 1, 1996 PARTIES ...................................................................... 1 ARTICLE I DEFINITIONS......................................................... 1 Section 101. Definitions...................................................... 1 ARTICLE II USE OF FACILITIES: REPRESENTATIONS AND WARRANTIES.................. 7 Section 201. Uses and Ownership of Facilities............................ 7 Section 202. Representations and Warranties by the Authority............. 8 Section 203. Representations and Warranties by the Lessee................ 8 ARTICLE III COMMENCEMENT AND COMPLETION OF FACILITIES; ISSUANCE OF BONDS............................. 10 Section 301. Plans and Specifications, Approvals, Construction, Construction Contracts; Utilities......................... 10 Section 302. Agreement to Issue Bonds; Application of Proceeds; the Lessee Required to Pay Costs of Construction if Bond Proceeds Insufficient............................. 12 Section 303. As-Built Drawings........................................... 12 Section 304. Cost of Construction and Preliminary Completion Certificates 12 Section 305. Establishment of the Completion Date, Other Completion Certificates.............................................. 12 Section 306. The Lessee to Pursue Remedies Against Contractors, Subcontractors and Suppliers and Their Sureties........... 13 Section 307. Construction of Additional Facilities....................... 13 Section 308. Ownership of Improvements................................... 14 Section 309. Form of Construction Contracts.............................. 14 ARTICLE IV TERM........................................................ 14 Section 401. Term........................................................ 14 Section 402. Rights at Expiration........................................ 14 Section 403. Expiration.................................................. 15 ARTICLE V RENTALS AND FEES............................................ 15 Section 501. Ground Rent................................................. 15 Section 502. Special Facilities Rental................................... 15 Section 503. Facilities Rental after Bonds are No Longer Outstanding..... 15 Section 504. Field Use Charges........................................... 16 Section 505. Time and Place of Payments.................................. 16 Section 506. Delinquent Rentals.......................................... 16 Section 507. Assignment of Rights........................................ 16
Section 508. Obligations of the Lessee Hereunder Unconditional........... 17 Section 509. Prepayment of Rentals....................................... 17 Section 510. Payments to Authority....................................... 17 ARTICLE VI OBLIGATIONS OF THE LESSEE................................... 17 Section 601. Net Lease................................................... 17 Section 602. Maintenance and Operation................................... 17 Section 603. Utilities................................................... 17 Section 604. Signs....................................................... 18 Section 605. Hazardous Materials......................................... 17 Section 606. Nondiscrimination........................................... 19 Section 607. Affirmative Action.......................................... 20 Section 608. Right to Use Airport........................................ 20 Section 609. [Intentionally Omitted]..................................... 20 Section 610. Mechanic's Liens............................................ 20 Section 611. The Lessee to Maintain its Corporate Existence; Conditions Under Which Exceptions Permitted.......................... 21 Section 612. Equipment................................................... 21 Section 613. Security Plan............................................... 21 Section 614. Tax Exemption............................................... 21 Section 615. The Lessee's Covenant Concerning the Bonds.................. 22 Section 616. The Lessee's Obligations Concerning SEC Rule 15c2-12........ 23 ARTICLE VII OBLIGATIONS OF THE AUTHORITY................................ 24 Section 701. Operation as a Public Airport............................... 24 Section 702. Ingress and Egress.......................................... 24 Section 703. Quiet Enjoyment of Leased Premises.......................... 24 Section 704. Maintenance and Operations.................................. 24 Section 705. No Federal Funds to be Spent on Leased Premises............. 24 Section 706. Expansion of Airport Boundaries to Include Contiguous Land.. 24 ARTICLE VIII RESERVATIONS................................................ 24 Section 801. Improvement, Relocation or Removal of Special Facilities.... 24 Section 802. Inspection of Leased Premises............................... 24 Section 803. Subordination to U.S. Government............................ 25 Section 804. War or National Emergency................................... 25 Section 805. No Liability of the Authority............................... 25 Section 806. No Warranty of Condition or Suitability..................... 25 Section 807. Responsibility for Contracts for Special Facilities and Payment of Special Facilities Rentals....................... 25 Section 808. [Intentionally Omitted]..................................... 25 Section 809. Consideration of Amendment.................................. 25
ARTICLE IX INDEMNITY AND INSURANCE..................................... 26 Section 901. Indemnification of Indemnified Parties...................... 26 Section 902. Indemnification of the Trustee.............................. 27 Section 903. Public Liability Insurance.................................. 27 Section 904. Fire and Extended Coverage Insurance........................ 27 Section 905. Application of Insurance Proceeds........................... 28 Section 906. Performance Bonds........................................... 28 Section 907. Right of the City or Trustee to Pay Insurance Premiums...... 28 ARTICLE X PREPAYMENT OF SPECIAL FACILITIES RENTALS.................... 28 Section 1001. In Connection with Optional Redemption of Bonds............. 28 Section 1002. In Connection with Defeasance of the Bonds.................. 28 Section 1003. In Connection with the Termination of this Agreement in the Event of Damage or Destruction or Condemnation............ 29 Section 1004. In Connection with a Partial Redemption..................... 29 Section 1005. In Connection with a Determination of Taxability............ 29 ARTICLE XI DAMAGE AND CONDEMNATION..................................... 29 Section 1101. Damage and Destruction...................................... 29 Section 1102. Condemnation................................................ 31 Section 1103. Destruction or Condemnation of Excluded Personal Property or Lessee Improvements.................................... 32 Section 1104. Taking or Condemnation by the City.......................... 32 Section 1105. Destruction or Condemnation of Leased Premises Other Than Special Facilities or Former Lessee Improvements....... 32 ARTICLE XII ADDITIONAL BONDS............................................ 33 Section 1201. Additional Bonds............................................ 33 Section 1202. Approval of State Agencies.................................. 33 ARTICLE XIII TERMINATION OF AGREEMENT BY THE LESSEE...................... 33 Section 1301. Termination by the Lessee................................... 33 ARTICLE XIV EVENTS OF DEFAULT........................................... 34 Section 1401. Events of Default........................................... 34 Section 1402. Remedies of the Trustee for Certain Events of Default....... 34 Section 1403. Remedies of the Authority on Default........................ 35 Section 1404. The Lessee to Remain Liable for Payments; Reletting......... 35
Section 1405. Disposition of Excluded Personal Property................... 35 Section 1406. No Remedy Exclusive......................................... 36 Section 1407. No Additional Waiver Implied By One Waiver; Consents to Waiver................................................. 36 Section 1408. Suspension.................................................. 36 Section 1409. Delay not a Waiver.......................................... 36 ARTICLE XV DEFAULT BY THE AUTHORITY.................................... 36 Section 1501. Default by the Authority; Remedies of the Lessee............ 36 ARTICLE XVI RIGHTS UPON TERMINATION..................................... 37 Section 1601. Fixed Improvements.......................................... 37 Section 1602. Excluded Personal Property.................................. 37 ARTICLE XVII ASSIGNMENT AND SUBLETTING................................... 37 Section 1701. Successors and Assignments.................................. 37 Section 1702. Subletting.................................................. 37 Section 1703. Transfer of Leased Premises by the Authority; Performance of Rights, Duties and Obligations of the Authority under this Agreement............................................ 37 Section 1704. Opinion of Bond Counsel Required............................ 38 ARTICLE XVIII GENERAL PROVISIONS.......................................... 38 Section 1801. Non-Interference with Operation of Airport.................. 38 Section 1802. Attorney's Fees............................................. 38 Section 1803. Taxes....................................................... 38 Section 1804. License Fees and Permits.................................... 38 Section 1805. Amendments to this Agreement................................ 39 Section 1806. Force Majeure............................................... 39 Section 1807. References to Bonds, the Authority, the Trustee and the Indenture Ineffective when Bonds are no Longer Outstanding............................................... 39 Section 1808. Modifications Hereof and of Indenture....................... 39 Section 1809. Paragraph Headings.......................................... 39 Section 1810. Interpretations............................................. 39 Section 1811. Notices..................................................... 39 Section 1812. Party's Consent............................................. 40 Section 1813. Nondisturbance by Authority and Trustee..................... 40 Section 1814. Counterparts................................................ 40 Execution Page ...............................................................41 Exhibit A Property Description........................................ A-1
Exhibit B Special Facilities.......................................... B-1 Exhibit C Insurance Form.............................................. C-1
LAND AND SPECIAL FACILITIES LEASE AGREEMENT THIS LAND AND SPECIAL FACILITIES LEASE AGREEMENT (hereinafter called this "Agreement") made and entered into as of April 1, 1996, by and between the AllianceAirport Authority, Inc. (the "Authority"), a nonstock, nonprofit industrial development corporation, created to act on behalf of the City of Fort Worth, a home-rule city and a political subdivision of the State of Texas (the "City"), pursuant to the Constitution and laws of the State of Texas, including particularly Article 5190.6, V.A.T.C.S., as amended (hereinafter called the "Development Corporation Act"), and Federal Express Corporation, a Delaware corporation with its principal office at Memphis, Tennessee and authorized to do business in the State of Texas (hereinafter called the "Lessee"). WITNESSETH: WHEREAS, the City owns and operates the Alliance Airport (hereinafter called "Airport"); and WHEREAS, the Lessee is primarily engaged in the business of distribution of express cargo and parcels; and WHEREAS, at the request of the Lessee, the Authority has acquired or will acquire simultaneously herewith and develop certain real estate described in EXHIBIT A hereto, and will acquire and construct thereon certain facilities described in EXHIBIT B hereto; and WHEREAS, in furtherance of the public purposes set forth in the Development Corporation Act, the Authority proposes to finance the costs of the project to be leased to the Lessee through the issuance of Special Facilities Revenue Bonds of the Authority issued under the Indenture herein defined; and WHEREAS, the Lessee desires to lease such real estate and improvements upon the terms and conditions hereinafter stated; NOW, THEREFORE, in consideration of the mutual covenants and considerations herein contained, the Authority lets and demises to the Lessee and the Lessee rents from the Authority the Leased Premises and all herein described rights incident thereto, and the Lessee and the Authority further agree and covenant as follows: ARTICLE I --------- DEFINITIONS ----------- Section 101. Definitions. In addition to terms defined elsewhere in this Agreement, the following terms, for the purposes of this Agreement, shall have the meanings set forth below: "Act of Bankruptcy" means the commencement of a bankruptcy or similar proceeding by or against the Lessee, including, but not limited to, the following: the making of a general assignment for the benefit of creditors, the commencing of a voluntary case under the Federal Bankruptcy Code or the filing of a petition thereunder, petitioning or applying to any tribunal for the appointment of a receiver, or any trustee for the Lessee or a substantial part of the assets of the Lessee, commencing any proceeding under any bankruptcy, reorganization, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect, or the appointment of a receiver or any trustee for the Lessee or any substantial part of any of the properties of the Lessee. "Airport" means the public transportation facility owned by and located within the City and known as Alliance Airport. "Architect" means Taylor Gardner Montgomery Architects, Inc. "Authority" means the AllianceAirport Authority, Inc., a nonstock, nonprofit industrial development corporation duly organized and operating under the laws of the State, including the Development Corporation Act, or any successor thereto or assign thereof. "Authorized Lessee Representative" means such officer or employee of the Lessee authorized by the Lessee to act on its behalf under this Agreement or the Indenture as certified to the Authority, the City and the Trustee in writing by the Lessee. "Board" or "Board of Directors" means the lawfully qualified board of directors of the Authority. "Bond Counsel" means McCall, Parkhurst & Horton L.L.P. and Kelly, Hart & Hallman, a Professional Corporation, or such nationally recognized bond counsel as may hereafter be selected by the Authority. "Bond Year" means each one year period beginning on the Closing Date, or any yearly anniversary thereof, and ending one year thereafter, until the Bonds are retired in full. "Bonds" means the AllianceAirport Authority, Inc. Special Facilities Revenue Bonds, Series 1996 (Federal Express Corporation Project) to be issued in the aggregate principal amount not to exceed $250,000,000. "Business Day" means any day which is not a Sunday, a Saturday, a legal holiday or a day on which banking institutions in the City of New York, New York, the City of Memphis, Tennessee, or the city in which the Designated Trust Office of the Trustee is located are authorized by law or executive order to close. "City" means the City of Fort Worth, Texas, a home-rule city organized and existing under the laws of the State. "Claims" means all claims, lawsuits, causes of action and other legal actions and proceedings brought against any Indemnified Party so long as the claim, lawsuit, cause of action or other legal action or proceeding, directly or indirectly, arises out of, results from, relates to or is based upon, in whole or in part: (a) the issuance, offering, sale, delivery or payment of the Bonds (except when arising out of, resulting from, relating to or based upon the information under the captions "The Authority", "The Airport", "The City" and "Tax Matters" contained in the preliminary official statement and the official statement relating to the Bonds), or (b) the design, construction, installation, operation, use, occupancy, maintenance or ownership of the Special Facilities or any part thereof. "Closing Date" means the date of issuance and delivery of the Bonds to the initial purchasers thereof in exchange for the purchase price therefor. "Code" means the Internal Revenue Code of 1986, together with any amendments thereto or successor federal income tax laws. "Commission" means the Securities and Exchange Commission of the United States of America. "Completion Date" means the date of completion of the acquisition and construction of the Special Facilities certified in accordance with Section 305 hereof. "Construction Fund" means the construction fund established with the Trustee pursuant to Article III of the Indenture. "Costs" means all costs incident to the purchase of the Land and the provision of the Special Facilities and the financing thereof now or hereafter permitted by the Development Corporation Act, including, without limitation, the cost of acquisition, construction, reconstruction, improvement, and expansion, including the cost of the acquisition of any land, rights-of-way, property rights, easements, and interests, the cost of machinery and equipment, financing charges, inventory, raw materials and other supplies, research and development costs, interest prior to and during construction and for one year after completion of construction (whether or not capitalized), cost of estimates and of engineering and legal services, plans, specifications, surveys, estimates of cost and of revenue, other expenses necessary or incident to determining the feasibility and practicability of acquiring, constructing, reconstructing, improving, and expanding the Special Facilities, administrative expense and such other expense as may be necessary or incident to the acquisition, construction, reconstruction, improvement and expansion thereof, the placing of the same in operation, and the financing or refinancing of the Special Facilities, including the refunding of any outstanding obligations, mortgages, or advances issued, made or given by any Person for any of the aforementioned costs. "Debt Service Fund" means the debt service fund established with the Trustee pursuant to Article III of the Indenture. "Department" means the Texas Department of Commerce, together with any successor under the Development Corporation Act. "Designated Trust Office" means the corporate trust office of the Trustee located in Chicago, Illinois, or such future location as shall be designated in writing by the Trustee to the Authority and the Lessee. "Disbursement Request" means a certificate signed by an Authorized Lessee Representative, which certificate shall state: (i) the requisition number, amount to be paid and the name and address of the Person to whom payment is to be made or to whom a reimbursable advance, if any, by the Company has been made; (ii) that there has been expended, or is being expended concurrently with the delivery of such certificate (or in the case of interest which the Trustee is directed to transfer from the Capitalized Interest Account of the Construction Fund to the Debt Service Fund, will be expended within the year following the date the Special Facilities is completed and placed in service) an amount on account of Costs of the Special Facilities at least equal to the amount set forth in such certificate; (iii) that no other certificate in respect of such expenditure is being or previously has been delivered to the Trustee; (iv) that no Event of Default (as defined herein) has occurred and is continuing; (v) to the extent such disbursement (a "reimbursement allocation") is to reimburse an expenditure (an "original expenditure") that was paid (X) from a source other than the proceeds of the Bonds and (Y) prior to the issue date of the Bonds, that such original expenditure is for a proper Cost of the Special Facilities and was incurred not more than 60 days prior to the Inducement Date and that the reimbursement allocation is being made not later than 18 months after the later of (A) the date on which such original expenditure was paid or (B) the date on which the property is placed in service or abandoned (but the date of such reimbursement allocation may not be more than three years after the date the original expenditure was paid); (vi) that at least 95% of all amounts previously disbursed from the Construction Fund to pay Costs of the Special Facilities (not including costs of issuance and any underwriters' discount) plus the amount requested by such certificate to be disbursed from the Construction Fund have been or will be used to provide "airport facilities" or other exempt facilities within the meaning of the Code and the Regulations in effect thereunder and applicable to the Bonds; and (vii) if applicable, that the sum of (A) all amounts previously disbursed from the Construction Fund to pay costs of issuance plus (B) the amount requested by such certificate to be disbursed from the Construction Fund, when added to other amounts already expended for the payment of such costs (including underwriters' discount), to pay costs of issuance does not exceed 2% of the issue price of the Bonds. "DTC" means The Depository Trust Company, New York, New York. "Environment, Health and Safety Requirements" means all of the terms and conditions of all permits, licenses, and other authorizations which are required under, and all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules, and timetables which are contained in, all federal, state and local laws (including rules, regulations, codes, judgments, orders, decrees, stipulations, injunctions, and demand letters issued, entered, promulgated or approved thereunder) relating to public health and safety, worker health and safety, or pollution or protection of the environment, including Laws (specifically those defined in Section 605 hereof as Environmental Laws) relating to emissions, discharges, releases, or threatened releases of Hazardous Materials into ambient air, surface water, ground water, or lands or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials. "Equipment" means tangible personal property that is not annexed to the Land as a fixture, and that was financed from moneys disbursed from the Construction Fund, or that was financed with moneys other than from moneys disbursed from the Construction Fund and donated in writing to and as part of the Airport, as the same shall be substituted or replaced from time to time in accordance with Subsection 612(a) hereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Excluded Personal Property" means tangible personal property that was financed from moneys other than moneys disbursed from the Construction Fund, that is not annexed to the Land as a fixture, that is not or has not been donated in writing to and as a part of the Airport, and that is not Equipment. "FAA" means the Federal Aviation Administration, or any successor thereto or assign thereof. "Facilities" means, collectively, the Leased Premises, the Lessee Improvements and the Excluded Personal Property. "Force Majeure" means Acts of God, strikes, lockouts or other industrial disturbances, acts of the public enemy, orders of any kind of the government of the United States of America, or of any state thereof, or any civil or military authority, insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, hurricanes, tornadoes, blue northers, storms, floods, washouts, droughts, arrests, restraining of government and people, civil disturbances, explosions, nuclear accidents, wars, partial or entire failure of utilities, shortages of labor, material, supplies or transportation, or any other cause not reasonably within the control of the party claiming inability to perform due to such cause. "Guaranty" means the Guaranty dated as of April 1, 1996 between the Lessee, as guarantor, and the Trustee. "Hazardous Materials" shall have the meaning ascribed to said term in Section 605 hereof. "Indemnified Parties" means the Authority, the City, and the Department, and the members, officers, directors, employees and agents (excluding Bond Counsel, counsel to the Authority, and the Manager) of each of such Persons, either individually or collectively. "Indenture" means the Trust Indenture dated as of April 1, 1996 between the Authority and The First National Bank of Chicago, as amended and supplemented, providing for the issuance of the Bonds. "Inducement Date" means January 4, 1994. "Interest Payment Date" means October 1, 1996 and each April 1 and October 1 thereafter until maturity or redemption of the Bonds. "Land" means the Primary Land (as described in Exhibit A hereto) and any additional land which is hereafter leased to the Lessee by the Authority pursuant to this Agreement by an amendment hereto or supplement hereof, or by the City at the Airport, as the case may be. "Laws" means and shall include, but not be limited to, the Comprehensive Environmental Response, Compensation and Liability Act, the Solid Waste Disposal Act, the Occupational Safety and Health Act, the Federal Water Pollution Control Act, the Clean Air Act, the Safe Drinking Water Act, the Toxic Substances Control Act, the Refuse Act, the Hazardous Materials Transportation Act, the Emergency Planning and Community Right-to-Know Act, the Federal Insecticide, Fungicide and Rodenticide Act, the Endangered Species Act, the National Environmental Policy Act, the Texas Clean Air Act, the Texas Solid Waste Disposal Act, the Texas Underground and Aboveground Storage Tanks Act, the Texas Water Code, and the Texas Hazardous Substances Spill Prevention Act. "Leased Premises" means: (i) the Land; (ii) the Special Facilities; (iii) any Lessee Improvements that have been conveyed to the Authority pursuant to the provisions of Section 308 hereof; and (iv) any land acquired at the request of the Lessee, or any other buildings, structures, additions, improvements, fixtures and facilities constructed on the Land, at the request of the Lessee, from time to time, other than Lessee Improvements. "Lessee" means Federal Express Corporation, a corporation duly organized and validly existing under the laws of the State of Delaware and qualified to do business in the State, or any successor thereto or assignee thereof permitted by this Agreement. "Lessee Improvements" means any additional buildings, structures, additions, improvements, fixtures or facilities constructed on the Land as provided in Subsection 307(a) hereof, except to the extent the same have been conveyed to the Authority or its assignee pursuant to Section 308 hereof. "Letter of Representations" means the letter of representations executed by the Lessee pursuant to the terms of the Underwriting Agreement. "Liability" means any liability (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated, and whether due or to become due), including, without limitation, responsibility under Environment, Health and Safety Requirements for cleanup, containment, restoration, removal, remediation, investigation or monitoring relating thereto (collectively, "Remedial Work"), liability for costs of Remedial Work, liability for costs of government oversight and other expenses incidental to Remedial Work, liability for natural resources damage, liability for illness, personal injury or the increased risk of or fear of illness or personal injury, and liability for economic losses or other property damage. "Losses" means losses, costs, damages, expenses and liabilities of whatever nature (including reasonable attorneys' fees, litigation and court costs and expenses, amounts paid in settlement, amounts paid to discharge judgments) directly or indirectly resulting from, arising out of or relating to one or more Claims. "Management Agreement" means the Management Agreement, as amended, between the City and the Manager, governing the management, operation and maintenance of the Airport. "Manager" means (i) Alliance Air Services, Inc., a Texas corporation, or any successor thereto or assignee thereof and (ii) any Person succeeding the entity named in clause (i) as manager of the Airport. "MSRB" means the Municipal Securities Rulemaking Board. "M/WBE Ordinance" means the ordinance passed by the City with respect to the City's disadvantaged business enterprise contracting and subcontracting goals as established from time to time by the City, currently Ordinance No. 121932. "Net Proceeds" means the term by that name as defined in Sections 1101 and 1102 of this Agreement. "NRMSIR" means, as of any date, all nationally recognized municipal securities information repositories then recognized by the Commission for purposes of the Rule. As of the date of this Agreement, the NRMSIRs are: Bloomberg Municipal Repository P.O. Box 840 Princeton, NJ 08542-0840 Phone: (609) 279-3224 Fax: (609) 279-5962 Thomson Municipal Services Group c/o The Bond Buyer 395 Hudson Street - 3rd Floor New York, NY 10014 Attn: Municipal Disclosure Phone: (212) 807-3891 Fax: (212) 989-2078 Internet: Disclosure @ Muller.com Disclosure, Inc. 5161 River Road Bethesda, MD 20816 Attn: Document Acquisitions/Municipal Securities Phone: (301) 951-1300 Fax: (301) 718-2329 Kenny Information Systems, Inc. 65 Broadway - 16th Floor New York, NY 10006 Attn: Kenny Repository Service Phone: (212) 770-4500 Fax: (212) 797-7994 Moody's NRMSIR Public Finance Information Center 99 Church Street New York, NY 10007 Phone: (800) 339-6306 Fax: (212) 553-1460 R.R. Donnelly Financial Municipal Securities Disclosure Archive 559 Main Street Hudson, MA 01749 Phone: (800) 580-3670 Fax: (508) 562-1969 "Outstanding" means, with respect to the Bonds, as of the time in question, all Bonds registered or authenticated, as applicable, and delivered under the Indenture, except: (i) Bonds cancelled by the Trustee or delivered to the Trustee for cancellation; (ii) Bonds in exchange for or in lieu of which other Bonds have been authenticated and delivered pursuant to the Indenture; (iii) Bonds deemed to have been paid within the meaning of Article VIII of the Indenture; and (iv) Bonds for which payment or prepayment of money in the necessary amount has been deposited with the Trustee in trust for the registered owners of such Bonds pursuant to the Indenture, provided that, if such Bonds are to be redeemed, notice of such redemption has been duly given pursuant to the Indenture. "Paying Agent" means the Trustee or any other paying agent for a series of Bonds named in the Indenture. "Person" means any association, individual, corporation, governmental entity, partnership, joint venture, business association, estate or any other organization or entity. "Plans and Specifications" means the final plans and specifications for the Special Facilities and any Lessee Improvements prepared by the Architect and approved by the Authority and the Lessee. "Record Date" means the fifteenth day of the month next preceding an Interest Payment Date. "Registrar" means the registrar and transfer agent for the Bonds named in the Indenture. "Regulations" means the Treasury Regulations promulgated pursuant to the Code . "Rule" means Rule 15c2-12 adopted by the Commission under the Exchange Act, as the same may be amended from time to time. "SID" means the public or private repository designated by the State as the state information depository and recognized as such by the Commission for purposes of the Rule. As of the date of this Agreement, the SID is the Municipal Advisory Council of Texas, Austin, Texas. "Special Facilities" means the Primary Land, buildings, structures, fixtures, improvements, equipment and facilities located on, affixed to, or used in connection with the Land, and financed with moneys disbursed from the Construction Fund and the Equipment, whether now owned or hereafter acquired. "Special Facilities Rentals" means the amounts paid or payable by the Lessee pursuant to Section 502 hereof. "Special Rebate Fund" means the special rebate fund established with the Trustee pursuant to Article III of the Indenture. "State" means the State of Texas. "Supplemental Agreement" means an amendment to or supplement of this Agreement entered into in accordance with Section 1805 hereof. "Tax Representation Certificate" means the certificate executed by an Authorized Lessee Representative addressing matters relating to the tax-exempt status of the interest on the Bonds. "Trust Estate" means the term by that name as defined in the Indenture. "Trustee" means The First National Bank of Chicago, or any successor thereto or assignee thereof permitted by the Indenture. "Underwriting Agreement" means the Underwriting Agreement, dated 1996, by and between the Authority and the underwriters named therein. ARTICLE II ---------- USE OF FACILITIES; REPRESENTATIONS AND WARRANTIES ------------------------------------------------- Section 201. Uses and Ownership of Facilities. (a) Ownership. The Authority shall, at all times throughout the term of this Agreement, unless transferred with the consent of the Lessee as provided in Section 1703 hereof, own, hold, use, and enjoy legal, fee title to the Leased Premises as a part of the Airport on behalf of and for the benefit of the City, as the owner of the Airport, subject to the provisions of this Agreement. The Authority reserves the right to transfer, convey and assign legal, fee title to the Leased Premises, subject to the terms of this Agreement, but shall not transfer the Leased Premises to any party, without the consent of the Lessee. (b) Lessee's Permitted Uses. The Lessee shall use the Facilities as a part of the Airport and as airport facilities within the meaning of Section 142(a)(1) of the Code (or the successor provisions of any federal income tax laws) or as functionally related and subordinate facilities to the Airport, and for the purposes of collecting, storing, sorting, distributing, and shipping air cargo, including parcels, and for other purposes reasonably related thereto. (c) Management Agreement. The City has entered into the Management Agreement with the Manager, pursuant to which the manager is obligated to perform, on behalf of the City, administrative responsibilities necessary to monitor the performance or nonperformance of the obligations of any Airport tenant to maintain and repair its leased premises and improvements and, further, to perform, on behalf of the City, the administrative responsibilities of monitoring or overseeing the performance of all City obligations pursuant to existing and future agreements with all Airport tenants, all in accordance with and subject to the terms of the Management Agreement. By entering into this Agreement, the Lessee acknowledges that certain duties to be performed by the City in connection with the operation and maintenance of the Airport may be performed by the Manager, and that the Lessee agrees to deal directly with the Manager with respect to such matters. The foregoing notwithstanding, the Authority shall remain responsible for the performance of its obligations under this Agreement; provided, however, the Authority shall have no responsibilities with respect to the condition, maintenance or repair of the Leased Premises. Section 202. Representations and Warranties by the Authority. The Authority makes the following representations and warranties as the basis for the undertakings on its part herein contained: (a) The Authority is duly organized as a nonstock, nonprofit industrial development corporation, existing and in good standing under the laws of the State, including specifically the Development Corporation Act, and has the power under the Development Corporation Act to enter into the transactions contemplated by this Agreement, the Underwriting Agreement and the Indenture and to carry out its obligations hereunder and thereunder. By written resolution as required by the Development Corporation Act, the City has duly approved the execution and delivery of the Indenture, the Underwriting Agreement and this Agreement by the Authority. (b) The Authority has taken all action and has complied with all provisions of law with respect to the execution, delivery and performance of this Agreement, the Underwriting Agreement and the Indenture and the due authorization of the consummation of the transactions contemplated hereby and thereby, and this Agreement, the Underwriting Agreement and the Indenture have been duly executed and delivered by, and constitute the valid and legally binding agreements of, the Authority, enforceable against the Authority in accordance with their respective terms. (c) Neither the execution and delivery of this Agreement, the Underwriting Agreement and the Indenture, the consummation of the transactions contemplated hereby and thereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement, the Underwriting Agreement and the Indenture, violate any law or regulation, or any Articles of Incorporation or Bylaws, or any judicial order, judgment, decree, or injunction, conflict with or results in a breach of any of the terms, conditions or provisions of any restriction, ordinance or any agreement or instrument to which the Authority is now a party or by which it is bound, or constitute a default under any of the foregoing, or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Authority under the terms of any instrument or agreement. (d) There is no litigation now pending or, to the Authority's knowledge, threatened challenging the powers of the Authority or its Board of Directors or in any way affecting this Agreement, the Underwriting Agreement, the Indenture or the Bonds. (e) The Authority has determined, in the public interest, that it will finance the Cost of the Special Facilities, and deposit the proceeds from the sale of the Bonds into the Construction Fund for use by the Lessee for such purposes and in the manner provided in the Development Corporation Act and this Agreement. Section 203. Representations and Warranties by the Lessee. The Lessee makes the following representations and warranties as the basis for the undertakings on its part herein contained: (a) The Lessee is a corporation duly organized under the laws of the State of Delaware and duly qualified to do business in the State, is in good standing in the State of Delaware and the State, has power to execute and enter into this Agreement, the Guaranty and the Letter of Representations and by proper corporate action has been duly authorized to execute and deliver this Agreement, the Guaranty and the Letter of Representations. (b) The Lessee will execute the Tax Representation Certificate, dated the Closing Date, setting forth certain covenants, representations and warranties, which Tax Representation Certificate is incorporated herein and included as a part of this Agreement by reference. The Lessee represents that the representations set forth in the Tax Representation Certificate will be accurate as of such date and covenants to comply with the covenants set forth in the Tax Representation Certificate. (c) The Lessee represents and certifies that to the best of its knowledge the Leased Premises was not a site used for the storage or disposal of hazardous waste. (d) The Lessee hereby makes an irrevocable election not to claim depreciation or an investment tax credit with respect to the Special Facilities in accordance with Section 142(b)(1)(B)(i) of the Code, such that the Bonds shall qualify under Section 142(a)(1) of the Code. The tax identification number of the Lessee is 71-0427007. (e) This Agreement, the Guaranty and the Letter of Representations have been duly executed and delivered by duly authorized officers of the Lessee, and constitute valid and binding obligations of the Lessee, enforceable against the Lessee in accordance with their respective terms. (f) No approvals or consents, other than those that have been or will in normal course be obtained, are necessary in order for the Lessee to execute and deliver this Agreement, the Guaranty, the Letter of Representations or the Tax Representation Certificate. (g) There is no litigation now pending or, to the Lessee's knowledge, threatened, challenging the corporate existence of the Lessee and, except for matters described under "Legal Proceedings" in the Lessee's Annual Report on Form 10-K for the Lessee's fiscal year ended May 31, 1995, as updated by the Lessee's Form 10-Q for the quarter ending November 30, 1995, there is no pending, or to the Lessee's knowledge, threatened action or proceeding before any court or administrative agency that individually (or in the aggregate in the case of any group of related lawsuits) is expected to have a material adverse effect on the financial condition of the Lessee or the ability of the Lessee to perform its obligations under this Agreement or the Guaranty. (h) Neither the execution and delivery of this Agreement, the Guaranty, the Letter of Representations or the Tax Representation Certificate, the consummation of the transactions contemplated hereby or thereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement, the Guaranty, the Letter of Representations or the Tax Representation Certificate, will conflict with or result in a material breach of the Restated Certificate of Incorporation or By-laws of the Lessee or any of the terms, conditions or provisions of any indenture, agreement or other instrument to which the Lessee is now a party or by which it is bound, or constitute a material default under any of the foregoing, or result in the creation or imposition of any material lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Lessee under the terms of any instrument or agreement. (i) The Lessee has duly and validly obtained all material certificates, licenses and permits from all public authorities, both federal and state, required to enable the Lessee to carry on its business as it is now conducted and to enter into this Agreement. (j) To the best of its knowledge, no event has occurred and no condition currently exists, which constitutes or may, with the passage of time or the giving of notice, or both, constitute an Event of Default with respect to or on the part of the Lessee under this Agreement or the Guaranty or that could materially adversely affect the ability of the Lessee to perform its obligations hereunder or thereunder. (k) During the term of this Agreement, the Lessee shall operate the Special Facilities in accordance with all applicable laws; provided, however, that the Lessee shall not be required to comply or cause compliance with such applicable laws so long as the Lessee shall, at the Lessee's expense, contest the same or the validity thereof in good faith, by appropriate proceedings; and provided, further, such non-compliance will not have a material adverse effect on the Special Facilities or the Lessee or the performance of its obligations hereunder. Such contest may be made by the Lessee in the name of the Authority or the Lessee, or both, as the Lessee shall determine, and the Authority agrees that it will, at the Lessee's expense, cooperate with the Lessee in any such contest to such extent as the Lessee may reasonably request; provided, however, the Lessee may not contest in the name of the Authority any law, ordinance, rule, regulation, order or requirement of the Authority, and the Authority has no obligation to cooperate in any such contest against the Authority. The Authority shall not be subject to any liability for the payment of any costs or expenses in connection with any such proceedings brought by the Lessee. (l) The Lessee has no present intention of disposing of or abandoning the Special Facilities, using or moving any portion of the Special Facilities out of the State, or of directing the Special Facilities to a use other than the uses represented to the Department and the Authority. (m) The Lessee has no reason to believe, based upon the best information in the possession thereof, that the development of the Special Facilities in the City will not result in contributing to the economic growth or stability of the City by (1) increasing or stabilizing employment opportunities in the City, (2) significantly increasing or stabilizing the property tax base of the City and the State, and (3) promoting commerce within the City and the State. ARTICLE III ----------- COMMENCEMENT AND COMPLETION OF FACILITIES; ------------------------------------------ ISSUANCE OF BONDS ----------------- Section 301. Plans and Specifications, Approvals, Construction, Construction Contracts, Utilities. (a) Location Improvement Permit. An airport location improvement permit was obtained from the City subsequent to the Inducement Date and prior to the Closing Date with respect to the Land and Special Facilities. The Lessee covenants and agrees that, prior to the preparation of detailed plans and specifications for any of the Facilities (other than those Facilities described in the previous sentence), it shall first obtain an airport location improvement permit from the City by submitting to the City for approval plans showing the general site plan, design and character of improvements and their locations relative to the Leased Premises, including location of drainage, utilities and roadways. (b) Approval of Plans and Specifications. In connection with construction of any of the Facilities, the Lessee shall cause preliminary plans and specifications, together with the estimated cost of such portion, to be prepared by the Architect, which shall be submitted to the Authority for its approval. The Authority shall approve or suggest reasonable revisions to such preliminary plans and specifications within seven (7) days from the date of receipt thereof, and shall submit the same to the Lessee. If the Authority fails to respond within that seven (7) day period, the preliminary plans and specifications shall be deemed approved. If within said seven (7) day period the Authority notifies the Lessee of items of which it disapproves, the Lessee shall thereafter cause such Architect to prepare revised preliminary plans and specifications that take into consideration any revisions suggested by the Authority, and accepted by the Lessee, at which time the revised preliminary plans and specifications shall be submitted to the Authority for approval in the manner provided herein. After the Authority has approved such preliminary plans and specifications, the Lessee shall cause the Architect to prepare final plans and specifications. The final plans and specifications shall be submitted by the Lessee to the Authority for review and approval of any changes not previously approved in the preliminary plans and specifications, in the same manner as the preliminary plans and specifications were reviewed and approved. If the Authority fails to respond to the Lessee in writing within seven (7) days after submission of any of the plans and specifications contemplated by this Subsection (b), then such plans and specifications shall be deemed approved for purposes of this Subsection (b). Upon approval such final plans and specifications shall become the Plans and Specifications. (c) Provisions Concerning Design. The Plans and Specifications (i) for any of the Facilities shall meet the City's design standards for the type of development proposed at the Airport, which the Authority agrees to cause to be available to the Lessee and (ii) with respect to the Special Facilities to be constructed and acquired with proceeds of the Bonds, shall qualify as Costs of a "Project" under the Development Corporation Act. The Lessee covenants and agrees that all construction or installation of any building, roadway, structure, addition, or improvement on the Land will be in accordance with such Plans and Specifications. (d) Provisions Concerning Design Changes. The Lessee may initiate whatever design changes to the Plans and Specifications it deems necessary or desirable; provided, however, that any such changes (i) shall be subject to approval by the Authority prior to implementation for consistency with the Plans and Specifications and the mutually contemplated use of the Facilities as set forth in Subsection 201(b) of this Agreement and (ii) shall qualify as a "Project" under the Development Corporation Act. Review of such design changes shall be conducted in the same time and manner as review of the Plans and Specifications as set forth in Subsection (b) hereof and shall otherwise comply with Subsection (c) hereof. (e) Compliance with Laws. Contracts relating to the designing, equipping and constructing of the Facilities shall include those provisions agreed to by the Lessee and the Authority for the purposes intended and shall comply in all respects with State and federal law and the provisions of this Agreement. The Facilities shall be constructed and equipped in compliance with all State, federal and local laws, ordinances and regulations applicable thereto. (f) Permits. The Lessee, with the cooperation of the Authority, shall obtain or cause to be obtained all other necessary approvals and permits from any and all governmental agencies prior to constructing and equipping any of the Facilities. (g) Occupancy Permits. Upon completion of the construction and equipping of any of the Facilities, the Lessee shall furnish to the Authority copies of all required occupancy permits and authorizations from appropriate authorities, if any are required, authorizing the occupancy and use thereof for the purposes described herein. (h) Additions and Changes. The Lessee may, at its sole cost and expense, make such additions or changes to the Facilities as it shall desire, provided that the Lessee: (1) obtains all requisite governmental permits, licenses and approvals, including an airport location improvement permit issued by the City in the manner provided in Subsection 301(a) hereof; and (2) prosecutes the work in a workmanlike and diligent manner in compliance with the Plans and Specifications therefor, all laws and regulations and the other provisions of this Agreement. (i) Layout. The Lessee may change the location of a structure on the Land from the location approved in Subsection (a) hereof, subject to submission to the Authority for its review and approval of any such change in the same manner as the preliminary plans and specifications are required to be reviewed and approved hereunder. The provisions of this Subsection (i) shall not constitute an approval for purposes of Subsection (a) hereof. (j) Use of Construction Fund Moneys. Moneys held in the Construction Fund or, at the Lessee's option, moneys provided by the Lessee, shall be used to construct: (1) all necessary utility lines required for the Lessee to connect utility services for the Special Facilities to the line of existing service; (2) the connecting roadways to the existing roadway system up to the property line; and (3) all necessary utility lines required for the Lessee to connect the utility services for any portion of the Leased Premises (other than the Special Facilities) or for any Lessee Improvement. The Authority agrees to use its best efforts to cause the City to grant to the Lessee all necessary roadway or utility easements required for the Lessee to meet its obligations under this Subsection (j). Section 302. Agreement to Issue Bonds; Application of Proceeds; the Lessee Required to Pay Costs of Construction if Bond Proceeds Insufficient. (a) Pursuant to the terms of the Indenture, the Authority shall issue the Bonds upon the execution and delivery of this Agreement to provide funds for paying the Costs of the Land and of the Special Facilities. (b) The Bonds shall be issued under and in accordance with the Indenture, the form of which shall have been approved by the Lessee prior to the adoption thereof. (c) The proceeds of the Bonds shall be deposited directly by the Authority with the Trustee in the Funds and Accounts specified in the Indenture. Proceeds of the Bonds deposited in the Construction Fund shall be disbursed by the Trustee for the payment of Costs. (d) In the event that funds held in the Construction Fund available for payment of the Costs of the Land and of the Special Facilities are insufficient, the Lessee shall: (i) provide funds to complete the construction of the Special Facilities; (ii) appropriately reduce the scope of the Special Facilities so that funds in the Construction Fund will be sufficient (if such reduction in scope, in the opinion of Bond Counsel, will not adversely affect the exclusion from gross income of the interest on the Bonds for federal income tax purposes); or (iii) cause the Authority to issue additional bonds ("Additional Bonds") pursuant to Article XII hereof to the extent necessary to provide sufficient funds for such purposes, provided that, in the opinion of Bond Counsel, the issuance of such Additional Bonds will not adversely affect the exclusion from gross income of the interest on the Bonds for federal income tax purposes. (e) The Authority does not make any warranty, either express or implied, that the Special Facilities can or will be constructed for the estimated cost therefor, or that the moneys paid into the Construction Fund and available for payment of the Costs shall be sufficient for that purpose. The Lessee agrees that if, after exhaustion of such funds, the Lessee pays any portion of the Costs for any reason whatsoever, it shall not be entitled to any reimbursement therefor from the Authority (except reimbursement from the proceeds of Additional Bonds, if any) nor shall the Lessee be entitled to any set-off or diminution of the rentals or other amounts payable under this Agreement. (f) The Lessee is authorized as tenant to design, construct and equip the Special Facilities pursuant to and in conformity with the Plans and Specifications. Section 303. As-Built Drawings. Within sixty (60) days following completion of the construction of any of the Special Facilities, any Lessee Improvement or any other improvements on the Land, the Lessee shall present to the Authority a complete set of reproducible (mylar) "record" drawings including, but not limited to, specifications and shop drawings. This information, with the exception of shop drawings, shall be submitted by the Lessee on a computer diskette using Autocadd Version 11 or any more recent version as of that date (or any successor technology). Similar record drawings shall be provided by the Lessee as additional facilities are constructed or if any material alterations are made in any of the facilities included in the Leased Premises. Section 304. Cost of Construction and Preliminary Completion Certificates. Within sixty (60) days of the date upon which the Special Facilities have been substantially completed and available for their intended use, the Lessee shall present to the Authority for examination and approval by the Authority a sworn statement setting forth all amounts incurred to such date of substantial completion by the Lessee with respect to such Special Facilities and the economic lives of the buildings, structures, additions, improvements, fixtures, facilities and equipment that comprise such Special Facilities. Section 305. Establishment of the Completion Date, Other Completion Certificates. (a) The Completion Date of the Special Facilities shall be evidenced to the Authority, the City and the Trustee by a certificate signed by the Lessee to the effect: (i) that the design, construction and equipping of the Special Facilities has been completed and (ii) that the Lessee has made a reasonable investigation of such sources of information it deems necessary and is of the opinion that the Special Facilities have been fully paid for and that no claim or claims exist against the Authority, the City or the Lessee or against the properties of either out of which a lien based on furnishing labor or material for the Special Facilities might ripen. Such certificate shall be delivered within one hundred twenty (120) days of the first day on which the conditions set forth in both (i) and (ii) above have been satisfied. (b) Within one hundred twenty (120) days of the date on which the Special Facilities have been finally completed and all amounts due and owing with respect thereto have been paid, the Lessee shall certify to the Authority and the City the final amounts paid by the Lessee with respect thereto. Section 306. The Lessee to Pursue Remedies Against Contractors, Subcontractors and Suppliers and Their Sureties. (a) In the event of default or breach by any contractor, subcontractor, manufacturer or supplier under any contract made in connection with the design, construction and equipping of the Leased Premises, the Lessee may, in its discretion, either separately or in conjunction with the Authority, pursue the remedies of the Authority and/or the Lessee against the contractor, subcontractor, manufacturer or supplier so in default and against any surety for the performance of that contractor, subcontractor, manufacturer or supplier, or against a contractor, subcontractor, manufacturer or supplier for breach of warranty. (b) In the event that the Lessee shall, after thirty (30) days written notice from the Authority, fail to pursue its remedies under such contracts, the Authority may pursue such remedies and, subject to any reimbursement received by the Authority under Subsection (d) hereof, the Lessee shall permit the Authority to be reimbursed from the Construction Fund for one hundred percent (100%) of its reasonable costs with respect thereto to the extent that moneys are available in the Construction Fund. (c) The Lessee agrees to advise the Authority of any default by a contractor, subcontractor, manufacturer or supplier in connection with the construction of all or a portion of the Leased Premises which is material to the operations of the Leased Premises and of any legal actions or proceedings the Lessee intends to commence in connection with any such breach or default. (d) The Authority agrees, if requested by the Lessee, to cooperate with and assist the Lessee in any such proceeding and to join in any such proceeding, or allow such proceeding to be brought in its name if necessary. Any amount recovered by way of damages, refunds, adjustment or otherwise in connection with the foregoing shall be disbursed in the following order: (i) for reimbursement of costs to the Lessee if the Lessee pursues the recovery on its own and for reimbursement of costs proportionately to the Lessee and the Authority (measured by the costs incurred by each party in pursuit of such recovery) if the Authority joins in the pursuit or pursues recovery in lieu of the Lessee; (ii) for the repair, restoration or completion of the Leased Premises or the relevant portion thereof; and (iii) the balance to the Lessee. Section 307. Construction of Additional Facilities. -------------------------------------- (a) The Lessee has the right at its own expense to construct additional buildings or facilities on the Land or to improve, expand or better the Special Facilities all in compliance with the provisions of this Agreement. In such event, the use thereof shall be enjoyed by the Lessee during the term hereof without additional rental therefor. Such buildings, facilities, improvements, additions and betterments shall be Lessee Improvements and shall be the property of the Lessee during the term of this Agreement, except as provided in Sections 201 and 308 hereof. Notwithstanding the provisions of paragraph (ii) of Subsection 602(a) hereof, the Lessee shall have within its sole discretion and subject to Sections 301 and 303 hereof, the right to remove, replace or renovate any Lessee Improvement, provided, however, that during the final year of the term hereof the Lessee shall not remove any Lessee Improvement or otherwise alter such Lessee Improvement so as to materially decrease the value thereof without first obtaining the written consent of the Authority. The foregoing notwithstanding, any such buildings, facilities, improvements, additions and betterments shall be constructed in a manner consistent with the development standards imposed by the City in connection with the development of the Airport. (b) The Lessee shall have the right to locate on the Leased Premises or install in the Special Facilities or the Lessee Improvements any Excluded Personal Property, which Excluded Personal Property shall not become part of the Special Facilities or the Leased Premises. Section 308. Ownership of Improvements. All Excluded Personal Property and Lessee Improvements shall be the property of the Lessee during the term of this Agreement. Notwithstanding the foregoing, the Lessee shall have the right at all times during the term of this Agreement to convey to the Authority, and the Authority shall take, title to all or a portion of the Lessee Improvements and any additional land contiguous to the Land acquired by the Lessee to accommodate such Lessee Improvements, subject to the Authority's approval upon performance by the Authority of appropriate due diligence and investigation. No such conveyance shall be effective unless, in the opinion of Bond Counsel, such conveyance will not adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Bonds. Upon such conveyance, the buildings, structures, improvements, fixtures and facilities so conveyed shall cease to be Lessee Improvements and from such point forward shall constitute a portion of the Leased Premises. Upon the termination of this Agreement: (i) the Excluded Personal Property shall remain the property of the Lessee, and (ii) the Lessee Improvements then remaining shall become the property of the Authority. Section 309. Form of Construction Contracts. All contracts for construction of buildings or facilities on the Land shall be in a form mutually agreed to in writing by the Authority and Lessee and shall contain provisions requiring the contractor to provide payment and performance bonds and insurance which are acceptable to the Authority and Lessee, and Lessee agrees, in connection with all such contracts, to comply with the MBE/WBE Ordinance. ARTICLE IV ---------- TERM ---- Section 401. Term. (a) The term of this Agreement shall commence on the date of the execution hereof and shall terminate on April 1, 2021, or such earlier date determined pursuant to the provisions of Subsection (b) hereof. Notwithstanding the stated commencement date of this Agreement, the lease for the Special Facilities shall commence on the weighted average date that the Special Facilities have been placed in service (within the meaning of Section 147(b)(3) of the Code); provided, however, that neither the termination date of this Agreement nor the commencement date of the lease for the Special Facilities shall adversely impact upon, or affect in any way, the payment obligations of the Lessee under Section 502 hereof. (b) Not more than ninety (90) days after the Special Facilities are placed in service (within the meaning of Section 147(b)(3) of the Code), the Lessee shall deliver to the Authority and the City an opinion of Bond Counsel to the effect that: (i) a termination date for this Agreement of April 1, 2021 will not adversely affect the exclusion from gross income of the interest on the Bonds; or (ii) a termination date earlier than April 1, 2021 will be required in order to maintain the exclusion from gross income of the interest on the Bonds (which opinion shall state the latest permissible termination date, which date shall be deemed to be the date of termination of this Agreement). Section 402. Rights at Expiration. --------------------- (a) In the event the Lessee shall continue to occupy the Leased Premises beyond the Agreement term without the Authority's written renewal thereof, such holding over shall not constitute a renewal or extension of this Agreement, but shall create a tenancy from month to month which may be terminated at any time by the Authority or the Lessee by giving thirty (30) days written notice to the other party. (b) The Lessee further agrees that upon the expiration of the term of this Agreement or sooner cancellation thereof, the Leased Premises will be delivered to the Authority in good condition, reasonable wear and tear, matters covered by insurance and damages from condemnation excepted. (c) The Lessee further agrees that upon the expiration of the term of this Agreement or sooner cancellation thereof, the Lessee shall execute such instruments as are necessary to convey title to the Lessee Improvements to the Authority, and such Lessee Improvements and the Leased Premises shall be delivered to the Authority free and clear of all liens not consented to by the Authority. Section 403. Expiration. This Agreement shall expire and terminate at the end of the term specified in Section 401 hereof, and the Lessee shall have no further right or interest in the Leased Premises except as provided in Section 1405. ARTICLE V --------- RENTALS AND FEES ---------------- Section 501. Ground Rent. (a) The Lessee shall pay ground rentals for the Land in the amount of one dollar ($1.00) per calendar year. (b) If at any time during the term hereof the Land is substituted with other land due to a condemnation, such substituted land shall become a part of the Land. Section 502. Special Facilities Rentals. So long as any Bond is Outstanding, the Lessee shall pay to the Authority, by depositing with the Trustee, a rental (the "Special Facilities Rentals") payable without demand, either: (i) in same day funds pursuant to an automated clearinghouse transfer, one (1) Business Day prior to the date on which principal of, or premium, if any, and interest is due on the Bonds, or (ii) in same day funds prior to 10:00 a.m., Chicago, Illinois time, on the date on which principal of, or premium, if any, and interest is due on the Bonds, in either case in an amount equal to such principal of, interest or premium payments due on the Bonds whether at maturity, upon redemption, by acceleration or otherwise; provided that in the case of each payment the amount thereof shall be reduced by an amount equal to any amount then held by the Trustee in the Debt Service Fund which is available for such payment. The Lessee hereby acknowledges that the Special Facilities Rentals are the sole source of moneys to be used by the Authority to make payments of the principal of, interest or premium, if any, due on the Bonds. Section 503. Facilities Rental after Bonds are No Longer Outstanding. (a) In the event that there shall cease to be any Bonds Outstanding prior to April 1, 2021 or such other date that the term of this Agreement is scheduled to expire pursuant to Section 401, the Lessee shall continue to occupy the Leased Premises under the terms of this Agreement until the scheduled termination date; and the amounts paid to prepay or redeem or otherwise retire the Bonds shall be considered a prepayment of all Special Facilities Rentals and other rentals, other than ground rentals under Section 501(a), that would have been due for the remainder of the term of this Agreement. The Lessee shall continue to pay the ground rentals as they become due under Section 501(a). In the event the Lessee shall occupy the Leased Premises beyond the Agreement term in accordance with Section 402 hereof, and the Bonds are no longer Outstanding during such occupancy, the Lessee shall pay to the Authority a rental without demand, in an amount equal to (i) the fair market rental value of all buildings, fixtures or other improvements then located upon the Land which were constructed using funds made available to the Lessee by the Authority in accordance with the terms of this Agreement, the Equipment and any Lessee Improvements determined in the manner hereinafter described (the "Fair Market Rental Value") plus (ii) one dollar ($1.00), which shall be the agreed rental for all buildings and improvements included in the Leased Premises but which are not covered by clause (i) above. (b) The Lessee and the Authority shall attempt to agree in writing on the Fair Market Rental Value, but if they do not do so within 30 days after the date of expiration of the Agreement term and there are no longer any Bonds Outstanding ("Appraisal Date"), the Lessee and the Authority shall appoint an Independent Appraiser (as hereinafter defined) within 10 days after the end of such 30-day period. If any party fails to appoint an Independent Appraiser as provided above, the Independent Appraiser timely appointed by the other party shall make his determination of the Fair Market Rental Value. (c) If only one Independent Appraiser is timely appointed as provided above, that Independent Appraiser shall determine the Fair Market Value Rental within 60 days after the Appraisal Date. (d) If two Independent Appraisers are timely appointed as provided above, and if they fail to agree on the Fair Market Rental Value within 60 days after the Appraisal Date: (1) if the difference between the appraisals is three percent (3%) or less of the amount of the higher appraisal, the Fair Market Rental Value shall be the average of the two appraisals; or (2) if the difference between the appraisals is greater than three percent (3%) of the amount of the higher appraisal, the two Independent Appraisers shall appoint a third Independent Appraiser, who shall make his determination of Fair Market Rental Value within 120 days after the Appraisal Date, and the Fair Market Rental Value shall be (i) the appraisal that is neither the highest nor the lowest of the three appraisals, or (ii) if two of the Appraisals are the same, the amount of such identical appraisals. (e) The Fair Market Rental Value determined in accordance with the provisions of this provision shall be deemed to be the Fair Market Rental Value as of the date of the Appraisal Date, and the Lessee shall pay all past due rental and continue to pay the Fair Market Rental in advance for the duration of the occupancy occurring under Section 402. (f) The Independent Appraisers shall give written notice to the Lessee and the Authority concurrently upon the determination of the Fair Market Rental Value. (g) Each party shall bear the costs and expenses of the Independent Appraiser appointed by that party. In the event a third Independent Appraiser is appointed, the costs and expenses of such appraiser shall be borne equally by the Lessee and the Authority. (h) For purposes of this Section 503, the term "Independent Appraiser" shall mean a person or firm with at least 10 years experience in appraising the rental value of properties similar to the Leased Premises, who is a member of the American Institute of Real Estate appraisers (MAI), which individual or firm shall not be a member, director, officer or employee of the Lessee or the Authority and, in the case of a firm, shall not have a partner, member, director, officer or employee who is a member, director, officer or employee of the Lessee or the Authority. Section 504. Field Use Charges. The Lessee is not granted hereunder the right to use any aircraft parking apron or taxiway not on the Land for the use of itself or its tenants, but nothing herein shall abrogate any rights the Lessee may have for such use pursuant to other agreements with the City or the Manager, acting on behalf of the City. Any use of aircraft operational areas outside of the Land by the Lessee or the Lessee's tenants or agents shall be by separate agreement and payment of appropriate fees. Nothing in this Section, however, shall prohibit the Lessee or its tenants from the joint use with others at the Airport of interior and exterior roadways serving the Land in accordance with Airport rules, regulations and/or restrictions, including, without limitation, the Management Agreement. Section 505. Time and Place of Payments. --------------------------- (a) Any ground rentals due under Section 501 hereof shall be payable in advance on or before the first Business Day of each calendar year, and any rentals due under Section 503 hereof shall be payable in equal monthly installments in advance on or before the first Business Day of each calendar month of the term at the office of the City Manager of the City at the address set forth in Section 1811 hereof. (b) The Special Facilities Rentals payable pursuant to Section 502 hereof shall be payable to the Authority at the Designated Trust Office of the Trustee for deposit in the Debt Service Fund. Section 506. Delinquent Rentals. In the event rentals due pursuant to Section 503 hereof shall not be paid by the Lessee on the due date thereof, the Lessee shall pay as additional rental, an interest charge at an interest rate of 15% per annum, from time to time, on the amount due for each full calendar month of delinquency computed as simple interest. No interest shall be charged upon that portion of any such rental which, in good faith, is not paid because it is in dispute. No interest shall be charged until payment is thirty (30) days overdue, but such interest when assessed thereafter, shall be computed from the due date. Section 507. Assignment of Rights. As security for the payment of the Bonds, the Authority agrees and, pursuant to the terms of the Indenture, does assign its right, title and interest in and to the Special Facilities Rentals to the Trustee as part of the Trust Estate. The Lessee hereby assents to the assignment of such rights hereunder. The Trustee shall not be responsible for those rights and obligations of the Authority not assigned by the Authority to the Trustee as part of the Trust Estate. Section 508. Obligations of the Lessee Hereunder Unconditional. The obligation of the Lessee to make the payments required under Section 502 hereof and to pay the premiums or charges necessary to maintain or cause to be maintained the insurance required by Article IX shall be absolute and unconditional and shall not be subject to any defense (other than payment) or any right of set-off, counterclaim, abatement or otherwise. The Lessee shall not suspend, postpone, discontinue or permit the suspension, postponement or discontinuance of any such payments referred to in Section 502. Each payment referred to in Section 502 made by the Lessee pursuant to this Agreement shall be final and the Lessee shall not seek to recover all or any part of such payment from the Trustee or any holder of the Bonds for any reason whatsoever. Nothing contained in this Section 508 shall be construed to relieve the Authority or the Trustee from the performance of any of the agreements on their part contained herein or in the Indenture or to constitute a waiver by the Lessee of its rights to enforce the performance thereof or to recover from the Authority damages for the Authority's failure to perform its covenants hereunder. Section 509. Prepayment of Rentals. Any prepayment of ground rentals due pursuant to Section 501 or rentals due pursuant to Section 503 hereof shall be applied to the next ensuing payments in order of their due dates. Section 510. Payments to Authority. The Lessee hereby agrees to pay or cause to be paid directly to the Authority annually while any of the Bonds is outstanding, upon receiving a bill or statement therefor, which shall be submitted by the Authority promptly after the close of its fiscal year, an amount sufficient to pay and reimburse the Authority for any of its actual costs reasonably and necessarily incurred in connection with the Bonds, this Agreement or the Leased Premises during the previous fiscal year. ARTICLE VI ---------- OBLIGATIONS OF THE LESSEE ------------------------- Section 601. Net Lease. It shall be the sole responsibility of the Lessee to maintain, repair and operate the entirety of the Facilities at the Lessee's sole cost and expense. Neither the Authority nor the Manager shall bear any responsibility to maintain, repair and operate all or any part of the Facilities. Section 602. Maintenance and Operation. (a) The Lessee shall at its own expense: (i) keep the Facilities in as reasonably safe, neat and attractive condition, as its operation shall permit and in good repair; (ii) keep the Leased Premises in good operating condition, making from time to time all necessary repairs thereto (including external and structural repairs) and renewals and replacements thereof, ordinary wear and tear, matters covered by insurance and damages from condemnation excepted (subject to the rights of the Lessee set forth in Subsection 307(a) hereof with respect to any Lessee Improvement); and (iii) shall repaint the Facilities as necessary. (b) The Lessee shall be responsible for and perform all maintenance of the Facilities, including, but not limited to, maintenance of all equipment and facilities for the storage and control of Hazardous Substances, including, but not by way of limitation, any detention ponds constructed or developed on the Leased Premises. (c) The Lessee shall consider in good faith any recommendation of the City or the Manager, acting on behalf of the City, as to necessary maintenance to or repairs of the Leased Premises. (d) No waste shall be committed to the Leased Premises. Section 603. Utilities. The Lessee shall assume and pay for any costs or charges for utilities services furnished to the Lessee during the term hereof. The Lessee shall have the right to connect to any and all storm and sanitary sewers and water and utility outlets at its own cost and expense; and the Lessee shall pay for any and all service charges incurred therefor. Section 604. Signs. The Lessee shall not erect, maintain, or display upon the outside of any of the Facilities any billboards or advertising signs; provided, however, that the Lessee may maintain on the outside of said buildings its own name and services on signs, the size, location and design of which shall be subject to prior written approval by the Manager. Section 605. Hazardous Materials. (a) For purposes of this Agreement, the following terms shall have the following meanings: (1) "Hazardous Materials" shall mean (i) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers, or other equipment that contain dielectric fluid containing polychlorinated biphenyls, and radon gas; (ii) any chemicals or substances now or hereafter defined as or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic substances", "toxic pollutants", "contaminants" or "pollutants", or words of similar import, under any applicable Environmental Law; and (iii) any other chemical, material, or substance, exposure to which is now or hereafter prohibited, limited, or regulated by any applicable Environmental Law or governmental authority; (2) "Environmental Law" means any applicable federal, state, or local statute, law, rule, regulation, ordinance, code, policy, or rule of common law now or hereafter in effect and in each case as amended and any judicial or administrative order, consent decree or judgment, relating to the environment, health, safety, or Hazardous Materials, including without limitation the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. (S) 9601 et. seq.; the Hazardous Materials Transportation Act, as amended, 49 U.S.C. (S) 1801 et seq.; the Resource Conservation and Recovery Act, as amended, 42 U.S.C. (S) 6901 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. (S) 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq.; the Clean Air Act, 42 U.S.C. (S) 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. (S) 3808 et seq.; the Texas Solid Waste Disposal Act, Tex. Health & Safety Code Ann. Ch. 361 (Vernon 1990); the Texas Clean Air Act, Tex. Health & Safety Code Ann. Ch. 382 (Vernon 1990); the Texas Water Code, Tex. Water Code Ann. (Vernon 1988 and Supp. 1990); and the Texas Hazardous Substances Spill Prevention and Control Act, Tex. Water Code Ann. (Vernon 1988 and Supp. 1990); and (3) "Release" or "Released" means disposed, discharged, injected, spilled, leaked, leached, migrated, dumped, emitted, escaped, emptied, seeped, or placed, in, on, or under any land, water, or air, or otherwise entered into the environment, and as otherwise more broadly defined in applicable Environmental Law. (b) The Lessee covenants and agrees with the Authority, which covenants and agreements shall be effective as of the Closing Date and shall continue during the term of this Agreement, as follows: (1) the construction and installation of all improvements and the use and operation of the Facilities shall at all times be in full compliance with applicable Environmental Law; (2) the Lessee is the owner of, and has in its possession, all environmental permits, licenses, and approvals that are necessary or required by applicable Environmental Law to conduct its business and operations as then being conducted, and the Lessee is in full compliance with such environmental permits, licenses, and approvals; (3) neither the Lessee nor any person claiming by, through, or under the Lessee shall bring onto, use, store, generate, treat, process, dispose of, recycle, incinerate or transport any Hazardous Materials in, on, or under the Facilities except in compliance with applicable Environmental Law; (4) the Lessee shall regularly inspect the Facilities to monitor and assure that the Facilities are at all times in full compliance with applicable Environmental Law; (5) the Lessee shall protect the Facilities against intentional or negligent acts or omissions of third parties which might result, directly or indirectly, in the Release of Hazardous Materials on the Facilities in violation of applicable Environmental Law; and (6) if any Hazardous Materials are released in, on, or under the Facilities during the term of this Agreement: (i) the Lessee shall immediately notify applicable governmental agencies having competent jurisdiction of the occurrence of the Release of Hazardous Materials in accordance with the requirements of applicable Environmental Law; (ii) the Lessee shall immediately notify the Manager, acting on behalf of the City, and the City of the occurrence of the Release of the Hazardous Materials and shall immediately furnish or make available to the Manager such information, documents, and other communications as the Manager or the City shall reasonably request; (iii) the Lessee shall promptly and timely commence or cause to be commenced appropriate actions required by applicable Environmental Law to clean up the Hazardous Materials that have been Released on the Facilities (collectively referred to as "Response Action") and shall conduct and perform all appropriate Response Action in accordance with applicable Environmental Law; and (iv) the Lessee shall contract for or perform all Response Action in the Lessee's own name or cause the violator to do so in the violator's name. (c) As between the Authority, the City (as the owner of the Airport) and the Lessee, the Lessee hereby covenants and agrees that it shall be responsible for, and waives, releases, and forever discharges the Authority and the City from, and agrees to indemnify, defend, and hold the Authority and the City harmless from and against, all expenses, costs (including reasonable attorneys' fees and court costs), losses, damages, penalties, fines, and other expenditures of any nature arising from or in connection with any claims, demands, liens, investigations, notices of violation, governmental directives, causes of action, or any other administrative or legal proceedings of any nature which result from, relate to, or arise out of (1) the breach of any covenant or agreement of the Lessee in this Section 605; (2) the presence or alleged presence of Hazardous Materials in, on, or under the Facilities; or (3) the violation of any applicable Environmental Law with respect to the Facilities. This release and indemnity specifically includes (a) all costs of "removal" and/or "remedial action" and all other costs of "response" as those terms are defined and used in applicable Environmental Law, and (b) all other costs and expenses of any nature incurred by, assessed against, imposed upon, or charged to the Authority and the City relating to compliance with or enforcement of applicable Environmental Law. If the Authority and the City incur costs or expenses described in this indemnity, the Lessee shall reimburse the Authority and the City for those reasonable costs or expenses within ten (10) days of the date of receipt by the Lessee of notice from the Authority and the City, including copies of invoices or other verification, that the costs or expenses have been incurred. The foregoing release and indemnity shall survive the expiration or termination of this Agreement. (d) If (i) there exists any uncorrected violation by the Lessee of an Environmental Law or any condition, caused directly or indirectly by the Lessee, which requires a cleanup, removal or other remedial action by the Lessee under any Environmental Law, and such cleanup, removal or other remedial action is not initiated within the time period required by Environmental Law or (ii) that if the City reasonably determines that (A) such uncorrected violation or condition poses an imminent threat to the safety or well being of any other users of the Airport, the citizens of the City or other persons or (B) the Land is likely to be further damaged or contaminated or other land on or in the vicinity of the Airport is likely to be damaged or contaminated by virtue of the continued failure to correct such violation or condition; and such cleanup, removal or other remedial action is not initiated within ninety (90) days from the date of written notice from the City (or the Manager acting on behalf of the City) to the Lessee, and diligently pursued to completion, the same shall, at the election of the Authority, constitute an Event of Default as described in Section 1401(e)(ii) hereof; and provided, further, that the Authority will not consider any failure to initiate such cleanup, removal or other remedial action within the aforesaid ninety (90) day period an Event of Default if such cleanup, removal or other remedial action is of such a nature that it cannot readily be initiated within the ninety (90) days and so long as the Lessee commences in good faith to cure such uncorrected violation or condition and diligently pursues the cure continuously thereafter. Section 606. Nondiscrimination. (a) The Lessee, for itself, its personal representatives, successors in interest, and assigns, as part of the consideration hereof, does hereby covenant and agree that it will comply with pertinent statutes, Executive Orders and such rules that are promulgated to assure that (1) no person on the grounds of race, color, creed, sex, age or national origin shall be excluded from participation in, denied the benefits of, or otherwise be subjected to discrimination in the use of the Facilities; (2) in the construction of any improvements on, over, or under such land and the furnishing of services thereof no person on the grounds of race, color, creed, sex, age or national origin shall be excluded from participation in, denied the benefits of, or otherwise be subjected to discrimination; (3) the Lessee shall use the Facilities in compliance with all other requirements imposed by or pursuant to Title 49, Code of Federal Regulations, Department of Transportation, Subtitle A, Office of the Secretary, Part 21, Nondiscrimination in federally- assisted programs of the Department of Transportation, Effectuation of title VI of the Civil Rights Act of 1964, and as said Regulations may be amended, to the extent that said requirements are applicable, as a matter of law, to the Lessee. (b) With respect to the Facilities, the Lessee agrees to furnish services on a fair, equal and not unjustly discriminatory basis to all users thereof, and to charge fair, reasonable and not unjustly discriminatory prices for each unit or service; provided, that the Lessee may be allowed to make reasonable and nondiscriminatory discounts, rebates, or other similar types of price reductions to volume purchasers. (c) The Lessee assures that it will comply with pertinent statutes, Executive Orders and such rules as are promulgated to assure, that no person shall, on the grounds of race, creed, color, national origin, sex, age, or handicap be excluded from participating in any activity conducted with or benefiting from federal assistance. This Subsection (c) obligates the Lessee or its transferee for the period during which federal assistance is extended to the airport program, except where federal assistance is to provide, or is in the form of personal property or real property or interest therein or structures or improvements thereon. In these cases, this Subsection (c) obligates the Lessee or any transferee for the longer of the following periods: (a) the period during which the property is used by the Authority, the City, the Lessee or any transferee for a purpose for which federal assistance is extended, or for another purpose involving the provision of similar services or benefits; or (b) the period during which the Authority, the City, the Lessee or any transferee retains ownership or possession of the Leased Premises. Section 607. Affirmative Action. With respect to the Facilities, the Lessee assures that it will undertake an affirmative action program as required by 14 CFR Part 152, Subpart E, to insure that no person shall, on the grounds of race, creed, color, national origin or sex, be excluded from participating in any employment activities covered in 14 CFR Part 152, Subpart E; that no person shall be excluded on these grounds from participating in or receiving the services or benefits of any program or activity covered by that Subpart; and that it will require that its covered suborganizations provide assurance to the Lessee that they similarly will undertake affirmative action programs, and that they will require assurances from their suborganizations, as required by 14 CFR Part 152, Subpart E, to the same effect, to the extent that said requirements are applicable, as a matter of law, to the Lessee. Furthermore, with respect to the Facilities, the Lessee assures that it shall use its best efforts to comply with the City's disadvantaged business enterprise contracting and subcontracting goals, as established in the M/WBE Ordinance. Section 608. Right to Use Airport. The granting of this Agreement and its acceptance by the Lessee is conditioned upon the right to use the Airport in common with others authorized to do so, provided, however, that the Lessee shall observe and comply with any and all requirements of the constituted public authorities and with all federal, State or local statutes, ordinances, regimens and standards applicable to the Lessee for its use of the Facilities, including but not limited to, rules and regulations promulgated from time to time by the City for the administration of the Airport. Section 609. [Intentionally Omitted]. ------------------------ Section 610. Mechanic's Liens. ----------------- (a) The Lessee herein agrees that if any mechanic's lien is filed upon any portion of the Facilities, the Lessee shall protect and save harmless the Authority and the City against any loss, liability or expense whatsoever by reason thereof and shall proceed with or defend, at its own expense, such action or proceedings as may be necessary to remove such lien from the records to the extent that the Leased Premises or any portion thereof is affected. Upon receipt of notice thereof by the Authority or the City, the Authority or the City shall promptly give the Lessee written notice of the existence of any such mechanic's lien on the Facilities, but the failure of the Authority or the City to give such notice shall not affect the responsibilities of the Lessee as set forth in this Section 610. (b) The Lessee may, however, in good faith and with due diligence, contest any mechanic's lien or other lien filed or established against all or any portion of the Facilities, and in such event may permit such lien or charge to remain undischarged and unsatisfied during the period of such contest and appeal therefrom, if (i) the Lessee shall effectively prevent or stay the execution, foreclosure or enforcement of such lien or charge, or (ii) such contest or appeal shall prevent or stay the execution or enforcement or foreclosure of such lien or charge. If such lien or charge is so stayed and such stay thereafter expires or the Authority or the City gives the Lessee written notice of the fact that by nonpayment of any such items the Leased Premises or any portion thereof will be subject to loss or forfeiture, then the Lessee shall forthwith pay and cause to be satisfied and discharged such lien or charge or secure such payment by posting a bond, in form satisfactory to the Authority and the City. The Authority and the City shall cooperate fully with the Lessee in any such contest. (c) If the Lessee shall fail to contest, discharge or pay any such lien as required by Subsections (a) and (b) hereof, the Authority or the City may, after having given the Lessee at least sixty (60) days' written notice of such failure, contest, discharge or pay any such lien which the Authority or the City may reasonably determine to be necessary in order to protect its interest in the Leased Premises. In such event, the Lessee agrees to reimburse the Authority and the City for any and all reasonable expenses and costs incurred by the City in respect thereto. Section 611. The Lessee to Maintain its Corporate Existence; Conditions Under Which Exceptions Permitted. Except as hereinafter provided, the Lessee agrees that during the term of this Agreement it will not dissolve or otherwise dispose of all or substantially all of its assets and will not consolidate with or merge into another Person unless the surviving or transferee Person, as applicable, is, and after such transfer shall be, a solvent Person qualified to do business in the State and, concurrently with such transaction, irrevocably and unconditionally assumes in writing, by means of an instrument which is delivered to the Authority, the City and the Trustee, all of the obligations of the Lessee herein. Section 612. Equipment. ---------- (a) The Lessee shall acquire (either from its own funds or from moneys in the Construction Fund) the necessary equipment, fixtures, permanent inventory and other tangible personal property for use at the Special Facilities in order to operate the Special Facilities as contemplated by this Agreement. The Lessee shall continue to maintain in good working order and repair and keep fully insured each piece of Equipment, including, but not limited to, the furnishing of all parts, mechanisms and devices required to keep the Equipment in good mechanical and working order and repair, unless the same becomes irreparable, worn out, obsolete or is no longer needed by the Lessee to conduct its operations at the Special Facilities. The Lessee shall replace or substitute any Equipment necessary to maintain the operating utility or productive capacity of the Special Facilities (unless the same is not needed by the Lessee in the conduct of its operations) with replacement equipment of equal functional value and utility to the item replaced and such replacement equipment shall become a part of the Equipment when installed by the Lessee. (b) The Lessee shall undertake diligent efforts to properly identify the Equipment by appropriate tags or other means of identification. The Lessee shall, (i) on or before the date the Special Facilities have been substantially completed and available for their intended use, (ii) on each date of the purchase or sale of the Equipment, and (iii) at the expiration of the term or earlier termination of this Agreement, certify to the Authority a true and correct current itemized list of the Equipment indicating with particularity (A) whether the Equipment was acquired with moneys in the Construction Fund or from the funds of the Lessee and (B) any changes from the previous certification. Section 613. Security Plan. The Lessee shall have entrances and gates to the Air Operations Area (as defined in applicable regulations of the FAA), and an "Airport Security Plan" as required by the City in accordance with FAA regulations, Title 14 CFR Part 139. Section 614. Tax Exemption. (a) The Authority (to the extent that such matters are within its control) and the Lessee covenant to refrain from any action which would adversely affect, and to take such action (including the provision and enforcement by the Lessee in any document of sublease or assignment of the Lessee's leasehold interest in the Special Facilities of appropriate covenants of the sublessee or assignee thereunder) as is necessary to assure, the treatment of the Bonds as obligations described in section 103(a) of the Code, the interest on which is not includable in the "gross income" of the owner thereof for purposes of federal income taxation (other than the gross income of a "substantial user" of the Special Facilities or a "related person" to such a "substantial user", within the meaning of the Code). In particular, but not by way of limitation thereof, the Authority (to the extent that such matters are within its control) and the Lessee covenant as follows: (i) to take such action which may be reasonably available to the Authority or the Lessee to assure that the bonds are "exempt facility bonds", as defined in section 142(a) of the Code, at least 95 percent of the proceeds of which are used to provide airport facilities (within the meaning of section 142(a) of the Code); (ii) to ensure that at all times during the term of the Bonds that the property provided with the proceeds thereof be treated as governmentally owned within the meaning of section 142(b) of the Code; (iii) to refrain from taking any action that would result in the Bonds being "federally guaranteed" within the meaning of section 149(b) of the Code; (iv) to refrain from using any portion of the proceeds of the Bonds, directly or indirectly, to acquire or to replace funds which were used, directly or indirectly, to acquire investment property (as defined in section 148(b)(2) of the Code) which produces a materially higher yield over the term of the Bonds, other than investment property acquired with -- (1) proceeds of the Bonds invested for a reasonable temporary period (not to exceed three years) or, until such proceeds are needed for the purpose for which the Bonds are issued, and (2) proceeds of amounts invested in a bona fide debt service fund, within the meaning of section 1.148-1(b) of the Regulations (v) to otherwise restrict the investment of the proceeds of the Bonds or amounts treated as proceeds of the Bonds, as may be necessary, to satisfy the requirements of section 148 of the Code (relating to arbitrage); (vi) to use no more than two percent of the proceeds of the Bonds for the payment of costs of issuance (including underwriters' discount) of the Bonds; (vii) to use no portion of the proceeds of the Bonds to provide any airplane, sky-box or other private luxury box, facility primarily used for gambling or store the principal business of which is the sale of alcoholic beverages for consumption off-premises; (viii) to comply with the limitations imposed by section 147(c) of the Code (relating to the limitation of the use of proceeds to acquire land) and section 147(d) of the Code (relating to restrictions on the use of bonds proceeds to acquire existing buildings, structures or other property). It is the understanding of the Authority and the Lessee that the covenants contained herein are intended to assure compliance with the provisions of the Code, and any regulations or rulings promulgated by the U.S. Department of the Treasury pursuant thereto, pertaining to obligations described in section 103(a) of the Code. In the event that regulations or rulings applicable to the Bonds are hereafter promulgated which modify or expand such provisions of the Code, the Authority and the Lessee will not be required to comply with any covenant contained herein to the extent that, in the opinion of Bond Counsel, such failure to comply will not adversely affect the excludability pursuant to section 103(a) of the Code of interest on the Bonds from the gross income of the owners thereof for federal income tax purposes. In the event that regulations or rulings are hereafter promulgated which impose additional requirements, pertaining to obligations described in section 103(a) of the Code, which are applicable to the Bonds, the Authority and the Lessee agree to comply with the additional requirements to the extent necessary, in the opinion of Bond Counsel, to preserve the excludability pursuant to section 103(a) of the Code of interest on the Bonds from the gross income of the owners thereof for federal income tax purposes. (b) The Lessee shall maintain or cause the Trustee to maintain for at least six years following final payment of interest and principal on the Bonds accurate investment records for the purpose of determining the amount of arbitrage rebate that shall be owed with respect to the Bonds to the United States in order to comply with the requirements of Section 148 of the Code with respect to the Bonds. The Lessee shall compute and cause to be paid, in the manner and time provided in the Tax Representation Certificate, the arbitrage rebate that is required to be paid to the United States pursuant to Section 148 of the Code in order to preserve the tax status of the interest on the Bonds. In any event, if the amount of cash held in the Special Rebate Fund immediately prior to the date on which any payment must be made by the Trustee pursuant to Article III(F)(2) of the Indenture shall be insufficient to permit the Trustee to make such payment to the United States, the Lessee forthwith shall pay the amount of such insufficiency to the Trustee in immediately available funds. The obligations of the Lessee under this Section are direct obligations of the Lessee, acting under the authorization of, and on behalf of, the Authority, and neither the City nor the Authority shall have any further obligation or duty with respect to the Special Rebate Fund. Section 615. The Lessee's Covenant Concerning the Bonds. ------------------------------------------- (a) Trustee's Fees and Expenses. The Lessee shall pay the ordinary fees and expenses of the Trustee for serving as the Trustee under the Indenture and the Guaranty and shall also pay to the Trustee all extraordinary fees and expenses incurred by the Trustee in enforcing the provisions of this Agreement, the Indenture or the Guaranty or otherwise serving in the capacity as the Trustee under the Indenture and the Guaranty. (b) Investment of Funds Under the Indenture. Any moneys held in the Funds or Accounts established under the Indenture shall be invested or reinvested by the Trustee in Qualified Investments in accordance with the provisions of the Indenture. (c) Advances by the Authority and Trustee. In the event the Lessee shall fail to comply with any covenant or agreement set forth in this Agreement, the Authority, the City or the Trustee may (but shall be under no obligation to) comply with said covenants and agreements. All amounts advanced by the Authority, the City or the Trustee to comply with such agreements and covenants shall be paid by the Lessee to the one making the advancements, together with interest thereon at the Trustee's prime rate of interest. Section 616. The Lessee's Obligations Concerning SEC Rule 15c2-12. ------------------------------------------------------- (a) Pursuant to Rule 15c2-12(b)(5) under the Exchange Act, the Lessee hereby agrees and undertakes, for the benefit of the holders and beneficial owners of the Bonds, to (1) file, within ninety (90) days after the end of the Lessee's 1996 fiscal year and each fiscal year thereafter, with the Commission annual financial information concerning the Lessee for the prior fiscal year including (i) the Lessee's audited financial statements, prepared in accordance with generally accepted accounting principles in effect from time to time, (ii) the Lessee's periodic reports filed with the Commission under the Exchange Act, and (iii) summary financial information and operating data of the type disclosed in Appendix A to the official statement prepared in connection with the sale of the Bonds; (2) send, within ninety (90) days after the end of the Lessee's 1996 fiscal year and each fiscal year thereafter, notice to each NRMSIR and the SID that the Lessee's annual financial information filed with the Commission in accordance with the Exchange Act constitutes the Lessee's annual financial information for the prior fiscal year for purposes of this Section 616; and (3) provide timely notice to each NRMSIR, the MSRB and the SID of (i) the occurrence of any of the events enumerated in Rule 15c2- 12(b)(5)(i)(C), as amended from time to time, with respect to the Bonds if material, and (ii) any failure of the Lessee to provide required annual financial information. (b) No holder or beneficial owner of a Bond may institute any suit, action or proceeding at law or in equity for the enforcement of any covenant herein or for any remedy for breach thereof, unless such holder or beneficial owner shall have given the Lessee evidence of ownership and written notice of and request to cure such breach, and the Lessee shall have failed to comply within reasonable time. No remedy shall be sought or granted other than specific performance of the covenant at issue. Failure to comply with any covenant contained in this Section 616 shall not be an Event of Default under this Agreement. (c) This Section 616 may only be amended in accordance with the Rule and interpretations thereunder. If this Section 616 is amended, the annual financial information containing the amended summary financial information or operating data will explain, in narrative form, the reasons for the amendment and the impact of the change in the type of summary financial information or operating data being provided. (d) The obligation of the Lessee under this Section 616 shall be automatically terminated upon the legal defeasance, prior redemption or payment in full of all of the Bonds or at the time nationally recognized counsel determines that the Lessee is no longer an "obligated person" under the Rule. If such termination occurs prior to the maturity of the Bonds, the Lessee shall give notice in a timely manner to each NRMSIR, the MSRB and the SID. (e) This Section 616 shall inure solely to the benefit of the holders and the beneficial owners of the Bonds and shall create no rights in any other person or entity. ARTICLE VII ----------- OBLIGATIONS OF THE AUTHORITY ---------------------------- Section 701. Operation as a Public Airport. The Authority covenants and agrees that at all times it will use its best efforts to cause the City to operate and maintain the Airport as a public airport consistent with and pursuant to the sponsor's assurances given by the City to the United States Government under the Federal Airport and Airways Act. Section 702. Ingress and Egress. The Lessee shall have the right of ingress to and egress from the Facilities for the Lessee, its officers, employees, agents, servants, customers, vendors, suppliers, patrons, and invitees over the roadway provided by the City serving the Facilities. The City's roadway shall be used jointly with other tenants on the Airport, and the Lessee shall not interfere with the rights and privileges of other persons or firms using said roadway and shall be subject to such weight and use restrictions promulgated in the City's rules and regulations. Section 703. Quiet Enjoyment of Leased Premises. By keeping and performing the covenants and agreement herein contained to be performed by it, the Lessee shall at all times throughout the term of this Agreement, have the right, subject to the provisions of this Agreement, to peaceably and quietly possess and enjoy the Leased Premises without suit, trouble or hindrance. The Authority shall defend the Lessee's right to such peaceable and quiet possession at the Authority's expense. Section 704. Maintenance and Operations. The Authority will be responsible, either itself or acting through the Manager, for snow removal from the runways, taxiways and public use areas of the Airport, but not from the Leased Premises. The Lessee acknowledges that the City, or the Manager acting on behalf of the City, bears the responsibility for snow removal at the Airport. Section 705. No Federal Funds to be Spent on Leased Premises. The parties hereto acknowledge and agree that the City has not spent federal funds on, developing, expanding or maintaining the Leased Premises. In the resolution adopted by the City approving the issuance of the Bonds by the Authority, as required by the Development Corporation Act, the City will agree not to spend federal funds during the term of this Agreement on developing, expanding or maintaining the Leased Premises. Section 706. Expansion of Airport Boundaries to Include Contiguous Land. In the event the Lessee exercises its right under Section 308 hereof to convey additional land contiguous to the Land acquired by the Lessee to accommodate Lessee Improvements, the Authority agrees to request the City to consider in good faith any request by the Lessee that the City seek approval from FAA of an expansion of the Airport boundaries to include such additional land. The foregoing notwithstanding, no assurances can be made that any such request will receive approval from the FAA. ARTICLE VIII ------------ RESERVATIONS ------------ Section 801. Improvement, Relocation or Removal of Special Facilities. Subject to Section 1104 hereof, the Lessee hereby acknowledges that the City, at its sole discretion, reserves the right to further develop or improve the Aircraft Operating Area (as defined in FAA regulations) and other portions of the Airport, including the right to remove or relocate any structure on the Airport, as it sees fit, and to take any action it considers necessary to protect the aerial approaches of the Airport against obstructions, together with the right to prevent the Lessee from erecting or permitting to be erected, any buildings or other structure on the Airport which, in the reasonable opinion of the City, would limit the usefulness of the Airport, constitute a hazard to aircraft or violate FAA standards or regulations. Section 802. Inspection of Leased Premises. The Authority, acting through the duly authorized agent of the City (currently the Manager), shall have at any reasonable time the right to enter the Leased Premises for the purpose of periodic inspection for fire protection, maintenance and to investigate compliance with the terms of this Agreement; provided, however, that except in the case of emergency, such right shall be exercised upon twenty-four (24) hours prior notice to the Lessee and with an opportunity for the Lessee to have an employee or agent present. The Authority, acting through the City and its designated agents, will comply with the Lessee's security procedures and will conduct such inspections in a manner that does not unduly interfere with or disrupt the Lessee's normal business operations. Section 803. Subordination to U.S. Government. This Agreement shall be subordinate to the provisions of any existing or future agreement(s) between the City and the United States Government, relative to the operation and maintenance of the Airport, the terms and execution of which have been or may be required as a condition precedent to the expenditure or reimbursement to the City of Federal funds for the development of the Airport; the foregoing notwithstanding, no such subordination shall adversely impact the obligations of the Lessee under Section 502 or the assignment of rental payments by the Authority under Section 507. Section 804. War or National Emergency. During the time of war or national emergency, the parties recognize that the City shall have the right to lease the Airport or any part thereof to the United States Government for military use, and if any such lease is executed, the provisions of this Agreement insofar as they are inconsistent with the lease to the United States Government shall be suspended, and in that event, a just and proportionate part of the ground rent due under Section 501 hereof shall be abated. Section 805. No Liability of the Authority. The Bonds shall be special and limited obligations of the Authority, payable solely and only out of the Trust Estate. No holder of any Bond shall have the right to compel any exercise of the taxing power of the State or any political subdivision thereof, including the City, to pay principal of, premium, if any, or interest on the Bonds, and the Bonds shall not constitute an indebtedness of the State or any political subdivision thereof, including the City, or a loan of credit thereof within the meaning of any constitutional or statutory provision or limitation or indebtedness. Section 806. No Warranty of Condition or Suitability. The Authority makes no warranty, either express or implied, as to the condition of the Leased Premises or that it shall be suitable for the Lessee's purposes or needs. The Authority shall not be responsible for any latent defect or change of condition in the Leased Premises and the Lessee shall not, under any circumstances, withhold any rentals or other amounts payable to the Authority hereunder on account of any defect in the Leased Premises, nor for any change in the condition thereof nor for any damage accruing thereto. By its entry onto the Leased Premises, the Lessee accepts the Leased Premises as being free and clear from all defects and in good, safe, clean and orderly condition and repair, and agrees to maintain the same. Section 807. Responsibility for Contracts for Special Facilities and Payment of Special Facilities Rentals. The Authority shall not be responsible to the Lessee for the performance of the contractor or contractors for the construction, modification, expansion and installation of the Special Facilities. The Authority shall not be required to pay or provide any monies for the construction, modification, expansion or installation of the Special Facilities, except to the extent of the moneys in the Construction Fund. Failure of the contractor or contractors to complete the construction, modification, expansion and installation of the Special Facilities shall in no way affect the payment obligations of the Lessee under Section 502 of this Agreement. Section 808. [Intentionally Omitted]. ------------------------ Section 809. Consideration of Amendment. In the event that the FAA, or its successors, requires modifications or changes in this Agreement as a condition precedent to the granting of funds for the improvement of the Airport, the Lessee agrees to consider in good faith to such amendments, modifications, revisions, supplements or deletions of any of the terms, conditions or requirements of this Agreement as may be reasonably required to obtain such funds; provided, however, that in no event will the Lessee be required, pursuant to this Section, to agree to an increase in the rent provided for hereunder or to a change in the use (provided it is an authorized use hereunder) to which the Lessee has put the Facilities. ARTICLE IX ---------- INDEMNITY AND INSURANCE ----------------------- Section 901. Indemnification of Indemnified Parties. ----------------------------------------- (a) Agreement to Indemnify. The Lessee releases the Indemnified Parties from, and the Indemnified Parties shall not be liable for, and the Lessee agrees and shall protect, indemnify, defend, and hold the Indemnified Parties harmless from any and all Claims or Losses (including, but not limited to, attorneys' fees, litigation and court costs, amounts paid in settlement, and amounts paid to discharge judgments) directly or indirectly resulting from, arising out of, in connection with, or related to (i) the issuance, offering, sale, or delivery of the Bonds, the Underwriting Agreement, the Indenture, the Guaranty, and this Agreement and the obligations imposed on the Authority or the City hereby and thereby; or the design, construction, installation, operation, use, occupancy, maintenance, or ownership of the Special Facilities; (ii) any written statements or representations made or given by the Lessee or any of its agents, officers or employees, to the Indemnified Parties, or to any underwriters or purchasers of any of the Bonds, with respect to the Lessee, the Special Facilities, or the Bonds, including, but not limited to, statements or representations of facts, financial information, or corporate affairs; (iii) damage to property or any injury to or death of any person that may be occasioned by any cause whatsoever pertaining to the Facilities; (iv) the presence or release of any Hazardous Materials or any environmental condition at the Facilities; and (v) any breach, violation or nonperformance of any covenant of the Lessee hereunder, including, without limitation, any loss or damage incurred by the Authority or the City as a result of violation by the Lessee of the provisions of Sections 614 or 615. THIS INDEMNIFICATION REMAINS IN FULL FORCE AND EFFECT EVEN IF ANY CLAIM DIRECTLY OR INDIRECTLY RESULTS FROM, ARISES OUT OF, OR RELATES TO OR IS ASSERTED TO HAVE RESULTED FROM, ARISEN OUT OF, OR RELATED TO THE SOLE NEGLIGENCE OR CONCURRENT NEGLIGENCE OF AN INDEMNIFIED PARTY. The foregoing notwithstanding, such indemnification shall (i) not extend to any Claim or Loss resulting from the willful misconduct, bad faith or fraud of an Indemnified Party and (ii) continue and remain in effect notwithstanding any disclaimers of warranty contained in the Special Warranty Deed conveying the Land to the Authority. (b) Defense. The Lessee shall have the right to assume the investigation and defense of all Claims, including the employment of counsel and the payment of all expenses. Each Indemnified Party shall have the right to employ separate counsel in any such action and participate in the investigation and defense thereof, but the fees and expenses of such counsel shall be paid by such Indemnified Party unless (i) the employment of such counsel has been specifically authorized by the Lessee, in writing, or (ii) the Lessee has failed to assume the defense and to employ counsel and the ability of the Indemnified Parties to be adequately defended is thereby jeopardized, or (iii) the named parties to any such action include both an Indemnified Party and the Lessee, and the Indemnified Party shall have received a written legal opinion of counsel to the effect that in such counsel's opinion, one or more of the legal defenses available to such Indemnified Party are in conflict with those available to the Lessee (in which case, if such Indemnified Party notifies the Lessee in writing that it elects to employ separate counsel at the Lessee's expense, the Lessee shall not have the right to assume the defense of the action on behalf of such Indemnified Party; provided however, that the Lessee shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegation or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys for the Indemnified Parties, which firm shall be designated in writing by the Indemnified Parties); provided further, anything to the contrary notwithstanding, nothing herein shall be construed as prohibiting the Department from utilizing the Attorney General of the State as its counsel, or the City and the Authority from utilizing the City Attorney of the City as its counsel, and having the expenses and overhead associated therewith paid by the Lessee. (c) Cooperation with Lessee. Each Indemnified Party shall use reasonable efforts to cooperate with the Lessee in the defense of any Claim. The Lessee shall not be liable for any settlement of any such action without its consent, unless the interests of the Indemnified Parties are in conflict with the interests of the Lessee, but, if any such action is settled with the consent of the Lessee, the Lessee shall indemnify and hold harmless the Indemnified Parties against any Loss by reason of such settlement as provided in this Section. (d) Survival of Term. The provisions of this Section 901 shall survive the term of this Agreement for all Claims arising out of actions or occurrences during the term of this Agreement. Section 902. Indemnification of the Trustee. The Lessee agrees to indemnify the Trustee, its directors, officers and employees, for and to hold it harmless against, any loss, liability or expense incurred without negligence, whether by act or omission to act, or willful misconduct on its part, arising out of or in connection with the performance of its duties under the trust imposed by the Indenture, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties under the Indenture, provided, however, that: (1) the Trustee shall reimburse the Lessee for payments made by the Lessee pursuant to such indemnity, to the extent of any proceeds, net of all expenses of collection, actually received by it from any insurance proceeds with respect to any such indemnified loss, liability or expense, and the Trustee shall assign rights to such proceeds, to the extent of such required reimbursement, to the Lessee; (2) as a condition to such indemnity, the Trustee shall promptly notify the Lessee in writing of any claim brought or, to the knowledge of the Trustee, threatened against the Trustee in respect of which indemnity may be sought against the Lessee; (3) the Lessee shall have the right to assume the investigation and defense of any claims against the Trustee in respect of which indemnity may be sought against the Lessee, including the employment of counsel and the payment of all expenses, provided that the Trustee shall have the right to employ separate counsel in any such action and participate in the investigation and defense thereof, but the fees and expenses of such counsel shall be paid by the Trustee unless (a) the employment of such counsel has been specifically authorized by the Lessee, in writing, or (b) the Lessee has failed to assume the defense and to employ counsel, or (c) the Trustee determines in good faith that its rights cannot be adequately represented by counsel employed by the Lessee as a result of a conflict between the interests of the Lessee and the interests of the Trustee; (4) the Trustee, as a condition of such indemnity, shall use reasonable efforts to cooperate with the Lessee in the defense of any claim in respect of which indemnity may be sought against the Lessee; and (5) the Lessee shall not be liable for any settlement of any such action without its consent, but, if any such action is settled with the consent of the Lessee or there be final judgment for the plaintiff in any such action, the Lessee shall indemnify and hold harmless the Trustee by reason of such settlement or judgment as provided herein. Section 903. Public Liability Insurance. The Lessee shall, at its expense, procure, maintain and keep in force, at all times during the term of this Agreement from financially sound and reputable companies reasonably acceptable to the Authority, commercial general liability insurance, insuring the Lessee, the Authority, the Trustee and the City against liability for bodily injury and property damage with respect to the risks set forth in Exhibit C attached hereto. Without limiting its liability, the Lessee agrees to carry and keep in force insurance with single limit liability for bodily injury or death and property damage in a sum not less than $20,000,000 with said policy designating the Authority, the City and the Trustee as additional insureds to the extent the Lessee is required to indemnify the Authority and the City pursuant to Section 901 hereof. In no event shall the Lessee knowingly handle any materials which would void or reduce the insurance coverage of the Facilities required of the Lessee herein. The Lessee shall furnish the Authority, the City and the Trustee with a certificate of insurance as evidence of such coverage. Said insurance shall not be cancelled or materially modified except upon ten (10) days' advance written notice to the Authority, the City and the Trustee. Section 904. Fire and Extended Coverage Insurance. The Lessee shall, at its expense, procure and keep in force at all times during the term of this Agreement with financially sound and reputable companies reasonably acceptable to the Authority, replacement cost insurance on the Leased Premises against loss and damage by fire, aircraft and extended coverage perils. Such policy shall be in an amount of not less than eighty percent (80%) of the replacement cost of the Leased Premises. In no event shall the Lessee knowingly handle any materials which would void or reduce the insurance coverage of the Facilities required of the Lessee herein. Said policy shall designate the Authority, the City and the Trustee as additional insureds. The Lessee shall furnish the Authority and the Trustee with a certificate of insurance as evidence of such coverage. Said policy shall not be cancelled or materially modified except upon ten (10) days' advance written notice to the Authority, the City and the Trustee. In connection with any transfer of the Leased Premises by the Authority under the provisions of Section 1703, the Authority may provide that it shall no longer be an insured under the terms of this Section. Section 905. Application of Insurance Proceeds. The proceeds of the insurance required to be maintained in accordance with the provisions of Section 904 hereof shall be paid and disbursed in accordance with the provisions of Article XI hereof. Section 906. Performance Bonds. At any time that the Lessee undertakes any construction pursuant to Article III hereof, the Lessee shall, at its own cost and expense, cause to be made, executed, and delivered to the Authority separate performance bonds, as follows: (a) Prior to the date of commencement of such construction, a contract surety bond in a sum equal to the full amount of the construction contract awarded. Said bond shall be drawn in a form and from a financially sound and reputable company reasonably acceptable to the City, acting on behalf of the Authority; shall guarantee the faithful performance of necessary construction and completion of improvements in accordance with the Plans and Specifications therefor; and shall guarantee the Authority against any losses and liability, damages, expenses, claims and judgments caused by or resulting from any failure of the Lessee to perform completely, the work described therein. (b) Prior to the date of commencement of such construction, a payment bond with the Lessee's contractor or contractors as principal, in a sum equal to the full amount of the construction contract awarded. Said bond shall guarantee payment of all wages for labor and services engaged and of all bills for materials, supplies and equipment used in the performance of said construction contract. Section 907. Right of the City or Trustee to Pay Insurance Premiums. In the event that the Lessee shall fail to maintain full insurance coverage required by this Agreement, the City, acting on behalf of the Authority, or the Trustee may (but shall be under no obligation to) take out the required policies of insurance, pay the required premiums or otherwise comply with the covenants set forth in Sections 903 and 904 hereof. All amounts advanced by the City, acting on behalf of the Authority, or the Trustee in payment of the required premiums for such insurance or otherwise to comply with the covenants set forth in such Sections shall be paid by the Lessee to the one making the advances, together with interest thereon at the Trustee's prime rate of interest. ARTICLE X --------- PREPAYMENT OF SPECIAL FACILITIES RENTALS ---------------------------------------- Section 1001. In Connection With Optional Redemption of Bonds. The Lessee shall have the option to prepay the Special Facilities Rentals due pursuant to Section 502 hereof with respect to the Bonds for the purpose of providing for the redemption of the Bonds then Outstanding in accordance with the Indenture. In order to exercise such right, the Lessee shall: (i) give conditional written notice of the exercise of such right to the Authority, the City and the Trustee not more than one hundred twenty (120) days nor less than forty-five (45) days prior to the date the Lessee has selected for the redemption of the Bonds; and (ii) irrevocably deposit with the Trustee in the Debt Service Fund on or prior to such redemption date sufficient moneys, which, together with investment earnings thereon to such redemption date and other moneys in the Debt Service Fund available therefore, shall be sufficient to provide for the payment of the principal, redemption premium, if any, and interest on the Bonds to be redeemed on such redemption date. Section 1002. In Connection with Defeasance of the Bonds. The Lessee shall have the option to prepay the Special Facilities Rentals due pursuant to Section 502 hereof with respect to the Bonds for the purpose of providing for the defeasance of the Bonds in accordance with the Indenture. In order to exercise such right, the Lessee shall: (i) give written notice of the exercise of such right to the Authority, the City and the Trustee; and (ii) irrevocably deposit with the Trustee in the Debt Service Fund on or prior to the date of such defeasance sufficient moneys, which, together with investment earnings thereon and other moneys in the Debt Service Fund available therefor, shall be sufficient to provide for the payment of principal of, redemption premium, if any, and interest on the Bonds to the date the Lessee has selected for the redemption thereof or the date of maturity, as the case may be, in accordance with the Indenture. Section 1003. In Connection with the Termination of this Agreement in the Event of Damage or Destruction or Condemnation. The Lessee shall have and is hereby granted the option, in accordance with paragraph (ii) of Subsection 1101 (a) and paragraph (iii) of Subsection 1102(a) hereof, to prepay the Special Facilities Rentals due pursuant to Section 502 and to terminate this Agreement in the event of a destruction or damage to or condemnation of the Special Facilities for the purpose of redeeming the Bonds then Outstanding in accordance with the Indenture. In order to exercise such right, the Lessee shall: (i) give written notice of the exercise of such right to the Authority, the City and the Trustee not more than one hundred twenty (120) days nor less than forty-five (45) days prior to the date the Lessee has selected for the redemption of the Bonds; and (ii) irrevocably deposit with the Trustee in the Debt Service Fund on or prior to such redemption date sufficient moneys which, together with interest thereon to such redemption date and other moneys in the Debt Service Fund available therefor, shall be sufficient to provide for the payment of the principal of and interest on all the Bonds then Outstanding in accordance with the provisions of the Indenture. Section 1004. In Connection with a Partial Redemption. The Lessee shall have the option, in accordance with paragraph (iii) of Subsection 1102(a) hereof to prepay the Special Facilities Rentals due pursuant to Section 502 hereof for the purpose of providing for the redemption of the Bonds then Outstanding in accordance with the Indenture. In order to exercise such right, the Lessee shall: (i) give written notice of the exercise of such right to the Authority, the City and the Trustee not more than one hundred twenty (120) days nor less than forty-five (45) days prior to the date the Lessee has scheduled for the redemption of the Bonds; and (ii) irrevocably deposit with the Trustee in the Debt Service Fund on or prior to such redemption date sufficient moneys, which, together with investment earnings thereon to such redemption date and other moneys in the Debt Service Fund available therefor, shall be sufficient to provide for the payment of the principal of and interest on the Bonds to such redemption date. Section 1005. In Connection With a Determination of Taxability. The Lessee shall be obligated to prepay the Special Facilities Rentals due pursuant to Section 502 hereof with respect to the Bonds in the event of a Determination of Taxability. Such redemption shall occur at a date to be selected by the Lessee not more than one hundred twenty (120) days after the occurrence of the Determination of Taxability. The Lessee shall irrevocably deposit with the Trustee in the Debt Service Fund on or prior to such redemption date sufficient moneys, which, together with investment earnings thereon to such redemption date and other moneys in the Debt Service Fund available therefor, shall be sufficient to provide for the payment of the principal of and interest on the Bonds to such redemption date. ARTICLE XI ---------- DAMAGE AND CONDEMNATION ----------------------- Section 1101. Damage and Destruction. ----------------------- (a) If prior to full payment of the Bonds (or provision for payment thereof having been made in accordance with the provisions of the Indenture) the Special Facilities are destroyed (in whole or in part) or are damaged by fire or other casualty, the Lessee shall promptly give written notice thereof to the Authority, the City and the Trustee. All Net Proceeds in an amount less than one million dollars ($1,000,000) per casualty shall be paid to the Lessee to be applied to repair, rebuild or restore the property damaged. Any remaining balance after payment for such repair, rebuilding or restoration shall be retained by the Lessee. Net Proceeds of insurance in excess of one million dollars ($1,000,000) per casualty resulting from such claims for losses shall be paid to and held by the Trustee in the Net Proceeds Account of the Construction Fund created under the Indenture, whereupon the Lessee shall elect to proceed in accordance with paragraphs (i) or (ii) hereof: (i) The Lessee will proceed promptly to repair, rebuild or restore the property damaged or destroyed to substantially the same condition as it existed prior to the event causing such damage or destruction, with such changes, alterations and modifications (including the substitution and addition of other property) as may be desired by the Lessee and as will not impair productive capacity or the character of the Special Facilities, and the Trustee will apply so much as may be necessary of the Net Proceeds to payment of the costs of such repair, rebuilding or restoration, either on completion thereof or as the work progresses, as directed by the Lessee. In the event said Net Proceeds are not sufficient to pay in full the costs of such repair, rebuilding or restoration, the Lessee will, nonetheless, complete the work thereof and will pay that portion of the costs thereof in excess of the amount of said Net Proceeds, or will advance to the Authority the moneys necessary to complete said work, in which case the Authority will proceed so to complete said work. Any balance of such Net Proceeds remaining after payment of all the costs of such repair, rebuilding or restoration shall be paid to the Lessee. (ii) The Lessee shall: (A) cause the Special Facilities to be returned to the Authority either in the condition the Special Facilities then exist or in the same condition in which the Special Facilities existed prior to the execution of this Agreement, whichever shall be acceptable to the Authority; (B) transfer all amounts in the Net Proceeds Account in the Construction Fund not used pursuant to clause (A) to the Debt Service Fund and prepay all of the Special Facilities Rentals due pursuant to Section 502 hereof pursuant to the provisions of Section 1003 hereof and the corresponding provisions of the Indenture and cause the Authority and the Trustee to provide for the redemption of all Bonds then Outstanding under the Indenture in whole in accordance with the provisions thereof; (C) if any Bonds have previously been redeemed or provision for their payment has been made pursuant to the Indenture, reimburse itself for such prepayment in an amount equal to the amount that would have been necessary (on the date of receipt of such Net Proceeds), to redeem or provide for the payment of such Bonds to the next practicable redemption date, but not less than the actual amount paid by the Lessee; and (D) apportion the remaining Net Proceeds between the Authority and the Lessee, with the Authority receiving the same proportion of the remaining Net Proceeds as the then expired portion of the term of this Agreement bears to the full term and the Lessee shall be entitled to the remainder of the Net Proceeds; provided, that if the Lessee proceeds under this paragraph (ii) hereof, it shall provide for the completion of the requirements of clauses (A) and (B) hereof, whether or not the Net Proceeds are sufficient for such purposes. The Lessee may elect to proceed pursuant to this paragraph (ii) only if the Special Facilities have been damaged or destroyed by fire or other casualty (x) to such extent that, in the opinion of the Lessee expressed within a period of six consecutive months following such damage or destruction, it is not practicable or desirable to rebuild, repair or restore the Special Facilities, or (y) to such extent that, in the opinion of the Lessee, the Lessee is or will be thereby prevented from carrying on its normal operations at the Special Facilities for a period of six consecutive months. Any moneys held by the Trustee in the Net Proceeds Account shall, at the written direction of the Lessee, be invested or reinvested by the Trustee in Qualified Investments in accordance with the Indenture. The Lessee shall forthwith pay to the Trustee the amount of any net losses with respect to principal on such investments. (b) If the Bonds have been fully paid (or provision for the payment thereof has been made in accordance with the Indenture) and the Special Facilities are destroyed (in whole or in part) or are damaged by fire or other casualty, all Net Proceeds will be paid to the Trustee or a mutually acceptable third party, with any disbursements to be approved by the Lessee and the Authority, and the Lessee shall elect to proceed in accordance with paragraphs (i) or (ii) hereof: (i) The Lessee will proceed promptly to repair, rebuild or restore the property damaged or destroyed to substantially the same condition as it existed prior to the event causing such damage or destruction, with such changes, alterations and modifications (including the substitution and addition of other property) as may be desired by the Lessee and as will not impair productive capacity or the character of the Special Facilities, and the Lessee will apply so much as may be necessary of the Net Proceeds to payment of the costs of such repair, rebuilding or restoration, either on completion thereof or as the work progresses as directed by the Lessee. In the event the Net Proceeds are not sufficient to pay in full the costs of such repair, rebuilding or restoration, the Lessee will, nonetheless, complete the work thereof and will pay that portion of the costs thereof in excess of the amount of the Net Proceeds, or will advance to the Authority the moneys necessary to complete said work, in which case the Authority will proceed so to complete said work. Any balance of the Net Proceeds remaining after payment of all the costs of such repair, rebuilding or restoration shall be paid to the Lessee. (ii) The Lessee will (A) cause the Special Facilities to be returned to the Authority either in the condition the Special Facilities then exist or in the same condition in which the Special Facilities existed prior to the execution of this Agreement, whichever shall be acceptable to the Authority, (B) if any Bonds have previously been redeemed or provision for their payment has been made pursuant to the Indenture, reimburse itself for such prepayment in an amount equal to the amount that would have been necessary (on the date of receipt of such Net Proceeds) to redeem or provide for the payment of such Bonds to the next practicable redemption date, but not less than the actual amount paid by the Lessee and (C) apportion the remaining Net Proceeds between the Authority and the Lessee, with the Authority receiving the same proportion of such remaining Net Proceeds as the then expired portion of the term of this Agreement bears to the full term, and the Lessee shall be entitled to the remainder of the Net Proceeds. (c) The Lessee shall not, by reason of the payment of the costs (whether by direct payment thereof or advances to the Authority or the Trustee) of replacing or repairing of any property damaged or destroyed in excess of the Net Proceeds be entitled to any reimbursement from the Authority, the City, the Trustee, or the holders or owners of the Bonds, or any abatement or diminution of the rents payable under Article V hereof. (d) Within this Section 1101, "Net Proceeds" means the gross proceeds from the insurance with respect to which that term is used remaining after payment of all expenses (including attorneys expenses and any extraordinary fees and expenses of the Trustee), incurred in the collection of such gross proceeds. Section 1102. Condemnation. ------------- (a) In the event that title to, or the temporary use of, the Special Facilities or the leasehold estate of the Lessee in the Special Facilities created by this Agreement or any part of either thereof shall be taken under the exercise of the power of eminent domain by any governmental body or by any person, firm or corporation acting under governmental authority, in each case other than the City, while any Bonds are Outstanding, the Lessee shall be obligated to continue to pay the Special Facilities Rental and other amounts due to the Trustee. Any Net Proceeds derived for the temporary use or condemnation of the Special Facilities shall be paid to the Lessee. The Authority, the Lessee and the Trustee will cause any other Net Proceeds received by them or any of them from any award made in such eminent domain proceedings with respect to the Special Facilities, to be paid to and held by the Trustee in the Net proceeds Account, to be applied in one or more of the following ways, as shall be directed in writing by the Lessee: (i) The restoration of the Special Facilities to substantially the same condition as existed prior to the exercise of the said power of eminent domain. (ii) The acquisition, by construction or otherwise, by the Lessee of other improvements suitable for the Lessee's operations (which improvements shall be deemed a part of the Special Facilities and available for use and occupancy by the Lessee without the payment of any rent other than the Special Facilities Rental to the same extent as if such other improvements were specifically described herein and demised hereby). (iii) Redemption of any of the Bonds together with accrued interest thereon to the date of redemption; provided, that no part of any such condemnation award may be applied for such redemption, unless all of the Bonds are to be redeemed or, in the event that less than all of the Bonds are, to be redeemed, the Lessee shall certify to the Authority, the City and the Trustee that (A) the property forming a part of the Special Facilities that was taken by such condemnation proceedings is not essential to the Lessee's use or occupancy of the Special Facilities, or (B) the Special Facilities have been restored to a condition substantially equivalent to its condition prior to the taking by such condemnation proceedings, or (C) improvements have been acquired which are suitable for the Lessee's operations at the Special Facilities as contemplated by the foregoing paragraph (ii) of this Subsection 1102(a). The Lessee may elect to proceed pursuant to this paragraph (iii) only if the Special Facilities have been condemned (x) to such extent that, in the opinion of the Lessee expressed within a period of six consecutive months following such condemnation it is not practicable or desirable to rebuild, repair or restore the Special Facilities, or (y) to such extent that, in the opinion of the Lessee, the Lessee is or will be thereby prevented from carrying on its normal operations at the Special Facilities for a period of six consecutive months. (b) The Lessee shall direct the Authority, the City and the Trustee in writing as to which of the ways specified in this Section the Lessee elects to have the condemnation award applied. Any balance of the Net Proceeds of the award in such eminent domain proceedings in an amount necessary to redeem the then Outstanding Bonds shall be paid into the Debt Service Fund. If the Bonds have been fully paid (or provision for payment thereof has been made in accordance with the provisions of the Indenture), all Net Proceeds will be apportioned between the Authority and the Lessee, with the Authority receiving the same portion of such proceeds as the then expired portion of the Agreement term bears to the term of the Agreement, and the Lessee receiving the balance, provided, however, that if any Bonds have been previously redeemed or provision for their payment has been made pursuant to the Indenture, prior to any such apportionment the Lessee shall receive Net Proceeds in an amount (determined on the date of the receipt of such Net Proceeds) that would have been necessary to redeem such Bonds to the next practicable redemption date, but not less than the actual amount paid by the Lessee. (c) Any moneys held by the Trustee under the provisions of the preceding paragraph shall, at the written request of the Lessee, be invested or reinvested by the Trustee in Qualified Investments in accordance with the provisions of the Indenture. The Lessee shall forthwith pay to the Trustee the amount of any net losses with respect to principal on such investments. (d) Within this Section 1102, "Net Proceeds" means the gross proceeds derived from the condemnation award with respect to which that term is used after payment of all expenses (including attorney's expenses and any extraordinary expenses of the Trustee) incurred in connection with the collection of such gross proceeds. (e) The Authority shall cooperate fully with the Lessee in the handling and conduct of any prospective or pending condemnation proceedings with respect to the Special Facilities or any part thereof and will, to the extent it may lawfully do so, permit the Lessee to litigate in any such proceedings in the name and behalf of the Authority. In no event will the Authority voluntarily settle, or consent to the settlement of, any prospective or pending condemnation proceeding with respect to the Special Facilities or any part thereof without the written consent of the Lessee. Section 1103. Destruction or Condemnation of Excluded Personal Property or Lessee Improvements. The Lessee shall also be entitled to the net proceeds of any insurance or condemnation award or portion thereof made for damages to or takings of the Excluded Personal Property or any portion thereof, the Lessee Improvements or any portion thereof, as well as any portion of the Leased Premises that at one time was Lessee Improvements. Section 1104. Taking or Condemnation by the City. In the event the City requires the Facilities for expansion, improvement, development of the Airport or in the event the City exercises its right of condemnation or eminent domain with respect to all or substantially all of the Facilities for the purposes set forth in Section 801 hereof, the Authority reserves the right, on six (6) months notice, to relocate or replace the Facilities in substantially similar form at another comparable location on the Airport. The City shall identify to the Authority and the Lessee the comparable location by appending to this Agreement revised Exhibits A and B. The new location shall constitute thereafter the Land and the facilities or improvements located thereon shall constitute the Facilities for purposes of this Agreement. The relocation of the Facilities shall be at no cost to the Lessee and the new Facilities must be ready for occupancy by the Lessee prior to the date of required relocation. If the Authority complies with the provisions of this Section, such remedies shall be in lieu of any remedies the Lessee may have pursuant to law or equity with respect to the actions taken by the City in condemning or relocating the Facilities. Section 1105. Destruction or Condemnation of Leased Premises Other Than Special Facilities or Former Lessee Improvements. The Lessee shall direct the Authority to apply the net proceeds of any insurance or condemnation award (other than condemnation by the City) or any portion thereof made for damages or takings of Leased Premises (other than Special Facilities or former Lessee Improvements) to restore such Leased Premises to substantially the same condition as existed prior to such damage or condemnation or acquire, by construction or otherwise, other improvements of similar character suitable for the Lessee's operations. To the extent that such net proceeds are insufficient to effect the foregoing, the Lessee shall: (i) pay all costs in excess of the net proceeds required for such redemption; (ii) develop Plans and Specifications which can accomplish such restoration with the net proceeds available therefor; or (iii) terminate this Agreement with respect to those Leased Premises condemned or destroyed, in which case, such net proceeds shall be retained by the Authority. Any excess net proceeds shall be retained by the Authority. ARTICLE XII ----------- ADDITIONAL BONDS ---------------- Section 1201. Additional Bonds. If the Lessee is not in default hereunder, the Authority will issue pursuant to an indenture between the Authority and the trustee thereunder the amount of Additional Bonds specified by the Lessee to provide funds to pay or to reimburse the Lessee for costs incurred by the Lessee for any one or more of the following: (a) the costs of completing the Special Facilities, (b) the costs of the issuance and sale of the Additional Bonds and other costs reasonably related to the financing as shall be agreed upon by the Lessee and the City, (c) the costs of acquiring land, buildings, and equipment, one or more, to expand the Special Facilities for the purpose of distributing cargo and parcels and for other purposes reasonably incidental thereto, and (d) the refunding of Outstanding Bonds (including Additional Bonds, if any); provided that: (i) the terms of such Additional Bonds, the purchase price to be paid therefor, and the manner in which the proceeds therefrom are to be disbursed, shall have been approved in writing by the Lessee; (ii) the Authority and the Lessee shall have entered into a Supplemental Agreement to provide for additional rent in an amount at least sufficient to pay principal of, interest, and premium, if any, on the Additional Bonds when due; (iii) the Authority shall have otherwise complied with the provisions of said indenture with respect to the issuance of such Additional Bonds; and (iv) there shall be delivered to the Trustee an opinion of Bond Counsel to the effect that the issuance of such Additional Bonds shall not adversely affect the exemption from gross income for federal income tax purposes of interest on the Bonds. Section 1202. Approval of State Agencies. Should Additional Bonds be issued by the Authority pursuant to the terms of the Development Corporation Act, no such Additional Bonds shall be issued without the prior approval of the Department. To the extent required by State law, no Additional Bonds shall be issued without the prior approval of the Attorney General of Texas. ARTICLE XIII ------------ TERMINATION OF AGREEMENT BY THE LESSEE -------------------------------------- Section 1301. Termination by the Lessee. So long as no Bonds remain Outstanding under the Indenture, the Lessee may terminate this Agreement and terminate its obligations hereunder at any time that the Lessee is not in default in the payment of ground rentals and other amounts payable to the Authority hereunder by giving the Authority sixty (60) days advance written notice to be served as hereinafter provided, and by surrender of the Leased Premises, upon or after the happening of any one of the following events: (a) The issuance by any court of competent jurisdiction of an injunction in any way preventing or restricting the use of the Airport, so as to substantially affect the Lessee's use of the system at the Airport, and the remaining in force of such injunction for a period of at least ninety (90) days; provided, however, that such injunction is not due solely to the Lessee's violation of this Agreement. (b) Failure by the Authority to observe and perform any covenant, condition or agreement on its part to be observed or performed, for a period of sixty (60) days after written notice to the Authority, specifying such failure and requesting that it be remedied, given to the Authority by the Lessee, unless the Lessee shall agree in writing to an extension of such time prior to its expiration. If a failure under this Subsection is such that it cannot be corrected within the applicable period, the Lessee shall not terminate this Agreement if corrective action is instituted by the Authority within the applicable period and diligently pursued until the failure is corrected. (c) The assumption by the United States Government or any authorized agency thereof of the operation, control, or use of the Airport or the Facilities, or any substantial part or parts thereof, in a manner which substantially restricts the Lessee for a period of at least ninety (90) days from full use of the Facilities. The provisions of this Section 1301 shall be subject to the provisions of Section 1806 hereof. ARTICLE XIV ----------- EVENTS OF DEFAULT ----------------- Section 1401. Events of Default. The following shall constitute Events of Default: (a) the failure of the Lessee to pay any installment of rent then due (with interest) under Section 501 or Section 503 hereof within thirty (30) days after receipt by the Lessee of written notice to pay such rent; (b) the failure of the Lessee to pay any installment of Special Facilities Rentals pursuant to Section 502 hereof, which results in the occurrence of an "Event of Default" as described in Article V(C)(1) or Article V(C)(2) of the Indenture; (c) the occurrence of an Act of Bankruptcy, provided that with respect to the filing of an involuntary petition in bankruptcy or other commencement of a bankruptcy or similar proceeding against the Lessee, such petition or proceeding shall remain undismissed for ninety (90) days; (d) (i) failure by the Lessee to observe and perform any covenant, condition or agreement on its part to be observed or performed pursuant to Sections 201 or 611 hereof, or (ii) any violation of an FAA or United States Department of Transportation regulation that (A) deprives the City of the use of or the power to operate all or a portion of the Airport or (B) prevents the City from obtaining an airport development grant in aid from the United States Government, where such occurrence set forth in (i) or (ii) shall continue for a period of sixty (60) days after written notice to the Lessee specifying such failure and requesting that it be remedied, given to the Lessee by the Authority or the City, unless the City shall agree in writing to an extension of such time prior to its expiration. If a failure under this Subsection is such that it cannot be corrected within the applicable period, it shall not constitute an Event of Default if corrective action is instituted by the Lessee within the applicable period and diligently pursued until the failure is corrected; or (e) (i) failure by the Lessee to observe and perform any covenant, condition or agreement on its part to be observed or performed, other than as referred to in Subsections (a) through (d) above, for a period of sixty (60) days after written notice to the Lessee, specifying such failure and requesting that it be remedied, given to the Lessee by the Authority, unless the Authority shall agree in writing to an extension of such time prior to its expiration; provided, however, if a failure under this clause (i) is such that it cannot be corrected within the applicable period, it shall not constitute an Event of Default if corrective action is instituted by the Lessee within the applicable period and diligently pursued until the failure is corrected; or (ii) election of the Authority to declare an Event of Default as provided in Subsection 605(d) hereof. The provisions of Subsections (d) and (e) shall be subject to the provisions of Section 1806 hereof. Section 1402. Remedies of the Trustee for Certain Events of Default. Upon the occurrence of any Event of Default described in Subsections 1401(b) or (c), the Trustee, as assignee pursuant to Section 507 hereof, may in its discretion and shall upon the direction of the Owners of at least twenty-five percent (25 %) of the principal amount of Bonds Outstanding, join in or separately initiate whatever action at law or in equity as may appear necessary or desirable to collect the Special Facilities Rentals due and owing and any other amounts then due to the Trustee under this Agreement including, without limitation, the use and filing of actions for specific performance and mandamus proceedings in any court of competent jurisdiction, against the Company, and to obtain judgments against the Company for, or to seek the appointment of a receiver in equity to collect, the Special Facilities Rentals due and owing and any other amounts then due to the Trustee under this Agreement. No waiver by the Authority of an Event of Default described in Subsections 1401 (b) or (c) shall adversely affect the Trustee's rights under this Section 1402. Section 1403. Remedies of the Authority on Default. ------------------------------------- (a) If any Event of Default shall have occurred, the Authority may, in its own name and for its own account, without impairing the ability of the Authority to pursue any other remedy provided for in this Agreement or now or hereafter existing at law or in equity or by statute, institute such action against the Lessee as may appear necessary or desirable to collect such rentals and any other amounts then due under this Agreement, or to enforce performance and observance of such covenant, condition or obligation of the Lessee hereunder, or to recover damages for the Lessee's non-payment, non-performance or non- observance of the same. (b) Upon the occurrence of any Event of Default described in Subsections 1401 (a), (c) or (d), the Authority may (i) by giving the Lessee written notice upon the occurrence of any Event of Default described in Subsections 1401(a) and (d) and without giving the Lessee notice upon the occurrence of an Event of Default described in Subsection 1401(c), declare this Agreement to be terminated, except for the Lessee's continuing obligation pursuant to Subsection 1404(a) hereof to make payments due hereunder, (ii) exclude the Lessee from possession of the Leased Premises and reenter the same; and (iii) take whatever action at law or in equity as may appear necessary or desirable to collect the rentals and any other amounts then due, to enforce performance and observance of any covenant, condition or obligation of the Lessee hereunder, or to recover damages for the Lessee's non-payment, non-performance or non-observance of the same; provided that the Authority shall be required to mitigate its damages to the extent required by law and Subsection 1404(b) hereof. (c) The Lessee shall pay all of the Authority's reasonable fees and expenses, including reasonable attorneys' fees, in enforcing any covenant to be observed by the Lessee or pursuing any remedy upon an Event of Default. Such amounts shall for all purposes of this Agreement be considered additional rent due under Section 501 hereof. Section 1404. The Lessee To Remain Liable for Payments; Reletting. ---------------------------------------------------- (a) Notwithstanding the exercise by the Authority of its remedies pursuant to Section 1403 hereof or the exercise by the Trustee of its remedies pursuant to Section 1402 hereof or the Indenture, the Lessee shall continue to be liable for the payment of all rentals payable under Article V hereof and other amounts payable under this Agreement and the Lessee shall make such payments at the same times and in the same manner as provided in this Agreement, except as provided in Subsection 1404(b) hereof. (b) Whether or not any Bonds are Outstanding, the Authority shall use reasonable efforts to relet the Leased Premises for the maximum rental it may reasonably obtain, provided, however, that the Authority shall have no obligation to relet the Leased Premises to any person who will not use the Leased Premises for aviation related purposes requiring airfield access. Any such rentals received prior to the stated termination date of this Agreement shall be applied first to the payment of expenses incurred by the Authority in connection with such reletting, second, to the Trustee, to the extent Bonds are then Outstanding, for the payment of principal, premium, if any, and interest on the Bonds, third to the Lessee in an amount equal to the sum of the principal amount of the Bonds Outstanding on the date of such termination and the principal amount and any premium paid on Bonds no longer Outstanding, and fourth to the Authority. All such rentals paid to the Authority after the stated termination date of this Agreement shall be retained by the Authority. Section 1405. Disposition of Excluded Personal Property. If there shall remain any Excluded Personal Property upon the Authority's reentry of the Leased Premises, the Authority may, but without any obligation to do so, remove such property and hold it for the Lessee and the Lessee shall reimburse the Authority for any expense incurred by the Authority in connection with such removal and storage of such property. The Authority shall have the right to sell or rent such Excluded Personal Property; provided that it shall give to the Lessee not less than thirty (30) days' prior written notice that it intends to conduct such a sale or rental. The proceeds of such sale or letting shall be applied first, to the cost of such sale, second, to the payment of the charges for storage, third, to the payment of any other amounts which may then be due from the Lessee to the Authority under this Agreement, except Sections 502 hereof, fourth, so long as any Bonds are Outstanding, to the payment, redemption, purchase in the open market or defeasance of such Bonds, and the balance, if any, shall be paid to the Lessee. Section 1406. No Remedy Exclusive. No remedy herein conferred upon the Authority is intended to be exclusive of any other available remedy or remedies, and each such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default granted under this Agreement shall impair any right or power or shall be construed to be a waiver thereof, and any such right or power may be exercised from time to time and as often as may be deemed expedient, and the exercise of any one right or remedy shall not impair the right of the Authority to any or all other remedies under this Agreement. Section 1407. No Additional Waiver Implied By One Waiver; Consents to Waiver. The waiver of either party of any breach by the other party of any covenant, condition or obligation under this Agreement shall not operate as a waiver of any subsequent breach of the same or a waiver of any breach of any other covenant, condition or obligation under this Agreement, nor shall any forbearance by the non-defaulting party not breaching to seek a remedy for any breach by the other party be a waiver by such non-defaulting party not breaching any of its rights and remedies with respect to such breach or any subsequent breach of the same or with respect to any other breach. Section 1408. Suspension. During the time of war or national emergency, the Lessee acknowledges that the City shall have the right to lease the landing area or any part thereof to the United States Government for military use. If any such lease is executed, any provisions of this instrument which are inconsistent with the provisions of the lease to the Government shall be suspended; provided that the term of this Agreement shall be extended by the amount of the period of suspension; provided that such shall not affect the Lessee's obligations to pay Special Facilities Rentals pursuant to Section 502 and provided that the City obtains an opinion of Bond Counsel that such extension does not affect the exemption from gross income of interest on the Bonds for federal income tax purposes. Section 1409. Delay not a Waiver. No delay or omission by the Authority of the exercise of any right or power accruing upon any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or any acquiescence therein, and every power or remedy given by this Agreement to the City may be exercised from time to time and as often as may be deemed expedient. The Authority may waive any Event of Default which in its opinion has been remedied before the entry of final judgment or decree in any suit, action or proceeding instituted by it under the provisions of this Agreement or before the completion of the enforcement of any other remedies under this Agreement. No such waiver shall extend to or affect any other existing or subsequent Event of Default or impair any rights or remedies consequent thereon. ARTICLE XV ---------- DEFAULT BY THE AUTHORITY ------------------------ Section 1501. Default by the Authority; Remedies of the Lessee. The Authority shall in no event be in default in the performance of any of its obligations hereunder unless and until the Authority shall have failed to perform such obligation within thirty (30) days, or such additional time as is reasonably required in the opinion of the Lessee and the Trustee, to conduct any such default, after notice by the Lessee to the Authority and, so long as any of the Bonds are outstanding, to the Trustee, properly specifying wherein the Authority has failed to perform any such obligation; but, so long as any of the Bonds are Outstanding, neither the occurrence nor existence of any default by the Authority shall relieve the Lessee of any of its obligations hereunder, including, without limitation, its obligation to pay Special Facilities Rentals under Section 502 hereunder, to provide indemnification under Section 901 hereof, or to provide insurance under Sections 902 and 903 hereof; provided, however, the Lessee may institute such action against the Authority as the Lessee may deem necessary to compel performance or recover its damages for non- performance. The Lessee shall have the right, to the extent permitted by law, to perform the obligations of the Authority hereunder if the Authority does not so perform and any costs associated therewith and not reimbursed by the Authority, shall be abated against the ground rental payable under this Agreement. The Lessee shall have the right in addition to instituting any such action, to terminate this Agreement upon sixty (60) days' notice to the Authority and the Trustee, and upon payment to the Trustee of that amount which, together with any monies available for that purpose under the provisions of the Indenture, will be sufficient to pay or redeem, or provide for such payment or redemption of, the Bonds then Outstanding on the first practicable retirement or redemption date thereof, including principal, premium, if any, and interest to the redemption date, this Agreement shall forthwith cease and determine and the parties hereto shall be released and discharged of and from all further obligations hereunder, without prejudice, subject, however, to any claim which may have occurred prior thereto in favor of either party against the other and to the provisions that by the terms of this Agreement specifically survive the term hereof. ARTICLE XVI ----------- RIGHTS UPON TERMINATION ----------------------- Section 1601. Fixed Improvements. It is the intent of this Agreement that the Leased Premises shall be and remain on the Airport during the entire term of this Agreement and thereafter. Section 1602. Excluded Personal Property. Upon termination of this Agreement, the Lessee shall remove all Excluded Personal Property from the Leased Premises within thirty (30) days (or such longer period as shall be reasonably necessary) after the effective date of the termination and make all necessary or appropriate repairs to the Leased Premises resulting from such removal so as to restore the Leased Premises to proper operating condition, ordinary wear and tear and damage by casualty or condemnation excepted. If the Lessee fails to remove all or any portion of the Excluded Personal Property, the Authority may thereafter elect to remove the Excluded Personal Property (or any part thereof) at the Lessee's expense or elect to deem such Excluded Personal Property or any part thereof as abandoned by the Lessee to the Authority. ARTICLE XVII ------------ ASSIGNMENT AND SUBLETTING ------------------------- Section 1701. Successors and Assignments. Except as provided in Section 611 hereof, but subject to the provisions of Section 1703 hereof, the Lessee shall not assign this Agreement or any part thereof in any manner whatsoever or assign any of the privileges recited herein without the prior written consent of the Authority. Such consent shall not be unreasonably withheld, having in mind the particular requirements of the Authority in maintaining its public service air transportation facilities. No such consent shall be granted unless the Leased Premises shall be continued to be used for aviation related purposes requiring airfield access. In the event of such assignment, the Lessee shall remain liable to the Authority for the remainder of the term of the Agreement to pay to the Authority or the Trustee the rentals provided for in Sections 501, 502 and 503 hereof and to otherwise comply with the provisions of the Agreement for the term of this Agreement and the Lessee's assignee shall agree to comply with the applicable provisions of this Agreement. Said assignee shall not further assign its interest in this Agreement except with the prior written approval of the Authority and the Lessee; and any assignment by the Lessee shall contain a clause to this effect. Any assignment in violation of this Section 1701 shall be void. Section 1702. Subletting. Except as otherwise provided herein, but subject to the provisions of Section 1703 hereof, the Lessee shall not sublease or permit any part of the Leased Premises to be occupied by others without the prior written consent of the Authority. No such consent shall be granted unless the Leased Premises shall be continued to be used for aviation related purposes requiring airfield access. Such consent shall not be unreasonably withheld, having in mind the particular requirements of the City in maintaining its public service air transportation facilities. In the event of such sublease, the Lessee shall remain liable to the Authority and the Trustee for the remainder of the term of this Agreement to pay to the Authority and the Trustee the rentals provided for in Sections 501, 502 and 503 hereof and to otherwise comply with the provisions of this Agreement for the term of this Agreement and the sublessee shall agree to comply with the applicable provisions of this Agreement. Said sublessee shall not further sublease its interest in this Agreement except with the prior written approval of the Authority and the Lessee; and any sublease shall contain a clause to this effect. Any subletting in violation of this Section 1702 shall be void. Section 1703. Transfer of Leased Premises by the Authority; Performance of Rights, Duties and Obligations of the Authority under this Agreement. (a) Upon the receipt of the prior written consent of the Lessee in its sole discretion, the Authority may, prior to the time no Bonds are Outstanding under the terms of the Indenture, transfer, convey or otherwise dispose of the Leased Premises, and together therewith its rights as lessor hereunder, to any Person; provided, that any transfer, conveyance or other disposition of the Leased Premises to any Person, other than the City, under the terms of this Section 1703 will not be effective unless, in the opinion of Bond Counsel delivered to the Trustee, such transfer, conveyance or other disposition will not adversely affect the exclusion from gross income for federal income tax purposes of the interest on any Bonds; and provided, further, that any such transfer, conveyance or other disposition shall be subject to the provisions of Section 507. (b) Upon the receipt of the prior written consent of the Lessee, the Authority may designate as its agent any Person to perform its duties, responsibilities and obligations described in this Agreement, other than those duties, responsibilities and obligations with respect to the issuance of the Bonds and any Additional Bonds (the "Bond Duties"), as herein set forth. Upon the receipt of such consent from the Lessee, for all purposes under this Agreement, any reference to the Authority in respect to the performance of such duties, responsibilities and obligations, other than the Bond Duties, shall be deemed to mean the Person so designated to the Lessee by the Authority. The Authority agrees to provide to the Lessee and the Trustee appropriate names, addresses and telephone numbers of any such Person so designated. (c) Anything to the contrary herein notwithstanding, upon the later of (1) the termination of this Agreement in accordance with the terms and conditions herein set forth or (2) the date the Bonds are no longer Outstanding as a result of the final payment of Special Facilities Payments in support of the debt service on the Bonds, the Authority (i) shall no longer act as lessor under the terms of this Agreement, and (ii) shall convey the Special Facilities then owned thereby to the City. Section 1704. Opinion of Bond Counsel Required. No assignment of this Agreement or sublease of the Leased Premises by the Company will be effective unless, in the opinion of Bond Counsel delivered to the Trustee, such assignment or sublease will not adversely affect the exclusion from gross income for federal income tax purposes of the interest on any Bonds. ARTICLE XVIII ------------- GENERAL PROVISIONS ------------------ Section 1801. Non-Interference with Operation of Airport. The Lessee, by accepting this Agreement, expressly agrees for itself and its successors and assigns that it will not make use of the Leased Premises in any manner which might interfere with the landing and taking off of aircraft at the Airport or otherwise constitute a hazard. In the event the aforesaid covenant is breached, the City shall have the right to enter upon the Leased Premises and cause the abatement of such interference at the expense of the Lessee. The City shall maintain and keep in repair the Airport landing areas, including taxiways and aircraft parking apron located outside the Leased Premises and shall have the right to direct and control all activities of the Lessee in this regard. Section 1802. Attorney's Fees. In any action brought by any party to this Agreement or the Trustee for the enforcement of the provisions hereof, the prevailing party shall be entitled to recover interest and its reasonable attorney's fees. Section 1803. Taxes. The Lessee shall timely pay any lawfully imposed property taxes, assessments charged against the property, or sales and use taxes which may be assessed a charge against personal property included in or located on the Land or other permitted portions of the Airport, including without limitation the Excluded Personal Property. Furthermore, the Lessee shall not claim that it is entitled to an exemption from sales and use taxes under Section 151.341 of the Texas Tax Code (which supplies an exemption for items sold to or used by corporations formed under the Development Corporation Act) in connection with the financing of the Special Facilities under the Development Corporation Act. Section 1804. License Fees and Permits. The Lessee shall obtain and pay for all licenses, permits, fees or other authorization or charges as required under federal, State or local laws and regulations insofar as they are necessary to comply with the requirements of this Agreement and the privileges extended hereunder. Section 1805. Amendments to this Agreement. If at any time that Bonds are then Outstanding (including if provisions have been made for the payment thereof in accordance with the provisions of the Indenture), and the Lessee and the Authority wish to amend, modify, change, alter or terminate this Agreement by execution of a Supplemental Agreement, and pursuant to Article IX of the Indenture, the consent of the Trustee to such Supplemental Agreement is necessary, such alteration, amendment, change, modification or termination shall become effective only upon the prior written consent of the Trustee obtained in accordance with the provisions of the Indenture. The Lessee and the Authority specifically reserve the right to execute a Supplemental Agreement, without the consent of the Trustee, (i) to provide for additional rental payments to secure future obligations undertaken by the Authority on behalf of the Lessee (other than additional Special Facilities Rentals securing Bonds or Additional Bonds), provided that such additional payments shall be payable on a parity basis or subordinate to the Special Facilities Rental, or (ii) to exclude certain Land from the Leased Premises, provided that, giving effect to such exclusion, the operating utility or productive capacity of the remaining Leased Premises is not materially less than the operating utility or productive capacity of the Leased Premises prior to such exclusion. Section 1806. Force Majeure. Neither the Authority nor the Lessee shall be deemed to be in breach of this Agreement and no default shall arise hereunder by reason of failure to perform any of its obligations hereunder, if, while, and to the extent that such failure is due to the occurrence of a Force Majeure. This provision shall not apply to failures by the Lessee to pay rents, fees, or other charges, or to make any other money payments required by this Agreement. This provision shall not prevent the Authority from exercising its rights upon the occurrence of an Event of Default described in Subsections 1401(a)-(c) hereof. Section 1807. References to Bonds, the Authority, the Trustee and the Indenture Ineffective when Bonds are no Longer Outstanding. From and after such time as there are no longer any Bonds Outstanding, and all fees and charges of the Trustee and any paying agents for the Bonds have been paid or provided for, to their respective satisfaction, all references in this Agreement to the Bonds, the Authority, the Trustee and the Indenture shall be ineffective and neither the Trustee nor the Owners of any of the Bonds shall thereafter have any rights hereunder, saving and excepting those that shall have theretofore vested. Section 1808. Modifications Hereof and of Indenture. So long as an Event of Default shall not have occurred and be continuing hereunder, the Authority has covenanted in the Indenture that it will not, without the written consent of the Lessee, agree with the Trustee to effectively amend, supplement, change, modify or alter the Indenture in any manner. The Lessee shall provide the Trustee with an executed copy of any instrument altering, amending, modifying, or rescinding this Agreement. Section 1809. Paragraph Headings. The paragraph headings contained herein are for convenience in reference and are not intended to define or limit the scope of any provision of this Agreement. Section 1810. Interpretations. This Agreement shall be interpreted in accordance with the laws of the State. Section 1811. Notices. Whenever any notice or payment (other than a payment required by Section 502) is required by this Agreement to be made, given or transmitted to the parties hereto, such notice or payment (other than a payment required by Section 502) shall be enclosed in an envelope with sufficient postage attached to insure delivery and deposited in the United States Mail or Federal Express Priority Overnight delivery, addressed as follows: if to the Authority, 1000 Throckmorton, Fort Worth, Texas 76102, Attention: City Manager; if to the City, 1000 Throckmorton, Fort Worth, Texas 76102, Attention: City Attorney; if to the Lessee, Federal Express Corporation, 2007 Corporate Avenue, Memphis, Tennessee 38132, Attention: Vice President and Treasurer, with a copy of such notice to be sent in the same manner to Federal Express Corporation, 1980 Nonconnah Blvd., Memphis, Tennessee 38132, Attention: Legal Department, Managing Attorney, Real Estate Development and Operations Group, and to Federal Express Corporation, 2003 Corporate Avenue, Memphis, Tennessee 38132, Attention: Vice President, Properties; and if to the Trustee, One First National Plaza, Suite 0126, Chicago, Illinois 60670-0126, Attention: Corporate Trust Services Division. A duplicate copy of each notice, certificate, request, or other communication given hereunder to the Authority, the City, the Lessee, or the Trustee shall also be given to the others. The Lessee, the City, the Authority, and the Trustee may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates, requests or other communications shall be sent. Section 1812. Party's Consent. Whenever any provision of this Agreement requires the approval, consent or exercise of discretion of any party to this Agreement, such action shall not be unreasonably withheld, conditioned, delayed or exercised. Section 1813. Nondisturbance by Authority and Trustee. So long as no Event of Default shall have occurred and be continuing hereunder, the Lessee's peaceful and quiet possession or right to such peaceful and quiet possession of the Leased Premises and its rights and privileges under this Agreement or any renewal or extension thereof shall not be diminished, disturbed or interfered with by the Authority or the Trustee. Section 1814. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. [THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above mentioned at Fort Worth, Texas. ALLIANCE AIRPORT AUTHORITY, INC. By:/s/ JAMES LANE -------------- President, Board of Directors (SEAL) By:/s/ JEWEL WOODS --------------- Secretary, Board of Directors FEDERAL EXPRESS CORPORATION By:/s/ CHARLES M. BUCHAS, JR. ----------------------------- Name: Charles M. Buchas, Jr. ------------------------ Title: Vice President and Treasurer -------------------------------- Date of Execution: April 10, 1996 -------------- EXHIBIT A BEING a tract of land situated in the G. Overton Survey, Abstract No. 972, the E. B. Peters Survey, Abstract No. 1626, the A. McDonald Survey Abstract No. 786, and the J. Evans Survey, Abstract No. 396, in Denton County, Texas; and being all of that certain 158.00 acre tract of land described in deed to Federal Express Corporation, filed by clerks file no. 94- R0034691, Map Records of Denton County, Texas together with a part of that certain tract of land described in Deed to Alliance Airport Ltd., recorded in Volume 2451, Page 412, Real Records of Denton County Texas; said tract being more particularly described by metes and bounds as follows: COMMENCING at a 1 inch steel rod on the West line of said Alliance Airport tract, being the Southwest corner of Lot 1, Block 1, American Airlines AFW Maintenance Base, recorded in Cabinet H, Page 309, Plat Records of Denton County, Texas and Cabinet A, Slide 593, Plat Records of Tarrant County, Texas; said rod also being the most Westerly Northwest corner of Taxiway H, as described in deed to the City of Fort Worth, recorded in Volume 2931, Page 213, Real Records of Denton County, Texas; THENCE South 09 degrees 53 minutes 13 seconds East, with the West line of said Alliance Airport tract, and the West end of Taxiway H, a distance of 299.79 feet to a "+" cut in concrete, being the Northwest corner of said Federal Express tract and the POINT OF BEGINNING of this tract herein described. THENCE North 80 degrees 06 minutes 47 seconds East, with a South line of Taxiway H, a distance of 2557.33 feet to a railroad spike in concrete at a fence post, the Northeast corner of said Federal Express tract; THENCE South 09 degrees 53 minutes 13 seconds East with the East line of said Federal Express tract, a distance of 1390.00 feet to a 5/8 inch Carter & Burgess capped steel rod. THENCE North 80 degrees 06 minutes 47 seconds East, a distance of 385.29 feet to a 5/8 inch Carter & Burgess capped steel rod. THENCE South 09 degrees 53 minutes 13 seconds East, a distance of 1132.00 feet to a 5/8 inch Carter & Burgess capped steel rod. THENCE South 80 degrees 06 minutes 47 minutes West, a distance of 269.78 feet to a 5/8 inch Carter & Burgess capped steel rod, at the beginning of a curve to the right whose radius is 168.00 and whose chord bears North 77 degrees 50 minutes 23 seconds West, 124.62 feet. THENCE in a westerly direction with said curve through a central- angle of 44 degrees 05 minutes 40 seconds, a distance of 127.75 feet to a 5/8 inch Carter & Burgess capped steel rod on the East line of said Federal Express tract. THENCE South 09 degrees 53 minutes 10 seconds East, with said East line a distance of 84.26 feet to a 5/8 inch Carter & Burgess capped steel rod lying in a curve to the left whose radius is 234.00 feet and whose chord bears South 85 degrees 05 minutes 50 seconds East, 119.47 feet; THENCE In an Easterly direction with said curve through a central angle of 29 degrees 34 minutes 47 seconds, a distance of 120.61 feet to a 5/8 inch capped Carter & Burgess steel rod. THENCE South 80 degrees 08 minutes 47 seconds West, passing at a distance of 115.51 feet, a 5/8 inch Carter & Burgess capped steel rod being the Southeast corner of said Federal Express tract, continuing with its South line in all a distance of 2772.84 feet to a 5/8 inch Carter & Burgess capped steel rod for the Southwest corner of said Federal Express tract, on the West line of the before mentioned Alliance Airport tract; THENCE North 09 degrees 53 minutes 13 seconds West with the West line of said Alliance Airport tract, and the West line of said Federal Express tract, a distance of 2590.00 feet to the POINT OF BEGINNING and embracing 7,318,066 Square Feet, or 168.00 Acres of Land. NORTH APPROACH BEING a tract of land situated in the G. Overton Survey, Abstract No. 972, the E.B. Peters survey, Abstract No. 1636, the A. McDonald Survey Abstract No. 786, and the J. Evans Survey, Abstract No. 396, in Denton County, Texas; and being all of that certain 158.00 acre tract of land described in deed to Federal Express Corporation, filed by clerks File No. 94- R0034691, Map Records of Denton County, Texas together with a part of that certain tract of land described in Deed to Alliance Airport Ltd., recorded in Volume 2451, page 412, Real Records of Denton County, Texas; said tract being more particularly described by metes and bounds as follows; COMMENCING at a 1 inch steel rod on the West line of said Alliance Airport tract, being the Southwest corner of Lot 1, Block 1, American Airlines AFW Maintenance Base, recorded in Cabinet H, Page 309, Plat Records of Denton County, Texas and Cabinet A, Slide 593, Plat Records of Tarrant County, Texas; said rod also being the most Westerly Northwest corner of Taxiway H, as described in deed to the City of Fort Worth, recorded in Volume 2931, Page 213, Real Records of Denton County, Texas; THENCE South 09 degrees 53 minutes 13 seconds East, with the West line of said Alliance Airport tract, and the West end of Taxiway H, a distance of 299.79 feet to a "+" cut in concrete, being the Northwest corner of said Federal Express tract; THENCE North 80 degrees 06 minutes 47 seconds East with a South line of Taxiway H, a distance of 1696.12 feet to the POINT OF BEGINNING of this tract herein described being in a curve to the left whose radius is 135.00 feet and whose chord bears North 67 degrees 29 minutes 23 seconds West; THENCE along said curve to the left through a central angle of 64 degrees 47 minutes 40 seconds, an arc distance or 152.67 feet to a point for corner; THENCE North 09 degrees 53 minutes 13 seconds West, a distance of 35.00 feet to a point for corner; THENCE North 80 degrees 06 minutes 47 seconds East, a distance of 440.00 feet to a point for corner; THENCE South 09 degrees 53 minutes 13 seconds East, a distance of 35.00 feet to the beginning of a curve to the left whose radius is 135.00 feet and whose chord bears South 47 degrees 42 minutes 57 seconds West 144.66 feet; THENCE along said curve to the left through a central angle of 64 degrees 47 minutes 40 seconds, an arc length of 152.67 feet to a point for corner from which a railroad spike in concrete to a fence post bears North 80 degrees 06 minutes 47 seconds East 765.50 feet; THENCE South 80 degrees 06 minutes 47 seconds West along the North line of said Federal Express tract; a distance of 195.71 feet to a POINT OF BEGINNING and embracing 35,916 Square Feet or 0.82 Acre of Land. WEST APPROACH BEING a tract of land situated in the G. Overton Survey, Abstract No. 972, the E. B. Peters Survey, Abstract No. 1636, the A. McDonald Survey Abstract No. 786, and the J. Evans Survey, Abstract No. 396, in Denton County, Texas; and being all of that certain 158.00 acre tract of land described in deed to Federal Express Corporation, filed by clerks File No. 94- R0034691, Map Records of Denton County, Texas together with a part of that certain tract of land described in Deed to Alliance Airport Ltd., recorded in Volume 2451, page 412, Real Records of Denton County, Texas; said tract being more particularly described by metes and bounds as follows: COMMENCING at a 1 inch steel rod on the West line of said Alliance tract, being the Southwest corner of Lot 1, Block 1, American Airlines AFW Maintenance Base, recorded in Cabinet H, Page 309, Plat Records of Denton County, Texas and Cabinet A, Slide 593; Plat in Cabint H, Page 309, Plat Records of Tarrant County, Texas; said rod also being the most Westerly Northwest corner of Taxiway H, as described in deed to the City of Fort Worth, recorded in Volume 2931, Page 213, Real Records of Denton County, Texas; THENCE South 09 degrees 53 minutes 13 seconds East, with the West line of said Alliance Airport tract, and the West end of Taxiway H, a distance of 299.79 feet to a "+" cut in concrete, being the Northwest corner of said Federal Express tract; THENCE continuing South 09 degrees 53 minutes 13 seconds East along the West line of said Federal Express tract a distance of 1765.34 feet to the POINT OF BEGINNING on this tract herein described; THENCE South 09 degrees 53 minutes 13 seconds East continuing along said West line, a distance of 170.00 feet to a point for corner from which a 5/8 inch Carter & Burgess capped steel rod being the Southwest corner of said Federal Express tract bears South 09 degrees 53 minutes 13 seconds East, 654.66 feet; THENCE South 80 degrees 06 minutes 47 seconds West, a distance of 77.01 feet to the beginning of a curve to the left whose radius is 100.00 feet and whose chord bears South 35 degrees 06 minutes 47 seconds West 141.42 feet; THENCE along said curve to the left through a central angle of 90 degrees 00 minutes 00 seconds, an arc length of 157.08 feet to a point for corner; THENCE South 80 degrees 06 minutes 47 seconds West, a distance of 35.48 feet to a point for corner; THENCE North 09 degrees 53 minutes 13 seconds West, a distance of 370.00 feet to a point for corner; THENCE North 80 degrees 06 minutes 47 seconds East, a distance of 35.48 feet to the beginning of a curve to the left whose radius is 100.00 feet and whose chord bears South 54 degrees 53 minutes 13 seconds East 141.42 feet; THENCE along said curve to the left through a central angle of 90 degrees 00 minutes 00 seconds, an arc length of 157.08 feet to a point for corner; THENCE North 80 degrees 06 minutes 47 seconds East, a distance of 77.01 feet to a point for corner; THENCE South 09 degrees 53 minutes 13 seconds East along the East line of said Federal Express tract, a distance of 170.00 feet to the POINT OF BEGINNING and embracing 47,514 Square Feet or 1.09 Acres of Land. EXHIBIT B SPECIAL FACILITIES DESCRIPTION The Special Facilities to be acquired and constructed with the proceeds of the Bonds will consist of land (described in Exhibit A as the Primary Land), buildings, improvements, fixtures and equipment for the handling and sorting of packages at the Airport; including, but not limited to, aircraft parking apron, taxiway connectors, vehicular parking spaces with security gates and fencing, fuel dispensing and storage facilities, offices, maintenance shops and storage areas. The Special Facilities will serve as a regional sorting facility for distribution of packages to other facilities within the Lessee's distribution system. EXHIBIT C INSURANCE REQUIREMENTS ________________________________________________________________________ DESCRIPTIVE SCHEDULE ________________________________________________________________________ Kind of Insurance Limits of Liability of Not Less Than ________________________________________________________________________ Aircraft Liability: Single Limit (PL, PD & PASS) $20,000,000 ________________________________________________________________________ Public Liability: Single Limit (Bodily Injury, Death, Property Damage) - Premises/Operations - Contractual Liability - Independent Contractors - Products/Completed Operations - Personal Injury $20,000,000 - --------------------------------------------------- Hangarkeepers Liability: $20,000,000 - --------------------------------------------------- Automobile $20,000,000 - --------------------------------------------------- EX-10.69 10 ASSIGNMENT & ASSUMPTION OF FACILITIES EXHIBIT 10.69 ASSIGNMENT AND ASSUMPTION OF FACILITIES AGREEMENT AND AGREEMENT FOR DONATION AND ASSIGNMENT OF PURCHASED ITEMS -------------------------------------------------------- THIS ASSIGNMENT AND ASSUMPTION OF FACILITIES AGREEMENT AND AGREEMENT FOR DONATION AND ASSIGNMENT OF PURCHASED ITEMS (this "Assignment") is made and entered into as of the ___ day of April, 1996, by and between AllianceAirport Authority, Inc., a nonstock, nonprofit industrial development corporation organized and existing under the laws of the State of Texas, having a mailing address at 1000 Throckmorton, Fort Worth, Texas 76102 ("Assignor"), and the City of Fort Worth, Texas, a municipal corporation, having a mailing address at 1000 Throckmorton, Fort Worth, Texas 76102 ("Assignee"); RECITALS: --------- A. Assignee is a political subdivision of the State of Texas. B. Assignor is an industrial development corporation created by Assignee. C. Assignor has this day conveyed to Assignee a certain tract of land and appurtenances situated in Denton County, Texas, more particularly described on the attached Exhibit "A" which is incorporated into this Assignment, together with all improvements thereon (the "Property"). D. The Property is subject to a Land and Special Facilities Lease Agreement (the "Facilities Agreement") dated April 1, 1996, between Assignor, as lessor, and Federal Express Corporation, a Delaware corporation, as lessee (the "Lessee"). Capitalized terms not otherwise defined herein shall have the meanings assigned such terms in the Facilities Agreement. E. In conjunction with the conveyance of the Property, Assignor has agreed to assign all of its right, title and interest in and to the Facilities Agreement to Assignee, except as otherwise provided herein, and Assignee has agreed to assume and perform all of Assignor's liabilities and obligations arising under the Facilities Agreement, except as otherwise provided herein, on and after the date of this Assignment, all in accordance with the terms and conditions set forth below. F. In connection with construction of improvements on and placement of tangible personal property on the Property, it is anticipated that certain items of tangible personal property, material, consumables, equipment, fixtures, and services (collectively, the "Purchased Items") acquired pursuant to various construction contracts and other agreements with third parties (the "Project Contracts") will or may, with Assignor's consent, become the property of Assignor, subject to and in accordance with the provisions of the Facilities Agreement. G. Upon its acceptance thereof, Assignor will donate, assign, and transfer to Assignee all right, title, and interest in any such Purchased Items subject to Assignee's acceptance and approval thereof after appropriate due diligence by Assignee. H. Assignor will acquire the Purchased Items under the Project Contracts upon Assignor's approval thereof and after appropriate due diligence by Assignor for the sole purpose of donating such Purchased Items to Assignee, and Assignor does not intend to make any intervening use of any Purchased Items. I. To the extent it may lawfully do so, Assignor will issue an exemption certificate pursuant to Section 151.155 of the Texas Tax Code. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are acknowledged, Assignor and Assignee agree as follows: 1. Definitions. Capitalized terms not otherwise defined herein shall have the meanings assigned such terms in the Facilities Agreement. 2. Assignment. Assignor assigns, transfers and conveys to Assignee all of Assignor's right, title and interest as lessor in and to the Facilities Agreement and all of the rights, benefits and privileges of Assignor as lessor thereunder, including without limitation all of Assignor's right, title and interest in and to all rentals thereunder; provided, however, that Assignor retains its rights (i) to receive any payments due the Authority under Section 510 of the Facilities Agreement, (ii) to indemnity under Section 605(c) and Article IX of the Facilities Agreement and (iii) to perform its covenants (A) with respect to the Bonds, including those under Section 614 of the Facilities Agreement and (B) under Article XII of the Facilities Agreement. 3. Assumption. Assignee assumes all liabilities and obligations of Assignor under the Facilities Agreement which arise on or after the date hereof and agrees to perform all obligations of Assignor under the Facilities Agreement which are to be performed or which become due on or after the date hereof; provided, however, that Assignee does not assume and Assignor shall remain responsible for, the performance of its covenants (i) with respect to the Bonds, including those under Section 614 of the Facilities Agreement and (ii) under Article XII of the Facilities Agreement. Notwithstanding any provisions of this Assignment to the contrary, Assignee shall not be or become a party to any Project Contracts. 4. Additional Covenant of Assignee. In consideration of Lessee granting its consent to this Assignment, Assignee covenants and agrees that in the event Lessee exercises its right under Section 308 of the Facilities Agreement to convey additional land continguous to the Land acquired by the Lessee to accommodate Lessee Improvements, Assignee shall consider in good faith any request by Lessee that Assignee seek approval from the FAA of an expansion of the Airport boundaries to include such additional land. The foregoing notwithstanding, Assignee makes no assurances that any such request will receive approval from the FAA. 5. Ad Valorem Taxation. The Land and Special Facilities are owned by Assignor and, as of the date of this Assignment, correspondence has been received by the parties hereto from the Tarrant Appraisal District and the Denton County Central Appraisal District stating that the Land and portions of the Special Facilities may be found to be exempt from ad valorem taxes. Copies of such correspondence have been provided to the Lessee. Assignor, Assignee and Lessee recognize that the proposed use of the Land and Special Facilities is reasonably necessary 2 to carry out the public purpose of Assignee as defined by Chapter 22 of the Texas Transportation Code (the "Airports Act") and that as such anticipate that the leasehold interest of the Lessee in the Land and Special Facilities may be exempt from ad valorem taxation. Neither Assignor nor Assignee, however, makes any warranty as to whether the leasehold interest of the Lessee in the Land and Special Facilities is or will be exempt from ad valorem taxation, it being the duty and responsibility of the Lessee to establish such exemption of its leasehold interest. 6. Representations and Warranties. ------------------------------- (a) Assignor represents and warrants to Assignee (i) that it has full power and authority to assign the Facilities Agreement to Assignee, (ii) that the Facilities Agreement is in full force and effect and has not been modified or amended in any manner whatsoever, and (c) that all right, title and interests of Assignor in and to the Facilities Agreement are free and clear of any and all claims, liens and encumbrances whatsoever other than the lien and pledge thereof under the Indenture to secure the Bonds, and that Assignor warrants and will forever defend the same against the claims of all persons claiming the same or any part thereof. (b) In consideration of Lessee granting its consent to this Assignment, Assignee represents and warrants to Lessee that: (i) It is duly organized as a home-rule city pursuant to the laws of the State, and has the power under the laws of the State, including specifically the Airports Act, to enter into the transactions contemplated by this Assignment and to carry out its obligations hereunder. By proper action, Assignee has duly authorized the execution and delivery of this Assignment. (ii) This Assignment constitutes the valid and binding obligation of Assignee, enforceable against Assignee in accordance with its terms, except as the enforceability thereof may be subject to applicable bankruptcy or other laws affecting the rights of creditors generally or by the application of general principles of equity. (iii) All approvals or consents of which Assignee has knowledge and which are necessary for Assignee to approve, execute and deliver this Assignment have been obtained. (iv) Neither the execution and delivery of this Assignment, the consummation of the transactions contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this Assignment conflicts with or results in a breach of any of the terms, conditions or provisions of any restriction, ordinance or any agreement or instrument to which Assignee is now a party or by which it is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of Assignee under the terms of any instrument or agreement to which Assignee is party. 3 (v) There is no litigation now pending or to Assignee's knowledge, threatened challenging the powers of Assignee or its councilmembers or in any way affecting this Assignment. (vi) Subject to the provisions of Section 803 of the Facilities Agreement, it will use its best efforts to operate and maintain the Airport as a public airport consistent with and pursuant to the sponsor's assurances given by the City to the United States Government under the Federal Airport and Airways Act. (vii) To the extent it may do so and at Lessee's expense, it will grant Lessee all necessary roadway or utility easements required by Lessee to construct utility lines and connecting roadways necessary to connect utility services for the Leased Premises. 7. Donation and Assignment of Purchased Items. Assignor by means of this instrument grants and conveys to Assignee all right, title, and interest that Assignor may have in the Purchased Items described in Exhibit "B" hereto. 8. Agreement to Deliver Purchased Items. Upon Assignor's acceptance of Purchased Items, Assignor will immediately notify Assignee, and upon Assignee's acceptance of such Purchased Items, Assignor will deliver all such Purchased Items to Assignee. Assignor will not make any intervening use of any such Purchased Items. All costs or expenses of any such delivery shall be paid by Assignor but solely from funds on deposit in the Construction Fund or monies provided by Lessee. 9. No Assumption of Liabilities by Assignor or Assignee with Respect to Purchased Items. Neither Assignor nor Assignee assumes any liability, under the Project Contracts or otherwise, to pay for the acquisition of any of the Purchased Items at any time other than from funds on deposit in the Construction Fund, and nothing in this Agreement shall operate to impose any such liability on Assignor or Assignee. Correspondingly, any liability of Lessee under the Project Contracts shall not be affected by this Agreement. Neither Assignor nor Assignee shall be liable for any taxes related to the Purchased Items by virtue of any use of such property or otherwise, and Lessee shall be liable for such taxes, if any, as may be levied from time to time. 10. Further Assurances. Assignor covenants with Assignee and Assignee covenants with Assignor that each will execute or procure any additional documents necessary to establish the rights of the other under this Assignment. 11. Binding Effect. This Assignment is binding upon and shall inure to the benefit of Assignor, Assignee and their respective successors and assigns. 12. Multiple Counterparts. This Assignment may be executed in a number of identical counterparts, each of which is deemed an original, and all of which constitute collectively one agreement between the parties. 4 13. Governing Law. This Assignment shall be construed and enforced in accordance with the laws of the United States of America and the State of Texas. 14. Entire Agreement. This Assignment contains the entire agreement of the parties and supersedes all prior agreements and understandings, oral or written, with respect to the subject matter hereof. This Assignment may be changed only by an agreement in writing signed by all of the parties to this Assignment. 15. Conflict. In the event of any conflict between the terms of this Assignment and the terms of any other agreement or understanding between the parties relating to the Purchased Items, the terms of this Assignment shall control. 16. Headings. The headings contained in this Assignment are for reference purposes only and shall not affect the meaning or interpretation of this Assignment. IN WITNESS WHEREOF, the parties have executed this Assignment as of the date set forth above. ASSIGNOR: ALLIANCEAIRPORT AUTHORITY, INC. By: /s/ JIM LANE -------------------------------------------------- President By: /s/ JEWEL WOODS ---------------------------------------------- (SEAL) Secretary ASSIGNEE: THE CITY OF FORT WORTH, TEXAS By: /s/ BOB TERRELL ----------------------------------------------- City Manager By: /s/ ALICE CHURCH ---------------------------------------------- City Secretary APPROVED AS TO FORM: (SEAL) By: /s/ WADE ADKINS --------------------------------------------- City Attorney 5 The undersigned lessee under the Facilities Agreement consents to and acknowledges the provisions of the above Assignment and Assumption of Facilities Agreement and Agreement for Donation and Assignment of Purchased Items by and between Assignor and Assignee: FEDERAL EXPRESS CORPORATION By: /s/ CHARLES M. BUCHAS, JR. ----------------------------------- Name: Charles M. Buchas, Jr. Title: Vice President and Treasurer THE STATE OF TEXAS ) ) COUNTY OF TARRANT ) This instrument was acknowledged before me on the 2nd day of April, 1996, by Jim Lane and Jewel Woods, President and Secretary, respectively, of AllianceAirport Authority, Inc., a nonstock, nonprofit industrial development corporation organized and existing under the laws of the State of Texas, on behalf of said Corporation. /s/ LOIS O. THREATT ------------------------------------------ Notary Public in and for the State of Texas My Commission Expires: 10-6-97 --------------------- THE STATE OF TEXAS ) ) COUNTY OF TARRANT ) This instrument was acknowledged before me on the 2nd day of April, 1996, by Bob Terrell, Alice Church, and Wade Adkins, City Manager, City Secretary, and City Attorney, respectively, of the City of Fort Worth, Texas, a municipal corporation, on behalf of said City. /s/ LOIS O. THREATT ------------------------------------------ Notary Public in and for the State of Texas My Commission Expires: 10-6-97 --------------------- 6 THE STATE OF TENNESSEE ) COUNTY OF SHELBY ) This instrument was acknowledged before me on the 1st day of April, 1996, by Charles M. Buchas, Jr., Vice President and Treasurer of Federal Express Corporation, a Delaware corporation, on behalf of said corporation. /s/ KIMBLE HALE SCOTT -------------------------------------------- Notary Public in and for the State of Tennessee My Commission Expires: June 8, 1999 ----------------------- 7 EX-10.80 11 RESTRICTED STOCK AGREEMENT Exhibit 10.80 RESTRICTED STOCK AGREEMENT PURSUANT TO FEDERAL EXPRESS CORPORATION 1995 RESTRICTED STOCK PLAN THIS RESTRICTED STOCK AGREEMENT is made this ______ day of __________________, by and between __________________________ (the "Participant") and Federal Express Corporation, a Delaware corporation (the "Company"), pursuant to the Company's 1995 Restricted Stock Plan (the "Plan"). WHEREAS, the Compensation Committee (the "Committee") of the Board of Directors of the Company at its meeting on __________________ authorized and directed the Company to make an award of stock to the Participant under the Plan for the purposes expressed in the Plan; NOW THEREFORE, in consideration of the foregoing and the mutual undertakings herein contained, the parties agree as follows: 1. Grant of Stock. In accordance with the terms of the Plan and subject to the further terms, conditions and restrictions contained in this Agreement, the Company hereby grants to the Participant __________ shares (the "Shares") of the Company's common stock, $.10 par value (the "Common Stock"). As long as the Shares are subject to the Restrictions set forth in Section 4 of this Agreement, such shares shall be deemed to be, and are referred to in this Agreement as, the "Restricted Shares." The Shares granted shall be treasury stock. 2. Certificates for Shares. Certificates evidencing Restricted Shares shall be deposited with the Company to be held in escrow until such Shares are released to the Participant or forfeited in accordance with this Agreement. The Participant shall, simultaneously with the delivery of this Agreement, deliver to the Company a stock power, in blank, executed by the Participant. If any Restricted Shares are forfeited, the Company shall direct the transfer agent of the Common Stock to make the appropriate entries in its records showing the cancellation of the certificate or certificates for such Restricted Shares and to return the Shares represented thereby to the Company's treasury. 3. Adjustments in Restricted Shares. In the event of any change in the outstanding Common Stock by reason of a stock dividend or distribution, recapitalization, merger, consolidation, split-up, combination, exchange of shares or the like, the Committee shall make equitable adjustments in the Restricted Shares corresponding to adjustments made by the Committee in the number and class of shares of Common Stock which may be issued under the Plan. Any new, additional or different securities to which the Participant shall be entitled in respect of Restricted Shares by reason of such adjustment shall be deemed to be Restricted Shares and shall be subject to the same terms, conditions, and restrictions as the Restricted Shares so adjusted. 4. Restrictions. During applicable periods of restriction determined in accordance with Section 6 of this Agreement, Restricted Shares and all rights with respect to such Shares, may not be sold, assigned, transferred, exchanged, pledged, hypothecated or otherwise encumbered or disposed of and shall be subject to the risk of forfeiture contained in Section 5 of this Agreement (such limitations on transferability and risk of forfeiture being herein referred to as "Restrictions"), but the Participant shall have all other rights of a stockholder, including, but not limited to, the right to vote and receive dividends on Restricted Shares. 5. Forfeiture of Restricted Shares. In the event that the Participant terminates employment with the Company and its subsidiaries for any reason other than his or her death, retirement or permanent disability, such event shall constitute an "Event of Forfeiture" and all Shares which at that time are Restricted Shares shall thereupon be forfeited by the Participant to the Company without payment of any consideration by the Company, and neither the Participant nor any successor, heir, assign or personal representative of the Participant shall have any right, title or interest in or to such Restricted Shares or the certificates evidencing them. 6. Lapse of Restrictions. (a) Except as provided in subsection (b) below, the Restrictions on the Restricted Shares granted under this Agreement shall lapse ratably on each of the _________ through ___________ anniversaries of the date of this Agreement in accordance with the following schedule: Number of Shares on Date Which Restrictions Lapse ----- ------------------------- (b) In the event that a Participant's employment with the Company and its subsidiaries terminates as a result of his or her death, retirement or permanent disability, the Restrictions shall lapse on the Restricted Shares (if not already lapsed pursuant to subsection (a) above) on the later of (i) the date of such event, or (ii) the first anniversary of the date of this Agreement. Upon lapse of the Restrictions in accordance with this Section, the Company shall, as soon as practicable thereafter, deliver to the Participant an unrestricted certificate for the Shares with respect to which such Restrictions have lapsed. 7. Tax Equalization Bonus. The Company shall, provided the Participant has furnished the Company evidence of having timely made the election under Section 83(b) of the Internal Revenue Code with respect to the grant of the Shares, pay for the benefit of the Participant a bonus equal to the gross amount of Federal income taxes, Medicare tax and loss of itemized deduction for such Federal income taxes for which the Participant has incurred a liability solely as a result of the grant of the Shares, the making of such election and the payment of such bonus. All of such payment shall be made in the form of Federal income tax withholding payments on or before December 31, ______ and the amount thereof shall be determined assuming that the Participant's marginal Federal income tax rate is ______%. No such bonus shall be paid unless the Participant makes such election and furnishes the Company proof of such election in such form and manner as the Company shall prescribe. 8. Withholding Requirements. Whenever payments hereunder are to be made in cash, or Restrictions lapse with respect to Restricted Shares, the Company shall have the right to withhold from sums due to the Participant (or to require the Participant to remit to the Company) an amount sufficient to satisfy any Federal, state or local withholding tax requirements prior to making such payments or delivering any certificate evidencing such Shares. 9. Change in Control. Notwithstanding any other provision of this Agreement or the Plan, upon the occurrence of a Change in Control, as defined below, the stock certificates evidencing any Restricted Shares shall be cancelled and the Company shall make a cash payment to Participant in an amount equal to the highest price per share received by holders of the Company's Common Stock in connection with the Change in Control multiplied by the then number of Restricted Shares, with any non-cash consideration valued in good faith by the Committee. For purposes of the Plan, a "Change in Control" of the Company shall be deemed to have occurred if: (a) any person, as such term is used in Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, as amended, becomes a beneficial owner (within the meaning of Rule 13d-3 under such Act) of 20% or more of the Company's outstanding Common Stock; (b) there occurs within any period of two consecutive years any change in the directors of the Company such that the members of the Company's Board of Directors prior to such change do not constitute a majority of the directors after giving effect to all changes during such two- year period unless the election, or the nomination for election by the Company's stockholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period; or (c) the Company is merged, consolidated or reorganized into or with, or sells all or substantially all of its assets to, another corporation or other entity, and immediately after such transaction less than 80% of the voting power of the then-outstanding securities of such corporation or other entity immediately after such transaction is held in the aggregate by holders of the Company's Common Stock immediately before such transaction. In addition, if the Company enters into an agreement or series of agreements or the Board of Directors of the Company adopts a resolution which results in the occurrence of any of the foregoing events, and Participant's employment is terminated after the entering into of such agreement or series of agreements or the adoption of such resolution, then, upon the occurrence of any of the events described above, a Change in Control shall be deemed to have retroactively occurred on the date of entering into of the earliest of such agreements or the adoption of such resolution and Participant shall be entitled to the payment as of such date with respect to any forfeited Restricted Shares. 10. Effect of Employment. Nothing contained in this Agreement shall confer upon the Participant the right to continue in the employment of the Company or affect any right which the Company may have to terminate the employment of the Participant. 11. Amendment. This Agreement may not be amended except with the consent of the Committee and by a written instrument duly executed by the Participant and the Company. 12. Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their heirs, personal representatives, successors and assigns. Participant acknowledges receipt of a copy of the Plan, which is annexed hereto, represents that he or she is familiar with the terms and provisions thereof and accepts the award of Shares hereunder subject to all of the terms and conditions thereof and of this Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions and interpretations of the Committee upon any questions arising under the Plan or this Agreement. IN WITNESS WHEREOF, the Company and the Participant have each executed and delivered this Agreement as of the date first above written. ATTEST: FEDERAL EXPRESS CORPORATION _______________________________ By:_________________________________ Assistant Secretary Chairman, President and Chief Executive Officer PARTICIPANT: _________________________________ EX-11 12 COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE Net income applicable to common and common equivalent shares and the weighted average number of shares used in the calculation of earnings per share for the years ended May 31 were as follows (in thousands, except per share amounts):
YEAR ENDED MAY 31 -------------------------------- 1996 1995 1994 --------- ---------- --------- Net income applicable to common and common equivalent shares.................. $307,777 $297,588 $204,370 ======== ======== ======== Average shares of common stock outstanding............................... 56,564 55,988 55,333 Common Equivalent Shares: Assumed exercise of outstanding dilutive options........................ 2,625 2,438 2,867 Less shares repurchased from proceeds of assumed exercise of options............. (2,051) (1,932) (2,188) -------- -------- -------- Average common and common equivalent shares.................................... 57,138 56,494 56,012 ======== ======== ======== Earnings per share.......................... $ 5.39 $ 5.27 $ 3.65 -------- -------- --------
- - The computation of the number of shares repurchased from the proceeds of the assumed exercise of outstanding dilutive options is based upon the average market price of the Company's common stock during the periods. Common equivalent shares are excluded in periods in which their assumed exercise would have an anti-dilutive effect. - - Fully diluted earnings per share are substantially the same as earnings per share for the years ended May 31, 1996, 1995, and 1994. EX-12 13 COMPUTATION OF RATIO OF EARNINGS Exhibit 12 FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Unaudited)
Year Ended May 31, -------------------------------------------------------- 1992 1993 1994 1995 1996 --------- -------- -------- -------- ---------- (In thousands, except ratios) Earnings: Income (loss) before income taxes............................. $(146,828) $203,576 $378,462 $522,084 $ 539,959 Add back: Interest expense, net of capitalized interest................... 176,321 168,762 152,170 130,923 105,449 Amortization of debt issuance costs......................... 2,570 4,906 2,860 2,493 1,628 Portion of rent expense representative of interest factor................................. 299,012 262,724 285,261 329,370 386,254 --------- -------- -------- -------- ---------- Earnings as adjusted....................... $ 331,075 $639,968 $818,753 $984,870 $1,033,290 ========= ======== ======== ======== ========== Fixed Charges: Interest expense, net of capitalized interest..................... $ 176,321 $168,762 $152,170 $130,923 $ 105,449 Capitalized interest....................... 26,603 31,256 29,738 27,381 39,254 Amortization of debt issuance costs........................... 2,570 4,906 2,860 2,493 1,628 Portion of rent expense representative of interest factor................................... 299,012 262,724 285,261 329,370 386,254 --------- -------- -------- -------- ---------- $ 504,506 $467,648 $470,029 $490,167 $ 532,585 ========= ======== ======== ======== ========== Ratio of Earnings to Fixed Charges (A) 1.4 1.7 2.0 1.9 ========= ======== ======== ======== ==========
(A) Earnings were inadequate to cover fixed charges by $173.4 million for the year ended May 31, 1992. EX-13 14 ANNUAL REPORT TO SHAREHOLDERS A Message from the Chief Financial Officer Most investors seek answers to at least three questions before electing to invest in a particular enterprise: Does the company operate in a growth industry? Does it enjoy leadership leverage within its industry? Do its people demonstrate both the vision and vigor not only to defend, but to extend, their company's leadership advantage? a As you've seen in this and recent years' annual reports, FedEx operates and clearly excels within a rapidly growing, forward-moving industry. FedEx revenues have grown by nearly $1 billion annually, and our net income has nearly tripled since fiscal 1993. Looking ahead, the global express transportation market is expected to exhibit consistently exceptional growth over the next two decades. a With 16 million pounds of daily cargo capacity and an unmatched portfolio of exclusive air cargo route authorities, the FedEx integrated global distribution network affords us tremendous economies of scale and competitive leverage as we grow. a On the third question, the company's ability to extend its competitive advantage, FedEx entered fiscal 1996 from a position of strength, as the express distribution industry leader. Rather than rest on that advantage, we elected to strategically invest $2.0 billion in overall network enhancements and information technologies. These investments will help us continue to expand our network to handle increasing customer demand as well as extend it to reach new markets. a In fiscal 1997, we will remain committed to making similar investments to improve our financial performance, continue our strong revenue growth and solidify our leadership position. Alan B. Graf, Jr. Executive Vice President and Chief Financial Officer
Financial Section Management's Discussion and Analysis of Results of Operations and Financial Condition 18 Consolidated Statements of Income 23 Consolidated Balance Sheets 24 Consolidated Statements of Cash Flows 26 Consolidated Statements of Changes in Common Stockholders' Investment 27 Notes to Consolidated Financial Statements 28 Report of Independent Public Accountants 39 Selected Consolidated Financial Data 40
Management's Discussion and Analysis of Results of Operations and Financial Condition Results of Operations In 1996, the Company achieved record net income and earnings per share for the third consecutive year. Consolidated net income for 1996 was $308 million ($5.39 per share) compared with $298 million ($5.27 per share) and $204 million ($3.65 per share) for 1995 and 1994, respectively. Over the past three years, the Company's consolidated financial results improved considerably. The majority of the Company's earnings growth during this period was attributable to the development of its international express delivery services and a growing demand for those services. In 1996, however, weakness in the global airfreight market and costs associated with implementing the Company's intra-Asian network resulted in much lower international operating income than in 1995. The Company's U.S. domestic operations over the same period have been subject to an express delivery market characterized by intense competition and generally declining prices. Consequently, from 1992 to 1995, U.S. domestic operating profits declined. In 1996, despite the impact of unusually severe winter weather in the eastern United States, management actions to control prices and expenses contributed to a significant year-over- year improvement in U.S. domestic operating profits. Revenues The following table shows a comparison of revenues for the years ended May 31:
In millions Percent Change 1996/ 1995/ 1996 1995 1994 1995 1994 U.S. domestic express $ 7,284 $6,700 $6,142 + 9 + 9 FedEx International Priority/R/ (IP) 1,997 1,680 1,339 +19 +25 FedEx International Express Freight/R/ (IXF) and FedEx International Airport-to-AirportSM (ATA) 554 580 505 - 5 +15 FedEx/R/ Air Charter 92 115 113 -20 + 1 Logistics services 94 106 248 -11 -57 Other* 253 211 132 +20 +59 ------- ------ ------ $10,274 $9,392 $8,479 + 9 +11 ======= ====== ======
*Includes the sale of engine noise reduction kits. The following table shows a comparison of selected express and airfreight (IXF/ATA) statistics for the years ended May 31:
In thousands, except dollar amounts Percent Change 1996/ 1995/ 1996 1995 1994 1995 1994 U.S. domestic express: Average daily packages 2,246 2,084 1,792 + 8 +16 Revenue per package $12.67 $12.61 $13.33 -- - 5 IP: Average daily packages 192 164 133 +17 +23 Revenue per package $40.58 $40.28 $39.21 + 1 + 3 IXF/ATA: Average daily pounds 2,144 2,153 1,844 -- +17 Revenue per pound $ 1.01 $ 1.06 $ 1.06 - 5 --
Federal Express Corporation and Subsidiaries In 1996, revenue per package (yield) associated with the Company's U.S. domestic express service improved on a year-over-year basis for the first time in five years. This improvement was partially attributable to an ongoing program of systematic review and revision of customer pricing and discounts. The goal of this program is to ensure a balance between revenues generated and the cost of providing express services. This program particularly impacted FedEx 2DaySM volumes and yields. In 1995, FedEx 2Day yields declined 4%, while average daily volumes increased 22%. In 1996, however, FedEx 2Day yields increased 5%, but average daily volumes increased only 1%. Additionally, the Company raised the list price for FedEx Standard Overnight/R/ service in June 1995 and April 1996. Also impacting U.S. domestic revenue per package in 1996 was the expiration of the air cargo transportation excise tax on December 31, 1995. The expiration of this tax added approximately $50 million and 1% to U.S. domestic revenues and yields, respectively. This benefit will continue until such time as Congress reenacts the excise tax. Over the past three years, the Company's IP service benefited from its EXPRESSfreighter/R/ network which provides customers with reduced transit times, later drop-off opportunities and daily service on a global basis that is generally unmatched by competitors. Year-over-year increases in average daily volumes and revenues equaled or exceeded 16% during this three-year period. Yields remained relatively constant. In 1995 and 1996, the Company's airfreight revenues were a significant factor in determining overall profitability. The Company uses its ATA airfreight service (a lower-priced, space-available service) to fill space on its international flights not utilized by express services such as IP or IXF. In 1995, the demand for global airfreight services generally exceeded available market capacity. Consequently, airfreight shippers paid higher prices for airfreight services than in prior years. This additional revenue contributed to 1995's improvement in earnings. In contrast to 1995, the available market capacity in 1996 was greater relative to demand, which resulted in lower non- express airfreight pounds, prices and revenues for the Company. The decrease in logistics services revenue in 1995 and 1996 was due to the sale, effective May 1994, of the Company's German logistics subsidiary and the 1995 sale of two dedicated warehousing and contract distribution companies in the United Kingdom. See additional discussion in Other Income and Expense and Income Taxes below. The increases in other revenue in 1995 and 1996 were primarily attributable to increased sales of engine noise reduction kits. Operating Expenses Volume growth and expansion of the Company's operations resulted in a trend of increasing operating expenses. Presented below are year-over-year percentage changes in operating expenses:
Percent Change 1996/ 1995/ 1995 1994 Salaries and employee benefits + 4 + 8 Rentals and landing fees +17 +16 Depreciation and amortization +10 + 9 Fuel +15 + 6 Maintenance and repairs +14 +17 Other +16 +16 Total operating expenses +10 +11
Increases in salaries and employee benefits were primarily due to higher employment levels associated with volume growth. In 1996, decreased provisions under the Company's performance-based incentive compensation plans offset a large portion of the increase in salaries and wages expense. The increases in rentals and landing fees were primarily due to the leasing of additional aircraft. As of May 31, 1996, the Company had 74 wide-bodied aircraft under operating lease compared with 58 as of May 31, 1995, and 37 as of May 31, 1994. Management expects year-over-year increases in lease expense to continue as the Company enters into additional aircraft rental agreements during 1997 and thereafter. Management's Discussion and Analysis The increase in fuel expense in 1996 was due to increases in the average price per gallon of jet fuel (7%) and gallons consumed (9%). The rise in average price per gallon of jet fuel was due to higher jet fuel prices and a 4.3 cents per gallon excise tax on aviation fuel, used domestically, which became effective October 1, 1995. The increase in fuel expense in 1995 was due to an increase in gallons consumed (10%), partially offset by a decline in average jet fuel price per gallon (5%). The increase in maintenance and repairs expense for 1996 was due to a number of factors. The Company's aircraft fleet has increased, resulting in a corresponding increase in maintenance expense. The Company also incurred significant spare parts expense outfitting the newly-opened Subic Bay facility and earlier than expected DC10 engine maintenance expense. In 1995, regulatory directives on B727 and MD11 aircraft engines resulted in higher maintenance and repairs expense, and the Company's MD11 aircraft entered their initial cycle of engine maintenance. Maintenance and repairs expense, as it relates to aircraft, typically follows a predictable pattern over the life of the aircraft. Unforeseen maintenance events will occasionally disrupt this pattern, resulting in periodic fluctuations in maintenance and repairs expense. Given the Company's increasing fleet size and variety of aircraft types, management believes that maintenance and repairs expense will continue a long-term trend of year-over- year increases for the foreseeable future. Increases in other operating expenses for 1996 and 1995 were primarily due to expenses related to volume growth, including the transportation of packages by third parties and temporary manpower. The cost of sales of engine noise reduction kits increased in 1996 and 1995. A significant portion of the 1996 increase in other operating expenses was also due to consulting fees related to ongoing projects designed to optimize the value of goods and services purchased and the use of internal resources. Advertising also contributed to the increase in other operating expenses in 1995. Operating Income The Company's operating income increased 6% and 11% in 1996 and 1995, respectively. U.S. domestic operating income rose 16% in 1996 and declined 17% in 1995. During 1996, revenue per package increased 0.5% and cost per package increased only 0.3%, while average daily volume rose 8%. These factors contributed to a substantial improvement in operating profits. In 1996, severe winter storms in the eastern United States closed numerous airports and businesses and, consequently, lowered U.S. domestic operating income by approximately $30 million. U.S. domestic results declined in 1995 because of lower margins attributable to a 5% decrease in U.S. domestic express yields, while the average U.S. domestic cost per package declined only 3%. Sales of engine noise reduction kits contributed an incremental $15 million and $36 million to U.S. domestic operating income in 1996 and 1995, respectively. U.S. domestic operating margins were 7.3%, 6.8% and 9.0% in 1996, 1995 and 1994, respectively. International operating income declined $44 million in 1996 compared with a $155 million increase in 1995. In addition to the factors impacting express and airfreight revenue discussed above, the costs of establishing the Company's intra-Asian network and declines in charter revenue contributed to the decrease in international operating income. International operating margins were 2.9%, 4.9% and 1.3% in 1996, 1995 and 1994, respectively. For additional information on the Company's U.S. domestic and international operations, see Note 10 of Notes to Consolidated Financial Statements. Other Income and Expense and Income Taxes Decreases in net interest expense of 17% and 19% for 1996 and 1995, respectively, were due to lower debt levels and a higher level of capitalized interest. Interest is capitalized during the modification of certain Airbus A310 aircraft from passenger to freighter configuration. During 1996, 17 A310 aircraft were modified, or were undergoing modification, compared with four during 1995. Other, net for 1996 and 1995 included distributions of $7.8 million and $9.7 million, respectively, from the bankruptcy estate of a firm engaged by the Company in 1990 to remit payments of employee payroll taxes to the appropriate authorities. In total, the Company has received $17.9 million. All major issues pertaining to the bankruptcy have been resolved, and any additional amounts the Company may receive are expected to be insignificant. Other, net for 1996 also included gains on sales of B727 aircraft and, for 1995, a pre-tax gain of $35.7 million from the sale of warehousing and distribution companies in the United Kingdom. Federal Express Corporation and Subsidiaries The Company's effective tax rate was 43.0% in 1996 and 1995 and 46.0% for 1994. In each year, the effective tax rate was greater than the statutory U.S. federal tax rate primarily because of state income taxes and the impact of foreign operations. The 43.0% effective tax rate in 1996 was lower than the 46.0% effective rate in 1994 primarily due to reductions in state and local taxes and taxes on earnings from foreign operations. The 43.0% rate in 1995 was largely attributable to a change in the structure of the Company's foreign entity in Mexico. This change permitted the one-time deduction in 1995 of certain items for U.S. federal income tax purposes that were not deductible in prior years. For 1997, management expects the effective tax rate to remain at a level similar to the 1996 rate. The actual rate, however, is dependent on a number of factors, including the amount and source of operating income. Outlook Management is committed to achieving long-term earnings growth by positioning the Company's resources to address customers' expectations and to capitalize on emerging markets for express distribution services. Very often this involves a significant front-end investment in assets, technology and personnel that might have a negative impact on near-term profitability. As discussed above, a key factor in the improvement in the Company's U.S. domestic operations was the customer pricing and discount review program. Management will continue this program in 1997. Additionally, the Company has introduced a new U.S. domestic service for certain customers in select markets with prices based on the distance between a package's origin and destination. Management believes that year-over-year changes in U.S. domestic yields will remain flat or fall slightly during 1997. Actual results, however, may vary depending primarily on the impact of competitive pricing changes, changing customer demand patterns, and the timing of the reenactment of the air cargo transportation excise tax. To reduce costs, management will continue investing in technologies that streamline package pick-up, sorting, tracking and delivery. Improving package movement through more efficient integration of the Company's air and ground transportation systems is a continuing Company effort and, assuming effective implementation, is expected to reduce transportation cost per package. The Company has also implemented programs designed to optimize the value of goods and services purchased. These programs have already resulted in modest savings in 1996 with additional savings anticipated in 1997 and beyond. The results of these programs may differ from management's expectations depending upon the Company's success and timing in implementing the program recommendations and the timing of technological changes. Management's long-term plan for the Company's international operations calls for continued expansion of its international network to the emerging centers of economic growth. Management believes that the overall success of its international operations is strongly tied to connecting these growth areas, most notably China, the Pacific Basin and Latin America, to its global transportation network. Providing direct service to new areas typically entails a significant capital investment followed by a start-up period characterized by operating costs higher than in established service areas. Furthermore, during the start-up period, until express volumes grow into available capacity, more reliance is placed on lower-yielding ATA and IXF to fill available space. This reliance on airfreight exposes the Company to cyclical downturns in the international airfreight market. Management expects strong IP average daily volume growth to continue in 1997. With respect to airfreight, management believes that excess market capacity and unfavorable economic conditions encountered in 1996 will continue to hamper profitability in 1997. Actual results for IP or airfreight, however, will depend on international economic conditions, actions by the Company's competitors and regulatory conditions for international aviation rights. Financial Condition Liquidity Cash and cash equivalents totaled $93 million at May 31, 1996, a decrease of $264 million during 1996 compared with a decrease of $35 million in 1995 and an increase of $237 million in 1994. Cash provided from operations during 1996 was $947 million compared with $1.0 billion and $767 million in 1995 and 1994, respectively. The Company currently has available a $1 billion revolving bank credit facility that is generally used to finance temporary operating cash requirements and to provide support for the issuance of commercial paper. Management believes that cash flow from operations, its commercial paper program and the revolving bank credit facility will adequately meet its working capital needs for the foreseeable future. Management's Discussion and Analysis Capital Resources The Company's operations are capital intensive, characterized by significant investments in aircraft, vehicles, computer and telecommunication equipment, package handling facilities and sort equipment. The amount and timing of capital additions are dependent on various factors including volume growth, new or enhanced services, geographical expansion of services, competition and availability of satisfactory financing. Capital expenditures for 1996 totaled $1.4 billion and included seven Airbus A310 aircraft, two MD11 aircraft, five B727-200 aircraft, 35 Cessna 208 aircraft, deposits on future Airbus A300 aircraft, vehicles and ground support equipment, customer automation and computer equipment, and package handling facilities and sort equipment. In comparison, prior year expenditures totaled $1.1 billion and included four A310s, 15 Cessna 208s, deposits on future A300s, vehicle and ground support equipment, and customer automation and computer equipment. One MD11 and one A310 acquired in 1996 along with two A310s acquired in 1995 were subsequently sold and leased back during 1996. For information on the Company's purchase commitments, see Note 12 of Notes to Consolidated Financial Statements. Additional investing activities in 1996 included the purchase of an all- cargo route authority between the U.S. and China. The Company has historically financed its capital investments through the use of lease, debt and equity financing in addition to the use of internally generated cash from operations. Generally, management's practice in recent years with respect to funding new aircraft acquisitions has been to finance such aircraft through long-term lease transactions that qualify as off balance sheet operating leases under applicable accounting rules. Management has determined that these operating leases have provided economic benefits favorable to ownership with respect to market values, liquidity and after-tax cash flows. In the future, alternative approaches to financing the Company's aircraft acquisitions, such as capitalized leases or other forms of secured financing, may be pursued when management determines that such financing best meets the Company's needs. The Company has been successful in obtaining investment capital, both domestic and international, for long-term leases on terms acceptable to it although the marketplace for such capital can become restricted depending on a variety of economic factors beyond the control of the Company. See Note 3 of Notes to Consolidated Financial Statements for additional information concerning the Company's debt and credit facilities. In August and October 1995, approximately $123 and $195 million, respectively, of pass through certificates were issued under a shelf registration filed with the Securities and Exchange Commission to refinance the debt portion of leveraged leases related to five Airbus A300 aircraft. The pass through certificates are not direct obligations of, or guaranteed by, the Company, but amounts payable by the Company under the five leveraged leases are sufficient to pay the principal of and interest on the certificates. The Company's capital resources include backstop financing for nine Airbus A300 aircraft and the public and private debt markets for leveraged lease financing. Management believes that the capital resources available to the Company provide flexibility to access the most efficient markets for financing its capital acquisitions, including aircraft, and are adequate for the Company's future capital needs. Deferred Tax Assets At May 31, 1996, the Company had a net cumulative deferred tax asset of $29 million consisting of $443 million of deferred tax assets and $414 million of deferred tax liabilities. The reversals of deferred tax liabilities in future periods will offset similar amounts of deferred tax assets. Based upon historical levels of taxable income, the Company believes that it is more likely than not that sufficient levels of future taxable income will be generated to realize the remaining deferred tax asset.
Consolidated Statements of Income Federal Express Corporation and Subsidiaries Years ended May 31 In thousands, except Earnings Per Share 1996 1995 1994 Revenues $10,273,619 $9,392,073 $8,479,456 ----------- ---------- ---------- Operating Expenses: Salaries and employee benefits (Notes 8 and 9) 4,619,990 4,425,202 4,104,800 Rentals and landing fees (Note 4) 959,055 818,599 703,028 Depreciation and amortization 719,609 652,287 599,357 Fuel 578,614 502,417 472,786 Maintenance and repairs 617,657 544,170 464,557 Other 2,154,870 1,858,254 1,604,296 ----------- ---------- ---------- 9,649,795 8,800,929 7,948,824 ----------- ---------- ---------- Operating Income 623,824 591,144 530,632 ----------- ---------- ---------- Other Income (Expense): Interest, net (Note 1) (95,599) (114,687) (142,392) Other, net (Note 14) 11,734 45,627 (9,778) ----------- ---------- ---------- (83,865) (69,060) (152,170) ----------- ---------- ---------- Income before Income Taxes 539,959 522,084 378,462 Provision for Income Taxes (Note 7) 232,182 224,496 174,092 ----------- ---------- ---------- Net Income $ 307,777 $ 297,588 $ 204,370 =========== ========== ========== Earnings Per Share (Note 6) $5.39 $5.27 $3.65 =========== ========== ========== Average Shares Outstanding (Note 6) 57,138 56,494 56,012 =========== ========== ==========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. Consolidated Balance Sheets May 31
In thousands 1996 1995 Assets Current Assets: Cash and cash equivalents $ 93,419 $ 357,548 Receivables, less allowance for doubtful accounts of $30,809 and $31,173 1,271,599 1,130,254 Spare parts, supplies and fuel 222,110 193,251 Deferred income taxes (Note 7) 92,606 115,801 Prepaid expenses and other 48,527 72,228 ---------- ---------- Total current assets 1,728,261 1,869,082 ---------- ---------- Property and Equipment, at Cost (Notes 1, 3, 4 and 12): Flight equipment 3,372,647 3,006,693 Package handling and ground support equipment 2,148,509 1,841,108 Computer and electronic equipment 1,439,883 1,224,050 Other 1,717,478 1,625,860 ---------- ---------- 8,678,517 7,697,711 Less accumulated depreciation and amortization 4,561,916 3,982,467 ---------- ---------- Net property and equipment 4,116,601 3,715,244 ---------- ---------- Other Assets: Goodwill (Note 1) 380,748 397,272 Equipment deposits and other assets (Note 12) 473,361 451,774 ---------- ---------- Total other assets 854,109 849,046 ---------- ---------- $6,698,971 $6,433,372 ========== ==========
The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets. Federal Express Corporation and Subsidiaries
1996 1995 Liabilities and Stockholders' Investment Current Liabilities: Current portion of long-term debt (Note 3) $ 8,009 $ 255,448 Accounts payable 705,532 618,621 Accrued expenses (Note 2) 904,856 904,466 ---------- ---------- Total current liabilities 1,618,397 1,778,535 ---------- ---------- Long-Term Debt, Less Current Portion (Note 3) 1,325,277 1,324,711 ---------- ---------- Deferred Income Taxes (Note 7) 64,034 55,956 ---------- ---------- Other Liabilities (Note 1) 1,115,124 1,028,601 ---------- ---------- Commitments and Contingencies (Notes 4, 12 and 13) Common Stockholders' Investment (Note 6): Common Stock, $.10 par value; 200,000 shares authorized; 56,885 and 56,174 shares issued 5,689 5,617 Additional paid-in capital 815,137 775,255 Retained earnings 1,766,578 1,466,427 ---------- ---------- 2,587,404 2,247,299 Less treasury stock and deferred compensation 11,265 1,730 ---------- ---------- Total common stockholders' investment 2,576,139 2,245,569 ---------- ---------- $6,698,971 $6,433,372 ========== ==========
Consolidated Statements of CashFlows Federal Express Corporation and Subsidiaries Years ended May 31 In thousands 1996 1995 1994 Operating Activities Net income $ 307,777 $ 297,588 $ 204,370 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 719,609 652,287 599,357 Provision for uncollectible accounts 38,963 36,334 45,763 Provision for deferred income taxes and other 26,489 25,976 3,810 Gain from disposals of property and equipment (5,397) (39,997) (11,897) Changes in assets and liabilities, net of effects from dispositions of businesses: Increase in receivables (191,334) (167,319) (173,902) Increase in other current assets (41,992) (24,101) (7,826) Increase in accounts payable, accrued expenses and other liabilities 100,515 258,373 110,508 Other, net (8,050) (8,424) (2,905) --------- ---------- ---------- Cash provided by operating activities 946,580 1,030,717 767,278 --------- ---------- ---------- Investing Activities Purchases of property and equipment, including deposits on aircraft of $68,202, $113,073 and $112,138 (1,412,242) (1,060,761) (1,087,708) Proceeds from dispositions of property and equipment: Sale-leaseback transactions 176,500 -- 581,400 Reimbursements of A300 deposits 143,859 138,203 38,794 Other dispositions 26,504 59,523 46,148 Other, net 77,208 87,925 27,843 --------- ---------- ---------- Cash used in investing activities (988,171) (775,110) (393,523) --------- ---------- ---------- Financing Activities Proceeds from debt issuances 17,298 45,460 10,777 Principal payments on debt (264,004) (349,523) (198,243) Proceeds from stock issuances 36,566 13,081 53,759 Other, net (12,398) -- (2,581) --------- ---------- ---------- Cash used in financing activities (222,538) (290,982) (136,288) --------- ---------- ---------- Cash and Cash Equivalents Increase (decrease) during the year (264,129) (35,375) 237,467 Balance at beginning of year 357,548 392,923 155,456 --------- ---------- ---------- Balance at end of year $ 93,419 $ 357,548 $ 392,923 ========= ========== ==========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
Consolidated Statements of Changes in Common Stockholders' Investment Federal Express Corporation and Subsidiaries In thousands, except shares Additional Common Paid-in Retained Treasury Deferred Stock Capital Earnings Stock Compensation Balance at May 31, 1993 $5,474 $699,385 $ 969,515 $ (36) $ (2,957) Purchase of treasury stock -- -- -- (185) -- Forfeiture of restricted stock -- -- -- (1,224) -- Issuance of common and treasury stock under employee incentive plans (1,153,248 shares) 115 59,844 -- 670 (8) Amortization of deferred compensation -- -- -- -- 1,467 Foreign currency translation adjustment -- -- (11,725) -- -- Net income -- -- 204,370 -- -- ------- -------- --------- ------- -------- Balance at May 31, 1994 5,589 759,229 1,162,160 (775) (1,498) Forfeiture of restricted stock -- -- -- (231) -- Issuance of common stock under employee incentive plans (288,724 shares) 28 16,026 -- -- -- Amortization of deferred compensation -- -- -- -- 774 Foreign currency translation adjustment -- -- 6,679 -- -- Net income -- -- 297,588 -- -- ------- -------- --------- ------- -------- Balance at May 31, 1995 5,617 775,255 1,466,427 (1,006) (724) Purchase of treasury stock -- -- -- (12,398) -- Forfeiture of restricted stock -- -- -- (1,068) 1,130 Issuance of common and treasury stock under employee incentive plans (886,195 shares) 72 39,882 -- 14,472 (13,898) Amortization of deferred compensation -- -- -- -- 2,227 Foreign currency translation adjustment -- -- (7,626) -- -- Net income -- -- 307,777 -- -- ------- -------- --------- ------- -------- Balance at May 31, 1996 $5,689 $815,137 $1,766,578 $ -- $(11,265) ======= ======== ========== ======== ========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. Notes to Consolidated Financial Statements Note 1: Summary of Significant Accounting Policies Principles of consolidation. The consolidated financial statements include the accounts of Federal Express Corporation and its wholly-owned subsidiaries (the "Company"). All significant intercompany accounts and transactions have been eliminated. Property and equipment. Expenditures for major additions, improvements, flight equipment modifications, and certain overhaul costs are capitalized. Maintenance and repairs are charged to expense as incurred, except for B747 airframe and engine overhaul maintenance which is accrued and charged to expense on the basis of hours flown. The cost and accumulated depreciation of property and equipment disposed of are removed from the related accounts, and any gain or loss is reflected in the results of operations. For financial reporting purposes, depreciation and amortization of property and equipment is provided on a straight-line basis over the asset's service life or related lease term as follows: Flight equipment 7 to 20 years Package handling and ground support equipment 5 to 30 years Computer and electronic equipment 3 to 10 years Other 2 to 30 years Aircraft airframes and engines are assigned residual values ranging from 10% to 20% of asset cost. All other property and equipment have no assigned residual values. Vehicles, which are included in package handling and ground support equipment, are depreciated on a straight-line basis over 5 to 10 years. For income tax purposes, depreciation is generally computed using accelerated methods. Deferred gains. Gains on the sale and leaseback of aircraft and other property and equipment are deferred and amortized over the life of the lease as a reduction of rent expense. Included in other liabilities at May 31, 1996 and 1995, were deferred gains of $337,118,000 and $293,000,000, respectively. Deferred lease obligations. While certain of the Company's aircraft and facility leases contain fluctuating or escalating payments, the related rent expense is recorded on a straight-line basis over the lease term. Included in other liabilities at May 31, 1996 and 1995, were $260,977,000 and $216,683,000, respectively, representing the cumulative difference between rent expense and rent payments. Self-insurance reserves. The Company is self-insured up to certain levels for workers' compensation, employee health care and vehicle liabilities. Reserves are based on the actuarially estimated cost of claims. Included in other liabilities at May 31, 1996 and 1995, were $278,000,000 and $294,000,000, respectively, representing self-insurance reserves for the Company's workers' compensation and vehicle liabilities. Capitalized interest. Interest on funds used to finance the acquisition and modification of aircraft and construction of certain facilities up to the date the asset is placed in service is capitalized and included in the cost of the asset. Capitalized interest was $39,254,000, $27,381,000 and $29,738,000 for 1996, 1995 and 1994, respectively. Advertising. Advertising costs are generally expensed as incurred and are included in other operating expenses. Advertising expenses were $138,408,000, $147,288,000 and $122,002,000 in 1996, 1995 and 1994, respectively. Cash equivalents. Cash equivalents are cash in excess of current operating requirements invested in short-term, interest-bearing instruments with maturities of three months or less at the date of purchase and are stated at cost, which approximates market value. Interest income was $9,850,000 in 1996, $16,236,000 in 1995 and $9,778,000 in 1994. Federal Express Corporation and Subsidiaries Spare parts, supplies and fuel. Spare parts, supplies and fuel are stated principally at standard cost (approximates actual cost on a first-in, first-out basis) which is not in excess of current replacement cost. Goodwill. Goodwill is the excess of the purchase price over the fair value of net assets of businesses acquired. It is amortized on a straight-line basis over periods ranging up to 40 years. Accumulated amortization was $114,606,000 and $100,527,000 at May 31, 1996 and 1995, respectively. Foreign currency translation. Translation gains and losses of the Company's foreign operations that use local currencies as the functional currency are accumulated and reported as a separate component of common stockholders' investment. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the local functional currency are included in the results of operations. Income taxes. Deferred income taxes are provided for the tax effect of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. The Company uses the liability method to account for income taxes, which requires deferred taxes to be recorded at the statutory rate expected to be in effect when the taxes are paid. The Company has not provided for U.S. federal income taxes on its foreign subsidiaries' earnings deemed to be permanently reinvested. Quantification of the deferred tax liability, if any, associated with permanently reinvested earnings is not practicable. Revenue recognition. Revenue is generally recognized upon delivery of shipments. For shipments in transit, revenue is recorded based on the percentage of service completed. Earnings per share. Earnings per share is computed based on the weighted average number of common and common equivalent shares outstanding during the period. Common equivalent shares are the shares of common stock that would be issued upon the exercise of all dilutive outstanding stock options, less the assumed repurchase of treasury shares. Earnings per share assuming full dilution is substantially the same as earnings per share as stated and, accordingly, is not shown separately. Recent pronouncements. During 1997, the Company will adopt the provisions of two Statements of Financial Accounting Standards ("SFAS") recently issued by the Financial Accounting Standards Board. SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," requires that long-lived assets and certain identifiable intangibles be reviewed periodically for impairment. The Company does not expect the adoption of SFAS 121 to have a material effect on its financial statements. SFAS 123, "Accounting for Stock-Based Compensation," defines a fair-value based method of measuring and recording compensation costs for employee stock compensation programs. This new standard, however, permits companies to follow the intrinsic-value based method presently required by Accounting Principles Board Opinion No. 25, as long as they also provide pro forma footnote disclosure of the effect that the fair-value based method would have had on net income and earnings per share had that method been adopted. Management intends to adopt the pro forma disclosure alternative beginning in 1997. Reclassifications. Certain amounts for 1995 and 1994 have been reclassified to conform to the 1996 presentation. Use of estimates. The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Notes to Consolidated Financial Statements Note 2: Accrued Expenses
May 31 In thousands 1996 1995 Compensated absences $ 211,499 $ 192,785 Insurance 194,209 176,806 Taxes other than income taxes 153,905 137,037 Employee benefits 111,912 127,870 Salaries 78,384 100,024 Aircraft overhaul 59,343 53,540 Other 95,604 116,404 ---------- --------- $ 904,856 $ 904,466 ========== =========
Note 3: Long-Term Debt
May 31 In thousands 1996 1995 Unsecured notes payable, interest rates of 6.25% to 10.57%, due through 2013 $ 934,181 $1,187,413 ---------- --------- Unsecured sinking fund debentures, interest rate of 9.63%, due through 2020 98,392 98,323 ---------- --------- Capital lease obligations and tax exempt bonds, due through 2017, interest rates of 6.75% to 8.30% 255,100 255,100 Less bond reserves 11,096 11,096 ---------- --------- 244,004 244,004 ---------- --------- Other debt, interest rates of 9.68% to 9.98% 56,709 50,419 ---------- --------- 1,333,286 1,580,159 Less current portion 8,009 255,448 ---------- --------- $1,325,277 $1,324,711 ========== ==========
The Company has a revolving credit agreement with domestic and foreign banks that provides for a commitment of $1,000,000,000 through May 31, 2000, all of which was available at May 31, 1996. Interest rates on borrowings under this agreement are generally determined by maturities selected and prevailing market conditions. The agreement contains certain covenants and restrictions, none of which are expected to significantly affect operations or the ability to pay dividends. As of May 31, 1996, approximately $957,000,000 was available for the payment of dividends. Commercial paper borrowings are backed by unused commitments under the revolving credit agreement and reduce the amount available under the agreement. Tax exempt bonds were issued by the Memphis-Shelby County Airport Authority ("MSCAA") and the City of Indianapolis. A lease agreement with the MSCAA and a loan agreement with the City of Indianapolis covering the facilities and equipment financed with the bond proceeds obligate the Company to pay rentals and loan payments, respectively, equal to principal and interest due on the bonds. Scheduled annual principal maturities of long-term debt for the five years subsequent to May 31, 1996, are as follows: $8,000,000 in 1997; $126,700,000 in 1998; $265,500,000 in 1999; $14,900,000 in 2000; and $11,300,000 in 2001. The Company's long-term debt, exclusive of capital leases, had carrying values of $1,130,000,000 and $1,390,000,000 at May 31, 1996 and 1995, respectively, compared with fair values of approximately $1,245,000,000 and $1,470,000,000 at those dates. The estimated fair values were determined based on quoted market prices or on the current rates offered for debt with similar terms and maturities. Federal Express Corporation and Subsidiaries Note 4: Lease Commitments The Company utilizes certain aircraft, land, facilities and equipment under capital and operating leases which expire at various dates through 2024. In addition, supplemental aircraft are leased under agreements which generally provide for cancellation upon 30 days' notice. Property and equipment recorded under capital leases at May 31 was as follows:
In thousands 1996 1995 Package handling and ground support equipment $346,479 $378,438 Facilities 133,435 133,435 Computer and electronic equipment and other 7,143 7,175 -------- -------- 487,057 519,048 Less accumulated amortization 329,678 347,738 -------- -------- $157,379 $171,310 ======== ========
Rent expense under operating leases for the years ended May 31 was as follows:
In thousands 1996 1995 1994 Minimum rentals $820,896 $707,182 $621,174 Contingent rentals 61,164 43,005 21,540 -------- -------- -------- $882,060 $750,187 $642,714 ======== ======== ========
Contingent rentals are based on mileage under supplemental aircraft leases. A summary of future minimum lease payments under capital leases and non- cancelable operating leases (principally aircraft and facilities) with an initial or remaining term in excess of one year at May 31, 1996, follows:
In thousands Capital Leases Operating Leases 1997 $ 15,561 $ 724,161 1998 15,561 732,675 1999 15,561 715,247 2000 15,561 671,798 2001 15,561 638,510 Thereafter 356,085 7,634,161 -------- ----------- $433,890 $11,116,552 ======== ===========
At May 31, 1996, the present value of future minimum lease payments for capital lease obligations was $199,004,000. Note 5: Preferred Stock The Certificate of Incorporation authorizes the Board of Directors, at its discretion, to issue up to 4,000,000 shares of Series Preferred Stock. The stock is issuable in series which may vary as to certain rights and preferences and has no par value. As of May 31, 1996, none of these shares had been issued. Notes to Consolidated Financial Statements Note 6: Common Stockholders' Investment Under the provisions of the Company's stock incentive plans, options may be granted to certain key employees (and, under the 1993 plan, to directors who are not employees of the Company) to purchase common stock of the Company at a price not less than its fair market value at the date of grant. The following summarizes information for the past three years with respect to those plans:
Number of Shares Option Price Under Option Per Share Outstanding at May 31, 1993 3,147,043 $30.56-$70.19 Granted 982,750 54.31-70.81 Exercised (1,142,249) 30.56-70.19 Canceled (111,758) 34.31-62.94 ---------- Outstanding at May 31, 1994 2,875,786 $30.56-$70.81 Granted 671,800 56.13-75.88 Exercised (288,724) 30.56-62.94 Canceled (89,997) 30.56-75.88 ---------- Outstanding at May 31, 1995 3,168,865 $30.56-$75.88 Granted 909,000 59.13-82.31 Exercised (710,945) 30.56-75.88 Canceled (167,640) 34.50-82.31 ---------- Outstanding at May 31, 1996 3,199,280 $30.56-$82.31 ========== Exercisable at May 31, 1996 1,226,400 $30.56-$75.88 ==========
At May 31, 1996, 942,731 shares were available for future grants under the above-mentioned stock incentive plans. Under the terms of the Company's restricted stock plans, shares of the Company's common stock may be awarded to key employees. Restrictions on the shares expire over a period of one to ten years from the date of award. The value of shares awarded under these plans is recorded as a reduction of common stockholders' investment and is being amortized to compensation expense as restrictions on such shares expire. Shares awarded under the plans totaled 175,250 in 1996 and 11,000 in 1994. No shares were awarded in 1995. During 1996, 1995 and 1994, 14,500, 3,750 and 18,438 shares, respectively, were forfeited. At May 31, 1996, 128,938 shares were available for future awards. At May 31, 1996, there were 4,270,949 shares of common stock reserved for issuance under the above-mentioned plans. In 1988, the Board of Directors authorized the purchase of up to approximately 5,300,000 shares of the Company's common stock on the open market. As of May 31, 1996, a total of 2,911,305 shares at an average cost of $43.85 per share had been purchased and reissued under the above-mentioned plans. Federal Express Corporation and Subsidiaries Note 7: Income Taxes The components of the provision for income taxes for the years ended May 31 were as follows:
In thousands 1996 1995 1994 Current provision: Federal $142,512 $137,041 $131,724 Foreign 37,759 29,787 16,387 State 18,007 23,405 26,862 -------- -------- -------- 198,278 190,233 174,973 ======== ======== ======== Deferred provision (credit): Federal 27,962 24,058 2,263 Foreign 2,351 9,072 2,524 State 3,591 1,133 (5,668) -------- -------- -------- 33,904 34,263 (881) -------- -------- -------- $232,182 $224,496 $174,092 ======== ======== ========
The Company's operations included the following income (loss) with respect to entities in foreign locations for the years ended May 31:
In thousands 1996 1995 1994 Entities with pre-tax income $ 153,000 $ 149,000 $ 127,000 Entities with pre-tax losses (228,000) (173,000) (210,000) --------- --------- --------- $ (75,000) $ (24,000) $ (83,000) ========= ========= =========
Income (losses) from entities which are structured as foreign subsidiaries are not included in the U.S. consolidated income tax return. Approximately $60,000,000, $29,000,000 and $14,000,000 of net foreign subsidiary income were not taxable for federal income tax purposes in 1996, 1995 and 1994, respectively. Income taxes have been provided for foreign operations based upon the various tax laws and rates of the countries in which the Company's operations are conducted. There is no direct relationship between the Company's overall foreign income tax provision and foreign pre-tax book income due to the different methods of taxation used by countries throughout the world. A reconciliation of the statutory federal income tax rate to the Company's effective income tax rate for the years ended May 31 follows:
1996 1995 1994 Statutory U.S. income tax rate 35.0% 35.0% 35.0% Increase resulting from: Goodwill amortization 0.9 1.0 1.3 Foreign operations 1.7 0.9 3.5 State income taxes, net of federal benefit 2.6 3.1 3.6 Other, net 2.8 3.0 2.6 ---- ---- ---- 43.0% 43.0% 46.0% ==== ==== ====
Notes to Consolidated Financial Statements The significant components of deferred tax assets and liabilities as of May 31 were as follows:
In thousands 1996 1995 Deferred Deferred Deferred Deferred Tax Assets Tax Liabilities Tax Assets Tax Liabilities Depreciation $ -- $324,221 $ -- $303,088 Deferred gains on sales of assets 81,370 -- 67,912 -- Employee benefits 45,137 -- 69,563 -- Self-insurance reserves 165,020 -- 165,197 -- Other 151,355 90,089 137,063 76,802 -------- -------- -------- -------- $442,882 $414,310 $439,735 $379,890 ======== ======== ======== ========
Note 8: Pension and Profit Sharing Plans The Company sponsors pension plans covering substantially all employees. The largest plan covers U.S. domestic employees age 21 and over, with at least one year of service, and provides benefits based on final average earnings and years of service. Plan funding is actuarially determined, subject to certain tax law limitations. International defined benefit plans provide benefits primarily based on final earnings and years of service and are funded in accordance with local laws and income tax regulations. The following table sets forth the funded status of the plans as of May 31:
In thousands 1996 1995 Plan assets at fair value $2,725,896 $2,093,422 Actuarial present value of the projected benefit obligation for service rendered to date 2,571,086 1,972,009 ---------- ---------- Plan assets in excess of projected benefit obligation 154,810 121,413 Unrecognized net gains from past experience different from that assumed and effects of changes in assumptions (74,425) (123,929) Prior service cost not yet recognized in net periodic cost (7,398) (6,449) Unrecognized transition amount 3,239 3,679 ---------- ---------- Pension asset (liability) $ 76,226 $ (5,286) ========== ========== Accumulated benefit obligation $1,626,877 $1,203,126 ========== ========== Vested benefit obligation $1,538,267 $1,140,545 ========== ==========
Federal Express Corporation and Subsidiaries Net periodic pension cost for the years ended May 31 included the following components:
In thousands 1996 1995 1994 Service cost -- benefits earned during the period $ 184,305 $ 182,617 $176,861 Interest cost on projected benefit obligation 165,635 143,408 127,959 Actual return on plan assets (463,819) (192,939) (82,019) Net amortization and deferral 256,968 19,333 (64,727) --------- --------- -------- $ 143,089 $ 152,419 $158,074 ========= ========= ========
The weighted-average discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation were 8.0% and 5.5%, respectively, in 1996, 8.6% and 6.0%, respectively, in 1995 and 8.1% and 6.0%, respectively, in 1994. The expected long-term rate of return on assets was 9.5% in 1996, 1995 and 1994. Plan assets consist primarily of marketable equity securities and fixed income instruments. The Company also has a profit sharing plan, which covers substantially all U.S. domestic employees age 21 and over, with at least one year of service with the Company as of the contribution date, as defined in the plan. The plan provides for discretionary contributions by the Company which are determined annually by the Board of Directors. Profit sharing expense was $54,000,000 in 1996, $52,200,000 in 1995 and $36,800,000 in 1994. Note 9: Postretirement Benefit Plans The Company offers medical and dental coverage to all eligible U.S. domestic retirees and their eligible dependents. Vision coverage is provided for retirees only. Substantially all of the Company's U.S. domestic employees become eligible for these benefits at age 55 and older, if they have permanent, continuous service with the Company of at least 10 years after attainment of age 45 if hired prior to January 1, 1988, or at least 20 years after attainment of age 35, if hired on or after January 1, 1988. Life insurance benefits are provided to retirees of the former Tiger International, Inc. who retired prior to acquisition. The following table sets forth accrued postretirement benefit cost as of May 31: Accumulated postretirement benefit obligation:
In thousands 1996 1995 Retirees $ 39,539 $ 35,816 Fully eligible active employees 31,472 24,400 Other active employees, not fully eligible 80,001 60,769 --------- -------- 151,012 120,985 Unrecognized net gain 15,402 25,421 --------- -------- $166,414 $146,406 ========= ========
Net postretirement benefit cost for the years ended May 31 was as follows:
In thousands 1996 1995 1994 Service cost $12,085 $ 12,870 $ 12,392 Interest cost 11,275 10,617 10,174 Amortization of accumulated gains (780) -- -- ------- -------- -------- $22,580 $ 23,487 $ 22,566 ======= ======== ========
Notes to Consolidated Financial Statements Future medical benefit costs were estimated to increase at an annual rate of 10.5% during 1997, decreasing to an annual growth rate of 5.5% in 2007 and thereafter. Future dental benefit costs were estimated to increase at an annual rate of 8.5% during 1997, decreasing to an annual growth rate of 5.5% in 2009 and thereafter. The Company's cost is capped at 150% of 1993 employer cost and, therefore, will not be subject to medical and dental trends after the capped cost is attained, projected to be in 1999. Primarily because of the cap on the Company's cost, a 1% increase in these annual trend rates would not have a significant impact on the accumulated postretirement benefit obligation at May 31, 1996, or 1996 benefit expense. The weighted average discount rates used in estimating the accumulated postretirement obligation were 7.4% and 8.6% at May 31, 1996 and 1995, respectively. The Company pays claims as incurred. Note 10: Business Segment Information The Company is in a single line of business -- the worldwide transportation and distribution of documents, packages and freight. For reporting purposes, operations are classified into two geographic areas, U.S. domestic and international. Shipments which either originate in or are destined to locations outside the U.S. are categorized as international. A summary of selected financial information for U.S. domestic and international operations for the years ended May 31 follows:
In thousands U.S. Total Domestic International Worldwide Revenues: 1996 $7,466,311 $2,807,308 $10,273,619 1995 6,839,418 2,552,655 9,392,073 1994 6,199,940 2,279,516 8,479,456 Operating Income (Loss): 1996 $ 542,168 $ 81,656 $ 623,824 1995 465,527 125,617 591,144 1994 559,629 (28,997) 530,632 Identifiable Assets: 1996 $5,449,353 $1,249,618 $ 6,698,971 1995 5,321,811 1,111,561 6,433,372 1994 4,883,644 1,108,854 5,992,498
Identifiable assets used jointly in U.S. domestic and international operations (principally aircraft) have been allocated based on estimated usage. International revenues related to services originating in the U.S. totaled $1,316,100,000, $1,201,100,000 and $1,020,000,000 for the years ended May 31, 1996, 1995 and 1994, respectively. Note 11: Supplemental Cash Flow Information Cash paid for interest expense and income taxes for the years ended May 31 was as follows:
In thousands 1996 1995 1994 Interest (net of capitalized interest) $108,052 $138,833 $158,149 Income taxes 204,487 185,964 167,209
In March 1995, the Company issued three series of loan certificates totaling $50,300,000 in exchange for a leased B747 aircraft. Federal Express Corporation and Subsidiaries Note 12: Commitments and Contingencies The Company's annual purchase commitments under various contracts as of May 31, 1996, were as follows:
In thousands Aircraft- Aircraft Related(1) Other(2) Total 1997 $482,800 $185,000 $194,400 $862,200 1998 478,600 64,200 37,800 580,600 1999 240,800 18,500 15,600 274,900 2000 124,200 9,900 -- 134,100
(1)Primarily aircraft modifications, rotables, spare parts and engines. (2)Facilities, vehicles, computer and other equipment. At May 31, 1996, the Company was committed to purchase nine Airbus A300, 12 Airbus A310 and ten MD11 aircraft to be delivered through 2000. Deposits and progress payments of $199,880,000 had been made toward these purchases. In April 1996, the Company canceled its options to purchase up to 36 additional Airbus A300s for delivery beginning in 1999. The Company may be required to purchase seven additional MD11 aircraft for delivery beginning no later than 2000 under a put option agreement. The Company has entered into contracts which are designed to limit its exposure to fluctuations in jet fuel prices. Under these contracts, the Company makes (or receives) payments based on the difference between a specified lower (or upper) limit and the market price of jet fuel, as determined by an index of spot market prices representing various geographic regions. The difference is recorded as an increase or decrease in fuel expense. At May 31, 1996, the Company had contracts with various financial institutions covering a total notional volume of 365,300,000 gallons (approximately 54% of the Company's annual jet fuel consumption), with some contracts extending through May 1997. At May 31, 1995, the Company had similar contracts covering a total notional volume of 97,400,000 gallons (approximately 16% of the Company's annual jet fuel consumption), with some contracts extending through August 1996. During 1996, the Company received $1,977,000 under jet fuel contracts. Based on current market prices, the fair value of outstanding contracts at May 31, 1996 and 1995, was approximately $1,370,000 and $141,000, respectively. Note 13: Legal Proceedings On May 14, 1996, a class-action suit was filed by customers of the Company in the United States District Court for the District of Minnesota. The complaint generally alleges that the Company breached its contract with the plaintiffs in transporting packages shipped by them by continuing to collect a 6.25% federal excise tax on the transportation of property shipped by air after the tax expired on December 31, 1995. The plaintiffs assert that the benefit to the Company is believed to be in excess of $30,000,000. The plaintiffs seek certification as a class action, damages, an injunction to enjoin the Company from continuing to collect the excise tax referred to above, and an award of attorneys' fees and costs. Other customers of the Company filed two separate lawsuits, one in California state court during April 1996 and one in Minnesota state court during June 1996, containing substantially similar allegations and requests for relief. During June 1996, the Company reached an agreement with the plaintiffs in all three lawsuits to consolidate the three lawsuits in the United States District Court for the District of Minnesota. The plaintiffs are in the process of filing the necessary motions to accomplish this consolidation. The Company intends to vigorously defend itself in these cases.No amount has been reserved for these contingencies. The Company is subject to other legal proceedings and claims which arise in the ordinary course of its business. In the opinion of management, the aggregate liability, if any, with respect to these other actions will not materially adversely affect the financial position or results of operations of the Company. Notes to Consolidated Financial Statements Note 14: Unusual Events The Company received $7,800,000 and $9,700,000 in 1996 and 1995, respectively, from the bankruptcy estate of a firm engaged by the Company in 1990 to remit payments of employee withholding taxes. These amounts are a partial recovery of a $32,000,000 loss incurred by the Company in 1991 that resulted from the firm's failure to remit certain tax payments to appropriate authorities. The Company has received a total of $17,900,000 from the bankruptcy estate of the firm. All major issues pertaining to the bankruptcy have been resolved, and any additional amounts the Company may receive are expected to be insignificant. In 1995, the Company sold two dedicated warehousing and contract distribution companies in the United Kingdom. A gain of $35,700,000 was recorded from the sale. Note 15: Summary of Quarterly Operating Results (Unaudited)
In thousands, except earnings per share First Second Third Fourth Quarter Quarter Quarter Quarter 1996 Revenues $2,453,394 $2,547,012 $2,535,470 $2,737,743 Operating income 149,230 170,905 77,943 225,746 Income before income taxes 129,886 154,952 52,637 202,484 Net income 75,334 89,871 27,156 115,416 Earnings per share $ 1.33 $ 1.57 $ .47 $ 2.01 Average shares outstanding 56,688 57,260 57,258 57,346 1995 Revenues $2,231,127 $2,358,765 $2,332,594 $2,469,587 Operating income 142,985 176,376 97,672 174,111 Income before income taxes 107,267 151,120 110,714 152,983 Net income 61,142 86,139 63,107 87,200 Earnings per share $ 1.08 $ 1.53 $ 1.12 $ 1.54 Average shares outstanding 56,614 56,385 56,374 56,601
Report of Independent Public Accountants Federal Express Corporation and Subsidiaries To the Stockholders of Federal Express Corporation: We have audited the accompanying consolidated balance sheets of Federal Express Corporation (a Delaware corporation) and subsidiaries as of May 31, 1996 and 1995, and the related consolidated statements of income, common stockholders' investment and cash flows for each of the three years in the period ended May 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Federal Express Corporation and subsidiaries as of May 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended May 31, 1996, in conformity with generally accepted accounting principles. Memphis, Tennessee July 1, 1996 Selected Consolidated Financial Data
Years ended May 31 In thousands, except per share amounts and Other Operating Data 1996 1995 1994 Operating Results Revenues $10,273,619 $9,392,073 $8,479,456 Operating income 623,824 591,144 530,632 Income (loss) before income taxes 539,959 522,084 378,462 Income (loss) from continuing operations 307,777 297,588 204,370 Net income (loss) $ 307,777 $ 297,588 $ 204,370 Per Share Data Earnings (loss) per share: Continuing operations $ 5.39 $ 5.27 $ 3.65 Discontinued operations -- -- -- Cumulative effect of changes in accounting principles -- -- -- Net earnings (loss) per share $ 5.39 $ 5.27 $ 3.65 Average shares outstanding 57,138 56,494 56,012 Cash dividends -- -- -- Financial Position Property and equipment, net $ 4,116,601 $3,715,244 $3,449,093 Total assets 6,698,971 6,433,372 5,992,498 Long-term debt 1,325,277 1,324,711 1,632,202 Common stockholders' investment 2,576,139 2,245,569 1,924,705 Other Operating Data Express package: Average daily package volume 2,437,662 2,247,594 1,925,105 Average pounds per package 6.4 6.3 6.0 Average revenue per pound* $ 2.31 $ 2.31 $ 2.51 Average revenue per package* $ 14.87 $ 14.62 $ 15.12 Airfreight: Average daily pounds 2,144,225 2,153,041 1,844,270 Average revenue per pound $ 1.01 $ 1.06 $ 1.06 Operating weekdays 256 255 257 Aircraft fleet: Airbus A300-600 16 9 2 Airbus A310-200 25 15 -- Boeing 747-100 -- -- -- Boeing 747-200 4 5 6 McDonnell Douglas MD11 18 13 13 McDonnell Douglas DC10-10 13 13 11 McDonnell Douglas DC10-30 22 22 19 McDonnell Douglas DC8 -- -- -- Boeing 727-100 68 68 69 Boeing 727-200 95 90 90 Cessna 208A 10 10 10 Cessna 208B 254 219 206 Fokker F27 32 32 32 Vehicle fleet 36,900 35,900 30,900 Average number of employees (based on a standard full-time workweek) 99,999 94,201 88,502
* Beginning in 1995, certain service fee revenues were classified as package- related revenue. Data for prior periods has been restated where applicable to conform to this presentation. Federal Express Corporation and Subsidiaries
1993 1992 1991 1990 1989 1988 1987 $7,808,043 $7,550,060 $7,688,296 $7,015,069 $5,166,967 $3,882,817 $3,178,308 377,173 22,967 252,126 387,355 414,787 379,452 364,743 203,576 (146,828) 40,942 218,423 298,332 302,328 311,885 109,809 (113,782) 5,898 115,764 166,451 187,716 166,952 $ 53,866 $ (113,782) $ 5,898 $ 115,764 $ 184,551 $ 187,716 $ (65,571) $ 2.01 $ (2.11) $ .11 $ 2.18 $ 3.18 $ 3.56 $ 3.21 -- -- -- -- -- -- (4.48) (1.03) -- -- -- .35 -- -- $ .98 $ (2.11) $ .11 $ 2.18 $ 3.53 $ 3.56 $ (1.27) 54,719 53,961 53,350 53,161 52,272 52,670 51,905 -- -- -- -- -- -- -- $3,476,268 $3,411,297 $3,624,026 $3,566,321 $3,431,814 $2,231,875 $1,861,432 5,793,064 5,463,186 5,672,461 5,675,073 5,293,422 3,008,549 2,499,511 1,882,279 1,797,844 1,826,781 2,148,142 2,138,940 838,730 744,914 1,671,381 1,579,722 1,668,620 1,649,187 1,493,524 1,330,679 1,078,920 1,710,561 1,472,642 1,310,890 1,234,174 1,059,882 877,543 704,392 5.8 5.7 5.6 5.4 5.4 5.3 5.1 $ 2.62 $ 2.90 $ 3.08 $ 3.13 $ 3.04 $ 3.10 $ 3.33 $ 15.30 $ 16.38 $ 17.33 $ 16.76 $ 16.28 $ 16.32 $ 16.97 2,050,033 2,258,303 2,650,204 3,148,290 4,019,353 -- -- $ 1.09 $ 1.22 $ 1.20 $ 1.13 $ 1.06 -- -- 255 254 255 255 255 257 254 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 4 8 9 9 -- -- 8 9 10 10 12 -- -- 8 4 1 -- -- -- -- 11 11 11 10 8 8 8 19 17 16 16 16 13 11 -- -- -- 6 6 -- -- 80 85 92 89 80 47 39 87 66 57 41 26 21 21 10 10 10 37 38 38 39 206 206 183 147 109 71 27 32 32 26 19 7 5 -- 28,100 30,400 32,800 31,000 28,900 21,000 18,700 84,104 84,162 81,711 75,102 58,136 48,556 41,047
Board of Directors Robert H. Allen(2) Private Investor and Managing Partner Challenge Investment Partners Investment firm Howard H. Baker, Jr.(1) Partner Baker, Donelson, Bearman & Caldwell Law firm Anthony J.A. Bryan(1) Senior Managing Director The Whatley Group L.L.C. Private investment and consulting firm Robert L. Cox(1) Partner Waring Cox Law firm Ralph D. DeNunzio(2) President Harbor Point Associates, Inc. Private investment and consulting firm Judith L. Estrin President and Chief Executive Officer Precept Software, Inc. Computer software company Philip Greer(1*) Senior Managing Principal Weiss, Peck & Greer, L.L.C. Diversified investment man- agement and securities firm J.R. Hyde, III (2) Chairman and Chief Executive Officer AutoZone, Inc. Auto parts retail chain Charles T. Manatt(2) Senior Partner Manatt, Phelps & Phillips Law firm George J. Mitchell(1) Special Counsel Verner, Liipfert, Bernhard, McPherson and Hand Law firm Jackson W. Smart, Jr.(2*) Chairman and Chief Executive Officer MSP Communications, Inc. Radio broadcasting company Frederick W. Smith Chairman, President and Chief Executive Officer Federal Express Corporation Dr. Joshua I. Smith(1) Chairman, President and Chief Executive Officer The MAXIMA Corporation Information and data processing firm Peter S. Willmott(1) Chairman and Chief Executive Officer Willmott Services, Inc. Retail and consulting firm (1) Audit Committee (2) Compensation Committee (*) Committee Chairman Senior Officers Federal Express Corporation and Subsidiaries Frederick W. Smith Chairman, President and Chief Executive Officer Alan B. Graf, Jr. Executive Vice President and Chief Financial Officer Kenneth R. Masterson Executive Vice President, General Counsel and Secretary Theodore L. Weise Executive Vice President Worldwide Operations David J. Bronczek Senior Vice President Europe, Middle East and Africa Michael L. Ducker Senior Vice President Asia and Pacific Leonard B. Feiler Senior Vice President Central Support Services T. Michael Glenn Senior Vice President Marketing, Customer Service and Corporate Communications Dennis H. Jones Senior Vice President and Chief Information Officer Joseph C. McCarty,III Senior Vice President Latin America and Caribbean Gilbert D. Mook Senior Vice President Air Operations James A. Perkins Senior Vice President and Chief Personnel Officer David F. Rebholz Senior Vice President Global Sales and Trade Services Tracy G. Schmidt Senior Vice President Air Ground Terminals and Transportation Mary Alice Taylor Senior Vice President United States and Canada Laurie A. Tucker Senior Vice President Logistics, Electronic Commerce and Catalog James S. Hudson Vice President, Controller and Chief Accounting Officer Corporate Information STOCK LISTING: The Company's common stock is listed on The New YorkStock Exchange under the ticker symbol FDX. STOCKHOLDERS: At July 15, 1996, there were 9,649 stockholders of record. MARKET INFORMATION: Following are high and low closing prices, by quarter, for Federal Express Corporation common stock in fiscal 1996 and 1995. No cash dividends have been declared.
Closing prices of common stock First Quarter Second Quarter Third Quarter Fourth Quarter FY1996 High $75-3/8 $86 82-5/8 82-1/2 Low 58-5/8 79-5/8 66-7/8 68-7/8 FY1995 High $80-3/4 70-3/4 65-3/4 69-5/8 Low 64 56-1/2 53-7/8 59-7/8
Corporate headquarters: 2005 Corporate Avenue,Memphis, Tennessee 38132, (901) 369-3600. Annual meeting: The annual meeting of stockholders will be held at the Crowne Plaza Memphis, 250 NorthMain Street, Memphis,Tennessee, on Tuesday, October 1, 1996, at 10:00 a.m., CDT. Inquiries: For financial information, contact Thomas L. Holland, Managing Director, Investor Relations and Corporate Contributions, Federal Express Corporation, Box 727, Dept. 1854, Memphis,Tennessee 38194, (901) 395-3478. For general information, contact Gregory M. Rossiter, Managing Director, Public Relations, Federal Express Corporation, Box 727, Dept. 1850, Memphis, Tennessee 38194, (901) 395-3460. Form 10-K: A copy of the Company's Annual Report on Form 10-K (excluding exhibits), filed with the Securities and Exchange Commission (SEC) is available free of charge.You will be mailed a copy upon request to Rebecca M. Halvorson, Manager, Investor Relations Department,Federal Express Corporation,Box 727, Dept. 1854, Memphis,Tennessee 38194, (901) 395-3478. Company documents filed electronically with the SEC can also be found on the Internet at the SEC's Web site (http://www.sec.gov). Auditors: Arthur Andersen LLP, Memphis,Tennessee. Registrar and transfer agent: First Chicago Trust Company of New York, Shareholder Services, P.O.Box 2500, Jersey City, New Jersey 07303-2500, (800) 446-2617 / Michael R. Phalen (312) 407-4885. Equal Employment Opportunity: Federal Express Corporation is firmly committed to afford Equal Employment Opportunity to all individuals regardless of age, sex, race, color, religion, national origin, citizenship, disability, or status as a Vietnam era or special disabled veteran. We are strongly bound to this commitment because adherence to Equal Employment Opportunity principles is the only acceptable way of life. We adhere to those principles not just because they're the law, but because it's the right thing to do. Service Marks: Federal Express,/R/ FedEx,/R/ the FedEx logo, The World On Time,/R/ 1-800-Go-FedEx,/R/ FedEx AsiaOne,/R/ FedEx International Priority,/R/ FedEx ShipSite,/R/ FedEx World Service Centers,/R/ FedEx First Overnight,/R/ FedEx International Express Freight,/R/ FedEx/R/ Air Charter, FedEx Standard Overnight/R/ and FedEx EXPRESSFREIGHTER/R/ ARE REGISTERED SERVICE MARKS OF FEDERAL EXPRESS CORPORATION REG. U.S. PAT. &TM. OFF. AND IN CERTAIN OTHER COUNTRIES. FEDEX INTERNETSHIP,SM FEDEX INTERNATIONAL FIRST,SM FEDEX SAMEDAYSM AND FEDEX INTERNATIONAL AIRPORT-TO-AIRPORTSM ARE SERVICE MARKS AND FEDEX SHIPTM IS A TRADEMARK OF FEDERAL EXPRESS CORPORATION. Portions of this Annual Report were printed on recycled paper. EX-21 15 LIST OF SUBSIDIARIES Exhibit 21 FEDERAL EXPRESS CORPORATION
JURISDICTION OF ORGANIZATION OR REGISTRATION STATUS ----------------- ------ I. Federal Express Aviation Services, Incorporated Delaware Active A. Federal Express Aviation Services International, Ltd. Delaware Active II. Federal Express Canada Ltd. Canada Active III. Federal Express International, Inc. Delaware Active A. Dencom Investments Limited Northern Ireland Inactive 1. Dencom Freight Holdings Limited Northern Ireland Inactive a. Federal Express (N.I.) Limited Northern Ireland Inactive b. Fedex (Ireland) Limited Ireland Inactive c. F.E.D.S. (Ireland) Limited Ireland Inactive B. Federal Express (Australia) PTY Ltd. Australia Active C. Federal Express Europe, Inc. Delaware Active 1. Federal Express Europe, Inc. & Co., V.O.F/S.N.C. Belgium Active 2. Federal Express European Services, Inc. Delaware Active 3. PIK Holdings Limited United Kingdom Active D. Federal Express Europlex, Inc. Delaware Liquidation E. Federal Express Holdings, S.A. Delaware Active 1. Federal Express (Antigua) Limited Antigua Active 2. Federal Express (Antilles Francaises) S.A.R.L. French West Indies Active 3. Federal Express (Barbados) Limited Barbados Active 4. Federal Express (Bermuda) Limited Bermuda Active 5. Federal Express Cayman Limited Cayman Islands Active
JURISDICTION OF ORGANIZATION OR REGISTRATION STATUS ----------------- -------- 6. Federal Express (Dominicana) S.A. Dominican Republic Active a. Inversiones Geminis, S.A. Dominican Republic Active b. Inversiones Piscis, S.A. Dominican Republic Active c. Inversiones Sagitario, S.A. Dominican Republic Active 7. Federal Express Entregas Rapidas, Ltd. Brazil Inactive 8. Federal Express (Grenada) Limited Grenada Active 9. Federal Express (Haiti) S.A. Haiti Inactive 10. Federal Express Holdings y Compania (Mexico) S.N.C. de C.V. Mexico Active 11. Federal Express (Jamaica) Limited Jamaica Active 12. Federal Express (St. Kitts) Limited St. Kitts Active 13. Federal Express (St. Lucia) Limited St. Lucia Active 14. Federal Express (St. Maarten) N.V. Netherland Antilles Active a. Federal Express (Aruba) N.V. Netherland Antilles Active 15. Federal Express (Turks & Caicos) Limited Turks & Caicos Islands Active 16. Federal Express Virgin Islands, Inc. U.S. Virgin Islands Active 17. FedEx (Bahamas) Limited Bahamas Active F. Federal Express (Hong Kong) Limited Hong Kong Liquidation G. Federal Express International (France) SNC France Active H. Federal Express International Y Compania Mexico Active S.N.C. de C.V. I. Federal Express Italy Inc. Delaware Inactive 1. Federal Express Italia SpA Italy Liquidation J. Federal Express (Japan) K.K. Japan Active
JURISDICTION OF ORGANIZATION OR REGISTRATION STATUS ---------------- ----------- K. Federal Express Limited United Kingdom Liquidation 1. Federal Express Finance P.L.C. United Kingdom Inactive 2. Federal Express International Limited United Kingdom Inactive 3. Federal Express Parcel Services Limited United Kingdom Inactive 4. Federal Express (U.K.) Limited United Kingdom Active a. Federal Express (U.K.) Pension Trustees Ltd. United Kingdom Active 5. Winchmore Developments Ltd. United Kingdom Inactive a. Concorde Advertising Limited United Kingdom Inactive L. Federal Express Luxembourg, Inc. Delaware Active M. Federal Express Pacific, Inc. Delaware Active 1. Federal Express Services (M) Sdn. Bhd. Malaysia Active 2. The Flying Tiger Line, Limited Hong Kong Inactive 3. Udara Express Courier Services Sdn. Bhd. Malaysia Active N. Federal Express (Singapore) PTE, LTD. Singapore Active O. Federal Express (Thailand) Limited Thailand Inactive P. Fedex (N. I.) Limited Northern Ireland Inactive IV. Federal Express Leasing Corporation Delaware Active V. Federal Express Logistics, Inc. Delaware Inactive VI. Federal Express Redevelopment Corporation Missouri Inactive VII. FEDEX Aeronautics Corporation Delaware Active VIII. Fedex Customs Brokerage Corporation Delaware Inactive IX. Fedex Foreign Sales Corporation U. S. Virgin Islands Active X. Fedex International Transmission Corporation Delaware Active
JURISDICTION OF ORGANIZATION OR REGISTRATION STATUS ------------------ -------- XI. Fedex Partners, Inc. Delaware Active XII. Flying Tigers Limited New Zealand Inactive XIII. The Flying Tiger Line (NZ) Limited New Zealand Inactive XIV. Tiger International Insurance Ltd. Cayman Islands Active XV. Tiger Trading Company Delaware Inactive
EX-23 16 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in Federal Express Corporation's previously filed Form S-8 Registration Statement Nos. 2-74000, 2-95720, 33-20138, 33-38041, 33-55055 and 333-03443 and Form S-3 Registration Statement No. 333-07691 of our report dated July 1, 1996, included (or incorporated by reference) in Federal Express Corporation's Form 10-K for the year ended May 31, 1996. /s/ ARTHUR ANDERSEN LLP -------------------------- ARTHUR ANDERSEN LLP Memphis, Tennessee August 2, 1996 EX-24 17 POWER OF ATTORNEY EXHIBIT 24 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1996, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 12 day of June, 1996. /s/ ROBERT H. ALLEN ------------------------------------------ Robert H. Allen STATE OF TEXAS COUNTY OF HARRIS I, Earlene L. Barbeau, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Robert H. Allen, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ EARLENE L. BARBEAU ------------------------------------------- Notary Public My Commission Expires: March 8, 1997 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1996, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 1 day of July, 1996. /s/ HOWARD H. BAKER, JR. ----------------------------------------- Howard H. Baker, Jr. STATE OF TENNESSEE COUNTY OF SCOTT I, Betty B. Lowe, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Howard H. Baker, Jr., personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ BETTY B. LOWE ------------------------------------------ Notary Public My Commission Expires: August 27, 1997 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1996, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 4th day of June, 1996. /s/ ROBERT L. COX ------------------------------------------ Robert L. Cox STATE OF TENNESSEE COUNTY OF SHELBY I, Lillian W. Powers, a Notary Public in and for said County, in the aforesaid state, do hereby certify that Robert L. Cox, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ LILLIAN W. POWERS ------------------------------------------ Notary Public My Commission Expires: 4-29-97 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1996, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 11 day of June, 1996. /s/ RALPH D. DENUNZIO --------------------------------------- Ralph D. Denunzio STATE OF NEW YORK COUNTY OF NEW YORK I, Pauline Kalahele, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Ralph D. Denunzio, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ PAULINE E.KALAHELE ----------------------------------------- Notary Public My Commission Expires: Feb. 28, 1998 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, her true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1996, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 2 day of July, 1996. /s/ JUDITH L. ESTRIN ------------------------------------------- Judith L. Estrin STATE OF CALIFORNIA COUNTY OF SAN FRANCISCO I, Katherine Poulter, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Judith L. Estrin, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that she signed and delivered the said instrument as her free and voluntary act, for the uses and purposes therein set forth. /s/ KATHERINE POULTER ------------------------------------------ Notary Public My Commission Expires: Feb. 24, 1998 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1996, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of June, 1996. /s/ PHILIP GREER ----------------------------------------------- Philip Greer STATE OF NEW YORK COUNTY OF NEW YORK I, Nancy Martinek, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Philip Greer, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ NANCY MARTINEK ----------------------------------------------- Notary Public My Commission Expires: 9/30/97 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware Corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1996, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 21 day of June, 1996. /s/ J.R. HYDE, III ------------------------------------------- J. R. Hyde, III STATE OF TENNESSEE COUNTY OF SHELBY I, Nancy C. Phillips, a Notary Public in and for said County, in the aforesaid State, do hereby certify that J. R. Hyde, III, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ NANCY C.PHILLIPS ------------------------------------------- Notary Public My Commission Expires: Jan. 12, 2000 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware Corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1996, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 8 day of July, 1996. /s/ CHARLES T. MANATT ------------------------------------------ Charles T. Manatt DISTRICT OF COLUMBIA I, Bernida D. Evans, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Charles T. Manatt, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ BERNIDA D.EVANS ------------------------------------------- Notary Public My Commission Expires: 11/30/99 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1996, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this ________ day of ____________, 1996. _____________________________________ GEORGE J. MITCHELL STATE OF ___________ CITY OF ____________ I,________________________________, a Notary Public in and for said County, in the aforesaid State, do hereby certify that George J. Mitchell, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. _____________________________________ Notary Public My Commission Expires: ______________________ POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1996, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of August, 1996. /s/ George J. Mitchell ------------------------------------------- GEORGE J. MITCHELL DISTRICT OF COLUMBIA I, Ione M. Hartl, a Notary Public in and for said County, in the aforesaid State, do hereby certify that George J. Mitchell, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ Ione M. Hartl ------------------------------------------- Notary Public My Commission Expires: 8/14/00 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1996, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 27th day of June, 1996. /s/ JOSHUA I. SMITH ------------------------------------------- Joshua I. Smith STATE OF MARYLAND COUNTY OF PRINCE GEORGES I, Bertha A. Davies, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Joshua I. Smith, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ BERTHA A. DAVIES ------------------------------------------- Notary Public My Commission Expires: 5-1-00 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1996, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 17th day of June, 1996. /s/ PETER S. WILLMOTT -------------------------------------------- Peter S. Willmott STATE OF ILLINOIS COUNTY OF COOK I, Joan L. Noble, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Peter S. Willmott, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ JOAN L. NOBLE ------------------------------------------ Notary Public My Commission Expires: 03/05/99 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, the principal financial officer of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such officer, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1996, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 6 day of June, 1996. /s/ ALAN B. GRAF, JR. ------------------------------------------- Alan B. Graf, Jr. STATE OF TENNESSEE COUNTY OF SHELBY I, Edna M. Kennon, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Alan B. Graf, Jr., personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ EDNA M. KENNON ------------------------------------------- Notary Public My Commission Expires: 9-14-99 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, the principal executive officer and a director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such officer and Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1996, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 12 day of June, 1996. /s/ FREDERICK W. SMITH ----------------------------------------- Frederick W. Smith STATE OF TENNESSEE COUNTY OF SHELBY I, June Y. Fitzgerald, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Frederick W. Smith, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ JUNE Y. FITZGERALD ------------------------------------------ Notary Public My Commission Expires: Jan. 26, 1999 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, the principal accounting officer of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith and Alan B. Graf, Jr., and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in- fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such officer, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1996, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 28 day of June, 1996. /S/ JAMES S. HUDSON ------------------------------------------ James S. Hudson STATE OF TENNESSEE COUNTY OF SHELBY I, Joyce J. Jones, a Notary Public in and for said County, in the aforesaid State, do hereby certify that James S. Hudson, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ JOYCE J. JONES ------------------------------------------- Notary Public My Commission Expires: August 12, 1998 EX-27 18 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED BALANCE SHEETS ON PAGES ___ OF THE COMPANY'S FORM 10-K FOR THE YEAR ENDED MAY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS MAY-31-1996 JUN-01-1995 MAY-31-1996 93,419 0 1,302,408 30,809 222,110 1,728,261 8,678,517 4,561,916 6,698,971 1,618,397 1,325,277 0 0 5,689 2,570,450 6,698,971 0 10,273,619 0 9,649,795 0 0 95,599 539,959 232,182 0 0 0 0 307,777 5.39 5.39
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