-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, hv7/QGQzj3fGywKXudn+h0ovC7tOKKs9ShqaMp5sYEyMOA29fWjYvbpxuUonvVtL 2GaUtVjex0isAUrpWr3zAA== 0000950144-95-002131.txt : 19950807 0000950144-95-002131.hdr.sgml : 19950807 ACCESSION NUMBER: 0000950144-95-002131 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19950531 FILED AS OF DATE: 19950804 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: 95559121 BUSINESS ADDRESS: STREET 1: 2005 CORPORATE AVENUE CITY: MEMPHIS STATE: TN ZIP: 38132 BUSINESS PHONE: 9013953382 MAIL ADDRESS: STREET 1: 2005 CORPORATE AVENUE CITY: MEMPHIS STATE: TN ZIP: 38132 10-K 1 FEDERAL EXPRESS CORPORATION - FORM 10-K 1 ================================================================================ 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) OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) FOR THE FISCAL YEAR ENDED MAY 31, 1995 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: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED Common Stock, Par Value New York Stock Exchange $.10 per share 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 (Section 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, 1995, 56,181,384 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 closing price of such stock on the New York Stock Exchange) was approximately $3,453,894,270 DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Stockholders for the fiscal year ended May 31, 1995 are incorporated by reference into Parts II and IV. Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held September 25, 1995 are incorporated by reference into Part III. ================================================================================ 2 TABLE OF CONTENTS
PAGE ---- PART I ITEM 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ITEM 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ITEM 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 ITEM 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . 12 Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . 12 PART II ITEM 5. Market for the Registrant's Common Stock and Related Stockholder Matters . . . . . . . 14 ITEM 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 ITEM 7. Management's Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . 14 ITEM 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . 15 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . 15 PART III ITEM 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . 15 ITEM 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ITEM 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . 15 ITEM 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . 15 PART IV ITEM 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K . . . . . . . . . . . . 16 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 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
3 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 1995, 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 Company established a new regional sorting facility in the Philippines, reached an agreement, pending governmental approval, to acquire route authorities to serve the People's Republic of China, broke ground on another regional sorting hub in Texas, and unveiled a new international economy service which enhances the Company's ability to serve Canadian customers. 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. FEDEX SERVICES The Company offers three U.S. domestic overnight delivery services: FedEx Priority Overnight, FedEx Standard Overnight and FedEx 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, FedEx Mini-Centers, FedEx Drop Boxes and FedEx authorized shipping centers strategically located throughout the country. 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 and FedEx 2Day Freight. 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 1500 pounds. Shipments exceeding 1500 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. 4 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. On June 1, 1995, the Company introduced FedEx SameDay 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. In addition to the services discussed above, the Company offers various international document and package delivery services and international freight services. FedEx International Priority ("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 Freight is an expansion of IP service and is a time-definite service for international shipments exceeding 150 pounds. Customs clearance is included as part of this service and customers are permitted to designate their own customs broker for clearance where not 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 is an overnight service for packages (up to 70 pounds) and documents shipped from New York City to Amsterdam, Brussels, 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 and from Washington, D.C. to London and Paris. 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 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 Distribution is a time-definite service for bulk shipments destined to several different recipients in one country. Once the bulk shipment arrives in the destination country, 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 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 three to six days, while receipt of material sent by FedEx International MailService for standard service takes four to ten days. FedEx International Economy, a deferred, customs-cleared service for shipments of unlimited weight (except individual boxes within the shipment may not exceed 150 pounds) was introduced in 1995. 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. 2 5 FedEx International Express Freight, 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 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. 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 1995, revenues from charter operations accounted for approximately 1.2% of the Company's total revenues and approximately 1.3% and 1.4% of total revenues during fiscal 1994 and 1993, respectively. FEDEX LOGISTICS SERVICES FedEx Logistics Services ("FLS") 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. FLS focuses on markets where delivering high-speed, time-definite, information-intensive solutions provide significant customer value. FLS services include PartsBank, an inventory management and warehouse service with access to the Company's global transportation network. PartsBank 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. Other FLS services include EMerge and Integrated Repair and Return. 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. Integrated 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. FLS also offers an extensive array of services for catalogers and direct marketers, including customized promotional strategies, telemarketing training, operational support and international mailing services. FLS has offices in Memphis and other key U.S. cities, the United Kingdom, Belgium, France, the Netherlands, Singapore and Hong Kong to serve its more than 2,000 customers. 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 3 6 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 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):
1995 1994 1993 ---- ---- ---- FedEx Priority Overnight $3,908,837 $3,737,022 $3,459,374 FedEx Standard Overnight 1,374,440 1,178,628 1,022,319 FedEx 2Day 1,284,297 1,110,543 985,068 Domestic freight services 132,672 115,365 88,693 International priority services 1,679,830 1,338,795 1,116,589 International freight services 580,315 504,738 570,154 Charter 115,062 113,446 112,416 FedEx Logistics Services and other* 316,620 380,919 453,430 ---------- ---------- ---------- Total $9,392,073 $8,479,456 $7,808,043 ========== ========== ==========
*Includes revenues generated by the specialized services summarized above under "FedEx Logistics Services." Also, includes revenues from non-U.S. intra-country operations, Warren Transport, Inc. (sold September 1993) and aircraft noise-reduction kit sales. Certain service fee revenues previously included in this caption are now classified as package-related revenues, which have been restated for prior years where applicable. 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. 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, 501 aircraft, approximately 35,900 vehicles, sorting facilities, FedEx World Service Centers, FedEx Mini-Centers, FedEx Drop Boxes 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 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 4 7 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. Manned or unmanned FedEx Mini-Centers and 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 5,000 new drop-off sites in retail stores. In international regions where low package traffic makes our 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 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 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. In 1995, the Company began offering 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. FUEL SUPPLIES AND COSTS During 1995 the Company purchased aviation fuel from various suppliers under contracts which vary in length from three to twenty-four months and which provide for specific amounts of fuel to be delivered. Certain of these contracts extend through May 1997. Approximately 65% of the fuel represented by these contracts is prepriced; i.e., preset or "price not to exceed." The remainder 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, as well as provide fuel-cost stability for the term of the contracts. 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 5 8 May 31, 1995, the Company had contracts with various financial institutions covering a total notional volume of 97.4 million gallons (approximately 16% of the Company's annual jet fuel consumption), with some contracts extending through August 1996. As of May 31, 1995, the Company had neither received nor made any payments related to these 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 ----------- -------------- ------------------- 1995 $394,225 4.5% 1994 374,561 4.7 1993 403,597 5.4 1992 414,481 5.5 1991 554,637 7.5
Approximately 40% of the Company's requirement for vehicle fuel is purchased in bulk under fixed-price agreements. The remainder of the Company's requirement is satisfied by retail purchases, discounted from 1% to 3%. The percentage of total operating expense for vehicle fuel purchases for each of the last five fiscal years has not exceeded 1.5%. COMPETITION The overnight express market is highly competitive and sensitive to both price and service. Competitors in this market include passenger airlines offering package express services, regional express delivery concerns, airfreight forwarders and other express package concerns, principally United Parcel Service and Airborne Express. 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 airfreight 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 6 9 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. Ground The ground transportation performed by the Company is integral to its air transportation services and is exempt from regulation by the Interstate Commerce Commission ("ICC") under the Motor Carrier Act of 1980. In addition, the Bureau of Motor Carrier Safety of the Federal Highway Administration of the DOT regulates the safety aspects of the Company's motor vehicle operations. The Company also holds nationwide motor carrier common and contract carrier authorities issued by the ICC which authorize the express carriage of general commodities in interstate commerce between points in the United States. As a result of the enactment of the Federal Aviation Administration Authorization Act in July 1994, which abrogated the authority of states to regulate the rates, routes or prices of intermodal all-cargo air carriers and most motor carriers, states may now exercise jurisdiction over safety and insurance only. The Company has applied for registration for these limited purposes in those states that require registration. Deregulation of intrastate trucking will provide the Company the flexibility to maximize the integration of its transportation system. 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. The costs of complying with these regulations cannot be accurately determined because of the evolving nature of the regulations, but in any case are not expected to be material. 7 10 EMPLOYEES At June 30, 1995, the Company employed approximately 69,000 permanent full-time and 38,000 permanent part-time employees, of which approximately 21% are employed in Memphis. Employees of the Company's international branches and subsidiaries in the aggregate comprise approximately 10% 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 on certain interim issues on August 26, 1993 in preparation for a comprehensive collective bargaining agreement. In March 1994, the Company and ALPA entered into two agreements, one creating a dispute resolution system for certain disciplinary matters, the other permitting ALPA crewmembers to be excused from flying to perform ALPA related duties in exchange for ALPA's agreement to reimburse the Company for the loss of those crewmembers. Negotiations toward a comprehensive collective bargaining agreement began in May 1994. 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. While negotiations have continued, the core financial issues remain unresolved. In July 1995, a union representation election was held involving the Company's Global Operations Control Specialists. The Transport Workers Union received less than half of the votes needed for certification as the representative of this group, and the NMB dismissed the union's application. 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, 1995, 1994 and 1993, refer to Note 10 of Notes to Consolidated Financial Statements contained in the Company's 1995 Annual Report to Stockholders, which Note is incorporated herein by reference. 8 11 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 Mini-Centers, FedEx Drop Boxes and data processing and telecommunications equipment. AIRCRAFT AND VEHICLES The Company's aircraft fleet at June 30, 1995 consisted of the following:
MAXIMUM GROSS STRUCTURAL PAYLOAD DESCRIPTION NUMBER (POUNDS PER AIRCRAFT)** ----------- ------ ---------------------- Boeing B747-200 5* 250,000 McDonnell Douglas MD11 13* 198,500 McDonnell Douglas DC10-30 22* 172,000 McDonnell Douglas DC10-10 13* 142,000 Airbus A300-600 9* 117,700 Airbus A310-200 17* 74,200 Boeing B727-200 90* 59,500 Boeing B727-100 68* 38,000 Fokker F27-500 24 14,000 Fokker F27-600 8 12,500 Cessna 208B 222 3,500 Cessna 208A 10 3,000 --- Total 501 - -------------------------
*Five B747-200, 13 MD11, 17 DC10-30, four DC10-10, nine A300, 11 A310, 13 B727-200 and five 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 DC-10s. The DC-10s 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 30 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. At June 30, 1995, the Company operated approximately 35,900 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 June 30, 1995, the Company was committed under various contracts to purchase 16 Airbus A300, two Airbus A310, 12 McDonnell Douglas MD11 and 32 Cessna 208B aircraft to be delivered through 2000. The Company also had options to purchase up to 44 additional A300 aircraft for delivery beginning in 1999. In 9 12 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 June 30, 1995, 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 2014 Airport 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, The 9 166,000 16,000 Subic Bay Metropolitan 2002 Philippines++ 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. 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, hangars and 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 1997. 10 13 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 14 and leases 795 facilities for city station operations in the United States. In addition, 177 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 June 30, 1995, the Company leased space for 425 FedEx World Service Centers in the United States and had placed approximately 31,900 Drop Boxes. The Company also owns stand-alone FedEx Mini-Centers located on leaseholds in parking lots adjacent to office buildings, shopping centers and office parks of which 254 were operating at June 30, 1995. Internationally, the Company leases space for 48 FedEx World Service Centers and has approximately 777 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 The Internal Revenue Service ("IRS") issued an Examination Report on October 31, 1991 asserting the Company underpaid federal excise taxes for the calendar quarters ended December 31, 1983 through March 31, 1987. The Examination Report contains a primary position and a mutually exclusive alternative position asserting the Company underpaid federal excise taxes by $54,000,000 and $26,000,000, respectively. Disagreeing with essentially all of the proposed adjustments contained in the Examination Report, the Company filed a Protest on March 16, 1992, which set forth the Company's defenses to both IRS positions and a claim for refund of overpaid federal excise taxes of $23,500,000. On March 19, 1993, the IRS issued another Examination Report to the Company asserting the Company underpaid federal excise taxes by $105,000,000 for the calendar quarters ended June 30, 1987 through March 31, 1991. On June 17, 1993, the Company filed a Protest contesting the March 19 Examination Report which set forth the Company's defenses to the IRS position and a claim for refund of overpaid federal excise taxes of $46,500,000. Interest would be payable on the amount of any refunds by the IRS to the Company or underpaid federal excise taxes payable by the Company to the IRS at statutorily determined rates. The interest rates payable by the Company for underpaid taxes are higher than the rates payable by the IRS on refund amounts. The Company is vigorously pursuing its Protests administratively with the IRS Appeals Division. If it is unsuccessful with the IRS Appeals Division, the Company intends to pursue its position in court. Pending resolution of this matter, the IRS can be expected to take positions similar to those taken in their Examination Reports for periods after March 31, 1991. Given the inherent uncertainties in the excise tax matter, management is currently unable to predict with certainty the outcome of this matter or the ultimate effect, if any, its resolution would have on the Company's financial condition or results of operations. No amounts have been reserved for this contingency. 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 11 14 .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, 1995. 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 50 Chairman, President and Chief Executive Officer since April 1983; Chief 1971 Executive Officer since April 1977; Chairman since February 1975; and President from June 1971 to February 1975. Founder of the Company. WILLIAM J. RAZZOUK 47 Executive Vice President - Worldwide Customer Operations since June 1983 1993; Senior Vice President - Sales and Customer Service from October 1991 to June 1993; Senior Vice President - Sales and Customer Information from September 1990 to October 1991; Vice President - U.S. Sales from 1988 to September 1990; Vice President - Field Sales from October 1986 to 1988; and Vice President - Electronic Product Sales from August 1983 to October 1986. DAVID J. BRONCZEK 41 Senior Vice President - Europe, Middle East and Africa since June 1995; 1987 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. T. MICHAEL GLENN 39 Senior Vice President - Marketing, Customer Service and Corporate 1985 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.
12 15 ALAN B. GRAF, JR. 41 Senior Vice President and Chief Financial Officer since December 1991; 1987 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. DENNIS H. JONES 43 Senior Vice President and Chief Information Officer since December 1991; 1986 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. KENNETH R. MASTERSON 51 Senior Vice President and General Counsel since February 1981; Secretary 1980 since September 1993; and Vice President - Legal from January 1980 to February 1981. JOSEPH C. MCCARTY, III 50 Senior Vice President - Asia Pacific since June 1995; Senior Vice 1983 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. JAMES A. MCKINNEY 50 Senior Vice President, President FedEx Logistics Services since December 1989 1993; Vice President - Business Logistics Services - North America from October 1992 to December 1993; Vice President - Information Systems from July 1992 to October 1992; Vice President - Operations - FEDEX Aeronautics Corporation from January 1992 to July 1992; Vice President - Flight Operations from June 1989 to January 1992; and various managerial positions from 1984 to 1989. GILBERT D. MOOK 52 Senior Vice President - Central Support Services since November 1994; 1985 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 51 Senior Vice President and Chief Personnel Officer since June 1979 and 1979 various personnel managerial positions from 1974 to 1979. DAVID F. REBHOLZ 42 Senior Vice President - Global Sales and Trade Services since June 1993; 1988 Vice President of the Central Region for the Americas and Caribbean from October 1991 to June 1993; Vice President of 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 38 Senior Vice President - Air Ground Terminals and Transportation since 1990 July 1994; Vice President - Corporate Financial Planning from January 1990 to July 1994; and various management positions in finance from 1980 to 1990.
13 16 MARY ALICE TAYLOR 45 Senior Vice President - Americas and Caribbean since October 1994; 1985 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. THEODORE L. WEISE 51 Senior Vice President - Air Operations since August 1991; Senior Vice 1977 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. JAMES S. HUDSON 46 Vice President, Controller and Chief Accounting Officer since December 1992 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. PART II Information for Items 5 through 8 of this Report appears in the Company's 1995 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 1995 Annual Report to Stockholders, on page 48 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 . . . . . . . . . . . . . . . . . . . . . . 44 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . 18
14 17 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . 25 Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . 28 Consolidated Statements of Changes in Common Stockholders' Investment . . . . . . . . . . . . . . . . . . . 29 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . 30 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . Not 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," "Transactions with Management and Others" and "Compensation of Directors" on pages 1 through 6 and 13 through 14 of the Definitive Proxy Statement for the Company's 1995 Annual Meeting of Stockholders which will be held September 25, 1995 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 Filings" on page 18 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 1995 Annual Meeting of Stockholders to be held on September 25, 1995, as indicated in the following table and is incorporated herein by reference.
PAGE IN PROXY STATEMENT ------------- ITEM 11. EXECUTIVE COMPENSATION Compensation Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 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 . . . . . . . . . . . . . . . . . . . . 13 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K (A) 1. FINANCIAL STATEMENTS
15 18 The consolidated financial statements of the Company, together with the report thereon of Arthur Andersen LLP, dated June 29, 1995, are presented on pages 25 through 43 of the Company's 1995 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 1995 Annual Report to Stockholders is not to be deemed as filed as part of this Report.
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 1995 Annual Report to Stockholders and incorporated herein by reference. 3. EXHIBITS The documents attached hereto as Exhibits 3.1, 3.2, 4.1 through 4.24, 10.1 through 10.79, 11.1, 12.1, 13.1, 21.1, 23.1 and 24.1 are being filed in connection with this Report and incorporated herein by reference. The Exhibit Index on pages E-1 through E-10 is hereby 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 no Current Reports on Form 8-K. 16 19 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 (Principal Executive Officer) /s/ WILLIAM J. RAZZOUK * Executive Vice President ------------------------------ Worldwide Customer William J. Razzouk Operations /s/ ALAN B. GRAF, JR.* Senior Vice President and ------------------------------ Chief Financial Officer Alan B. Graf, Jr. (Principal Financial Officer) /s/ JAMES S. HUDSON Vice President and Controller August 4, 1995 ------------------------------ (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/ ANTHONY J.A. BRYAN * Director ----------------------------- Anthony J.A. Bryan /s/ ROBERT L. COX * Director ----------------------------- Robert L. Cox /s/ RALPH D. DENUNZIO * Director ----------------------------- Ralph D. DeNunzio
17 20
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 4, 1995 ----------------------- James S. Hudson Attorney-in-Fact
18 21 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 1995 Annual Report to Stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated June 29, 1995. 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, June 29, 1995. 19 22 S-2 SCHEDULE II FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED MAY 31, 1995, 1994 AND 1993 (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 ----------------- 1995. . . . . . . . . . . . $33,933 $36,334 - $39,094 $31,173 ======= ======= ========= ======= ======= 1994. . . . . . . . . . . . $31,308 $45,763 - $43,138 $33,933 ======= ======= ========= ======= ======= 1993. . . . . . . . . . . . $32,074 $33,552 - $34,318 $31,308 ======= ======= ========= ======= =======
(A) Accounts written off net of recoveries. 20 23 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 1995 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 1993 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 NationsBank of Tennessee, National Association ("NationsBank"), as Trustee, relating to Registrant's 10% Senior Notes due April 15, 1999. (Filed as Exhibit 10.36 to Registrant's 1988 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 NationsBank, 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 NationsBank 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 NationsBank, relating to Registrant's 9 3/4% Senior Notes due May 15, 1996. (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. 1 dated as of May 22, 1989 between Registrant and NationsBank and form of note relating to Registrant's 9 3/4% Senior Notes due May 15, 1996. (Filed as Exhibit 4 to Registrant's Current Report on Form 8-K dated May 24, 1989, Commission File No. 1-7806, and incorporated herein by reference.) 4.6 Supplemental Indenture No. 2 dated as of August 11, 1989 between Registrant and NationsBank, relating to Registrant's 9 5/8% Sinking Fund Debentures due October 15, 2019. (Filed as Exhibit 4.2 to Registrant's Registration Statement No. 33-30415 on Form S-3 and incorporated herein by reference.) 4.7 Supplemental Indenture No. 3 dated as of October 15, 1989 between Registrant and NationsBank, 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.) 4.8 Supplemental Indenture No. 5 dated as of August 15, 1990 between Registrant and NationsBank, relating to Registrant's Medium-Term Notes, Series A, the last of which is due November 20, 1995. (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.) 4.9 Form of Fixed Rate Medium-Term Note, Series A, the last of which is due November 20, 1995. (Filed as Exhibit 4(a) to Registrant's Current Report on Form 8-K dated August 28, 1990, Commission File No. 1-7806, and incorporated herein by reference.)
E-1 24
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------ ---------------------- 4.10 Form of Floating Rate Medium-Term Note, Series A, the last of which is due November 20, 1995. (Filed as Exhibit 4(b) to Registrant's Current Report on Form 8-K dated August 28, 1990, Commission File No. 1-7806, and incorporated herein by reference.) 4.11 Indenture dated May 15, 1989 including Supplemental Indenture Nos. 1, 2, 3 and 5 dated as described above, between Registrant and NationsBank, 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.) 4.12 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.) 4.13 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.) 4.14 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.) 4.15 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.) 4.16 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.) 4.17 Pass Through Trust Agreement dated as of February 1, 1993 between Registrant and NationsBank of South Carolina, National Association, as Pass Through Trustee, relating to Registrant's 1993 Pass Through Certificates, Series A1 and A2, Series B1 and B2 and Series C1 and C2. (Filed as Exhibit 4.19 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 4.18 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.) 4.19 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.) 4.20 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 25
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------ ---------------------- 4.21 Pass Through Trust Agreement dated as of March 1, 1994 between Registrant and NationsBank of South Carolina, National Association, 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.) 4.22 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.) 4.23 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). 4.24 Loan Agreement dated as of April 1, 1995 between Registrant and The Chase Manhattan Bank, National Association, 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. 10.2 Second Supplemental Indenture dated as of May 1, 1982 between the Authority and NationsBank relating to 8.30% Special Facilities Revenue Bonds, Series 1982B due September 1, 2012. (Refiled as Exhibit 10.2 to Registrant's 1993 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 NationsBank. (Refiled as Exhibit 10.3 to Registrant's 1993 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 NationsBank, relating to 7 7/8% Special Facilities Revenue Bonds, Series 1984 due September 1, 2009. 10.5 Fifth Supplemental Indenture dated as of July 1, 1992 between the Authority and NationsBank, relating to 6 3/4% Special Facilities Revenue Bonds, Refunding Series 1992 due September 1, 2012. (Filed as Exhibit 10.5 to Registrant's 1992 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 between Registrant and NationsBank. (Refiled as Exhibit 10.5 to Registrant's 1990 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 between NationsBank and Registrant relating to Special Facilities Revenue Bonds, Series 1982B. (Refiled as Exhibit 10.7 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.)
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------ ---------------------- 10.8 Reaffirmation of Guaranty dated as of December 1, 1984 between NationsBank and Registrant relating to Special Facilities Revenue Bonds, Series 1984. (Refiled as Exhibit 10.10 to Registrant's 1993 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 between NationsBank and Registrant relating to Special Facilities Revenue Bonds, Refunding Series 1992. (Filed as Exhibit 10.11 to Registrant's 1992 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 1990 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 1992 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 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 1993 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 1993 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 1993 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 1993 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 1993 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 1993 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 1993 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 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.)
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------ ---------------------- 10.20 Tenth Supplemental Lease Agreement dated October 1, 1991 between the Authority and Registrant. (Filed as Exhibit 28.29 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.21 Twelfth Supplemental Lease Agreement dated July 1, 1993 between the Authority and Registrant. (Filed as Exhibit 10.23 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.22 Special Facility Lease Agreement between the Authority and Registrant dated as of August 1, 1979. (Refiled as Exhibit 10.15 to Registrant's 1990 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.23 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 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.24 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 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.25 Third Special Facility Supplemental Lease Agreement dated as of December 1, 1984 between the Authority and Registrant. 10.26 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 1992 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.27 Special Facility Lease Agreement between the Authority and Registrant dated as of July 1, 1993. (Filed as Exhibit 10.29 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.28 Special Facility Ground Lease Agreement between the Authority and Registrant dated as of July 1, 1993. (Filed as Exhibit 10.30 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.29 Indenture between the Authority and NationsBank, as Trustee, dated as of July 1, 1993 relating to 6.20% Special Facility Revenue Bonds, Series 1993, due July 1, 2014. (Filed as Exhibit 10.31 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.30 Guaranty dated as of July 1, 1993 between Registrant and NationsBank, relating to 6.20% Special Facility Revenue Bonds, Series 1993. (Filed as Exhibit 10.32 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.31 Ground Lease dated as of February 27, 1979 between the City of Los Angeles and The Flying Tiger Line Inc. ("FTL") covering acreage at the Los Angeles International Airport. (Filed as Exhibit 28.1 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.)
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------ ---------------------- 10.32 First Amendment dated September 18, 1979, to Ground Lease, dated February 27, 1979, between the City of Los Angeles and FTL covering acreage at the Los Angeles International Airport. (Filed as Exhibit 28.2 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.33 Second Amendment dated March 9, 1983 to Ground Lease, dated February 27, 1979, between the City of Los Angeles and FTL covering acreage at the Los Angeles International Airport. (Filed as Exhibit 28.3 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.34 Interim Exchange Agreement dated as of September 11, 1990 between the City of Los Angeles and Registrant relating to the Los Angeles International Airport. (Filed as Exhibit 28.4 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.35 Lease Agreement dated as of May 7, 1985 between the City of Oakland and Registrant. (Filed as Exhibit 28.5 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.36 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 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.37 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 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.38 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 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.39 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 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.40 Amendment dated August 1, 1989 to Lease Agreement dated May 7, 1985 between the City of Oakland and Registrant. 10.41 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 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.42 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 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.)
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------ ---------------------- 10.43 Supplement No. 1 dated May 19, 1989 to Development Agreement between the State of Alaska, Department of Transportation and Public Facilities and Registrant. (Filed as Exhibit 28.12 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.44 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 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.45 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 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.46 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 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.47 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 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.48 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 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.49 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 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.50 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 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.51 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. 10.52 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. 10.53 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 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.54 Cargo Building Site Lease dated September 23, 1987 between the City of Chicago and FTL. (Filed as Exhibit 28.21 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.)
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------ ---------------------- 10.55 Amended and Restated Land Lease Agreement dated August 1993 between Registrant and the Indianapolis Airport Authority. (Filed as Exhibit 10.52 to Registrant's 1994 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.56 Indenture between the City of Indianapolis, Indiana and National Bank of Detroit, as Trustee, dated as of September 1, 1993 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 1994 First Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.57 Loan Agreement between the City of Indianapolis and Registrant. (Filed as Exhibit 10.2 to Registrant's 1994 First Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.58 Form of Promissory Note to the City of Indianapolis. (Filed as Exhibit 10.3 to Registrant's 1994 First Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.59 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 1995 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.60 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 1995 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.61 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 1995 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.62 Lease Agreement dated October 9, 1994 between the Registrant and Subic Bay Metropolitan Authority. 10.63 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 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.64 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.) 10.65 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.) 10.66 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.)
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------ ---------------------- 10.67 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 1990 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.68 1993 Stock Incentive Plan and Form of Stock Option Agreement pursuant to 1993 Stock Incentive Plan. (1993 Stock Incentive Plan was filed as Exhibit A to Registrant's 1993 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 1994 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.69 Amendment to Registrant's 1980, 1983, 1984, 1987 and 1989 Stock Incentive Plans. (Filed as Exhibit 10.27 to Registrant's 1990 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.70 Amendment to Registrant's 1983, 1984, 1987, 1989 and 1993 Stock Incentive Plans. (Filed as Exhibit 10.63 to Registrant's 1994 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.71 1986 Restricted Stock Plan and Form of Restricted Stock Agreement pursuant to 1986 Restricted Stock Plan. (Filed as Exhibit 10.28 to Registrant's 1990 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.72 Registrant's Retirement Parity Pension Plan. (Filed as Exhibit 10.67 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.73 First Amendment to Registrant's Retirement Parity Pension Plan. (Filed as Exhibit 10.1 to Registrant's 1995 First Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.74 Management Performance Bonus Plan. (Description of the performance bonus plan contained in the Definitive Proxy Statement for Registrant's 1995 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.) 10.75 Registrant's Retirement Plan for Outside Directors. (Filed as Exhibit 10.30 to Registrant's 1990 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.76 Long-term Performance Bonus Plans. (Description of the long-term performance bonus plans contained in the Definitive Proxy Statement for Registrant's 1995 Annual Meeting of Stockholders, under the heading "Long-term Incentive Plans - Awards in Last Fiscal Year" is incorporated herein by reference.)
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------ ---------------------- 10.77 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. 10.78 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 1991 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.79 Sales Agreement dated April 7, 1995 between Registrant and American Airlines, Inc. for the purchase of MD11 aircraft. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. 11.1 Statement re Computation of Earnings Per Share. 12.1 Statement re Computation of Ratio of Earnings to Fixed Charges. 13.1 Registrant's Annual Report to Stockholders for the fiscal year ended May 31, 1995. 21.1 Subsidiaries of Registrant. 23.1 Consent of Independent Public Accountants. 24.1 Powers of Attorney. 27.1 Financial Data Schedule (for SEC use only).
E-10 EX-4.24 2 LOAN AGREEMENT DATED 4/1/95 1 EXHIBIT 4.24 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. ************************************************************ FEDERAL EXPRESS CORPORATION _____________________________ LOAN AGREEMENT Dated as of April 1, 1995 ______________________________ THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Agent ************************************************************ 2 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, Loans and Equipment Purchase Certificates . . . . . . . . . . . . . . . . . 5 2.01 Loans and Equipment Purchase Certificates . . . . . 5 2.02 Borrowings . . . . . . . . . . . . . . . . . . . . 6 2.03 Changes of Commitments and Maximum Exposures . . . 6 2.04 Fees . . . . . . . . . . . . . . . . . . . . . . . 7 2.05 Lending Offices . . . . . . . . . . . . . . . . . . 8 2.06 Several Obligations; Remedies Independent . . . . . 8 2.07 Pro Rata Treatment . . . . . . . . . . . . . . . . 9 2.08 Certain Notices . . . . . . . . . . . . . . . . . . 9 2.09 Maximum Amounts . . . . . . . . . . . . . . . . . . 9 2.10 Delayed Delivery . . . . . . . . . . . . . . . . . 10 2.11 Sharing of Payments, Etc. . . . . . . . . . . . . . 12 2.12 Additional Costs . . . . . . . . . . . . . . . . . 13 2.13 Limitation on Types of Loans . . . . . . . . . . . 15 2.14 Illegality . . . . . . . . . . . . . . . . . . . . 16 2.15 Treatment of Affected Loans . . . . . . . . . . . . 16 Section 3. Conditions Precedent . . . . . . . . . . . . . . 17 Section 4. Representations and Warranties. . . . . . . . . . 24 4.01 Corporate Existence . . . . . . . . . . . . . . . . 24 4.02 Certification . . . . . . . . . . . . . . . . . . . 24 4.03 Permits . . . . . . . . . . . . . . . . . . . . . . 24 4.04 Recordings and Filings . . . . . . . . . . . . . . 24 4.05 Authorization . . . . . . . . . . . . . . . . . . . 25 4.06 Governmental Approvals . . . . . . . . . . . . . . 25 4.07 Enforceability . . . . . . . . . . . . . . . . . . 25 4.08 No Conflicts . . . . . . . . . . . . . . . . . . . 25 4.09 Litigation . . . . . . . . . . . . . . . . . . . . 25 4.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . 26 4.11 Financial Statements . . . . . . . . . . . . . . . 26 4.12 Disclosure . . . . . . . . . . . . . . . . . . . . 27 4.13 No Defaults, Etc. . . . . . . . . . . . . . . . . . 27
2 3 4.14 Use of Proceeds . . . . . . . . . . . . . . . . . . . 27 4.15 ERISA . . . . . . . . . . . . . . . . . . . . . . . 27 [ * . . . . . . . . . . . . . . . . . . . . . . . . . . ] [ * . . . . . . . . . . . . . . . . . . . . . . . . . . ] Section 5. The Agent . . . . . . . . . . . . . . . . . . . . . 28 5.01 Appointment, Powers and Immunities . . . . . . . . . 28 5.02 Reliance by Agent . . . . . . . . . . . . . . . . . 29 5.03 Defaults, Etc. . . . . . . . . . . . . . . . . . . . 30 5.04 Rights as a Bank . . . . . . . . . . . . . . . . . . 30 5.05 Indemnification . . . . . . . . . . . . . . . . . . 30 5.06 Non-Reliance on Agent and Other Banks . . . . . . . 31 5.07 Failure to Act . . . . . . . . . . . . . . . . . . . 31 5.08 Resignation or Removal of Agent . . . . . . . . . . 31 Section 6. Certain Covenants . . . . . . . . . . . . . . . . . 32 6.01 Tax Indemnity . . . . . . . . . . . . . . . . . . . 32 6.02 General Indemnity . . . . . . . . . . . . . . . . . 36 6.03 Insurance . . . . . . . . . . . . . . . . . . . . . 39 6.04 Liens . . . . . . . . . . . . . . . . . . . . . . . 39 6.05 Certification . . . . . . . . . . . . . . . . . . . 39 Section 7. Miscellaneous . . . . . . . . . . . . . . . . . . . 39 7.01 Waiver . . . . . . . . . . . . . . . . . . . . . . . 39 7.02 Notices . . . . . . . . . . . . . . . . . . . . . . 40 7.03 Expenses, Etc. . . . . . . . . . . . . . . . . . . . 40 7.04 Amendments, Etc. . . . . . . . . . . . . . . . . . . 41 7.05 Successors and Assigns . . . . . . . . . . . . . . . 42 7.06 Assignments and Participations . . . . . . . . . . . 42 7.07 Survival . . . . . . . . . . . . . . . . . . . . . . 44 7.08 Captions . . . . . . . . . . . . . . . . . . . . . . 44 7.09 Counterparts . . . . . . . . . . . . . . . . . . . . 44 7.10 Governing Law; Submission to Jurisdiction . . . . . 44 7.11 Waiver of Jury Trial . . . . . . . . . . . . . . . . 45 7.12 No Oral Modifications . . . . . . . . . . . . . . . 45 7.13 Severability . . . . . . . . . . . . . . . . . . . . 45 7.14 Treatment of Certain Information; Confidentiality . . 45 7.15 Leveraged Lease Documentation; Conversion . . . . . 46 7.16 Allocation . . . . . . . . . . . . . . . . . . . . . 46
- ------------------- *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. 3 4 Schedule I - Definitions Schedule 2.08 - Notice of Borrowing Exhibit A - Form of Indenture Exhibit B - Form of Opinion of Vice President, Law - Corporate and Business Transactions of the Company Exhibit C - Form of Opinion of Special Counsel for the Company Exhibit D - Form of Opinion of Special Counsel for the Indenture Trustee Exhibit E - Form of Opinion of Counsel for the Engine Manufacturer Exhibit F - Form of Opinion of Counsel for AVSA and the Manufacturer Exhibit G - Form of French Pledge Agreement Exhibit H - [* ] - -------------------------- *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 5 LOAN AGREEMENT dated as of April 1, 1995, 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 THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), a national banking association, as agent for the Banks (in such capacity, together with its successors in such capacity, the "Agent"). Each of Bank of America NT & SA, CIBC Inc. and The First National Bank of Chicago has been named as co-agent (collectively, the "Co-Agents") hereunder and shall have no obligations in its capacity as Co-Agent hereunder. The Company has requested the Banks to make loans to the Company in an aggregate principal amount not exceeding $350,625,000, of which the aggregate principal amount outstanding at any one time shall not exceed $210,000,000 (as such amounts may be reduced from time to time pursuant to Section 2.03 hereof), to finance a portion of the purchase price by the Company of one or more of the Aircraft. 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 loans to the Company, and the Company will agree to issue and deliver to the Banks Equipment Purchase Certificates evidencing such loans pursuant to one or more Indentures to be entered into by the Company, 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 Schedule I 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 I 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): "Additional Costs" shall have the meaning assigned to such term in Section 2.12 hereof. "Aggregate Maximum Exposure" shall mean the sum of the Maximum Exposure of each Bank (as such amounts may be reduced from time to time pursuant to Section 2.03 hereof). Initially such sum is $210,000,000. 5 6 "Aircraft" shall mean, individually, each of the five Airbus Industrie A300F4-605R aircraft referred to in the Facility, in each case as more fully described in the Indenture and the Indenture Supplement relating to such aircraft, and, collectively, all of such aircraft. [ * ] "Closing Date" shall mean April 26, 1995, or such later date occurring on or before April 30, 1995 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 to make a Loan 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", and, with respect to all of the Aircraft and for each Bank, the obligation of such Bank to make Loans to finance the purchase of all of the Aircraft in an aggregate amount up to but not exceeding the amount set opposite the name of such Bank on the signature pages hereof under the caption "Aggregate Commitment" (in each case as the same may be reduced from time to time pursuant to Section 2.03 hereof); 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 and the aggregate outstanding principal amount of loan certificates issued to such Bank in connection with leveraged lease transactions pursuant to the Facility exceeding such Bank's Maximum Exposure. The aggregate principal amount of the Commitments with respect to all of the Aircraft and for all of the Banks is $350,625,000. The sum of (i) the aggregate principal amount of all Loans for all of the Banks that may be outstanding at any one time and (ii) the aggregate principal amount of all loan certificates issued to all of the Banks in connection with leveraged lease transactions pursuant to the Facility that may be outstanding at such time (i.e., the Banks' maximum exposure) is the Aggregate Maximum Exposure. The aggregate principal amount of the Commitments with respect to each Aircraft for all of the Banks is $70,125,000. "Commitment Termination Date" shall mean the first to occur of (i) April 26, 1996, and (ii) the termination of the Commitments of all of the Banks with respect to all of the Aircraft pursuant hereto. "Dollars" and "$" shall mean lawful money of the United States of America. - --------------------- *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. 6 7 "ERISA Affiliate" shall mean any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which the Company is a member and (ii) solely for purposes of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which the Company is a member. "Facility" shall mean the facility agreement [ * ] as consented and agreed to by each of the Banks by separate instruments dated on or before the Closing Date, and the related letter agreement dated April 7, 1995 between the Company and the Agent. "French Pledge Agreement" shall mean each French Pledge Agreement between the Company and the Indenture Trustee, substantially in the form of Exhibit G hereto, entered into in connection with the making of any Loans hereunder, and any amendment or supplement thereto from time to time entered into. "GAAP" shall mean generally accepted accounting principles. "Indenture" shall mean each Trust Indenture, Mortgage and Security Agreement between the Company and the Indenture Trustee, substantially in the form of Exhibit A hereto, entered into in connection with the making of any Loans hereunder, and any amendment or supplement thereto from time to time entered into. "Indenture Trustee" shall mean NationsBank of Georgia, National Association, a national banking association, not in its individual capacity, but solely in its capacity as Indenture Trustee under an Indenture, and its successors and permitted assigns as trustee thereunder. "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. "Margin Stock" shall mean "margin stock" within the meaning of Regulations U and X. - ---------------------- *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. 7 8 "Maximum Exposure" shall mean, for any Bank, the amount set opposite the name of such Bank on the signature pages hereof under the caption "Maximum Exposure" (in each case as the same may be reduced from time to time pursuant to Section 2.03 hereof). "Multiemployer Plan" shall mean a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been made by the Company or any ERISA Affiliate and which is covered by Title IV of ERISA. "Operative Agreements" shall mean, collectively, with respect to each Aircraft, this Agreement, the Facility (as it relates to such Aircraft or other matters related thereto), the Indenture and Indenture Supplement covering such Aircraft [ * ] the Bills of Sale and the Purchase Agreement, the Consent and Guaranty, the Airbus Guaranty, the Consent and Agreement, the Engine Consent and Agreement, the French Pledge Agreement and the Equipment Purchase Certificates in each case to the extent that the same relates to such Aircraft. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Plan" shall mean an employee benefit or other plan established or maintained by the Company or any ERISA Affiliate and that is covered by Title IV of ERISA, other than a Multiemployer Plan. "Property" shall mean any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. "Quarterly Dates" shall mean the last day of March, June, September and December in each year, the first of which shall be the first such day to occur in 1996; provided that if any such day is not a Business Day, then such Quarterly Date shall be the next succeeding Business Day (unless such Business Day falls in a subsequent calendar month, in which event such Quarterly Date shall be the next preceding Business Day). "Regulatory Change" shall mean, with respect to any Bank, any change after the date of this Agreement in Federal, state or foreign law or regulations (including, without limitation, Regulation D) or the adoption or making after such date of any interpretation, directive or request applying to a class of banks including such Bank of or under any Federal, state or foreign law or regulations (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) by any court or governmental or monetary authority charged with the interpretation or administration thereof. - --------------------- *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. 8 9 "Reserve Requirement" shall mean, for any Interest Period for any Floating Rate Loan, the average maximum rate at which reserves (including, without limitation, any marginal, supplemental or emergency reserves) are required to be maintained during such Interest Period under Regulation D by member banks of the Federal Reserve System in New York City with deposits exceeding one billion Dollars against "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall include any other reserves required to be maintained by such member banks by reason of any Regulatory Change with respect to (i) any category of liabilities that includes deposits by reference to which the LIBOR Base Rate for Floating Rate Loans is to be determined as provided in the definition of "LIBOR Base Rate" or (ii) any category of extensions of credit or other assets that includes Floating Rate Loans. "Subsidiary" shall mean, for any Person, any corporation, partnership or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person. Section 2. Commitments, Loans and Equipment Purchase Certificates 2.01 Loans and Equipment Purchase Certificates Each Bank severally agrees, on the terms and conditions of this Agreement, to make one or more Loans to the Company 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, and in an aggregate amount with respect to all Aircraft up to but not exceeding the amount of the aggregate Commitment of such Bank for all Aircraft; provided, however, that the sum of the aggregate amount of such Loans made by such Bank outstanding at any one time and the aggregate principal amount of loan certificates issued to such Bank in leveraged lease transactions pursuant to the Facility outstanding at such time shall not exceed such Bank's Maximum Exposure. The Company 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. 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 and, concurrently with the making of such Loan, the Company shall issue and deliver to such Bank, consistent with the terms and provisions of Article 2 of the Indenture to be executed and delivered on such Delivery Date as contemplated by Section 3 hereof, an Equipment Purchase Certificate, in the form prescribed in Exhibit B to such Indenture, which Equipment Purchase Certificate shall be in principal amount equal to the original principal amount of such Loan, duly authenticated and registered in the name of such Bank by the Indenture Trustee, and 9 10 designated as having been issued in connection with such Aircraft. Each such Equipment Purchase Certificate shall be dated such Delivery Date and shall bear interest therefrom and shall be otherwise payable in accordance with, and governed by the terms of, such Indenture, including, without limitation, the Events of Default specified in Section 6.01 thereof. The Company may convert all Loans made in respect of the same Aircraft into Loans of another Type by making the election specified in Section 2.02(b) of the related Indenture with respect to the Equipment Purchase Certificates evidencing such Loans. 2.02 Borrowings The Company shall give the Agent (which shall promptly notify the Banks) a Notice of Borrowing with respect to each borrowing hereunder as provided in Section 2.08 hereof. Not later than 10:30 a.m. New York time on the date specified for each borrowing hereunder, each Bank shall make available to the Agent the amount of the Loan to be made by it on such date, at account number [ * ] maintained by the Agent with Chase at the Principal Office, in immediately available funds, for account of the Company. The amount so received by the Agent shall, subject to the terms and conditions of this Agreement, be made available to the Company by transferring the same, in immediately available funds, to the Company at its account number [ * ] maintained at The Chase Manhattan Bank, N.A., One Chase Manhattan Plaza, New York, New York 10081, or, if so directed by the Company in such Notice of Borrowing, at its account number [ * ] maintained at Citibank, N.A., in New York, New York, in either case with the instructions "CR Federal Express Corporation". The Company agrees that promptly upon its receipt of such amount, it shall apply the same to the payment of the remaining balance of the purchase price of the Aircraft, by transferring such amount, in immediately available funds, to AVSA at its account number [ * ] maintained at Credit Lyonnais, New York Branch, 1301 Avenue of the Americas, New York, New York 10019, Attention: Yanick Ergas. 2.03 Changes of Commitments and Maximum Exposures (a) The aggregate unused amount of the 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, or (ii) the occurrence and continuance of an Event of Default under any Indenture or an event of default under any lease agreement entered into by the Company in connection with the leveraged lease financing of an Aircraft under the Facility and, in the case of clause (ii) 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 aggregate unused amount of the Commitments of all of the Banks with respect to any particular Aircraft shall be automatically reduced to zero immediately after - --------------------- *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 11 giving effect to the making of any loans in respect of such Aircraft hereunder or in connection with the leveraged lease financing of such Aircraft under the Facility. (c) The Company shall have the right at any time or from time to time to terminate or reduce the aggregate unused amount of the Commitments in respect of one or more Aircraft, provided that (x) 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, (y) each partial reduction shall be in an aggregate amount at least equal to [ * ] or in multiples of [ * ] in excess thereof, and (z) such right shall be exercisable only once with respect to any Aircraft. (d) The Commitments once terminated or reduced may not be reinstated. (e) Concurrently with each termination or reduction of any Bank's Commitments and each payment or prepayment of any principal of any of such Bank's Loans or any of the loan certificates issued to such Bank in connection with leveraged lease transactions pursuant to the Facility, such Bank's Maximum Exposure shall be automatically reduced by the amount, if any, by which such Bank's Maximum Exposure immediately prior thereto exceeds the sum of such Bank's unused Commitments and the aggregate principal amount outstanding of such Bank's Loans and loan certificates issued to such Bank in connection with leveraged lease transactions pursuant to the Facility after giving effect to such termination, reduction, payment or prepayment. 2.04 Fees (a) Subject to subsection (c) of this Section 2.04, the Company shall pay to the Agent for the account of each Bank with respect to each Aircraft a fee equal to $[ * ] Such fees with respect to each Aircraft shall be payable on the earlier of the Delivery Date of such Aircraft or the date on which the Commitments with respect to such Aircraft terminate or are terminated. (b) Unless the Aggregate Maximum Exposure has been reduced to zero prior to December 1, 1995, the Company shall pay to the Agent for the account of each Bank a further facility fee on the daily amount of each of such Bank's Maximum Exposure, whether or not utilized, in each case for the period from and including December 1, 1995 to but not including the earlier of the date the Aggregate Maximum Exposure is reduced to zero and the date 18 months after the last Delivery Date to occur hereunder (the "Fee Termination Date"), at a 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. 11 12 per [ * ] All accrued facility fees shall be payable in arrears on each Quarterly Date and on the Fee Termination Date. (c) Notwithstanding the provisions of subsection (a) of this Section 2.04, in the event the Commitments with respect to any Aircraft terminate or are terminated on a date other than the Delivery Date for such Aircraft, the fee payable to each Bank with respect to such Aircraft pursuant to such subsection (a) on such termination date shall in the case of each Bank be the lesser of (i) such Bank's pro rata share of $30,625 and (ii) the amount, if any, by which (A) the amount equal to 1/8 of 1% per annum of the daily amount of such Bank's Maximum Exposure, whether or not utilized, for the period from and including the Closing Date to but not including such termination date exceeds (B) the aggregate fees theretofore paid to such Bank under this Section 2.04 and any fee to be paid to such Bank on such date under subsection (b) 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. 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. 2.06 Several Obligations; Remedies Independent 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. The amounts payable by the Company at any time hereunder and under the Equipment Purchase Certificates to each Bank shall be a separate and independent debt and each Bank, subject always to the terms and conditions of the applicable Indenture, shall be entitled to protect and enforce its rights arising out of this Agreement and the Equipment Purchase Certificates, and it shall not, except as otherwise provided in the applicable Indenture, be necessary for any other Bank or the Agent to consent to, or be joined as an additional party in, any proceedings for such purposes. 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 the Banks, and each termination or reduction of the amount of the Commitments under Section 2.03 hereof shall be applied to the respective - -------------------- *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. 12 13 Commitments of the Banks, in each case pro rata according to the amounts of their respective Commitments or Loans at the time outstanding. 2.08 Certain Notices Notices by the Company to the Agent of terminations or reductions of the Commitments and of borrowings shall be irrevocable and shall be effective only if received by the Agent not later than 10:00 a.m. New York time (or, in the case of a borrowing of a Base Rate Loan, not later than 2:00 p.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 the Commitments to be terminated or reduced and the Aircraft to which such Commitments relate. Each such notice of borrowing (a "Notice of Borrowing") shall be substantially in the form of Schedule 2.08 hereto and shall specify 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). 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 lesser of [ * ] - -------------------- *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 14 2.10 Delayed Delivery (a) If, after any Bank shall have made available to the Agent the amount of its Loan on any scheduled Delivery Date (hereinafter, a "Scheduled Delivery Date") as contemplated by Section 2.02 hereof, the Agent and the Banks determine (or the Agent is so advised in writing by the Company) before 2:00 p.m., New York time, on the Scheduled Delivery Date that the related Operative Agreements will not be executed and delivered or that the other conditions precedent set forth in Section 3 hereof will not be satisfied (or waived by the Banks) on such Scheduled Delivery Date, the Agent shall, on such Scheduled Delivery Date, use its best efforts to cause the amounts held by it for the purpose of making such Loan to be invested pursuant to subsection (b) of this Section 2.10. (b) The Agent shall use its best efforts to cause the amount held by it for the purpose of making such Loan to be invested and reinvested to the extent practicable at the direction received by it from the Company, at the risk of the Company, in Permitted Investments consisting of either commercial paper or time deposits; provided, however, that in the absence of instructions by 3:00 p.m., New York time, the Agent shall use its best efforts to cause such amount or the proceeds thereof to be invested and reinvested to the extent practicable in overnight Eurodollar time deposits. Earnings on any such investments shall be applied to the Company's payment obligations, if any, to such Bank under this Section 2.10 to the extent of such obligations, and the balance, if any, of such earnings remaining after such application shall be paid in accordance with the Company's written instructions. Unless the funding arrangements contemplated hereby shall have been terminated as provided in subsection (d) below, the Agent will apply the amounts held by it for the purpose of making such Loan to the making of such Loan on the actual Delivery Date (the "Delayed Delivery Date") for the related Aircraft, as provided in Section 2.02. Notwithstanding any provision of this Agreement or any related Operative Agreement to the contrary, any Loans made pursuant to this Section 2.10 on a Delayed Delivery Date shall be treated for all purposes of the related Indenture and the other related Operative Agreements (other than Section 3 hereof) as if such Loans had been made on, and the Equipment Purchase Certificates evidencing the same had been issued on and dated the date of, the Scheduled Delivery Date therefor, and without limiting the generality of the foregoing, in the case of any Floating Rate Loans and the Equipment Purchase Certificates evidencing the same, the initial Interest Period relating thereto shall be deemed to have begun on such Scheduled Delivery Date and shall end on the date that such Interest Period would otherwise have ended if such Loans had been made on the Scheduled Delivery Date. (c) The Company shall reimburse the Agent on demand for any loss incurred by the Agent as a result of the investment of funds by the Agent in accordance with the terms of this Section 2.10. Further, the Company shall indemnify the Agent and hold it harmless from and against any cost or expense the Agent may incur as a result of any investment of funds or transfer of funds referred to herein in accordance with the terms hereof. The Agent shall not 14 15 be liable for failure to invest such funds except as otherwise provided herein or for any losses incurred on such investments except for any losses arising out of its own gross negligence or willful misconduct. (d) If for any reason (i) the related Operative Agreements shall not be executed and delivered by the respective parties thereto and/or the Delayed Delivery Date shall not occur (whether by reason of a failure to meet a condition precedent thereto set forth in Section 3 hereof or otherwise) on or before the tenth Business Day after the related Scheduled Delivery Date, or (ii) the Company has notified the Agent prior to 3:00 p.m., New York time, on any date after the Scheduled Delivery Date that it does not intend to go forward to close the transactions contemplated hereby for such Delivery Date (the earlier of such dates being herein referred to as the "Funding Termination Date"), the Banks may cancel or terminate any funding arrangements they may have made to fund the Loans on the Scheduled Delivery Date (or the unutilized portion thereof) but the Banks' Commitments hereunder with respect to such Aircraft shall not be reduced or terminated thereby. In the event that the Funding Termination Date shall have occurred with respect to any proposed Loans as provided above in this subsection (d), the Agent shall return the amounts held by it hereunder to the Banks having furnished the same on the earliest practicable Business Day, provided that the Agent shall have had a reasonable time to liquidate any Permitted Investments it has been authorized to invest in pursuant to subsection (b) of this Section 2.10 and to obtain the proceeds therefrom in funds of the type originally received, and the Company shall pay interest on such funds to the Banks having furnished [ * ] such interest to be payable for the period from and including such Scheduled Delivery Date to but excluding the date such funds are returned to such Bank in accordance with the terms hereof; provided that if any such funds are returned to a Bank after 2:00 p.m., New York time, on any such date, such funds shall be deemed for purposes of this subsection (d) to have been returned on the next succeeding Business Day. In addition, the Company shall indemnify the Banks against and reimburse the Banks on demand for any cost or expense incurred by the Banks as a result of such termination, including, in the case of funds acquired by the Banks to fund any Base Rate Loans, any cost or expense incurred by reason of the liquidation or redeployment of funds and, in the case of funds acquired by the Banks to fund any Floating Rate Loans, Breakage Costs, if any (determined as if such Floating Rate Loans had been made on the Scheduled Delivery Date and were being prepaid on such Funding Termination Date), and including, without limitation, reasonable legal costs and expenses) incurred by or payable to the Banks or the Agent in connection with the transactions contemplated hereby for such Delivery Date in accordance with the provisions of the last sentence of Section 3 hereof. - -------------------- *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. 15 16 2.11 Sharing of Payments, Etc. (a) The Company agrees that, in addition to (and without limitation of) any right of set-off, banker's lien or counterclaim a Bank may otherwise have, each Bank shall be entitled, at its option, to offset balances held by it for account of the Company at any of its offices, in Dollars or in any other currency, against any principal of or interest on any of such Bank's Loans or the Equipment Purchase Certificates evidencing the same or any other amount payable to such Bank hereunder or under any Indenture or other Operative Agreement, that is not paid when due (after giving effect to any applicable grace period and regardless of whether such balances are then due to the Company), in which case it shall promptly notify the Company, the Agent and the Indenture Trustee thereof, provided that such Bank's failure to give such notice shall not affect the validity thereof. (b) If any Bank shall obtain any payment of any principal of or interest on any Loan or the Equipment Purchase Certificate evidencing the same owing to it or payment of any other amount under this Agreement or any Indenture or other Operative Agreement through the exercise of any right of set-off, banker's lien or counterclaim or similar right or otherwise (other than from the Agent as provided herein or the Indenture Trustee as provided in the related Indenture), and, as a result of such payment, such Bank shall have received a greater percentage of the principal of or interest on the Loans or the Equipment Purchase Certificates evidencing the same or such other amounts then due hereunder or thereunder by the Company to such Bank than the percentage received by any other Bank, it shall promptly purchase from such other Banks participations in (or, if and to the extent specified by such Bank, direct interests in) the Loans and the Equipment Purchase Certificates evidencing the same or such other amounts, respectively, owing to such other Banks (or in interest due thereon, as the case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all the Banks shall share the benefit of such excess payment (net of any expenses that may be incurred by such Bank in obtaining or preserving such excess payment) pro rata in accordance with the unpaid principal of and/or interest on the Loans and the Equipment Purchase Certificates evidencing the same or such other amounts, respectively, owing to each of the Banks. (c) The Company agrees that any Bank so purchasing such a participation (or direct interest) may exercise all rights of set-off, banker's lien, counterclaim or similar rights with respect to such participation as fully as if such Bank were a direct holder of Loans and Equipment Purchase Certificates or other amounts (as the case may be) owing to such Bank in the amount of such participation. (d) Nothing contained herein shall require any Bank to exercise any such right or shall affect the right of any Bank to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of the Company. If, under any applicable bankruptcy, insolvency or other similar law, any Bank receives a secured claim in lieu of a set-off to which this Section 2.11 applies, such Bank shall, to the extent practicable, 16 17 exercise its rights in respect of such secured claim in a manner consistent with the rights of the Banks entitled under this Section 2.11 to share in the benefits of any recovery on such secured claim. 2.12 Additional Costs [ * ] [ * ] [ * ] [ * ] (b) Without limiting the effect of the provisions of subsection (a) of this Section 2.12, in the event that, by reason of any Regulatory Change, any Bank either (i) incurs Additional Costs based on or measured by the excess above a specified level of the amount of a category - ------------------- *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. 17 18 of deposits or other liabilities of such Bank that includes deposits by reference to which the interest rate on Floating Rate Loans is determined as provided in the related Indenture or a category of extensions of credit or other assets of such Bank that includes Floating Rate Loans, or (ii) becomes subject to restrictions on the amount of such a category of liabilities or assets that it may hold, then, if such Bank so elects by notice to the Company (with a copy to the Agent and the Indenture Trustee), the obligation of such Bank to make or continue such Floating Rate Loans shall be suspended until such Regulatory Change ceases to be in effect (in which case the provisions of Section 2.15 hereof shall be applicable). [ * ] (d) Each Bank shall notify the Company of any event occurring after the date hereof [* ] as promptly as practicable, but in any event within 30 days, after such Bank obtains actual knowledge thereof; provided that (i) if any Bank fails to give such notice within 30 days after it obtains actual knowledge of such an event, such Bank shall, [ * ] (ii) each Bank will designate a different Applicable Lending Office for holding the Loans or the Equipment Purchase Certificates evidencing the same of such Bank affected by such event if such designation will avoid the need for, [ * ] be disadvantageous to such Bank, except that such Bank shall have no obligation to designate an Applicable Lending Office located in the United States of America. Each Bank will furnish to the Company and the Indenture - -------------------- *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 19 Trustee a certificate setting forth the basis [ * ] on its costs or rate of return of maintaining its Loans or the Equipment Purchase Certificates evidencing the same or its Commitment, or on amounts receivable by it in respect of its Loans or the Equipment Purchase Certificates evidencing the same, [ * ] such Bank under this Section 2.12, shall be conclusive, provided that such determinations and allocations are made on a reasonable basis. 2.13 Limitation on Types of Loans Anything herein to the contrary notwithstanding, if, on or prior to the determination of any LIBOR Base Rate for any Interest Period: (a) the Agent determines, which determination shall be conclusive, that quotations of interest rates for the relevant deposits referred to in the definition of "LIBOR Base Rate" in Schedule I hereto are not being provided in the relevant amounts or for the relevant maturities for purposes of determining rates of interest for any Floating Rate Loan as provided herein or in the related Indenture; or (b) if the Majority Banks determine, which determination shall be conclusive, and notify (or notifies, as the case may be) the Agent and the Indenture Trustee that the relevant rates of interest referred to in the definition of "LIBOR Base Rate" in said Schedule I upon the basis of which the rate of interest for Floating Rate Loans for such Interest Period is to be determined are not likely adequately to cover the cost to such Banks of making or maintaining such Floating Rate Loans for such Interest Period; then the Agent shall give the Company, the Indenture Trustee and each Bank prompt notice thereof and, so long as such condition remains in effect, the Banks' obligations to make or continue Floating Rate Loans shall be suspended, and the Company shall, at its election, on the last day(s) of the then current Interest Period(s) for the outstanding Floating Rate Loans, either prepay such Loans or such Floating Rate Loans shall be automatically converted into Base Rate Loans. 2.14 Illegality Notwithstanding any other provision of this Agreement or any Indenture, in the event that it becomes unlawful for any Bank or its Applicable Lending Office to honor its obligation to make or maintain Floating Rate Loans hereunder or under any Indenture, then such Bank shall promptly notify the Company thereof (with a copy to the Agent and the Indenture Trustee) and such Bank's obligation to make or continue - ------------------- *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. 19 20 Floating Rate Loans shall be suspended until such time as such Bank may again make and maintain Floating Rate Loans (in which case the provisions of Section 2.15 hereof shall be applicable). 2.15 Treatment of Affected Loans If the obligation of any Bank to make or continue a particular Floating Rate Loan is suspended pursuant to Section 2.12, 2.13 or 2.14 hereof (Loans of such Type being herein called "Affected Loans" and such Type being herein called the "Affected Type", and any Commitments to make such Loans being herein called the "Affected Commitments"), or, in the case of clause (a) below, if the Company shall be [ * ] then, (a) at the request of the Company but subject always to the provisions of Section 7.06 hereof, such Bank will assign its Affected Loans and the Equipment Purchase Certificates evidencing the same, or its Affected Commitment, as the case may be, without recourse or warranty, to any financial institution designated by the Company, provided that concurrently with such assignment, such Bank receives from such financial institution and/or the Company an amount in immediately available funds equal to the unpaid principal amount of such Equipment Purchase Certificates at the time outstanding, plus all accrued and unpaid interest thereon, whether or not then due, and all other sums then owing to such Bank in respect of such Equipment Purchase Certificates or any of the Operative Agreements relating thereto, including, without limitation, any amounts owing to such Bank pursuant to Section 2.12 hereof and any Breakage Costs (determined for such purposes as if such assignment were a prepayment in full of the principal amount of such Equipment Purchase Certificates), and if such Bank shall fail to so assign such Loans and the Equipment Purchase Certificates evidencing the same in accordance with the foregoing provisions after such request by the Company, such Bank shall not be entitled [ * ] hereof to the extent (but only to the extent) such assignment would have avoided the need for, or reduced the amount of, such compensation, and (b) if no such assignment shall be requested and consummated, or if the Affected Loans are not prepaid in the case of any such suspension pursuant to Section 2.13, or if the Affected Loans are otherwise to be converted into Base Rate Loans pursuant to the provisions of Section 2.12, 2.13 or 2.14 hereof, then such Bank's Affected Loans shall be automatically converted into Base Rate Loans on the last day(s) of the then current Interest Period(s) for Affected Loans (or, in the case of a conversion required by Section 2.12(b), 2.13 or 2.14 hereof, on such earlier date as such Bank may specify to the Company with a copy to the Agent and the Indenture Trustee) and, unless and until such Bank gives notice as provided below that the circumstances specified in Section 2.12, 2.13 or 2.14 hereof that gave rise to such conversion no longer exist, all Loans that would otherwise be made or continued by such Bank as Loans of the Affected Type hereunder or under any Indenture shall be made or continued instead as Base Rate Loans, and all Loans of such Bank that would otherwise be converted into Loans of the Affected Type shall be - --------------------- *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. 20 21 converted instead into (or shall remain as) Base Rate Loans. Each Bank shall give notice to the Company with a copy to the Agent and the Indenture Trustee that the circumstances specified in Section 2.12, 2.13 or 2.14 hereof that gave rise to the conversion of such Bank's Affected Loans pursuant to this Section 2.15 no longer exist (which such Bank agrees to do promptly upon such circumstances ceasing to exist). Five Business Days after the date of receipt of such notice by the Agent, the Affected Loans shall automatically be converted into Floating Rate Loans unless the Agent, at least three Business Days prior to the date such conversion would otherwise have occurred, shall have received notice from the Company that it has elected to continue such Loans as Base Rate Loans; provided that the Company shall not be entitled to make any such election after the first anniversary of the Closing Date. Section 3. Conditions Precedent The obligation of any Bank to make any Loan to be made by it hereunder is subject to the receipt by the Agent, on or before the Delivery Date for the Aircraft to be purchased with the proceeds of such Loan, of the following documents, each of which shall be satisfactory to the Agent (and to the extent specified below, to each Bank) in form and substance: (a) Notice of Borrowing. Such Bank shall have received due notice from the Agent with respect to such borrowing pursuant to Section 2.02 hereof. (b) Equipment Purchase Certificates. Concurrently with making such Loan to the Company, the Agent, on behalf of such Bank, shall have received an Equipment Purchase Certificate in an original principal amount equal to the original principal amount of such Loan, duly executed and delivered by the Company, and duly authenticated by the Indenture Trustee (acting at the written request and direction of the Company). (c) Legal Investment. No change shall have occurred after the date of this Agreement in applicable laws or regulations, or interpretations of any such laws or regulations by applicable regulatory authorities, which, in the opinion of such Bank, would make it illegal for such Bank, and no change in circumstances outside the control of such Bank shall have occurred which would otherwise make it illegal or otherwise in contravention of guidance issued by regulatory authorities for such Bank, to participate in the transaction to be consummated on such Delivery Date with respect to such Aircraft; and no action or proceeding shall have been instituted nor shall governmental action before any court, governmental authority or agency be threatened which in the opinion of counsel for such Bank is not frivolous, nor shall any order have been issued or proposed to be issued by any court, or governmental authority or agency, as of such Delivery Date, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated by this Agreement or by any of the other Operative Agreements. (d) Approvals. All approvals and consents of any trustees or holders of any 21 22 indebtedness or obligations of the Company, which in the opinion of such Bank are required in connection with any transaction contemplated by this Agreement, shall have been duly obtained. (e) Corporate Documents. The following documents, each certified as indicated below: (i) In the case of the Loans to be made on the first Delivery Date, (A) a certificate from such Secretary of State dated as of a date reasonably near such Delivery Date as to the good standing of and charter documents filed by the Company; (B) a certificate of the Secretary or an Assistant Secretary of the Company, dated such Delivery Date and certifying (1) that attached thereto are true and complete copies of the Certificate of Incorporation of the Company as in effect on such Delivery Date, and of the by-laws of the Company as amended and in effect at all times from the date on which the resolutions referred to in clause (2) were adopted to and including the date of such certificate, (2) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors of the Company authorizing the execution, delivery and performance of the Operative Agreements to which the Company is or is intended to be a party in connection with each borrowing hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (3) that the Certificate of Incorporation of the Company has not been amended since the date of the certificate furnished pursuant to clause (A) above, and (4) as to the incumbency and specimen signature of each officer of the Company executing such of the Operative Agreements to which the Company is intended to be a party in connection with each borrowing hereunder and each other document to be delivered by the Company from time to time in connection therewith (and the Agent and each Bank may conclusively rely on such certificate until it receives notice to the contrary in writing from the Company); (C) a certificate of an officer of the Company whose incumbency and signature have been certified in the certificate referred to in clause (i)(B) above, dated such Delivery Date, as to the incumbency and specimen signature of the Secretary or Assistant Secretary, as the case may be, of the Company; and (D) a copy of the charter and bylaws and other instruments of NationsBank of Georgia, National Association ("NationsBank") certified by a Secretary 22 23 or an Assistant Secretary of NationsBank as of such Closing Date (or other like instruments satisfactory to the Agent), and a copy of the resolutions of the board of directors of NationsBank, certified by such Secretary or Assistant Secretary as of such Delivery Date, authorizing the execution and delivery by NationsBank (either individually or as Indenture Trustee) of each of the Indenture and the other Operative Agreements to which it is or is to be a party, together with an incumbency certificate of NationsBank as to the person or persons authorized to execute and deliver said documents on behalf of NationsBank (either individually or as Indenture Trustee) and the signatures of such person or persons. (ii) In the case of each Loan (other than the Loans to be made on the first Delivery Date) hereunder, a certificate of the Secretary or Assistant Secretary of the Company whose incumbency and specimen signature were certified pursuant to clause (i)(C) above, dated such Delivery Date, and certifying (A) that the bylaws, resolutions and Certificate of Incorporation of the Company furnished pursuant to clause (i)(B) above have not been modified, rescinded or amended (or, if modified or amended, that attached thereto is a true and complete copy of such modification or amendment), and are in full force and effect, and (B) as to the continuing incumbency of the officers referred to in clause (i)(B)(4) above, and a certificate of one such officer, dated such Delivery Date, as to the continuing incumbency of such Secretary or Assistant Secretary. (iii) In the case of each Loan hereunder, such other documents, evidences, materials and information with respect to the Company and the Indenture Trustee as the Agent or any Bank may reasonably request in order to establish the consummation of the transactions contemplated by this Agreement. (f) Operative and Other Documents. This Agreement and the following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to the Agent (acting directly or by authorization to its special counsel) and shall each be in full force and effect; and copies executed or certified as requested by the Agent of such documents shall have been delivered to the Agent or its special counsel, each Bank and the Indenture Trustee: (i) the Indenture covering 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. 23 24 (ii) an Indenture Supplement covering such Aircraft, dated such Delivery Date; (iii) the French Pledge Agreement for such Aircraft; (iv) the Bills of Sale for such Aircraft and the related Airbus Guaranty, each dated such Delivery Date; (v) in the case of the Loans to be made on the first Delivery Date, a redacted copy of each of the Purchase Agreement, the Consent and Guaranty and the Engine Agreement; (vi) the Consent and Agreement and the AVSA Consent and Agreement; and (vii) the Engine Consent and Agreement. (g) Insurance. The Agent shall have received such evidence as it deems appropriate, including, without limitation, an independent insurance broker's report, together with certificates of insurance from such broker, in form and substance satisfactory to the Agent, to establish that the insurance required by Section 4.06 of the Indenture is in effect. (h) Financing Statements. Uniform Commercial Code financing statements covering all the security interests (and other interests) intended to be created by or pursuant to the relevant Indenture shall have been executed and delivered by the Company, as debtor, and by the Indenture Trustee, as secured party, for and on behalf of the Banks, and such financing statements or other documents to the same purpose shall have been duly filed in each relevant jurisdiction, if any, other than the State of Tennessee, and all other action shall have been taken which, in the opinion of the Agent, is necessary or desirable to perfect and protect such security interests and other interests. (i) Title, Airworthiness and Registration. On such Delivery Date, the following statements shall be true, and the Agent and each Bank shall have received evidence from the Company reasonably satisfactory to the Agent to the effect that: (i) the Company has good title (subject to filing and recording of the FAA Bill of Sale with the FAA) to such Aircraft, free and clear of Liens (other than Liens of the type described in Section 4.01(a) and (c) of the related Indenture), which evidence shall include the FAA Bill of Sale to the Company with respect to such Aircraft; (ii) such Aircraft has been duly certified by the FAA as to type and airworthiness in accordance with the terms of the Operative Agreements; 24 25 (iii) the FAA Bill of Sale, the relevant Indenture and an Indenture Supplement covering such Aircraft shall have been duly filed for recordation with the FAA pursuant to the Act; and (iv) application to the FAA for registration of such Aircraft in the name of the Company shall have been duly made and the Company shall have temporary or permanent authority to operate such Aircraft. (j) Officers' Certificate of the Company. On such Delivery Date, the following statements shall be true, and the Agent and each Bank shall have received a certificate signed by the Vice President and Treasurer or any other duly authorized officer of the Company, dated such Delivery Date, to the effect set forth below (provided that the statement made in clause (ii) below shall apply for purposes of this subsection (j) only in the case of the Loans to be made on the first Delivery Date): (i) the representations and warranties of the Company contained in this Agreement and in any other Operative Agreement, and in any certificate delivered pursuant hereto or thereto, are true and correct on and as of such Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such certificate shall state that such representations and warranties were true and correct on and as of such earlier date); [ * ] (iii) nothing has occurred which will, in the judgment of such officer, materially adversely affect the ability of the Company to carry on its business or to perform its obligations under this Agreement, the Indenture, the Equipment Purchase Certificates and each other Operative Agreement to which it is a party; and (iv) no event has occurred and is continuing, or would result from the purchase of such Aircraft, which constitutes an Event of Loss with respect to such Aircraft, a Default or an Event of Default. - -------------------- *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. 25 26 (k) Legal Opinions. The Agent (acting directly or by authorization to its special counsel) and each Bank shall have received from the following counsel their respective legal opinions, in each case satisfactory to the Agent as to scope and substance (and covering such other matters as the Agent may reasonably request) and dated such Delivery Date: (i) George W. Hearn, Esq., Vice President, Law-Corporate and Business Transactions of the Company, substantially in the form of Exhibit B hereto and addressed to the Agent, each Bank and the Indenture Trustee; (ii) Davis Polk & Wardwell, special counsel for the Company, substantially in the form of Exhibit C hereto and addressed to the Agent, each Bank and the Trustee; (iii) Powell, Goldstein, Frazer & Murphy, special counsel for the Indenture Trustee, substantially in the form of Exhibit D hereto and addressed to the Agent and each Bank; (iv) Daugherty, Fowler & Peregrin, special FAA counsel, addressed to the Agent, each Bank and the Indenture Trustee and covering such matters as the Banks (or any of them) may reasonably request; (v) counsel for the Engine Manufacturer, substantially in the form set forth in Exhibit E hereto and addressed to the Agent, each Bank and the Indenture Trustee; and (vi) counsel for AVSA and the Manufacturer, substantially in the form set forth in Exhibit F hereto and addressed to the Agent, each Bank and the Indenture Trustee. In addition, the Banks shall have received opinions, dated the Delivery Date, of Milbank, Tweed, Hadley & McCloy, special New York counsel for the Banks, and S.G. Archibald, special French counsel to the Banks, each addressed to the Banks and covering such matters as the Banks (or any of them) may reasonably request. (l) Appraisal. The Agent and each Bank shall have received an acceptable appraisal by an independent internationally recognized appraiser acceptable to the Company and the Agent, setting forth the Fair Market Value of such Aircraft on such Delivery Date. (m) Payment of Taxes, Etc. All fees, charges, taxes, assessments, costs and other expenses then due and payable in connection with the execution, delivery, recording 26 27 and filing of all financing statements and the documents and instruments referred to in subsections (h) and (i) of this Section 3, or in connection with the purchase of such Aircraft by the Company and the issuance of the Equipment Purchase Certificates, and all sales taxes and duties related to the consummation of the transactions contemplated by the Operative Agreements which are then due shall, in each case, have been duly paid or caused to be paid in full by the Company, other than any such taxes which, after notice to the Agent by the Company, are being contested by the Company in good faith and by appropriate proceedings, so long as any such proceeding or the failure by the Company to pay such taxes does not involve any danger of the sale, forfeiture or loss of the Aircraft or otherwise have any adverse effect on any Bank or its rights or interests under or in respect of any Loan or the Equipment Purchase Certificates evidencing the same or this Agreement or any other related Operative Agreement. (n) Opinion of Special FAA Counsel Upon Registration. Promptly upon the registration of such Aircraft and the recording of the Indenture and the Indenture Supplement covering such Aircraft pursuant to the Act, special FAA counsel referred to in clause (iv) of subsection (k) of this Section 3 shall deliver to the Agent, each Bank and the Indenture Trustee an opinion as to (i) the due registration of such Aircraft in the name of the Company, and (ii) the due recording pursuant to the Act of the FAA Bill of Sale and the Indenture with such Indenture Supplement attached as an exhibit. The obligation of any Bank to make any Loan hereunder is also subject to the payment by the Company of such fees and other costs and expenses as the Company shall have agreed pursuant to the Facility to pay to any Bank or the Agent in connection herewith, including, without limitation, any fees payable on or prior to such Delivery Date pursuant to Section 2.04 hereof. 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; (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, the Equipment Purchase Certificates and the other Operative Agreements to which it is a party; and (c) is duly qualified to do business as a foreign corporation in good standing in all jurisdictions in which it has intrastate routes, or offices or major overhaul facilities or in which other activities of the Company require such qualification. 4.02 Certification The Company is an "air carrier" within the meaning of the Act, and a holder of a certificate under Sections 41102(a) and 41103 of the Act and a "citizen of the 27 28 United States" within the meaning of Section 40102(a)(15) of the Act holding an "air carrier operating certificate" issued under Chapter 447 of the Act for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, and each such certificate is in full force and effect. 4.03 Permits The Company possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents (collectively, "permits") which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted, and each such permit is in full force and effect. 4.04 Recordings and Filings Except for (a) the filing for recording pursuant to the Act of the documents referred to in Section 3(i), and (b) the filings referred to in Section 3(h), no further action, including any filing or recording of any document, is necessary or advisable in order to establish and perfect the Company's title to and interest in the Aircraft as against any third parties, or to perfect the first security interest in and mortgage lien on the Indenture Estate in favor of the Indenture Trustee with respect to such portion of the Aircraft as is covered by the recording system established by the Act. 4.05 Authorization The execution, delivery and performance by the Company of the Equipment Purchase Certificates and the other Operative Agreements to which it is a party have been duly authorized by all necessary corporate action of the Company. 4.06 Governmental Approvals No authorization, approval, consent or other action by, and no notice to or filing with, any United States Federal or state governmental authority or regulatory body is required for the due execution, delivery or, except as specified in Section 4.04 above, performance, by the Company of the Equipment Purchase Certificates or the other Operative Agreements to which it is a party. 4.07 Enforceability Each of the Equipment Purchase Certificates issued or to be issued by the Company on a Delivery Date with respect to which it has given a notice of borrowing pursuant to Section 2.02 hereof, and each of the other Operative Agreements to which it is or will be a party on such Delivery Date, has, or on such Delivery Date will have, been duly and validly executed and delivered by the Company and constitutes, or on such Delivery Date will constitute, 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. 4.08 No Conflicts Neither the execution, delivery or performance by the Company of this Agreement, the Equipment Purchase Certificates or any of the other Operative Agreements to which it is a party, nor compliance with the terms and provisions hereof or thereof, 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 (other than the Consent and Agreement, the AVSA Consent and Agreement and the Engine Consent and Agreement) 28 29 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 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 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, except for the Liens of the Indenture. 4.09 Litigation [ * ] 4.10 Taxes The Company has filed or caused to be filed all tax returns which are required to be filed and has paid or caused to be paid all taxes shown to be due and payable pursuant to such returns or pursuant to any assessment received by the Company (other than assessments the payment of which is being contested in good faith by the Company), and the Company has no knowledge of any related actual or proposed deficiency or additional assessment which either in any case or in the aggregate would materially adversely affect the Company's consolidated financial condition (other than, in any such case, assessments, the payment of which is being contested in good faith by the Company and other than the federal transportation excise tax assessments, the protests against which are described in the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1994 (as updated by Note 7 to the financial statements included in the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended February 28, 1995) which assessments are being contested in good faith by the Company). 4.11 Financial Statements The Company has heretofore delivered to the Banks true and correct copies of the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1994, and of the Company's Quarterly Report on Form 10-Q referred to in Section 4.09 above, and of the audited consolidated balance sheets of the Company for the fiscal year 1994 and the unaudited consolidated balance sheets of the Company as of February 28, 1995, and the related consolidated statements of income, changes in common - -------------------- *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 30 stockholders' investment and cash flows for the fiscal year and interim reporting period ended on such dates, accompanied (except in the case of such interim reporting period) by a report thereon containing opinions without qualification by Arthur Andersen & Co., independent public accountants. Said financial statements have been prepared in accordance with GAAP consistently applied and present fairly the financial position of the Company as of such dates and the results of its operations and cash flows for such periods. 4.12 Disclosure [ * ] 4.13 No Defaults, Etc. The Company is not in default under any mortgage, deed of trust, indenture or other instrument or agreement to which the Company is a party or by which it or any of its Properties may be bound, or in violation of any applicable law, which default or violation would have a material adverse effect on the financial condition, business or operations of the Company or its ability to perform any of its obligations under any of the Operative Agreements to which it is or will be a party. 4.14 Use of Proceeds [ * ] 4.15 ERISA Except as otherwise disclosed in writing to the Agent and each Bank: (a) none of the Plans nor their related trusts have been terminated in a distress termination pursuant to Section 4041(c) of ERISA or by the PBGC pursuant to Section 4042 of ERISA, nor have any actions been taken to so terminate any Plan or related trust and neither the Company nor any ERISA Affiliate has incurred or could reasonably expect to incur any material liability with respect to a Plan under Section - -------------------- *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. 30 31 4062, 4063, 4064 or 4069 of ERISA; (b) there have been no "reportable events" (as such term is defined in Section 4043(b) of ERISA) with respect to any Plan which have resulted or could reasonably be expected to result in any material liability of the Company; (c) no "accumulated funding deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of the Code) exists with respect to any Plan, whether or not waived, nor has any request for a waiver under Section 412(d) of the Code been, or is reasonably likely to be, filed with respect to any of the Plans; (d) neither the Company nor any ERISA Affiliate has failed to make any contribution or payment to any Plan which has resulted or could reasonably be expected to result in the imposition of a Lien under Section 302(f) of ERISA or Section 412(n) of the Code; (e) all Plans are in compliance in all material respects with all applicable provisions of ERISA and the Code and have been so administered and operated by the Company and/or ERISA Affiliates, as applicable; (f) neither the Company nor any ERISA Affiliate has incurred or is reasonably likely to incur any material withdrawal liability pursuant to Section 4201 or 4204 of ERISA or any material liability under Section 515 of ERISA; and (g) to the best of the Company's knowledge, neither the Company nor any ERISA Affiliate has engaged in a "prohibited transaction" (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to subject the Company to the tax or penalties on prohibited transactions imposed by Section 4975 of the Code or Section 502 of ERISA. [ * ] [ * ] Section 5. The Agent - ---------------------- *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. 31 32 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 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 Equipment Purchase Certificate delivered to the Agent on behalf of such Bank pursuant to Section 3(b) hereof unless and until such Bank shall direct the Agent in writing to deliver such Equipment Purchase 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 Company's delivering any such Equipment Purchase Certificate to such Bank shall be satisfied by the Company's delivering such Equipment Purchase 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; (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 Equipment Purchase 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 Equipment Purchase 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 32 33 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 a Default or an Event of Default unless the Agent has received notice from a Bank or the Company specifying such Default or Event of Default and stating that such notice is a "Notice of Default" or "Notice of Event of Default", as the case may be. In the event that the Agent receives such a notice of the occurrence of a Default or an 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 Default or 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 Default or 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. 5.04 Rights as a Bank With respect to its Commitments and the Loans made by it, Chase (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. Chase (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 Chase 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 33 34 thereby (including, without limitation, the costs and expenses that the Company is obligated to pay under Section 7.03 hereof, but excluding, unless a Default or an 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 of the Company 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 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, that shall be a bank which 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 34 35 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. Certain Covenants 6.01 Tax Indemnity (a) Generally. The Company agrees promptly to pay when due, and to indemnify and hold each Bank and the Agent (each an "Indemnitee") harmless from the following taxes, fees, levies, imposts, recording duties, charges or withholdings, together with any assessments, penalties, fines, additions to tax or interest thereon (individually, a "Tax," and collectively, "Taxes"), however imposed, upon or with respect to, payments by the Company hereunder or under the Equipment Purchase Certificates or an Indenture: (i) Taxes imposed on or measured by the net or gross income or excess profits, receipts, minimum tax, capital, franchise, net worth or conduct of business taxes of any Indemnitee, solely to the extent that such Income Tax is imposed by an authority purporting to have power to impose a Tax other than the United States federal government, and only if (i) the operation, registration, location, presence, basing or use of any Aircraft or Airframe or any part thereof, or (ii) the place of incorporation, principal office or corporate domicile of the Company in such state or foreign country is the sole connection between such Indemnitee and such jurisdiction; and (ii) any U.S. Federal withholding taxes with respect to an Indemnitee which is not a United States Person (as described in Section 7701(a)(30) of the Code) if such Indemnitee in a timely manner (I) delivers (A) two duly completed Treasury Department Forms 4224 with respect to any and all payments under the Equipment Purchase Certificates, (B) a Treasury Department Form 1001 claiming the benefit of a Tax treaty with respect to interest, or (C) a Treasury Department Form W8, in each case, evidencing such Indemnitee's complete exemption from United States withholding taxes on interest, and (II) executes and delivers additional Treasury Department Form 4224, 1001, or W8 (or any successor forms), as applicable in such manner and at such times as may be necessary to evidence such exemption unless and to the extent that such Indemnitee is not legally entitled to do so as a result of a change in law, treaty or regulation enacted, adopted or promulgated after the date such Holder became a Holder other than the amendment of a tax treaty or the adoption of a new treaty that contains a limitation of benefits article similar to that contained in article 28 of the German-U.S. tax treaty signed August 29, 1989); provided, however, that the provision of this clause (ii) shall not apply to any U.S. Federal withholding taxes for which the Company would be required to indemnify a Holder so that any payment otherwise required to be made on a After-Tax Basis under the Operative Agreements is made on an After-Tax Basis. 35 36 The Company shall withhold (or cause to be withheld) any Taxes required to be withheld on payments to any Bank (including the Agent) who is not a U.S. Person except to the extent that such Bank (including the Agent) has furnished evidence satisfactory to the Company of any exemption from withholding claimed by such Bank (including the Agent). (b) After-Tax Basis. The amount which the Company shall be required to pay with respect to any Tax indemnified against under Section 6.01(a) shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis, to the same position such party would have been in had such Tax not been incurred. If any Indemnitee actually realizes a tax benefit by reason of the payment of any Tax paid or indemnified against by the Company, such Indemnitee shall promptly pay to the Company to the extent such tax benefit was not previously taken into account in computing such payment, but not before the Company shall have made all payments then due to such Indemnitee under this Agreement, and any other Operative Agreement, an amount equal to the lesser of (x) such amount as such Indemnitee reasonably estimates represents the sum of such tax benefit plus any other tax benefit realized by such Indemnitee that would not have been realized but for any payment made by such Indemnitee pursuant to this sentence and not already paid to the Company, and (y) the amount of the payment, if any, then required to be made under Sections 6.01(a) and this Section 6.01(b) by the Company to such Indemnitee plus the amount of any other payments by the Company to such Indemnitee theretofore required to be made under Section 6.01(a) and this Section 6.01(b) (and the excess, if any, of the amount described in clause (x) above over the amount described in clause (y) above shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Company to make payments pursuant to Section 6.01(a)); provided, however, that such Indemnitee shall not be obligated to make any payment to the Company pursuant to this sentence as long as an Event of Default shall have occurred and be continuing. The Company shall reimburse on an After-Tax Basis such Indemnitee for any payment of a tax benefit pursuant to the preceding sentence to the extent that such tax benefit is disallowed or reduced in a taxable year subsequent to the year of such payment (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired). (c) Time of Payment. Any amount payable to an Indemnitee pursuant to this Section 6.01 shall be paid within 30 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable; provided, that in the case of amounts which are being contested by the Company in good faith or by the Indemnitee pursuant to subsection (f) below, such amount shall be payable 30 days after the time such contest is finally resolved. (d) Contests. If a written claim is made against any Indemnitee for Taxes with respect to which the Company is liable for a payment or indemnity under Section 6.01(a)(i) hereof, such Indemnitee shall promptly give the Company notice in writing of such claim and shall furnish the Company with copies of any requests for information from any taxing authority 36 37 relating to such Taxes with respect to which the Company may be required to indemnify hereunder; provided, however, that the failure of an Indemnitee to give such notice or furnish such copy shall not terminate any of the rights of such Indemnitee under this Section 6.01, except to the extent that the Company has been materially and adversely prejudiced by such failure. The Indemnitee shall in good faith, with due diligence and at the Company's expense, if timely requested in writing by the Company, contest (or, at the Indemnitee's option, require the Company to contest in the name of the Company if permitted by law, or the Indemnitee) the validity, applicability or amount of such Taxes by: (i) resisting payment thereof if lawful and practicable or not paying the same except under protest if protest is necessary and proper in each case so long as nonpayment will not result in a material risk of the sale, forfeiture or loss of, or the creation of a Lien other than a Lien permitted under Section 4.01(a) or (c) of the related Indenture on any Aircraft, Airframe or any parts; or (ii) if the payment be made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings. If the Indemnitee elects to conduct the contest it shall determine in consultation with the Company, the manner in which to contest such Taxes and the Indemnitee shall advise the Company of actions to be taken in implementing such contest and shall consider in good faith any suggestion made by the Company as to the method of pursuing such contest. Notwithstanding the preceding sentences of this subsection (d) such Indemnitee shall not be required to take any action unless the Company shall have (i) agreed to indemnify the Indemnitee for any liability or reasonable expense which such Indemnitee incurred as a result of contesting such Taxes including without limitation (y) reasonable attorneys' and accountants' fees, and (z) the amount of any interest, penalty or additions to tax which may ultimately be payable as the result of contesting such Taxes; (ii) delivered to the Indemnitee a written acknowledgment of the Company's obligation to such Indemnitee pursuant to this Agreement to the extent that the contest is not successful; provided, however, that such acknowledgement shall not preclude the Company from raising defenses to liability under this Agreement if a decision in such contest is rendered which articulates the cause of such Tax and the cause, as so articulated, is not one for which the Company is responsible to pay an indemnity hereunder; (iii) furnished such Indemnitee with an opinion of counsel to the effect that reasonable grounds exist for contesting such Tax; and (iv) made all payments and indemnities (other than contested payments and indemnities) then due to the Indemnitee hereunder or with respect to any of the transactions contemplated by or under any Operative Agreements. In no event shall such Indemnitee be required or the Company permitted to contest pursuant to this subsection (d) the imposition of any Tax for which the Company is obligated to indemnify any Indemnitee hereunder unless, if such contest shall be conducted in a manner requiring payment of the claim in advance, the Company shall have advanced sufficient funds, on an interest free basis to make the payment required, and agreed to 37 38 indemnify the Indemnitee against any additional net after-tax cost to such Indemnitee of such advance. Nothing contained in this subsection (d) shall require any Indemnitee to contest, or permit the Company to contest, a claim which such Indemnitee would otherwise be required to contest pursuant to this subsection (f), if such Indemnitee shall waive payment by the Company of any amount that might otherwise be payable by the Company under this Section 6.01 in connection with such claim. (e) Refunds. Upon receipt by an Indemnitee of a refund of all or any part of any Taxes which the Company shall have paid for such Indemnitee or for which the Company shall have reimbursed or indemnified such Indemnitee, and provided there shall not have occurred and be continuing any Payment Default, Bankruptcy Default or Event of Default (in which case payment shall not be made to the Company until such Payment Default, Bankruptcy Default or Event of Default shall have been cured), such Indemnitee shall pay to the Company an amount equal to the amount of such refund less (x) reasonable expenses not previously reimbursed, (y) all payments then due to such Indemnitee under this Section 6.01 and (z) Taxes payable with respect to receipt thereof, including interest received attributable thereto, plus any tax benefit actually realized by such Indemnitee as a result of any payment by such Indemnitee made pursuant to this sentence. (f) Survival of Obligations. The representations, warranties, indemnities, agreements and obligations under this Section 6.01 shall survive the making available by the Banks of their respective Commitments and the expiration or other termination of the Operative Agreements but, as to such indemnities, only with respect to losses, liabilities, obligations, damages, penalties, claims, actions, suits, costs, expenses and disbursements caused by events or existing prior to or incurred in the process of the termination of the related Indenture or the return or disposition of the related Aircraft. 6.02 General Indemnity (a) For the purposes of this Section 6.02, "Claims" shall mean any and all costs, liabilities (including strict or absolute liability without fault in tort or otherwise), losses, damages, penalties, actions or suits or claims which may be imposed on, incurred by, suffered by, or asserted against an Indemnified Person, as defined herein, and, except as otherwise expressly provided in this Section 6.02, shall include all reasonable out-of-pocket costs, disbursements and expenses (including legal fees and expenses, including, without limitation, the allocated reasonable costs and expenses of in-house counsel to any Bank) paid or incurred by an Indemnified Person in connection therewith. (b) For the purposes of this Section 6.02, "Indemnified Person" means the Agent, each Bank and each of the successors, permitted transferees or assigns of each of the foregoing and their respective officers, directors, employees and agents permitted under the terms hereof; provided, that any Persons who are not signatories hereto that make a claim for 38 39 indemnification hereunder in respect of any Claim shall by the making of such Claim be deemed to have agreed to be bound by all the terms of this Section 6.02. (c) Subject to the exclusions stated in clause (d) below, the Company agrees to indemnify, defend and hold harmless each Indemnified Person on an After-Tax Basis against Claims resulting from or arising out of: (i) the purchase, ownership, operation, possession, use, maintenance, overhaul, testing, registration, reregistration, modification, alteration or lease of any Aircraft, Airframe or any Engine, or any engine used in connection with any Airframe, or any part thereof by the Company, any Lessee or any other Person whatsoever, whether or not such purchase, ownership, operation, possession, use, maintenance, overhaul, testing, registration, reregistration, nonuse, modification, alteration or lease is in compliance with the terms of the related Indenture; (ii) the manufacture, design, purchase, acceptance, rejection, delivery, or condition of any Aircraft or any Engine, including, without limitation, latent and other defects, whether or not discoverable, and patent, trademark or copyright infringement; and (iii) any breach of or failure to perform or observe, or any other noncompliance with, any covenant or agreement to be performed or other obligation of the Company under any of the Operative Agreements, or the falsity of any representation or warranty of the Company in any of the Operative Agreements. (d) The following are excluded from the Company's agreement to indemnify under this Section 6.02: (i) Claims which are Taxes whether or not covered pursuant to the indemnity set forth in Section 6.01 hereof; (ii) with respect to any particular Indemnified Person, Claims to the extent attributable to the gross negligence or willful misconduct of, or to the breach of any contractual obligation by, or the falsity or inaccuracy of any representation or warranty of, such Indemnified Person; (iii) Claims attributable to acts or events occurring in any period subsequent to termination of this Loan Agreement and the repayment in full of the Loans and all other amounts due to the Banks hereunder and under the other Operative Agreements; (iv) with respect to any particular Indemnified Person, Claims in respect of any Liens described in Section 4.01(c) of any Indenture, to the extent attributable to such Indemnified Person; and 39 40 (v) with respect to any particular Indemnified Person, Claims to the extent resulting from or arising out of any transfer by such Indemnified Person of any Equipment Purchase Certificate, unless such transfer shall occur during a period when an Event of Default under the related Indenture has occurred and is continuing or shall have been made at the request of the Company as contemplated by Section 2.15 hereof (but in the case of a transfer so requested by the Company, Claims shall not include Additional Costs to the extent such Indemnified Person is pursuant to clause (a) of Section 2.15 hereof denied the right to Additional Cost otherwise payable to it pursuant to Section 2.12). (e) In the case of any Claim indemnified by the Company hereunder which is covered by a policy of insurance maintained by the Company pursuant to Section 4.06 of the related Indenture or otherwise, the Company and its insurers shall, unless an Event of Default shall have occurred and be continuing, have the right (in each case at the Company's sole cost and expense) to investigate such Claim and any Indemnified Person claiming indemnification hereunder in respect of such Claim shall reasonably cooperate (at the Company's sole cost and expense) with such insurers in connection therewith. (f) An Indemnified Person shall promptly notify the Company of any Claim as to which indemnification is sought. Subject to the rights of insurers under policies of insurance maintained by the Company, the Company shall, unless an Event of Default shall have occurred and be continuing, have the right to investigate, and the right in its sole discretion to defend or compromise any Claim for which indemnification is sought under this Section 6.02, and the Indemnified Person shall cooperate with all reasonable requests of the Company in connection therewith; provided, that the Company shall have first acknowledged in writing to such Indemnified Person the Company's obligation to indemnify such Person hereunder in respect of such Claim; and provided, further, the Company shall not be entitled to assume and control the defense of any such Claim if and to the extent such Indemnified Person reasonably objects to such control on the ground that an actual or potential material conflict of interest exists where it is advisable for such Indemnified Person to be represented by separate counsel. Subject to the immediately foregoing sentence, where the Company or the insurers under a policy of insurance maintained by the Company undertake the defense of an Indemnified Person with respect to a Claim, no additional legal fees or expenses of such Indemnified Person in connection with the defense of such Claim shall be indemnified hereunder unless the fees or expenses were incurred at the written request of the Company or such insurers. Subject to the requirement of any policy of insurance applicable to a Claim, an Indemnified Person may participate at its own expense in any judicial proceeding controlled by the Company or its insurers pursuant to the preceding provisions, provided that such party's participation does not, in the opinion of the independent counsel appointed by the Company or its insurers to conduct such proceedings, interfere with such control; and such participation shall not constitute a waiver of the indemnification provided in this Section 6.02. 40 41 (g) To the extent that a Claim indemnified by the Company under this Section 6.02 is in fact paid by the Company and/or an insurer under a policy of insurance maintained by the Company, the Company and/or such insurer as the case may be shall be subrogated to the extent of such payment to the rights and remedies of the Indemnified Person on whose behalf such Claim was paid with respect to the transaction or event giving rise to such Claim. Should an Indemnified Person receive any refund, in whole or in part, with respect to any Claim paid by the Company hereunder, it shall promptly pay over the amount refunded, together with any interest received with respect to such amount for the period between the indemnification payment and the receipt of such refund, to the Company, but in no event more than the amount theretofore received by such Indemnified Person from the Company and its insurers in respect of such Claim. (h) The general indemnification provisions of this Section 6.02 are not intended to waive or supersede any specific provisions of, or any rights or remedies of the Company under, this Loan Agreement or any other Operative Agreement to the extent such provisions apply to any Claim. The Company does not guarantee and nothing in the general indemnification provisions of this Section 6.02 shall be construed as a guarantee by the Company with respect to the value of any Aircraft or any part thereof. 6.03 Insurance [ * ] 6.04 Liens Notwithstanding any provision of any Indenture or any other Operative Agreement to the contrary, if the Company shall fail to perform or observe the provisions of Section 4.01 of any Indenture, such failure shall constitute a "Default" under such Indenture, and if such failure shall continue unremedied for a period of 30 days, such failure shall, unless such failure does not involve any material danger of the sale, forfeiture or loss of any of the Indenture Estate or any interest therein, constitute an "Event of Default" under such Indenture, in each case for all purposes thereof and of the related Operative Agreements, and such Default or Event of Default, as the case may be, shall be deemed to exist and continue so long as, but only so long as, it shall not have been remedied, and, without limiting the generality of the foregoing, the remedial provisions of Section 6.02 of such Indenture shall apply to such Event of Default as if it were an Event of Default expressly referred to in Section 6.01 thereof (other than an Event of Default referred to in Section 6.01(d), (e) or (f) thereof). 6.05 Certification The Company shall, as long as and to the extent required under Section 1110 of the Bankruptcy Code in order that the Indenture Trustee under such - ----------------------- *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. 41 42 Indenture shall be entitled to the benefits of said Section 1110 with respect to the Aircraft subject to the Lien thereof, remain a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Act holding an "air carrier operating certificate" issued under Chapter 447 of the Act for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo. 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 or any Equipment Purchase Certificate or any other Operative Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Agreement or any Equipment Purchase Certificate or any other Operative 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 Federal Express 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 Federal Express 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 each of the Banks and the Agent for paying: (a) all reasonable out-of-pocket costs and expenses of the Banks and the Agent (including, without limitation, and within 30 days after receipt of any statement therefor or reasonably promptly after the closing of any U.S. leveraged lease financing under the Facility, the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special New York counsel for the Banks, and S.G. Archibald, special French counsel for the Banks), in connection with (i) the negotiation, preparation, execution and delivery of this Agreement and the other Operative Agreements and the making of the Loans hereunder, and (ii) any modification, supplement or waiver of any of the terms of this Agreement or any of the other 42 43 Operative Agreements; (b) all reasonable costs and expenses of the Banks and the Agent (including, without limitation, reasonable counsels' fees and the allocated reasonable costs and expenses of in-house counsel to any Bank) in connection with (i) any Default or Event of Default and any enforcement or collection proceedings resulting therefrom or in connection with the negotiation of any restructuring or "work-out" (whether or not consummated), or the obligations of the Company hereunder and (ii) the enforcement of this Section 7.03; and (c) except in connection with such Bank's voluntary transfer, or grant of a participation in, its Loans or Equipment Purchase Certificates (other than if an Event of Default shall have occurred and be continuing), all appraisal costs and all transfer, stamp, documentary or other similar taxes, assessments or charges levied by any governmental or revenue authority in respect of this Agreement or any of the other Operative Agreements or any other document referred to herein or therein and all costs, expenses, taxes, assessments and other charges incurred in connection with any filing, registration, recording or perfection of any security interest contemplated by any Operative Agreement or any other document referred to therein, including, without limitation, the Uniform Commercial Code financing statements referred to in Section 3(h) and any continuation statements in respect thereof; provided that, notwithstanding any provision of this Agreement or the Facility to the contrary, in no event shall the Company be required to pay or reimburse any Bank for any out-of-pocket costs or expenses incurred by such Bank in connection with any Loan to be made by it hereunder if such Bank, after satisfaction in full in accordance with the terms of this Agreement of the conditions to its obligation to make such Loan, shall fail to make such Loan as provided herein in breach of its obligations hereunder. 7.04 Amendments, Etc. Except as otherwise expressly provided in this Agreement and subject always to the provisions of Section 10.01(b) of the related Indenture, 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 or by the Agent acting with the consent of all of the Banks: (i) increase, or extend the term of any of the Commitments, or extend the time or waive any requirement for the reduction or termination of any of the Commitments, (ii) extend the date fixed for the payment of principal of or interest on any Loan or the Equipment Purchase Certificate evidencing the same or fee hereunder, (iii) reduce the amount of any such payment of principal, (iv) reduce the rate at which interest is payable thereon or any fee is payable hereunder, (v) alter the rights or obligations of the Company to prepay Loans or the Equipment Purchase Certificates evidencing the same as provided in the related Indenture, (vi) alter the terms of this Section 7.04, (vii) 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, or (viii) waive any of the 43 44 conditions precedent set forth in Section 3 hereof; and (b) any modification or supplement of Section 5 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 any Loan hereunder are, in the opinion of the Majority Banks, satisfied, any Bank shall fail to fulfill its obligations to make such Loan 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. 7.06 Assignments and Participations (a) The Company may not assign any of its rights or obligations hereunder or under the Equipment Purchase Certificates or the other Operative Agreements without the prior consent of all of the Banks and the Agent. (b) Subject to Section 2.08 of the related Indenture, each Bank may assign any of its Loans and the Equipment Purchase Certificates evidencing the same 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 January 1, 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 in the case of any assignment made after the first anniversary of the Closing Date or at any time that an 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 Equipment Purchase Certificates evidencing the same or Commitment shall be made in such manner so that the same portion of its Loans and the Equipment Purchase Certificates evidencing the same and Commitments is assigned to the respective assignee, (v) whether or not in connection with any assignment requiring the Company's consent hereunder, unless an Event of Default shall have occurred and be continuing, the Company shall not immediately after giving effect to such assignment have any increased liabilities or additional costs in connection with or as a result of any such assignment, and (vi) each such assignment 44 45 by a Bank of its Loans and the Equipment Purchase Certificates evidencing the same and/or its Commitment shall 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. Upon each such assignment the assigning Bank shall pay the Agent an assignment fee of $2,500. The Company shall not be required to pay any costs or expenses of any such assignment. (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 Equipment Purchase 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 Equipment Purchase 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), and in no event shall the Company have any increased liabilities or additional costs in connection with or as a result of any such participation. In no event shall a Bank that sells a participation agree with the Participant to take or refrain from taking any action hereunder or under any other Operative Agreement except that such Bank may agree with the Participant that it will not, without the consent of the Participant, agree to any modification, supplement or waiver of any provision of this Agreement or any other related Operative Agreement that would have the effect described in clause (a)(i), (ii), (iii), (iv) or (v) of the proviso to Section 7.04 hereof, provided that in no event shall the Company have any obligation by reason of any such agreement between a Bank and a Participant to inquire into whether such Bank has complied with the provisions thereof in connection with any action taken by such Bank under or pursuant to this Agreement or any other Operative Agreement. (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 Equipment Purchase 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. - -------------- *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. 45 46 (e) A Bank may furnish any information concerning the Company or any of its Subsidiaries in the possession of such Bank from time to time to permitted assignees and participants (including prospective assignees and participants), subject, however, to the provisions of Section 7.14(b) hereof. (f) Anything in this Section 7.06 to the contrary notwithstanding, no Bank may assign or participate any interest in any Loan and Equipment Purchase 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 Bank. 7.07 Survival The obligations of the Company under Sections 2.12 and 7.03 hereof and the obligations of the Banks under Sections 5.05 and 6 hereof shall survive the repayment, disposition and/or payment in full of the Loans and Equipment Purchase Certificates evidencing the same and the termination of the Commitments. In addition, each representation and warranty made, or deemed to be made hereunder or pursuant hereto shall survive the making of such representation and warranty, and no Bank shall be deemed to have waived, by reason of making any Loan hereunder, any Default or Event of Default which may arise by reason of such representation or warranty proving to have been false or misleading, notwithstanding that such Bank or the Agent may have had notice or knowledge or reason to believe that such representation or warranty was false or misleading at the time such extension of credit was made. 7.08 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. 7.09 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. 7.10 Governing Law; Submission to Jurisdiction This Agreement shall be governed by, and construed in accordance with, the law of the State of New York. The Company hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York state court sitting in New York, New York for the purposes of all legal proceedings arising out of or relating to this Agreement or the other Operative Agreements or the transactions contemplated hereby or thereby. The Company irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Nothing in this Section 7.10 shall affect the right of the Agent or any Bank to serve legal process in any other manner permitted by law or affect the right of the Agent or any Bank to bring any action or proceeding against the Company or its Property in the courts of other jurisdictions. 46 47 7.11 Waiver of Jury Trial EACH OF THE COMPANY, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 7.12 No Oral Modifications The terms and provisions of this Agreement and the other Operative Agreements may not be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party or parties against which enforcement of the change, waiver, discharge or termination is sought and subject to Section 7.04 hereof. 7.13 Severability Any provision of this Agreement which 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. 7.14 Treatment of Certain Information; Confidentiality (a) The Company acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to the Company or one or more of its Subsidiaries (in connection with this Agreement or otherwise) by any Bank or by one or more subsidiaries or affiliates of such Bank and the Company hereby authorizes each Bank to share any information delivered to such Bank by the Company and its Subsidiaries pursuant to this Agreement, or in connection with the decision of such Bank to enter into this Agreement, to any such subsidiary or affiliate, it being understood that any such subsidiary or affiliate receiving such information shall be bound by the provisions of clause (b) below as if it were a Bank hereunder. (b) Each Bank and the Agent agrees (on behalf of itself and each of its affiliates, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with their customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices, any non-public information supplied to it by the Company pursuant to this Agreement which is identified by such Person as being confidential at the time the same is delivered to the Banks or the Agent, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for any of the Banks or the Agent who have been instructed and have agreed to hold such information confidential, (iii) to bank examiners, auditors or accountants, (iv) to the Agent or any other Bank (or to Chase Securities, Inc. in its role as syndicator of the Loans), (v) in connection with any litigation to which any one or more of the Banks or the Agent is a party 47 48 relating to the transactions contemplated hereby or by any of the other Operative Agreements, (vi) to a subsidiary or affiliate of such Bank as provided in clause (a) above or (vii) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first executes and delivers to the respective Bank an agreement in writing to be bound by the provisions of this clause (b). 7.15 Leveraged Lease Documentation; Conversion Each of the Banks agrees that it will, at the Company's request, (i) provide loan participations in a U.S. leveraged lease financing of the purchase of one or more of the Aircraft, in lieu of the Loans contemplated hereby to be made in respect of such Aircraft, and (ii) if the Agent consents thereto, convert the Loans made hereunder in respect of one or more particular Aircraft into loan participations in a U.S. leveraged lease of such Aircraft, in each case subject to the terms and conditions of and as contemplated by the Facility, subject to the preparation, negotiation, execution and delivery of definitive leveraged lease documentation therefor incorporating the terms set forth for a leveraged lease financing in the Facility and otherwise in form and substance reasonably satisfactory to the Banks and the Agent. 7.16 Allocation Any amount payable hereunder by the Company to any Bank or the Agent (whether pursuant to Section 6.01, 6.02 or 7.03 hereof or otherwise) that does not relate only to a single, particular outstanding Loan or Equipment Purchase Certificate may, for purposes of the Indentures (including, in particular, the second paragraph of Section 1.01 of each thereof), be allocated among the outstanding Loans or Equipment Purchase Certificates by such Bank or the Agent, as the case may be, in such manner as it may reasonably determine. 48 49 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: Managing Director Aircraft Financing 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: General Counsel 49 50 Commitment for each THE CHASE MANHATTAN BANK - ------------------- Aircraft: (NATIONAL ASSOCIATION) - -------- $17,531,250.00 Aggregate Commitment: By /s/ MATTHEW H. MORRIS - -------------------- --------------------- Title: Vice President $87,656,250.00 Lending Office for all Loans: Maximum Exposure: The Chase Manhattan Bank - ---------------- (National Association) $52,500,000.00 One Chase Manhattan Plaza New York, New York 10081 Address for Notices: The Chase Manhattan Bank (National Association) One Chase Manhattan Plaza New York, New York 10081 Attention: Mr. Sherwood E. Exum, Jr. Telex No.: 62910 (Answerback: CHAMBANK) Telecopier No.: 212-552-5242 Telephone No.: 212-552-4655 212-552-5910 50 51 Commitment for each BANK OF AMERICA NT & SA - ------------------- Aircraft: - -------- $17,531,250.00 Aggregate Commitment: By /s/ TIMOTHY C. HINTZ - -------------------- -------------------- Title: Vice President $87,656,250.00 Lending Office for all Loans: Maximum Exposure: - ---------------- Bank of America NT & SA $52,500,000.00 GPO Account Admin. #5693 1850 Gateway Blvd. Concord, CA 94520 Address for Notices: Bank of America NT & SA GPO Account Admin. #5693 1850 Gateway Blvd. Concord, CA 94520 Attention: Mr. Milt Haverty Telex No.: 67652 (Answerback: BANAMERSFO) Telecopier No.: 510-675-7531 Telephone No.: 510-675-8254 51 52 Commitment for each CIBC INC. - ------------------- Aircraft: - -------- $17,531,250.00 Aggregate Commitment: By /s/ JAVREN S. - -------------------- ------------- Title: Managing Director $87,656,250.00 Lending Office for all Loans: Maximum Exposure: - ---------------- CIBC Inc. $52,500,000.00 Two Paces West 2727 Paces Ferry Road, Suite 1200 Atlanta, GA 30339 Address for Notices: CIBC Inc. Two Paces West 2727 Paces Ferry Road, Suite 1200 Atlanta, GA 30339 Attention: Ms. Pluria Howell Telex No.: 542413 (Answerback: CANBANKATL) Telecopier No.: 404-319-4950 Telephone No.: 404-319-4814 52 53 Commitment for each THE FIRST NATIONAL BANK OF CHICAGO - ------------------- Aircraft: - -------- $17,531,250.00 Aggregate Commitment: By /s/ DAVID DIXON - -------------------- --------------- Title: Authorized Agent $87,656,250.00 Lending Office for all Loans: Maximum Exposure: - ---------------- The First National Bank of $52,500,000.00 Chicago One First National Plaza, Suite 0362 Chicago, IL 60670 Address for Notices: The First National Bank of Chicago Transportation Division One First National Plaza, Mail Suite 0362 Chicago, IL 60670 Attention: Mr. David G. Dixon Telecopier No.: 312-732-3055 Telephone No.: 312-732-8142 53 54 THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Agent By /s/ MATTEW H. MORRIS -------------------- Title: Vice President Address for Notices to Chase as Agent: The Chase Manhattan Bank (National Association) 4 Chase Metrotech Center 13th Floor Brooklyn, New York 11245 Attention: New York Agency Telex No.: 6720516 (Answerback: CMBNYAUW) Telecopier No.: (718) 242-6909 Telephone No.: (718) 242-7978 54 55 Schedule I DEFINITIONS GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Act or Federal Aviation Act. Title 49 of the United States Code (which, among other things, recodified the Federal Aviation Act of 1958, as amended to the time of such recodification), as amended and in effect on the date of the Indenture and as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Additional Insureds. The Indenture Trustee, the Agent and the Holders, and in the case of insurance obtained by any lessee of the Aircraft, the Company in its capacity as lessor under any of the Aircraft. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency succeeding to the functions of any of the foregoing. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person whether through the ownership of voting securities or by contract or otherwise. 55 56 After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person shall be supplemented by a further payment to such Person so that the sum of the two payments, after deduction of all Taxes resulting from the receipt or accrual of such payments, shall be equal to the payment received or deemed to have been received. Agent. The Chase Manhattan Bank, N.A. and its successors and permitted assigns, as Agent for the Banks under the Loan Agreement. Air Carrier. Any U.S. Carrier and any "foreign air carrier" (as defined in the Act) as to which there is in force a permit granted under Section 41302 of the Act. Airbus Guaranty. The Guaranty dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Company pursuant to the Purchase Agreement (or any permitted substitute airframe) together with the two Engines (or any Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 4.05(c) of the Indenture. Airframe. The Airbus Industries A300F4-605R (excluding the Engines or engines from time to time installed thereon) having the United States FAA Registration Number and manufacturer's serial number specified in the Indenture Supplement, including (i) all Parts, and (ii) any replacement airframe which may be substituted pursuant to Section 4.05(c) of the Indenture, whether or not the same shall at the time be incorporated in or attached to such aircraft. Amortization Dates. The dates listed under the heading "Amortization Date" in Section 2.02(a) of the Indenture. Applicable Lending Office. For each Holder and for each Type of Loan, the "Lending Office" of such Holder (or of an Affiliate of such Holder) designated for such Type of Loan on the signature pages of the Loan Agreement or such other office of such Holder (or of an Affiliate of such Holder) as such Holder 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. Appraisal. The report prepared by the BK Associates, Inc. and delivered to the Indenture Trustee on the Delivery Date pursuant to Section 3(1) of the Loan Agreement. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France, and its successors and assigns. 56 57 AVSA Consent and Agreement. The Consent and Agreement dated as of the Document Date, executed by AVSA, as the same may be amended, modified or supplemented from time to time. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Company and dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 6.01(e) and (f) of the Indenture which either does or with the giving of notice or lapse of time or both would constitute an Event of Default. Banks. Has the meaning set forth in the Loan Agreement. Base Rate. For any day, a rate per annum equal to the higher of (a) the Federal Funds Rate for such day plus [ * ] and (b) the Prime Rate for such day. 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. [ * ] Base Rate Loan. Loans evidenced by an Equipment Purchase Certificate that bears interest at rates based upon the Base Rate. Bills of Sale. Collectively, the FAA Bill of Sale for the Aircraft and AVSA's Warranty Bill of Sale. Breakage Costs. An amount payable pursuant to Section 2.02(f) of the Indenture. Business Day. (a) Any day on which commercial banks are not authorized or required to close in New York City or Georgia or (b) if such day relates to the giving of notices or quotes in connection with a borrowing of, a payment or prepayment of principal of or interest on, a conversion of or into, or an Interest Period for, a Floating Rate Loan or a notice by the Company with respect to any such borrowing, payment, prepayment conversion or Interest Period, any date on which commercial banks are not authorized or required to close in New York City and on which dealings in Dollar deposits are carried out in the London interbank market. - -------------------------- *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. 57 58 Chase. The Chase Manhattan Bank (National Association). Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Act, or any analogous part of any successor substituted legislation or regulation at the time in effect. Code. Except as otherwise provided, references to the Code shall mean the Internal Revenue Code of 1986, as amended from time to time. Commitments. Has the meaning assigned to such term in the Loan Agreement. Company. Federal Express Corporation, a Delaware corporation, and its successors and permitted assigns. Consent and Agreement. The Consent and Agreement dated as of the Document Date, executed by the Manufacturer, as the same may be amended, modified or supplemented from time to time. Consent and Guaranty. The Consent and Guaranty of the Manufacturer dated as of July 3, 1991 attached to the Purchase Agreement. Corporate Trust Office. The corporate trust office of the Indenture Trustee located at 600 Peachtree Street, N.E., Suite 900, Atlanta, Georgia 30308 or such other office at which the Indenture Trustee's corporate trust business shall be administered that the Indenture Trustee shall have specified by notice in writing to the Company and the Holders. Debt Rate. The Floating Rate or the Base Rate, as the case may be. Default. Any event of condition, which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which (i) the Aircraft is to be delivered and sold by AVSA to the Company which date is also the date of the initial Indenture Supplement and (ii) Loans have been made by the Banks to the Company in respect of the Aircraft. Document Date. The date of the Indenture. Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Indenture Supplement, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time by substituted for an Engine pursuant to Sections 4.02(c)(vii), 4.05(c) or 4.05(d) of the Indenture, together with all Parts. 58 59 Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Indenture. The term "Engines" means, as of any date of determination, all Engines subject to the Lien of the Indenture. Engine Agreement. The General Terms Agreement dated as of July 3, 1991 between the Company and the Engine Manufacturer (as heretofore amended, modified and supplemented). Engine Consent and Agreement. The Engine Consent and Agreement dated as of the Document Date, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Equipment Purchase Certificates. The Equipment Purchase Certificates issued by the Company pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. ERISA. The Employee Retirement Income Security Act of 1974, as amended. Estate Documents. The Purchase Agreement, the Consent and Guaranty, the Bills of Sale, the Airbus Guaranty, the Consent and Agreement, AVSA Consent and Agreement, the Engine Agreement and the Engine Consent and Agreement, in each case to the extent that the same related to the Aircraft. Event of Default. Each of the events specified in Section 6.01 of the Indenture. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 180 days due to theft or disappearance, or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by the Company for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) condemnation, confiscation or seizure of, or requisition of title to such property, by the Government, any foreign government or purported government or agency or instrumentality thereof, (iv) requisition of use of such property by (A) a foreign government or instrumentality or agency thereof, or any purported government or instrumentality or agency thereof, for a period in excess of 180 days (or for such shorter period ending on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Maturity of the Equipment Purchase Certificates for the Aircraft; and (v) as a result of any law, rule, regulation, order or 59 60 other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all aircraft of the same type for a period of eighteen (18) consecutive months, unless the Company, prior to the expiration of such eighteen month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use shall have been prohibited for a period of two (2) consecutive years, unless the Company, prior to the expiration of such two (2) year period shall have conformed at least one Airbus Industrie A300F-600 aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Company. The date of such Event of Loss shall be the date of (i) loss of such property or its use for a period in excess of 180 days due to theft or disappearance, or loss for a period in excess of 60 days due to damage beyond economic repair or loss of use of the Airframe because of requisition for use for a period in excess of 180 days (or shorter period due to insurance settlement), (ii) an insurance settlement on the basis of total loss with respect to such property, (iii) condemnation, confiscation, seizure or requisition of title, or (iv) prohibition from usage for the periods described in clause (v) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Company and dated the Delivery Date. Facility. Has the meaning specified in the Loan Agreement. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell. In such determination it shall be assumed that the Aircraft is in the condition required under the Indenture. Federal Aviation Administration and FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. Federal Funds Rate. For any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve system arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (a) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on 60 61 such transactions on the next preceding Business Day as so published on the next succeeding Business Day and (b) if such rate is not so published for any Business Day, the Federal Funds Rate for such Business Day shall be the average rate charged to Chase on such Business Day on such transactions as determined by the Agent. Floating Rate. (i) For the period commencing on the Delivery Date and ending on the last day of the twelfth month following the Delivery Date, the LIBOR Rate plus [ * ] (ii) for the period commencing on the first day of the thirteenth month following the Delivery Date and ending on the last day of the eighteenth month following the Delivery Date, the LIBOR Rate plus [ * ] and (iii) thereafter, in respect of each Interest Period, the higher of the Treasury Rate and the LIBOR Rate,[ * ] Floating Rate Loan. Loans evidenced by an Equipment Purchase Certificate that bears interest at rates based upon the Floating Rate. French Pledge Agreement. The French Pledge Agreement dated the Delivery Date between the Company and the Indenture Trustee, as the same may be amended, modified or supplemented from time to time. Government. The United States of America or any agency or instrumentality thereof. Holder. On any date of determination, a holder of an Equipment Purchase Certificate on such date, provided that for the purposes of Section 2.02(f) of the Indenture, each holder from time to time of an Equipment Purchase Certificate shall be deemed to be a "Holder" and the obligations of the Company to each Holder under Section 2.02 of the Indenture shall survive the disposition of any Equipment Purchase Certificate by such Holder and the payment in full of the Equipment Purchase Certificate held by such Holder. Indenture. The Trust Indenture, Mortgage and Security Agreement, dated as of the Document Date, between the Company and the Indenture Trustee, as amended, supplemented or modified by any amendment or supplement thereto from time to time entered into. Indenture Estate. Has the meaning set forth in the Granting Clauses of the Indenture. Indenture Supplement. A supplement to the Indenture, substantially in the form of Exhibit A to the Indenture. Indenture Trustee. NationsBank of Georgia, National Association, a national banking - ---------------------- *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. 61 62 association, not in its individual capacity, but solely in its capacity as Indenture Trustee under the Indenture, and its successors and permitted assigns as trustee thereunder. Interest Period. With respect to any Floating Rate Loan, each period commencing on the date such Floating Rate Loan is made or converted from a Base Rate Loan or the last day of the next preceding Interest Period for such Loan and ending on the seventh calendar day thereafter or on the numerically corresponding date in the first, third or sixth calendar month thereafter, as the Company may select by notice to the Agent and the Indenture Trustee no later than 11:00 a.m. on the date three Business Days prior to the first day of such Interest Period, except that each Interest Period (other than a 7-day Interest Period) that commences on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month. Notwithstanding the foregoing: (i) no Interest Period for any Loan may commence before and end after any Amortization Date; (ii) each Interest Period that would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day (or, if such next succeeding Business Day falls in the next succeeding calendar month, on the next preceding Business Day); (iii) no more than three 7-day Interest Periods may be selected with respect to the Loans for the Aircraft; and (iv) subject to clause (i) above, if the Company does not select an Interest Period as provided above, then the Company shall have deemed to have selected a one-month Interest Period. LIBOR Base Rate. With respect to any Floating Rate Loan for any Interest Period therefor, the arithmetic mean (rounded upwards, if necessary, to the nearest 1/16 of 1%) of the respective rates per annum quoted by each Reference Bank at approximately 11:00 a.m. London time (or as soon thereafter as practicable) on the date two Business Days prior to the first day of such Interest Period for the offering by such Reference Bank to leading banks in the London interbank market of Dollar deposits having a term comparable to such Interest Period and in an amount comparable to the principal amount of the Floating Rate Loan to be made by such Reference Bank for such Interest Period. If any Reference Bank is not participating in any Floating Rate Loan during any Interest Period therefor, the LIBOR Base Rate for such Loan for such Interest Period shall be deemed by reference to the amount of the Loan that such Reference Bank would have made or had outstanding had it been participating in such Loan during such Interest Period. If any Reference Bank does not timely furnish such information for determination of any LIBOR Base Rate, then such LIBOR Base Rate shall be determined on the basis of the information timely furnished by the remaining Reference Banks. LIBOR Rate. For any Floating Rate Loan for any Interest Period therefor, a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by the Agent to be equal to the sum of the LIBOR Base Rate for such Loan for such Interest Period divided by 1 minus the Reserve Requirement for such Loan for such Interest Period. 62 63 Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest. Loan. Has the meaning set forth in Section 1 of the Loan Agreement. Loan Agreement. The Loan Agreement dated as of April 1, 1995 between the Company, the Banks named therein and Chase, as agent for such Banks (as amended, modified, supplemented and in effect from time to time). Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% in aggregate unpaid principal amount of all Equipment Purchase Certificates outstanding as of such date excluding for purposes of this definition any Equipment Purchase Certificates held by the Company or any Affiliate thereof. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France, and its successors and assigns. Maturity. The date which is 24.5 years after the Delivery Date. Moody's. Moody's Investors Service, Inc. Notice of Borrowing. Has the meaning set forth in Section 2.08 of the Loan Agreement. Obsolete Parts. Parts which the Company deems obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Operative Agreements. The Indenture, the Indenture Supplement, the Loan Agreement (until the Banks shall have been paid in full), the Equipment Purchase Certificates, the Bills of Sale, the Facility (as it relates to the Aircraft or other matters related thereto and except to the extent that any term thereof shall conflict with any express provision of any other Operative Agreement, in which case, such provision of such other Operative Agreement shall control), the Notice of Borrowing, the Estate Documents and the French Pledge Agreement. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or, prior to replacement therefor in accordance with the Indenture, which may be removed therefrom. Payment Date. Each of the dates specified in the last sentence of Section 2.02(b) of the Indenture. 63 64 Payment Default. Any event specified in Section 6.01(a) of the Indenture which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Investment in (i) direct obligations of the United States of America; (ii) obligations fully guaranteed by the United States; (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 (which may include the Indenture Trustee, in its individual capacity, and any of its Affiliates), having a combined capital and surplus of at least $500,000,000 and having a rating of "B" or better from the Thomson Bank Watch; or (iv) commercial paper rated at least A-1/P-1 by S&P and Moody's, respectively (or if neither such organization shall rate such commercial paper at any time, by any nationally recognized rating organization in the United States of America equal to the highest rating assigned by such rating organization). Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). PMSI Obligations. Principal of and interest on the Equipment Purchase Certificates and all other amounts owing by the Company thereunder, under the Indenture and the Loan Agreement in respect of the Equipment Purchase Certificates and under the other Operative Agreements and the performance and observance by the Company of all of the agreements, covenants and provisions contained in the Indenture and in the Loan Agreement in respect of the Equipment Purchase Certificates and in the other Operative Agreements. Post-Default Rate. In respect of any principal of any Equipment Purchase Certificate or any other amount under the Indenture, the Loan Agreement, any Equipment Purchase Certificate or any other Operative Agreement that is not paid when due (whether at stated maturity, by acceleration, by optional or mandatory prepayment or otherwise), a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal[ * ] (after giving effect to any adjustment thereto as provided in the final sentence of the definition thereof (provided that, if the amount so in default is principal of a Floating Rate Loan and the due date thereof is a day other than the last day of the Interest Period therefor, the "Post-Default Rate" for such principal shall be, for the period from and including such - ---------------------- *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. 64 65 due date to but excluding the last day of the Interest Period, [ * ] Prime Rate. The rate of interest from time to time announced by Chase at the Principal Office as its prime commercial lending rate. Such rate is a rate set by Chase based upon various factors including Chase's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Principal Office. The principal office of Chase, located on the date of the Indenture at 1 Chase Manhattan Plaza, New York, New York 10081. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement dated July 3, 1991, between the AVSA and the Company (as heretofore amended, modified and supplemented), providing, inter alia, for the manufacture by the Manufacturer and sale by AVSA to the Company of certain Airbus Industries A300F4-605R aircraft, as such Purchase Agreement may hereafter be amended, modified or supplemented, but solely as such Purchase Agreement relates to the Aircraft. Quarterly Payment Dates. The last day of March, June, September and December in each year, the first of which shall be the first such day to occur after the Company selects a Base Rate Loan; provided that if such date is not a Business Day, then such Quarterly Payment Date shall be the next succeeding Business Day, unless such Business Day falls in a subsequent calendar month, in which case such Quarterly Payment Date shall be the next preceding Business Day. Reference Banks. Chase, Bank of America NT&SA, Canadian Imperial Bank of Commerce and The First National Bank of Chicago (or their respective Applicable Lending Offices, as the case may be). Register. Has the meaning specified in Section 2.08 of the Indenture. Regulation D. Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer of the same or of equal or greater value, and utility), which shall have been substituted for an Engine pursuant to Sections 4.02(c)(vii), 4.05(c) or 4.05(d) of - ----------------------- *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. 65 66 the Indenture and leased pursuant to the Lease, together with all Parts relating to such engine. Reserve Requirement. Has the meaning specified in the Loan Agreement. Responsible Officer. With respect to the Indenture Trustee, any officer in its Corporate Trust Administration Department designated by such person to perform obligations under the Operative Agreements, and with respect to any other Person, any corporate officer or other employee of a Person who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Corporation. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Treasury Rate. For each Interest Period, the weighted average yield to maturity of United States Treasury securities with maturities next above and below the remaining term of the Equipment Purchase Certificates (calculated as provided below), such yields to be specified by the Agent on the basis of the bid price for such United States Treasury securities as displayed on Telerate screen (Page 7677) or, if the Telerate screen is unavailable, by averaging (and rounding upward to the nearest whole multiple of 1/100 of 1% per annum, if the average is not such multiple), the yields of the relevant United States Treasury securities (rounded, if necessary, to the nearest 1/100 of 1% with any figure of 1/200 of 1% or above rounded upward) as quoted to the Agent by two reputable dealers in United States Treasury securities selected by the Agent, in either case, at approximately 11:00 a.m. (New York time) on the date two Business Days prior to the first day of the relevant Interest Period and notified to the Company, the Indenture Trustee and the Holders; any weighted average yield of United States Treasury securities with two maturities is to be calculated by the Agent in accordance with the following formula: WAY = Y1 + (Y2 - Y1) (RT - X1) --------------------- (X2 - X1) Where: WAY = Weighted Average Yield 66 67 RT = relevant remaining term to maturity X1 = whole integer in years closest to and less than RT which equals the maturity of a United States Treasury security then publicly traded. X2 = whole integer in years closest to and greater than RT which equals the maturity of a United States Treasury security then publicly traded. Y1 = yield, determined as provided above, of United States Treasury securities then most recently auctioned with maturities equal to X1. Y2 = yield, determined as provided above, of United States Treasury securities then most recently auctioned with maturities equal to X2. Type . The Type of Loan refers to whether such Loan is a Floating Rate Loan or a Base Rate Loan. United States or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Federal Aviation Act, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Federal Aviation Act and Part 121 of the regulations under such Act for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any successor or substitute provision thereof or in absence thereof. 67 68 Schedule 2.08 NOTICE OF BORROWING ______________, 199_ The Chase Manhattan Bank (National Association) One Chase Manhattan Plaza New York, New York 10081 Attention: Mr. Sherwood Exum, Jr. Ladies and Gentlemen: Reference is made to the Loan Agreement dated as of April 1, 1995 (the "Loan Agreement") between Federal Express Corporation ("Federal"), The Chase Manhattan Bank, N.A., as Agent, and the Banks named therein. Capitalized terms used herein, unless otherwise defined herein, are used herein as used or defined in the Loan Agreement. Pursuant to Sections 2.02 and 2.08 of the Loan Agreement, Federal hereby gives you irrevocable notice of its request to borrow [Floating/Base] Rate Loans under the Loan Agreement in the aggregate amount of $[___________] (the "Loan Amount") with respect to the Airbus Industrie A300F4-605R aircraft identified in the Purchase Agreement as Firm Aircraft No. [__], 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 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 to us in accordance with Section 2.02 of the Loan Agreement, by transferring the same, in immediately available funds, to Federal at its account number [* ] maintained at The Chase Manhattan Bank, N.A., One Chase Manhattan Plaza, New York, New York [* ] maintained at Citibank, N.A. in New York, New York], with the instructions "CR Federal Express Corporation". Very truly yours, FEDERAL EXPRESS CORPORATION By_________________________ Title: - ------------------------ +To be included in Notice of Borrowing for Floating Rate Loan only. *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. 68 69 Exhibit A to Loan Agreement =============================================================== TRUST INDENTURE, MORTGAGE AND SECURITY AGREEMENT Dated as of [ , 199_]+ between FEDERAL EXPRESS CORPORATION and NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION, Indenture Trustee COVERING ONE AIRBUS A300F4-605R AIRCRAFT SERIAL NO. [ ], REGISTRATION NO. [N6__FE] =============================================================== - ----------------------- +Here insert Documentation Date. 70 TABLE OF CONTENTS RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 GRANTING CLAUSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 HABENDUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 ARTICLE 2 THE EQUIPMENT PURCHASE CERTIFICATES SECTION 2.01. Issuance of an Equipment Purchase Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 SECTION 2.02. Terms of the Equipment Purchase Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 2.03. Intentionally left blank. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 2.04. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 2.05. Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 2.06. Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 SECTION 2.07. Termination of Interest in Indenture Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 SECTION 2.08. Transfer and Exchange of Certificates: Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 SECTION 2.09. Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 SECTION 2.10. Costs and Expenses of Issuance of New Equipment Purchase Certificates . . . . . . . . . . . . . . . . . . . . 12 SECTION 2.11. No Liability of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 2.12. ERISA Plan Prohibition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE 3 Intentionally Left Blank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
70 71 ARTICLE 4 COVENANTS AND REPRESENTATIONS OF THE COMPANY SECTION 4.01. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 4.02. Registration, Maintenance and Operation; Possession and Lease; Insignia . . . . . . . . . . . . . . . . . . . . 13 SECTION 4.03. Replacement and Pooling of Parts . . . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 4.04. Alterations, Modifications and Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 4.05. Loss, Destruction, Requisition . . . . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 4.06. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 SECTION 4.07. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 4.08. Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 SECTION 4.09. Annual Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 SECTION 4.10. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 SECTION 4.11. Merger, Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 SECTION 4.12. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 SECTION 4.13. Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 SECTION 4.14. Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 ARTICLE 5 RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE INDENTURE ESTATE SECTION 5.01. Distribution of Principal and Interest . . . . . . . . . . . . . . . . . . . . . 39 SECTION 5.02. Intentionally Left Blank . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 5.03. Payments during Continuance of Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 5.04. Funds Held by Indenture Trustee; Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 ARTICLE 6 EVENTS OF DEFAULT; REMEDIES OF THE INDENTURE TRUSTEE UPON AN EVENT OF DEFAULT SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 SECTION 6.02. Remedies with Respect to Indenture Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
71 72 ARTICLE 7 DUTIES OF THE INDENTURE TRUSTEE SECTION 7.01. Action Upon Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 7.02. No Duties Except as Specified . . . . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 7.03. No Action Except Under Indenture or Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 7.04. Action Upon Instructions Generally . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 7.05. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 7.06. Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 ARTICLE 8 THE INDENTURE TRUSTEE SECTION 8.01. Acceptance of Trusts and Duties . . . . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 8.02. Absence of Certain Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 8.03. Representations, Warranties and Agreements of Indenture Trustee . . . . . . . . . . . . . . . . . . . . 54 SECTION 8.04. Reliance; Agents; Advice of Experts . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 8.06. Moneys Held by Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 8.07. Capacity in Which Acting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 ARTICLE 9 SUCCESSOR INDENTURE TRUSTEE SECTION 9.01. Resignation or Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 SECTION 9.02. Appointment of Separate Trustees . . . . . . . . . . . . . . . . . . . . . . . . 58 ARTICLE 10 SUPPLEMENTS AND AMENDMENTS TO THIS INDENTURE AND OTHER DOCUMENTS SECTION 10.01. Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 10.02. Indenture Trustee Protected . . . . . . . . . . . . . . . . . . . . . . . . . . 61 SECTION 10.03. Requirement of Substance, Not Form . . . . . . . . . . . . . . . . . . . . . . . 61
72 73 SECTION 10.04. Documents Mailed to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 62 ARTICLE 11 Intentionally Left Blank. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 ARTICLE 12 MISCELLANEOUS SECTION 12.01. Termination of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 12.02. No Legal Title in Indenture Estate . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 12.03. Sale of Collateral by Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 12.04. Indenture for Benefit of Parties and Holders Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 12.05. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 SECTION 12.06. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 SECTION 12.07. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 12.08. Headings; Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 12.09. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 12.10. Governing Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 12.11. No Oral Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 12.12. Normal Commercial Relations . . . . . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 12.13. Section 1110 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 SCHEDULE I. Definitions SCHEDULE II. Permitted Country List EXHIBIT A. Form of Indenture Supplement EXHIBIT B. Form of Equipment Purchase Certificate
73 74 TRUST INDENTURE, MORTGAGE AND SECURITY AGREEMENT TRUST INDENTURE, MORTGAGE AND SECURITY AGREEMENT entered into as of [_______, 199_] + between FEDERAL EXPRESS CORPORATION, a Delaware corporation (together with its successors and assigns the "Company") and NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION, a national banking corporation, as Indenture Trustee hereunder (together with its successors hereunder, the "Indenture Trustee"); W I T N E S S E T H: WHEREAS, unless otherwise defined herein or the context otherwise requires, capitalized terms herein are used as provided in Article 1 hereof; WHEREAS, pursuant to the Purchase Agreement, AVSA has agreed to sell to the Company and the Company has agreed to purchase from AVSA the Aircraft; WHEREAS, the Holders have agreed pursuant to a Loan Agreement to make the Loans to the Company to be used by the Company for payment of the purchase price of certain aircraft, including the Aircraft; WHEREAS, the Company desires by this Indenture, among other things, (i) to provide for the issuance to the Holders by the Company of certain Equipment Purchase Certificates evidencing the Loans made by the Holders under the Loan Agreement and (ii) to provide for the assignment, mortgage, grant of a first priority purchase money equipment security interest in and pledge by the Company to the Indenture Trustee, of certain of the Company's right, title and interest in and to the Aircraft as security for the PMSI Obligation; WHEREAS, all things have been done to make the Equipment Purchase Certificates, when executed by the Company, authenticated and delivered under this Indenture and issued, the legal, valid and binding obligations of the Company; and WHEREAS, all things necessary to make this Indenture the legal, valid and binding obligation of the Company, for the uses and purposes set forth in this Indenture, in accordance with its terms, have been done and performed and have happened. ____________________ +Here insert Documentation Date. 74 75 -- GRANTING CLAUSES -- NOW, THEREFORE, THIS TRUST INDENTURE, MORTGAGE AND SECURITY AGREEMENT WITNESSETH, that: to secure the PMSI Obligations, and in consideration of the premises and of the covenants herein contained, and of the acceptance of the Equipment Purchase Certificates by the Holders, and of the sum of $1 paid to the Company by the Indenture Trustee at or before the delivery hereof, the receipt whereof is hereby acknowledged, the Company has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Indenture Trustee and its successors and assigns, for the security and benefit of the Holders, as aforesaid, a first priority purchase money equipment security interest in and first mortgage lien upon, all right, title and interest of the Company in, to and under the following described property, rights and privileges (which collectively, including all property hereinafter specifically subjected to the Lien of this Indenture by an Indenture Supplement or any other mortgage supplemental hereto, shall constitute the "Indenture Estate"), to wit: a. all estate, right, title and interest of the Company in the Aircraft (including the Airframe and the Engines and all warranties of any manufacturer in respect thereof) and all replacements thereof and substitutions therefor to which the Company shall from time to time acquire title, all as more particularly described in the Indenture Supplement executed and delivered with respect to the Aircraft or any such replacements or substitutions therefor, as provided in this Indenture, all Parts relating to the foregoing, and all records, logs and other documents at any time maintained with respect to the foregoing property; b. all estate, right, title and interest of the Company in, to and under the Estate Documents; c. all tolls, rents, issues, profits, revenues and other income of the property subjected or required to be subjected to the Lien of this Indenture including all payments or proceeds payable to the Company with respect to the Aircraft as the result of the sale, lease or other disposition thereof, and all estate, right, title and interest of every nature whatsoever of the Company in and to the same and every part thereof; d. all insurance and requisition proceeds and all other payments of any kind with respect to the Aircraft or any part thereof, including but not limited to the insurance required under Section 4.06 hereof; e. all monies and securities deposited or required to be deposited with the Indenture Trustee pursuant to any term of this Indenture or required to be held by the Indenture Trustee hereunder; and 75 76 f. all proceeds of the foregoing. All property referred to in the Granting Clauses, whenever acquired by the Company, shall secure all PMSI Obligations at any time outstanding. Any and all properties referred to in the Granting Clauses which are hereafter acquired by the Company shall, without further conveyance, assignment or act by the Company or the Indenture Trustee thereby become and be subject to the security interest hereby granted as fully and completely as though specifically described herein. TO HAVE AND TO HOLD all and singular the aforesaid property unto the Indenture Trustee, its successors and assigns, in trust for the benefit and security of the Holders, and for the uses and purposes and subject to the terms and provisions set forth in this Indenture. It is expressly agreed that anything herein contained to the contrary notwithstanding, the Company shall remain liable under the Operative Agreements to perform all of the obligations assumed by it thereunder, all in accordance with and pursuant to the terms and provisions thereof, and the Indenture Trustee and the Holders shall have no obligation or liability under any thereof by reason of or arising out of the assignment hereunder, nor shall the Holders be required or obligated in any manner to perform or fulfill any obligations of the Company under or pursuant to any of the Operative Agreements, except as therein or herein expressly provided, to make any payment, or to make any inquiry as to the nature or sufficiency of any payment received by it, or present or file any claim, or take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. The Company does hereby constitute the Indenture Trustee the true and lawful attorney of the Company, irrevocably, with full power (in the name of the Company or otherwise) to ask, require, demand, receive, compound and give acquittance for any and all monies and claims for monies (in each case including insurance and requisition proceeds) due and to become due under or arising out of the Operative Agreements and all other property which now or hereafter constitutes part of the Indenture Estate, to endorse any checks or other instruments or orders in connection therewith and to file any claims or to take any action or to institute any proceedings which the Indenture Trustee may deem to be necessary or advisable in the premises. The Company agrees that promptly on receipt thereof, it will transfer to the Indenture Trustee any and all monies from time to time received by it constituting part of the Indenture Estate, for distribution by the Indenture Trustee pursuant to this Indenture. The Company does hereby warrant and represent that (except as permitted herein) it has not assigned or pledged any of its right, title, and interest hereby assigned to anyone other than the Indenture Trustee. 76 77 The Company does hereby ratify and confirm the Operative Agreements and does hereby agree that (except as permitted herein) it will not take or omit to take any action, the taking or omission of which would result in an alteration or impairment of any of the Operative Agreements or of any of the rights created by any thereof or the assignment hereunder. IT IS HEREBY COVENANTED AND AGREED by and between the parties hereto as follows: ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions. Unless the context otherwise requires, all capitalized terms used herein and not otherwise defined shall have the meanings set forth in Schedule I hereto. All references in this Indenture to the Loan Agreement (except for references thereto in Section 2.02(b) hereof) shall refer to the Loan Agreement as it relates to Loans made, and Equipment Purchase Certificates issued, with respect to the Aircraft covered by this Indenture. ARTICLE 2 THE EQUIPMENT PURCHASE CERTIFICATES SECTION 2.01. Issuance of an Equipment Purchase Certificate. There shall be issued by the Company to each of the Holders in connection with their respective participation in the payment of the purchase price, as provided in and on and subject to the terms and conditions of the Loan Agreement, an Equipment Purchase Certificate or Equipment Purchase Certificates dated the Delivery Date of the Aircraft, designated as having been issued in connection with the purchase of the Aircraft, and registered in the name of such Holder in a principal amount equal to the principal amount of the Loan made by such Holder to fund a portion of the purchase price. The Equipment Purchase Certificates and the Indenture Trustee's certificate of authentication shall be substantially in the form set forth in Exhibit B hereto. The Equipment Purchase Certificates shall be issued in registered form only and in denominations of not less than $500,000. SECTION 2.02. Terms of the Equipment Purchase Certificates. (a) Principal. The aggregate principal amount of the Equipment Purchase Certificates shall be due and payable in installments, payable on Amortization Dates, as follows (provided, however, that the final principal payment on each Equipment Purchase Certificate shall in any and all events equal the then outstanding principal balance thereof): 77 78 Schedule of Principal Payments
Percentage of Amortization Date Original Principal Payment Number Amount to be Repaid ----------------- ------------------- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
78 79 38 39 40 41 42 43 44 45 46 47 48 (b) Interest. Each Equipment Purchase Certificate shall bear interest on the unpaid principal amount thereof from time to time outstanding from and including the date thereof until such principal amount is paid in full, for each Interest Period relating thereto, at the Floating Rate for such Interest Period or at the Base Rate. The Company may convert the interest rate payable on the Equipment Purchase Certificates from the Floating Rate to the Base Rate as of the last day of any Interest Period provided (x) the Company provides notice of such conversion to the Agent and the Indenture Trustee no later than three Business Days prior to the last day of such Interest Period, and (y) such conversion occurs no later than the Business Day prior to the eighteenth-month anniversary of the first Loan (as defined in the Loan Agreement) under the Loan Agreement. In addition, the Debt Rate, if other than the Floating Rate, shall (except as otherwise provided in Section 2.12, 2.13, 2.14 or 2.15 of the Loan Agreement) automatically convert or revert, as the case may be, to the Floating Rate on the eighteenth-month anniversary of such first Loan under the Loan Agreement. The Company may, at any time, on not less than three (3) Business Days' prior notice to the Agent and the Indenture Trustee convert a Base Rate Loan into a Floating Rate Loan. Accrued interest on each Equipment Purchase Certificate shall be payable (i) in the case of a Floating Rate Loan, on the last day of each Interest Period therefor and, if such Interest Period is longer than three months, at the three-month intervals following the first day of such Interest Period (or if such day is not a Business Day, on the next succeeding Business Day, unless such Business Day falls in a subsequent calendar month, in which case such payment shall be made on the next preceding Business Day) and upon any conversion of the interest rate to the Base Rate in accordance with the immediately preceding sentence, (ii) in the case of any Base Rate Loan, quarterly on the Quarterly Payment Dates or, if earlier, the date on which any Base Rate Loan is converted into a Floating Rate Loan and (iii) regardless of the applicable Debt Rate, upon the payment or prepayment of any Equipment Purchase Certificate. (c) Post-Default Interest. Notwithstanding Section 2.02(b), the Company hereby promises to pay to the Indenture Trustee for the account of each Holder interest at the 79 80 applicable Post-Default Rate on any principal of any Equipment Purchase Certificate of such Holder and on any other amount payable by the Company hereunder or under the Loan Agreement or the Equipment Purchase Certificates held by such Holder to or for the account of such Holder, which shall not be paid in full when due (whether at Maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the due date thereof to but excluding the date the same is paid in full, payable from time to time on demand of the Agent. (d) Computations. Interest on Floating Rate Loans shall be computed on the basis of a year of 360 days and actual days elapsed (including the first day but excluding the last day of the Interest Period) occurring in the period for which payable and interest on Base Rate Loans shall be computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed (including the first day but excluding the last day of the Interest Period) in the period for which payable. Notwithstanding the foregoing, for each day that the Base Rate is calculated by reference to the Federal Funds Rate, interest on Base Rate Loans shall be computed on the basis of a year of 360 days and actual days elapsed. (e) Prepayments. The Equipment Purchase Certificates shall be prepaid in whole but not in part by the Company as and when provided in Section 4.05(b) hereof in connection with an Event of Loss with respect to the Aircraft in an amount, in addition to any other amounts payable to the Holders hereunder and under the Loan Agreement in respect thereof, equal to the aggregate unpaid principal amount thereof, together with accrued interest thereon and any amount payable under Section 2.02(f) hereof; provided, however, that so long as no Event of Default has occurred and is continuing and the Agent or the Indenture Trustee holds any insurance proceeds resulting from such Event of Loss, such prepayment may be postponed, at the Company's election, until the end of any then current Interest Period. The Equipment Purchase Certificates shall also be prepaid in whole but not in part upon any sale of the Aircraft to an owner trust in connection with a sale and leaseback transaction. The Indenture Trustee shall give prompt notice of any prepayment of the Equipment Purchase Certificates to the Holders as soon as a Responsible Officer of the Indenture Trustee shall have actual knowledge that such prepayment is to occur, which notice shall specify the date fixed for prepayment and the principal amount of the Equipment Purchase Certificates to be prepaid. In addition, the Equipment Purchase Certificates may be prepaid as provided in and on the terms and conditions of Section 2.13 of the Loan Agreement and at any other time as may be selected by the Company, upon not less than 3 Business Days' prior notice to the Holders. (f) Compensation. The Company shall pay to the Indenture Trustee for account of each Holder, upon the request of such Holder through the Indenture Trustee, such amount or amounts as shall be sufficient (in the reasonable opinion of such Holder) to 80 81 compensate it for any loss, cost or expense that such Holder determines is attributable to: (1) any payment, mandatory or optional prepayment or conversion of a Floating Rate Loan made by such Holder for any reason (including, without limitation, the acceleration of the principal of the Equipment Purchase Certificates pursuant to Section 6 hereof) on a date other than the last day of the Interest Period for such Loan; (2) any failure by the Company for any reason (including, without limitation, the failure of any of the conditions precedent specified in Section 3 of the Loan Agreement to be satisfied) to borrow a Floating Rate Loan from such Holder on the date for such borrowing specified in the relevant notice of borrowing given pursuant to Section 2.02 of the Loan Agreement. Without limiting the effect of the preceding sentence, such compensation shall include an amount equal to the excess, if any, of (i) the amount of interest that otherwise would have accrued on the principal amount so paid, prepaid or converted or not borrowed for the period from the date for such payment, prepayment, conversion or failure to borrow to the last day of the then current Interest Period for such Floating Rate Loan (or, in the case of a failure to borrow, the Interest Period for such Floating Rate Loan that would have commenced on the date specified for such borrowing) at the applicable rate of interest for such Floating Rate Loan provided for herein over (ii) the amount of interest that otherwise would have accrued on such principal amount at a rate per annum equal to the interest component of the amount such Holder would have bid in the London interbank market for Dollar deposits of leading banks in amounts comparable to such principal amount and with maturities comparable to such period (as reasonably determined by such Holder). (g) Business Day. If the due date of any payment under this Indenture or any Equipment Purchase Certificate would otherwise fall on a day that is not a Business Day, such date shall be extended to the next succeeding Business Day, and interest shall be payable for any principal so extended for the period of such extension. SECTION 2.03. Intentionally left blank. SECTION 2.04. Execution and Authentication. The Equipment Purchase Certificates shall be executed on behalf of the Company by an authorized officer of the Company. No Equipment Purchase Certificate shall be secured or entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Equipment Purchase Certificate a certificate of authentication in the form provided for in Exhibit B hereto executed by the Indenture Trustee by the manual signature of one of its authorized officers, and such certificate of authentication upon any Equipment Purchase Certificate shall 81 82 be conclusive evidence, and the only evidence, that such Equipment Purchase Certificate has been duly authenticated and delivered under this Indenture. SECTION 2.05. Method of Payment. The Company covenants and agrees that it will duly and punctually pay or cause to be paid in immediately available funds the principal of, any Breakage Costs and interest and all other amounts due on each of the Equipment Purchase Certificates hereunder at the Corporate Trust Office of the Indenture Trustee (or at such other account in New York, New York or Atlanta, Georgia as the Indenture Trustee may designate for the purpose) no later than noon (New York City time) on the date when due and, upon receipt of such amounts, the Indenture Trustee agrees to pay such amounts to the appropriate Holders no later than 2:00 p.m. (New York City time) on such day. In the event the Indenture Trustee shall fail to make any such payment as provided in the immediately preceding sentence after its receipt of funds at the place and prior to the time specified above, the Indenture Trustee, in its individual capacity and not as trustee, agrees to compensate the Holders for loss of use of such funds at the Federal Funds Rate; provided, however, notwithstanding the foregoing, the Indenture Trustee, in its individual capacity, shall not be liable for such compensation to the extent any failure to make any such payment is a result of any action, inaction, event or other occurrence that in each case is outside the Indenture Trustee's control. The principal of and any Breakage Costs and interest on each Equipment Purchase Certificate and all other amounts due hereunder or under the Equipment Purchase Certificates shall be payable at the Corporate Trust Office of the Indenture Trustee or at any office or agency maintained for such purpose pursuant to this Section 2.05; provided, however, that notwithstanding the foregoing, the Equipment Purchase Certificates shall not be deemed to have been paid in full for purposes of Section 2.07 hereof (whether in connection with a prepayment pursuant to Section 2.02(e) hereof or otherwise) unless and until the Holders (or the Agent on their behalf) shall have received all amounts payable with respect thereto as provided above. Notwithstanding the foregoing, if requested by any Holder (or by the Agent on such Holder's behalf), any amounts payable with respect to the Equipment Purchase Certificates held by such Holder shall be sent by wire transfer of immediately available funds to an account or accounts in the United States previously specified by such Holder or the Agent to the Indenture Trustee. Prior to the due presentment for registration of transfer of any Equipment Purchase Certificate, the Company and the Indenture Trustee shall deem and treat the Person in whose name any Equipment Purchase Certificate is registered on the Register as the absolute owner and Holder of such Equipment Purchase Certificate for the purpose of receiving payment of all amounts payable with respect to such Equipment Purchase Certificate and for all other purposes, and neither the Company nor the Indenture Trustee shall be affected by any notice to the contrary. So long as the Equipment Purchase Certificates remain outstanding, the Indenture Trustee will maintain the following: (a) an office or agency where the Equipment Purchase Certificates may be presented for payment and (b) a facility or agency in New York, 82 83 New York where the Equipment Purchase Certificates may be presented for registration of transfer under this Indenture. SECTION 2.06. Application of Payments. The Company shall, at the time of making each payment under this Indenture or any Equipment Purchase Certificate for account of any Holder, specify to the Indenture Trustee (which shall so notify the intended recipient(s) thereof) the amounts payable by the Company hereunder to which such payment is to be applied (and in the event that the Company fails to so specify, or if an Event of Default has occurred and is continuing, the Indenture Trustee may distribute such payment to the Holders for application in such manner as the Agent or the Majority in Interest of Certificate Holders, subject to Sections 5.01 and 5.03 hereof, may determine to be appropriate). SECTION 2.07. Termination of Interest in Indenture Estate. A Holder of an Equipment Purchase Certificate shall have no further interest in, or other right with respect to, the Indenture Estate when and if the principal of and any Breakage Costs and interest on all Equipment Purchase Certificates held by such Holder and all other sums payable to such Holder under this Indenture and under such Equipment Purchase Certificates and the Loan Agreement shall have been paid in full, and upon such payment in full such Holder shall surrender such Equipment Purchase Certificates to the Indenture Trustee for cancellation. Notwithstanding the foregoing or any other provision of this Indenture to the contrary, the obligations of the Company under Section 2.02(f) and Section 2.12 of the Loan Agreement to each Holder shall survive the repayment of all amounts under the Equipment Purchase Certificates held by such Holder or sold to the Pass Through Trustee. SECTION 2.08. Transfer and Exchange of Certificates: Participation. (a) The Indenture Trustee shall keep at its Corporate Trust Office and at each other office or agency to be maintained for the purpose as provided in Section 2.05 hereof a register (the "Register") of Equipment Purchase Certificates issued from time to time and the Holders thereof. A Holder of an Equipment Purchase Certificate intending to transfer such Equipment Purchase Certificate to a new payee, or to exchange such Equipment Purchase Certificate for new Equipment Purchase Certificates of authorized denominations, shall endorse such outstanding Equipment Purchase Certificate and surrender such outstanding Equipment Purchase Certificate at the Corporate Trust Office or other office maintained for the purpose, or execute a written instrument of transfer, duly executed by such Holder for the issuance of a new Equipment Purchase Certificate or Equipment Purchase Certificates, specifying the name and address of the new payee or payees. Promptly upon receipt of such documents, subject to satisfaction of Section 2.10 hereof, the Company shall execute and the Indenture Trustee will authenticate and deliver a new Equipment Purchase Certificate or Equipment Purchase Certificates, in the same aggregate original face amount and with the same Maturity and the same interest rate and dated the same date as the Equipment Purchase Certificate surrendered, and in such authorized denomination or denominations and, subject to Section 7.06 of the Loan Agreement, registered in the name of such payee or payees as 83 84 such Holder may specify by written request. The Indenture Trustee shall make a notation on each new Equipment Purchase Certificate of the amount of all payments of principal previously made on the surrendered Equipment Purchase Certificate with respect to which such new Equipment Purchase Certificate is issued and the date to which interest on such surrendered Equipment Purchase Certificate has been paid. From time to time, the Indenture Trustee will provide the Company with such information as it may request as to the registered Holders of Equipment Purchase Certificates. All Holders shall be deemed to be "Banks" with respect to such Equipment Trust Certificates for all purposes under the Loan Agreement. (b) A Holder may sell participations in its Equipment Purchase Certificates in accordance with Section 2.10 hereof and Section 7.06 of the Loan Agreement or as otherwise provided in the Loan Agreement. SECTION 2.09. Mutilated, Destroyed, Lost or Stolen Certificates. If any Equipment Purchase Certificate shall become mutilated, destroyed, lost or stolen, upon the written request of the Holder thereof (a copy of which request shall be sent by the Holder to the Indenture Trustee), and subject to satisfaction of Section 2.10 hereof, the Company shall execute and the Indenture Trustee shall authenticate and deliver as a replacement a new Equipment Purchase Certificate, payable in the same original principal amount and dated the same date as the Equipment Purchase Certificate so mutilated, destroyed, lost or stolen. If the Equipment Purchase Certificate being replaced has become mutilated, such Equipment Purchase Certificate shall be surrendered to the Indenture Trustee and a photocopy shall be furnished to the Company by the Indenture Trustee. If the Equipment Purchase Certificate being replaced has been destroyed, lost or stolen, the Holder shall furnish to the Company and the Indenture Trustee such security or indemnity as may be required by them to save the Company and the Indenture Trustee harmless and evidence satisfactory to the Company and Indenture Trustee of the destruction, loss or theft of such Equipment Purchase Certificate and of the ownership of such Equipment Purchase Certificate; provided, however, that if the Holder of such Equipment Purchase Certificate is one of the Banks (or an Affiliate thereof) the written undertaking of such Holder delivered to the Company and the Indenture Trustee shall be sufficient security and indemnity under this Section 2.09. The Indenture Trustee will promptly cancel and destroy all Equipment Purchase Certificates surrendered for transfer, exchange or replacement pursuant to Section 2.08 hereof and this Section. SECTION 2.10. Costs and Expenses of Issuance of New Equipment Purchase Certificates. Upon the issuance of a new Equipment Purchase Certificate pursuant to Section 2.08 or 2.09, the Company and/or the Indenture Trustee may require from the party requesting such new Equipment Purchase Certificate payment of a sum to reimburse the 84 85 Company and the Indenture Trustee for, or to provide funds for the payment of, any tax or other governmental charge in connection with the issuance of such new Equipment Purchase Certificate. No service charge shall be levied for any such transaction. SECTION 2.11. No Liability of Indenture Trustee. All payments to be made by the Indenture Trustee under this Indenture shall be made only to the extent the Indenture Trustee shall have received sufficient funds from the Company to enable the Indenture Trustee to make payments in accordance with the terms hereof. Each Holder, by its acceptance of an Equipment Purchase Certificate, agrees that the Indenture Trustee is not and shall not be personally liable to the Holder for any amount payable under such Equipment Purchase Certificate or this Indenture or, except as expressly provided in this Indenture, for any liability under the Loan Agreement or this Indenture. SECTION 2.12. ERISA Plan Prohibition. No employee benefit plan subject to Title I of ERISA, or individual retirement account or employee benefit plan subject to Section 4975 of the Code, or any trust established under any such plan or account (hereinafter collectively referred to as an "ERISA Plan"), may acquire or hold any of the Equipment Purchase Certificates. The purchase by any Person of any Equipment Purchase Certificate constitutes a representation by such Person to the Company and the Indenture Trustee that such Person is not an ERISA Plan and that such Person is not acquiring, and has not acquired, such Equipment Purchase Certificate with assets of an ERISA Plan. ARTICLE 3 Intentionally Left Blank. ARTICLE 4 COVENANTS AND REPRESENTATIONS OF THE COMPANY SECTION 4.01. Liens. The Company will not directly or indirectly create, incur, assume or suffer to exist, and will promptly, at its own cost and expense, take such action as may be necessary to discharge, any Lien on or with respect to any of the Indenture Estate or title thereto or any interest therein except: (a) the Lien of this Indenture and the rights of the parties to the other Operative Agreements; (b) the rights of any assignee, lessee or transferee under a lease or an assignment expressly permitted by the terms of this Indenture; (c) Liens arising as a result of claims against or affecting the Indenture Trustee, the Holders or any Affiliate thereof not arising solely from participation in the 85 86 transactions contemplated by the Operative Agreements or any act or omission of the Indenture Trustee, the Holders or any Affiliate thereof not required or expressly permitted by the Operative Agreements; (d) Liens for taxes imposed against the Company either not yet due or being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of any of the Indenture Estate or any interest therein; (e) materialmen's, mechanic's, workmen's, repairmen's, employees' or other like Liens arising against the Company in the ordinary course of the Company's business for amounts the payment of which is either not yet overdue or is being contested in good faith by appropriate proceedings so long as such Liens or proceedings do not involve any material danger of the sale, forfeiture or loss of any of the Indenture Estate or any interest therein; (f) Liens arising from judgment or awards against the Company with respect to which at the time an appeal or proceeding for review is being prosecuted in good faith and with respect to which there shall have been secured a stay of execution pending such appeal or proceeding for review and then only for the period of such stay; and (g) the right of any Person (other than the Company) to claim a portion of the insurance proceeds received or receivable as a result of an Event of Loss with respect to the Airframe, which right arises out of such Person's having a direct interest in an engine (other than an Engine) installed on the Airframe as a lessor, conditional vendor, owner or otherwise. SECTION 4.02. Registration, Maintenance and Operation; Possession and Lease; Insignia. (a) Registration, Maintenance and Operation. The Company at its own cost and expense, shall: (i) on the Delivery Date cause the Aircraft to be duly registered in its name, pursuant to the Act and, to remain, subject to paragraph (b) below, at all times duly registered pursuant to the Act and at all times act in accordance with the rules and regulations of the Aeronautics Authority; (ii) maintain, inspect, service, repair and overhaul the Aircraft (or cause the same to be done) so as to keep the Aircraft (and any engine which is not an Engine but is installed on the Aircraft) in good operating condition, ordinary wear and tear 86 87 excepted, and in any event (x) in accordance with the applicable regulations of the applicable Aeronautics Authority or regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 4.02(b) and the Company's maintenance program approved by the applicable Aeronautics Authority, (y) in the same manner and with the same care used by the Company with respect to other Airbus Industrie A300-600 aircraft and General Electric CF6-80C2-A5F engines owned or operated by the Company, to the extent that the same regulations, and the Company's FAA-approved maintenance program shall apply to any such aircraft and related engines, owned or leased by the Company, and utilized in similar circumstances and (z) so as to keep the Aircraft in such condition as may be necessary to enable its airworthiness certification to be maintained in good standing at all times under the Act or any applicable rule or regulation of the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered, and, provided, however, the Company shall not be in default of its obligation in this Section 4.02(a)(ii) to maintain the Aircraft's airworthiness certification in good standing if the Aircraft loses its airworthiness certification, such loss is curable and the Company undertakes such cure promptly, diligently, and continuously, using its best efforts; provided, further that if such loss is not a loss of the character described in clause (v) of the definition of Event of Loss and is not curable or if curable, is not cured within two (2) years of the date the airworthiness certification was lost, an Event of Loss shall be deemed to have occurred on the date it is determined that such loss is not curable, or at the expiration of such two (2) year period, as the case may be; (iii) maintain, or cause to be maintained, all records, logs and other materials in respect of the Aircraft required by the Aeronautics Authority, or the applicable regulatory agency or body of any other jurisdiction in which the Aircraft may then be registered, to be maintained; (iv) not maintain, service, repair, overhaul, use or operate the Aircraft or any Engine in violation of any airworthiness certificate or registration relating thereto, or in violation of any law or any license, rule, regulation or order of or by any government or governmental authority having jurisdiction over the Company or the Aircraft or any Engine or any service bulletin relating to the Aircraft or any Engine or for any purpose for which the Aircraft or any Engine is not designed; provided, however, that the Company or any lessee may in good faith contest the validity or application of any such law, license, rule, regulation or order in any manner that does not adversely affect the Indenture Trustee or any Holder; and if any such law, license, rule, regulation or order requires alteration of the Aircraft or any Engine, the Company will conform therewith at its own cost and expense and will maintain the Aircraft or any Engine in compliance with such law, license, rule, regulation or order; 87 88 (v) not operate or locate the Airframe or any Engine, or suffer the Airframe or any Engine to be operated or located (x) in any area excluded from coverage by any insurance policy in effect with respect to the Airframe or any Engine required by the terms of Section 4.06 or (y) in any area that is a war zone or recognized or, in the Company's reasonable judgment, threatened area of hostilities, unless the Company has obtained, prior to the operation or location of the Airframe or any Engine in such area, indemnification from the Government, or other insurance, against the risks and in the amounts required by, and in compliance with, Section 4.06 covering such area (and naming the Indenture Trustee as loss payee in respect of indemnification or insurance payable in respect of casualties to the Aircraft) or unless the Aircraft is only temporarily located in such area as a result of an isolated occurrence attributable to a hijacking, medical emergency, equipment malfunction, weather conditions, navigational error or other similar unforeseen circumstances and the Company is using its good faith efforts promptly to remove the Aircraft from such area. (b) Reregistration. At any time, the Company may at its sole expense reregister the Aircraft under the laws of a country listed in Schedule II hereto with which the United States then maintains normal and full (other than in the case of Taiwan) diplomatic relations, subject to the following conditions. The Indenture Trustee shall have received: (i) assurances satisfactory to it: (A) to the effect that the insurance provisions of this Indenture have been and will be complied with upon such change of registry; (B) as to the continuation of the Lien of this Indenture as a first priority, duly perfected lien on the Aircraft; (C) that such new country of registry (x) would provide substantially equivalent protection for the rights of lenders in similar transactions as provided under United States law (except that, in the absence of restrictions under the laws of such country on rights and remedies of lessors and secured parties similar to those imposed by Sections 362 and 363 of the Bankruptcy Code, rights and remedies similar to those available under Section 1110 of the Bankruptcy Code shall not be required), and (y) imposes aircraft maintenance standards not materially less stringent than those of the Aeronautics Authority; (D) that import and export certificates, if required, shall have been procured at the Company's own cost and expense by the Company; (E) that duties and tariffs, if applicable, shall have been paid for by the Company; and 88 89 (F) that the Company shall have effected or caused to be effected at the Company's own cost and expense all recordings and filings that are required to perfect the Lien of this Indenture; and (ii) a favorable opinion of counsel (reasonably satisfactory in form and substance to the Indenture Trustee) in the new jurisdiction of registry to the effect: (A) that the terms (including, without limitation, the governing law, service-of-process and jurisdictional-submission provisions thereof) of the Indenture are legal, valid, binding and enforceable in such jurisdiction; (B) that it is not necessary for the Indenture Trustee or Pass Through Trustee to register or qualify to do business in such jurisdiction in connection with the registration in the new jurisdiction (and the filing and/or recordation therein of this Indenture) and the exercise of any rights or remedies with respect to the Aircraft; (C) that the courts of such jurisdiction would provide substantially equivalent protection to the Indenture Trustee as provided under United States law (with the exception described in paragraph (b)(i)(C) of this Section 4.02) in respect of the transactions contemplated hereby, including, without limitation, the remedies provided herein; (D) that there is no tort liability of the mortgagee of an aircraft not in possession thereof under the laws of such jurisdiction, other than tort liability which might have been imposed on such mortgagee under the laws of the United States or any state thereof (it being understood that, in the event such latter opinion cannot be given in a form satisfactory to the Indenture Trustee, such opinion shall be waived, if insurance reasonably satisfactory to the Indenture Trustee is provided, at the Company's expense, to cover such risk and the Company undertakes to keep such insurance in full force and effect); and (E) (unless the Company shall have agreed to provide insurance reasonably satisfactory to the Indenture Trustee covering the risk of requisition of use of the Aircraft by the government of registry of the Aircraft) that the laws of such jurisdiction require fair compensation by the government of such jurisdiction payable in currency freely convertible into United States Dollars for the loss of use of the Aircraft in the event of such requisition. (c) Possession and Leases. The Company will not, without the prior written consent of the Indenture Trustee, lease or otherwise in any manner deliver, transfer or relinquish possession of the Aircraft, the Airframe or any Engine or install any Engine, or 89 90 permit any Engine to be installed, on any airframe other than the Airframe; provided, that, so long as (i) no Event of Default shall have occurred and be continuing, and (ii) the Company shall comply with the provisions of Section 4.06 hereof, the Company may without the prior written consent of the Indenture Trustee: (i) so long as the lessee is generally meeting its material obligations as they come due and is not subject to a proceeding or final order under applicable bankruptcy, insolvency or reorganization laws on the date the lease is entered into, (A) lease the Aircraft or any Engine to a U.S. Air Carrier, (B) lease the Aircraft to an Air Carrier which is principally based in and domiciled in one of the countries listed on Schedule II hereto, (C) lease the Aircraft to any Air Carrier principally based in and domiciled in a country which, at the inception of such lease, is a signatory to the Convention on the International Recognition of Rights in Aircraft, or (D) lease the Aircraft to any other Air Carrier not described in this Section which shall be reasonably acceptable to the Indenture Trustee; provided, that, with respect to clause (C) above, at the time of any such lease the United States maintains normal and full (other than in the case of Taiwan) diplomatic relations with the country in which such Air Carrier is principally based and domiciled. In the case of any lease (x) such lessee shall operate and maintain the Aircraft in compliance with this Indenture, (y) such lease shall provide that such lessee will not transfer possession of, or any other rights to, the leased Airframe or Aircraft to any other person without the prior written consent of the Indenture Trustee (except as permitted by subparagraphs (ii), (iii), (iv), (v), (vi), (vii) and (viii) below). Prior to any lease to an Air Carrier permitted under clause (C) of this Section 4.02(c)(i): (I) the maintenance standards of the aeronautical authority of the country of domicile or principal operation of the lessee taken as a whole shall be not materially less stringent than those of the FAA and the lease will provide that the maintenance performed during such lease will meet in all material respects such maintenance standards; (II) the Company will provide opinions of counsel reasonably satisfactory to the Indenture Trustee with respect to the validity and enforceability of the Indenture in such country, that it is not necessary for the Indenture Trustee to register or qualify to do business in such country in order for the Indenture Trustee to enforce the terms and conditions of this Indenture and that the laws of such country require fair compensation by the government of such country payable in a currency freely convertible into US Dollars for the loss of the use of the Aircraft in the event of a requisition of use by such government; (III) import and export certificates, if required, shall be procured at the Company's own cost and expense by the Company; (IV) duties and tariffs, if applicable, shall be paid for by the Company; and (V) the Company shall effect or cause to be effected at the Company's own cost and expense all recordings and filings that are required to perfect the Lien of this Indenture; (ii) subject the Airframe or permit the Airframe to be subjected to normal interchange agreements or subject the Engines or permit any Engine to be subjected to 90 91 normal interchange or pooling agreements or arrangements, in each case customary in the airline industry, entered into by the Company or any permitted lessee in the ordinary course of its business with any Air Carrier; provided that no transfer of the registration of the Airframe or any Engine shall be effected and that throughout the period that the Airframe or any Engine is subjected to such interchange or pooling agreement or arrangement the terms of this Indenture shall be observed; and provided, further, that no such agreement or arrangement contemplates or requires the transfer of title to the Airframe or any Engine, and if the Company's title to any Engine shall be divested under any such agreement or arrangement, such divestiture shall be deemed to be an Event of Loss with respect to such Engine and the Company shall comply with Section 4.05(d) hereof in respect of such Engine; (iii) deliver or permit the delivery of possession of the Airframe or any Engine to their respective manufacturers or certified maintenance providers for testing, services, repair, maintenance or overhaul work or for alterations or modifications in or additions to the Airframe or Engine to the extent required or permitted by the terms of Section 4.04 hereof; (iv) transfer or permit the transfer of possession of the Airframe or any Engine pursuant to a contract or agreement with the Government or pursuant to the Civil Reserve Air Fleet Program ("CRAF Program") administered pursuant to Executive Order No. 20999, as amended, or any similar or substitute programs, so long as the Company or any lessee shall promptly notify the Indenture Trustee upon such transfer of possession and provide the Indenture Trustee with the name and address of the Contracting Officer or representative of the Military Aircraft Command of the United States Air Force to whom notices must be given in respect of the Aircraft; (v) install or permit the installation of an Engine on an airframe which is owned by the Company or any lessee free and clear of all Liens, except (A) Liens of the type permitted under Section 4.01 hereof; (B) Liens which apply only to the engines (other than an Engine), appliances, parts, instruments, appurtenances, accessories, furnishings and other equipment (other than Parts) installed on such airframe and which do not apply to substantially all of such airframe; and (C) the rights of an Air Carrier under normal interchange or pooling agreements which are customary in the airline industry and do not contemplate or require the transfer of title to such airframe or the engines installed on it; (vi) install or permit the installation of an Engine on an airframe leased to the Company or any lessee or purchased by the Company subject to a conditional sale or other security agreement, provided that (A) such lease, conditional sale or other security agreement does not cover the Engine so installed and the Indenture Trustee shall have received from the lessor, conditional vendor or secured party of such airframe, an agreement (which may be the lease or conditional sale or other security 91 92 agreement covering such airframe), whereby such lessor, conditional vendor or secured party expressly agrees that neither it nor its successors or assigns will acquire or claim any right, title or interest in any Engine by reason of such Engine being installed on such airframe at any time, and (B) such airframe is and remains free and clear of all Liens except the rights of the parties to the lease or conditional sale or other security agreement covering such airframe and Liens of the type permitted by subparagraph (v) of this Section 4.02(c); (vii) install or permit the installation of an Engine on an airframe owned by the Company, leased to the Company or any permitted lessee or purchased by the Company subject to a conditional sale or other security agreement under circumstances where neither subparagraph (v) nor subparagraph (vi) of this Section 4.02(c) is applicable, provided that such installation shall be deemed an Event of Loss with respect to such Engine and the Company shall comply with Section 4.05(d) hereof in respect of such Engine, the Indenture Trustee not intending to waive any right or interest it may have to or in such Engine under applicable law until compliance by the Company with such Section 4.05(d); and (viii) enter into a wet lease under which the Company or any permitted lessee has effective control of the Aircraft in the ordinary course of the Company's business which shall not be considered a transfer of possession hereunder, provided that the Company's obligations under this Indenture shall continue in full force and effect notwithstanding any such wet lease. (d) Rights of Transferee. Notwithstanding the provisions of Section 4.02(c) hereof, the rights of any transferee who takes possession of the Aircraft, the Airframe or any Engine by reason of a transfer permitted by Section 4.02(c) hereof shall be subject and subordinate to, and any lease or wet lease permitted by Section 4.02(c) hereof shall be made expressly subject and subordinate to, all the terms of this Indenture, including, without limitation, the Indenture Trustee's right to repossession pursuant to Article 6, and to avoid such lease upon such repossession, and the Company shall remain primarily liable for the performance of all the terms of this Indenture to the same extent as if such lease or transfer had not occurred. Any such lease shall include appropriate provisions for the maintenance and insurance of the Aircraft, the Airframe and each Engine in accordance with the provisions of this Indenture and shall provide assurances reasonably satisfactory to the Indenture Trustee that the lessee may not further lease any of such equipment. The Company shall notify the Indenture Trustee within 60 days after any lease and will promptly upon request from the Indenture Trustee furnish to the Indenture Trustee a copy of any lease which has a term in excess of six (6) months and deliver to the Indenture Trustee all other documents required hereunder relating to such lease or transfer of possession. (e) Insignia. The Company agrees to affix to and maintain in the cockpit of the Airframe, in a clearly visible location, and on each Engine, a clearly visible metal nameplate 92 93 bearing the inscription "Mortgaged To: NationsBank of Georgia, National Association, as Indenture Trustee". SECTION 4.03. Replacement and Pooling of Parts. (a) Replacement of Parts. The Company, at its own cost and expense, will replace or cause to be replaced as promptly as practicable all Parts which may from time to time be incorporated or installed in or attached to the Airframe or any Engine and which may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use for any reason, except as otherwise provided in Section 4.04 hereof. In addition, the Company may, at its own cost and expense, remove or cause to be removed in the ordinary course of maintenance, service, repair, overhaul or testing, any Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use, provided that the Company, except as otherwise provided in Section 4.04 hereof, will, at its own cost and expense, replace such Parts as promptly as practicable. All replacement Parts shall be free and clear of Liens (except for pooling arrangements to the extent permitted by Section 4.03(b) hereof and Liens of the type permitted under Section 4.01(e) hereof) and shall be in as good operating condition as, and shall have a value and utility at least equal to, the Parts replaced, assuming such replaced Parts were in the condition and repair required to be maintained by the provisions of this Indenture. Immediately upon any replacement Part becoming incorporated or installed in or attached to the Airframe or any Engine, and without further act (subject only to a pooling arrangement to the extent permitted by Section 4.03(b) hereof) such replacement Part shall become subject to the Lien of this Indenture and shall be deemed part of the Airframe or any Engine, for all purposes to the same extent as the Parts originally incorporated or installed in or attached to the Airframe or such Engine. (b) Pooling of Parts. Any Part removed from the Airframe or any Engine as permitted in Section 4.03(a) hereof may be subjected by the Company to any normal pooling arrangement customary in the airline industry and entered into with other Air Carriers in the ordinary course of the Company's business, provided that the Part replacing such removed Part shall be incorporated or installed in or attached to the Airframe or such Engine, as promptly as practicable after the removal of such removed Part. In addition, any replacement Part when incorporated or installed in or attached to the Airframe or any Engine in accordance with Section 4.03(a) hereof may be owned by another Air Carrier subject to such normal pooling arrangement, provided that the Company, at its own cost and expense and as promptly as possible, either: (A) causes title to such replacement Part to vest in the Company free and clear of all Liens (other than Liens permitted under Section 4.01(a), (b), (c) and (e) hereof) and become subject to the Lien of this Indenture; or 93 94 (B) replaces such replacement Part by incorporating or installing in or attaching to the Airframe or such Engine a further replacement Part owned by the Company free and clear of all Liens (other than Liens permitted under Section 4.01(a), (b), (c) and (e) hereof) and causes such replacement Part to become subject to the Lien of this Indenture. All replacement Parts shall meet the standards set forth in Section 4.03(a) hereof. SECTION 4.04. Alterations, Modifications and Additions. The Company, at its own cost and expense, shall make or cause to be made such alterations and modifications in and additions to the Aircraft as may be required from time to time to meet the applicable requirements of the Aeronautics Authority or any other governmental authority with jurisdiction over the Aircraft and/or the Company's operations and aircraft; provided, however, that the Company may in good faith contest the validity or application of any such requirements in any reasonable manner that does not adversely affect the first and prior perfected Lien and security interest of the Indenture or the interests of the Indenture Trustee or the Holders in the Indenture Estate or involve any risk of liability or civil or criminal penalties imposed on or against the Indenture Trustee or any Holder or involve any material danger of the sale, forfeiture or loss of any of the Indenture Estate or any interest therein. All alterations, modifications and additions made pursuant to this Section 4.04 shall without further act secure the PMSI Obligations. In addition, the Company, at its own cost and expense, may from time to time make such alterations and modifications in and additions to the Airframe or any Engine as the Company may deem desirable in the proper conduct of its business, including, without limitation, removal of Obsolete Parts, provided that no such alteration, modification, addition or removal shall materially diminish the value or utility of the Airframe or any Engine or impair its condition or airworthiness below its value, utility, condition and airworthiness immediately prior to such alteration, modification, addition or removal, assuming that the Airframe or such Engine was then in the condition and airworthiness required to be maintained by the terms of this Indenture, except that the value (but not the utility, condition or airworthiness) of the Airframe or any Engine may be reduced by the value of any such Obsolete Parts which shall have been removed; provided that the aggregate value of all such Obsolete Parts which shall have been so removed and not replaced shall not exceed $1,000,000. Each Part incorporated or installed in or attached or added to the Airframe or any Engine as the result of any alteration, modification, removal or addition made pursuant to this Section 4.04 shall without further act become subject to the Lien of this Agreement. Notwithstanding the foregoing, the Company may remove any such Part if: (i) such Part is in addition to, and not in replacement of or substitution for, any Part originally incorporated or installed in or attached or added to the Airframe or such Engine on the Delivery Date or any Part in replacement of, or substitution for, any such Part; (ii) such Part is not required to be incorporated or installed in or attached or added to the Airframe or such Engine pursuant to 94 95 the terms of Section 4.02 or the first sentence of this Section 4.04; and (iii) such Part can be removed from the Airframe or such Engine without (A) causing material damage to the Aircraft or diminishing or impairing the utility, condition or airworthiness required to be maintained by the terms of this Indenture or (B) diminishing the value or utility which the Airframe or such Engine would have had at such time had such alteration, modification, removal or addition not occurred assuming the Aircraft was then in the condition required to be maintained by the terms of this Indenture. Upon the removal by the Company of any such Part as provided in the preceding sentence such Part shall no longer be subject to the Lien of this Indenture or deemed a Part. SECTION 4.05. Loss, Destruction, Requisition. (a) Company's Election Rights. The Company shall notify the Indenture Trustee as soon as practicable but in no event more than 10 Business Days following the occurrence of an event which constitutes or might constitute an Event of Loss with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe. By written notice to the Indenture Trustee given within 60 days of the occurrence of any Event of Loss, the Company shall elect the alternative set forth in Section 4.05(b) hereof or the alternative set forth in Section 4.05(c) hereof. The Company's failure to make such election within said 60-day period shall be deemed to be an election of the alternative set forth in Section 4.05(b) hereof. (b) Prepayment of Equipment Purchase Certificates. The Company shall, if it has so elected or is deemed to have so elected under 4.05(a), pay to the Indenture Trustee, by wire transfer of immediately available funds on the earlier of (i) tenth Business Day following receipt in full of insurance proceeds or requisition proceeds, described in Section 4.05(e), in connection with such Event of Loss and (ii) the 120th day after the occurrence of such Event of Loss (the earlier of such dates being referred to herein as the "Loss Payment Date"), the outstanding principal amount of the Equipment Purchase Certificates and all accrued and unpaid interest thereon together with all other amounts due and owing under this Indenture or the Loan Agreement including without limitation, any Breakage Costs in respect of such prepayment (unless such prepayment has been postponed to the end of the then current Interest Period pursuant to Section 2.02(e) hereof). Upon receipt by the Indenture Trustee of such amounts, the Indenture Trustee shall apply such amounts as provided in Section 5.01 hereof and thereupon the Lien of this Indenture shall terminate. (c) Replacement of Airframe and Engines. So long as no Event of Default shall have occurred and be continuing, and subject to Section 4.05(a) hereof, if the Company has elected to replace the Airframe and Engines pursuant to this Section 4.05(c), the Company shall, within one hundred twenty (120) days after the occurrence of such Event of Loss, as replacement for the Airframe and Engines with respect to which an Event of loss has occurred, substitute for the Aircraft subject to the Event of Loss, by causing to be subjected to the Lien of this Indenture, a an Airbus A300F4-605R airframe and a number of engines equal 95 96 to the number of Engines with respect to which the Event of Loss has occurred of the same or an improved make and model, owned by the Company free and clear of all Liens not excepted in Sections 4.01(a), (b), (c) and (e) hereof, duly certified as an airworthy aircraft by the Aeronautics Authority and having a value and utility at least equal to, and being in as good operating condition as, the Airframe and Engines with respect to which such Event of Loss occurred, assuming that the Airframe and Engines were then in the condition and airworthiness required to be maintained by the terms of this Indenture immediately prior to the occurrence of such Event of Loss. In such case and as a condition to such substitution the Company, at its own cost and expense, will also promptly: (i) furnish the Indenture Trustee with a certificate of a nationally recognized aircraft appraiser reasonably satisfactory to the Indenture Trustee certifying that such replacement airframe and engines have a value and utility at least equal to, and are in as good operating condition as, the Airframe and Engines replaced, assuming such Airframe and Engines were in the condition and repair required by the terms of this Indenture immediately prior to the occurrence of such Event of Loss; (ii) furnish the Indenture Trustee with such evidence as the Indenture Trustee may reasonably request of compliance with the insurance provisions of Section 4.06 with respect to such replacement airframe and engines; (iii) cause an Indenture Supplement with respect to such replacement airframe and engines to be duly executed by the Company and the Indenture Trustee and recorded pursuant to the Act, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 4.02(b) hereof, in order that the Lien of this Indenture shall constitute a first and prior perfected Lien and security interest on and in respect of such replacement airframe and engines; (iv) furnish the Indenture Trustee with a copy of the original bill of sale or other evidence of ownership reasonably satisfactory to the Indenture Trustee respecting such replacement airframe and engines, together with an assignment in form and substance satisfactory to the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Indenture Trustee from such manufacturer or manufacturers to such assignment; (v) furnish the Indenture Trustee with an opinion (reasonably satisfactory to the Indenture Trustee) of counsel to the Company (which may be the Company's General Counsel) addressed to the Indenture Trustee and each Holder to the effect that (A) the Company has good title to such replacement airframe and engines, (B) such replacement airframe and engines have been validly subjected to the Lien of this Indenture (with the effect and result that this Indenture constitutes a first and prior perfected security interest and Lien on such replacement airframe and engines), and 96 97 (C) the Indenture Trustee would be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to such replacement airframe and engines, provided, that such opinion need not be to the effect specified in the foregoing clause (C) to the extent that the benefits of such Section 1110 would not have been, by reason of a change in law or governmental interpretation thereof after the date hereof, available to the Indenture Trustee with respect to the Aircraft immediately prior to such substitution had such Event of Loss not occurred; (vi) cause a financing statement or statements with respect to such replacement airframe and engines to be filed in such place or places as necessary in order that the Lien of this Indenture shall constitute a first and prior perfected Lien and security interest on and in respect of such replacement airframe and engines; and (vii) take such other action as the Indenture Trustee may reasonable request in order that such replacement airframe and engines shall be due and properly subjected to the Lien of this Indenture to the same extent as the replaced Airframe and Engines. Promptly upon the registration of any such replacement airframe and the recordation of the Indenture Supplement covering such replacement airframe and engines pursuant to the Act, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 4.02(b) hereof, the Company will cause to be delivered to the Indenture Trustee an opinion of counsel to the Company addressed to the Indenture Trustee and the Holders as to the due registration of the Aircraft and the due recordation of such Indenture Supplement or such other requisite documents or instruments and the validity and perfection of the Lien in such replacement airframe and engines granted to the Indenture Trustee under this Indenture. Each replacement airframe shall be deemed an "Airframe," each such replacement engine shall be deemed an "Engine" and each such replacement airframe and engine shall be deemed part of the same Aircraft as was the Airframe or Engine replaced. (d) Event of Loss with Respect to an Engine. Upon the occurrence of an Event of Loss with respect to an Engine under circumstances in which there has not occurred an Event of Loss with respect to the Airframe, the Company shall give the Indenture Trustee prompt written notice thereof and shall, as soon as practicable but in any event within ninety (90) days after the occurrence of such Event of Loss, substitute (by subjection to the Lien of this Indenture) for the Engine with respect to which such Event of Loss occurred, a Replacement Engine, free and clear of all Liens not excepted in Sections 4.01(a), (b), (c) and (e) hereof and having a value and utility at least equal to, and being in as good operating condition as, the Engine with respect to which such Event of Loss occurred, assuming such Engine was of the value and utility and in the condition and repair required by the terms of this Indenture immediately prior to the occurrence of such Event of Loss. The standards set forth in this Section with respect to Replacement Engines shall apply upon any replacement 97 98 or substitution of an Engine with a Replacement Engine pursuant to any other provision of this Indenture. Prior to or at the time of any substitution of an Engine pursuant to this Section 4.05(d), the Company, at its own cost and expense will: (i) furnish the Indenture Trustee with such evidence of compliance with the insurance provisions of Section 4.06 hereof with respect to such Replacement Engine as the Indenture Trustee may reasonably request; (ii) furnish the Indenture Trustee with a certificate of an aircraft advisor (who must be a nationally recognized aircraft authority) certifying that such Replacement Engine has a value and utility at least equal to, and is in as good operating condition as, the Engine replaced, assuming such Engine was in the condition and repair required by the terms of this Indenture immediately prior to the occurrence of such Event of Loss; (iii) cause an Indenture Supplement with respect to such Replacement Engine to be duly executed by the Company and the Indenture Trustee and recorded pursuant to the Act, or the applicable laws, rule and regulations of any other jurisdiction in which the Aircraft may be registered as permitted by Section 4.02(b) hereof in order that the Lien of this Indenture shall constitute a first and prior and perfected Lien and security interest on and in respect of such Replacement Engine; (iv) furnish the Indenture Trustee with a copy of the original bill of sale or other evidence of ownership reasonably satisfactory to the Indenture Trustee respecting such Replacement Engine, together with an assignment in form and substance satisfactory to the Indenture Trustee of any and all manufacturer's warranties applicable thereto and a consent reasonably satisfactory to the Indenture Trustee from such manufacturer to such assignment; (v) furnish the Indenture Trustee with an opinion (reasonably satisfactory to the Indenture Trustee) of counsel to the Company (which may be the Company's General Counsel) addressed to the Indenture Trustee and each Holder to the effect that (A) the Company has good title to such Replacement Engine, and (B) such Replacement Engine has been validly subjected to the Lien of this Indenture (with the effect and result that this Indenture constitutes a first and prior perfected security interest and Lien on such Replacement Engine); (vi) cause a financing statement or statements with respect to such Replacement Engine to be filed in such place or places as necessary in order that the Lien of this Indenture shall constitute a first and prior perfected Lien and security interest on and in respect of such Replacement Engine; and 98 99 (vii) take such other action, as the Indenture Trustee may reasonably request in order that such Replacement Engine be duly and properly subjected to the Lien of this Indenture to the same extent as the replaced Engine. Promptly upon the recordation of the Indenture Supplement covering such Replacement Engine pursuant to the Act, or the applicable laws, rules and regulations of any other jurisdiction in which the Aircraft may then be registered as permitted by Section 4.02(b) hereof, the Company will cause to be delivered to the Indenture Trustee an opinion of counsel to the Company addressed to the Indenture Trustee and the Holders as to the due recordation of such Indenture Supplement or such other requisite documents or instruments and the validity and perfection of the Lien in such Replacement Engine granted to the Indenture Trustee under this Indenture. (e) Requisition of an Airframe and the Installed Engines for Use by Government. In the event of the requisition for use by the Government or any other government of registry of the Aircraft, or any agency or instrumentality thereof of the Airframe and the Engines or engines then installed on the Airframe, which requisition does not constitute an Event of Loss, the Company shall promptly notify the Indenture Trustee of such requisition and all of the Company's obligations under this Indenture with respect to such Airframe and Engines or engines shall continue to the same extent as if such requisition had not occurred. All payments received by the Company, any lessee or the Indenture Trustee from the Government or other government of registry of the Aircraft or any agency or instrumentality thereof for such use of the Airframe and Engines or engines shall, so long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, be paid over to, or retained by, the Company (or if directed by the Company, any lessee). All payments received by the Company, any lessee or the Indenture Trustee with respect to the Airframe or any Engine with respect to any requisition constituting an Event of Loss or while a Payment Default, Bankruptcy Default or Event of Default is continuing shall be paid over to, or retained by, the Indenture Trustee for application in accordance with this Indenture. At such time as there shall not be continuing any such Payment Default, Bankruptcy Default or Event of Default such amounts shall be paid to the Company. (f) Requisition for Use by Government of an Engine not Installed on the Airframe. In the event of the requisition for use by the Government or any other government of registry of the Aircraft or any agency or instrumentality thereof of any Engine not then installed on the Airframe, the Company shall replace such Engine by complying with the terms of Section 4.05(d) hereof to the same extent as if an Event of Loss had occurred with respect to such Engine, and any payments received by the Company, any lessee or the Indenture Trustee from the Government or other government of registry or any instrumentality thereof with respect to such requisition shall, so long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing be paid over to or retained by the Company, provided that the Company shall have fully performed its 99 100 obligations under Section 4.05(d) hereof. If a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, all such payments shall be paid over to, or retained by, the Indenture Trustee for application in accordance with this Indenture. (g) Other Payments. Any payments (other than insurance proceeds, the application of which is provided in Section 4.06 hereof) received at any time by the Company or the Indenture Trustee from any governmental authority or any other Person in connection with an Event of Loss with respect to the Airframe or the Airframe and the Engines or engines then installed on the Airframe will be applied toward the Company's obligations under Section 4.05(b) hereof or if the Company has made the election under Section 4.05(c) hereof or if the Event of Loss relates to an Engine not then installed on the Airframe, such payments shall, so long as no Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, be paid over to the Company, provided that the Company shall have fully performed its obligations pursuant to Section 4.05(c) or (d) hereof, as the case may be. SECTION 4.06. Insurance. (a) Public Liability and Property Damage Liability Insurance. (i) The Company, at its own cost and expense, will maintain or cause to be maintained with respect to the Aircraft, comprehensive aircraft liability insurance including, without limitation, passenger legal liability and property damage liability insurance and cargo legal liability in such amounts, against such risks (including, without limitation, contractual liability and war risk and allied perils liability), with such retentions as the Company customarily maintains with respect to similar aircraft and engines which comprise the fleet of the Company (subject to the limitations set forth in Section 4.06(f)), and with such insurers (which shall be insurers of recognized responsibility), and such insurance against such other risks as is usually carried by similar corporations engaged in the same or similar business and similarly situated as the Company and owning or operating aircraft and engines similar to the Aircraft and Engines; provided that such insurance shall not be in amounts less than the amount per occurrence specified in Section 6.03(b) of the Loan Agreement unless the Aircraft is not operated and appropriate liability insurance for the Aircraft on the ground is maintained provided further that in no event shall the limits of liability for all public liability insurance be less than the amount, per occurrence as set forth on the insurance certificate delivered on the Delivery Date unless the Aircraft is not operated and appropriate insurance for the Aircraft on the ground is maintained. (ii) Notwithstanding Section 4.06(a)(i), in the event of the requisition for use by the Government of the Airframe or the Airframe and the Engines or engines then installed on the Airframe, the Company shall maintain throughout the period of such requisition such insurance as would otherwise be required under this Section 4.06, provided that the Indenture Trustee shall accept, in lieu of such insurance coverage, indemnification or 100 101 insurance from the Government which is substantially the same as otherwise required under this Section 4.06. (iii) Any policy of insurance carried and maintained in accordance with this Section 4.06(a), and any policy taken out in substitution or replacement for any such policy subject to the terms, conditions and limitations thereof, shall: (A) name or be amended to name the Indenture Trustee, the Agent and the Holders as additional insureds; (B) provide that, in respect of the interest of any Additional Insured in such policies, the insurance shall not be invalidated by any action or inaction of the Company or any Additional Insured as defined under the policy of insurance required under this Section 4.06 (other than such Additional Insured) and shall insure each Additional Insured regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Company or any Additional Insured as defined under the policy of insurance required under this Section 4.06 (other than such Additional Insured); (C) provide that if such insurance is cancelled for any reason, or any substantial change is made in the policies which adversely affect the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to any Additional Insured for thirty (30) days (except in the case of war risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by each such Additional Insured of written notice from such insurers of such cancellation, change or lapse; (D) provide that no Additional Insured shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance; (E) provide that the insurers shall waive any rights of subrogation against each Additional Insured, to the extent that the Company has waived its rights under this Indenture or the Loan Agreement; provided that the exercise by insurers of rights of subrogation derived from rights retained by the Company shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of rights of subrogation derived from rights retained by the Company; (F) provide that such insurer shall waive the right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of any Additional Insured; 101 102 (G) provide that all of the provisions of such policy shall operate in the same manner as if there were a separate policy covering each Additional Insured; provided that such policies shall not operate to increase any insurer's limit of liability; and (H) be primary, without right of contribution from any other insurance which is carried by any Additional Insured with respect to its interest in the Aircraft. (b) Insurance Against Loss or Damage to Aircraft and Engines. (i) The Company, at its own cost and expense, shall maintain or cause to be maintained in effect, with insurers of recognized responsibility, all-risk ground and flight aircraft hull insurance covering the Aircraft and all-risk coverage with respect to any Engines and Parts while temporarily removed from the Aircraft and not replaced by similar Engines or Parts, including in each case war-risk and allied perils, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) with such retentions (subject to the limitations set forth in Section 4.06(f)) and in such form and amounts as the Company customarily maintains with respect to the aircraft in the Company's fleet of the same type and model and operated on the same routes as the Aircraft (except that the Company shall be required to maintain war-risk, hijacking (air piracy) and governmental confiscation and expropriation insurance (except in the country of registry) if the Aircraft is operated on routes where the custom is for major international Air Carriers flying comparable routes to carry such insurance), provided that such insurance shall at all times while the Aircraft is subject to the Lien of this Indenture be for an amount not less than an amount equal to 125% of the aggregate outstanding principal amount of the Equipment Purchase Certificates at the date of determination (the "Threshold Value"). (ii) Any policies carried and maintained in accordance with this Section 4.06(b) and any policies taken out in substitution or replacement for any such policies subject to the terms, conditions and limitations thereof shall: (A) name or be amended to name the Indenture Trustee, the Agent and the Holders as additional insureds and to name the Indenture Trustee as loss payee (the "Loss Payee"); (B) provide with respect to coverage provided under this Section 4.06(b), that (i) in the event of a loss involving proceeds in excess of $6,000,000, the proceeds in respect of such loss up to an amount equal to the Threshold Value shall be payable to the Indenture Trustee, it being understood and agreed that in the case of any payment to the Indenture Trustee otherwise than in respect of an Event of Loss, the Indenture Trustee shall, unless a Payment Default or an Event of Default shall have occurred and be continuing, upon receipt of evidence satisfactory to it that the damage giving rise to such payment shall have been repaired or that such payment shall then be required to 102 103 pay for repairs then being made, pay the amount of such payment to the Company or its order, and (ii) the entire amount of any loss involving proceeds in the aggregate of $6,000,000 or less or the amount of any proceeds of any loss in excess of the Threshold Value for the Aircraft shall be paid to the Company or its order unless a Payment Default or Event of Default shall have occurred and be continuing and the insurers have been notified thereof by the Indenture Trustee (and if the insurers have notice of a Payment Default or Event of Default such payment shall be made to the Indenture Trustee); (C) provide that if such insurance is cancelled for any reason or any substantial change is made in the policies which adversely affects the coverage required herein, or if such insurance is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to any Additional Insured or the Loss Payee for thirty days (except in the case of war-risk coverage in which event the applicable period shall be seven (7) days or such other period as may be customary) after receipt by each such Additional Insured or the Loss Payee of written notice from such insurer of such cancellation, change or lapse; (D) provide that, in respect of the interest of any Additional Insured or the Loss Payee in such policies the insurance shall not be invalidated by any action or inaction of the Company, the Loss Payee or any Additional Insured (other than any action or inaction of the Loss Payee or such Additional Insured, as the case may be) and shall insure the Additional Insured and the Loss Payee regardless of any breach or violation of any warranty, declaration or condition in such policies by the Company or any other Additional Insured as defined under the policy of insurance required under this Section 4.06(b); (E) provide that the insurers shall waive any rights of subrogation against the Loss Payee and the Additional Insureds, to the extent that the Company has waived its rights under this Indenture; provided that the exercise by insurers of rights of subrogation derived from right retained by the Company shall not, in any way, delay payment of any claim that would otherwise be payable by such insurers but for the existence of right of subrogation derived from rights retained by the Company; (F) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines, or spare parts, as the case may be) such insurer shall waive any right of such insurer to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of any Additional Insured or Loss Payee; 103 104 (G) be primary and without rights of contribution from any other insurance which is carried by any Additional Insured or the Loss Payee with respect to its interest in the Aircraft; and (H) provide that (except in the case of insurance with respect to Engines and spare parts that have been removed from the Aircraft and replaced with other Engines or engines, or spare parts, as the case may be as otherwise provided in that certain letter dated July 2, 1993 (the delivery date of the first aircraft financed pursuant to the Company's 1993 facility with certain of the Banks) a copy of which was heretofore delivered to the Banks, but deeming for such purpose the aircraft referred in such letter to be the Aircraft) no Additional Insured or Loss Payee shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance. (c) Application of Insurance Proceeds. (i) All insurance proceeds (other than proceeds from policies carried by the Indenture Trustee, the Agent or any Holder) received under policies described in Section 4.05(b) hereof as the result of the occurrence of an Event of Loss with respect to the Airframe or an Engine will be applied as follows: (A) if such proceeds are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and the Company has elected or is deemed to have elected the alternative set forth in Section 4.05(b) hereof, so much of such proceeds as shall not exceed the amounts required to be paid by the Company pursuant to said Section 4.05(b) hereof shall be applied in reduction of the Company's obligation to pay such amounts if not already paid by the Company, or if already paid by the Company, shall be applied to reimburse the Company for its payment of such amounts, provided that no Payment Default or Event of Default shall have occurred and be continuing and the balance, if any, of such proceeds remaining will be paid to the order of the Company; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held pursuant to Section 5.04 hereof as security for the Company's obligations hereunder; or (B) if such proceeds are received with respect to the Airframe or the Airframe and the Engines or engines then installed on the Airframe and the Company has elected the alternative set forth in Section 4.05(c) hereof, or if such proceeds are received with respect to an Engine not then installed on the Airframe and not replaced by an Engine or engine under the circumstances contemplated by Section 4.05(d) hereof, all such proceeds shall be paid to the Indenture Trustee for disbursement to the order of the Company, after the Company shall have fully performed the terms of Sections 4.05(c) or 4.05(d), as applicable, hereof with respect to the Event of Loss for which such proceeds are paid, provided that no Default or Event of Default shall have 104 105 occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held pursuant to Section 5.04 hereof as security for the Company's obligations hereunder. (ii) The insurance proceeds of any property damage loss not constituting an Event of Loss with respect to the Airframe or an Engine will be applied in payment (or to reimburse the Company) for repairs or for replacement property in accordance with Sections 4.02 and 4.03 hereof, if not already paid for by the Company, and any balance remaining after compliance with said Sections 4.02 and 4.03 hereof with respect to such loss shall be paid to the order of the Company, provided that no Payment Default or Event of Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held pursuant to Section 5.04 hereof as security for the Company's obligations hereunder. (iii) If the Indenture Trustee, the Agent or any Holder becomes subject to any claim covered by any insurance policy maintained pursuant to this Section 4.06, the Company shall make available any information required by the Indenture Trustee, the Agent or such Holder, as the case may be, in connection with such claim. (d) Reports. On or before the Delivery Date and thereafter annually on or before the scheduled expiration date for such policy while the Equipment Purchase Certificates are outstanding, the Company's aviation insurance broker will furnish to the Indenture Trustee a report, signed by the Company's independent aviation insurance broker, stating the types of coverage and limits carried and maintained on the Aircraft and certifying that such insurance complies with the terms and conditions of this Indenture. The Company will cause its aviation insurance broker to advise the Indenture Trustee in writing promptly of any default in the payment of any premium and of any other act or omission on the part of the Company of which it has knowledge and which might cause cancellation of all or any part of any insurance carried by the Company with respect to the Aircraft. The Company will cause such insurance broker to agree to advise the Indenture Trustee in writing if and when it becomes evident to such broker that any insurance policy carried and maintained on the Aircraft pursuant to this Section 4.06 will not be renewed at the expiration date. The Company will also cause such insurance broker to deliver to the Indenture Trustee, on or prior to the date of expiration of any insurance policy referenced in a previously delivered certificate of insurance, a new certificate of insurance, confirming to such parties that such insurance as certified on the Delivery Date continues in full force and effect. If the Company shall fail to maintain insurance as required hereby the Indenture Trustee, the Agent or any Holder may, at its option, provide such insurance, and in such event, the Company shall, upon demand, reimburse the Indenture Trustee, the Agent or such Holder, as the case may be, for the cost of such insurance; provided, however, that no exercise of said option shall affect the provisions of this Indenture, including the provisions that failure by the Company to maintain the prescribed insurance shall constitute an Event of Default, or otherwise constitute a waiver of any other rights the Indenture Trustee may have against the Company. 105 106 (e) Indenture Trustee's Insurance. The Indenture Trustee may insure the Airframe or any Engine at its own cost and expense, including insuring the Aircraft for amounts in excess of the Threshold Value, provided that any insurance so maintained by the Indenture Trustee shall not result in a reduction of coverage or amounts payable under insurance required or permitted to be maintained by the Company under this Section 4.06 or increase the cost to the Company of maintaining such insurance; provided further, that any insurance policies of the Indenture Trustee insuring the Airframe or any Engine shall provide for a release to the Company of any and all salvage rights in and to the Airframe or any Engine. (f) Self-Insurance. The Company may self-insure policies, the risks required to be insured against by Section 4.06(a) and Section 4.06(b) in such reasonable amounts as are then applicable to other aircraft or engines of the Company of value comparable to the Aircraft, but in no case shall such self-insurance with respect to all aircraft in the Company's fleet in aggregate exceed for any 12-month policy year an amount equal to the lesser of (i) 50% of the highest insured value of any single aircraft in the Company's fleet and (ii) 1.5% of the average aggregate insured value from time to time of the Company's entire aircraft fleet, provided that a standard deductible per occurrence per aircraft not in excess of the amount customarily allowed as a deductible in the industry shall be permitted in addition to the above-mentioned self-insurance. The Company shall not discriminate as between insurance coverage on the Aircraft and insurance which the Company maintains with respect to similar aircraft owned or operated by the Company operating on similar routes in similar locations. SECTION 4.07. Inspection. At reasonable times, and (so long as no Event of Default shall have occurred and be continuing) upon at least five Business Days' prior written notice to the Company, the Indenture Trustee or its authorized representative, may inspect the Aircraft and, (so long as no Event of Default shall have occurred and be continuing) upon at least 10 Business Days' prior written notice, all Aeronautics Authority-required books and records of the Company and any lessee relating to the maintenance of the Aircraft and such Persons shall keep any information obtained thereby confidential and shall not disclose the same to any Person, except (a) to the Indenture Trustee's counsel, independent insurance advisors or other agents, the Holders and any prospective purchaser of the Aircraft in connection with the exercise of remedies following an Event of Default, each of whom agree to hold such information confidential, (b) as may be required by any statute, court or administrative order or decree or governmental ruling, regulation or demand or (c) as may be necessary for purposes of protecting the interests of any such Person or for enforcement of this Indenture by the Indenture Trustee; provided, however, that any and all disclosures permitted by (b) or (c) above shall be made only to the extent necessary to meet the specific requirements or needs of the Persons to whom such disclosures are hereby permitted; any such inspection of the Aircraft shall be a visual, walk-around inspection of the interior and exterior of the Aircraft and shall not include opening any panel, bays or the like without the express consent of the Company. Notwithstanding the previous sentence, the Indenture 106 107 Trustee or its authorized representative shall (so long as no Event of Default shall have occurred and be continuing) be entitled to inspect the Aircraft only one time among themselves during any consecutive twelve month period. Neither the Indenture Trustee, the Agent nor any Holder shall have any duty to make any inspection of the Aircraft and none of them shall incur any liability or obligation by reason of not making any such inspection. SECTION 4.08. Filings. So long as the Equipment Purchase Certificates remain unpaid, the Company will take, or cause to be taken, at the Company's cost and expense, such action with respect to the recording, filing, re-recording and re-filing of this Indenture, each Indenture Supplement and any financing statements or other instruments as are necessary, or as requested by the Indenture Trustee and appropriate, to maintain, so long as this Indenture is in effect, the perfection of the purchase money equipment security interest and the Lien created by this Indenture, or will furnish to the Indenture Trustee timely notice of the necessity of such action, together with such instruments, in execution form, and such other information as may be required to enable it to take such action at the Company's cost and expense in a timely manner. SECTION 4.09. Annual Opinion. So long as the Equipment Purchase Certificates remain unpaid, the Company shall furnish to the Indenture Trustee annually after the execution hereof (but not later than March 15 of each year) commencing with the year 1996, an opinion, reasonably satisfactory to the Indenture Trustee, of Special Aviation Counsel or other counsel reasonably satisfactory to the Indenture Trustee, with a copy to the Agent, stating: (i) that in the opinion of such counsel, except as otherwise noted in the opinion, such action has been taken with respect to the recording, filing, re-recording and re-filing of this Indenture, the Indenture Supplement and any financing statement, continuation statement or other instruments, and all other action has been taken, as is necessary to maintain the perfection of the security interest created by this Indenture and reciting the details of such recording or other action or that in the opinion of such counsel no action is necessary to maintain the Perfection of such security interest; (ii) specifying all other action which needs to be taken during the succeeding 14 months in order to maintain the perfection of such security interest; and (iii) stating that the Company is the owner of the legal title to the Aircraft, and the Aircraft is free and clear of all Liens, except the security interest created by this Indenture and such as are permitted by this Indenture. SECTION 4.10. Corporate Existence. So long as the Equipment Purchase Certificates remain unpaid, the Company shall at all times maintain its corporate existence except as permitted by Section 4.11 hereof and all of its rights, privileges and franchises necessary in the normal conduct of its business, except for any corporate right, privilege or 107 108 franchise (i) that it determines, in its reasonable, good faith business judgment, is no longer necessary or desirable in the conduct of its business and (ii) the loss of which will not materially adversely affect or diminish the rights of the Holders. SECTION 4.11. Merger, Consolidation. So long as the Equipment Purchase Certificates remain unpaid, the Company shall not enter into any merger or consolidation, or convey, transfer or lease all or substantially all of its assets as an entirety to any Person, unless the surviving corporation or Person which acquires by conveyance, transfer or lease all or substantially all of the assets of the Company as an entirety (i) is a domestic corporation organized and existing under the laws of the United States or a political subdivision thereof, (ii) is a Citizen of the United States, (iii) is a certificated Air Carrier, (iv) expressly assumes by an instrument in writing in form and substance satisfactory to the Indenture Trustee all of the Company's obligations hereunder and under the other Operative Agreements, and the Company delivers such instrument to the Indenture Trustee, (v) provides an opinion from counsel to the Company which counsel shall be reasonably satisfactory to the Indenture Trustee and which opinion shall be reasonably satisfactory to the Indenture Trustee that such merger, consolidation or conveyance, transfer or lease and the instrument noted in clause (iv) above comply with this Section 4.11, that such instrument is a legal, valid and binding obligation of, and is enforceable against, such survivor or Person, and that all conditions precedent herein provided for relating to such transaction have been complied with, and (vi) immediately after such merger, consolidation or conveyance, transfer or lease, as the case may be, the surviving company is in compliance with all of the terms and conditions of this Indenture and each other Operative Agreement, provided that no such merger, consolidation or conveyance, transfer or lease shall be permitted if the same gives rise to an Event of Default. Upon any consolidation or merger, or any conveyance, transfer or lease of all or substantially all of the assets of the Company and the satisfaction of the conditions specified in this Section 4.11, the successor corporation formed by such consolidation or into which the Company is merged or the Person 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 and the other Operative Agreements to which the Company is a party with the same effect as if such successor corporation had been named as the Company herein and therein. SECTION 4.12. Financial Information. So long as any of the Equipment Purchase Certificates remain unpaid, the Company agrees to furnish to the Indenture Trustee: (i) as soon as available, but in any event within one hundred twenty (120) days after the end of each fiscal year of the Company, a consolidated balance sheet of the Company as of the end of such fiscal year, and the related consolidated statements of income, retained earnings and cash flows of the Company for the fiscal year then 108 109 ended as prepared and certified by the Company's independent certified public accountants, including their opinion; (ii) within sixty (60) days after the end of the first, second and third quarterly accounting periods in each fiscal year of the Company, a consolidated balance sheet of the Company prepared by the Company as of the close of the accounting period then ended, together with the related consolidated statements of income, retained earnings and cash flows of the Company for such accounting period certified by the chief accounting officer or a financial vice president of the Company; (iii) promptly upon their general transmission, copies of all regular and periodic reports furnished by the Company to its stockholders; (iv) promptly after filing with the SEC, copies of the Company's annual reports on Form 10-K, quarterly reports on Form 10-Q and, if requested, any registration statement or prospectus filed by the Company with any securities exchange or with the SEC; (v) promptly upon any officer of the Company obtaining knowledge of any condition or event which constitutes an Event of Default, an officer's certificate specifying the nature and period of existence thereof and what action the Company has taken or is taking or proposes to take with respect thereto; and (vi) from time to time, such other financial information as the Indenture Trustee, the Agent or any Holder may reasonably request. Concurrently with the delivery of the financial statements referred to in clause (i) above, the Company shall deliver to the Indenture Trustee a certificate of the Company, signed by any one of the President, the Chief Financial Officer, the General Counsel, the Treasurer or the principal accounting officer of the Company, stating that the signer, or an officer reporting to same, is familiar with the relevant terms of this Indenture and the signer has reviewed, or has caused to be made under such person's supervision a review, of the activities of the Company and that, to the best of his or her knowledge, there does not exist an Event of Default or if an Event of Default exists or did exist, specifying the nature thereof, the period of existence thereof and what action the Company has taken or proposes to take with respect thereto. SECTION 4.13. Representations and Warranties of the Company. The Company represents and warrants that, on the date hereof: (i) the Company is a corporation duly organized and validly existing 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 is duly qualified to do business 109 110 as a foreign corporation in good standing in all jurisdictions in which it has intrastate routes, or offices or major overhaul facilities or in which other activities of the Company require such qualification; (ii) the Company 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 the Operative Agreements to which it is a party (the "Company Documents"); (iii) the Company is an "air carrier" within the meaning of the Act and a holder of a certificate under Sections 41102(a) and 41103 of the Act and a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Act holding an "air carrier operating certificate" issued under Chapter 447 of the Act for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo; (iv) the Company possesses all necessary certificates, franchises, licenses, permits, rights and concessions and consents which are material to the operation of the routes flown by it and the conduct of its business and operations as currently conducted; (v) the Company Documents have each been duly authorized, executed and delivered by the Company and constitute, or when executed and delivered by the Company will constitute, the legal, valid and binding obligations of the Company enforceable against it in accordance with the terms thereof except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws of general application to or affecting the enforcement of creditors' rights, or equitable principles; (vi) no authorization, consent or approval of, notice to or filing with any governmental authority is required for the execution, delivery or performance by the Company of the Company Documents or for the use and maintenance of the Aircraft except for those that have been duly made, given or accomplished; and (vii) neither the execution, delivery or performance by the Company of the Company Documents, nor compliance with the terms and provisions hereof or thereof, conflicts or will conflict with 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 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 is bound, or constitutes or will constitute a default thereunder or will result in the 110 111 imposition of any Lien (other than the Lien of this Indenture) upon any of its properties. SECTION 4.14. Survival of Representations and Warranties. The representations and warranties of the Company shall survive the Delivery Date hereunder and the expiration or termination of this Indenture. ARTICLE 5 RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE INDENTURE ESTATE SECTION 5.01. Distribution of Principal and Interest. Except as otherwise provided in Section 5.03 hereof, (a) each payment or prepayment of principal of Equipment Purchase Certificates by the Company shall be made for the account of the Holders pro rata in accordance with the respective unpaid principal amounts of the Equipment Purchase Certificates held by them and (b) each payment of interest on Equipment Purchase Certificates by the Company shall be made for the account of the Holders pro rata in accordance with the amounts of interest on the Equipment Purchase Certificates then due and payable to the Holders. SECTION 5.02. Intentionally Left Blank. SECTION 5.03. Payments during Continuance of Event of Default. All payments received and amounts held or realized by the Indenture Trustee after an Event of Default shall have occurred and be continuing (including any amounts realized by the Indenture Trustee from the exercise of any remedies pursuant to Article 6), as well as all payments or amounts then held or thereafter received by the Indenture Trustee as part of the Indenture Estate while such Event of Default shall be continuing, shall be distributed by the Indenture Trustee in the following order of priority: first, so much of such payments or amounts as shall be required to pay the Indenture Trustee all amounts then due it pursuant to Sections 8.05 and 7.05(b) hereof shall be applied to pay the Indenture Trustee such amounts; second, so much of such payments or amounts remaining as shall be required to pay the expenses incurred, or in the judgment of the Indenture Trustee expected to be incurred, in using, operating, storing, leasing, controlling or managing the Indenture Estate, and in all maintenance, repairs, replacements, alterations, additions and improvements and in making all payments which the Indenture Trustee may be required or may elect to make, if any, for taxes, assessments, insurance or other proper charges upon the Indenture Estate or any part thereof (including the employment of 111 112 engineers and accountants to examine and make reports upon the properties, books and records of the Company), or for the satisfaction of Liens, if any, prior to the Lien of this Indenture; third, so much of such aggregate amount remaining as shall be required to reimburse the Holders for payment made by them to the Indenture Trustee pursuant to Section 7.05 hereof (to the extent not previously reimbursed), to be distributed to the Holders ratably, without priority of one over any other, in the proportion of the amounts of such unreimbursed payment made pursuant to Section 7.05; fourth, so much of such payments or amounts remaining as shall be required to pay Breakage Costs, if any, and any other amounts owing to the Holders under this Indenture, the Loan Agreement and the other Operative Agreements, in respect of the Equipment Purchase Certificates (other than principal of and interest on the Equipment Purchase Certificates) shall be applied ratably to the payment of such amounts; fifth, so much of such payments or amounts remaining as shall be required to pay the unpaid principal of and interest on the Equipment Purchase Certificates, shall be applied to the payment of such amounts; and sixth, the balance, if any, of such payments or amounts remaining thereafter shall be held by the Indenture Trustee as collateral security for the obligations secured hereby until such time as no Event of Default shall be continuing hereunder or the Equipment Purchase Certificates have been accelerated and all amounts due thereon have been paid, at which time such payments or amounts shall be distributed to the Company. SECTION 5.04. Funds Held by Indenture Trustee; Investments. At any time and from time to time, so long as no Event of Default shall have occurred and be continuing, the Indenture Trustee shall, upon the written instructions of the Company, invest and reinvest in Permitted Investments as specified in the written instructions of the Company, any monies on deposit with the Indenture Trustee as part of the Indenture Estate, and sell any Permitted Investments, in either case, at such prices, including accrued interest, as are set forth in the written instructions of the Company, and such Permitted Investments shall be held by the Indenture Trustee until so sold in trust as part of the Indenture Estate; provided, that the Company shall upon demand pay to the Indenture Trustee the amount of any loss realized upon maturity, sale or other disposition of any Permitted Investments and, so long as no Event of Default shall have occurred and be continuing, be entitled to receive from the Indenture Trustee, and the Indenture Trustee shall promptly pay to the Company, any profit, income interest, dividend or gain realized upon maturity, sale or other disposition of any Permitted Investment. The Indenture Trustee shall not be responsible for any losses on any investments or sales of Permitted Investments made pursuant to the procedure specified in 112 113 this Section 5.04. An account statement delivered by the Indenture Trustee to the Company shall be deemed written confirmation by the Company that the investment transactions identified therein accurately reflect the investment directions given to the Indenture Trustee by the Company, unless the Company notifies the Indenture Trustee in writing to the contrary within ten (10) days of the date of receipt of such statement. ARTICLE 6 EVENTS OF DEFAULT; REMEDIES OF THE INDENTURE TRUSTEE UPON AN EVENT OF DEFAULT SECTION 6.01. Events of Default. The following events shall constitute "Events of Default" and each such Event of Default shall be deemed to exist and continue so long as, but only so long as, it shall not have been remedied: (a) the Company shall fail to make any payment of principal, Breakage Costs or interest on any Equipment Purchase Certificates or any fee payable pursuant to Section 2.04 of the Loan Agreement within five (5) Business Days after the date when due; or the Company shall fail to pay any other amount owing hereunder or under the Equipment Purchase Certificates when due within 30 days after demand therefor by the Indenture Trustee; or (b)(i) the Company shall fail to procure, carry and maintain insurance on the Aircraft at any time in accordance with the provisions of Section 4.06 hereof or such insurance lapses or is cancelled, provided that no such lapse or cancellation shall constitute an Event of Default until the earlier of 30 days (seven days or such shorter time as may be standard in the industry with respect to war risk coverage) after receipt by the Indenture Trustee of written notice of such lapse or cancellation and the date that such lapse or cancellation is effective as to the Indenture Trustee and provided further, that such failure for a period of not more than 30 days shall not constitute an Event of Default as long as the Aircraft is insured as required while on the ground and not operated; or (ii) the Aircraft shall be operated at any time when public liability insurance required under Section 4.06(a) shall not be in effect (it being understood that the Company is not required to maintain such insurance under Section 4.06(a) hereof while the indemnification or insurance referred to in the proviso to Section 4.06(a)(ii) hereof is in effect); or (c) the Company shall fail to perform or observe any other covenant, condition or agreement to be performed or observed by it under this Indenture or any other Operative Agreement or any other written agreement of the Company entered into in connection with the transactions contemplated by the Operative Agreements and such 113 114 failure shall continue unremedied for a period of thirty (30) days from the date on which a Responsible Officer the Company has actual knowledge of the failure or the Company shall have received written notice, identified as a "Notice of Indenture Default," from the Indenture Trustee (or from the Holders of not less than 25% of aggregate principal amount of outstanding Equipment Purchase Certificates) of such failure, provided, that in the event such failure is curable and so long as (but for no longer than 150 days after such 30-day period) the Company shall have promptly undertaken such cure after the earlier of such knowledge or notice thereof which undertaking shall be diligently and continuously pursued using the Company's reasonable best efforts, such failure shall not constitute an Event of Default; or (d) an order for relief shall be entered in respect of the Company by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws as now or hereafter in effect; or the Company shall consent to the appointment of a custodian, receiver, trustee or liquidator of itself or of a substantial part of its property; or the Company is not paying, or shall admit in writing its inability to pay, its debts generally as they come due or shall make a general assignment for the benefit of creditors; or the Company shall file, or the Board of Directors of the Company shall authorize the filing of, or grant one or more persons authority (at their discretion) to make a filing for, a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws (as now or hereafter in effect) or an answer admitting the material allegations of a petition filed against the Company in any such proceeding; or the Company shall file, or the Board of Directors of the Company shall authorize the Company to, or grant one or more persons authority (at their discretion) to, seek relief by voluntary petition, answer or consent, under the provisions of any other or future bankruptcy or other similar law providing for the reorganization or winding-up of corporations, or providing for an agreement, composition, extension or adjustment with its creditors; or (e) an order, judgment or decree shall be entered by any court of competent jurisdiction appointing, without the consent of the Company, a custodian, receiver, trustee, or liquidator of the Company or of any substantial part of its property, or sequestering any substantial part of the property of the Company or granting any other relief in respect of the Company under the federal bankruptcy laws or other insolvency laws, and any such order, judgment or decree of appointment or sequestration shall remain in force undismissed or unvacated for a period of sixty (60) days after the date of its entry; or (f) a petition against the Company in a proceeding under the federal bankruptcy law or other insolvency laws (as now or hereafter in effect) shall be filed and shall not be withdrawn or dismissed within ninety (90) days, or under the provisions of any law providing for reorganization or winding-up of corporations 114 115 which may apply to the Company, any court of competent jurisdiction shall assume jurisdiction, custody or control of the Company or of any substantial part of its property and such jurisdiction, custody or control shall remain in force unrelinquished or unterminated for a period of ninety (90) days; or (g) any representation or warranty made by the Company in this Indenture or in any other Operative Document shall at any time prove to have been incorrect at the time made in any respect material to the transactions contemplated by this Indenture and, if originally made by the Company in good faith, shall remain material and unremedied for a period of thirty (30) days after the Company shall have received written notice, identified as a "Notice of Indenture Default," of such misstatement from the Indenture Trustee or from the Holders of not less than 25% aggregate principal amount of outstanding Equipment Purchase Certificates. SECTION 6.02. Remedies with Respect to Indenture Estate. (i) Upon the occurrence of any Event of Default referred to in Section 6.01(d), (e) or (f) then and in every such case the entire unpaid principal amount of the Equipment Purchase Certificates together with all accrued interest and any Breakage Costs and other sums then owing by the Company hereunder shall immediately and without further act become due and payable without presentment, demand, protest or notice, all of which are hereby waived. Upon the occurrence of any other Event of Default and at any time thereafter so long as the same shall be continuing, the Indenture Trustee may on its own accord or at the direction of Holders of not less than a Majority in Interest of Certificate Holders declare the entire unpaid principal amount of the Equipment Purchase Certificates together with all accrued interest and any Breakage Costs and other sums then owing by the Company hereunder to be forthwith due and payable. Upon the occurrence of any Event of Default and at any time thereafter so long as the same shall be continuing, the Indenture Trustee may, and upon the written instructions of a Majority in Interest of Certificate Holders, the Indenture Trustee shall, do one or more of the following: (a) cause the Company, upon the written demand of the Indenture Trustee, at the Company's expense, to deliver promptly, and the Company shall deliver promptly, all or such part of the Airframe or any Engine (together with all records, logs, manuals, data, and inspection, modification and overhaul records and other documents maintained with respect thereto or pertaining thereto) as the Indenture Trustee may so demand to the Indenture Trustee or its order, or the Indenture Trustee, at its option, may enter upon the premises where all or any part of the Airframe or any Engine (or any such records, logs, manuals, data, or inspection, modification or overhaul records or other documents) are located and take immediate possession (to the exclusion of the Company and all Persons claiming under or through the Company) of and remove the same together with any engine which is not an Engine but which is installed on the Airframe, subject to all of the rights of the owner, lessor, lienor or secured party of such engine, provided, that any such engine shall be held for 115 116 the account of any such owner, lessor, lienor or secured party or, if owned by the Company, may at the option of the Indenture Trustee, be exchanged with the Company for an Engine in accordance with the provisions of Section 4.05(d) hereof by summary proceedings or otherwise, all without liability accruing to the Indenture Trustee for or by reason of such entry or taking of possession or removal, whether for the restoration of damage to property caused by such taking or otherwise; (b) sell all or any part of the Airframe and any Engine and any other part of the Indenture Estate at public or private sale, whether or not the Indenture Trustee shall at the time have possession thereof, as the Indenture Trustee may determine, or otherwise dispose of, hold, use, operate, lease to others or keep idle all or any part of the Airframe or such Engine or any other part of the Indenture Estate as the Indenture Trustee, in its sole discretion, may determine, all free and clear of any rights or claims of whatsoever kind of the Company; or (c) exercise any or all of the rights and powers and pursue any and all remedies of a secured party under the Uniform Commercial Code of the State of New York (whether or not in effect in the jurisdiction in which enforcement is sought). Upon every taking of possession of any part of the Indenture Estate under this Section 6.02, the Indenture Trustee may, from time to time, at the expense of the Company or the Indenture Estate, make all such expenditures for maintenance, insurance, repairs, replacements, alterations, additions and improvements to and of any of the Indenture Estate, as it may deem proper. In each such case, the Indenture Trustee shall have the right to maintain, use, operate, store, lease, control or manage all or any part of the Indenture Estate and to exercise all rights and powers of the Company in relation to any part of the Indenture Estate in connection therewith, as the Indenture Trustee shall deem best, including the right to enter into any and all such agreements with respect to the maintenance, insurance, use, operation, storage, leasing, control, management or disposition of any and all of the Indenture Estate as the Indenture Trustee may determine; and the Indenture Trustee shall be entitled to collect and receive directly all tolls, rents, revenues, issues, income, products and profits of all or any part of the Indenture Estate, without prejudice, however, to the right of the Indenture Trustee under any provision of this Indenture to collect and receive all cash held by, or required to be deposited with, the Indenture Trustee hereunder. Such tolls, rents, revenues, issues, income, products and profits may be applied to pay the expenses of use, operation, storage, leasing, control, management or disposition of all or any part of the Indenture Estate, and of all maintenance, repairs, replacements, alterations additions and improvements, and to make all payments which the Indenture Trustee may be required or may elect to make, if any, for taxes, assessments, insurance or other proper charges upon any or all of the Indenture Estate (including the employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of the Company), and all other payments which the Indenture Trustee may be required or authorized to make under any provision of this Indenture, as well as just and reasonable 116 117 compensation for the services of the Indenture Trustee, and of all Persons properly engaged and employed by the Indenture Trustee. In addition, the Company shall be liable for all legal fees and other costs and expenses incurred by reason of the occurrence of any Event of Default or the exercise of the Indenture Trustee's remedies with respect thereto, including all costs and expenses incurred in connection with the retaking or return of the Airframe or any Engine (or any records, logs, manuals, data, or inspection, modification, or overhaul records or other documents maintained with respect thereto or pertaining thereto) in accordance with the terms hereof and under the Uniform Commercial Code of the State of New York, which amounts shall, until paid, be secured by the Lien of this Indenture. If an Event of Default shall have occurred and be continuing and the Equipment Purchase Certificates shall have been accelerated pursuant to this Section 6.02(i), at the request of the Indenture Trustee, the Company shall promptly execute and deliver to the Indenture Trustee such instruments of title and other documents as the Indenture Trustee any deem necessary or advisable to enable the Indenture Trustee or an agent or representative designated by the Indenture Trustee, at such time or times and place or places as the Indenture Trustee may specify, to obtain possession of any or all of the Indenture Estate to which the Indenture Trustee shall at the time be entitled hereunder. If the Company shall for any reason fail to execute and deliver such instruments and documents after such request by the Indenture Trustee, the Indenture Trustee may obtain a judgment conferring on the Indenture Trustee the right to immediate possession and requiring the Company to execute and deliver such instruments and documents to the Indenture Trustee, to the entry of which judgment the Company hereby specifically consents to the fullest extent it may lawfully do so. Nothing in the foregoing shall affect the right of each Holder to receive all payments of principal of, and interest on, the Equipment Purchase Certificate or Certificates held by such Holder and all other amounts owing to such Holder as and when the same may be due. (ii) The Indenture Trustee shall give the Company at least 30 days' prior notice of any public sale or of the date on or after which any private sale will be held, which notice the Company hereby agrees is reasonable notice. (iii) At any time after the Indenture Trustee has declared the unpaid principal amount of all Equipment Purchase Certificates then outstanding to be due and payable and prior to the sale of any part of the Indenture Estate pursuant to this Article 6, a Majority in Interest of Certificate Holders, by written notice to the Company and the Indenture Trustee, may rescind and annul such declaration and its consequences if: (i) there has been paid to or deposited with the Indenture Trustee an amount sufficient to pay all overdue installments of interest on the Equipment Purchase Certificates, and the principal of and any Breakage Costs 117 118 on any Equipment Purchase Certificates that have become due otherwise than by such declaration of acceleration, and (ii) all other Events of Default, other than nonpayment of principal or interest on the Equipment Purchase Certificates that have become due solely because of such acceleration, have been cured or waived. (iv) A Majority in Interest of Certificate Holders may on behalf of all Holders waive any past default hereunder and its consequences, except a default: (i) in the payment of the principal of, any Breakage Costs or interest on any Equipment Purchase Certificate, or (ii) in respect of a covenant or provision hereof which under Section 10.01(b) hereof cannot be modified or amended without the consent of each Holder affected thereby. Upon any such waiver, such default shall cease to exist, 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. (v) Each and every right, power and remedy herein specifically given to the Indenture Trustee or otherwise in the Indentures shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Indenture Trustee, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy. No delay or omission by the Indenture Trustee in the exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Company or to be an acquiescence therein. (vi) In case the Indenture Trustee shall have instituted any proceeding to enforce any right, power or remedy under this Indenture by foreclosure, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Indenture Trustee, then and in every such case the Company and the Indenture Trustee shall, subject to any determination in such proceedings, be restored to their former positions and rights hereunder with respect to the Indenture Estate, and all rights, remedies and powers of the Indenture Trustee shall continue, as if no such proceedings had been undertaken (but otherwise without prejudice). ARTICLE 7 DUTIES OF THE INDENTURE TRUSTEE SECTION 7.01. Action Upon Event of Default. If any payments of the principal of, or interest on, the Equipment Purchase Certificates due and payable on any Payment 118 119 Date, or when otherwise due and payable, shall not have been paid in full on such Payment Date or such other date, the Indenture Trustee shall give telephonic notice within one Business Day (followed by prompt written notice) to the Company and each Holder specifying the amount and nature of such deficiency in payment; provided that any failure to give such notice under this Section 7.01 shall not relieve the Company of its obligation to make such payment. If a Responsible Officer of the Indenture Trustee shall have actual knowledge of an Event of Default or an event or condition which after notice or lapse of time, or both, would become an Event of Default (other than as provided in the preceding sentence), the Indenture Trustee shall give prompt written notice within 5 Business Days of receiving such knowledge, to the Company and each Holder; provided, however, that the failure of the Indenture Trustee to give any such notice shall not in any way affect the validity of any action taken by the Indenture Trustee or any Holder pursuant to the exercise of any of the remedies provided in Article 6 hereof, except that the foregoing proviso shall not reduce the time provided for any action or otherwise impair any right granted the Company under this Indenture. Subject to the terms of Sections 6.02 and 7.03, the Indenture Trustee shall take such action, or refrain from taking such action, with respect to such Event of Default as the Indenture Trustee shall be instructed in writing by a Majority in Interest of Certificate Holders. If the Indenture Trustee shall not have received instructions as above provided within twenty (20) Business Days after giving notice of such Event of Default to the Holders, the Indenture Trustee may, subject to instructions later received pursuant to the preceding sentence, take such action, or refrain from taking such action, but shall be under no duty to take or refrain from taking any action, with respect to such Event of Default as it shall determine advisable in the best interests of the Holders, and shall use the same degree of care and skill in connection therewith as a prudent Person would use under the circumstances in the conduct of its own affairs; provided, that the Indenture Trustee may not sell the Airframe or any Engine without the consent of a Majority in Interest of Certificate Holders. The Indenture Trustee shall promptly provide each Holder with a copy of any notice it received from the Company to the extent such Holder has not otherwise received such notice from the Company. SECTION 7.02. No Duties Except as Specified. (a) Generally. The Indenture Trustee shall not have any duty or obligation to manage, control, use, sell, dispose of or otherwise deal with the Aircraft or any other part of the Indenture Estate or otherwise to take or refrain from taking any action under or in connection with this Indenture, except as expressly provided by the terms of this Indenture or as expressly provided in written instructions received pursuant to the terms of Section 7.01 or 7.04 hereof. No implied duties or obligations shall be read into this Indenture against the Indenture Trustee. (b) Specific Duties. Notwithstanding the provisions of paragraph (a) of this Section 7.02, the Indenture Trustee agrees that (i) it will, in its individual capacity and at its own cost and expense, promptly take such action as may be necessary to discharge duly any Liens on any part of the Indenture Estate or on any properties of the Company assigned, pledged or mortgaged as part of the Indenture Estate, which result from claims against the 119 120 Indenture Trustee not related to the Lien and security interest created under this Indenture on the Indenture Estate or to the administration of the Indenture Estate or to any other transaction pursuant to this Indenture or any document included in the Indenture Estate, (ii) so long as this Indenture is in effect, it will, with respect to specific actions to be taken and subject to Section 7.04 hereof, cooperate with the Company in connection with the recording, filing, re-recording and refiling of the Indenture and any supplements to any of them, and any financing statement or other documents as is necessary to maintain the perfection hereof or otherwise to protect the security interests created hereby and (iii) it will furnish the notices and other instruments referred to in the last sentence of Section 8.02 hereof. The Indenture Trustee shall not discriminate as between Holders. SECTION 7.03. No Action Except Under Indenture or Instructions. The Indenture Trustee agrees that it will not manage, control, use, sell, dispose of or otherwise deal with the Aircraft or any other property constituting part of the Indenture Estate except (i) in accordance with the powers granted to, or the authority conferred upon, the Indenture Trustee pursuant to this Indenture or (ii) in accordance with the express terms of this Indenture or with written instructions pursuant to Section 6.02, 7.01 or 7.04. SECTION 7.04. Action Upon Instructions Generally. Subject to the terms of Sections 6.02, 7.01 and 7.05 and except as otherwise provided herein, upon the written instructions at any time and from time to time of a Majority in Interest of Certificate Holders, the Indenture Trustee shall take such of the following actions as may be specified in such instructions or this Indenture: (i) give such notice or direction or consent or exercise such right, remedy or power under this Indenture or in respect of any part or all of the Indenture Estate as shall be specified in such instructions; and (ii) take such other action as shall be specified in such instructions, it being understood that without the written instructions of a Majority in Interest of Certificate Holders, the Indenture Trustee will not approve any such matter as satisfactory to the Indenture Trustee. The Indenture Trustee will execute and the Company will file or cause to be filed such continuation statements with respect to financing statements relating to the security interest created under this Indenture in the Indenture Estate as may be specified from time to time in written instructions of the Company or a Majority in Interest of Certificate Holders (which instructions may, by their terms, be operative only at a future date and which shall be accompanied by the form of such continuation statement so to be filed). The Indenture Trustee shall forthwith notify all of the Holders of any direction received pursuant to this Section 7.04 by a Majority in Interest of Certificate Holders. SECTION 7.05. Indemnification. (a) With Respect to Actions Hereunder. The Indenture Trustee shall not be required to take any action or refrain from taking any action requested by the Holders under Sections 7.01 (other than the first two sentences of Section 7.01), 7.04 or Article 6 hereof if it shall have reasonable grounds for believing that repayment of any funds expended by it or adequate indemnification against risks incurred in connection therewith is not reasonably assured to it. The Indenture Trustee shall not be required to take 120 121 any action pursuant to Section 7.01 or 7.04 or Article 6 hereof, nor shall any other provision of this Indenture be deemed to impose a duty on the Indenture Trustee to take any action, if the Indenture Trustee shall have been advised by counsel that such action is contrary to the terms hereof or is otherwise contrary to law. Each Holder may, but shall not be required to, participate in any indemnification of the Indenture Trustee given pursuant to this Section 7.05. Each Holder so participating shall be entitled to reimbursement from the Company for such participation. (b) With Respect to Claims. (i) For the purposes of this Section 7.05(b), "Claims" shall mean any and all costs, liabilities (including strict or absolute liability without fault in tort or otherwise), losses, damages, penalties, actions or suits or claims which may be imposed on, incurred by, suffered by, or asserted against an Indemnified Person, as defined herein, and, except as otherwise expressly provided in this Section 7.05(b), shall include all reasonable out-of-pocket costs, disbursements and expenses (including legal fees and expenses) paid or incurred by an Indemnified Person in connection therewith. (ii) For the purposes of this Section 7.05(b), "Indemnified Person" means the Indenture Estate, the Indenture Trustee both in its individual capacity and as trustee and each of its successors, permitted transferees or assigns permitted under the terms hereof, provided that as a condition of any obligations of the Company to pay any indemnity or perform any action under this Section 7.05(b) with respect to any Persons who are not signatories hereto, such Persons shall expressly agree in writing to be bound by all the terms of this Section 7.05(b). (iii) Subject to the exclusions stated in Section 7.05(b)(iv) hereof the Company agrees to indemnify, defend and hold harmless each Indemnified Person on an After-Tax Basis against Claims resulting from or arising out of: (A) the purchase, ownership, operation, possession, use, maintenance, overhaul, testing, registration, re-registration, modification, alteration or lease of the Aircraft, Airframe or Engine, or any engine used in connection with the Airframe, or any part thereof by the Company, any lessee or any other Person whatsoever, whether or not such purchase, ownership, operation, possession, use, maintenance, overhaul, testing, registration, re-registration, non-use, modification, alteration or lease is in compliance with the terms of this Indenture; (B) the manufacture, design, purchase, acceptance, rejection, delivery, or condition of the Aircraft or any Engine, including, without limitation, latent and other defects, whether or not discoverable, and claims relating to patent, trademark or copyright infringement; and (C) any breach of or failure to perform or observe, or any other non-compliance with, any covenant or agreement to be performed, or other obligation of the Company 121 122 under any of the Operative Agreements, or the falsity of any representation or warranty of the Company in any of the Operative Agreements. (iv) The following are excluded from the Company's agreement to indemnify under this Section 7.05(b): (A) Claims which are taxes whether or not covered pursuant to the indemnity set forth in Section 8.05 hereof; (B) Claims which are covered pursuant to Section 8.05 hereof; (C) With respect to any particular Indemnified Person, Claims attributable to the gross negligence or willful misconduct of, or to the breach of any contractual obligation by or the falsity or inaccuracy of any representation or warranty of, such Indemnified Person; and (D) Claims attributable to acts or events occurring in any period subsequent to termination of this Indenture. (v) In the case of any Claim indemnified by the Company hereunder which is covered by a policy of insurance maintained by the Company pursuant to Section 4.06 hereof or otherwise, it shall be a condition of such indemnity with respect to any particular Indemnified Person that such Indemnified Person shall use reasonable efforts to cooperate with the insurers in the exercise of their rights to investigate, defend or compromise such Claim as may reasonably be required to retain the benefits of such insurance with respect to such Claim. (vi) An Indemnified Person shall promptly notify the Company of any Claim as to which indemnification is sought. Subject to the rights of insurers under policies of insurance maintained by the Company, the Company shall have the right to investigate, and the right in its sole discretion to defend or compromise any Claim for which indemnification is sought under this Section 7.05(b), and the Indemnified Person shall cooperate with all reasonable requests of the Company in connection therewith. Where the Company or the insurers under a policy of insurance maintained by the Company undertake the defense of an Indemnified Person with respect to a Claim, no additional legal fees or expenses of such Indemnified Person in connection with the defense of such Claim shall be indemnified hereunder unless the fees or expenses were incurred at the written request of the Company or such insurers. Subject to the requirement of any policy of insurance applicable to a Claim, an Indemnified Person may participate at its own expense in any judicial proceeding controlled by the Company or its insurers pursuant to the preceding provisions, provided that such party's participation does not, in the opinion of the independent counsel appointed by the Company or its insurers to conduct such proceedings, interfere with such control; and such 122 123 participation shall not constitute a waiver of the indemnification provided in this Section 7.05(b). (vii) To the extent that a Claim indemnified by the Company under this Section 7.05(b) is in fact paid by the Company and/or an insurer under a policy of insurance maintained by the Company, the Company and/or such insurer as the case may be shall be subrogated to the extent of such payment to the rights and remedies of the Indemnified Person on whose behalf such Claim was paid with respect to the transaction or event giving rise to such Claim. Should an Indemnified Person receive any refund, in whole or in part, with respect to any Claim paid by the Company hereunder, it shall, so long as no Event of Default or Payment Default shall have occurred and be continuing, promptly pay over the amount refunded, together with any interest received with respect to such amount for the period between the indemnification payment and the receipt of such refund, to the Company, but in no event more than the amount theretofore received by such Indemnified Person from the Company and its insurers in respect of such Claim. (viii) The general indemnification provisions of this Section 7.05(b) are not intended to waive or supersede any specific provisions of, or any rights or remedies of the Company under, this Indenture or any other Operative Agreement to the extent such provisions apply to any Claim. The Company does not guarantee and nothing in the general indemnification provisions of this Section 7.05(b) shall be construed as a guarantee by the Company with respect to the value of the Aircraft or any part thereof. (c) Survival of Indemnity. The indemnity contained in this Section 7.05 shall survive the Delivery Date and the expiration or termination of this Indenture but only with respect to Claims arising out of events occurring prior to such expiration or termination. SECTION 7.06. Withholding Taxes. The Indenture Trustee, as agent for the Company, shall exclude and withhold from each payment of principal, Breakage Costs, if any, and interest and other amounts due hereunder or under the Equipment Purchase Certificates any and all withholding taxes applicable thereto as required by law. The Indenture Trustee agrees to act as such withholding agent and, in connection therewith, whenever any present or future taxes or similar charges are required to be withheld with respect to any amounts payable in respect of the Equipment Purchase Certificates, it will withhold such amounts and timely pay the same to the appropriate authority in the name of and on behalf of the Holders, it will file any necessary withholding tax returns or statements when due, and that, as promptly as possible after the payment thereof, it will deliver to each Holder, appropriate documentation showing the payment thereof, together with such additional documentary evidence as such Holder may reasonably request from time to time. The Indenture Trustee agrees to file any other information reports as it may be required to file under United States law. 123 124 ARTICLE 8 THE INDENTURE TRUSTEE SECTION 8.01. Acceptance of Trusts and Duties. The Indenture Trustee accepts the trusts and duties hereby created and applicable to it and agrees to perform the same but only upon the terms of this Indenture, and agrees to receive and disburse all monies constituting part of the Indenture Estate in accordance with the terms hereof. The Indenture Trustee shall not be answerable or accountable under any circumstances, except for (a) ordinary negligence in the receipt or disbursement of money, (b) its obligations specified in Section 7.02(b) hereof and the last sentence of Section 8.02 hereof and (c) its own willful misconduct or gross negligence (except as otherwise provided with respect to liabilities that may result from the inaccuracy of any of its representations or warranties in its individual capacity or as Indenture Trustee, set forth in this Indenture). Unless otherwise expressly provided in this Indenture, the Indenture Trustee shall have no obligation to advance its individual funds for any purpose and shall have no obligation to distribute to the Holders, the Company or any third party any amounts to be paid to the Indenture Trustee until such amounts are collected by the Indenture Trustee. SECTION 8.02. Absence of Certain Duties. Except in accordance with written instructions to the Indenture Trustee furnished pursuant to Sections 6.02, 7.01 and 7.04 and except as provided in, and without limiting the generality of, Section 7.02 hereof, the Indenture Trustee shall have no duty (i) to see to any registration of the Aircraft or any recording or filing of this Indenture or any other document, or to see to the maintenance of any such registration, recording or filing, (ii) to see to any insurance on the Aircraft or to effect or maintain any such insurance, whether or not the Company shall be in default with respect to effecting or maintaining such insurance, (iii) to see to the payment or discharge of any tax, assessment or other governmental charge or any Lien or encumbrance of any kind owing with respect to, assessed or levied against, any part of the Indenture Estate except as expressly provided in Section 7.02(b)(i), (iv) to confirm, verify or inquire into the failure to receive any financial statements of the Company, or (v) to inspect the Aircraft at any time or ascertain or inquire as to the performance or observance of any of the Company's covenants under this Indenture with respect to the Aircraft. Notwithstanding the foregoing, the Indenture Trustee will furnish to each Holder promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Indenture Trustee, to the extent that the same shall not have been otherwise furnished to such Holder pursuant to this Indenture or to the extent the Indenture Trustee does not reasonably believe that the same shall have been furnished by the Company directly to such Holder. SECTION 8.03. Representations, Warranties and Agreements of Indenture Trustee. The Indenture Trustee, in its individual capacity, represents, warrants and agrees that: 124 125 (a) Organization; Authority; Legal and Binding Obligations. The Indenture Trustee in its individual capacity is a national banking association duly organized, validly existing and in good standing under the laws of the United States, is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Federal Aviation Act, and will resign as Indenture Trustee promptly after it obtains actual knowledge that it has ceased to be such a citizen, has the full corporate power and authority and legal right under the laws of the State of Georgia and the laws of the United States pertaining to its banking, trust and fiduciary powers to execute, deliver and perform this Indenture, that this Indenture has been duly authorized, executed and delivered by the Indenture Trustee and assuming due authorization, execution and delivery by the other party hereto, constitutes the Indenture Trustee's legal, valid and binding obligation, enforceable against the Indenture Trustee in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other laws of general application to or affecting the enforcement of creditors' rights generally, and that the execution, delivery and performance by the Indenture Trustee of this Indenture is not in violation of its articles of association or by-laws or of any indenture, mortgage, contract or other agreement to which the Indenture Trustee is a party or by which it is bound or of any order or judgment applicable to the Indenture Trustee or any applicable law of the United States or the laws of the State of Georgia governing the trust powers of the Indenture Trustee and by which it or its assets or property are bound. NOTWITHSTANDING THE FOREGOING, THE INDENTURE TRUSTEE DOES NOT MAKE NOR SHALL BE DEEMED TO HAVE MADE AND HEREBY EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, COMPLIANCE WITH SPECIFICATIONS, WORKMANSHIP, CONDITION, DESIGN, QUALITY, DURABILITY, OPERATION, MERCHANTABILITY OR FITNESS FOR USE OR FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY ENGINE, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENTS OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT, AIRFRAME OR ANY ENGINE WHATSOEVER. (b) Lien; Indemnity. The Indenture Trustee shall not directly or indirectly create, incur, assume or suffer to exist any Liens described in Section 7.02(b)(i) hereof with respect to the Aircraft, any interest therein, or any other portion of the Indenture Estate, and that it will promptly cause any such Lien to be discharged at its own expense. The Indenture Trustee, in its individual capacity, shall indemnify, protect, save and keep harmless the Company and each Holder from and against any reduction in the amount payable out of the Indenture Estate to such Holder, or any other loss, cost or expense (including legal fees and 125 126 expenses) incurred by such Holder or the Company as a result of the imposition or enforcement of such Lien. SECTION 8.04. Reliance; Agents; Advice of Experts. The Indenture Trustee shall incur no liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond or other document or paper reasonably believed by it to be genuine and reasonably believed by it to be signed by the proper party or parties. The Indenture Trustee may accept a copy of a resolution of the Board of Directors of the Company or any Holder or any committee of said Board, certified by the Secretary or an Assistant Secretary of said party as duly adopted and in full force and effect, as conclusive evidence that such resolution has been duly adopted by said Board or committee and that the same is in full force and effect. As to any fact or matter relating to the Company the manner of ascertainment of which is not specifically described in this Indenture, the Indenture Trustee may for all purposes of this Indenture rely on a certificate, signed by the President or by a Vice President signing with the Treasurer or any Assistant Treasurer or the Secretary or an Assistant Secretary of the Company as to such fact or matter, and such certificate shall constitute full protection to the Indenture Trustee for any action taken or omitted to be taken by it in good faith in reliance on such certificate. The Indenture Trustee shall furnish to the Company upon request such information and copies of such documents as the Indenture Trustee may have and as are necessary for the Company to perform its duties under Article 2 hereof. In the administration of the trust under this Indenture the Indenture Trustee may execute any trust or power of this Indenture and perform its powers and duties directly or through agents or attorneys and may, at the expense of the Company, consult with counsel, accountants and other skilled Persons to be selected and retained by it, and the Indenture Trustee shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the advice or opinion of any such counsel, accountants or other skilled Person (so long as the Indenture Trustee shall have exercised reasonable care and judgment in selecting such Persons). SECTION 8.05. Compensation and Expenses of Indenture Trustee. The Company agrees, to the extent the Indenture Trustee was not reimbursed under Section 7.05 hereof, to pay upon written demand the reasonable and customary fees and reasonable out-of-pocket costs and expenses (including legal fees and expenses) of the Indenture Trustee in the performance of its responsibilities hereunder and agrees to indemnify the Indenture Trustee against any taxes imposed upon it relating thereto (other than taxes, fees or charges based on or measured by any fees or compensation received by the Indenture Trustee for services rendered in connection with the transactions contemplated hereby). The Indenture Trustee agrees that it shall have no right against the Holders or the Indenture Estate for any fee as compensation for its services hereunder. The provisions of this Section 8.05 with respect to costs and expenses shall survive the termination of this Indenture. 126 127 SECTION 8.06. Moneys Held by Indenture Trustee. Subject to Section 5.04 hereof, all moneys received by the Indenture Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Subject to Section 5.04, neither the Indenture Trustee nor any agent of the Indenture Trustee shall be under any liability for interest on any moneys received by it hereunder SECTION 8.07. Capacity in Which Acting. The Indenture Trustee acts hereunder not in its individual capacity but solely as trustee except as otherwise expressly provided herein and in the other Operative Agreements. ARTICLE 9 SUCCESSOR INDENTURE TRUSTEE SECTION 9.01. Resignation or Removal; Appointment of Successor. (a) Resignation and Removal. The Indenture Trustee or any successor to it must resign if at any time it ceases to be a Citizen of the United States and may resign at any time without cause by giving at least 30 days' prior written notice to the Company, and each Holder, such resignation to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In addition, a Majority in Interest of Certificate Holders may at any time remove the Indenture Trustee without cause by an instrument in writing delivered to the Indenture Trustee and the Company and the Company shall promptly notify each Holder of such action in writing, such removal to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In addition, the Company may with the prior written consent of a Majority in Interest of Certificate Holders, unless an Event of Default shall have occurred and be continuing, remove the Indenture Trustee (i) if the Indenture Trustee fails to comply with Section 9.01(c) hereof, (ii) if the Indenture Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver or liquidator of the Indenture Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation. In the case of the resignation or removal of the Indenture Trustee, the Company shall promptly appoint a successor Indenture Trustee; provided that, a Majority in Interest of Certificate Holders may appoint after such resignation or removal, a successor Indenture Trustee which may be other than the successor Indenture Trustee appointed by the Company and such successor Indenture Trustee appointed by the Company shall be superseded by the successor Indenture Trustee appointed by a Majority in Interest of Certificate Holders. If a successor Indenture Trustee shall not have been appointed within 30 days after such notice of resignation or removal, the Indenture Trustee, the Company or any Holder may apply to any 127 128 court of competent jurisdiction to appoint a successor Indenture Trustee to act until such time, if any, as a successor shall have been appointed as above provided. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed from the date of the appointment by such court. (b) Acceptance of Appointment. Any successor Indenture Trustee, however appointed, shall execute and deliver to the Company and to the predecessor Indenture Trustee an instrument accepting such appointment, and, without further act, such successor Indenture Trustee shall become vested with all the estates, properties, rights, powers and duties of the predecessor Indenture Trustee under this Indenture in the trusts applicable to it with like effect as if originally named Indenture Trustee; but, nevertheless, upon the written request of such successor Indenture Trustee, such predecessor Indenture Trustee shall execute and deliver an instrument transferring to such successor Indenture Trustee all the estates, properties, rights and powers of such predecessor Indenture Trustee, and such predecessor Indenture Trustee shall duly assign, transfer, deliver and pay over to such successor Indenture Trustee all moneys or other property then held by such predecessor Indenture Trustee under this Indenture. (c) Qualification of Successor. Any successor Indenture Trustee, however appointed, shall be a Citizen of the United States and shall be a bank or trust company having its principal place of business in the United States of America and having a combined capital and surplus of at least $100,000,000 if there be such an institution willing, able and legally qualified to perform the duties of Indenture Trustee under this Indenture upon reasonable or customary terms. (d) Merger. Any corporation into which the Indenture 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 Indenture Trustee shall be a party, or any corporation to which substantially all the business of the Indenture Trustee may be transferred, shall, subject to the terms of Section 9.01(c), be the Indenture Trustee under this Indenture without further act. (e) Notice Period. The notice period specified in Section 9.01(a) shall be reduced as necessary so that any resignation of the Indenture Trustee or any successor Indenture Trustee shall be effective prior to the date such Indenture Trustee no longer qualifies, or is expected no longer to qualify, as a Citizen of the United States. SECTION 9.02. Appointment of Separate Trustees. (a) At any time or times, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Indenture Estate may at the time be located or in which any action of the Indenture Trustee may be required to be performed or taken, the Indenture Trustee, by an instrument in writing signed by it, may appoint one or more individuals or corporations to act as a separate 128 129 trustee or separate trustees or co-trustee, acting jointly with the Indenture Trustee, of all or any part of the Indenture Estate to the full extent that local law makes it necessary for such separate trustee or separate trustees or co-trustee acting jointly with the Indenture Trustee to act. (b) The Indenture Trustee and, at the request of the Indenture Trustee, the Company, shall execute, acknowledge and deliver all such instruments as may be required by the legal requirements of any jurisdiction or by any separate trustee or separate trustees or co-trustee for the purpose of more fully confirming such title, rights or duties to such separate trustee or separate trustees or co-trustee. Upon the acceptance in writing of such appointment by any such separate trustee or separate trustees or co-trustee, it, he or they shall be vested with such title to the Indenture Estate or any part of it and with such rights and duties, as shall be specified in the instrument of appointment, jointly with the Indenture Trustee (except insofar as local law makes it necessary for any such separate trustee or separate trustees to act alone) subject to all the terms of this Indenture. Any separate trustee or separate trustees or co-trustee may, at any time by an instrument in writing, constitute the Indenture Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name. In case any such separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, the title to the Indenture Estate and all rights and duties of such separate trustee or co-trustee shall, so far as permitted by law, vest in and be exercised by the Indenture Trustee, without the appointment of a successor to such separate trustee or co-trustee. (c) Every separate trustee and co-trustee hereunder shall, to the extent permitted by law, be appointed and act, and the Indenture Trustee shall act, subject to the following provisions and conditions: (i) all powers, duties, obligations and rights conferred upon the Indenture Trustee in respect of the receipt, custody, payment of moneys or the investment of moneys, shall be exercised solely by the Indenture Trustee; (ii) to the extent specified in the instrument of appointment, all other rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed upon and exercised or performed by the Indenture Trustee and such separate trustee or co-trustee jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Indenture Estate in any such jurisdiction) shall be exercised and performed by such additional trustee or separate trustee; (iii) no power hereby given to, or exercisable as provided herein by, any such additional trustee or separate trustee shall be exercised hereunder by such additional 129 130 trustee or separate trustee except jointly with, or with the consent of, the Indenture Trustee; and (iv) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder. Any separate trustee or co-trustee may be removed by the Indenture Trustee at any time without cause. (d) All provisions of this Indenture which are for the benefit of the Indenture Trustee shall extend to and apply to each separate trustee or co-trustee appointed pursuant to this Section 9.02. ARTICLE 10 SUPPLEMENTS AND AMENDMENTS TO THIS INDENTURE AND OTHER DOCUMENTS SECTION 10.01. Supplemental Indentures. (a) Supplemental Indentures Without Consent of Holders. The Company and the Indenture Trustee, at any time and from time to time, without notice to or the consent of the Holders, may enter into one or more indentures supplemental hereto for any of the following purposes: (i) to correct or amplify the description of any property at any time subject to the Lien of this Indenture or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subject to the Lien of this Indenture or to subject to the Lien of this Indenture any Airframe or Engine or any airframe or engine substituted for any Airframe or Engine in accordance with the terms hereof; provided, however, that indenture supplements entered into for the purpose of subjecting to the Lien of this Indenture any Airframe or Engine or airframe or engine substituted for any Airframe or Engine in accordance with the terms hereof need only be executed by the Company; or (ii) to add to the covenants of the Company, for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company; or (iii) to comply with any applicable requirements of the Trust Indenture Act of 1939, as from time to time amended or any other requirements of applicable law; or (iv) to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make 130 131 any other provisions with respect to matters or questions arising hereunder so long as any such action does not adversely affect the interests of the Holders. (b) Supplemental Indentures With Consent of Majority. With the written consent of a Majority in Interest of Certificate Holders, the Company may, and the Indenture Trustee, subject to Section 10.02 hereof, shall, at any time and from time to time, 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 and obligations of the Holders and of the Company under this Indenture; provided, however, without the consent of each Holder affected thereby, no such supplemental indenture shall: (i) change the final maturity of the principal of any Equipment Purchase Certificate, or change the dates or amounts of payment of any installment of the principal of or any Breakage Costs or interest on any Equipment Purchase Certificate, or reduce the principal amount thereof or any Breakage Costs or interest thereon, or change to a location outside the United States the place of payment where, or the coin or currency in which, any Equipment Purchase Certificate or any Breakage Costs or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment of principal or any Breakage Costs or interest becomes due and payable; or (ii) create any Lien with respect to the Indenture Estate ranking prior to, or on a parity with, the security interest created by this Indenture, except Liens permitted under Section 4.01 hereof, or deprive any Holder of the benefit of the Lien on the Indenture Estate created by this Indenture; or (iii) reduce the percentage in principal amount of the Equipment Purchase Certificates, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture, or of certain defaults hereunder and their consequences) provided for in this Indenture; or change the definition of the "Majority in Interest of Certificate Holders"; or (iv) modify any provisions of this Section 10.01(b), except to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Equipment Purchase Certificate affected thereby. SECTION 10.02. Indenture Trustee Protected. If in the opinion of the Indenture Trustee any document required to be executed pursuant to the terms of Section 10.01 hereof adversely affects any right, duty, immunity or indemnity in favor of the Indenture Trustee under this Indenture or the Loan Agreement, the Indenture Trustee may in its discretion decline to execute such document. 131 132 SECTION 10.03. Requirement of Substance, Not Form. It shall not be necessary for any consent of the Holders under Section 10.01(b) hereof to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. SECTION 10.04. Documents Mailed to Holders. Promptly after the execution by the Indenture Trustee of any document entered into pursuant to this Article 10, the Indenture Trustee shall mail, by first-class mail, postage prepaid, a conformed copy thereof to each Holder at its address last known to the Indenture Trustee, but the failure of the Indenture Trustee to mail such conformed copies shall not impair or affect the validity of such document. ARTICLE 11 Intentionally Left Blank. ARTICLE 12 MISCELLANEOUS SECTION 12.01. Termination of Indenture. This Indenture and the trust created hereby shall terminate and this Indenture shall be of no further force or effect upon the payment in full of the principal amount of, any Breakage Costs and interest on all Equipment Purchase Certificates outstanding hereunder and all other sums payable to the Indenture Trustee and the Holders hereunder and under such Equipment Purchase Certificates and the other Operative Agreements. SECTION 12.02. No Legal Title in Indenture Estate. No Holder shall have legal title to any part of the Indenture Estate. No transfer, by operation of law or otherwise, of any Equipment Purchase Certificate or other right, title and interest of any Holder in and to the Indenture Estate or under this Indenture shall operate to terminate this Indenture or entitle any successor or transferee of such Holder to an accounting or to the transfer to it of legal title to any part of the Indenture Estate. SECTION 12.03. Sale of Collateral by Indenture Trustee. Any sale or other conveyance of the Aircraft by the Indenture Trustee made pursuant to the terms of this Indenture shall bind the Holders and shall be effective to transfer or convey all right, title and interest of the Indenture Trustee, the Company, and such Holders in and to the Aircraft. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, 132 133 expediency or regularity of such sale or conveyance or as to the application of any sale or other proceeds by the Indenture Trustee. SECTION 12.04. Indenture for Benefit of Parties and Holders Only. Nothing in this Indenture shall be construed to give to any Person other than the Company, the Indenture Trustee and the Holders and former Holders any legal or equitable right, remedy or claim under or in respect of this Indenture or any Equipment Purchase Certificate. Upon termination of this Indenture pursuant to Section 12.01, the Indenture Trustee in connection with satisfaction of the Indenture shall return to the Company all property (and related documents and instruments) constituting or evidencing the Indenture Estate. SECTION 12.05. Notices. (a) Unless otherwise expressly specified or permitted by the terms of this Indenture, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by the Indenture 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 Federal Express or other delivery service of established reputation or by confirmed telex or facsimile addressed as follows: (i) if to the Indenture Trustee, sent to it at its office at Suite 900, 600 Peachtree Street, N.E., Atlanta, Georgia 30308, Attention: Corporate Trust Lease Administration (Facsimile: (404) 607-6534); (ii) if to the Company, sent to it at its office at 2007 Corporate Avenue, Memphis, Tennessee, 38132, Attention: Vice President and Treasurer (Facsimile: (901) 395-3910) with a copy to the General Counsel at 1980 Nonconnah Drive, Memphis, Tennessee 38132; and (iii) if to any Holder, at the address set forth for such Holder in the Register; or to such other address as any such party shall advise the others of in writing for such purpose. Any notice given pursuant to this Section 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 Federal Express 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), addressed as provided above. (b) Any party may change the address to which notices to such party will be sent by giving notice of such change to the other parties to this Indenture. SECTION 12.06. Severability. Any provision under this Indenture which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to 133 134 the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Indenture, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 12.07. Binding Effect. All covenants and agreements contained in this Indenture shall be binding upon the Indenture Trustee and its successors and assigns, the Company and its successors and assigns, and each Holder. Any request, notice, direction, consent, waiver or other instrument or action by any Holder shall bind the successors and assigns of such Holder. SECTION 12.08. Headings; Reference. The headings of the various articles and sections and in the Table of Contents are for convenience of reference only and shall not define or limit any of the terms or provisions of this Indenture. SECTION 12.09. Counterparts. This Indenture may be executed in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 12.10. Governing Laws. THIS INDENTURE IS BEING DELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 12.11. No Oral Modifications. The terms and provisions of this Indenture may not be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought and subject to Article 10 hereof. SECTION 12.12. Normal Commercial Relations. Notwithstanding anything contained in this Indenture to the contrary, the Company, the Indenture Trustee or any affiliate of either may enter into commercial banking or other financial transactions and conduct banking or other commercial relationships fully to the same extent as if this Indenture were not in effect, including, without limitation, the making of loans or other extensions of credit for any purpose whatsoever. SECTION 12.13. Section 1110 Compliance. Notwithstanding any provision herein or elsewhere contained to the contrary, it is understood and agreed among the parties hereto that the transactions contemplated by this Agreement and the other Operative Agreements are expressly intended to be, shall be and should be construed so as to be, entitled to the full benefits of Section 1110 of the Bankruptcy Code and any successor provision thereof. 134 135 IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed by their respective authorized officers, as of the day and year first above written. COMPANY: FEDERAL EXPRESS CORPORATION, By ---------------------------- Title: INDENTURE TRUSTEE: NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee, By ---------------------------- Title: 135 136 Schedule I DEFINITIONS GENERAL PROVISIONS The following terms shall have the following meanings for all purposes of the Operative Agreements referred to below, unless otherwise defined in an Operative Agreement or the context thereof shall otherwise require. In the case of any conflict between the provisions of this Schedule and the provisions of any Operative Agreement, the provisions of such Operative Agreement shall control the construction of such Operative Agreement. Unless the context otherwise requires, (i) references to agreements shall be deemed to mean and include such agreements as amended and supplemented from time to time, and (ii) references to parties to agreements shall be deemed to include the successors and permitted assigns of such parties. DEFINED TERMS: Act or Federal Aviation Act. Title 49 of the United States Code (which, among other things, recodified the Federal Aviation Act of 1958, as amended to the time of such recodification), as amended and in effect on the date of the Indenture and as subsequently amended, or any successor or substituted legislation at the time in effect and applicable, and the regulations promulgated pursuant thereto. Additional Insureds. The Indenture Trustee, the Agent and the Holders, and in the case of insurance obtained by any lessee of the Aircraft, the Company in its capacity as lessor under any of the Aircraft. Aeronautics Authority. As appropriate, the Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration, any successor to the former United States Civil Aeronautics Board, or any Person, governmental department, bureau, commission or agency succeeding to the functions of any of the foregoing. Affiliate. With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") shall mean the power, directly or indirectly, to direct or cause the direction of the management 136 137 and policies of such Person whether through the ownership of voting securities or by contract or otherwise. After-Tax Basis. A basis such that any payment received or deemed to have been received by a Person shall be supplemented by a further payment to such Person so that the sum of the two payments, after deduction of all Taxes resulting from the receipt or accrual of such payments, shall be equal to the payment received or deemed to have been received. Agent. The Chase Manhattan Bank, N.A. and its successors and permitted assigns, as Agent for the Banks under the Loan Agreement. Air Carrier. Any U.S. Carrier and any "foreign air carrier" (as defined in the Act) as to which there is in force a permit granted under Section 41302 of the Act. Airbus Guaranty. The Guaranty dated the Delivery Date executed by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale. Aircraft. The Airframe to be sold by AVSA to the Company pursuant to the Purchase Agreement (or any permitted substitute airframe) together with the two Engines (or any Replacement Engine) whether or not any of such initial or Replacement Engines may from time to time be installed on such Airframe or may be installed on any other airframe or on any other aircraft, including any aircraft substituted pursuant to Section 4.05(c) of the Indenture. Airframe. The Airbus Industries A300F4-605R (excluding the Engines or engines from time to time installed thereon) having the United States FAA Registration Number and manufacturer's serial number specified in the Indenture Supplement, including (i) all Parts, and (ii) any replacement airframe which may be substituted pursuant to Section 4.05(c) of the Indenture, whether or not the same shall at the time be incorporated in or attached to such aircraft. Amortization Dates. The dates listed under the heading "Amortization Date" in Section 2.02(a) of the Indenture. Applicable Lending Office. For each Holder and for each Type of Loan, the "Lending Office" of such Holder (or of an Affiliate of such Holder) designated for such Type of Loan on the signature pages of the Loan Agreement or such other office of such Holder (or of an Affiliate of such Holder) as such Holder 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. 137 138 Appraisal. The report prepared by the BK Associates, Inc. and delivered to the Indenture Trustee on the Delivery Date pursuant to Section 3(1) of the Loan Agreement. AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized and existing under the laws of France, and its successors and assigns. AVSA Consent and Agreement. The Consent and Agreement dated as of the Document Date, executed by AVSA, as the same may be amended, modified or supplemented from time to time. AVSA's Warranty Bill of Sale. The full warranty bill of sale covering the Aircraft (and specifically referring to each Engine) executed by AVSA as owner of the Aircraft in favor of the Company and dated the Delivery Date. Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and any successor thereto. Bankruptcy Default. An event specified in Section 6.01(e) and (f) of the Indenture which either does or with the giving of notice or lapse of time or both would constitute an Event of Default. Banks. Has the meaning set forth in the Loan Agreement. Base Rate. For any day, a rate per annum equal to the higher of (a) the Federal Funds Rate for such day plus [ * ] and (b) the Prime Rate for such day. 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. [ * ] Base Rate Loan. Loans evidenced by an Equipment Purchase Certificate that bears interest at rates based upon the Base Rate. Bills of Sale. Collectively, the FAA Bill of Sale for the Aircraft and AVSA's Warranty Bill of Sale. Breakage Costs. An amount payable pursuant to Section 2.02(f) of the Indenture. Business Day. (a) Any day on which commercial banks are not authorized or required to close in New York City or Georgia or (b) if such day relates to the giving of notices or quotes in connection with a borrowing of, a payment or prepayment of principal of or interest on, a conversion of or into, or an Interest Period for, a Floating Rate Loan or a - ---------------------- *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. 138 139 notice by the Company with respect to any such borrowing, payment, prepayment conversion or Interest Period, any date on which commercial banks are not authorized or required to close in New York City and on which dealings in Dollar deposits are carried out in the London interbank market. Chase. The Chase Manhattan Bank (National Association). Citizen of the United States. A citizen of the United States as defined in Section 40102(a)(15) of the Act, or any analogous part of any successor substituted legislation or regulation at the time in effect. Code. Except as otherwise provided, references to the Code shall mean the Internal Revenue Code of 1986, as amended from time to time. Commitments. Has the meaning assigned to such term in the Loan Agreement. Company. Federal Express Corporation, a Delaware corporation, and its successors and permitted assigns. Consent and Agreement. The Consent and Agreement dated as of the Document Date, executed by the Manufacturer, as the same may be amended, modified or supplemented from time to time. Consent and Guaranty. The Consent and Guaranty of the Manufacturer dated as of July 3, 1991 attached to the Purchase Agreement. Corporate Trust Office. The corporate trust office of the Indenture Trustee located at 600 Peachtree Street, N.E., Suite 900, Atlanta, Georgia 30308 or such other office at which the Indenture Trustee's corporate trust business shall be administered that the Indenture Trustee shall have specified by notice in writing to the Company and the Holders. Debt Rate. The Floating Rate or the Base Rate, as the case may be. Default. Any event of condition, which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Delivery Date. The date on which (i) the Aircraft is to be delivered and sold by AVSA to the Company which date is also the date of the initial Indenture Supplement and (ii) Loans have been made by the Banks to the Company in respect of the Aircraft. Document Date. The date of the Indenture. 139 140 Engine. Each of the two General Electric CF6-80C2-A5F engines listed by its manufacturer's serial number in the initial Indenture Supplement, whether or not from time to time installed on the Airframe or installed on any other airframe or on any other aircraft, and any Replacement Engine which may from time to time by substituted for an Engine pursuant to Sections 4.02(c)(vii), 4.05(c) or 4.05(d) of the Indenture, together with all Parts. Except as otherwise provided, at such time as a Replacement Engine shall be so substituted and the Engine for which the substitution is made shall be released from the lien of the Indenture, such replaced Engine shall cease to be an "Engine" under the Indenture. The term "Engines" means, as of any date of determination, all Engines subject to the Lien of the Indenture. Engine Agreement. The General Terms Agreement dated as of July 3, 1991 between the Company and the Engine Manufacturer (as heretofore amended, modified and supplemented). Engine Consent and Agreement. The Engine Consent and Agreement dated as of the Document Date, executed by the Engine Manufacturer. Engine Manufacturer. General Electric Company, a New York corporation. Equipment Purchase Certificates. The Equipment Purchase Certificates issued by the Company pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. ERISA. The Employee Retirement Income Security Act of 1974, as amended. Estate Documents. The Purchase Agreement, the Consent and Guaranty, the Bills of Sale, the Airbus Guaranty, the Consent and Agreement, AVSA Consent and Agreement, the Engine Agreement and the Engine Consent and Agreement, in each case to the extent that the same related to the Aircraft. Event of Default. Each of the events specified in Section 6.01 of the Indenture. Event of Loss. Any of the following events with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A) for a period in excess of 180 days due to theft or disappearance, or (B) for a period in excess of 60 days due to the destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use by the Company for any reason whatsoever; (ii) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss, or constructive or compromised total loss; (iii) condemnation, confiscation or seizure of, or requisition of title to such property, by the Government, any foreign government or purported government or agency or instrumentality thereof, (iv) requisition of use of such property by (A) a foreign government or instrumentality or agency thereof, or 140 141 any purported government or instrumentality or agency thereof, for a period in excess of 180 days (or for such shorter period ending on the date on which an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss shall occur) or (B) by the Government for a period extending beyond the Maturity of the Equipment Purchase Certificates for the Aircraft; and (v) as a result of any law, rule, regulation, order or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of the Aircraft or Airframe in the normal course of air transportation of cargo shall have been prohibited by virtue of a condition affecting all aircraft of the same type for a period of eighteen (18) consecutive months, unless the Company, prior to the expiration of such eighteen month period, shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of the Aircraft or Airframe or, in any event, if such use shall have been prohibited for a period of two (2) consecutive years, unless the Company, prior to the expiration of such two (2) year period shall have conformed at least one Airbus Industrie A300F-600 aircraft (but not necessarily the Aircraft or the Airframe) to the requirements of any such law, rule, regulation, order, or other action and shall have commenced regular commercial use and shall be diligently carrying forward, on a non-discriminatory basis, all steps necessary or desirable to permit the normal use of the Aircraft by the Company. The date of such Event of Loss shall be the date of (i) loss of such property or its use for a period in excess of 180 days due to theft or disappearance, or loss for a period in excess of 60 days due to damage beyond economic repair or loss of use of the Airframe because of requisition for use for a period in excess of 180 days (or shorter period due to insurance settlement), (ii) an insurance settlement on the basis of total loss with respect to such property, (iii) condemnation, confiscation, seizure or requisition of title, or (iv) prohibition from usage for the periods described in clause (v) above. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if any Event of Loss occurs with respect to the Airframe. FAA Bill of Sale. The bill of sale for the Airframe on AC Form 8050-2, or such other form as may be approved by the Aeronautics Authority, executed by AVSA in favor of the Company and dated the Delivery Date. Facility. Has the meaning specified in the Loan Agreement. Fair Market Value. An amount determined on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller unaffiliated with such purchaser and under no compulsion to sell. In such determination it shall be assumed that the Aircraft is in the condition required under the Indenture. Federal Aviation Administration and FAA. The United States Federal Aviation Administration and any successor agency or agencies thereto. 141 142 Federal Funds Rate. For any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve system arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (a) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day and (b) if such rate is not so published for any Business Day, the Federal Funds Rate for such Business Day shall be the average rate charged to Chase on such Business Day on such transactions as determined by the Agent. Floating Rate. (i) For the period commencing on the Delivery Date and ending on the last day of the twelfth month following the Delivery Date, the LIBOR Rate plus [ * ]; (ii) for the period commencing on the first day of the thirteenth month following the Delivery Date and ending on the last day of the eighteenth month following the Delivery Date, the LIBOR Rate plus [ * ]; and (iii) thereafter, in respect of each Interest Period, the higher of the Treasury Rate and the LIBOR Rate, [ * ] Floating Rate Loan. Loans evidenced by an Equipment Purchase Certificate that bears interest at rates based upon the Floating Rate. French Pledge Agreement. The French Pledge Agreement dated the Delivery Date between the Company and the Indenture Trustee, as the same may be amended, modified or supplemented from time to time. Government. The United States of America or any agency or instrumentality thereof. Holder. On any date of determination, a holder of an Equipment Purchase Certificate on such date, provided that for the purposes of Section 2.02(f) of the Indenture, each holder from time to time of an Equipment Purchase Certificate shall be deemed to be a "Holder" and the obligations of the Company to each Holder under Section 2.02 of the Indenture shall survive the disposition of any Equipment Purchase Certificate by such Holder and the payment in full of the Equipment Purchase Certificate held by such Holder. Indenture. The Trust Indenture, Mortgage and Security Agreement, dated as of the Document Date, between the Company and the Indenture Trustee, as amended, supplemented or modified by any amendment or supplement thereto from time to time entered into. Indenture Estate. Has the meaning set forth in the Granting Clauses of the Indenture. - ---------------------------- *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. 142 143 Indenture Supplement. A supplement to the Indenture, substantially in the form of Exhibit A to the Indenture. Indenture Trustee. NationsBank of Georgia, National Association, a national banking association, not in its individual capacity, but solely in its capacity as Indenture Trustee under the Indenture, and its successors and permitted assigns as trustee thereunder. Interest Period. With respect to any Floating Rate Loan, each period commencing on the date such Floating Rate Loan is made or converted from a Base Rate Loan or the last day of the next preceding Interest Period for such Loan and ending on the seventh calendar day thereafter or on the numerically corresponding date in the first, third or sixth calendar month thereafter, as the Company may select by notice to the Agent and the Indenture Trustee no later than 11:00 a.m. on the date three Business Days prior to the first day of such Interest Period, except that each Interest Period (other than a 7-day Interest Period) that commences on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month. Notwithstanding the foregoing: (i) no Interest Period for any Loan may commence before and end after any Amortization Date; (ii) each Interest Period that would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day (or, if such next succeeding Business Day falls in the next succeeding calendar month, on the next preceding Business Day); (iii) no more than three 7-day Interest Periods may be selected with respect to the Loans for the Aircraft; and (iv) subject to clause (i) above, if the Company does not select an Interest Period as provided above, then the Company shall have deemed to have selected a one-month Interest Period. LIBOR Base Rate. With respect to any Floating Rate Loan for any Interest Period therefor, the arithmetic mean (rounded upwards, if necessary, to the nearest 1/16 of 1%) of the respective rates per annum quoted by each Reference Bank at approximately 11:00 a.m. London time (or as soon thereafter as practicable) on the date two Business Days prior to the first day of such Interest Period for the offering by such Reference Bank to leading banks in the London interbank market of Dollar deposits having a term comparable to such Interest Period and in an amount comparable to the principal amount of the Floating Rate Loan to be made by such Reference Bank for such Interest Period. If any Reference Bank is not participating in any Floating Rate Loan during any Interest Period therefor, the LIBOR Base Rate for such Loan for such Interest Period shall be deemed by reference to the amount of the Loan that such Reference Bank would have made or had outstanding had it been participating in such Loan during such Interest Period. If any Reference Bank does not timely furnish such information for determination of any LIBOR Base Rate, then such LIBOR Base Rate shall be determined on the basis of the information timely furnished by the remaining Reference Banks. 143 144 LIBOR Rate. For any Floating Rate Loan for any Interest Period therefor, a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by the Agent to be equal to the sum of the LIBOR Base Rate for such Loan for such Interest Period divided by 1 minus the Reserve Requirement for such Loan for such Interest Period. Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or security interest. Loan. Has the meaning set forth in Section 1 of the Loan Agreement. Loan Agreement. The Loan Agreement dated as of April 1, 1995 between the Company, the Banks named therein and Chase, as agent for such Banks (as amended, modified, supplemented and in effect from time to time). Majority in Interest of Certificate Holders. As of a particular date of determination, the Holders of more than 50% in aggregate unpaid principal amount of all Equipment Purchase Certificates outstanding as of such date excluding for purposes of this definition any Equipment Purchase Certificates held by the Company or any Affiliate thereof. Manufacturer. Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of France, and its successors and assigns. Maturity. The date which is 24.5 years after the Delivery Date. Moody's. Moody's Investors Service, Inc. Notice of Borrowing. Has the meaning set forth in Section 2.08 of the Loan Agreement. Obsolete Parts. Parts which the Company deems obsolete or no longer suitable or appropriate for use on the Airframe or any Engine. Operative Agreements. The Indenture, the Indenture Supplement, the Loan Agreement (until the Banks shall have been paid in full), the Equipment Purchase Certificates, the Bills of Sale, the Facility (as it relates to the Aircraft or other matters related thereto and except to the extent that any term thereof shall conflict with any express provision of any other Operative Agreement, in which case, such provision of such other Operative Agreement shall control), the Notice of Borrowing, the Estate Documents and the French Pledge Agreement. Parts. All appliances, parts, components, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete 144 145 Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine or, prior to replacement therefor in accordance with the Indenture, which may be removed therefrom. Payment Date. Each of the dates specified in the last sentence of Section 2.02(b) of the Indenture. Payment Default. Any event specified in Section 6.01(a) of the Indenture which with the giving of notice or lapse of time or both would constitute an Event of Default. Permitted Investments. Investment in (i) direct obligations of the United States of America; (ii) obligations fully guaranteed by the United States; (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 (which may include the Indenture Trustee, in its individual capacity, and any of its Affiliates), having a combined capital and surplus of at least $500,000,000 and having a rating of "B" or better from the Thomson Bank Watch; or (iv) commercial paper rated at least A-1/P-1 by S&P and Moody's, respectively (or if neither such organization shall rate such commercial paper at any time, by any nationally recognized rating organization in the United States of America equal to the highest rating assigned by such rating organization). Person. Any individual, sole proprietorship, partnership, joint venture, joint stock company, trust, unincorporated organization, association, corporation, institution, entity or government (federal, state, local, foreign or any agency, instrumentality, division or body thereof). PMSI Obligations. Principal of and interest on the Equipment Purchase Certificates and all other amounts owing by the Company thereunder, under the Indenture and the Loan Agreement in respect of the Equipment Purchase Certificates and under the other Operative Agreements and the performance and observance by the Company of all of the agreements, covenants and provisions contained in the Indenture and in the Loan Agreement in respect of the Equipment Purchase Certificates and in the other Operative Agreements. Post-Default Rate. In respect of any principal of any Equipment Purchase Certificate or any other amount under the Indenture, the Loan Agreement, any Equipment Purchase Certificate or any other Operative Agreement that is not paid when due (whether at stated maturity, by acceleration, by optional or mandatory prepayment or otherwise), a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal [ * ] (after giving effect to any adjustment thereto as provided in the final sentence of the definition thereof (provided that, if the amount so in default is principal of a Floating 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. 145 146 Loan and the due date thereof is a day other than the last day of the Interest Period therefor, the "Post-Default Rate" for such principal shall be, for the period from and including such due date to but excluding the last day of the Interest Period, [ * ] Prime Rate. The rate of interest from time to time announced by Chase at the Principal Office as its prime commercial lending rate. Such rate is a rate set by Chase based upon various factors including Chase's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Principal Office. The principal office of Chase, located on the date of the Indenture at 1 Chase Manhattan Plaza, New York, New York 10081. Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement dated July 3, 1991, between the AVSA and the Company (as heretofore amended, modified and supplemented), providing, inter alia, for the manufacture by the Manufacturer and sale by AVSA to the Company of certain Airbus Industries A300F4-605R aircraft, as such Purchase Agreement may hereafter be amended, modified or supplemented, but solely as such Purchase Agreement relates to the Aircraft. Quarterly Payment Dates. The last day of March, June, September and December in each year, the first of which shall be the first such day to occur after the Company selects a Base Rate Loan; provided that if such date is not a Business Day, then such Quarterly Payment Date shall be the next succeeding Business Day, unless such Business Day falls in a subsequent calendar month, in which case such Quarterly Payment Date shall be the next preceding Business Day. Reference Banks. Chase, Bank of America NT&SA, Canadian Imperial Bank of Commerce and The First National Bank of Chicago (or their respective Applicable Lending Offices, as the case may be). Register. Has the meaning specified in Section 2.08 of the Indenture. Regulation D. Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time. Replacement Engine. A General Electric CF6-80C2-A5F engine (or an engine of the same or another manufacturer of the same or of equal or greater value, and utility), which shall have been substituted for an Engine pursuant to Sections 4.02(c)(vii), 4.05(c) or - ------------------------------- *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. 146 147 4.05(d) of the Indenture and leased pursuant to the Lease, together with all Parts relating to such engine. Reserve Requirement. Has the meaning specified in the Loan Agreement. Responsible Officer. With respect to the Indenture Trustee, any officer in its Corporate Trust Administration Department designated by such person to perform obligations under the Operative Agreements, and with respect to any other Person, any corporate officer or other employee of a Person who, in the normal performance of his or her operational responsibilities, with respect to the subject matter of any covenant, agreement or obligation of such party pursuant to any Operative Agreement, would have responsibility for and knowledge of such matter and the requirements of any Operative Agreement with respect thereto. S&P. Standard & Poor's Corporation. SEC. The Securities and Exchange Commission of the United States and any successor agencies or authorities. Special Aviation Counsel. Daugherty, Fowler & Peregrin. Treasury Rate. For each Interest Period, the weighted average yield to maturity of United States Treasury securities with maturities next above and below the remaining term of the Equipment Purchase Certificates (calculated as provided below), such yields to be specified by the Agent on the basis of the bid price for such United States Treasury securities as displayed on Telerate screen (Page 7677) or, if the Telerate screen is unavailable, by averaging (and rounding upward to the nearest whole multiple of 1/100 of 1% per annum, if the average is not such multiple), the yields of the relevant United States Treasury securities (rounded, if necessary, to the nearest 1/100 of 1% with any figure of 1/200 of 1% or above rounded upward) as quoted to the Agent by two reputable dealers in United States Treasury securities selected by the Agent, in either case, at approximately 11:00 a.m. (New York time) on the date two Business Days prior to the first day of the relevant Interest Period and notified to the Company, the Indenture Trustee and the Holders; any weighted average yield of United States Treasury securities with two maturities is to be calculated by the Agent in accordance with the following formula: WAY = Y1 + (Y2 - Y1) (RT - X1) --------------------- (X2 - X1) Where: WAY = Weighted Average Yield 147 148 RT = relevant remaining term to maturity X1 = whole integer in years closest to and less than RT which equals the maturity of a United States Treasury security then publicly traded. X2 = whole integer in years closest to and greater than RT which equals the maturity of a United States Treasury security then publicly traded. Y1 = yield, determined as provided above, of United States Treasury securities then most recently auctioned with maturities equal to X1. Y2 = yield, determined as provided above, of United States Treasury securities then most recently auctioned with maturities equal to X2. Type. The Type of Loan refers to whether such Loan is a Floating Rate Loan or a Base Rate Loan. United States or US. The United States of America. U.S. Air Carrier. Any United States air carrier as to which there is in force a certificate issued pursuant to Section 41102(a) or Section 41103 of the Federal Aviation Act, and as to which there is in force an air carrier operating certificate issued pursuant to Chapter 447 of the Federal Aviation Act and Part 121 of the regulations under such Act for aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or more of cargo, or which may operate as an air carrier by certification or otherwise under any //successor or substitute provision thereof or in absence thereof. 148 149 Schedule II PERMITTED COUNTRY LIST Argentina Ireland Australia Italy Austria Jamaica Bahamas Japan Barbados Luxembourg Belgium Malaysia Brazil Malta British Virgin Islands Mexico Canada Netherlands Cayman Islands New Zealand Denmark Norway Egypt Portugal Finland Republic of China (Taiwan) France Singapore Germany South Korea Greece Spain Grenada Sweden Hong Kong Switzerland Iceland Thailand Indonesia Trinidad & Tabago United Kingdom
149 150 EXHIBIT A to INDENTURE INDENTURE SUPPLEMENT THIS INDENTURE SUPPLEMENT, dated _________________, ____ between FEDERAL EXPRESS CORPORATION (the "Company"), a Delaware corporation, and NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION, a national banking corporation, not in its individual capacity but solely as trustee (the "Indenture Trustee") under Trust Indenture, Mortgage and Security Agreement dated as of [_______________, 199_]+ (the "Indenture") between the Company and the Indenture Trustee. All capitalized terms used herein and not defined herein shall have the respective meanings set forth in the Indenture. W I T N E S S E T H: WHEREAS, the Indenture provides for the execution and delivery of a Supplement substantially in the form of this Supplement, which Supplement shall particularly describe the Aircraft included in the Indenture Estate, and shall specifically mortgage such Aircraft to the Indenture Trustee; and WHEREAS, ++ the Indenture relates to the Aircraft and the Engines described in the following paragraph and a counterpart of the Indenture is attached to and made a part of this Supplement, and this Supplement, together with such attachment, is being filed for recordation on or promptly after the date of this Supplement with the Federal Aviation Administration as one document. WHEREAS, +++ the Indenture and Supplement dated _________________, _____ (the Indenture being attached to and made a part of such Supplement and filed therewith) have been duly recorded pursuant to the Federal Aviation Act, on ___________, _____, as one document and have been assigned Conveyance No. _____________________; NOW, THEREFORE, to secure (i) the prompt payment of the principal of and Breakage Costs, if any, and interest on, and all other amounts due with respect to, all the Equipment Purchase Certificates from time to time outstanding under the Indenture and (ii) the performance and observance by the Company of all the agreements, covenants and provisions in this Indenture contained for the benefit of the Holders of the Equipment - -------------------------- +Here insert the Documentation Date. ++This recital is to be included only in the first Supplement. +++This recital is not to be included in the first Supplement. 150 151 Purchase Certificates, and for the uses and purposes and subject to the terms and conditions of the Indenture, and in consideration of the premises and of the covenants contained in the Indenture and in the Equipment Purchase Certificates and of the purchase of the Equipment Purchase Certificates by the Holders, and of the sum of $1.00 paid to the Company by the Indenture Trustee at or before the delivery of this Supplement, the receipt of which is hereby acknowledged, the Company has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a purchase money equipment security interest in and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge, grant a purchase money equipment security interest in and confirm to the Indenture Trustee, its successors and assigns in the trust created by the Indenture for the security and benefit of the Holders from time to time of the Equipment Purchase Certificates, the following described Equipment (the "Delivered Equipment"): (i) one (1) Airbus Industrie A300F4-605R airframe; U.S. Registration Number _________; Manufacturer's Serial No. ______________; (ii) two (2) General Electric CF6-80C2-A5F engines bearing, respectively, Manufacturer's Serial Nos. _________, and __________ (each of which engines has 750 or more rated takeoff horsepower or the equivalent of such horsepower); and whether or not such engines shall be installed in or attached to such airframe or any other airframe. Together with all substitutions, replacements and renewals, by whomsoever manufactured, of the property above described, and all property which shall hereafter become physically attached to or incorporated in the property above described, by whomsoever manufactured, whether the same are now owned by the Company or shall hereafter be acquired by it and all Parts in respect thereof. TO HAVE AND TO HOLD the aforesaid property to the Indenture Trustee, its successors and assigns, for the benefit and security of the Holders from time to time of the Equipment Purchase Certificates and for the uses and purposes and subject to the terms and conditions set forth in the Indenture. AND, FURTHER, the Company, hereby acknowledges that the Delivered Equipment referred to in the aforesaid Indenture attached to and made a part of this Supplement has been delivered to the Company and is included in the property of the Company, subject to the pledge or mortgage under the Indenture. This Supplement shall be construed as supplemental to the Indenture and shall form a part thereof, and the Indenture is hereby incorporated by reference in this Supplement and is hereby ratified, approved and confirmed. 151 152 This Supplement may be executed by the Company and the Indenture Trustee in separate counterparts, each of which when so executed and delivered is an original, but all such counterparts shall together constitute but one and the same Supplement. IN WITNESS WHEREOF, the Company and the Indenture Trustee have each caused this Supplement to be duly executed by their respective, duly authorized officers as of the day and year first above written. COMPANY: FEDERAL EXPRESS CORPORATION, By ---------------------------- Title: INDENTURE TRUSTEE: NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee, By --------------------------- Title: 152 153 EXHIBIT B to INDENTURE THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR OFFERED FOR SALE UNLESS REGISTERED UNDER SAID ACT OR LAWS OR UNLESS AN EXEMPTION IS AVAILABLE UNDER SAID ACT OR LAWS. 153 154 FEDERAL EXPRESS CORPORATION EQUIPMENT PURCHASE CERTIFICATE DUE __________ FEDERAL EXPRESS CORPORATION [SERIES NAME] ISSUED IN CONNECTION WITH ONE AIRBUS INDUSTRIE A300F4-605R AIRCRAFT WITH MANUFACTURER'S SERIAL NO. ____________, AND INITIALLY BEARING UNITED STATES FEDERAL AVIATION ADMINISTRATION REGISTRATION NO. ______ AND INCLUDING TWO GENERAL ELECTRIC CF6-80C2-A5F ENGINES No. _____________, 199_ $ 154 155 FEDERAL EXPRESS CORPORATION hereby promises to pay to ________________________, or its registered assigns, the principal sum of ___________________ in ___ installments, one such installment to be due and payable on each Amortization Date, each such installment to be in an amount equal to the amount set forth in Annex A hereto, together with interest on each Payment Date on the amount of said principal sum remaining unpaid from time to time from and including the date of this Equipment Purchase Certificate until paid at the rates per annum provided in the Trust Indenture, Mortgage and Security Agreement, dated as of [_______________, 199_]+ between the Company and NationsBank of Georgia, National Association, not in its individual capacity except as otherwise expressly provided therein, but solely as Indenture Trustee (the "Indenture"), all as more fully provided therein. Capitalized terms used herein and not otherwise defined have the meanings specified in Schedule I to the Indenture. All principal, interest and other amounts payable on, under or in respect of this Equipment Purchase Certificate shall be payable in U.S. dollars in immediately available funds at the Corporate Trust Office of the Indenture Trustee or at any office or agency maintained for such purpose pursuant to the Indenture and otherwise in accordance with the terms of the Indenture. Notwithstanding the foregoing, if requested by the Holder hereof (or by the Agent on such Holder's behalf), any amount payable with respect to this Equipment Purchase Certificate shall be sent by wire transfer of immediately available funds to an account or accounts in the United States previously specified by such Holder or the Agent to the Indenture Trustee. The Holder hereof, by its acceptance of this Equipment Purchase Certificate, agrees that, except as expressly provided in the Indenture, the Indenture Trustee is not and shall not be personally liable to the Holder for any amount payable under this Equipment Purchase Certificate or the Indenture or for any liability under the Loan Agreement or the Indenture. This Equipment Purchase Certificate is one of the Equipment Purchase Certificates referred to in the Indenture which has been or is to be issued by the Company pursuant to the terms of the Indenture. The Indenture Estate is held by the Indenture Trustee as security for the Equipment Purchase Certificates. Reference is hereby made to the Indenture for a statement of the rights and obligations of the Holder of, and the nature and extent of the security for, this Equipment Purchase Certificate and of the rights and obligations of the Holders of, and the nature and extent of the security for, the other Equipment Purchase Certificates under the Indenture, as well as for a statement of the terms - -------------------------- +Here insert the Documentation Date. 155 156 and conditions of the trusts created by the Indenture, to all of which terms and conditions in the Indenture each Holder of this Equipment Purchase Certificate agrees by its acceptance of this Equipment Purchase Certificate. As provided in the Indenture and subject to certain limitations set forth in the Indenture, the Equipment Purchase Certificates are exchangeable for a like aggregate principal amount of Equipment Purchase Certificates of a different denomination, as requested by the Holder surrendering the same. This Equipment Purchase Certificate is a registered Equipment Purchase Certificate and is transferable, as provided in the Indenture, only upon surrender of this Equipment Purchase Certificate for registration of transfer duly endorsed by, or accompanied by a written statement of transfer duly executed by, the registered Holder hereof or his attorney duly authorized in writing. Prior to due presentment for registration of transfer of this Equipment Purchase Certificate, the Company and the Indenture Trustee shall deem and treat the Person in whose name this Equipment Purchase Certificate is registered as the owner of this Equipment Purchase Certificate for all purposes whether or not this Equipment Purchase Certificate shall be overdue, and neither the Company nor the Indenture Trustee shall be affected by notice to the contrary. This Equipment Purchase Certificate is not subject to prepayment except as specifically provided in the Indenture. Until the certificate of authentication below shall have been duly executed by or on behalf of the Indenture Trustee by manual signature, this Equipment Purchase Certificate shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. This Equipment Purchase Certificate may become or be declared due and payable prior to its Maturity as provided in the Indenture. No employee benefit plan subject to Title I of ERISA or individual retirement account or employee benefit plan subject to Section 4975 of the Code, or any trust established under any such plan or account (hereinafter collectively referred to as an "ERISA Plan"), may acquire or hold any of the Equipment Purchase Certificates. The acquiring by any Person of any Equipment Purchase Certificates shall be deemed to constitute a representation by such Person to the Company and the Indenture Trustee that such Person is not an ERISA Plan and that such Person is not acquiring, and has not acquired, such Equipment Purchase Certificate with assets of an ERISA Plan. THIS EQUIPMENT PURCHASE CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 156 157 IN WITNESS WHEREOF, the Company has caused this Equipment Purchase Certificate to be executed by its duly authorized officer as of the date hereof. FEDERAL EXPRESS CORPORATION By ----------------------------- Title: 157 158 [FORM OF INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is the Equipment Purchase Certificate referred to in the within mentioned Indenture. NATIONSBANK OF GEORGIA NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By ----------------------------------- Title: Authorized Officer 158 159 ANNEX A TO EQUIPMENT PURCHASE CERTIFICATE SCHEDULE OF PRINCIPAL PAYMENTS Percentage of Original Amortization Date Principal Amount to be Repaid - ----------------- -----------------------------
159 160 EXHIBIT B to Loan Agreement [FORM OF OPINION OF VICE PRESIDENT, LAW-CORPORATE AND BUSINESS TRANSACTIONS OF THE COMPANY] 160 161 EXHIBIT C to Loan Agreement [FORM OF OPINION OF SPECIAL COUNSEL FOR THE COMPANY] 161 162 EXHIBIT D to Loan Agreement [FORM OF OPINION OF SPECIAL COUNSEL FOR THE INDENTURE TRUSTEE] 162 163 EXHIBIT E to Loan Agreement [FORM OF OPINION OF COUNSEL FOR THE ENGINE MANUFACTURER] 164 EXHIBIT F to Loan Agreement [FORM OF OPINION OF COUNSEL FOR AVSA AND THE MANUFACTURER] 164 165 EXHIBIT G to Loan Agreement FRENCH PLEDGE AGREEMENT Between the Undersigned FEDERAL EXPRESS CORPORATION, a Delaware corporation (together with its successors and permitted assigns, the "Company"), On the one hand, And: NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION, a national banking corporation, not in its individual capacity, but solely as indenture trustee (herein called, together with its permitted successors and assigns, the "Indenture Trustee"), under the Trust Indenture, Mortgage and Security Agreement (the "Indenture"), dated as of [_________ __, 199_],+between the Company and the Indenture Trustee, On the other hand PREAMBLE: 1. Pursuant to the terms of the Indenture written in the English language and governed by the laws of the State of New York (capitalized terms used herein without definition having the meanings assigned thereto in the Indenture), the Company has, inter alia, assigned by way of collateral security certain of its right, interest, claims and demands in and to the Purchase Agreement; and 2. The Company and the Indenture Trustee wish to create a pledge under French law in the right, interest, claims and demands in and to the Purchase Agreement referred to in paragraph 1 above; NOW, THEREFORE, the parties hereto agree as follows: - -------------------------- +Here insert the Documentation Date. 165 166 ARTICLE 1 As security for the obligations of the Company under the Indenture and each of the other Operative Agreements, the Company hereby pledges to the Indenture Trustee in accordance with the terms and conditions of the Indenture, all of the Company's rights, interests and privileges in and to: (a) All right, title and interest of the Company in, to and under Clauses 12, 13 and, to the extent relating to acts to be performed following the date of enforcement of this Pledge Agreement or the Indenture, 17 of the Purchase Agreement (other than any of the Company's right, title and interest in or arising out of any advance payments made by the Company in respect of the Airbus Industrie A300F4-605R aircraft bearing Manufacturer's Serial No. [ ] (the "Aircraft") under the Purchase Agreement and any other payments made or to be made by the Company under the Purchase Agreement or amounts credited or to be credited by the Manufacturer to the Company in respect of the Aircraft or otherwise, unless such amounts credited or to be credited by the Manufacturer to the Company result from a default under the Purchase Agreement with respect to the Aircraft), the Bills of Sale and the Consent and Guaranty of the Manufacturer attached to the Purchase Agreement to the extent the Purchase Agreement, Bills of Sale and Consent and Guaranty relate to continuing rights of the Company in respect of any warranty, express or implied, as to title, materials, workmanship, design or patent infringement with respect to the Airframe or the Engines (reserving to the Company, however, all of the Company's other rights and interest in and to the Purchase Agreement and such Consent and Guaranty) together with all rights, powers, privileges, options and other benefits of the Company under said Clauses with respect to the Airframe or the Engines, including, without limitation, the right to make all waivers and agreements, to give and receive all notices and other instruments or communications, to take such action upon the occurrence of a default thereunder, including the commencement, conduct and consummation of legal, administrative or other proceedings, as shall be permitted thereby or by law, and to do any and all other things which the Company is or may be entitled to do thereunder, and in furtherance of the foregoing to the extent permitted by applicable law and upon the occurrence of an Event of Default the Company hereby directs AVSA and the Manufacturer to pay all amounts, if any, payable to the Company pursuant to such Clauses of the Purchase Agreement (other than any such amounts in respect of such advance payments or other payments by the Company or credited or to be credited, unless as a result of a default by the Manufacturer as aforesaid) and such Consent and Guaranty in respect of the Airframe or the Engines directly to the Indenture Trustee; and (b) All proceeds of the foregoing; PROVIDED, HOWEVER, that notwithstanding any of the foregoing provisions of this Article 1, so long as no Event of Default shall have occurred and be continuing, the Company shall have the right, to the exclusion of the Indenture Trustee, (a) to quiet enjoyment of the Airframe 166 167 and Engines, and to possess, use, retain and control the Airframe and Engines and all revenues, income and profits derived therefrom, and (b) with respect to the Purchase Agreement and the Consent and Guaranty attached thereto, to exercise in the Company's name all rights and powers of the buyer under the Purchase Agreement and such Consent and Guaranty (other than to amend, modify or waive any of the warranties contained therein) and to retain any recovery or benefit resulting from the enforcement of any warranty or indemnity under the Purchase Agreement and such Consent and Guaranty; provided, further, that notwithstanding the occurrence and continuation of an Event of Default, the Indenture Trustee shall not enter into any amendment of the Purchase Agreement or such Consent and Guaranty which would increase the obligations of the Company thereunder. The Indenture Trustee hereby accepts such pledge. ARTICLE 2 The obligations, the performance of which is secured by this pledge, are amounts payable in respect of principal of the Equipment Purchase Certificates and interest thereon, and Breakage Costs, and all other amounts due pursuant to the Indenture and the Equipment Purchase Certificates, and other sums secured by the Indenture. To the extent necessary to comply with French law, it is understood that the principal amount of the debt in question may amount to a maximum of the principal amount of the Equipment Purchase Certificates relating to the Aircraft (on the date hereof being U.S.$52,500,000) to which may be added interest and other amounts due under the Indenture and the Equipment Purchase Certificates, and other sums secured by the Indenture. ARTICLE 3 This Pledge Agreement shall be registered and notified by "huissier" to each of AVSA, S.A.R.L. and Airbus Industrie G.I.E. This Pledge Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument. ARTICLE 4 This Pledge Agreement is of a commercial nature and shall be governed by French law. 167 168 Done at New York, New York, U.S.A. on [__________, 199_].+ FEDERAL EXPRESS CORPORATION By ----------------------------- Title NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Indenture Trustee By ----------------------------- Title - -------------------- +Here insert the Delivery Date. 168 169 Exhibit H to Loan 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. 169 170 * - -------------------- *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. 170 171 * - -------------------- *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. 171 172 * - -------------------- *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. 172 173 * - -------------------- *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. 173 174 * - -------------------- *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. 174 175 * - -------------------- *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. 175 EX-10.4 3 FOURTH SUPPLEMENTAL INDENTURE 1 EXHIBIT 10.4 EXECUTION COPY ================================================================================ FOURTH SUPPLEMENTAL INDENTURE BETWEEN MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY AND COMMERCE UNION BANK, TRUSTEE DATED AS OF DECEMBER 1, 1984 SUPPLEMENTING INDENTURE DATED AS OF AUGUST 1, 1979 BETWEEN THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY AND COMMERCE UNION BANK, TRUSTEE ================================================================================ 2 TABLE OF CONTENTS -----------------
Section Page - ------- ---- ARTICLE I DEFINITIONS 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.2 General Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE II SERIES 1984 BONDS 2.1 Authorization of the 1984 Federal Express Acquisition Project . . . . . . . . . . . . . . . . . . . . . 5 2.2 Series 1984 Bonds; Details Thereof . . . . . . . . . . . . . . . . 5 2.3 Conversion to Fixed Interest Bonds . . . . . . . . . . . . . . . . 7 2.4 Purchase of Series 1984 Bonds . . . . . . . . . . . . . . . . . . 10 2.5 Provisions for Redemption of Series 1984 Bonds . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.6 Place of Payment for Series 1984 Bonds; Credits to the Reserve Account . . . . . . . . . . . . . . . 15 2.7 Execution and Forms of Series 1984 Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.8 Series 1984 Bonds to Constitute Bonds . . . . . . . . . . . . . . 29 ARTICLE III DISPOSITION OF PROCEEDS OF SERIES 1984 BONDS; SALE 3.1 Application of Series 1984 Bond Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 29 3.2 Application of Certain Moneys in Construction Fund . . . . . . . . . . . . . . . . . . . . . . 29 3.3 Sale of Series 1984 Bonds . . . . . . . . . . . . . . . . . . . . 30 ARTICLE IV AUTHORITY; FINDINGS AND DETERMINATIONS; ARBITRAGE AND INDUSTRIAL DEVELOPMENT BOND PROVISIONS 4.1 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 4.2 Findings and Determinations . . . . . . . . . . . . . . . . . . . 30 4.3 Additional Findings and Determinations . . . . . . . . . . . . . . . . . . . . . . . 32 4.4 Additional Findings as to the Initial Lease . . . . . . . . . . . . . . . . . . . . . . . . 32 4.5 Arbitrage and Industrial Development Bond Provisions . . . . . . . . . . . . . . . . . . . . . . . 32
-i- 3 Section Page - ------- ---- ARTICLE V MISCELLANEOUS 5.1 Headings, Table of Contents . . . . . . . . . . . . . . . . . . . 33 5.2 Law and Place of Enforcement . . . . . . . . . . . . . . . . . . . 33 5.3 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . 33 5.4 Reference to Fourth Supplemental Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . 35
-ii- 4 FOURTH SUPPLEMENTAL INDENTURE FOURTH SUPPLEMENTAL INDENTURE, made this 13th day of December, 1984, but dated for convenience of reference as of the first day of December, 1984, between MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY (the "Authority") and COMMERCE UNION BANK, Trustee (the "Trustee"). WHEREAS, the Authority has heretofore executed and delivered to the Trustee an Indenture dated as of August 1, 1979 (said Indenture, as originally adopted and, unless the context shall clearly indicate otherwise, as heretofore or hereafter supplemented, modified or amended from time to time by any Supplemental Indenture permitted thereby, being defined in said Indenture and referred to herein as the "Indenture") to secure, as provided therein, Special Facilities Revenue Bonds (Federal Express Corporation) of the Authority (in the Indenture and herein called the "Bonds") to be issued in one or more series as provided in the Indenture; and WHEREAS, pursuant to the Indenture there have been executed, authenticated and delivered four series of Bonds known as the Authority's Special Facilities Revenue Bonds, Series 1979, Series 1982A, Series 1982B and Series 1982C (Federal Express Corporation), in the original principal amounts of $34,970,000, $48,000,000, $22,000,000 and $47,770,000, respectively; and WHEREAS, the Authority has heretofore executed and delivered to the Trustee a First Supplemental Indenture dated as of March 13, 1980 amending the Indenture in certain respects, a Second Supplemental Indenture dated as of May 1, 1982 amending and supplementing the Indenture in certain respects and a Third Supplemental Indenture dated as of November 1, 1982 supplementing the Indenture in certain respects; and WHEREAS, Federal Express Corporation ("Federal Express"), as lessee under the Special Facility Lease Agreement between the Authority and Federal Express, dated as of August 1, 1979 (the "Initial Lease") has, pursuant to Section 5.8 of the Initial Lease, requested that the Authority issue a series of Additional Bonds in the principal amount of $94,550,000 in accordance with Sections 2.06 and 2.08 of the Indenture in order to fund the acquisition and construction of the 1984 Federal Express Acquisition Project (as hereinafter defined); and WHEREAS, it is provided in the Indenture that without the consent or concurrence of the holder of any Bond, the Authority and the Trustee may enter into a Supplemental Indenture for the purpose of providing for the issuance of Additional Bonds pursuant to the provisions of Article II of the Indenture; and WHEREAS, the Board of Commissioners of the Authority at a meeting held on November 29, 1984 duly adopted a resolution approving, among other things, this Fourth Supplemental Indenture, and the Third Special Facility Supplemental Lease Agreement dated as of December 1, 1984 supplementing the Initial Lease, and authorizing the issuance, sale and delivery of a series of Bonds to be known as the Memphis-Shelby County Airport Authority, Special Facilities Revenue Bonds, Series 1984 (Federal Express Corporation) in the principal amount of $94,550,000 (the "Series 1984 Bonds") which resolution has not been amended, modified or rescinded since the adoption thereof and remains in full force and effect as of the date hereof; and WHEREAS, the Authority desires to provide for the issuance of the Series 1984 Bonds; and WHEREAS, all things necessary to make the Series 1984 Bonds to be issued under the Indenture when executed by the Authority and authenticated and delivered under the Indenture, the valid special obligations of the Authority payable solely from Revenues, as defined in the Indenture, have been done and performed; NOW, THEREFORE, THIS AGREEMENT WITNESSETH: That in order to provide for the issuance of the Series 1984 Bonds, and in consideration of the premises and of the purchase and acceptance of the Series 1984 Bonds by the holders thereof, the Authority 5 covenants and agrees with the Trustee, for the equal and proportionate benefit of the respective bondholders from time to time, as follows: ARTICLE I DEFINITIONS Section 1.1. Definitions. Unless the context shall clearly indicate some other meaning, all words and terms used in this Fourth Supplemental Indenture (including, without limitation, in the next paragraph hereof) which are defined in the Indenture shall have the meanings given to them in the Indenture. Unless the context shall clearly indicate some other meaning, the following terms shall, for all purposes of the Indenture as originally executed and of any indentures supplemental thereto (including for all purposes this Fourth Supplemental Indenture) and for all purposes of any opinion or instrument or other document therein or herein mentioned, have the following meanings: (a) "Adjusted Interest Rate" means the rate of interest borne by the Series 1984 Bonds for each Bond Year. (b) "Adjusted Interest Rate Effective Date" means the September 1 immediately following each Tender Period. (c) "Adjusted Interest Rate Notice" means the notice, mailed by the Trustee to the holders of each Series 1984 Bond, stating (i) that in accordance with the Tender Agreement each holder of a Series 1984 Bond shall have the right to tender such Series 1984 Bond (endorsed in blank together with any appropriate instruments of transfer as the Tender Agent may request) to the Tender Agent during the then current Tender Period; (ii) the Anticipated Adjusted Interest Rate; (iii) that the actual Adjusted Interest Rate will be set on the Adjusted Interest Rate Setting Date; (iv) that the Adjusted Interest Rate will apply to all Series 1984 Bonds for the Bond Year commencing on the next Adjusted Interest Rate Effective Date; and (v) that the holders of the Series 1984 Bonds may telephone a member of the Interest Rate Committee at a number or numbers identified therein on or after 12:00 Noon on the Adjusted Interest Rate Setting Date to ascertain the new Adjusted Interest Rate. (d) "Adjusted Interest Rate Setting Date" means a date no later than August 13 of each year. (e) "Anticipated Adjusted Interest Rate" means the anticipated interest rate for the Series 1984 Bonds as determined by the Interest Rate Committee and as set forth in an Adjusted Interest Rate Notice. (f) "Bond Year" means the period from September 1 in any year to and including August 31 in the following year. (g) "Business Day" means a day on which banks located in the city in which the principal office of the Trustee is located are not authorized or required by law to be closed and on which the New York Stock Exchange is not closed. (h) "Conversion Date" means the Adjusted Interest Rate Effective Date on which the Fixed Interest Rate becomes effective. (i) "Federal Express" means Federal Express Corporation, a corporation duly organized and existing under the laws of the State of Delaware, its successors and assigns. (j) "Fixed Interest Rate" means the interest rate on the Series 1984 Bonds determined in accordance with Section 2.3 hereof. (k) "Fourth Supplemental Indenture" means this fourth supplemental indenture. -2- 6 (l) "Holder" or "holder" means the person in whose name any Series 1984 Bond is registered upon the registration books maintained by the Trustee under the Indenture. (m) "Interest Rate Committee" means Kidder, Peabody & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan, Keegan & Company, Inc., or as the Committee may be constituted from time to time. (n) "1984 Federal Express Acquisition Project" means the project described in Article II hereof. (o) "Series 1984 Bonds" means the bonds of the series authorized in Section 2.2 hereof in the aggregate principal amount of $94,550,000 and designated "Memphis-Shelby County Airport Authority, Special Facilities Revenue Bonds, Series 1984 (Federal Express Corporation)", with such definition to be equally applicable to the singular and plural form of such term. (p) "Tender Agent" means Commerce Union Bank in the City of Nashville, Tennessee and any successor thereto. (q) "Tender Agreement" means the Tender and Option Agreement dated as of December 1, 1984 by and between the Tender Agent, Kidder, Peabody & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Keegan & Company, Inc. and Federal Express, as the same may be supplemented and amended from time to time in accordance with the provisions thereof. (r) "Tender Period" means the period from the opening of business on August 1 (or, if not a Business Day, the succeeding Business Day) of each year to and including 4:00 P.M., New York time, on August 15 (or, if not a Business Day, the succeeding Business Day) of each year, commencing in 1985. (s) "Third Supplemental Lease" means that certain Third Special Facility Supplemental Lease Agreement dated as of December 1, 1984, by and between the Authority and Federal Express, supplementing the Special Facility Lease Agreement dated as of August 1, 1979, by and between the Authority and Federal Express (said Lease Agreement as heretofore amended and supplemented being herein and in the Indenture referred to as the "Initial Lease"), and as the same may hereafter be duly supplemented, modified or amended from time to time. Section 1.2. General Terms. Unless or except as the context shall indicate otherwise or may otherwise require, in this Fourth Supplemental Indenture: (i) all references to a particular section or subdivision of the Indenture, the First Supplemental Indenture, the Second Supplemental Indenture, the Third Supplemental Indenture or this Fourth Supplemental Indenture as the case may be, are to the corresponding section or subdivision of the Indenture as originally executed or the First Supplemental Indenture, the Second Supplemental Indenture, the Third Supplemental Indenture or this Fourth Supplemental Indenture only, as the case may be; (ii) the terms "herein", "hereunder", "hereby", "hereto", "hereof", and any similar terms, refer to this Fourth Supplemental Indenture only, and as to this Fourth Supplemental Indenture as a whole and not to any particular section or subdivision hereof; (iii) the terms "therein", "thereunder", "thereby", "thereto", "thereof", and any similar terms, refer to the Indenture only, and to the Indenture as a whole and not to any particular section or subdivision thereof; and (iv) the term "heretofore" means before the time of effectiveness of this Fourth Supplemental Indenture and the term "hereafter" means after the time of such effectiveness. ARTICLE II SERIES 1984 BONDS Section 2.1. Authorization of the 1984 Federal Express Acquisition Project. There is hereby authorized and approved the acquisition and construction of certain facilities and equipment including buildings, ramp and sorting equipment and miscellaneous related equipment, as described in the Third Supplemental Lease (the "1984 Federal Express Acquisition Project"). -3- 7 Section 2.2. Series 1984 Bonds; Details Thereof. For the purpose of providing funds to finance the acquisition of the 1984 Federal Express Acquisition Project, which Project will constitute a part of the Special Facility, there are hereby authorized to be issued and shall be issued under the Indenture and secured thereby a series of Bonds in the aggregate principal amount of ninety-four million five hundred fifty thousand dollars ($94,550,000), to be entitled and designated "Memphis-Shelby County Airport Authority, Special Facilities Revenue Bonds, Series 1984 (Federal Express Corporation)" (herein defined and referred to as the "Series 1984 Bonds"). The Series 1984 Bonds shall be issuable in fully registered form; shall be dated as of the date of their original issuance; shall be in the denomination of $5,000 or any integral multiple thereof; shall be numbered or lettered, or both, as shall be determined by the Trustee, which numbers or letters shall have the letter "R" prefixed thereto. The Series 1984 Bonds shall bear interest at the rates per annum determined in the manner as hereinafter set forth, payable in accordance with Section 4.01 of the Indenture, on March 1, 1985 and semi-annually on the first day of each March and September thereafter. The Series 1984 Bonds shall mature and become payable on September 1, 2009. Interest on the Series 1984 Bonds shall be computed on the basis of a year of 360 days. The Series 1984 Bonds shall bear interest from the date of their original issuance to and including August 31, 1985 at the rate of seven and one-quarter per centum (7.25%) per annum. Thereafter, and prior to the Conversion Date, the Series 1984 Bonds shall bear interest for each subsequent Bond Year at a rate of interest per annum determined as set forth below and based upon a determination by the Interest Rate Committee as of the Adjusted Interest Rate Setting Date in each year, which rate shall be the lowest rate which in the judgment of the Interest Rate Committee on the basis of prevailing financial market conditions would permit the resale on the Adjusted Interest Rate Setting Date of the Series 1984 Bonds at par. On and after the Conversion Date the Series 1984 Bonds shall bear interest at the rate of interest per annum determined as set forth in Section 2.3 hereof. On each July 31 (or, if not a Business Day, the next preceding Business Day), beginning July 31, 1985, the Interest Rate Committee shall determine the Anticipated Adjusted Interest Rate, which shall be the lowest rate which in the Interest Rate Committee's judgment, on the basis of prevailing financial market conditions, would permit the sale of the Series 1984 Bonds at par on the date of such determination. Immediately upon determining the Anticipated Adjusted Interest Rate, the Interest Rate Committee shall notify the Trustee of such rate, and not later than the Business Day following such determination, the Trustee shall mail, by first class mail, to the registered owner of each Series 1984 Bond as shown on the books of registry maintained by the Trustee the Adjusted Interest Rate Notice. The Interest Rate Committee shall determine the Adjusted Interest Rate before 12:00 noon, New York time, on the applicable Adjusted Interest Rate Setting Date, which rate shall be the lowest rate which in its judgment on the basis of prevailing financial market conditions, would permit on such Adjusted Interest Rate Setting Date the resale of all the Series 1984 Bonds at par. If the Interest Rate Committee does not determine an Adjusted Interest Rate for any reason or if the Adjusted Interest Rate that is determined by the Interest Rate Committee is held invalid or unenforceable by a court of law, the rate of interest on the Series 1984 Bonds in effect on the day immediately preceding the Adjusted Interest Rate Setting Date shall remain in effect throughout the next following Bond Year. The Interest Rate Committee shall provide telephonic notice, confirmed in writing, to the Trustee of the Adjusted Interest Rate on or before 12:00 noon on the Adjusted Interest Rate Setting Date. After 12:00 noon, New York time, on the Adjusted Interest Rate Setting Date, any Interest Rate Committee member may release the new Adjusted Interest Rate and any holder of a Series 1984 Bond may call any Interest Rate Committee member to ascertain the new Adjusted Interest Rate. The first Business Day after each determination of the Adjusted Interest Rate, the Trustee shall mail, by first class mail, to the registered owner of each Series 1984 Bond as shown in the books of registry maintained by the Trustee notice of the Adjusted Interest Rate. The determination of the Adjusted Interest Rate shall be final and conclusive and each owner of a Series 1984 Bond, by his acceptance of such bond, agrees to accept the rate of interest if determined as aforesaid. The Adjusted Interest Rate shall take effect the following September 1, notwithstanding any defect in (1) the determination of the Anticipated Adjusted Interest Rate or the Adjusted Interest Rate (2) the mailing of Adjusted Interest Rate Notice or (3) the communication to any bondowner of the Anticipated Adjusted Interest Rate or the -4- 8 Adjusted Interest Rate. The Tender Agreement provides that no such defect shall extend the period for tendering Series 1984 Bonds or otherwise change the rights of bondowners to tender Series 1984 Bonds to the Tender Agent for purchase. Any provision in this Fourth Supplemental Indenture to the contrary notwithstanding, in the event the Adjusted Interest Rate determined as aforesaid shall exceed fifteen per centum (15%) per annum, then the Series 1984 Bonds shall bear interest at the rate of fifteen per centum (15%) per annum. The Authority and members of the Interest Rate Committee shall enter into an agreement setting forth the terms and conditions under which the Interest Rate Committee shall serve in carrying out its obligations under this Section 2.2 and Section 2.3 hereof. Section 2.3. Conversion to Fixed Interest Rate. The Authority at the direction of Federal Express hereby reserves the right to permanently establish the rate of interest on the Series 1984 Bonds for the balance of the term thereof in the manner hereinafter set forth in this Section 2.3 (such rate as so established herein defined as the "Fixed Interest Rate"). Pursuant to the Third Supplemental Lease the Authority has granted to Federal Express, as lessee under such Agreement, the right to direct the Authority to exercise the right to establish the Fixed Interest Rate on September 1 of any year (herein defined as the "Conversion Date"). Such direction must be made by notice in writing to the Authority, the Trustee and the Tender Agent not later than the forty-fifth (45th) day (or, if not a Business Day, the next preceding Business Day) preceding the Conversion Date specifying the Conversion Date, which notice shall be accompanied by an opinion of nationally recognized bond counsel acceptable to the Authority stating that such establishment of the Fixed Interest Rate is authorized or permitted by the Indenture, as amended and supplemented, and will not adversely affect the exemption of the interest on the Series 1984 Bonds from federal income taxation. Immediately after receiving notice from Federal Express of direction to establish the Fixed Interest Rate and not later than the fortieth (40th) day (or, if not a Business Day, the next preceding Business Day) prior to the Conversion Date, the Trustee shall mail by first class mail, to each owner of a Series 1984 Bond at his address as it appears on the books of registry kept by the Trustee notice (i) that the Authority has exercised its right to establish a Fixed Interest Rate on the next ensuing September 1, (ii) specifying the Conversion Date, (iii) that a notice will be sent on or about the following August 1 of the anticipated Fixed Interest Rate, (iv) that the Fixed Interest Rate will be determined no later than the following August 13, (v) that in accordance with the Tender Agreement the holders of the Series 1984 Bonds have the option of tendering Series 1984 Bonds for purchase during the Tender Period preceding the Conversion Date, (vi) that in accordance with the Tender Agreement if Series 1984 Bonds are to be tendered for purchase, holders of Series 1984 Bonds must tender the Series 1984 Bonds to the Tender Agent, or the Tender Agent's designee in New York, New York for purchase during the Tender Period, (vii) specifying the terms and conditions pursuant to which the Series 1984 Bonds are to be delivered for purchase and the places where such Bonds must be so delivered, (viii) that on the Conversion Date the Tender Agent shall hold moneys equal to the purchase price of all tendered Series 1984 Bonds in trust for the holders thereof, (ix) that Series 1984 Bonds not tendered during the Tender Period prior to the Conversion Date will bear interest from and after the Conversion Date at the Fixed Interest Rate, and (x) setting forth such other information as the Trustee upon request of the Interest Rate Committee or Federal Express may determine. The Trustee shall, immediately upon receipt of notice from Federal Express specifying the Conversion Date, without further authorization or direction, notify the Interest Rate Committee, and the Interest Rate Committee on July 31 (or, if not a Business Day, the next preceding Business Day) preceding the Conversion Date shall determine the anticipated Fixed Interest Rate on the Series 1984 Bonds which rate shall be the lowest rate which in the judgment of the Interest Rate Committee on the basis of prevailing financial market conditions would permit the resale of the Series 1984 Bonds at par on the date of such determination. The Interest Rate Committee shall immediately certify to the Trustee, the Tender Agent, the Authority and Federal Express in writing as to the rate of interest per annum determined by it, as aforesaid. -5- 9 The Trustee shall, not later than the Business Day following receipt of notice of the anticipated Fixed Interest Rate without further authorization or direction of the Authority, mail, by first class mail, notice to each owner of a Series 1984 Bond at his address as it appears on the books of registry kept by the Trustee pursuant to the Indenture advising the owners and holders of Series 1984 Bonds (i) that the Authority has exercised its right to establish a Fixed Interest Rate on the Series 1984 Bonds to maturity, (ii) of the Conversion Date, (iii) of the anticipated Fixed Interest Rate, (iv) that such rate shall be determined by the Interest Rate Committee no later than August 13 prior to the Conversion Date and such rate shall be the lowest rate which in the judgment of the Interest Rate Committee, on the basis of prevailing financial market conditions, would permit the Series 1984 Bonds to be sold at par on the date of such determination; (v) that the holders of the Series 1984 bonds may telephone a member of the Interest Rate Committee at a number or numbers identified therein on or after 12:00 noon on the date of the determination of the Fixed Interest Rate to ascertain the Fixed Interest Rate; (vi) that the Series 1984 Bonds shall be subject to redemption prior to their maturity in accordance with their terms and a description of such terms, and (vii) that the Series 1984 Bonds shall bear interest at the Fixed Interest Rate from the Conversion Date until payment of the principal or redemption price thereof shall have been made or provided for whether at maturity, upon redemption or otherwise. The Interest Rate Committee shall determine the Fixed Interest Rate before 12:00 noon, New York time, on a date no later than August 13 preceding the Conversion Date which rate shall be the lowest rate which in its judgment on the basis of prevailing financial market conditions, would permit on such determination date the resale of all the Series 1984 Bonds at par. The Interest Rate Committee shall provide telephonic notice, confirmed in writing, to the Trustee of the Fixed Interest Rate on or before 12:00 noon on the determination date. After 12:00 noon, New York time, on such determination date prior to the Conversion Date, any Interest Rate Committee member may release the Fixed Interest Rate and any bondholder may call any Interest Rate Committee member to ascertain the Fixed Interest Rate. On the first Business Day after determination of the Fixed Interest Rate, the Trustee shall mail, by first class mail, to the registered owner of each Series 1984 Bond as shown on the books of registry maintained by the Trustee notice of the Fixed Interest Rate. The determination of the Fixed Interest Rate on the Series 1984 Bonds if computed and determined as aforesaid shall be final and conclusive, and each owner of a Series 1984 Bond, by his acceptance of the Series 1984 Bond, agrees to accept such rate of interest if computed and determined as aforesaid. Any provision in this Fourth Supplemental Indenture to the contrary notwithstanding, in the event the Fixed Interest Rate determined as aforesaid shall exceed fifteen per annum (15%) per annum, then the Series 1984 Bond shall bear interest at the rate of fifteen per centum (15%) per annum. Section 2.4. Purchase of Series 1984 Bonds. Federal Express and Commerce Union Bank in Nashville, Tennessee, in its separate corporate capacity as Tender Agent under the Tender Agreement and not as the Trustee hereunder, and Kidder, Peabody & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Keegan & Company, Inc. (herein called the "Remarketing Agents"), have entered into the Tender Agreement for the benefit of the owners and holders of the Series 1984 Bonds. Under and subject to the terms and conditions contained in the Tender Agreement, Federal Express has directed the Tender Agent to purchase any Series 1984 Bonds tendered under the Tender Agreement and to pay the purchase price therefor from moneys available therefor as more fully set forth in the Tender Agreement. Under the terms and conditions of the Tender Agreement, Federal Express has granted the owners and holders of the Series 1984 Bonds options to tender Series 1984 Bonds for purchase on September 1 of any year prior to and including the Conversion Date at a purchase price equal to the principal amount tendered to the Tender Agent or its designee in New York, New York as hereinafter provided, and delivered during the Tender Period of the Series 1984 Bonds to be purchased. The tender of a Series 1984 Bond for purchase shall be revocable as set forth in the Tender Agreement until the end of the Tender Period. The Tender Agreement provides, generally, that: -6- 10 (a) the purchase of Series 1984 Bonds shall be made only upon delivery to the Tender Agent or its designee in New York, New York of such Series 1984 Bond or Bonds during the Tender Period (together with necessary assignments and endorsements), at Commerce Union Bank, One Commerce Place, Nashville, Tennessee 37219, Attention: Corporate Trust Operation M-B or at the office of the designee of the Tender Agent in New York, New York. (b) the Tender Agent shall give notice to the Remarketing Agents by telephone promptly confirmed in writing of the principal amount of Series 1984 Bonds delivered to it for purchase as soon as practicable after the receipt thereof but in no event later than the first Business Day after the Tender Period. The Tender Agreement also provides, generally, that the Tender Agent shall purchase all tendered Series 1984 Bonds on the Conversion Date from moneys made available to the Tender Agent by Federal Express, less the sum of the proceeds received by the Remarketing Agents in remarketing the Series 1984 Bonds. With respect to any Series 1984 Bond which is tendered for purchase, delivery of such Series 1984 Bond shall be accompanied by an appointment of the Tender Agent as attorney-in-fact for such owner or holder for the purpose of transferring and exchanging such Series 1984 Bond on the books of registry kept pursuant to the Indenture. Any Series 1984 Bonds purchased in whole or in part pursuant to the Tender Agreement shall continue to be deemed to be outstanding for all purposes of the Indenture. Under the terms of the Tender Agreement the Remarketing Agents are required to offer for sale and use their best efforts to sell Series 1984 Bonds delivered for purchase (unless otherwise directed by Federal Express). The proceeds received by the Tender Agent from the sale of any Series 1984 Bonds, or portions thereof, on behalf of Federal Express in excess of the amount applied to the purchase price of Series 1984 Bonds tendered shall be paid over to the Trustee under the Indenture and deposited in the Bond Retirement Account in the Bond Fund and applied as are other moneys in said Account. If the Remarketing Agents sell any tendered Series 1984 Bonds at less than the principal amount thereof Federal Express shall pay to the Tender Agent on the Adjusted Interest Rate Effective Date or the Conversion Date, as the case may be, an amount equal to the difference between the sale price of such Series 1984 Bonds and the principal amount thereof in order to provide moneys under the Tender Agreement to pay the purchase price of the Series 1984 Bonds tendered and remarketed at less than the principal amount thereof. The Tender Agent shall notify Federal Express by telephone, confirmed in writing, on the third Business Day preceding the Adjusted Interest Rate Effective Date or the Conversion Date, as the case may be, of the amount required to be deposited with the Tender Agent on such date. The Authority is not a party to the Tender Agreement and is not responsible for the performances thereunder of the parties thereto. The rights granted the owners and holders of the Series 1984 Bonds under the Tender Agreement do not constitute, and shall not be deemed to constitute, a part of the contract between the owners or holders of the Series 1984 Bonds and the Authority evidenced by the Indenture or the Series 1984 Bonds. Nevertheless, the Tender Agreement has been executed by Federal Express for the benefit of, and to induce the purchase of the Series 1984 Bonds by, all who shall at any time and from time to time become owners or holders of the Series 1984 Bonds, and such owners and holders are entitled to the benefits of the Tender Agreement as third party beneficiaries. The initial Tender Agent as trustee for the holders of the Series 1984 Bonds under the Tender Agreement has accepted the obligation to protect certain rights of the owners and holders of the Series 1984 Bonds, and in pursuance thereof it shall institute any action or proceeding at law or in equity for the collection of all sums due and unpaid under the Tender Agreement or performance of such act or compliance with the terms thereof and may prosecute any such action or proceedings to judgment or final decree against Federal Express under the Tender Agreement, and, in the manner provided by law, collect out of the property of Federal Express, any moneys adjudged or decreed to be payable for the benefit of the owners or holders of the Series 1984 Bonds. No holder of a Series 1984 Bond shall be entitled to institute any suit, action or proceeding, in law or in equity, against the Authority or the Trustee to enforce the terms and provisions of the Tender Agreement -7- 11 or for payment of a tendered Series 1984 Bond from any moneys held under the Indenture. Under the Third Supplemental Lease the Authority has agreed to set forth this summary of the provisions of the rights of holders of Series 1984 Bonds provided in the Tender Agreement, in the Series 1984 Bonds and herein. Reference is made to the Tender Agreement for a more complete statement of the terms thereof. Section 2.5. Provisions for Redemption of Series 1984 Bonds. The Series 1984 Bonds may be called for redemption in whole at any time from any source of moneys at a redemption price equal to the principal amount redeemed, together with accrued interest on such principal amount to the date fixed for redemption: (i) if the Special Facility is destroyed in whole or is damaged by fire or other casualty to the extent that (A) such damage is not capable, in the reasonable estimation of the lessee under the Initial Lease, of being repaired within 180 days from the date on which such fire or other casualty occurs or (B) the cost of such repair is reasonably estimated by such lessee to be equal to or greater than one-half of the principal amount of the Bonds Outstanding on the date on which such fire or other casualty occurs, or (ii) in the event of the taking of the whole or substantially the whole of the Special Facility as a result, or in anticipation, of the exercise of the right of condemnation or eminent domain or the taking of less than the whole or less than substantially the whole of the Special Facility as a result, or in anticipation, of the exercise of the right of condemnation or eminent domain if in either event, (A) the remaining portion of the Special Facility is not capable in such lessee's reasonable estimation of being reconstructed and reequipped so that the same will constitute a complete and functional unit suitable for the purposes for which it is intended within 180 days from the date upon which such taking occurs or (B) the cost of such reconstruction and reequipping is reasonably estimated by such lessee to be equal to or greater than one-half of the principal amount of the Bonds outstanding on the date on which such taking occurs. The Series 1984 Bonds shall also be subject to redemption and shall be redeemed at any time in whole on the next practicable interest payment date at a redemption price equal to the principal amount redeemed plus accrued interest thereon to the date fixed for redemption, either upon a judgment or order of a court of competent jurisdiction which is final (either because the time for appeal thereof has expired or because the judgment or order is issued by that Court having final appellate jurisdiction over the matter and is not subject to collateral attack), or upon a determination of the Internal Revenue Service which is final (because the tax has been paid pursuant thereto and the time for filing a claim for refund for such tax has expired) to the effect that the interest paid or payable on any Series 1984 Bond, in the case of the issuance of such judgment, order or determination, to other than a substantial user of the Special Facility or a related person is or was includable in the gross income of the holder thereof for Federal income tax purposes as a result of a failure by Federal Express to observe or perform any covenant or agreement to be observed or performed by it under the Initial Lease or as a result of facts within its control which are contradictory to any representation or warranty made by it under the Initial Lease. Each holder of a Series 1984 Bond by acceptance of his Series 1984 Bond, shall be deemed to agree, if requested by Federal Express, to have an attorney-in-fact, qualified to practice before the Internal Revenue Service, appointed by Federal Express for the purpose of appealing any judgment, order to determination provided Federal Express provides indemnity reasonably satisfactory to the bondholder against any additional tax liability, penalties or interest that may result from any such appeal. All legal fees and costs incurred in prosecuting such appeal shall be paid by Federal Express. At the option of the Authority, at the direction of Federal Express, the Series 1984 Bonds (or portions of the principal amount thereof in installments of $5,000 or any integral multiple thereof) shall be subject to redemption prior to and on the Conversion Date as a whole or in part on any interest payment date by lot (a) at the principal amount of the Series 1984 Bond or Bonds to be redeemed if redeemed on September 1 in any year and (b) at the principal amount of the Series 1984 Bond or Bonds to be redeemed plus one-eighth (1/8) of one percent (1%) of the principal amount of the Series 1984 Bonds to be redeemed, if redeemed on March 1 in any year. Subsequent to the Conversion Date, the Series 1984 Bonds (or portions of the principal amount thereof in installments of $5,000 or any integral multiple thereof) shall be subject to redemption at the option of the Authority, at the direction of Federal Express, as a whole at any time or in part on any interest payment date by lot at the times and at the redemption prices (expressed as a percentage of the principal amount, or portion thereof, of -8- 12 Series 1984 Bonds to be redeemed) set forth below together with the interest accrued thereon to the date fixed for redemption: (a) if the Conversion Date is on or before September 1, 1991, then the Series 1984 Bond will be noncallable for redemption until September 1, 2001, and thereafter shall be subject to redemption at a redemption price of 103%, which price shall decline by 1/2 of 1% per annum, until reaching a price of 100%, over the remaining term of the Series 1984 Bonds; (b) if the Conversion Date is after September 1, 1991, and on or before September 1, 1997, then the Series 1984 Bonds shall be noncallable for redemption until September 1, 2005, and thereafter shall be subject to redemption at a redemption price of 102% per annum, which price shall decline by 1/2 of 1% per annum, until reaching a price of 100%, over the remaining term of the Series 1984 Bonds; (c) if the Conversion Date is after September 1, 1997, and on or before September 1, 2000, then the Series 1984 Bonds shall be noncallable for redemption until September 1, 2006, and thereafter shall be subject to redemption at a redemption price of 101%, which price shall decline by one-half of 1% per annum, until reaching a price of 100%, over the remaining term of the Series 1984 Bonds; (d) if the Conversion Date is after September 1, 2000, and on or before September 1, 2003, then the Series 1984 Bonds shall be noncallable for redemption until September 1, 2007, and thereafter shall be subject to redemption at a redemption price of 101%, which price shall decline by one-half of 1% per annum, until reaching a price of 100%, over the remaining term of the Series 1984 Bonds; (e) if the Conversion Date is after September 1, 2003, and before September 1, 2007, then the Series 1984 Bonds shall be callable for redemption on March 1, 2009 at a redemption price of 100% and on March 1, 2008 and September 1, 2008, at a price of 100-1/2%, and prior thereto shall be noncallable for redemption; and (f) if the Conversion Date is September 1, 2007, the Series 1984 Bonds shall be callable for redemption on March 1, 2009, at a redemption price of 100%. In the event of the redemption of Series 1984 Bonds: (i) if less than all of the Series 1984 Bonds of a maturity are to be redeemed, the Series 1984 Bonds of such maturity to be redeemed shall be selected as provided in Section 2.09 of the Indenture, and (ii) notice of such redemption shall be given, and such redemption shall have the effect as is provided in said Section 2.09. Section 2.6. Place of Payment for Series 1984 Bonds; Credits to the Reserve Account. Interest on each Series 1984 Bond shall be paid either by check or draft mailed, by first class mail, by the Trustee as Paying Agent for the Series 1984 Bonds to each holder thereof in whose name the Series 1984 Bond is registered upon the books of registry at the close of business on the fifteenth day of the month next preceding each interest payment date (whether or not a Business Day) at his address as it appears on such books of registry. The Trustee is hereby appointed as Paying Agent and registrar for the Series 1984 Bonds. A registered holder of One Million Dollars ($1,000,000) or more in principal amount of Series 1984 Bonds may elect, in lieu of payment by check or draft as described above, to receive payment of interest by wire transfer to a bank designated on or prior to the fifth Business Day next preceding an interest payment date by such owner for such payment. The Trustee may establish reasonable procedures governing the exercise of such options. Upon delivery of and payment for the Series 1984 Bonds there shall be deposited in the Bond Fund for credit to the Reserve Account therein an amount equal to the annual payment which would be required to pay the principal and interest on the Series 1984 Bonds on a level debt service basis from the date thereof to the final maturity, using that interest rate determined by the underwriters of the Series 1984 Bonds as the rate at which the Series 1984 Bonds would have been issued if they had been sold at a fixed rate computed on the basis of the maturity of the Series 1984 Bonds, which amount is hereby determined to be $11,022,516.08, and which amount -9- 13 shall be sufficient to make the moneys on deposit to the Bond Fund on credit to the Reserve Account equal to the Reserve Account Requirement for all Bonds to be Outstanding upon the issuance of the Series 1984 Bonds. The amount on deposit in the Bond Fund for credit to the Reserve Account shall be recalculated for the Series 1984 Bonds on September 1 of each year on the same basis set forth in this paragraph using prior to the Conversion Date the interest rate which the Series 1984 Bonds shall bear for the Bond Year commencing such September 1 and after the Conversion Date the Fixed Interest Rate. In the event the amount on credit to the Reserve Account upon such recalculation is less than the amount required to be maintained therein under the Indenture, the Trustee shall make the additional credits to the Reserve Account in the same manner as provided in the Indenture to make up a deficiency in the Reserve Account. Upon the effectiveness of the amendments to the Indenture set forth in Sections 5.1 and 5.2 of the Second Supplemental Indenture, the Trustee shall establish a subaccount in the Reserve Account to be known as the "Series 1984 Bond Reserve Subaccount." The Reserve Account Requirement with respect to the Series 1984 Bonds is hereby determined to be the amounts credited from time to time to the Reserve Account pursuant to the preceding paragraphs of this section and upon the effectiveness of the amendments to the Indenture set forth in Sections 5.1 and 5.2 of the Second Supplemental Indenture there shall be credited to the Series 1984 Bond Reserve Subaccount an amount equal to the Reserve Account Requirement for the Series 1984 Bonds from moneys on deposit in the Bond Fund on credit to the Reserve Account; provided, however, that the amount credited from time to time to the Series 1984 Bond Reserve Subaccount shall be recalculated in accordance with the provisions of the preceding paragraph hereof. The moneys on deposit in the Bond Fund for credit to the Reserve Account therein and credited to the Series 1984 Bond Reserve Subaccount shall constitute and be a reserve for the payment of the principal of and interest and premium (if any) on the Series 1984 Bonds and shall always be maintained at an amount at least equal to the Reserve Account Requirement for such series of Bonds at the time outstanding. Section 2.7. Execution and Forms of Series 1984 Bonds. The Series 1984 Bonds shall be executed, sealed and countersigned as is provided in Section 10.02 of the Indenture except that the signatures of the President and Secretary of the Authority on the Series 1984 Bonds may be facsimile signatures. The Series 1984 Bonds and the form of assignment thereof shall be in substantially the forms set forth in Section 10.01 of the Indenture and as more particularly set forth below: [Form of Series 1984 Bond] MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY SPECIAL FACILITIES REVENUE BOND SERIES 1984 (Federal Express Corporation) No. R-_____ $_______ ORIGINAL ISSUE DATE CUSIP ------------------- ----- REGISTERED HOLDER: ----------------- PRINCIPAL AMOUNT: DOLLARS ----------------
-10- 14 The Memphis-Shelby County Airport Authority, a public and governmental body politic and corporate of the State of Tennessee (hereinafter called the "Authority"), for value received hereby promises to pay, but solely from the revenues hereinafter specified and not otherwise, to the Registered Holder (named above), or registered assigns, on the first day of September 2009 (unless this Bond shall have theretofore been duly called for redemption and payment of the redemption price duly made or provided for), the Principal Amount (specified above), upon presentation and surrender hereof, and to pay interest on such Principal Amount, but solely from said revenues and not otherwise, from the Original Issue Date (specified above) until the payment of said Principal Amount at the rate per annum determined from time to time as hereinafter provided, payable on March 1 and September 1 in each year commencing March 1, 1985. This Bond as to principal, interest and premium will be payable in any coin or currency of the United States of America that at the time of payment is legal tender for public and private debts. Except as otherwise provided herein, interest shall be payable by the Trustee hereinafter mentioned by check or draft mailed to the holder hereof in whose name this Bond is registered upon the books of registry as of the close of business on the fifteenth day (whether or not a business day) of the month next preceding such interest payment date at his address as it appears on the books of registry kept at the principal office of the Trustee as Registrar. The principal of, and premium, if any, on this Bond are payable at the principal office of Commerce Union Bank in the City of Nashville, Tennessee or its successor as Trustee under the Indenture hereinafter referred to. A registered holder of $1,000,000 or more in principal amount of Bonds may elect, in lieu of payment by check or draft as described above, to receive payment of interest by wire transfer to a bank designated by such registered holder on or prior to the fifth business day next preceding an interest payment date for such payment. The Trustee may establish reasonable procedures governing the exercise of such option. This Bond and the Bonds of the series of which it is one (herein sometimes referred to as the "Series 1984 Bonds") shall bear interest from the Original Issue Date to and including August 31, 1985 at the rate per annum specified in the Fourth Supplemental Indenture hereinafter referred to. Thereafter, and prior to the Conversion Date, the Series 1984 Bonds shall bear interest for each subsequent Bond Year (September 1 to August 31) at a rate of interest per annum determined as set forth below as of a date no later than August 13 in each year (the "Adjusted Interest Rate Setting Date"). On and after the Conversion Date the Series 1984 Bonds shall bear interest at the rate of interest per annum determined as hereinafter set forth. The Conversion Date is that September 1 upon which the Authority permanently fixes the rate of interest on the Series 1984 Bonds until their final payment. The Authority has appointed a committee of institutions having expertise in evaluating municipal securities of the character of this Bond (the "Interest Rate Committee") for the purpose of determining the rate of interest on the Series 1984 Bonds from time to time all in accordance with the Fourth Supplemental Indenture hereinafter referred to. On each July 31 prior to the Conversion Date (or, if not a Business Day, the next preceding Business Day), beginning July 31, 1985, the Interest Rate Committee shall determine the anticipated interest rate for the succeeding Bond Year, which shall be the lowest rate which in the Interest Rate Committee's judgment, on the basis of prevailing financial market conditions, would permit the resale of the Series 1984 Bonds at par on the date of such determination. Immediately upon determining the anticipated interest rate, the Interest Rate Committee shall notify the Trustee of such rate, and not later than the first Business Day following such determination, the Trustee shall mail, by first class mail, to the registered owner of each Bond at his address as shown on the books of registry maintained by the Trustee a notice with respect thereto. The Interest Rate Committee shall determine the interest rate for the succeeding Bond Year before 12:00 noon, New York time, on the applicable Adjusted Interest Rate Setting Date, which rate shall be the lowest rate which in its judgment on the basis of prevailing financial market conditions, would permit on such Adjusted Interest Rate Setting Date the resale at par of all the Series 1984 Bonds. If the Interest Rate Committee does not determine an interest rate for any reason or if the interest rate that is determined by the Interest Rate Committee is held invalid or unenforceable by a court of law, the rate of interest on the Series 1984 Bonds in effect on the day immediately preceding the Adjusted Interest Rate Setting Date shall remain in effect throughout the next following Bond Year. The Interest Rate Committee shall provide a telephonic notice, confirmed in writing, to -11- 15 the Trustee of the interest rate for the succeeding Bond Year on or before 12:00 noon on the Adjusted Interest Rate Setting Date. After 12:00 noon, New York time, on the Adjusted Interest Rate Setting Date, any Interest rate Committee member may release the new interest rate for the succeeding Bond Year and any holder of a Bond may call any Interest Rate Committee member to ascertain such new interest rate. On the first Business Day after each determination of the interest rate for the succeeding Bond Year, the Trustee shall mail, by first class mail, to the registered owner of each Bond at his address as shown on the books of registry maintained by the Trustee notice of the interest rate for the succeeding Bond Year. The Authority, at the direction of Federal Express Corporation, has reserved the right to fix the rate of interest per annum on the Series 1984 Bonds for the balance of the term thereof by declaring any September 1 prior to the stated maturity of the Series 1984 Bonds as the Conversion Date. The Trustee shall serve notice to the holders of the Series 1984 Bonds with respect thereto as provided in the Fourth Supplemental Indenture. On July 31 (or, if not a Business Day, the next preceding Business Day) preceding the Conversion Date the Interest Rate Committee shall determine the anticipated interest rate on the Series 1984 Bonds for the period after the Conversion Date which rate shall be the lowest rate which in the judgment of the Interest Rate Committee on the basis of prevailing financial market conditions would permit the resale of the Series 1984 Bonds at par on the date of such determination. The Interest Rate Committee shall immediately notify the Trustee of such rate and the Trustee shall mail, by first class mail, to the registered owner of each Bond at his address as shown on the books of registry maintained by the Trustee notice with respect thereto. The Interest Rate Committee shall determine the interest rate for the period after the Conversion Date before 12:00 noon, New York time, on a date no later than August 13 preceding the Conversion Date which rate shall be the lowest rate which in its judgment on the basis of prevailing financial market conditions would permit on such determination date the resale at par of all the Series 1984 Bonds. The Interest Rate Committee shall provide telephonic notice, confirmed in writing, to the Trustee of the interest rate for the period after the Conversion Date on or before 12:00 noon on the determination date. After 12:00 noon, New York time, on such determination date prior to the Conversion Date, any Interest Rate Committee member may release the interest rate for the period after the Conversion Date and any holder of a Bond may call any Interest Rate Committee member to ascertain interest rate. On the first Business Day after determination of the interest rate for the period after the Conversion Date, the Trustee shall mail, by first class mail, to the registered owner of each Bond at his address as shown on the books of registry maintained by the Trustee notice of such interest rate. The determination of any interest rate shall be final and conclusive and each owner of a Bond, by his acceptance hereof, agrees to accept the rate of interest if determined as aforesaid. In no event shall the interest rate on this Bond exceed fifteen per centum (15%) per annum. Pursuant to a Tender and Option Agreement dated as of December 1, 1984 between, among others, Federal Express Corporation and Commerce Union Bank, in Nashville, Tennessee, in its separate corporate capacity and not as Trustee under the Indenture, Federal Express Corporation has granted the registered owner of this Bond options to tender this Bond or any portion thereof in $5,000 increments, to Commerce Union Bank, in Nashville, Tennessee, as agent for Federal Express Corporation, for purchase by Commerce Union Bank at a purchase price equal to the principal amount tendered on September 1 in any year prior to and including the Conversion Date. Interest on this Bond payable on any such September 1 purchase date shall be paid to the registered owner hereof by the Trustee in the normal course. The exercise of an option by the registered owner of this Bond is subject to the terms and conditions of the aforesaid Tender and Option Agreement and this Bond, if tendered, must be tendered in accordance with such terms and conditions. A copy of the aforesaid Tender and Option Agreement is on file at the principal corporate trust office of the Trustee and provides, generally, that the exercise of an option to tender as provided therein, shall become effective only upon the actual delivery of this Bond (together with necessary assignments and endorsements) to Commerce Union Bank at its principal corporate trust office in Nashville, Tennessee, or its designee in New York, New York, during the period from the opening of -12- 16 business on August 1 (or, if not a Business Day, the succeeding Business Day) to and including 4:00 P.M., New York time on August 15 (or, if not a Business Day, the succeeding Business Day) preceding the September 1 purchase date for which such tender is made, together with a written notice in the form furnished by said bank upon request. The options granted to the registered owner of this Bond do not constitute, and shall not be deemed to constitute, a right of such registered owner hereunder or under the Indenture, and the registered owner of this Bond shall not be entitled to institute any suit, action or proceeding in law or equity under the Indenture for the performance of any right under the aforesaid Tender and Option Agreement or for the payment of the purchase price under said Agreement from any moneys held under the Indenture. This Bond is one of a series of Bonds of the Authority aggregating ninety-four million five hundred fifty thousand dollars ($94,550,000) in principal amount. This Bond and the series of Bonds of which it is one are authorized to be issued and are issued under and in full compliance with the Constitution and statutes of the State of Tennessee, including particularly the Metropolitan Airport Authority Act, and under and pursuant to the Indenture dated as of August 1, 1979 as amended and supplemented and a Fourth Supplemental Indenture dated as of December 1, 1984, each between the Authority and Commerce Union Bank in Nashville, Tennessee, Trustee (herein the "Trustee") (the Indenture as amended and supplemented by the Fourth Supplemental Indenture and by all other indentures supplemental to the Indenture entered into prior to the Fourth Supplemental Indenture being hereinafter called the "Indenture") and resolutions duly adopted by the Board of Commissioners of the Authority. This Bond and the series of Bonds of which it is one constitute part of a duly authorized issue of Bonds (herein called the "Bonds") issued, or to be issued, under the Indenture for the purpose of constructing, furnishing and equipping a special facility to be used as air cargo facilities and to be located at the Memphis International Airport (herein called the "Special Facility") and any additions or improvements thereto, or for providing for the refunding of any such Bonds. Such issue of Bonds is unlimited as to principal amount except as provided in the Indenture and applicable law and comprises or may comprise one or more series in various principal amounts and of varying denominations, dates, maturities, interest rates and other provisions, as provided in the Indenture. All Bonds issued and to be issued under the Indenture are and will be equally and ratably secured by the pledges, liens, charges and covenants made therein, except as otherwise expressly provided or permitted in the Indenture. Copies of the Indenture are on file in the office of the Authority and at the principal office of the Trustee. Reference is hereby made to the Indenture, to all of the provisions of which any holder of this Bond by his acceptance hereof thereby assents, for a description of the nature and extent of the security for the Bonds issued or to be issued under the Indenture, including this Bond; definitions of terms; the funds and moneys pledged for the payment of the interest and principal of the Bonds and the nature and extent and manner of enforcement of the pledge; the rights and remedies of the holders of the Bonds with respect thereto; the conditions for and extent of alteration, modification and amendment of the Indenture; the terms and conditions upon which this Bond and the series of which this Bond is one are issued and upon which heretofore may have been issued and hereafter may be issued other Bonds payable as to principal, interest and premium on a parity with this Bond and the series of which this Bond is one and equally and ratably secured therewith; the rights, duties and obligations of the Authority and the Trustee thereunder; the events of default upon which the principal of this Bond may be declared or may become due and payable and the manner and effect thereof; and the terms and conditions upon which the liens, pledges and assignments made in the Indenture for the security of this Bond, and upon which the covenants, agreements and other obligations of the Authority made therein, may be discharged at or prior to the maturity or redemption of this Bond upon making provision for the payment thereof in the manner set forth in the Indenture. The provisions of the Indenture shall be a contract with the holder or holders of the Bonds and the duties thereunder of the Authority and the executive head thereof shall be enforceable by any Bondholder, by mandamus or other appropriate suit, action or proceeding, in any court of competent jurisdiction in the State of Tennessee. The Indenture has been amended by a Second Supplemental Indenture between the Authority and the Trustee, dated May 1, 1982, with respect to the definition and the amount of the Reserve Account Requirement and the application of the moneys on deposit in the Bond Fund created under the Indenture to the credit of the Reserve Account therein, the definition of Leased Equipment, and the issuance of bonds, notes, certificates, warrants or other evidences of indebtedness for any purpose relating to the Special Facility payable from the revenues derived by the Authority from said Special Facility subject and subordinate to the deposits and credits to be made to said Bond Fund. Such amendments will become effective on the earlier of the time when the Memphis-Shelby County Airport Authority Special Facilities Revenue Bonds, Series 1979 (Federal Express Corporation) heretofore issued under and pursuant to the Indenture -13- 17 are no longer Outstanding under the Indenture or the time when the holders of the requisite Outstanding principal amount of the aforesaid Series 1979 Bonds shall have consented in accordance with the provisions of the Indenture to such amendments. This Bond and the Bonds of the series of which it is one and the Bonds of the issue of which such series is a part are payable solely from and secured solely by the revenues (exclusive of certain additional rental, trustees' and paying agents' fees, charges and expenses and all costs of operation, maintenance and repair of the Special Facility paid to the Authority) derived by the Authority from the Special Facility, including the rentals payable under subparagraphs (b) and (c) of Section 3.3 of the Special Facility Lease Agreement dated as of August 1, 1979, as amended and supplemented, by and between the Authority, as lessor, and Federal Express Corporation, as lessee, whereby the Authority has leased the Special Facility to said corporation. This Bond and the Bonds of the series of which it is one and the Bonds of the issue of which such series is a part are and shall be equally and ratably secured by the assignments, pledges and charges made or created by the Indenture and by a co-equal lien on such revenues (subject to such exclusion) without priority by reason of series, number, date of Bonds, sale, execution, authentication, issuance or delivery or otherwise (except as to maturity and except as any Term Bond Principal Installments required in accordance with the provisions of the Indenture may afford additional security for the Bonds of any series). Pursuant to a Guaranty dated as of August 1, 1979, as amended and supplemented, Federal Express Corporation has guaranteed the payment of the principal of and interest and premium, if any, on the Bonds to the Trustee. This Bond and the Bonds of the series of which it is one and the Bonds of the issue of which such series is a part shall not constitute, and are not, an obligation of the City of Memphis or the County of Shelby or of any other municipality in the State of Tennessee. The Bonds of the series of which this Bond is one may be called for redemption prior to their stated maturities in whole at any time at a redemption price equal to the principal amount redeemed, together with the interest accrued on such principal amount to the date fixed for redemption, (i) if the Special Facility is destroyed in whole or is damaged by fire or other casualty to the extent that (A) such damage is not capable, in the reasonable estimation of the lessee under the Special Facility Lease Agreement, of being repaired within 180 days from the date on which such fire or other casualty occurs or (B) the cost of such repair is reasonably estimated by such lessee to be equal to or greater than one-half of the principal amount of the Bonds outstanding under the Indenture on the date on which such fire or other casualty occurs, or (ii) in the event of the taking of the whole or substantially the whole of the Special Facility as a result, or in anticipation, of the exercise of the right of condemnation or eminent domain or the taking of less than the whole or less than substantially the whole of the Special Facility as a result, or in anticipation, of the exercise of the right of condemnation or eminent domain if in either event, (A) the remaining portion of the Special Facility is not capable in such lessee's reasonable estimation of being reconstructed and reequipped so that the same will constitute a complete and functional unit suitable for the purposes for which it is intended within 180 days from the date upon which such taking occurs or (B) the cost of such reconstruction and reequipping is reasonably estimated by such lessee to be equal to or greater than one-half of the principal amount of the Bonds outstanding under the Indenture on the date on which such taking occurs, and shall be called for redemption prior to their stated maturity in whole from prepayments of certain rentals under said Special Facility Lease Agreement on the next practicable interest payment date either upon a judgment or order of a court of competent jurisdiction which is final (either because the time for appeal thereof has expired or because the judgment or order is issued by that Court having final appellate jurisdiction over the matter and is not subject to collateral attack), or upon a determination of the Internal Revenue Service which is final (because the tax has been paid pursuant thereto and the time for filing a claim for refund of such tax has expired) to the effect that the interest paid or payable on any Bond of the series of which this Bond is one to other than a substantial user of the Special Facility or a related person is or was includable in the gross income of the holder thereof for Federal income tax purposes as a result of a failure by the lessee under said Special Facility Lease Agreement to observe or perform any covenant or agreement to be observed or performed by it under said Special Facility Lease Agreement or as a result of facts within the control of the lessee under said Special Facility Lease Agreement which are contradictory to any representation or warranty made by the lessee under said Special Facility Lease Agreement. The holder hereof by acceptance of this Bond, shall be deemed to agree, if requested by the lessee under the Special Facility Lease Agreement, to have an attorney-in-fact, qualified to practice before the Internal Revenue Service, appointed by such lessee for the purpose of appealing any judgment, order or determination provided such lessee provides indemnity reasonably satisfactory to the bondholder against any -14- 18 additional tax liability, penalties or interest that may result from any such appeal and pays the legal fees and costs incurred in prosecuting such appeal. This Bond (or portions thereof in installments of $5,000 or any integral multiple thereof) and the Bonds of the series of which this Bond is one are also subject to redemption at the option of the Authority, at the direction of Federal Express Corporation, prior to and on the Conversion Date as a whole or in part on any interest payment date by lot (a) at the principal amount of the Series 1984 Bond or Bonds to be redeemed if redeemed on September 1 in any year and (b) at the principal amount of the Series 1984 Bond or Bonds to be redeemed plus one-eighth (1/8) of one percent (1%) of the principal amount of the Series 1984 Bonds to be redeemed, if redeemed on March 1 in any year. This Bond (or portions thereof in installments of $5,000 or any integral multiple thereof) and the Bonds of the series of which this Bond is one shall be subject to redemption at the option of the Authority, at the direction of Federal Express Corporation, after the Conversion Date as a whole at any time or in part on any interest payment date by lot at the times and at the redemption prices (expressed as a percentage of the principal amount, or portion thereof, of Series 1984 Bonds to be redeemed) set forth below together with the interest accrued thereon to the date fixed for redemption: (a) if the Conversion Date is on or before September 1, 1991, then the Series 1984 Bond will be noncallable for redemption until September 1, 2001, and thereafter shall be subject to redemption at a redemption price of 103%, which price shall decline by 1/2 of 1% per annum, until reaching a price of 100%, over the remaining term of the Series 1984 Bonds; (b) if the Conversion Date is after September 1, 1991, and on or before September 1, 1997, then the Series 1984 Bonds shall be noncallable for redemption until September 1, 2005, and thereafter shall be subject to redemption at a redemption price of 102% per annum, which price shall decline by 1/2 of 1% per annum, until reaching a price of 100%, over the remaining term of the Series 1984 Bonds; (c) if the Conversion Date is after September 1, 1997, and on or before September 1, 2000, then the Series 1984 Bonds shall be noncallable for redemption until September 1, 2006, and thereafter shall be subject to redemption at a redemption price of 101%, which price shall decline by one-half of 1% per annum, until reaching a price of 100%, over the remaining term of the Series 1984 Bonds; (d) if the Conversion Date is after September 1, 2000, and on or before September 1, 2003, then the Series 1984 Bonds shall be noncallable for redemption until September 1, 2007, and thereafter shall be subject to redemption at a redemption price of 101%, which price shall decline by one-half of 1% per annum, until reaching a price of 100%, over the remaining term of the Series 1984 Bonds; (e) if the Conversion Date is after September 1, 2003, and before September 1, 2007, then the Series 1984 Bonds shall be callable for redemption on March 1, 2009 at a redemption price of 100% and on March 1, 2008 and September 1, 2008, at a price of 100-1/2%, and prior thereto shall be noncallable for redemption; and (f) if the Conversion Date is September 1, 2007, the Series 1984 Bonds shall be callable for redemption on March 1, 2009, at a redemption price of 100%. In the event that at any time less than all the Bonds are called for redemption, the Bonds to be redeemed shall be selected by lot in any manner the Trustee deems fair. In the event this Bond shall be called for such redemption, notice of redemption shall be mailed not less than thirty (30) days prior to the redemption date, to the registered holder of this Bond at his address as shown on the books of registry. If this Bond be of a denomination in excess of $5,000, portions of the principal amount hereof in installments of $5,000 or any integral multiple thereof may be redeemed and in such case upon surrender of this Bond to the Trustee (or its successor as such Trustee) there shall be issued to the registered owner hereof without charge therefor, for the then unredeemed balance of the principal amount thereof, at the option of -15- 19 the holder, registered Bonds of like series, maturity and interest rate in any of the authorized denominations provided by the Indenture and aggregating in principal amount the then unredeemed balance of the principal amount hereof. If this Bond (or any portion of the principal amount hereof) shall have been duly called for redemption and notice of such redemption duly given, and if on or before the redemption date the payment of the applicable redemption price of the principal amount hereof to be redeemed and the interest accrued on such principal amount hereof to the redemption date shall be duly made or provided for, then this Bond (or the portion of the principal amount hereof to be redeemed) shall become due and payable at such redemption price upon such redemption date and from and after such date interest on the principal amount hereof to be redeemed shall cease to accrue. This Bond is transferable by the registered owner hereof, in person or by his attorney duly authorized in writing, at the principal office of the aforesaid Trustee (or its successor as such Trustee), but only in the manner, subject to the limitations and upon payment of the charges, if any, provided in the Indenture and upon the surrender hereof for cancellation. Upon such transfer a new fully registered Bond or Bonds of authorized denominations and of the same principal amount, series, interest rate and maturity as the Bond surrendered, will be issued to the transferee in exchange therefor. It is hereby certified, recited and declared that all acts, conditions and things required to exist, happen and be performed precedent to and in the issuance of this Bond, exist, have happened and have been performed in due time, form and manner as required by the Constitution and laws of the State of Tennessee, and that the amount of this Bond, together with all other indebtedness of the Authority, does not exceed any limit prescribed by the Constitution or laws of the State of Tennessee, and is not in excess of the amount of Bonds permitted to be issued under the Indenture. This Bond shall not be entitled to any security, right or benefit under the Indenture, or be valid or obligatory for any purpose, unless the Certificate of Authentication hereon has been duly executed by the Trustee. IN WITNESS WHEREOF, the Memphis-Shelby County Airport Authority has caused this Bond to be executed in its name and on its behalf by the facsimile signature of its President, to be sealed with the facsimile seal of the Memphis-Shelby County Airport Authority, attested by the facsimile signature of its Secretary, all as of the Original Issue Date (specified above). (Seal of Memphis-Shelby County MEMPHIS-SHELBY COUNTY AIRPORT Airport Authority) AUTHORITY By --------------------------- President Attest: - ---------------------------------- Secretary -16- 20 CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds described in the within-mentioned Indenture and is one of the Memphis-Shelby County Airport Authority Special Facilities Revenue Bonds, Series 1984 (Federal Express Corporation). COMMERCE UNION BANK Trustee By --------------------------- Authorized Officer Date of Authentication: --------------------- [FORM OF ASSIGNMENT OF FULLY REGISTERED BONDS] For value received ____________________________________ hereby sells, assigns and transfers unto ________________________ the within-mentioned Bond and hereby irrevocably constitutes and appoints ________________________ attorney-in-fact, to transfer the same on the books of registry with full power of substitution in the premises. [ENDORSEMENT] NOTE: The signature of this assignment must correspond with the name as written on the face of the within Bond in every particular, without alteration or enlargement or any change whatsoever. Section 2.8. Series 1984 Bonds to Constitute Bonds. The Series 1984 Bonds shall constitute and be "Bonds" as defined and used in the Indenture. The Series 1984 Bonds shall: (i) be issued under Sections 2.06 and 2.08 of the Indenture; (ii) shall be entitled to the benefits, security and protection of the Indenture, equally and ratably with one another and with any other Bonds heretofore or hereafter issued thereunder; (iii) shall be payable as provided in the Indenture solely from the Revenues and other moneys specified in the Indenture on a parity with one another and with all Bonds heretofore or hereafter issued under the Indenture; and (iv) shall be equally and ratably secured under the Indenture with one another and with all Bonds heretofore or hereafter issued thereunder, without priority by reason of series, number, date of adoption of the Supplemental Indenture providing for the issuance thereof, date of Bonds, date of sale, date of execution, date of authentication, date of issuance, date of delivery, or otherwise, by the liens, pledges, charges and assignments created by the Indenture. ARTICLE III DISPOSITION OF PROCEEDS OF SERIES 1984 BONDS; SALE Section 3.1. Application of Series 1984 Bond Proceeds. From the proceeds derived from the sale of the Series 1984 Bonds there shall be deposited: -17- 21 1. With the Trustee hereunder for deposit into the Bond Fund for credit to the Reserve Account the amount necessary to bring the amount held for that Account up to an amount equal to the Reserve Account Requirement in respect of all outstanding Bonds, including the Series 1984 Bonds, as determined in accordance with Section 2.6 hereof. 2. With the Trustee for deposit into the Construction Fund the remaining proceeds of the sale of the Series 1984 Bonds. Section 3.2. Application of Certain Moneys in Construction Fund. In order to provide for the payment of interest on the Series 1984 Bonds payable to and including September 1, 1985, there shall be credited to the Construction Interest Account in the Construction Fund an amount equal to such interest. The balance of moneys in the Construction Fund shall be credited to the Construction Account therein. The Trustee shall, without further direction or authorization, transfer on or prior to any interest payment date on the Series 1984 Bonds to and including September 1, 1985 from the Construction Interest Account to the Bond Fund an amount equal to the interest to become due and payable on such interest payment date on the Series 1984 Bonds. Moneys credited to the Construction Account from the proceeds of the Series 1984 Bonds shall be disbursed and applied in accordance with the provisions of Section 2.3 of the Initial Lease to pay the costs of the 1984 Federal Express Acquisition Project. Moneys on deposit in the Bond Fund and Construction Fund shall be invested as provided in Sections 3.05 and 4.06, respectively, of the Indenture. Section 3.3. Sale of Series 1984 Bonds. The Series 1984 Bonds shall be sold to the initial purchasers thereof on the terms and conditions set forth in the resolution of the Board of Commissioners of the Authority authorizing the issuance, sale and delivery of the Series 1984 Bonds. ARTICLE IV AUTHORITY; FINDINGS AND DETERMINATIONS; ARBITRAGE AND INDUSTRIAL DEVELOPMENT BOND PROVISIONS Section 4.1. Authority. This Fourth Supplemental Indenture: (i) supplements the Indenture; (ii) is hereby found, determined and declared to constitute and to be a "Supplemental Indenture" within the meaning of the quoted words as defined in and used in the Indenture; and (iii) has been authorized pursuant to and under the Authority of the Indenture. Section 4.2 Findings and Determinations. The Authority hereby finds and determines (the Airport Consultant to the Authority having filed with the Authority its concurrence of such findings and determinations set forth in subparagraphs 1 through 5 below), the following: 1. Pursuant to the provisions of Section 5.2 of the Initial Lease as amended Federal Express is required (i) to maintain, or cause to be maintained, and to keep or cause to be kept, the Special Facility in good condition and in as reasonably safe condition as its operations permit; and (ii) to make, or cause to be made, all necessary and proper repairs, renewals, replacements and substitutions thereof, including the substitution of materials handling equipment which has been designed to accommodate the loading and unloading of aircraft being operated by Federal Express as of the date thereof and ground flight training equipment which is being used to train pilots and other personnel for operation of such aircraft, with materials handling equipment which will be designed to accommodate the loading and unloading of aircraft which is to be operated by Federal Express in the future and with ground flight training equipment designed for the training of pilots and other personnel for the operation of such future aircraft, (a) resulting from or required by ordinary wear and tear, or want of care, on the part of Federal Express, or obsolescence or other cause, or (b) required to keep, place and maintain the Special Facility in good and efficient operating condition. The estimated useful life of the 1984 Federal Express Acquisition Project is at least twenty-five years and the cost of acquisition of the 1985 Federal Express Acquisition Project, which is to be financed from the proceeds of the Series 1984 Bonds, is $80,000,000. 2. The construction or acquisition and leasing for use or occupation of the Special Facility (which includes the 1984 Federal Express Acquisition Project) will not (a) be constructed or acquired and leased -18- 22 for use and occupation to provide services, facilities, commodities or supplies which are adequately being made available through the Airport (as defined in Resolution No. 73-0530 of the Authority adopted June 15, 1973 by the Board of Commissioners of the Authority ("Resolution No. 73-0530") as now existing, or (b) result in a reduction of Revenues (as defined in Resolution No. 73-0530) below the minimum amount of Revenues (as defined in Resolution No. 73-0530) covenanted to be produced and maintained in accordance with said Resolution No. 73-0530. 3. The Initial Lease (including the Third Supplemental Lease), which meets the requirements for a Special Facility Lease provided for in Resolution No. 73-0530, has been entered into as of the date hereof. 4. The payments to be made by Federal Express pursuant to subparagraph (b), (c) and (d) of Section 3.3 of the Initial Lease and Section 4 of the First Supplemental Lease, Section 3 of the Second Supplemental Lease and Section 3 of the Third Supplemental Lease in accordance with subparagraphs 2, 3 and 4 of Section 27 of Resolution No. 73-0530 will be sufficient to pay the principal of and interest and premium (if any) on the Series 1979 Bonds, the Series 1982A Bonds, the Series 1982B Bonds and the Series 1982C Bonds heretofore issued by the Authority and the Series 1984 Bonds authorized hereby as the same become due and to pay all trustee's, fiscal agents', paying agents' and Bank's fees and expenses in connection therewith. 5. The additional rental payable pursuant to sub-paragraph (a) of Section 3.3 of the Initial Lease and Section 4 of the First Supplemental Lease, Section 3 of the Second Supplemental Lease and Section 3 of the Third Supplemental Lease in accordance with clause (iii) of subparagraph 2 of Resolution No. 73-0530, is fair and reasonable. 6. The entering into of the Third Supplemental Lease will not be in violation of or result in a breach of any covenant contained in any resolution or indenture authorizing any bonds of the Authority now outstanding. Section 4.3. Additional Findings and Determinations. The Authority further finds and determines: (i) the Indenture has not been amended or supplemented or rescinded since the execution and delivery thereof other than by the First, Second and Third Supplemental Indentures; (ii) there does not exist an Event of Default as defined in Section 9.01 of the Indenture, nor does there exist any condition which, after the passage of time, would constitute such an "Event of Default"; and (iii) at the time of issuance of the Series 1984 Bonds all payments of principal of and premium, if any, and interest on any Bonds that have become due have been paid and no deficiencies exist in the Bond Fund. Section 4.4. Additional Findings as to the Initial Lease. The Authority further finds and determines: (i) the Initial Lease and the guaranty dated as of August 1, 1979 from Federal Express Corporation to the Trustee has not terminated and are each in full force and effect; (ii) the Initial Lease has been amended in such manner that the current term thereof shall be for a period extending at least to the final maturity date of all Bonds to be Outstanding upon the issuance of the Series 1984 Bonds; and (iii) the Initial Lease, the First Supplemental Lease, the Second Supplemental Lease and the Third Supplemental Lease contain provisions including an amount in the rentals payable under subparagraphs (b) and (c) of Section 3.3 of the Lease, Section 4 of the First Supplemental Lease, Section 3 of the Second Supplemental Lease and Section 3 of the Third Supplemental Lease at least equal to the principal of and premium (if any) and interest on all Bonds to be Outstanding upon the issuance of the Series 1984 Bonds. Section 4.5. Arbitrage and Industrial Development Bond Provisions. No part of the proceeds of the Series 1984 Bonds or any other funds held under the Indenture shall at any time be used directly or indirectly to acquire securities or obligations, the acquisition of which would cause any of the Series 1984 Bonds to be an "arbitrage bond", as defined in Subsection (c)(2) of 103 of the Internal Revenue Code of 1954, as amended (the "Code"), subject to treatment under Subsection (c)(1) of such Section 103 as an obligation not described in Subsection (a)(1) of such Section 103. -19- 23 The proceeds of the Series 1984 Bonds will be applied such that the facilities financed from the proceeds of at least ninety percent (90%) of the Series 1984 Bonds will qualify as airport facilities within the meaning of Section 103(b)(4)(D) of the Internal Revenue Code of 1954, as amended, and the application of the proceeds of the Series 1984 Bonds will not result in more than ten percent (10%) of the aggregate amount of expenditures from the Construction Fund at any time being used for facilities which would not qualify as airport facilities under such Section 103(b)(4)(D). The Authority will not cause or permit any plans and specifications in connection with the 1984 Federal Express Acquisition Project to be changed or revised, or such Project to be operated, maintained, repaired or renovated, in a manner such that the facilities to be financed from the proceeds of at least ninety percent (90%) of the proceeds of the Series 1984 Bonds will not qualify as airport facilities within the meaning of such Section 103(b)(4)(D), or take any other action which would cause the loss of the exemption of interest on any Series 1984 Bonds from federal income taxation. The securing of the covenant under Section 6 of the Third Supplemental Lease shall be deemed compliance with this Section. ARTICLE V MISCELLANEOUS Section 5.1. Headings, Table of Contents. The headings or titles of the several articles and sections hereof, and any table of contents appended hereto or to copies hereof, shall be solely for convenience of reference and shall not affect the meaning, construction, interpretation or effect of this Fourth Supplemental Indenture. Section 5.2. Law and Place of Enforcement. This Fourth Supplemental Indenture shall be construed and interpreted in accordance with the laws of the State of Tennessee. All suits and actions against the Authority arising under this Fourth Supplemental Indenture shall be instituted in a court of competent jurisdiction in said State. Section 5.3. Effective Date. This Fourth Supplemental Indenture shall become effective upon the occurrence of the last of the following events: (i) the execution and delivery hereof pursuant to Section 8.01 of the Indenture and applicable law; and (ii) the delivery to the Trustee of a copy hereof, certified by the Authority, together with an Opinion of Counsel to the Authority to the effect required under Sections 2.08 and 8.03 of the Indenture. Section 5.4. Reference to Fourth Supplemental Indenture. Notwithstanding the actual date of the effectiveness hereof, for convenience and purposes of reference this Fourth Supplemental Indenture shall be dated as of December 1, 1984 and may be cited and referred to as the "Fourth Supplemental Indenture dated as of December 1, 1984 between the Memphis-Shelby County Airport Authority and Commerce Union Bank, Trustee." -20- 24 IN WITNESS WHEREOF, the Authority has caused this Fourth Supplemental Indenture to be signed by its President, its seal to be hereunto affixed, and attested by its Secretary and Commerce Union Bank, Trustee, has caused this Fourth Supplemental Indenture to be signed in its name and on its behalf by one of its Vice Presidents, its seal to be hereunto affixed and its seal to be attested to by one of its Assistant Secretaries. MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY By /s/ W. M. FLETCHER ---------------------------------- President (SEAL) Attest: /s/ LARRY D. COX - ---------------------------------------- Secretary Approved: /s/ R. GRATTON BROWN, JR. - ---------------------------------------- Counsel Memphis-Shelby County Airport Authority COMMERCE UNION BANK, TRUSTEE By /s/ PAUL WILLIAMS ----------------------------------- Vice President (SEAL) Attest: /s/ C. B. SELF - ---------------------------------------- Assistant Secretary -21- 25 STATE OF TENNESSEE ) ) ss: COUNTY OF SHELBY ) On this 6th day of December, 1984 before me appeared W. M. Fletcher, to me personally known, who, being by me duly sworn (or affirmed) did say that he is the 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 he acknowledged said instrument to be the free act and deed of said Authority. /s/ CLARA F. BELL ---------------------------------------------- Notary Public My Commission Expires September 7, 1988 STATE OF TENNESSEE ) ) ss: COUNTY OF DAVIDSON ) On this 7th day of December, 1984 before me appeared Paul Williams, to be personally known, who, being by me duly sworn (or affirmed) did say that he is the Vice President of Commerce Union Bank, and that the seal affixed to the foregoing instrument is the corporate seal of said Bank, and that said instrument was signed and sealed in behalf of said Bank, by authority of its Board of Directors and he acknowledged said instrument to be the free act and deed of said Bank. /s/ VICKI D. YORK -------------------------------------------- Notary Public My Commission Expires April 20, 1986 -22- EX-10.25 4 THIRD SPECIAL FACILITY SUPPL. LEASE AGREEMENT 1 Exhibit 10.25 EXECUTION COPY ================================================================================ THIRD SPECIAL FACILITY SUPPLEMENTAL LEASE AGREEMENT BY AND BETWEEN MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY AND FEDERAL EXPRESS CORPORATION DATED AS OF DECEMBER 1, 1984 ================================================================================ 2 TABLE OF CONTENTS
PAGE Parties to Third Supplemental Lease Agreement . . . . . . . . . . . . . . . . . . . . . . . . 1 Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 2. Granting of Leasehold . . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 3. Rental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 4. Prepayment of Certain Rental . . . . . . . . . . . . . . . . . . . . 4 SECTION 5. 1984 Federal Express Acquisition Project . . . . . . . . . . . . . . 4 SECTION 6. Special Covenants of the Lessee . . . . . . . . . . . . . . . . . . 6 SECTION 7. Right to Permanently Fix the Interest Rate on the Series 1984 Bonds . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 8. Grant of Options to Tender . . . . . . . . . . . . . . . . . . . . . 7 SECTION 9. Lease Still in Effect; Provisions Thereof Applicable to this Third Supplemental Lease . . . . . . . . . . . . . . . . 8 SECTION 10. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 11. Effectiveness of this Third Supplemental Lease . . . . . . . . . . . 8 SECTION 12. Execution of Counterparts . . . . . . . . . . . . . . . . . . . . . 9 Execution Clauses . . . . . . . . . . . . . . . . . . . . . . . . . 10
(i) 3 THIRD SPECIAL FACILITY SUPPLEMENTAL LEASE AGREEMENT THIS THIRD SPECIAL FACILITY SUPPLEMENTAL LEASE AGREEMENT (the "Third Supplemental Lease") made this thirteenth day of December, 1984 but dated for convenience of reference as of the first day of December, 1984, by and between MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY (herein sometimes referred to as "Lessor"), party of the first part, a public and governmental body politic and corporate of the State of Tennessee, and FEDERAL EXPRESS CORPORATION (herein sometimes referred to as "Lessee"), party of the second part, a private corporation duly organized and existing under the laws of the State of Delaware and qualified to do business in the State of Tennessee; WITNESSETH: WHEREAS, Lessor and Lessee on August 21, 1979 entered into a Special Facility Lease Agreement dated as of August 1, 1979 (said Special Facility Lease Agreement as heretofore supplemented being herein referred to as the "Lease"); and WHEREAS, Lessor and Lessee on May 6, 1982 entered into a First Special Facility Supplemental Lease Agreement dated as of May 1, 1982 (the "First Supplemental Lease") so as to provide for the lease by Lessee from Lessor of additional facilities and equipment to be included in the Special Facility as defined in the Lease as heretofore and herein supplemented (the "1982 Federal Express Project"); and WHEREAS, Lessor and Lessee on December 9, 1982 entered into a Second Special Facility Supplemental Lease Agreement dated as of November 1, 1982 (the "Second Supplemental Lease") so as to provide for the lease by Lessee from Lessor of additional facilities and equipment to be included in the Special Facility (the "Federal Express Acquisition Project"); and WHEREAS, Lessor and Lessee have agreed to supplement the Lease so as to provide for the lease by Lessee from Lessor of additional facilities and equipment to be included in the Special Facility (such additional facilities and equipment hereinafter defined and referred to as the "1984 Federal Express Acquisition Project"), all as hereinafter set forth; 4 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, Lessor and Lessee 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 Third Supplemental Lease which are defined in the Lease shall, for all purposes of this Third Supplemental Lease, have the respective meanings given to them in the Lease. The following words and terms which are defined in the Lease shall be and hereby are supplemented as follows: Leased Equipment. On and after the effective date hereof the term "Leased Equipment" shall, in addition and supplemental to the meaning given that term in the Lease, also include the furnishings, machinery and equipment designated as "Leased Equipment" on Exhibit 1 of this Third Supplemental Lease. Leased Facilities. On and after the effective date hereof the term "Leased Facilities" shall, in addition and supplemental to the meaning given that term in the Lease also include (1) the improvements to the Leased Facilities designated as Buildings and Improvements on Exhibit 2 of this Third Supplemental Lease and (2) all other improvements on the land whereupon the Special Facility is situated in or incident to the aforesaid that are designated for use in connection therewith and which constitute "fixtures" or real property. Unless the context shall clearly require otherwise, the following terms shall, for all purposes of the Lease and of any agreement amendatory or supplemental thereto (including for all purposes this Third Supplemental Lease) have the meanings herein specified, with the following definitions to be equally applicable to both the single and plural forms of any of the terms herein defined: 1984 Federal Express Acquisition Project. The term "1984 Federal Express Acquisition Project" shall mean and include that portion of the Leased Facilities and Leased Equipment added pursuant to this Third Supplemental Lease and shall constitute and be a part of the Special Facility. 2 5 Fourth Supplemental Indenture. The term "Fourth Supplemental Indenture" shall mean the Fourth Supplemental Indenture dated as of December 1, 1984 between the Lessor and the Trustee supplementing the Indenture, as the same may theretofore or thereafter be supplemented or amended as provided in the Indenture. Series 1984 Bonds. The term "Series 1984 Bonds" shall mean the $94,550,000 principal amount of special obligation bonds of Lessor designated Special Facilities Revenue Bonds, Series 1984 (Federal Express Corporation) and issued under Section 2.06 and 2.08 of the Indenture and in accordance with Section 5.8 of the Lease. Tender Agreement. The term "Tender Agreement" shall mean the Tender and Option Agreement dated as of December 1, 1984 by and among the Lessee, Commerce Union Bank, Kidder Peabody & Co., Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan, Keegan & Company, Inc., as the same may be supplemented and amended from time to time in accordance with the provisions thereof. SECTION 2. Granting of Leasehold. In addition to the lease and demise to Lessee of the Leased Facilities and Leased Equipment set forth in Section 3.1 of the Lease and Section 2 of the First Supplemental Lease and Section 2 of the Second Supplemental Lease, the Lessor hereby leases and demises to Lessee, and Lessee hereby takes the hires from Lessor, for and during the term of the Lease, and upon and subject to the provisions and conditions set forth in the Lease and this Third Supplemental Lease to have and to hold for said term that portion of the Leased Facilities and Leased Equipment added by this Third Supplemental Lease. SECTION 3. Rental. Lessee shall pay the rentals reserved to the Lessor under Section 3.3 of the Lease at the time, place and manner set forth therein, which from and after the date specified in this section, in addition to the amounts payable as of the date hereof under said Section 3.3, under Section 4 of the First Supplemental Lease and under Section 3 of the Second Supplemental Lease shall include (a) an amount equal to the principal of, premium (if any) and interest on, the Series 1984 Bonds as and when the same become due and payable by reason of stated maturity or redemption of such Bonds as provided in the Indenture, (b) an annual rental of one dollar, which after taking into consideration the amount of ground rental payable by the Lessee as lessee under that certain Consolidated and Restated Lease Agreement dated as of August 1, 1979 between Lessor and Lessee, is hereby determined to be equal to the allocable share of the administrative costs 3 6 of the Lessor arising out of the Lease and the issuance and servicing of the Bonds, and which may be increased by the Lessor upon at least thirty days prior written notice to reflect actual administrative costs demonstrably shown by the Lessor to arise out of the Lease and the issuance and servicing of the Bonds, such rental to be payable in advance on the first day of September in each year of the term of the Lease, (c) all other amounts payable under said Section 3.3 in connection with the Series 1984 Bonds. The rentals to be paid by Lessee under said Section 3.3 in connection with the 1984 Federal Express Acquisition Project leased hereby shall commence as of September 1, 1985 and continue during the term hereof. SECTION 4. Prepayment of Certain Rental. (a) Lessee may prepay the rentals required hereby in accordance with subsections A, B and C of Section 3.4 of the Lease, and receive the credits provided therein. (b) In the event a judgment or order of a court of competent jurisdiction which is final (either because the time for appeal thereof has expired or because the judgment or order is issued by that Court having final appellate jurisdiction over the matter and is not subject to collateral attack), or a determination of the Internal Revenue Service which is final (because the tax has been paid pursuant thereto and the time for filing a claim for refund of such tax has expired) to the effect that the interest paid or payable on any Series 1984 Bond to other than a substantial user of the Special Facility or a related person is or was includable in the gross income of the holder thereof for Federal income tax purposes as a result of a failure by the Lessee to observe or perform any covenant or agreement to be observed or performed by it under the Lease or as a result of facts within the control of the Lessee which are contradictory to any representation or warranty made by the Lessee under the Lease, the Lessee shall prepay on the next scheduled rent payment date the entire amount of rent due under subparagraph (b) of Section 3.3 of the Lease and pursuant to Section 3 hereof to effect redemption of the then outstanding Series 1984 Bonds in accordance with the Indenture. SECTION 5. 1984 Federal Express Acquisition Project. The Lessor and the Lessee agree that the cost of constructing and equipping the 1984 Federal Express Acquisition Project in accordance with the proposal approved by the Lessor and the Lessee on the date of the execution hereof is estimated at $80,000,000. The aggregate sum of the proceeds of the sale of the Series 1984 Bonds deposited in the Construction Fund, including the income from and increment to the proceeds of the sale of the Series 1984 Bonds derived from the investment thereof during the Construction Period is estimated to be sufficient in amount to pay such estimated cost. 4 7 If the Lessee requests the Lessor to issue Completion Bonds, the Lessor shall upon request forthwith, use its best efforts to issue and sell Completion Bonds, subject to the provisions and limitations of applicable law and the provisions of the Indenture and subject also to approval by the Lessee of the terms of such Completion Bonds and the terms of sale thereof. If the Lessor issues Completion Bonds, the amount of rentals reserved to the Lessor under subparagraphs (b) and (c) of Section 3.3 in the Lease and Section 3 hereof shall from and after the issuance of such Completion Bonds be appropriately increased throughout the term hereof in order to reflect the issuance of such Completion Bonds, and the Lessee, if requested to do so by the Lessor, shall enter into a lease supplemental to the Lease providing for the payment of the Lessee of such increases in such rentals. If, however, the Lessor is unable so to issue and sell such Completion Bonds as aforesaid, then the Lessee shall upon demand pay, or reimburse the Lessor for, all costs and expenses of the Lessor incurred in attempting to sell such Completion Bonds. The Lessor does not make any warranty, either express or implied, that the moneys which will be paid into the Construction Fund and which, under the provisions of this Third Supplemental Lease or the Fourth Supplemental Indenture, will be available for payment of the costs of the 1984 Federal Express Acquisition Project pursuant to Section 2.3 of the Lease will be sufficient to pay all the costs which will be incurred in that connection. The Lessee agrees that if after exhaustion of the moneys in the Construction Fund available for the costs of the 1984 Federal Express Acquisition Project the Lessee should pay any portion of the said costs pursuant to the provisions of this section, it shall not be entitled to any reimbursement therefor from the Lessor or from the Trustee or from the holders of any of the Bonds, nor shall it be entitled to any diminution of the rentals payable pursuant hereto and to Section 3.3 of the Lease and Section 3 hereof. Lessor shall apply the proceeds of the Series 1984 Bonds in accordance with the terms of the Fourth Supplemental Indenture, the form, terms and provisions of which the Lessee hereby approves. Except as provided in Section 2.2 of the Lease which relates solely to the Special Facility as initially designed and except as hereinafter provided in this section, that portion of improvements to the Leased Facilities and Leased Equipment being leased pursuant to this Third Supplemental Lease shall be carried out and effected as provided in Article II of the Lease for the initial construction and equipping of the Special Facility, with the same force and effect as though: (a) all references in said Article II (other than Section 2.2 thereof) to the "Leased Equipment" were to that portion of Leased Equipment being leased pursuant to this Third Supplemental Lease; 5 8 (b) all references in said Article II (other than Section 2.2 thereof) to the "Leased Facilities" were to that portion of the improvements to the Leased Facilities being leased pursuant to this Third Supplemental Lease; (c) all references in said Article II (other than Section 2.2 thereof) to the "Plans and Specifications" were to plans and specifications for the 1984 Federal Express Acquisition Project; (d) all references in said Article II (other than Section 2.2 thereof) to the "Series 1979 Bonds" were to the Series 1984 Bonds and the reference in the third paragraph of subsection A of Section 2.1 and paragraph (k) of subsection A of Section 2.3 to the date to which interest shall be capitalized were to August 31, 1985; and (e) all references in said Article II (other than Section 2.2 thereof) to the "Special Facility" were to the 1984 Federal Express Acquisition Project and the reference in clause 4 of subsection C of Section 2.1 to the date for the construction and equipping to be completed were to August, 1986. SECTION 6. Special Covenants of the Lessee. The Lessee covenants and agrees with the Lessor that so long as the Series 1984 Bonds are outstanding, it will provide the Lessor with copies of all reports, notices, financial statements or other documents that the Lessee is required to provide its lenders under the Lessee's Credit Agreement dated December 1, 1981, between the Lessee and The First National Bank of Chicago, for itself and as agent for the banks named therein, as the same may be supplemented or amended from time to time, and the analogous provisions of any other debt agreement entered into by the Lessee in lieu of said Credit Agreement and shall include the Lessor on its list of major lenders of Lessee for receipt of all information made available to such lenders. The Lessee further covenants and agrees that the proceeds of the Series 1984 Bonds will be applied such that the facilities financed from the proceeds of at least ninety percent (90%) of the Series 1984 Bonds will qualify as airport facilities within the meaning of Section 103(b)(4)(D) of the Internal Revenue Code of 1954, as amended, and application of the proceeds of the Series 1984 Bonds will not result in more than ten percent (10%) of the aggregate amount of expenditures from the Construction Fund at any time being used for facilities which would not qualify as airport facilities under said Section 103(b)(4)(D). The Lessee will not cause or permit any plans and specifications in connection with the 1984 Federal Express Acquisition Project to be financed from the proceeds of the Series 1984 Bonds to be changed or revised, or such Project to be operated, maintained, repaired or renovated, in a manner such that the facilities to be financed from the 6 9 proceeds of at least ninety percent (90%) of the proceeds of the Series 1984 Bonds will not qualify as airport facilities within the meaning of Section 103(b)(4)(D) of the Code, or take any other action which would cause the loss of the exemption of interest on any Series 1984 Bonds from federal income taxation. SECTION 7. Right to Permanently Fix the Interest Rate on Series 1984 Bonds. The Authority has provided in the Fourth Supplemental Indenture that the Special Facilities Revenue Bonds, Series 1984 (Federal Express Corporation) referred to in the definition of Series 1984 Bonds set forth in Section 1 hereof (hereinafter referred to as the "Series 1984 Bonds") shall bear interest at the rate of seven and one quarter per centum (7.25%) per annum from the date thereof to and including August 13, 1985. Pursuant to the terms of the Fourth Supplemental Indenture the interest rate may change on September 1 of each year commencing September 1, 1985 and may be permanently fixed on September 1, 1985 and on any September 1 thereafter. In consideration of the payment of the rentals provided herein, which are at least equal to the principal of and interest on all Bonds issued under the Indenture, the Authority hereby grants to the Lessee the right to direct the declaration of September 1, 1985 or any subsequent September 1 prior to the maturity of the Series 1984 Bonds as the date on which the interest rate on the Series 1984 Bonds may be permanently fixed; provided such declaration shall be in accordance with the terms and provisions of the Fourth Supplemental Indenture. SECTION 8. Grant of Options to Tender. The Lessee has entered into the Tender Agreement for the benefit of the holders of the Series 1984 Bonds. Pursuant and subject to the terms and conditions set forth therein, the Lessee has granted to the holders from time to time of the Series 1984 Bonds options to tender Series 1984 Bonds to Commerce Union Bank in its individual corporate capacity and not as Trustee under the Indenture, for purchase at a purchase price equal to the principal amount tendered on September 1, 1985 or on any subsequent September 1 prior to the maturity of the Series 1984 Bonds to and including the date referred to in Section 7 hereof on which the interest rate on the Series 1984 Bonds is permanently fixed. The Lessee hereby covenants and agrees that it shall enter into the Tender Agreement in substantially the form attached hereto as Exhibit 3, and shall comply with all terms, provisions and agreements thereof and perform all of its duties and obligations thereunder. The Lessee hereby agrees to be bound by all terms and provisions of the Fourth Supplemental Indenture insofar as they bear on, and establish rights, duties and obligations with respect to, said agreement and covenants that it will not amend the Tender Agreement in any manner which would have an adverse affect on the rights granted the holders of the Series 1984 Bonds by the Lessee under the Tender Agreement except in the manner permitted for amendment of the Lease. The Lessee acknowledges that it has entered into the Tender Agreement for the benefit of, and to induce the purchase of the Series 1984 Bonds by, all who shall at any time and from time to 7 10 time become holders of the Series 1984 Bonds, and such holders are entitled to the benefits of said Agreement as third party beneficiaries. Accordingly, the Lessee hereby consents to the enforcement of the terms and provisions of the Tender Agreement by the Trustee under the Indenture on behalf of the holders of the Series 1984 Bonds. The Lessor agrees to set forth the provisions of the options to tender granted to the holders of the Series 1984 Bonds under the Tender Agreement in the form of the Series 1984 Bonds. However, it is expressly understood that such options shall not constitute a part of the contract between the Lessor and the holders of the Series 1984 Bonds represented by such Bonds. SECTION 9. Lease Still in Effect; Provisions Thereof Applicable to this Third Supplemental Lease. All of the terms, provisions, conditions, covenants and agreements of the Lease shall continue in full force and effect as amended and supplemented hereby, and shall be applicable to each of the provisions of this Third Supplemental Lease during the term hereof with the same force and effect as though the provisions hereof were set forth in the Lease. SECTION 10. Descriptive Headings. The descriptive headings of the sections of this Third Supplemental Lease are inserted for convenience of reference only and do not constitute a part of this Third Supplemental Lease and shall not affect the meaning, construction, interpretation or effect of this Third Supplemental Lease. SECTION 11. Effectiveness of this Third Supplemental Lease. This Third Supplemental Lease shall become effective upon delivery of and payment for the Series 1984 Bonds. SECTION 12. Execution of Counterparts. This Third Supplemental Lease 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. 8 11 IN WITNESS WHEREOF, MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY AND FEDERAL EXPRESS CORPORATION have caused this Third Supplemental Lease to be duly executed in their respective behalf, this 13th day of December, 1984. MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY By /s/ W. M. FLETCHER ------------------------------------------ President ATTEST: /s/ LARRY D. COX - ------------------------------- Secretary APPROVED: /s/ R. GRATTON BROWN, JR. - ------------------------------- Counsel Memphis-Shelby County Airport Authority FEDERAL EXPRESS CORPORATION By /s/ DAVID C. ANDERSON ------------------------------------------- ATTEST: /s/ ROBERT L. COX - ------------------------------- 9 12 STATE OF TENNESSEE ) ) ss: COUNTY OF SHELBY ) On this 7th day of December, 1984, before me appeared W.M. Fletcher, to me personally known, who, being by me duly sworn (or affirmed) did say that he is the 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 he acknowledged said instrument to be the free act and deed of such Authority. (seal) /s/ CLARA F. BELL -------------------------------------------- Notary Public My Commission Expires: 10 13 STATE OF TENNESSEE ) ) ss: COUNTY OF SHELBY ) On this 11th day of December, 1984, before me appeared David C. Anderson, to me personally known, who, being by me duly sworn (or affirmed) did say that he is the Senior Vice President & Chief Financial Officer 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 Directors and he acknowledged said instrument to be the free act and deed of such corporation. MY COMMISSION EXPIRES MY COMMISSION EXPIRES OCT. 20, 1985 - ----------------------------------------- /s/ VICKI L. SHIREY -------------------------------- , Notary Public (seal) 11 14 EXHIBIT I Leased Equipment 1. Document handling systems, consisting of: (a) Additional document sort equipment expanding capacity from 180,000 pieces per night to 300,000 pieces. (b) Operational prototype of automated sort equipment. 2. Material handling systems (a) Expansion of the primary matrix sort system by 22 automatic sort lines. (b) System controllers (computers). (c) Manual secondaries. (d) 135 dual scale decks. (e) Slat conveyors and related equipment. (f) Truck and van unload dock. (g) New primary input on the southeast corner of the hub. (h) Expansion of secondary sort system by extension of AS belts. (j) Secondary feed conveyors. 15 EXHIBIT II 1. East Primary Building Expansion (a) 175,000 additional square feet (b) Drive aisle over Hurricane Creek (c) Upgrade of electrical feed systems (d) Expansion of hub offices and buffeteria 2. North Ramp Secondaries Building Expansion (a) 112,000 square feet addition (b) Relocation of fuel farm 3. North Input Nonconveyables Building Expansion - a 37,000 foot addition with a canopy 4. Southeast Input Building Expansion - a 400 foot long extension of the primary building 5. Southeast Ramp Expansion (a) 130,000 square yards of concrete ramp (b) Electrical systems and hydrant fueling 6. Employee Parking Lot - 2,600 new spaces EX-10.40 5 AMENDMENT TO LEASE AGREEMENT 1 Exhibit 10.40 OAKLAND INTERNATIONAL AIRPORT FORM "A" South Airport Tenant (A.O.A.) Date: August 1, 1989 -------------------------- Ref: - Lease Agreement/Right of Entry Between Port of Oakland and Tenant/Lessee - FAR 107.11(B) - M.O.I.A. Security Program dated 5/1/88 "EXCLUSIVE AREA SECURITY AGREEMENT" This letter serves as an agreement between Federal Express Corporation ("Federal Express") and the Port of Oakland. The purpose of this agreement is to identify the "Restricted Area(s)" and "Air Operations Area(s)" of the (AOA) as associated access points for which Federal Express agrees herein to exercise exclusive security responsibility under the Metropolitan Oakland International Airport Security Program, and the F.A.R. 107.11B. A copy of the Federal Express exclusive area is depicted on Tab "T" of the M.O.I.A. Security Manual and identified as those doors and/or gates of the AOA/or restricted areas which borders Bldg. 119; all doors, thoroughfares and ramp area(s) adjacent to the building complex, Gates #C-5 and C-6____________________ ________________________________________________________________________________ ________________________________________________________________________________ associated with leased facilities. The procedures implemented by Federal Express to secure these AOA'(s) or Restricted Area(s) in accordance with the M.O.I.A. Security Program are also described below: 1. For that portion of the AOA which borders all doors and/or thoroughfare(s) of Building M-119 and the associated ramp, Federal Express personnel will control access to this AOA by locking all doors when unattended. All personnel entries into exclusive area via Building M-119 will be subjected to the exclusive control of Federal Express Personnel access beyond "exclusive areas" onto common use AOA's will be first established by positive identification and authorized access certification as outlined in, Section 404 of the M.O.I.A. Security Program. 2. Federal Express agrees to control the movement of persons within its exclusive area by the posting of signs and necessary surveillance as required to maintain compliance with Section 404 of the M.O.I.A. Security Program. 3. Federal Express will ensure that "back ground check(s)" are accomplished and that current records are maintained in accordance with Section 404.A3 and B of the M.O.I.A. Security Manual. 4. Federal Express agrees to maintain a current manifest of personnel having authorized airport I.D. Access Badges and will promptly notify the Airport Manager or his delegated representative of any assigned I.D. Badge deemed out of control due to termination of employee, loss of I.D. badge(s), etc. 5. Federal Express personnel will challenge all persons within or adjacent to their exclusive use area(s) not recognized as authorized presence within the AOA (Re: 2 Page 2 "EXCLUSIVE AREA SECURITY AGREEMENT" FORM "A" South Airport Tenant (continued) 404 of the M.O.I.A. Security Program) and promptly report them to airport management (i.e., Airport Operations Control Center). 6. Federal Express will immediately notify the Airport Manager or his designated representative each time a suspicious act is observed or an unresolved question arises concerning airport security. 7. Federal Express will promptly notify the Airport Manager or his designated representative when the procedures described herein are not adequate to perform the control function as stated. 8. Federal Express personnel and/or representative(s) when utilizing common use passenger gates/doors which affords access onto the AOA (i.e., loading bridges, baggage carousel(s), baggage door portals, etc.) will secure common use doors immediately upon completion of aircraft/passenger operations and will ensure that common use gates and/or doors are not left unattended while open during aircraft/passenger operation details. 9. Federal Express personnel and/or representative(s) when escorting (i.e., sponsoring and/or facilitating) cargo operations within the common use area(s) of the AOA will control movement of person by abiding by the personnel identification rules as outlined in section 404 of the M.O.I.A. Security Program. 10. Federal Express will ensure compliance with vehicle access I.D. program (Positive Identification) for company and/or contract service vehicle(s) while within/on the AOA. 11. Federal Express agrees to control the movement of persons sponsored and/or escorted onto the A.O.A. as required and to maintain compliance with Section 404 of the M.O.I.A. Security Program. Federal Express shall promptly reimburse the Port the amount of any civil penalty or fine that may be assessed against the Port by any governmental agency for violation of airport security rules or regulations which violation is caused by Federal Express failure to comply with "Exclusive Area Security Agreement." - ------------------------ ---------------------------------- Date Airline Station Manager/Tenant 08/10/89 /s/ BEN BETANCOUNT - ------------------------ ---------------------------------- Date Airport Manager Attachment FEDERAL EXPRESS CORPORATION BY: /s/ GILBERT MOOK ------------------------------- TITLE: VP ---------------------------- cc: M.O.I.A. Security Manual - Tab "T" Airport Properties Department Airport Tenant Chron File EX-10.51 6 SUPPLEMENT NO. 4 TO LEASE AGREEMENT 1 Exhibit 10.51 THIS SUPPLEMENT SHALL NOT BE BINDING UPON THE PORT AUTHORITY UNTIL DULY EXECUTED BY AN EXECUTIVE OFFICER THEREOF AND DELIVERED TO THE LESSEE BY AN AUTHORIZED REPRESENTATIVE OF THE PORT AUTHORITY Port Authority Lease No. ANA-041 Supplement No. 4 Facility: Newark International Airport SUPPLEMENTAL AGREEMENT THIS SUPPLEMENTAL AGREEMENT, made as of March 1, 1993, by and between THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY (hereinafter called "the Port Authority"), and FEDERAL EXPRESS CORPORATION (hereinafter called "the Lessee"); WITNESSETH, That WHEREAS, the Port Authority and the Lessee as of October 1, 1983 entered into an agreement of lease (which agreement of lease, as the same has been heretofore supplemented or amended, is hereinafter called "the Lease"), covering certain premises, rights and privileges at and in respect to Newark International Airport (hereinafter called "the Airport") as therein set forth; and WHEREAS, the Port Authority and the Lessee desire to amend the Lease in certain respects as hereinafter provided; NOW, THEREFORE, for and in consideration of the covenants and mutual agreements herein contained, the Port Authority and the Lessee hereby agree, effective as of March 1, 1993 unless otherwise stated, as follows: 1. (a) The Lessee, at its sole cost and expense, shall design and perform the Construction Work, as defined in subparagraph (b) hereof, on the premises and related construction work off the premises in accordance with all the following terms and conditions. (b) The work to be performed by the Lessee shall consist generally of the following: (i) the construction on the premises of an aircraft ramp with a ramp Taxilane FD, including 2 the construction of an off-premises taxiway connection between Taxiway O and the said new ramp Taxilane FD; (ii) the construction on the premises of a flight line maintenance building consisting of approximately 1100 square feet; (iii) in addition to the provisions of subparagraph (viii) of paragraph (a) of Section 2 of the Lease, the construction and installation of further additions and modifications to the Fuel System (as defined in Section 49A of the Lease), including but not limited to, Distribution Facilities and Terminal Distribution Units (as defined in Section 49A of the Lease) and underground pipelines, fuel mains and stubs, said work to be located on and off the premises where required to tie into the portion of the Fuel System located on the premises (all of the foregoing work in this item [iii] being sometimes hereinafter called the "Additional Fuel System work"); (iv) the construction of an off-premises taxiway connection between the on-premises ramp Taxilane FE and Taxiway PC currently under construction; the foregoing items (i), (ii) and (iii) being as more fully set forth in Tenant Alteration Application NFE-38 previously submitted by the Lessee to the Port Authority for Port Authority approval and the plans and specifications forming a part thereof and the foregoing item (iv) to be as more fully set forth in a further Tenant Alteration Application to be submitted by the Lessee to the Port Authority for Port Authority approval and the plans and specifications forming a part thereof, said Applications being hereinafter collectively referred to as the "Applications"; all of the work set forth in items (i), (ii), (iii) and (iv) being herein collectively referred to as the "Construction Work." (c) All of the Construction Work shall be performed in accordance with and subject to all the terms and conditions of the Lease, including but not limited to, all the terms and conditions of Paragraph 2 of Supplement No. 3 to the Lease as if the same were set forth herein in full, and the Applications and final plans and specifications as and when the same have been approved by the Port Authority, and any conditions which may be set forth therein or imposed by the General Manager of the Airport. (d) All locations where the Construction Work is to be performed shall be as specified in the Applications. Notwithstanding any approval of the Applications and notwithstanding any reference therein to various proposed property lines or to space occupied by the Lessee, it is hereby understood and agreed that the areas upon which the Lessee shall perform the off-premises portions of the Construction Work shall be areas at the Airport which are not currently covered by any lease, permit or other agreement relating to occupancy of said areas between the Lessee and the -2- 3 Port Authority. Without limiting the foregoing, the Lessee shall not and shall not have the right to commence the Construction Work or any portion thereof until and unless the respective Application covering the same has been approved by the Port Authority and this Supplemental Agreement has been fully executed and delivered to the Lessee by the Port Authority. (e) The Lessee shall bear and pay any and all costs and expenses for, related to or in connection with the Construction Work, both on and off the premises, without any reimbursement or payment of any type from the Port Authority. (f) The Lessee shall stage and schedule the portions of the Construction Work covering the off-premises taxiway connection to Taxiway PC so as not to obstruct the aircraft using Cargo Building No. 155 from having access to the aircraft ramp serving said Cargo Building. (g) The Port Authority will assign one or more field engineers to the Construction Work. The Lessee shall pay to the Port Authority for the services of said engineers the sum of Four Hundred Forty Dollars and No Cents ($440.00) for each day or part thereof that each such engineer is so assigned. (h) All portions of the Construction Work constructed by the Lessee on the premises shall be and become part of the premises under the Lease except for the Additional Fuel System Work, as hereinbefore defined, which shall not be or become part of the premises under the Lease, it being understood and agreed that the Additional Fuel System Work shall, upon completion, be and become part of the Fuel System, as defined in Section 49A of the lease and subject to all the terms and conditions of the lease. In addition, the Lessee understands and agrees that the portions of the Construction Work constructed off the premises shall not be or become a part of the premises and that the portions of the Construction Work constituting the off-premises taxiway connections (as described in items [i] and [iv] of subparagraph [b] hereof) shall, upon completion, be and become a part of the Public Aircraft facilities at the Airport. (i) The Lessee shall substantially complete the performance of that portion of the Construction Work set forth in item (iv) of subparagraph (b) hereof no later than November 6, 1993, unless otherwise permitted by the General Manager of the Airport. 2. (a) The Lessee hereby specifically acknowledges that this Supplemental Agreement does not grant nor shall it be -3- 4 deemed to grant any rights whatsoever in the Lessee to lease any land from the Port Authority or any interest in or right to use or occupy any area or areas upon which the off-premises portions of the Construction work is performed, other than as expressly provided in the Lease with respect to the premises thereunder. (b) Neither this Supplemental Agreement nor any work performed hereunder shall or shall be deemed to alter, modify or affect in any way whatsoever the terms. provisions, covenants and conditions of the Lease, nor to grant to the lessee any right, claim or interest in the areas upon which the off-premises portions of the Construction Work are performed. 3. This Supplemental Agreement does not constitute either party the agent or representative of the other party for any purpose whatsoever, nor shall any partnership or joint venture be deemed created hereby. 4. The Lessee represents and warrants that no broker has been concerned in the negotiation of this Supplemental Agreement and that there is no broker who is or may be entitled to be paid a commission in connection therewith. The Lessee shall indemnify and save harmless the Port Authority of and from any and all claims for commission or brokerage made by any and all persons, firms or corporations whatsoever for services in connection with the negotiation and execution of this Supplemental Agreement. 5. Neither the Commissioners of the Port Authority nor any of them, nor any officer, agent or employee thereof, shall be charged personally by the Lessee with any liability, or held liable to it under any term or provision of this Supplemental Agreement, or because of its execution or attempted execution or because of any breach thereof. 6. As hereby amended, all of the terms, covenants, provisions, conditions and agreements of the Lease shall be and remain in full force and effect. 7. This Supplemental Agreement and the Lease which it amends constitute the entire agreement between the Port Authority and the Lessee on the subject matter, and may not be changed, modified, discharged or extended except by instrument in writing duly executed on behalf of both the Port Authority and the Lessee. The Lessee agrees that no representations or warranties shall be binding upon the Port Authority unless expressed in writing in the Lease or this Supplemental Agreement. -4- 5 IN WITNESS WHEREOF, the Port Authority and the Lessee have executed these presents as of the date first above written. ATTEST: THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY /s/ LAWRENCE L. HOFICLETER By /s/ GERALD P. FITZGERALD - ---------------------------------- -------------------------------- Assistant Secretary Deputy Director (Title) of Aviation --------------------------- (Seal) ATTEST: FEDERAL EXPRESS CORPORATION /s/ SYBILLE S. NOBLE By /s/ GILBERT MOOK - ---------------------------------- -------------------------------- Assistant Secretary V.P. Properties (Title) and Facilities --------------------------- (Corporate Seal) -5- 6 FORM XLD - Ack., N.J. 51380 STATE OF NEW YORK ss. COUNTY OF NEW YORK On this 25 day of May, 1993, before me, the subscriber, a notary public of New York, personally appeared Gerald P. Fitzgerald the Deputy Director of Aviation of The Port Authority of New York and New Jersey, who I am satisfied is the person who has signed the within instrument; and, I having first made known to him the contents thereof, he did acknowledge that he signed, sealed with the corporate seal and delivered the same as such officer aforesaid and that the within instrument is the voluntary act and deed of such corporation, made by virtue of the authority of its Board of Commissioners. /s/ ROSE ANN GUDDEM ------------------------------------- (Notarial seal and stamp) Term Expires June 30, 1993 STATE OF TENNESSEE ss. COUNTY OF SHELBY On this 19th day of April, 1993, before me, the subscriber, a notary public, personally appeared Gil Mook a Vice President of Federal Express Corporation who I am satisfied is the person who has signed the within instrument; and I having first made known to him the contents thereof, he did acknowledge that he signed, sealed with the corporate seal and delivered the same as such officer aforesaid and that the within instrument is the voluntary act and deed of such corporation, made by virtue of the authority of its Board of Directors. /s/ VICKI L. SHIREY ------------------------------------- (Notarial seal and stamp) My Commission Expires September 21, 1993 EX-10.52 7 SUPPLEMENT NO. 5 TO LEASE AGREEMENT 1 Exhibit 10.52 THIS SUPPLEMENT SHALL NOT BE BINDING UPON THE PORT AUTHORITY UNTIL DULY EXECUTED BY AN EXECUTIVE OFFICER THEREOF AND DELIVERED TO THE LESSEE BY AN AUTHORIZED REPRESENTATIVE OF THE PORT AUTHORITY Port Authority Lease No. ANA-041 Supplement No. 5 Port Authority Facility - Newark International Airport SUPPLEMENTAL AGREEMENT THIS SUPPLEMENTAL AGREEMENT, made as of February 1, 1994, by and between THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY (hereinafter called "the Port Authority") and FEDERAL EXPRESS CORPORATION (hereinafter called "the Lessee"), WITNESSETH, That: WHEREAS, the Port Authority and the Lessee are parties to an agreement of lease dated October 1, 1983 (which agreement of lease, as the same has been heretofore supplemented and amended, is hereinafter called "the Lease"), covering certain premises, rights and privileges at and in respect to Newark International Airport (hereinafter called "the Airport") as therein set forth; and WHEREAS, the parties desire to amend the Lease in certain respects: NOW, THEREFORE, for and in consideration of the mutual covenants and agreements hereinafter set forth, it is hereby agreed effective as of February 1, 1994, as follows: 1.(a) Exhibit Z attached to the Lease is hereby amended as follows: Paragraph 9 thereof (as set forth on pages 3 and 4 of said Exhibit Z) shall be deemed amended to read as set forth in the exhibit attached hereto, hereby made a part thereof and marked "Exhibit Z-Paragraph 9," which shall be and form a part of Exhibit Z of the Lease as if therein set forth in full. (b) It is expressly recognized that the aforesaid amendment to Exhibit Z of the Lease is based on the specific request of the Lessee as reflected by the amendment of the fuel service agreement between the Lessee and the Port Authority's 2 independent contractor (sometimes called the "Operator"), which amendment is attached hereto and marked as "Exhibit A", and, further, without limiting any other term or provision of the Lease or of Exhibit Z, that the contents of Exhibit Z, as hereby amended, form a part of the said fuel service agreement between the Port Authority's independent contractor and the Lessee, and, further, that neither Exhibit Z as hereby amended nor anything contained therein shall limit, modify or alter any rights and remedies or obligations of the Port Authority as a party to the said agreement between the Operator and the Lessee. It is further specifically understood and agreed that neither said Exhibit Z, as hereby amended, nor anything contained therein shall be deemed to impose any liability or responsibility of any type whatsoever on the part of the Port Authority for any failure of the Operator to perform or for any improper performance by the Operator of any of its obligations under the said agreement between the Operator and the Lessee. 2.(a) It is specifically recognized that, pursuant to the terms of the Lease, Exhibit Z may be changed, modified or amended (including the amendment herein provided) upon agreement of the Port Authority and a majority of the "Airline Lessees" as defined in the Lease, and that accordingly, this Supplemental Agreement shall be deemed effective upon (i) the execution hereof by the Lessee and the Port Authority and (ii) upon the execution of a agreement substantially similar to this Agreement by each of the airlines constituting said majority of "Airline Lessees." (b) It is also hereby specifically recognized and agreed that the said amendment to Exhibit Z of the Lease will be incorporated into the fuel storage permit of each fuel storage permittee at the Airport by an appropriate supplement or endorsement thereto, and that neither the failure or refusal of any such fuel storage permittee to execute said supplement or endorsement shall affect the effectiveness of the amendment to Exhibit Z hereunder. 3. Except as hereinbefore provided, all the terms, covenants and conditions of the Lease shall be and remain in full force and effect. 4. No Commissioner, director, officer, agent or employee of either party shall be charged personally or held contractually liable by or to the other party under any term or provision of this Agreement or because of its or their execution or attempted execution or because of any breach or attempted or -2- 3 alleged breach thereof. The Lessee agrees that no representations or warranties with respect to this Agreement shall be binding upon the Port Authority unless expressed in writing herein. 5. This Supplemental Agreement, together with the Lease (to which it is supplementary) constitutes the entire agreement between the Port Authority and the Lessee on the subject matter, and may not be changed, modified, discharged or extended except by instrument in writing duly executed on behalf of the Port Authority and the Lessee. The Lessee agrees that no representations or warranties shall be binding upon the Port Authority unless in writing in the Lease or in this Supplemental Agreement. IN WITNESS WHEREOF, the parties hereto have executed these presents as of the day and year first above written. ATTEST: THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY /s/ X By /s/ GERALD P. FITZGERALD - --------------------------------- --------------------------------- ACTING Secretary DEPUTY DIRECTOR (Title) OF AVIATION ----------------------------- (Seal) ATTEST: FEDERAL EXPRESS CORPORATION /s/ Sybille S. Noble By /s/ GILBERT MOOK - --------------------------------- --------------------------------- Assistant Secretary V.P. PROPERTIES AND (Title) FACILITIES ----------------------------- (Corporate Seal) -3- 4 "Exhibit Z - Paragraph 9" 8-Point Test The "8-Point Test" shall consist of the following:
Test Specification ---- ------------- 1. Color, Saybolt, min. Report 2. API Gravity at 60 F 37(degree) - 51(degree) 3. Flash Point, TCC, min. 100(degree) - 150(degree) F 4. Copper Strip Corrosion, max. No. 1 (2h at 212 F) 5. Freeze Point, ASTM D2386 max. Jet A - 40(degree) C Jet A-1 - 47(degree) C 6. Water Tolerance: Separatin Rating, max. 2 Interface rating, max. 1(b) ML, change Report 7. Distillation: 10% Evaporated, max. Temp. 400(degree) F 50% Evaporated, max. Temp. Report 90% Evaporated, max. Temp. Report Final Boiling Point, max. Temp. 572(degree) F Residue, max. % 1.5% Loss, max. % 1.5% 8. Water Separometer Index, 85 Modified min.
/s/ J.B. ------------------------------ For the Port Authority Initialed: /s/ D.M. ------------------------------ For the Lessee 5 Ogden Aviation Service Company of New Jersey Marine Air Terminal Building 7 South LaGuardia Airport Flushing, New York 11371 Attention: Mr. Bruce R. Pashley RE: Revised 8-Point Test Dear Sirs: This is to confirm the following agreement among the undersigned (the "Airline"), Ogden Aviation Service Company of New Jersey, Inc., ("Ogden") and the other airline members of the EWR Airline Fuel Committee: 1. From and after the effective date of this agreement, the 8-point test set forth in the Exhibit attached hereto shall be the "8-point test" applied by Ogden's independent testing laboratory as required under the fueling standards, specifications and delivery procedures set forth in Article 2 and Exhibit 1 of each of the fuel service agreements between Ogden and each EWR Fuel Storage Permittee. 2. This agreement shall become effective as of the day on which: (a) Each of the other airline members of the EWR Airline Fuel Committee shall have delivered to Ogden an executed agreement to the same effect as this agreement and Ogden shall have executed each such agreement and this agreement, and (b) The Port Authority of New York and New Jersey shall have provided to Ogden evidence of its approval for the use herein contemplated of the 8-point test set forth in the attached Exhibit which approval may be in the form of a notice from the Port Authority to Ogden indicating that the Port Authority and the Required number of Master Airline Lessees as specified in the Newark Master Airline Leases have agreed to the changes in the 8-Point Test. 6 3. Promptly after the effective date of this agreement, Ogden shall notify each Fuel Storage Permittee and provide to each a copy of the 8-point test set forth in the attached Exhibit, and the 8-point test referred to in each Ogden service agreement shall thereupon be deemed amended to conform to the 8-point test set forth in the attached Exhibit without further amendment to any such documents. If Ogden agrees to the foregoing, please so indicate in the place provided below and on the enclosed duplicate copy hereof, and return the executed duplicate to the undersigned. Agreed: FEDERAL EXPRESS CORPORATION -------------------------------- (Airline) By /s/ William Stark ------------------------------ Its Mng. Dir. - Fuel ---------------------------- Agreed this 28th day of January, 1994 Ogden Aviation Service Company of New Jersey, Inc. By /s/ John W. Bauknecht ----------------------------- Its Vice President ---------------------------- John W. Bauknecht Vice President 7 EXHIBIT 1 8-Point Test The "8-Point Test" shall consist of the following:
Test Specification ---- ------------- 1. Color, Saybolt, min. Report 2. API Gravity at 60 F 37(degree) - 51(degree) 3. Flash Point, TCC, min. 100(degree) - 150(degree) F 4. Copper Strip Corrosion, max. No. 1 (2h at 212 F) 5. Freeze Point, ASTM D2386 max. Jet A - 40(degree) C Jet A-1 - 47(degree) C 6. Water Tolerance: Separatin Rating, max. 2 Interface rating, max. 1(b) ML, change Report 7. Distillation: 10% Evaporated, max. Temp. 400(degree) F 50% Evaporated, max. Temp. Report 90% Evaporated, max. Temp. Report Final Boiling Point, max. Temp. 572(degree) F Residue, max. % 1.5% Loss, max. % 1.5% 8. Water Separometer Index, 85 Modified min.
8 CSL-61373; - ACK. N.J.; CORP. & CORP. STATE OF NEW JERSEY ) ) ss. COUNTY OF ) On this 28 day of February 1995, before me, the subscriber, a notary public of New York, personally appeared G. P. Fitzgerald the Deputy Dir. of Aviation of The Port Authority of New York and New Jersey, who I am satisfied is the person who has signed the within instrument; and, I having first made known to him the contents thereof, he did acknowledge that he signed, sealed with the corporate seal and delivered the same as such officer aforesaid and the within instrument is the voluntary act and deed of such corporation made by virtue of the authority of its Board of Commissioners. /s/ Jacqueline White --------------------------------- (notarial seal and stamp) Commission Expires: May 31, 1995 STATE OF TENNESSEE ) ) ss. COUNTY OF SHELBY ) On this 10th day of November, 1994, before me, the subscriber, a notary public of Tennessee, personally appeared Gilbert Mook, the Vice President of FEDERAL EXPRESS CORPORATION, who I am satisfied is the person who has signed the within instrument; and, I having first made known to him the contents thereof, he did acknowledge that he signed, sealed with the corporate seal and delivered the same as such officer aforesaid and the within instrument is the voluntary act and deed of such corporation made by virtue of the authority of its Board of Directors. /s/ Sandra Y. Snell --------------------------------- (notarial seal and stamp) Commission Expires: September 1, 1995 STATE OF ) ) ss. COUNTY OF ) On this ______ day of ___________ , 1994, before me, the subscriber, a ______________________personally appeared __________________ the President of ____________who I am satisfied is the person who has signed the within instrument; and, I having first made known to him the contents thereof, he did acknowledge that he signed, sealed with the corporate seal and delivered the same as such officer aforesaid and the within instrument is the voluntary act and deed of such corporation made by virtue of the authority of its Board of Directors. --------------------------------- (notarial seal and stamp) EX-10.62 8 LEASE AGREEMENT DATED 10/9/94 1 Exhibit 10.62 SUBIC BAY INTERNATIONAL AIRPORT FACILITIES LEASE AND OPERATING AGREEMENT This Facilities Lease and Operating Agreement, entered into this 9th day of October, 1994, by and between: SUBIC BAY METROPOLITAN AUTHORITY, a government agency organized and established under Republic Act No. 7227, with office address at Building No. 229, Waterfront Road, Subic Bay Freeport Zone, Philippines, represented herein by its Chairman and Administrator, Richard J. Gordon (hereinafter referred to as the "SBMA"); - and - FEDERAL EXPRESS CORPORATION, a corporation duly organized and existing under the laws of the State of Delaware, United States of America with principal offices at 2005 Corporate Avenue, Memphis, TN, U.S.A. represented herein by its Vice-President, Gilbert D. Mook (hereinafter referred to as "FedEx"); WITNESSETH: WHEREAS, pursuant to Republic Act No. 7227, a special economic and freeport zone was created consisting, among others, of the lands and other properties occupied by the former Subic Naval Base and its contiguous extensions as covered by the 1947 Military Bases Agreement between the Philippines and the United States of America, also known as the "Subic Bay Freeport" (hereinafter referred to as the "SBF"); WHEREAS, pursuant to the Act, all such land and properties, including the land and/or properties subject of this Facilities Lease and Operating Agreement, were transferred and conveyed to the SBMA; WHEREAS, Proclamation No. 50 was issued on 18 September 1992, adopting the Subic Conversion Program for economic development and designating the SBMA as the implementing agency thereof; WHEREAS, the SBMA owns and operates Subic Bay International Airport ("Airport") and intends to construct, develop and equip the Airport in accordance with the plans and specifications set out in Appendix A; WHEREAS, FedEx desires to locate its primary intra-Asia transshipment center at the Airport. WHEREAS, in the exercise of its powers under the Act and its Implementing Rules and Regulations, (i) the SBMA hereby leases in favor of FedEx the Exclusive-Use Space specifically described under this Agreement and FedEx accepts the lease subject to the terms and conditions herein set forth;, and (ii) the parties desire to enter into this Facilities Lease and Operating Agreement (this "Agreement"), which shall set forth the terms and conditions by which the SBMA makes the Airport and its facilities available to FedEx for its business, as described herein, including air transportation services, upon completion of such construction, development and equipping. 1 2 NOW, THEREFORE, for and in consideration of the foregoing premises and the covenants hereinafter stipulated, the parties hereby agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.01. Primary Definitions. In addition to words and terms elsewhere defined in this Agreement, the following words and terms as used in this Agreement shall have the following meanings unless some other meaning is apparent from the context in which the words and terms are used: Airline. A business entity, including FedEx, that provides Air Transportation services and such other transportation services as may be carried out at the Airport. Air Transportation. Subject to the limitations expressly set forth herein, the carriage of property, cargo, or mail by aircraft and the other activities, functions, and operations incidental thereto, including the carriage of persons employed by FedEx and such other persons as FedEx shall be authorized to carry under United States Federal Aviation Regulations, it being understood that FedEx will not conduct a passenger air transportation business from the Airport. Aircraft Landing. A complete aircraft cycle (one landing and one take-off) at the Airport of an aircraft in the Airline's revenue service. Airport. The real property and facilities of Subic Bay International Airport as it exists on the date of execution of this Agreement, and as modified or expanded in the future. The existing facilities and boundaries of the Airport are shown in Appendix A and described in the site plan. Airport Services. The general administration and operation of the Airport by the SBMA, including, but not limited to the following functions by the SBMA at the Airport: Airport police, crash, rescue and fire protection, and ground traffic control; clearing, grading and draining, the costs of which are not charged or chargeable in specific terms to users under other agreements; the collection and removal or treatment of sewage and other wastes; roadway systems; perimeter fencing and utility systems; the furnishing of communications systems, facilities and tunnels; landscaping; the construction, equipment and maintenance of facilities on the Airport and the maintenance of such land itself, facilities and areas or subdivisions of the Airport necessary in the operation and maintenance thereof, including the SBMA's administration, maintenance, police, crash, rescue, fire and operations space and facilities. Airport System. Subic Bay International Airport, as it now exists, and as it is to be constructed in accordance with the requirements of Appendix A, including the Airport, air navigation facilities, and other related facilities and related properties (real, personal, or mixed), and any rights or interests in the Airport, air navigation facilities, and other related facilities and related properties, now or hereafter belonging to or controlled by the SBMA or under the administration, jurisdiction, control, and management of the SBMA, and all equipment, improvements, extensions, or betterments thereto constructed or acquired, belonging to or controlled by the SBMA. Without limiting the generality of the foregoing, the term Airport System shall include any and all of the following of or belonging or pertaining to such Airport or air navigational facilities or such rights or interests: lands or water areas, rights-of-way, approaches, contract rights, airport terminal buildings, hangars and other 2 3 buildings and facilities erected on such lands, runways, taxiways, paved areas, access roads, parking lots, airport equipment, and any other equipment and property (real, personal or mixed) incidental to and included in such properties. Applicable Law. All present and future laws, orders, ordinances, rules, regulations, international treaties and conventions of the Philippine government, the SBMA, and other applicable government bodies, departments and agencies, including, where appropriate, those of the United States of America. Apron Area. As shown in Appendix B hereto the space provided to FedEx for loading and unloading passengers, cargo and mail to and from its aircraft and the aircraft of its vendors, providing such aircraft with fueling and lubricate, performing ramp service operations, inspection, maintenance of aircraft, and the parking of equipment used in connection therewith. More specifically, the terms Apron and Apron Area include the following: Preferential Aircraft Apron. That apron area described in Appendix B. FedEx shall from time to time provide the SBMA, at least thirty (30) days prior to the effective date thereof, its aircraft schedule(s) and the schedules of its Vendor Carriers and FedEx shall identify the parking gates within the Preferential Aircraft Apron FedEx prefers to use to accommodate said schedule(s). All such gates shall be made available to FedEx and the entire area comprised of these gates shall be the Preferential Aircraft Apron Area. Overflow Aircraft Apron. The apron areas described in Appendix B which is intended to accommodate unscheduled needs that may include, without limitation, extra sections (flights to supplement regularly scheduled operations), charters or aircraft with maintenance problems. Common-Use Aircraft Apron. All aircraft parking positions not designated as Preferential Aircraft Apron or Overflow Aircraft Apron. Exclusive Ramp. The ramp area designated on Appendix B attached hereto that includes (a) the area immediately adjacent to buildings leased by FedEx, and (b) for the period FedEx conducts its Air Transportation operations, the Preferential Aircraft Apron, for use by FedEx to stage and store GSE, ULDs, equipment and its personnel. Certificated Maximum Gross Takeoff Weight ("MGTOW"). The maximum takeoff weight at which each aircraft operated by FedEx is authorized by the FAA to operate, as recited in the flight manual governing that aircraft. Common-Use Space. All space at the Airport other than the Exclusive-Use Space as more particularly delineated in Appendix B for use by FedEx in common with the general public. Exclusive-Use Space. The space as shown and marked as "Exclusive-Use Space" on Appendix B attached hereto and leased exclusively by FedEx pursuant to Section 5.01. FAA. The Federal Aviation Administration of the Department of Transportation of the United States of America or its authorized successor. 3 4 Landing Fees. Those fees levied on FedEx and its Vendor Carriers for the use of the landing areas, taxiways and aprons of the Airport System, as established in Section 6.02 of this Agreement. Milestone Dates. Those dates set forth in Appendix A hereto by which the SBMA shall complete or commence the designated task, subject to applicable cure periods. Operation Date. 1 May 1995, which shall be the date on which FedEx shall occupy the Airport for the purpose of commencing its Air Transportation services. Plans and Specifications. Those plans and specifications set forth in the construction and equipment purchase contracts entered into by the SBMA and its designated contractors. SBMA Labor Pool Inventory. A list maintained by the SBMA of persons who are eligible for employment on the Airport by FedEx or FedEx's vendors. Telecom Vendor. Subic Telecom, the joint venture between AT&T, PLDT and the SBMA to provide telecommunication services to Airlines at the Airport. Vendor Carriers. Aircraft of other carriers serving the Airport at the request of FedEx to load or off-load freight handled by FedEx at its transshipment facility which meet at least one of the following criteria: (i) more than fifty percent (50%) of the cargo capacity of said aircraft has been contracted to FedEx, (ii) the aircraft loads or unloads at least one thousand kilograms (1000 kg) of freight under contract to FedEx, or (ii) the aircraft loads or unloads at least two (2) pallets or containers of freight under contract to FedEx. Vendor Carriers may be serving the Airport by way of wet lease, dry lease, straight charter, block space or other commercial arrangement with FedEx. Block space and commercial arrangements shall be with regularly scheduled commercial carriers. All Vendor Carriers and their respective flight crews shall be fully licensed, certified, authorized, and qualified to fly to the Airport. ARTICLE 2 CONSTRUCTION OF AIRPORT SECTION 2.01. Construction and Completion of the Airport System. (a) The SBMA agrees that, as a condition precedent to the obligations of FedEx under this Agreement, the SBMA shall, at its sole cost and expense, complete the construction of the Airport System described in Appendix A, all in accordance with the Plans and Specifications and the Milestone Dates for construction set out in Appendix A to this Agreement and in no event at a date later than the Operation Date. (b) If any Milestone Date is not met and is not cured within the time set forth in Appendix A, FedEx shall have the right to (i) terminate this Agreement immediately upon written notice to the SBMA and, in such event, FedEx shall have no further rights or obligations to the SBMA under this Agreement and the SBMA shall have no duties or obligations to FedEx under this Agreement; or (ii) extend the completion date for the construction of the Airport System and the Operation Date to a date mutually agreeable to FedEx and the SBMA. The remedies in Section 2.01(b) shall be the sole remedies of FedEx if any Milestone Date is not met and is not cured within the time set forth in Appendix A. 4 5 (c) During the period of construction of the Airport, FedEx and its authorized representatives shall have the full right of inspection. Additionally, during any such period of construction that FedEx has agreed to occupy any facilities upon the Airport, FedEx shall have the right, at all reasonable times with notice to the SBMA, to enter such facilities for the purpose of constructing and installing its fixtures and equipment and performing tenant finish work, provided FedEx agrees to exercise due care and agrees not to interfere unreasonably with the SBMA's construction of the Airport System. (d) The following approvals and certifications shall be acquired by the SBMA in respect of the Airport on or before the Operation Date: (i) The completion date of the construction of the Airport shall be evidenced by a certificate signed by the SBMA's architects and engineers stating that with the exception of push list items the construction of the Airport System has been completed substantially in accordance with the Plans and Specifications; and (ii) Certifications of fitness from the Air Transport Office of the Philippines and from such other Philippine and international organizations and agencies as shall be required to operate the Airport as a 24-hour international airport. SECTION 2.02. Operational Airport. The SBMA shall complete all work on and to the Airport System and the Airport shall be operational on or before 1 April 1995 so as to provide FedEx with a minimum of thirty (30) days to conduct tests on the Airport System and train its personnel prior to the Operation Date. The Airport shall be deemed to be operational when the following criteria are satisfied: (a) The runway and apron reconstruction and overlays have been fully completed in accordance with the Plans and Specifications and all surfaces have fully cured in accordance with standard industry practice; (b) Two connectors between the runway and the taxi way/apron have been reconstructed and overlaid in accordance with the Plans and Specifications and all surfaces have cured in accordance with standard industry practice; (c) The parallel taxi way west of the tower has been reconstructed and overlaid in accordance with the Plans and Specifications and all surfaces have cured in accordance with standard industry practice; (d) The ASR has been installed and certified for operation; (e) All airfield and navigational lighting, and navigational aids have been installed and are fully operative; (f) All approaches to the Airport have been finalized and approved by the applicable government bodies; said approaches meet FedEx requirements for flight minimums; and said approaches have been published by Jepperson's; (g) The aircraft control tower has been fully reconstructed and remodeled in accordance with the Plans and Specifications and there is 5 6 employed by the SBMA and other such applicable government agencies a sufficient number of fully trained operators to conduct safe, 24-hour daily flight operations at the Airport; (h) The certifications required in Section 2.01 (d) have been obtained without condition or limitation that would materially impede the ability of FedEx to operate its Air Transportation Business at the Airport; (i) There exists at the Airport sufficient and appropriate ground services, including access to fuel, to conduct 24-hour daily flight operations; and (j) The Airport has been fully fenced and has been secured in accordance with international standards in use at international airports in OECD countries. The construction of the entire Airport System in accordance with the Plans and Specifications shall be fully completed on or before 1 June 1995. ARTICLE 3 TERM SECTION 3.01. Term. (a) This Agreement shall become effective upon execution and delivery by the SBMA and FedEx (the "Effective Date"), but the rights of use and occupancy granted hereunder and obligations to pay rents and fees shall not commence until the Operation Date. (b) This Agreement will have a seven (7) year term, commencing with the Operation Date, with two (2) successive renewal terms of three (3) years each. Provided no event of termination has occurred under Section 11.05 and FedEx is not in material default under the terms of this Agreement at the time of exercise of any renewal term or at the commencement of any renewal term, the renewal terms shall be exercised by FedEx upon written notice to the SBMA not less than one hundred and twenty (120) days prior to the expiration of the term or any renewal term, as applicable. Except for Landing Fees and rental for the Exclusive-Use Space, which are subject to renegotiation on any renewal, renewals shall be on the same terms and conditions as stated herein unless otherwise agreed to in writing. ARTICLE 4 USE OF THE AIRPORT AND ITS FACILITIES SECTION 4.01. Uses of the Airport. FedEx is granted the right to use the Airport, in common with others, for the sole purpose of conducting FedEx's business, including an Air Transportation business. In addition to all rights granted elsewhere in this Agreement, FedEx's use of the Airport for the conduct of its business includes the right to: (i) Land, takeoff, fly, taxi, push, tow, load, or unload aircraft; (ii) Repair, maintain, condition, service, test, park, or store aircraft or other equipment belonging to or operated by FedEx; 6 7 (iii) Perform or cause to be performed by contract, customary aircraft fueling, servicing, and line maintenance, of aircraft and other equipment operated by FedEx, or by any Vendor Carrier, at aircraft parking positions adjacent to the Exclusive Ramp or on aprons, before loading and takeoff or as soon as practical following landing and unloading; (iv) Handle, bill and manifest shipments, and sell transportation of cargo, mail, and personal property by air, and perform, or cause to be performed by contract, the customary handling of passengers, baggage, cargo, and mail; (v) Install, maintain, or operate, by FedEx alone or in conjunction with any other Airline, air-to-ground and other communication, meteorological, and aerial navigation systems between locations on the Airport, provided such equipment and facilities do not interfere with other Airport communication, meteorological, or aerial navigation systems. Specifically, FedEx shall have the right to develop, construct and operate, at its own expense and for a nominal access fee, a back-up communication system, operated by FedEx, at its discretion, in conjunction with Telecom Vendor. The back-up system is to be used in the event of a failure of Telecom Vendor's primary system; (vi) Hire, train and supervise ground personnel on the Airport necessary for the conduct of FedEx's Air Transportation business; (vii) Transport by air or land, load, and unload persons, property, cargo, and mail at the Airport; (viii) Operate motor vehicles or other ground transportation equipment required for the conduct of FedEx's business. This shall include the right to operate a ground transportation business to or from the Airport for the carriage of cargo and FedEx personnel only; (ix) Install, maintain, and operate lounges, cafeterias, break rooms and rest areas in FedEx's Exclusive-Use Space and to sell refreshments and food, directly or through vendors of its choice, in such areas solely to FedEx employees or to FedEx vendors and their employees; (x) Install and maintain FedEx's identification signs, advertising, or similar matter on FedEx's Exclusive-Use Space; (xi) Purchase FedEx's requirements of personal property or services, including fuel, oil, lubricants, in-flight food or beverages, and other equipment, materials or supplies. FedEx may purchase goods and services from any person or company of FedEx's choice; provided, however, FedEx agrees that, wherever possible, and assuming such vendors meet FedEx's requirements for quality, service and price, FedEx shall select those vendors that are recommended by the SBMA. (xii) Sell, lease, transfer, dispose, or exchange FedEx's aircraft, engines, accessories, equipment, materials or supplies to and from other Airlines, as necessary or incidental to the operation of its Air Transportation business. (xiii) Establish and maintain business and operations offices in the Exclusive-Use Space in connection with its services, including an Air Transportation business, which may include customer service operations, accounting and billing functions and other matters related to the business of FedEx; 7 8 (xiv) Provide administrative offices for FedEx employees in the Exclusive-Use Space; and (xv) Conduct any other operation or activity that is reasonably necessary or incidental to the conduct by FedEx of its Air Transportation business and its logistical services business as conducted by Federal Express Logistics, a division of FedEx; provided that FedEx shall not conduct any business listed in Part 5 of the Aeronautical Fees and Charges, the SBMA Administrative Order No. 1, 15 December 1992. All such business shall be solely for the account of FedEx. Notwithstanding the foregoing, FedEx may provide aircraft handling services to entities other than Vendor Carriers upon receipt of a concession to provide such services from the SBMA. The SBMA shall grant such a concession to FedEx in a timely fashion upon payment of non-discriminatory concession fee by FedEx to the SBMA from time to time at rates to be mutually agreed upon between FedEx and the SBMA. SECTION 4.02. Limitation on Use. In connection with the exercise of its rights under this Agreement, FedEx: (i) Shall not do or permit to be done anything at or about the Airport that may interfere unreasonably with the effectiveness or accessibility of any of the Airport System or Airport Services or any system serving the Exclusive-Use Space, including the water system, drainage and sewage system, fire protection system, traffic circulation, sprinkler system, alarm system, fire hydrants and hoses, heating or ventilation system, air conditioning system, electrical system, natural gas, or other Airport systems installed or located on or within the Airport; (ii) Shall not do or permit to be done any act or thing upon the Airport that will invalidate or conflict with any fire or other casualty insurance policies covering the Airport or any part thereof; provided, however, said policies must be similar in form and content to policies held by other international airports offering twenty-four (24) hour flight operations; (iii) Shall not dispose of or permit any employee, agent or contractor to dispose of any waste material taken from, or products used with respect to, its aircraft, except in accordance with all applicable regulations of appropriate governmental or administrative bodies having jurisdiction over activities at the Airport; (iv) Shall not commit or permit any activity upon the Exclusive-Use Space that shall be inconsistent with or materially disrupt the operation of the Airport on a twenty-four (24) hour basis; and (v) Shall comply and make all reasonable efforts to cause its Vendor Carriers to comply with all Applicable Laws. ARTICLE 5 PREMISES SECTION 5.01. Exclusive- and Common-Use Space. Commencing at the Operation Date, and pursuant to the terms of this Agreement, the SBMA will lease to FedEx and FedEx shall lease from the SBMA, on an exclusive basis, the Exclusive-Use Space. In connection with said lease, FedEx shall have the right to use the Common-Use Space also listed in Appendix B, in common with others. Prior to the Operation Date FedEx shall have the right of access to the Exclusive-Use Space at no charge for the purpose of conducting non-revenue 8 9 generating activities related to its Air Transportation business which shall include training, fit-out of the Exclusive-Use Space with FedEx leasehold improvements, and to support testing and training flight operations. SECTION 5.02. Apron Area. FedEx is granted the use of the Apron Areas designated for FedEx's use from time to time, all subject to the following: (a) Preferential Aircraft Apron. (i) FedEx shall be permitted to stage Ground Support Equipment ("GSE"), Unit Load Devices ("ULDs"), static racks and other equipment in the Preferential Apron Area at no cost in addition to that which FedEx shall pay in rental for the Exclusive-Use Space under Section 6.01 hereof. FedEx shall only use such space in such a manner as not to impede the use of an adjacent taxi lane or parking position. Aircraft belonging to Vendor Carriers shall be permitted to use parking gates within the Preferential Aircraft Apron. (ii) SBMA may permit any other Airline to park aircraft at parking gates within the Preferential Aircraft Apron subject to the following: (1) There are no other parking gates available on the Airport; (2) The operator of the subject aircraft moves the aircraft out of the Preferential Aircraft Apron at least two (2) hours prior to the scheduled arrival of FedEx (or a Vendor Carrier) aircraft which are designated to use the subject parking gate; (3) In the event an operator fails to timely do so, the SBMA shall move those subject aircraft that are capable of being moved and shall make reasonable efforts to move all other subject aircraft; (4) The parking of an aircraft in the Preferential Aircraft Apron shall not require FedEx to move any FedEx GSE, ULDs, static racks or other equipment staged by FedEx in the Apron; and (5) SBMA will make reasonable efforts to cause the operator of the other aircraft to take responsibility for any and all damages done to FedEx GSE, ULDs, static racks and other equipment staged in said Apron. (b) Overflow Aircraft Apron. FedEx and the SBMA acknowledge and agree that there may be competing uses for the Overflow Aircraft Apron and that use of same shall be on a first come first served basis in common with others; provided, however, that the SBMA shall cooperate with FedEx to meet the reasonable requirements of FedEx with regard to the Overflow Aircraft Apron. Specifically, during FedEx scheduled and properly noticed Air Transportation operations, the SBMA shall not permit the use of the Overflow Aircraft Apron on a scheduled basis and shall endeavor to move aircraft parked on said Apron to other locations. FedEx shall only use such space in such a manner as not to impede the use of an adjacent taxi lane or parking position. (c) Common-Use Aircraft Apron. The SBMA may assign said gates in the Common-Use Aircraft Apron in the manner it deems appropriate. (d) Exclusive Ramp. The Exclusive Ramp shall be provided to FedEx for its exclusive use at no charge in addition to that which FedEx shall pay in rental for the Exclusive-Use Space under Section 6.01 hereof. 9 10 (e) Notice of Release. FedEx shall provide the SBMA reasonable notice of its intention not to further expand its parking requirements and those gates identified by the parties as not required for FedEx needs shall be released to the SBMA and shall no longer be designated or be capable of designation as Preferential or Overflow Aircraft Apron. SECTION 5.03. Expansion Space. (a) On or after 1 April 1996, the SBMA shall have the right to offer, in writing, to FedEx the lease on those facilities on the southwest ramp as shown on Appendix B attached hereto (the "Expansion Space") on rates and terms agreed to by the parties but consistent with the rates and terms of this Agreement (the "Offer to Lease"). FedEx shall have the right to lease all or part of the Expansion Space on the giving to the SBMA of written confirmation of its intent to lease within thirty (30) days of the date of the SBMA's offer. (b) Until the SBMA makes the Offer to Lease, the SBMA will grant an option to FedEx to lease all or a portion of the Expansion Space on rates and terms agreed to by the parties but consistent with the rates and terms of this Agreement, and FedEx shall have the right to occupy such space not earlier than six months following the date of FedEx's exercise of its option rights. FedEx's option rights hereunder shall expire on the date of the Offer to Lease. (c) FedEx shall exercise its option to lease the Option Space, or any portion thereof, from time to time by providing the SBMA with not less that six (6) months prior written notice for each building or piece of land in the Option Space that FedEx desires to lease. The SBMA shall make such building or land available to FedEx on or before the date of expiration of said notice period. (d) Until such time as FedEx exercises its options with regards to the Option Space, the SBMA may lease all or parts of the Option Space to third parties; provided that (i) all such leases shall be subject to termination upon six (6) months notice, (ii) the SBMA shall issue notice of termination to existing tenants immediately after receiving notice from FedEx of intention to exercise its option rights herein, and (iii) the SBMA shall not permit tenants to remain after the expiration of said notice of termination and shall take all steps available to it under law and equity to remove any tenants attempting to holdover. Once the SBMA has made the Offer to Lease and FedEx has elected not lease all or a portion of the Expansion Space, the SBMA shall be free to lease any such Space not taken by FedEx to any party without restriction. SECTION 5.04. Family Housing Units. (a) FedEx shall have the option, until 31 August 1995, to lease two additional duplex housing units in the Cubic Housing Area under the same rental and terms and conditions contained in Lease Agreements between FedEx and the SBMA for Building 8220 (units A and B). FedEx shall exercise its options under this Section 5.04 by giving thirty (30)-days' prior written notice to the SBMA. Until such time as FedEx exercises its options hereunder, the SBMA shall have the right to lease all or a part of said housing units to third parties. (b) Housing Units shall be leased to FedEx full or partly furnished at the request of FedEx from furniture and appliances held by the SBMA in its inventories; provided, however, if FedEx decides to renovate any housing unit or to replace any the SBMA owned fixture, furniture or appliances, any salvaged fixtures, furniture or appliances shall be returned to the SBMA. SECTION 5.05. SBMA's Improvements. On or before the dates set forth in Appendix C, or such later date agreed to by the parties, the SBMA shall cause the leasehold 10 11 improvements specified in Appendix C ("Improvements") to be completed for the Exclusive-Use Space and Housing Units leased to FedEx under this Agreement. The cost for the Improvements shall be for the account of the SBMA. Leasehold improvements required by FedEx in addition to the Improvements shall be deemed alterations subject to the provisions of Section 5.06 of this Agreement. SECTION 5.06. Alterations, Improvements and Repairs. (a) Subject to the provisions of Section 12.04, FedEx shall have the right to employ such architects, contractors or builders as FedEx shall deem necessary or desirable in connection with the authorized construction, installation, alteration, modification, repair or maintenance of any building, structure or improvement upon any of the Exclusive-Use Space. Before beginning construction of any alteration, improvement or repair, FedEx will submit to the SBMA for the SBMA's approval detailed drawings of the proposed construction and specifications of the proposed repair. All such alterations, improvements and repairs shall be completed in accordance with such drawings or specifications. (b) The SBMA will review and approve or disapprove the proposed alterations, improvements or repairs in writing within twenty (20) days after receipt of the construction drawings; provided, however, that with respect to repairs that are urgently required in the reasonable opinion of FedEx for FedEx to carry on its business, FedEx may effect such repairs without the prior approval of the SBMA and may deliver repair specifications to the SBMA after repairs have commenced or have been completed. Unless disapproval is given within said twenty (20)-day period, approval shall be deemed to have been given. The SBMA shall assist FedEx at FedEx's expense in obtaining all required permits, certificates and other approvals required from appropriate government agencies for the construction of FedEx's leasehold improvements. Upon compliance with the permit requirements, the SBMA shall provide official building permits to FedEx for all qualifying projects under this Section 5.06. (c) Any construction by FedEx must be performed in a safe, neat manner and meet the following criteria: (i) Not unreasonably interfere with the activities of the SBMA or its tenants; (ii) Be compatible with the architecture of the building as determined by the SBMA; (iii) Be performed at no cost to the SBMA; and (iv) Comply with all Applicable Laws. (d) FedEx shall pay or cause to be paid all uncontested claims lawfully made by its contractors, subcontractors, materialmen and workmen arising out of or in connection with the construction work; provided, however, that nothing herein contained shall be construed to limit the right of FedEx to contest any claim of a contractor, subcontractor, materialman or workman and no such contested claim shall be considered to be an obligation of FedEx within the meaning of this Agreement unless and until the same shall be fully adjudicated. Notwithstanding the foregoing, FedEx shall promptly remove or bond any lien or charge filed against the Airport or any interest therein by any such contractor, subcontractor, materialman or workman directly attributable to FedEx's construction work. (e) Within thirty (30) days after completion of the construction of any alteration or improvement, FedEx will deliver to the SBMA detailed copies of as-built drawings showing 11 12 the location and dimensions of the alteration or improvement constructed, including structural, mechanical, and electrical systems. (f) FedEx hereby assumes the risk of loss or damage to all of the construction work it conducts prior to the completion thereof and the risk of loss or damage to all property of the SBMA arising out of or in connection with the performance of such construction work so long as the SBMA has taken all steps reasonably prudent of a landlord to avoid contributing to any such loss or damage. FedEx shall procure and maintain such insurance as is standard in the Philippines for the type of construction work FedEx intends to conduct. Such insurance shall be in compliance with and subject to the applicable provisions of Article 9 hereof and shall name the SBMA as additional assureds and such policy shall provide that the loss shall be adjusted with and payable to FedEx. Such proceeds shall be used by FedEx to repair, replace or rebuild any the SBMA property for which FedEx may be liable hereunder with any excess to be used by FedEx at FedEx's sole discretion. SECTION 5.07. Ownership of Improvements. The ownership of improvements, furnishings, equipment, and fixtures that are constructed or installed on the Exclusive-Use Space by FedEx is as follows: (i) Title to all removable furniture, furnishings, fixtures, or equipment installed by FedEx remains vested in FedEx at all times during the term of this Agreement; provided that FedEx shall be liable for the cost of removal and repair. If not removed within thirty (30) days after the expiration or termination of this Agreement, all removable furniture, furnishings, fixtures, and equipment will become the property of the SBMA. (ii) Title to any structure or other improvement that cannot be removed without damage to the Exclusive-Use Space, vests in the SBMA unless otherwise provided by a successor agreement. These improvements include interior walls, ceilings, carpeting, finished flooring, electrical wiring, air conditioning ducts and equipment, furnishings, interior decoration, or finishing. The SBMA shall use its best efforts to use the Exclusive-Use Space with all such improvements intact. If removal or repair of structure and improvements is required by the SBMA to use said Space immediately after vacation of same by FedEx, the reasonable cost of such repairs or removal shall be for the account of FedEx. (iii) Except as set forth in this Section 5.07, upon expiration, termination or cancellation of this Agreement, FedEx shall surrender all the SBMA property, buildings and non-movable improvements located in the Exclusive-Use Space in the same order and condition as they were on the Operation Date, ordinary wear and tear and casualty damage to the extent covered by insurance excepted. SECTION 5.08. Ingress and Egress. The SBMA grants the right of adequate ingress to and egress from the Airport and the Exclusive-Use Space to FedEx and its officers, employees, customers, agents or the contractors, invitees, suppliers, and furnishers of services of any of them (the "Priority Users"). FedEx's rights shall be subject to: (i) nondiscriminatory easements, restrictions, covenants and agreements to which the premises may be subject and rights of the public to the Common-Use Space, (ii) rights of any enterprise which is furnishing, heating, lighting, power, telegraph, telephone, steam, or transportation services, and (iii) permits, licenses, regulations and restrictions, if any, the Philippines government, the SBMA or other agency. Specifically, the SBMA shall: (a) Immediately develop and implement an expedited procedure for the issuance of gate passes and documentation or authority required to permit such persons going to and 12 13 coming from the customs territory, to and from the SBF as well as the Airport and the Exclusive-Use Space, within a reasonable and acceptable time frame for FedEx operations, but in no case more than three (3) days. The SBMA shall use its best efforts to issue immediately gate passes and such other authorizations on an emergency basis. In the case of FedEx and Priority Users' vehicles, the SBMA shall likewise afford immediate access to and from the SBF. On or before the Operation Date, the SBMA shall establish and identify such gate(s) where FedEx and Priority Users' vehicles may be granted easy and unimpeded access on a 24-hour basis in accordance with these expedited procedures. (b) The SBMA shall construct, improve and maintain all surface roads within the SBF to a standard necessary to meet the reasonable requirements of its tenants. The SBMA shall ensure that the road system of the SBF is adequate to permit the vehicles of FedEx and the Priority Users to travel to and from an SBF checkpoint at the boundaries of the SBF to the FedEx gate at the Airport, during peak traffic times, without unreasonable delay. (c) The SBMA may, upon the giving of seventy-two (72)-hour notice to FedEx, or without notice in the event of an emergency only, temporarily close, or consent to or request the closing of, any roadway so long as FedEx and the Priority Users have a means of ingress and egress to the SBF and the Airport that is sufficient to meet the needs of FedEx and does not cause delay of ingress or egress of any vehicle or person connected with a Priority User. SECTION 5.09. SBMA Entry. The SBMA, its directors, officers, employees, agents and representatives shall have the right of entry to the Exclusive-Use Space from time to time to (i) perform its obligations under this Agreement, (ii) ensure compliance by FedEx of its obligations under this Agreement, and (iii) respond to any emergency applicable to the Exclusive-Use Space, subject to the limitations on and requirements for entry set forth in this Agreement. The SBMA shall not enter the Exclusive-Use Space, nor shall the SBMA cause or permit any person, except someone acting under the authority of law, to enter the Exclusive-Use Space for any reason other than those stated immediately above. Except for emergencies, entry shall be conducted in the following manner only: (x) the SBMA shall provide notice to FedEx during normal business hours at least twenty-four (24) hours prior to the intended date of entry, (y) at the time of entry, the SBMA representatives shall present themselves, with such identification and authorizations as FedEx shall reasonably require, to FedEx security personnel at the main entry to the Exclusive-Use Space, and (z) the SBMA representatives shall be accompanied by FedEx personnel at all times when in the Exclusive-Use Space. The SBMA shall use its best efforts to ensure that any entry by the SBMA, for any purpose, does not disturb, interrupt or impede the business of FedEx at the Airport. ARTICLE 6 RENTS AND FEES SECTION 6.01. Rents and Fees. (a) FedEx will pay monthly to the SBMA as rent for the Exclusive-Use Space the rates per square meter described in Appendix D, as amended from time to time by the inclusion of additional facilities pursuant to the Option granted FedEx herein. All rent for the Exclusive-Use Space is due on the first day of each month, commencing on the Operation Date. In the event the Operation Date or the date of termination or expiration of the term this Agreement or any renewals hereof shall be on a day other than the first or last day of a calendar month, amounts owing under this Section 6.01 shall be pro rated on the basis of thirty (30) days in a month. Except as otherwise 13 14 provided in this Agreement, there shall be no additional rent or other charges imposed on FedEx for it use of Common-Use Space or Apron Areas. (b) Except as otherwise provided in this Agreement: (i) rents and fees for the use of all other facilities, rights, and privileges granted to FedEx in this Agreement, are combined in and represented by the Landing Fees and Parking Charges set out in Appendix E; and (ii) no other fee, assessment or charge of any nature may be imposed on FedEx for its use or exercise of the facilities, rights and privileges granted under this Agreement. SECTION 6.02. Calculation and Payment of Landing Fees. (a) The Landing Fees will be payable monthly by FedEx based on an activity report to be prepared and certified by FedEx as accurate. FedEx shall self-invoice using said activity report. The activity report, invoice and payment thereon shall be provided and paid over to the SBMA within twenty-five (25) days of the last day of each calendar month. The Landing Fees for each Aircraft Landing will be calculated in the manner provided in Appendix E and will be based on the Certified Maximum Gross Takeoff Weight (MGTOW) for each Aircraft and each individual landing up to a monthly cumulative MGTOW of 28,000,000 kilograms for all FedEx aircraft and Vendor Carriers. Once the 28,000,000 kilograms cumulative weight is reached, the calculation method for Landing Fees shall be adjusted as set forth in Appendix E. (b) If FedEx fails to furnish the SBMA with the certified activity report, invoice and payment required by Section 6.02(a) within twenty-five (25) days of the last day of each calendar month, the SBMA may determine FedEx's Landing Fee by assuming that the total takeoff weight for FedEx during the subject month was one hundred percent (100%) of the total takeoff weight of FedEx set forth in the last certified activity report. After delivery of a late certified activity report, invoice and payment by FedEx, the SBMA will recalculate the Landing Fee and will invoice FedEx for the actual amount. If there is an overpayment or underpayment, a credit or charge shall be applied to the appropriate invoices in the next succeeding month. FedEx remains responsible for submitting a certified activity report for each month regardless of any estimate made by the SBMA. (c) Commencing on the fifth (5th) anniversary of this Agreement, Landing Fees shall be increased by five percent (5%) and the new Landing Fees shall remain in place for the balance of the term of this Agreement. SECTION 6.03. Fuel Flowage Fee. The SBMA shall not impose fuel flowage charges on FedEx during the term of this Agreement or any renewals. The SBMA may impose fuel flowage fees on fuel vendors at the Airport at its discretion, provided, however, that any such fees charged to a vendor used by FedEx shall not be greater than fuel flowage fees charged by the SBMA to Coastal Subic, Incorporated as of 29 January 1994 and shall remain constant during the term of this Agreement and may be revised only on the renewal of this Agreement. SECTION 6.04. Aircraft Parking Charges. (a) For aircraft comprising the first fifty million pounds (based on MGTOW) of landed weight in a calendar month, the first four (4) hours of parking shall be free. The parking charge per thirty (30) minutes after the first four hours shall be as set forth at Section 2.00 of Appendix E and shall be determined on the MGTOW of each individual aircraft. (b) Once an aggregate of fifty million kilograms (based on MGTOW) have landed in a given calendar month, parking for each aircraft landing thereafter shall be charged for parking (i) the first six (6) hours in accordance with Section 2.01 of Appendix E, and (ii) for each 30 minutes after six hours in accordance with Section 2.02 of Appendix E and shall be determined on the MGTOW of each individual aircraft. 14 15 (c) The invoicing and payment procedures for Parking Charges shall be the same as those used for Landing Fees as set forth in Section 6.02 hereof. SECTION 6.05. Commitment. (a) Subject to Section 6.05(d) FedEx shall be unconditionally obligated to pay to the SBMA the cumulative payment of eleven million five-hundred-and-fifty thousand dollars (USD$11,550,000) over the initial seven (7) year term of this Agreement for rentals applicable to the Exclusive-Use Space as of the date of this Agreement, Landing Fees and Parking Charges. The first anniversary date of this Commitment shall be 30 June 1996. (b) FedEx shall pay to the SBMA on or before 1 August 1996 and August 1st of each year thereafter during the term of this Agreement the difference between one million six-hundred-and-fifty thousand dollars (USD$1,650,000) and the actual amount paid during said preceding twelve-month period (fourteen months in the case of the first year) by FedEx to the SBMA for rentals on the Exclusive-Use Space as of the date of this Agreement, Landing Fees and Parking Charges under this Section 6.05. If the amount paid by FedEx in rentals on the Exclusive-Use Space as of the date of this Agreement, Landing Fees and Parking Charges during said period exceeds USD$1,650,000, no payment under this Section 6.05 shall be owing for said period. (c) Once FedEx has paid to the SBMA a cumulative amount equal to or exceeding USD$11,550,000 in rentals on the Exclusive-Use Space as of the date of this Agreement, Landing Fees and Parking Charges under this Section 6.05, the obligations of FedEx hereunder shall expire. (d) If an event of termination set forth in Section 11.03 hereof shall occur, FedEx's obligations under this Section 6.05 shall expire. SECTION 6.06. Payment Provisions; Interest on Overdue Payments. (a) Landing Fees and Parking Charges shall be due and payable as stated in Sections 6.02 and 6.04 hereof and rental payments and other charges shall be due and payable on invoice on the first day of each month unless otherwise agreed. Acceptance by the SBMA of any payment does not preclude the SBMA from verifying the accuracy of FedEx's calculations and from refunding or recovering any difference established by the SBMA. (b) Any payment due and not received by the due date accrues interest at the rate of twelve percent (12%) per annum, which shall be compounded monthly until full payment is remitted. Interest on disputed amounts will not be charged to FedEx if the dispute is resolved in FedEx's favor in whole or in part. SECTION 6.07. Vendor Carriers. Aircraft of Vendor Carriers shall pay Landing Fees and Parking Fees equal to those set forth in Appendix E. The MGTOW of all aircraft of Vendor Carriers shall be counted in determining the landed weight for the purpose of calculating Landing Fees for FedEx aircraft. FedEx shall pay the Landing Fees and Parking Charges of Vendor Carriers and all such payments shall be applied to any amounts committed by FedEx to the SBMA under Section 6.05. SECTION 6.08. Exempt Operations. Non-revenue flight operations conducted by FedEx shall not be subject to Landing Fees. Non-revenue flight operations shall include only flights that (i) immediately return to the Airport because of mechanical, meteorological, or other precautionary reasons, or (ii) sightseeing, test, ferry, courtesy, inspection or training flights; provided, however, all such flights designated in (i) and (ii) above that exceed ten (10) in any calendar month shall not be considered non-revenue flights. 15 16 SECTION 6.09. Domestic Flight. Any aircraft operation at the Airport by FedEx or a Vendor Carrier where the location of departure before arriving at the Airport is another location in the Philippines shall be considered a domestic operation, according to international standards, and Landing Fees and Parking Charges for domestic flights shall apply. ARTICLE 7 FEDEX'S ADDITIONAL RESPONSIBILITIES SECTION 7.01. Reporting. FedEx will file with the SBMA information describing its operations at the Airport not later than 30 days after the Operation Date. FedEx will update this information within 60 days after the beginning of each fiscal year of FedEx. The report will be limited to the following: (i) Names, addresses and telephone numbers of FedEx officials responsible for various major FedEx functions at the Airport including station operations, flight operations, scheduling, properties, facilities, and similar information; (ii) A general description of FedEx's operations, including number of employees and employee parking requirements; and (iii) Such other information as the SBMA shall reasonably request. SECTION 7.02. Maintenance. FedEx has the following maintenance, repair, and alteration responsibilities. FedEx will at its sole expense and in a manner acceptable to the SBMA: (i) Maintain the Apron Area in a neat, clean, and orderly condition free from litter, debris, refuse, petroleum products, or grease that may result from the activities of FedEx's employees, licensees, invitees, agents, or suppliers. All oil and grease spills attributable to FedEx's or Vendor Carriers' aircraft or equipment will be removed promptly. The SBMA shall undertake all other general maintenance of the Apron Area. (ii) Assume the entire responsibility and shall relieve the SBMA from all responsibility for all repair, rebuilding and maintenance whatsoever of the Exclusive-Use Space and all personal property, equipment and fixtures associated therewith, whether such repair, rebuilding or maintenance be ordinary or extraordinary, partial or entire, inside or outside, foreseen or unforeseen, structural or otherwise, including, without limitation: 1. Repair of all personal property and equipment, including fixtures, doors, interior windows, package conveyors and belts, floor coverings, and counters; and 2. Maintenance and repair of all electrical, plumbing, heating, ventilating, and air conditioning appliances and fixtures. 16 17 Any amounts expended by FedEx for the repair of the Exclusive-Use Space shall reduce the amount of the Commitment set forth in Section 6.05 for the year in which such repair are made; provided (i) such reduction in the committed amount shall not limit, affect, or alter FedEx's obligations to make payments hereunder (other than payments under the Commitment) and such payments for repair shall not be credited against Landing Fees, Parking Charges, rent or other sums due hereunder; (ii) FedEx shall not commence making such repairs without first giving the SBMA at least twenty (20)-days' notice, or such shorter notice as time and circumstances permit in the case of emergency repairs, and the opportunity to make such repairs at the expense of the SBMA in which case FedEx shall receive no credit against the committed amount hereunder, and (iii) the term 'repairs as used in this subparagraph shall encompass expenditures reasonably necessary to repair damages to the Exclusive-Use Space which must be repaired to make the space functional for the use intended by FedEx; and the term shall not include capital improvements undertaken by FedEx. (iii) Immediately repair any damage in any other space at the Airport caused by the fault or negligence of FedEx, its servants, contractors, agents, licensees, or employees; (iv) Provide and maintain all fire protection and safety equipment of every kind and nature required in the Exclusive-Use Space by any Applicable Law; and (v) Ensure that the SBMA has emergency access to FedEx's Exclusive-Use Space either by delivering keys to the SBMA's representative or by providing emergency telephone numbers by which FedEx or its agent can be reached on a 24-hour basis. SECTION 7.03. Security. (a) FedEx will comply with all Applicable Laws relating to Airport security imposed from time to time by the SBMA and cooperate in controlling the Exclusive-Use Space so as to prevent or deter unauthorized access to the restricted areas of the Airport. FedEx will provide its own internal security for its Exclusive-Use Space and, subject to the provisions of Section 12.04 of this Agreement, shall have the ability to hire its own employees to provide said service or contract with an outside party, including the SBMA, to provide such security. (b) FedEx agrees that neither its employees nor its contractors may carry firearms on the Exclusive-Use Space without the consent of the SBMA. The SBMA shall not unreasonably withhold consent to a request by FedEx that FedEx- employed security personnel be permitted to carry firearms. (c) To assist FedEx in its security obligations under this Agreement, the SBMA agrees, to the extent permitted by Applicable Law, to provide FedEx access to Navy employment records (where existing) and current NBI clearances for each applicant that FedEx interviews that is on the SBMA Labor Pool Inventory. SECTION 7.04. Abandonment. During the term of this Agreement, FedEx shall maintain and occupy the Exclusive-Use Space and maintain its Air Transportation business and shall not abandon or vacate the same. SECTION 7.05. Additional Obligations of FedEx. (a) FedEx shall conduct its business and operations at the Airport in an orderly, proper, safe and careful manner consistent with international industry practice and use its best efforts so as to not annoy, disturb or be offensive to others at the Airport and to minimize jet- or prop- blast interference to aircraft operations or buildings or structures at the Airport. 17 18 (b) FedEx agrees that it will not erect, construct or maintain or otherwise create or continue any obstacle or park or store any aircraft or other object on the Apron Area so as to create any obstacle that will hamper or interfere with the free, orderly, unobstructed and uninterrupted passage of vehicles, aircraft or of the wings or other integral part of aircraft of any type, nature or description, while such vehicle is operating or aircraft is taxiing or being transported or towed along runways, taxiways and roads outside of and adjacent to the Apron Areas; provided, however, that enforcement of this provision is subject to the priority rights of FedEx to the Preferential Aircraft Apron and with the full knowledge of the SBMA that certain ICAO airport standards cannot be met at the Airport due to space limitations and FedEx shall not be held to same. (c) FedEx shall not do or permit to be done anything which may interfere with the effectiveness or accessibility of the drainage and sewerage system, water system, communication systems, electrical system, fire protection system, sprinkler system, if any, installed or located on, under or in the Exclusive-Use Space or Apron Areas save and except for actions which are normal and acceptable in the conduct by FedEx of its business. (d) Recognizing the physical limitations and constraints of the Airport, FedEx shall not do or permit to be done any act or thing outside of its standard operating procedures or industry standards as applied in similar locations which will invalidate or conflict with any fire insurance, extended coverage or rental insurance policies covering the Airport System, or any part thereof. (e) FedEx shall not use or permit the use of the Exclusive-Use Space for the sale of tickets to the general public for passenger air transportation. Nothing herein shall in any manner be considered a limitation on the ability of FedEx to sell cargo transportation services in the SBF, the Philippines or any other location. (f) FedEx shall comply with the rules and regulations of any government body having jurisdiction over the Airport as to the lighting, physical description and location of all exterior advertising and signs on the Airport. So long as FedEx complies with said rules and regulations, FedEx may install advertising and signs at its discretion on the exterior of the Exclusive-Use Space and in the Exclusive Ramp. FedEx shall have the right to install advertising and signs elsewhere on the Airport and at other locations in the SBF with the prior approval of the SBMA or other applicable government body. Approval shall be deemed given if the SBMA or such applicable government body fails to approve or disapprove a request for advertising or signage within seven (7) calendar days of such request. Upon the termination of this Agreement or any approval for advertising or signage, FedEx shall remove, obliterate or paint out any and all signs and advertising on the Airport or the SBF and shall restore the location of such advertising or signage to good condition. The SBMA shall consult with its tenants prior to enacting any rule or regulation governing advertising or signage and shall give due consideration to the comments of said tenants. All advertising or signage that violates any rule or regulation promulgated by the SBMA after the same has been erected shall be permitted to remain in place. (g) FedEx shall use its best efforts to avoid committing any unlawful nuisance, waste or injury on the premises and shall operate the premises in accordance with the highest standards and in such manner that there will be at all times a minimum of air pollution, water pollution or any other type of pollution and a minimum of noise emanating from, arising out of or resulting from the operation, use or maintenance of the premises. (h) FedEx shall use its best efforts to cause its Vendor Carriers to comply with this Section 7.05. 18 19 ARTICLE 8 THE SBMA'S RESPONSIBILITIES SECTION 8.01. Airport Operations. (a) During the term of this Agreement, the SBMA will: (i) Obtain and maintain all certification required by the Philippine government, the FAA and applicable international organizations to operate the Airport, all in accordance with international standards for the operation of airports; (ii) Operate and maintain the Airport in good condition and repair including the runways, taxiways, aprons, roadways, vehicle parking areas, public areas of the terminal buildings, and all appurtenances, facilities, and services, and shall keep the Airport and its aerial approach free from obstruction and interference for the safe and proper use thereof; (iii) Use all rents and fees collected in respect of the Airport only for Airport operating expenses, debt obligations and other financial obligations of the SBMA in connection with the Airport; (iv) Keep the public areas of the Airport adequately equipped, furnished, and decorated, as well as clean and presentable. In the public areas of the Airport, the SBMA will provide and supply directional and informational signs, electricity, light, power, air conditioning, wastewater disposal, water, and janitorial services, including rubbish removal. (v) Excluding the Exclusive-Use Space, maintain existing and future utility systems on the Airport in reasonable condition and repair, including, electricity, fire alarm, fire protection, sprinkler, air conditioning, telephone, telegraph, and other telecommunication services, and any lines, pipes, mains, wires, conduits and equipment connected with or appurtenant to all those systems. (vi) Maintain, operate and annually test emergency systems and procedures to ensure safe, uninterrupted operation of the Airport. (b) The SBMA will use its best efforts to restore service as soon as practical after any interruption in the services described in this Section 8.01. (c) In the event the SBMA determines to make capital improvements at the Airport, the SBMA agrees that it will not increase the rents and fees charged to FedEx under this Agreement in respect of said capital improvements without the consent of FedEx. SECTION 8.02. Fuel Supply. The SBMA will make reasonable efforts to enter into appropriate agreements with vendors to ensure that adequate fuel, fuel storage and pipeline access will be available to Airlines operating at the Airport at market rates. In the event that the fuel supply is interrupted for any reason, FedEx and the SBMA shall each endeavor to obtain a new fuel supply at similar rates of service and cost as the old supply, and failing to 19 20 obtain such new supply of fuel within fifteen (15) days, FedEx's sole remedy shall be to terminate this Agreement immediately on notice to the SBMA. SECTION 8.03. Telecommunications. (a) The SBMA will make reasonable efforts to cause Telecom Vendor to provide telecommunication services to FedEx at the Airport. Charges to FedEx for use of the local exchange (and international calls) provided by Telecom Vendor, which FedEx hereby agrees to use, shall be as agreed between the SBMA and Telecom Vendor in that certain Agreement between them dated 29 June 1994, subject to such reasonable annual increases as the SBMA may grant to Telecom Vendor. The SBMA will make reasonable efforts to cause Telecom Vendor to: (i) provide cable connections that meet FedEx's specifications at Exclusive-Use Space leased by FedEx; (ii) redo trunk routing where required to satisfy FedEx's requirements; and (iii) provide FedEx at the Exclusive-Use Space on the Operation Date a minimum number of 100 telephone lines, and on demand such additional number of lines required by FedEx in the future. All telephone lines will be connected to a public exchange with IDD access. FedEx shall have the ability to operate a back-up communication system through Telecom Vendor in accordance with Section 4.01 hereof; or, when Applicable Law permits, the SBMA shall authorize FedEx to operate its own international gateway telecommunications systems, for FedEx's private use and not for resale to the public. (b) The SBMA will make reasonable efforts to ensure that FedEx can obtain, by no later than 1 February 1994, licenses to operate (i) ground-to-air radio communications, and (ii) a portable radio system at the Airport and the environs of the Subic Bay Freeport Zone. (c) In the event that (i) there are outages with telecommunication services provided by Telecom Vendor or such services are not adequate for any reason, or (ii) the radio license in Section 8.03(b) is revoked or otherwise not usable, FedEx and the SBMA shall each endeavor to obtain a new provider of telecommunication services at similar or better rates of service and cost as Telecom Vendor, and failing to obtain such new provider within fifteen (15) days, FedEx's sole remedy shall be to terminate this Agreement immediately on notice to the SBMA. SECTION 8.04. Vendor Selection, Licensing and Permitting. (a) FedEx shall have the right to contract with those vendors of its choosing. FedEx shall attempt to contract with vendors suggested by the SBMA, but where such vendors do not, in the sole opinion of FedEx, meet FedEx standards, FedEx shall contract with any vendor of its choosing. (b) Subject to applicable the SBMA rules and regulations the SBMA will provide vendors and employees of vendors selected by FedEx with licenses and other credentials required by the SBMA, including gate passes and other documentation required to access the Airport, within one week of notification by FedEx to the SBMA of such selection. In the event a vendor is to supply FedEx with fifty (50) or more personnel, FedEx shall notify the SBMA and together the parties shall agree on the length of time required by the SBMA to provide the required licenses and credentials, time being of the essence. SECTION 8.05. Aircraft Recovery Plan. (a) The SBMA shall maintain, update annually (or more frequently as required) and implement an aircraft recovery plan that will detail, among other things, the manner in which the SBMA will cause appropriate size cranes to be present at the Airport in the event the recovery of an aircraft is required. The SBMA shall acquire or make arrangements for on-call access to all equipment required to comply with such aircraft recovery plan and conduct such training as to ensure that its employees have the skill levels necessary to execute the plan. 20 21 (b) If any aircraft owned or operated by FedEx, through accident or any other reason, is disabled or abandoned in any area on the Airport which could interfere with the continuous, normal operations or any landing and field facilities, the SBMA will: (i) Make reasonable efforts to immediately remove the aircraft to a location designated by the SBMA, unless the aircraft is required to remain in place pending investigation by the appropriate regulatory agencies of the Philippine government; and (ii) In the event of any accident where governmental investigation in place is required, immediately, upon receiving clearance to do so from the governmental agency investigating such accident, make reasonable efforts to remove the aircraft and any resulting wreckage or debris to the area designated by the governmental agency authorizing the removal; otherwise the aircraft wreckage and debris will be immediately removed from the Airport and stored at a location approved by the SBMA. (c) FedEx will reimburse the SBMA for all reasonable costs and expenses (including storage costs) incurred in the removal. (d) FedEx shall have no liability to the SBMA arising out of the SBMA's failure to remove an aircraft covered by this Section 8.05 if the SBMA shall have failed to make available for the SBMA's use sufficient and adequate removal equipment. SECTION 8.06. Power. (a) On or before the Operation Date, the SBMA will cause sufficient power to be delivered to the Airport to ensure that, despite a loss of power, (i) power needs required to operate at the Airport electronic equipment vital for continued flight operations, including navigational aids, are met; and (ii) electronic equipment required by FedEx to operate its Air Transportation business will continue to operate. The SBMA shall meet its commitment hereunder by rebuilding and upgrading the primary link from the nearest substation to the Airport and locating a back-up generator of sufficient power at or near the Airport. The SBMA shall also use its reasonable efforts to deliver to the Airport, as soon as is reasonably practical, a second independent routing of power from the nearest substation to the Airport as a back-up. (b) The SBMA shall deliver to FedEx a grid layout of the power system for the Airport and major power lines serving the Airport, and will provide to FedEx, at no cost to FedEx, from the SBMA's equipment inventory operational back-up generators at FedEx's Exclusive-Use Space to meet FedEx's emergency power requirements. FedEx shall install, operate and maintain the generators at FedEx's sole cost and expense. (c) The SBMA shall ensure that there is sufficient power at the Exclusive-Use Space for FedEx to conduct the construction work it needs to complete prior to the Operation Date. FedEx shall provide the SBMA with FedEx's power requirements for such construction along with a timetable for same. SECTION 8.07. Electricity. The SBMA shall, directly or by arrangement with appropriate utility companies or suppliers, supply FedEx with electrical current in such quantities, voltages, and phases as FedEx shall reasonably require. FedEx shall pay the SBMA for all such utility services that FedEx uses at rates that shall not exceed the then current rates charged from time to time to corporate customers by Metro Manila power authorities subject to government rate review. 21 22 SECTION 8.08. Airport Parking. The SBMA shall construct, operate and maintain during the term of this Agreement parking facilities for Airline employees working on the Airport, and will provide a reasonable amount of parking at the Airport for FedEx employees, at no charge to FedEx. The SBMA and FedEx shall mutually agree on the issue of how much parking can be made available from time to time. FedEx agrees that it will be responsible for installing and maintaining fencing to secure the parking area designated by the SBMA for FedEx employees. SECTION 8.09. Airport Security. (a) The SBMA shall develop, maintain, update annually (or more frequently as required) and implement a security plan for the Airport operations area. The SBMA shall continuously operate and provide security at the Airport under and in strict accordance with said plan and shall advise FedEx in advance and consult with FedEx on any changes in same. (b) The SBMA shall have the sole obligation to provide all necessary personnel to provide adequate security protection on the Airport (excluding FedEx's Exclusive-Use Space) and will adequately secure the Airport operations area before and after the Operation Date, including, without limitation the installation and maintenance of fencing and gates on the perimeter of the Airport Operations Area which shall be completed on or before 1 April 1995. All gates to the Airport shall be manned by the SBMA security personnel. The SBMA will cause gates convenient to FedEx to be manned on a 24-hour basis. SECTION 8.10. Customs Operations. The SBMA acknowledges that the implementation of a customs operations on the Airport is critical to the successful operation of FedEx's Air Transportation business at the Airport. Therefore, the SBMA and FedEx agree to cooperate with appropriate customs officials of the Philippine government to (i) establish, on or before the Operation Date, a customs operation on the Airport that meets FedEx's operational needs at the Airport and, (ii) ensure that customs clearance procedures at the Airport, the SBF checkpoints and the Exclusive-Use Space are continually improved and updated. It is the intent of the parties to work toward implementing at the SBF and the Airport the most accurate and fast clearance procedures at the least amount of cost. SECTION 8.11. Training. The SBMA will assist FedEx in meeting its initial and continuing training requirements for current and future employees. The SBMA will provide, where possible, access to the SBMA facilities, at no cost to FedEx, for employee training classes. The SBMA will work with FedEx to develop personnel development programs for Olongapo residents to better prepare said residents for jobs FedEx offers, or may offer in the future. SECTION 8.12. Transportation. Subject to the provisions of Section 12.04 of this Agreement, FedEx shall have the ability to provide transportation services on the Airport to its employees, either directly or through vendors. In the event that the SBMA operates or licenses a common carrier to operate a transportation service, the SBMA will require that carrier to provide services to the Airport area at non-discriminatory rates. SECTION 8.13. Permit to Operate. The SBMA shall issue to FedEx on or before the Operation Date, a permit to operate or such other certifications, permits or authorizations the SBMA requires of enterprises before they can commence business in the SBF. SECTION 8.14. Registration. To the extent registration is possible, immediately following the execution and delivery of this Agreement, the SBMA shall cause this Agreement to be registered with the relevant Registry of Deeds at SBMA's cost and shall provide FedEx with proof that such registration has been completed. 22 23 SECTION 8.15. Laydown Area. In the event FedEx shall require a laydown area in the conduct of its construction work on the Exclusive-Use Space or any other facility, including the facilities covered under the option granted herein to FedEx, the SBMA shall provide an area sufficient to meet FedEx requirements without charge to FedEx for the duration of FedEx's construction; provided that Airport operations are not interfered with thereby. SECTION 8.16. The SBMA Programs. From time to time the SBMA may develop plans and programs to benefit the SBF, the surrounding communities and the people residing or employed therein. FedEx recognizes that the SBMA is developing a reasonable and sustainable Provident Fund program for the benefit of all employees within the SBF and agrees to subscribe thereto provided that substantially all employers within the SBF are required on a non-discriminatory basis to participate therein. FedEx agrees to carefully consider its voluntary participation in any other such plans or programs. ARTICLE 9 INDEMNIFICATION, INSURANCE, AND SUBROGATION SECTION 9.01. General Indemnification. FedEx will indemnify, hold harmless, and defend the SBMA, its officers, agents, and employees from claims, actions, and liabilities of any nature or kind, including costs and expenses, for or on account of any and all legal actions or claims of any character whatsoever based upon or arising out of FedEx's use and occupancy of the premises and exercise of rights under this Agreement. All liability or costs for legal actions or claims including defense costs resulting from death or injury to any person(s) or damage to property which are caused by the joint negligence of the SBMA and FedEx arising out of this Agreement will be apportioned on a comparative fault basis. FedEx s obligations to indemnify, hold harmless and defend under this Section 9.01 shall apply to claims, actions and liabilities of any nature or kind arising out of the use and occupancy of the premises by Vendor Carriers operating by way of wet lease, dry lease or straight charter. SECTION 9.02. Environmental Indemnification. (a) The SBMA shall not be liable for and FedEx agrees to hold harmless, indemnify, and defend the SBMA from any and all claims, fees, costs, penalties and charges assessed against or imposed upon the SBMA, including attorneys' fees and costs, as a result of FedEx's or Vendor Carriers' use, dispensing, handling, storage, transpiration, generation, sale, disposal, release or discharge of hazardous materials, including but not limited to, costs and expenses incurred in connection with any investigation, cleanup, or remedial, removal or restoration work in or about the Airport or other place required by any Applicable Law or standard because of hazardous materials that came or otherwise emanated from FedEx's or Vendor Carriers' use of the Exclusive-Use Space, Apron Areas or the Airport, or environmental damages to the Airport and its environs resulting therefrom. (b) The SBMA will indemnify, defend and hold harmless FedEx, its officers, directors, employees and agents from any and all claims, fees, costs, penalties and charges assessed against or imposed upon FedEx, including attorneys' fees and costs, as a result of all other environmental damages to the Exclusive-Use Space, the Apron Areas, the Airport and its environs, whether or not known as of the Effective Date of this Agreement. (c) A Phase I and Phase II environmental impact study on the Exclusive-Use Space and Apron Areas to be used by FedEx has been conducted by Dames and Moore who have issued a report thereon, the receipt of which both the SBMA and FedEx acknowledge. Said report will provide the baseline for determining liability under this Section 9.02. 23 24 SECTION 9.03. Insurance. (a) The SBMA will, during the term of this Agreement, procure and maintain comprehensive general liability and fire and extended coverage insurance for the Airport, terminal buildings, and other the SBMA facilities at the Airport, in such amounts and for such insured coverages as may be required to obtain the certifications required under Section 2.01(d) hereof. (b) FedEx will, during the term of this Agreement, procure and maintain liability insurance for public liability, aviation liability, premises, property damage, bodily injury and death, with contractual liability endorsements insuring all of FedEx's operations under this Agreement, including its obligations under the indemnity clause in Section 9.01 of this Agreement. These policies will be with limits not less than those set forth below. These policies and minimum limits will be consistently applied to all Airlines with similar operations and will be consistent with prudent airport industry practices and this Agreement.
Insurance Coverages Minimum Limits Airline/Aircraft/Airport $50,000,000 Public Liability Insurance or Equivalent Insurance $10,000,000 Combined Single Limit
(c) Each policy must provide that it may not be canceled or materially changed during its term without at least 30-days' advance written notice to the SBMA or FedEx, as appropriate. (d) A certificate certifying coverage of required insurance must be delivered to the other party within 30 days of the Operation Date of this Agreement. (e) Where any such policy has a normal expiration during the term of this Agreement, each party will provide to the other a certificate or satisfactory written evidence of continued coverage prior to such expiration. Prior to the effective date of any cancellation or reduction in the amount or extent of insurance coverage, each party will deliver to the other a certificate or satisfactory written evidence certifying coverage that reinstates or otherwise provides at least the required insurance coverage. (f) The failure by either party at any time to enforce the provisions in this Section will not be construed as a waiver of these provisions and will not reduce the other party's obligations under this Agreement. SECTION 9.04. Waiver of Subrogation. FedEx and the SBMA agree to waive their respective rights of recovery or claim against the other for any loss or damage to the Exclusive-Use Space, or their contents (excluding aircraft) resulting from fire or other "all-risk" insurable property hazards caused by the other. Notwithstanding Section 9.01, any fire or "all-risk" property insurance policies carried by either party will include a waiver of subrogation clause waiving any rights of subrogation against the other party to this Agreement. SECTION 9.05. Additional Insured. FedEx agrees that every insurance policy required under Section 9.03(b) will include an endorsement naming the SBMA as an additional insured. SECTION 9.06. Notice of Claim. Each party will give the other party prompt and reasonable notice of any claim or action involving this Agreement. 24 25 SECTION 9.07. Survival. The provisions of this Article shall survive the expiration, termination or early cancellation of this Agreement. ARTICLE 10 ASSIGNMENT OR SUBLEASE SECTION 10.01. Assignment or Sublease. (a) Assignment. Except as permitted herein, FedEx shall not sell, convey, transfer, mortgage, pledge or assign this Agreement without the advance written approval of the SBMA. The SBMA will approve an assignment or sublease of FedEx's Exclusive-Use Space or this Agreement in whole or in part, if: (i) It is made to an entity controlled by FedEx which entity shall carry on FedEx's Air Transportation business without any interruption or decrease in operations or, in the case of a sublease of partial space, it is to an entity whose presence within the Exclusive-Use Space is required to support FedEx's Air Transportation business; (ii) In the SBMA's reasonable opinion, the proposed assignment does not make a negative impact on the level or quality of operations at the Airport; and (iii) In the SBMA's opinion the proposed assignee or sublessee is qualified and capable to execute the Agreement and perform all obligations thereunder; provided, however, no such assignment or sublease shall be effective until an agreement in form and substance reasonably satisfactory to the SBMA has been entered into between FedEx, the proposed assignee or sublessee, and the SBMA which agreement shall contain provisions obligating the proposed assignee or sublessee to assume all the obligations of FedEx under this Agreement and warranting and confirming to the SBMA that FedEx shall not be relieved of liability under the Agreement and shall continue to be bound by all obligations under the Agreement. SECTION 10.02. Merger. This Article does not prevent the assignment of this Agreement to any corporation or business entity that merges or consolidates with FedEx so long as FedEx is the surviving entity, this Agreement remains in full force and effect and is binding on FedEx, and written documentation of the merger or consolidation is given to the SBMA within thirty (30) days after the merger or consolidation. SECTION 10.03. Assignment by the SBMA. (a) The SBMA reserves the right to pledge, assign, transfer or encumber any of its rights and interests under this Agreement to any entity with written notice to FedEx provided the SBMA shall continue to remain liable hereunder. (b) FedEx's consent to any such pledge, assignment, transfer or encumbrance shall not be required to effect same; provided, however, that no such pledge, assignment, transfer or encumbrance shall be effective with respect to FedEx until FedEx shall have received notice of same. (c) Certain of the obligations of the SBMA hereunder are not assignable as same are not capable of being performed by any entity other than the SBMA or the government of the Republic of the Philippines. The parties agree that any pledge, assignment, or transfer by the SBMA of any of its interest in an to this Agreement does not and cannot include those 25 26 obligations of the SBMA that only it can perform and that despite any such pledge, assignment or transfer, the SBMA shall remain primarily obligated in respect of same and FedEx shall look to the SBMA in any event for performance. ARTICLE 11 DEFAULT AND TERMINATION SECTION 11.01. Reentry and Reletting After Default. Upon the occurrence of any event specified in Section 11.05: (a) Without terminating this Agreement, the SBMA may immediately reenter, renovate, and relet all or part of the Exclusive-Use Space to others and reassign preferential aircraft parking positions to others for the account of FedEx. (b) At any time before or after a reentry and reletting as provided in this Section, the SBMA may terminate FedEx's rights under this Agreement, reenter and take possession of the Exclusive-Use Space, and cancel all rights and privileges granted to FedEx without any restriction on recovery by the SBMA for rents, fees and damages owed by FedEx. (c) In addition to the rights provided in this Agreement, the SBMA shall have any and all additional rights and remedies as provided by law. SECTION 11.02. Termination Due to Damage or Destruction. (a) If all or any portion of the Exclusive-Use Space is damaged by fire or other casualty, the SBMA will notify FedEx within thirty (30) days of the damage whether the damaged Exclusive-Use Space is to be repaired. If the damaged Exclusive-Use Space is to be repaired, the SBMA will repair the damage with due diligence and will abate the rent allocated to the particular building, room, or other portion of the Exclusive-Use Space rendered untenantable for the period from the occurrence of the damage to the completion of the repairs. The SBMA shall provide FedEx suitable temporary substitute space at a rental deemed reasonable by FedEx and the SBMA until the repairs are completed. (b) If the SBMA fails to notify FedEx within thirty (30) days after destruction that the SBMA will repair the damaged Exclusive-Use Space, FedEx may elect within one-hundred-and-twenty (120) days after destruction to: (i) Terminate this Agreement, in whole or as to the portion of the Exclusive-Use Space damaged or destroyed, effective on the date of the damage; or (ii) Continue this Agreement and repair such damage. During any such repair, rental shall be abated pro rata using the ratio of the area in need of repair to the total area in the Exclusive-Use Space. FedEx may abate Landing Fees, rental, and any other fees or charges due to the SBMA in respect of FedEx's cost of repair. (c) The remedies of FedEx, as set forth in Section 11.02(b), shall be its sole remedies for failure by the SBMA to give the notice specified in section 11.02(a); and FedEx shall have no claim against the SBMA as a result of the SBMA's election not to repair the damage. SECTION 11.03. Events Permitting Termination by FedEx. FedEx may terminate this Agreement only if: 26 27 (i) FedEx is prohibited by lawful authority from using the Airport because of any deficiency or unsafe operating condition at the Airport for a period exceeding fifteen (15) consecutive days unless the same shall result from any action or omission by FedEx. FedEx may terminate this Agreement immediately after said 15-day period by giving the SBMA written notice of such termination; (ii) FedEx is unable to fly aircraft to the Airport from major markets in Asia for any reason and such inability substantially impairs its ability to operate a hub operation at the Airport; or (iii) Rights granted to FedEx in the Philippines either by way of bilateral air treaty or otherwise are withdrawn, amended or otherwise limited so as to prevent it from operating its Asian Hub at the Airport through the use of Fifth Freedom change of gauge rights. (iv) The SBMA, its successor or any governmental entity of the Philippines passes a law, ordinance, regulation or other directive that, in the sole reasonable judgment of FedEx, makes it impossible for FedEx to conduct its business at the Airport. (v) Commencing after 1 October 1996, if, in the consecutive twelve (12)- month periods thereafter, FedEx or Vendor Carriers shall be required to divert more than four percent (4%) of their scheduled flights from SFS because of (i) weather conditions or (ii) operational deficiencies at the Airport which could have been remedied by the SBMA, not including acts or conditions caused by or constituting force majeure; provided, however, FedEx must exercise this right of termination on or before 1 November of each year or FedEx shall lose the right of termination for the immediately preceding 12-month period. (vi) The occurrence of such other right of termination expressly provided for in this Agreement. With respect to this Section 11.03 (ii), (iii) and (iv), termination may be effected by FedEx by giving the SBMA thirty (30)-days written notice of the date of such termination provided this Agreement shall continue in full force and effect if prior to the expiration of such 30-day period the event giving rise to the right of termination shall cease to exist. FedEx shall have no other rights or remedies against the SBMA other than the termination of this Agreement. SECTION 11.04. Default by the SBMA and Remedies Upon Default. (a) The SBMA shall be in default under this Agreement if it shall fail to perform any material covenant in this Agreement for a period of thirty (30) days after written notice from FedEx specifying such failure and declaring the SBMA to be in default. The SBMA will be deemed to have cured the default if the SBMA commences to cure the default within such 30-day period and diligently continues the cure to completion. (b) If a default by the SBMA shall have occurred and be continuing, FedEx shall have no right to terminate this Agreement but may, in its sole discretion: (i) Seek judicial relief against the SBMA for all damages incurred by FedEx as a result of such default, together with all other amounts and penalties that FedEx is entitled to recover under this Agreement, by law or in equity, together with all court costs, attorneys' fees and expenses incurred by FedEx. 27 28 (ii) Cure the default and the expense of FedEx's cure together with interest thereon at the rate equal to the lesser of two percent (2%) per month or the maximum rate permitted by law, shall be paid by the SBMA to FedEx. (iii) Seek injunctive relief against the SBMA. (iv) Require the SBMA to submit to binding arbitration in accordance with this Agreement. SECTION 11.05. Events Permitting Termination by the SBMA and Remedies of the SBMA. (a) Time being of the essence, the SBMA may terminate this Agreement immediately and exercise all rights of entry and reentry upon the Exclusive-Use Space after the occurrence of any of the following events: (i) FedEx fails to provide regularly scheduled Air Transportation to and from the Airport. (ii) FedEx fails to pay any rent, Landing Fee, Parking Charge or other fee due, including interest, within ten (10) days after FedEx's receipt of written notice of default from the SBMA. (iii) FedEx shall become insolvent or shall take the benefit of any present or future insolvency statute, or shall make a general assignment for the benefit of creditors, or file a voluntary petition in bankruptcy or a petition or answer seeking an arrangement or its reorganization or the readjustment of its indebtedness under the federal bankruptcy laws or under any other law or statute of the United States or any of any state thereof or the Republic of the Philippines, or consent to the appointment of a receiver, trustee, or liquidator of all or substantially all of its property. (iv) By order or decree of a court FedEx shall be adjudged bankrupt or an order shall be made approving a petition filed by any of its creditors or by any of the stockholders of FedEx, seeking its reorganization or the readjustment of its indebtedness under the federal bankruptcy laws or under any law or statute of the United States or of any state thereof, provided that if any such judgment or order is stayed or vacated within sixty (60) days after the entry thereof, any notice of cancellation shall be and become null, void and of no effect. (v) By or pursuant to, or under authority of any legislative act, resolution or rule, or any order or decree of any court or governmental board, agency or officer having jurisdiction, a receiver, trustee, or liquidator shall take possession or control of all or substantially all of the property of FedEx, and such possession or control shall continue in effect for a period of thirty (30) days. (vi) FedEx shall breach any of the covenants contained in Sections 4.02, 10.01, or 10.02 of this Agreement. (b) If a FedEx Event of Termination shall have occurred and be continuing, the SBMA may, in its sole discretion: 28 29 (i) Seek judicial relief against FedEx for all damages incurred by the SBMA as a result of such event of termination, together with all other amounts and penalties the SBMA is entitled to recover under this Agreement, by law, or in equity together with all court costs, attorneys' fees and expenses incurred by the SBMA. (ii) In the event that the letting or this Agreement shall have been terminated or in the event that the SBMA has re-entered, regained or resumed possession of the premises, all the obligations of FedEx under this Agreement shall survive such termination or cancellation, or re-entry, regaining or resumption of possession and shall remain in full force and effect for the full term of this Agreement, and the amount or amounts of damages or deficiency shall become due and payable to the SBMA to the same extent, at the same time or times and in the same manner as if no termination, cancellation, re-entry, regaining or resumption of possession had taken place. The SBMA may maintain separate actions each month to recover the damage or deficiency then due or at its option and at any time may declare all rent, Landing Fees, Parking Charges and other amounts payable under this Agreement during the remaining term of this Agreement immediately due and payable and sue to recover the full damages or deficiency less the proper discount, for the entire unexpired term. For the purposes of determining the amount in Landing Fees and other variable amounts payable under this Agreement, the average usage and traffic during the previous twelve (12) calendar months of operations shall be assumed to have continued for the remainder of this Agreement. (iii) By five (5)-days' written notice to FedEx, terminate this Agreement and retain all rent and other amounts previously paid by FedEx, such right of termination and the exercise thereof to operate as a conditional limitation. (iv) Cure the default and the expense of the SBMA's cure together with interest thereon at the rate equal to the lesser of two percent (2%) per month or the maximum rate permitted by law, shall be paid by FedEx to the SBMA as additional rent. (v) Seek injunctive relief against FedEx. (vi) Require FedEx to submit to binding arbitration in accordance with this Agreement. (vii) Whether or not the SBMA elects to terminate this Agreement, the SBMA may enter upon and repossess the premises and all other property leased or utilized by FedEx (said repossession being hereinafter referred to as "Repossession") by force, summary proceedings, ejectment or otherwise and may remove FedEx and all other persons and property therefrom. From time to time after Repossession, whether or not this Agreement has been terminated, the SBMA may, but shall not be obligated to, alter the premises or attempt to relet the Exclusive-Use Space and other property leased or utilized by FedEx in the name of the SBMA or otherwise, for such 29 30 term or terms (which may be greater or lesser that the period which would otherwise have constituted the balance of the term of this Agreement) and for such other uses as the SBMA, in its sole discretion, may determine, and may collect and receive rent therefor. Any rent received (net of expenses) shall be applied against FedEx's obligations hereunder, but the SBMA shall not be responsible or liable for any failure to collect any rent due upon such reletting. (c) No acceptance by the SBMA of rentals, Landing Fees or other payments, in whole or in part, for any period or periods after a default of any of the terms, covenants and conditions hereof to be performed, kept or observed by FedEx shall be deemed a waiver of any right on the part of the SBMA to terminate the letting, except that no claim of default for non-payment shall be asserted with respect any installment of rental, Landing Fee, Parking Charge or other payment to the extent the same has been accepted by the SBMA. (d) The rights upon termination described above shall be cumulative and shall be in addition to any other rights of termination provided in this Agreement and in addition to any rights and remedies that the SBMA would have at law or in equity consequent upon any breach of this Agreement by FedEx, and the exercise by the SBMA of any right of termination shall be without prejudice to such other rights and remedies. (e) The SBMA may not exercise any right to terminate this Agreement based upon a breach by FedEx of the covenants contained in Section 4.02 unless notice of the breach is given by the SBMA to FedEx and FedEx shall not have cured the breach within thirty (30) days of such notice. SECTION 11.06. Default by FedEx and Remedies Upon Default. (a) FedEx shall be in default under this Agreement, if it shall fail to perform any covenant in this Agreement, other than the covenants encompassed in Section 11.05, for a period of thirty (30) days after written notice from the SBMA specifying such failure and declaring FedEx to be in default. FedEx will be deemed to have cured the default if FedEx commences to cure the default within such 30-day period and diligently continues the cure to completion. (b) If a default by FedEx shall have occurred and be continuing, the SBMA shall have no right to terminate this Agreement, but may, in its discretion, exercise any other right provided for in Section 11.05. SECTION 11.07. Surrender of the Exclusive-Use Space. The SBMA is not required to give FedEx notice to quit possession of the Exclusive-Use Space at the expiration of this Agreement. Upon the expiration or termination of this Agreement, the SBMA has the right to take possession of the Exclusive-Use Space. FedEx agrees to surrender the Exclusive-Use Space peaceably and in good condition, except for reasonable wear and tear. SECTION 11.08. Holdover. If FedEx holds over without a written renewal after the expiration of this Agreement, the holding over does not operate as a renewal or extension of the term of this Agreement but only creates a month to month extension of this Agreement regardless of any rent or fee payment accepted by the SBMA. The obligations of the SBMA and FedEx to perform under this Agreement continue until the month to month holdover is terminated. Either party may terminate the holdover at any time by giving the other party at least thirty (30)-days' advance written notice. 30 31 ARTICLE 12 COMPLIANCE WITH LAWS, TAXES, AND POLICIES SECTION 12.01. Compliance With Laws. The SBMA will comply with all Applicable Laws. SECTION 12.02. Taxes. (a) FedEx will pay all taxes (including any possessory interest tax, assessment, or similar charge) that at any time during this Agreement are levied or liened against FedEx, it being understood and agreed that there shall at no time be taxes, duties or other imposts levied against the Airport facilities made available for FedEx's exclusive use, or against FedEx's personal property except in accordance with Republic of the Philippines Act No. 7227. (b) Except as shall be permitted in sub-paragraph (a) above, in the event the SBMA shall obtain taxing authority, the SBMA shall levy no discriminatory taxes, charges or imposts of any nature against FedEx or any subsidiary or affiliate of FedEx other than those it may lawfully levy on SBF-Registered Enterprises. (c) FedEx will indemnify and defend the SBMA from all costs that result directly or indirectly from tax or assessment that FedEx is liable for including taxes, penalties, expenses, and reasonable attorneys' fees incurred by the SBMA. (d) At its own expense, FedEx may contest the amount or validity of any tax or assessment or similar charge, or contest the inclusion of the space leased under this Agreement as taxable or assessable property directly with the taxing or assessing authority. FedEx will indemnify the SBMA for all taxes, penalties, costs, expenses, and reasonable attorneys' fees incurred by the SBMA resulting directly or indirectly from any tax contest. (e) Upon termination of this Agreement, FedEx will promptly pay in full all due and payable taxes and liens. SECTION 12.03. Policies. (a) FedEx will comply with all Applicable Laws governing the use of Airport facilities. The SBMA shall consult with FedEx prior to promulgating any law, regulation, directive, policy or procedure that could make a material and adverse impact on FedEx and its operations at the SBF, and the SBMA shall give due consideration to the comments of FedEx in respect of same. (b) The SBMA agrees not to promulgate any regulations governing use of the Airport Facilities, the SBMA Policies and Procedures, or local Airport directives as set forth by the SBMA contradictory to: (i) this Agreement; (ii) any regulation of the FAA; (iii) any U.S. government agency regulation that is binding upon FedEx. SECTION 12.04. Labor. (a) Where vendors selected by FedEx are from outside the Olongapo area, FedEx shall include in purchase contracts with such vendors an obligation on the part of each vendor to hire persons listed in the SBMA Labor Pool Inventory in accordance with the limitations and procedures set forth in Section 12.04(b) below. (b) FedEx shall hire and shall make reasonable efforts to cause its vendors to hire employees at the Airport and in the area controlled by the SBMA in accordance with FedEx's and such vendors specifications and requirements. FedEx will endeavor, and make reasonable efforts to cause its vendors to endeavor, to first hire its requirements from the SBMA Labor Pool Inventory. Where qualified or acceptable applicants do not exist in the SBMA Labor Pool Inventory, FedEx and its vendors may hire their personnel requirements from any source they deem appropriate. 31 32 (c) The SBMA will assist FedEx in obtaining exemptions or waivers to current labor regulations that: (i) restrict women from working night hours, and (ii) require understudies for foreign employees. ARTICLE 13 AGREEMENT NOT TO GRANT MORE FAVORABLE TERMS SECTION 13.01. Agreement Not to Grant More Favorable Terms. If the SBMA enters into any lease or agreement with any other international cargo carrier prior to the termination date of this Agreement which provides for (i) rent per square meter for space substantially similar to the Exclusive-Use Space, (ii) landing fees, or (iii) telecommunications services to be provided by Telecom Vendor, any of which are less than the comparable amounts charged hereunder, then the SBMA shall notify FedEx to such effect and offer to amend the applicable terms of this Agreement to reduce the applicable rate, fee or charge to the level provided in said other lease or agreement, effective the date on which such rate, fee or charge becomes payable under said other lease or agreement. ARTICLE 14 GENERAL PROVISIONS SECTION 14.01. Delivery of Notices. Required notices must be hand delivered, or sent by registered or certified mail, or by Federal Express service to the addresses below: If to the SBMA: Subic Bay Metropolitan Authority Attention: Chairman and Administrator SBMA Centre, Bldg. 229 Waterfront Road Subic Bay Freeport Zone Philippines with copy to: Subic Bay Metropolitan Authority Attention: Head - Legal Department SBMA Centre, Bldg. 229 Waterfront Road Subic Bay Freeport Zone Philippines If to FedEx: Federal Express Corporation Attention: Vice President - Properties and Facilities 2003 Corporate Avenue Memphis, Tennessee 38132 with copy to: Federal Express Corporation Attention: Vice President - Legal Two Pacific Place, 34F 88 Queensway Road Central, Hong Kong 32 33 (b) If notice is given in any other manner or at any other place, notice must also be given in writing at the place and in the manner specified in this Section in order to be effective under this Agreement. All notice periods begin on the date of delivery of written notice at the address listed in Section 14.01(a) except as provided elsewhere in this Agreement. (c) Either party may change the address in this Section by written notice to the other party. SECTION 14.02. Quiet Enjoyment. Upon payment of the required rents and fees, and subject to its performance of this Agreement, FedEx may peaceably use the Exclusive-Use Space and the Airport during the term of this Agreement and any renewal thereof. SECTION 14.03. Officers, Agents, and Employees. No commissioner, politician, director, officer, agent, employee, or other representative of either party may be charged personally nor held contractually liable by the other party for the enforcement, attempted enforcement, or breach of this Agreement. The SBMA and FedEx remain liable for the acts of these persons that are within the scope of their duties. SECTION 14.04. Subordination to Agreements with the Philippine and U.S. Government. This Agreement is subject to any present or future agreement between the SBMA and the Government of the Republic of the Philippines or the United States of America concerning the operation or maintenance of the Airport System. FedEx may not hold the SBMA liable for any failure to perform any part of this Agreement as a result of any national emergency declared by the U.S. or Philippine government. SECTION 14.05. Incorporation of Required Provisions. The parties agree to incorporate into this Agreement any provision required by any governmental agency, including the SBMA acting in its non-proprietary capacity, now or in the future. SECTION 14.06. Non-Waiver of Rights. No waiver of default of any part of this Agreement by either party may operate as a waiver of any subsequent default of any part of this Agreement that is to be performed by the other party. Consent or notice by either party may not be construed as consent or notice in the future. SECTION 14.07. Force Majeure. Neither the SBMA nor FedEx will be in violation of this Agreement if it is prevented from performance, nor shall FedEx be entitled to any abatement, diminution or reduction of the rental, Landing Fees, Parking Charges or other charges hereunder or otherwise expressly set forth herein, nor entitled to exercise any right of termination herein provided, by reason of strike, boycott, labor dispute, embargo, shortage of energy or materials, act of God, act of public enemy, act of superior governmental authority, weather condition, riot, rebellion, sabotage, or any other circumstance for which it is not responsible and which is beyond its control, whether foreseen or unforeseen. SECTION 14.08. Contract Interpretation. The headings of articles and sections are used only for convenience and reference, and may not be used to define or interpret the scope or intent of this Agreement. The language in all parts of this Agreement must be construed according to its fair meaning and not strictly for or against either the SBMA or FedEx. SECTION 14.09. Philippine Aviation Laws. This Agreement shall not be construed to grant FedEx any exclusive right or privilege within the meaning of the aviation laws of the Philippines, as amended, except that FedEx has the right to exclusive possession of its Exclusive-Use Space. 33 34 SECTION 14.10. Radio Interference. At SBMA's request, FedEx will stop using any machine or device that interferes with any government operated transmitter, receiver, or navigation aid until the cause of the interference is eliminated. SECTION 14.11. Management Audits. The SBMA will conduct periodic management and operation audits of the Airport and will take these audits into consideration in managing the Airport. SECTION 14.12. Governing Law. This Agreement is governed by the laws of the Philippines. SECTION 14.13. Arbitration. (a) Any dispute arising out of or in connection with this Agreement shall be referred to arbitration under the Arbitration Rules of the United Nations Commission on International Trade Law. (b) The venue for the arbitration shall be Hong Kong or such other location as the parties shall mutually agree. (c) There shall be three arbitrators, each party selecting one arbitrator and the two designees shall select a third. (d) The parties agree to submit to written and oral interrogatories. The parties may submit such written evidence as they deem appropriate, but discovery of written materials shall not be permitted. (e) Arbitration hearings shall commence within ninety (90) days of a written request for same and a final arbitral award must be passed down in writing no later than eighteen (18) months from the date of such request. If the arbitrators deem that failure to meet these deadlines is due substantially to the fault of one party, the arbitrators shall award to the other party its costs, including arbitration expenses and reasonable legal fees, but not travel costs. (f) Proceedings shall be in the English language and where required the procedural laws of Hong Kong or such other location as shall be mutually agreed shall apply. (g) Each party shall bear its own costs. The expense of arbitration, including fees paid to arbitrators, shall be split between the parties equally. (h) The parties expressly agree and acknowledge that a judgment of any court with jurisdiction over the relevant party may be entered upon the arbitral award and each of the parties hereby waives all rights to appeal awards of the arbitral tribunal, with the sole exceptions being for grounds of appeal as stated in the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. SECTION 14.14. Inspection of Books and Records. At its own expense and upon reasonable notice, each party has the right from time to time to inspect the books, records, or other data of the other party relating to this Agreement. Inspections must be conducted during regular business hours; provided, however, the right to inspect books shall be limited to only those books (i) that are required to be kept by Philippines law in respect of operations in the Philippines and then with respect only to operations and business at the Airport, or (ii) have been used by FedEx in the calculation by it of amounts owing to the SBMA hereunder. SECTION 14.15. Modification Necessary for Grant of Government Funds. If the Philippine government or any public or institutional lender requires that this Agreement be 34 35 amended as a condition to the granting of funds for the improvement of the Airport, FedEx shall agree to, and enter into, any such amendment provided that the terms of such amendment do not (i) increase FedEx's financial obligations hereunder, (ii) materially increase its other obligations, (iii) materially decrease its rights hereunder, (iv) cause FedEx to limit or alter its aircraft and ground transportation schedules, or (v) limit the ability of FedEx to efficiently conduct its business at the Airport. SECTION 14.16. Consent Not to be Unreasonably Withheld. Neither the SBMA nor FedEx will unreasonably withhold any consent or approval required by this Agreement. SECTION 14.17. Prudent Operations. The SBMA will manage the Airport and FedEx will manage its business at the Airport in a prudent and reasonable manner. SECTION 14.18. Independent Contractor. FedEx is neither an agent nor an employee of the SBMA but is an independent contractor with respect to all FedEx's activities on the Airport, including any installation, construction, or service provided. SECTION 14.19. Condemnation. In the event a substantial portion of the premises are condemned by any proper authority and material rights and privileges are impaired such that FedEx becomes unable to conduct its business at the Airport, this Agreement may be terminated automatically on the date FedEx is required to surrender possession of the property. The SBMA is entitled to all the condemnation proceeds provided that FedEx shall be paid the portion of the proceeds attributable to the fair market value of any improvements placed on the property by an independent assessor and not any compensation for consequential or severance damages including business damages, lost profits, or leasehold advantage. SECTION 14.20. Incorporation of Appendices. All Appendices described in this Agreement shall be deemed to be incorporated in and made a part of this Agreement, except that if there is any inconsistency between this Agreement and the provisions of any Appendix the provisions of this Agreement shall control. Terms used in an Appendix and also used in this Agreement shall have the same meaning in the Appendix as in this Agreement. SECTION 14.21. Representations and Warranties. (a) FedEx represents and warrants to the SBMA that: i. it is a corporation in good standing under the laws of the State of Delaware, U.S.A.; ii. has all right, power and authority to enter into this Agreement; and iii. as of the date of this Agreement holds all certifications, licenses and approvals from the Governments of the United States of America and the republic of the Philippines to operate aircraft on routes to and from the Philippines. (b) The SBMA represents and warrants to FedEx that: i. it has title to the properties it leases to FedEx under this Agreement and holds all right, power and authority to lease the same to FedEx; and ii. it has all right, power and authority to enter into this Agreement. 35 36 SECTION 14.22. No Representations. FedEx acknowledges that it has not relied upon any representation or statement of the SBMA or its Commissioners, officers, employees or agents as to the condition of the premises or the suitability thereof for the operations permitted on the premises by this Agreement. SECTION 14.23. Place of Payments. All payments required of FedEx by this Agreement shall be made at the office of the Subic Bay Metropolitan Authority, or to such other office or address as may be substituted therefor. SECTION 14.24. Estoppel Certificates. At any time and from time to time upon not less than ten (10)-days' prior notice by the SBMA to FedEx, FedEx shall, without charge, execute, acknowledge and deliver to the SBMA a statement prepared by the SBMA certifying (i) that this Agreement is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and stating the modifications), (ii) whether the term has commenced and rent, Landing Fees, Parking Charges, and other charges have become payable hereunder and, if so, the dates to which they have been paid, (iii) whether or not, to the best knowledge of the signer of such certificate, the SBMA is in default in performance of any of the terms of this Agreement and, if so, specifying each such default of which the signer may have knowledge, (iv) whether FedEx has made any claim against the SBMA under this Agreement and, if so, the nature thereof and the dollar amount, if any, of such claim, (v) whether there exist any offsets or defenses performed, and, if so, specifying the same, and (vi) such further information with respect to this Agreement as the SBMA may reasonably request, it being intended that any such statement delivered pursuant hereto may be relied upon by any prospective purchaser of, or lender against, SBMA's interest hereunder. The failure of FedEx to execute, acknowledge and deliver to the SBMA a statement in accordance with the provisions of this Section shall constitute an acknowledgment by FedEx, which may be relied on by any person who would be entitled to rely upon any such statement, that such statement is submitted by the SBMA is true and correct. SECTION 14.25. Successors and Assigns. The terms and conditions of this Agreement shall be binding upon and inure to the benefit of the successors and assigns of the SBMA and FedEx and shall be construed as covenants running with the real property leased hereunder. SECTION 14.26. Severability. If any part of this Agreement is declared to be invalid by a court of competent jurisdiction, so long as that part is not material, the other parts of this Agreement remain in full force. SECTION 14.27. Entire Agreement. This Agreement with all attached appendices constitutes the entire agreement between the SBMA and FedEx at the Airport. Statements previously made, verbal or written, are merged in this Agreement. Until signed by the representatives of the SBMA and FedEx, this Agreement is of no effect. This Agreement may only be amended in a writing that is signed by the authorized representatives of both parties. 36 37 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the date first above written. SUBIC BAY METROPOLITAN AUTHORITY FEDERAL EXPRESS CORPORATION /S/ FERDINAND M. ARISTORENS /S/ GILBERT D. MOOK - ---------------------------------- ---------------------------------- FERDINAND M. ARISTORENS GILBERT D. MOOK HEAD - LEGAL DEPARTMENT VICE PRESIDENT PROPERTIES AND FACILITIES 37 38 APPENDIX A MILESTONES
EVENT DATE ----- ---- 1. Runway paving starts Nov. 15, 1994 2. SFS designated by Government of Philippines Dec. 15, 1995 as co-terminal point with MNL 3. Asphalt paving starts Dec. 15, 1995 4. Alternate airport to SFS at MNL fully approved. Dec. 15, 1994 Fully approved means that sufficient apron space is available to park all FedEx and Vendor Carrier scheduled operations in the event of a diversion; FedEx has access to a covered facility to do some sorting/transloading; and 24-hour operations are acceptable to regulatory authorities. 5. Telecommunication lines are installed and operational Jan. 1, 1995 at the Exclusive Use Space. 6. VOR/DME and ASR are installed, flight tested and Feb. 1, 1995 certified and operational. 7. VOR/DME approaches and missed approaches are Feb. 1, 1995 approved, flight tested, certified and published. 8. ATO staff required to conduct flight operations at Feb. 15, 1995 SFS are hired, trained and on site. Other staff required to operate the airport (Crash, Fire and Rescue, Air Control Tower, and Airport Management) are hired and on site. 9. Labor certification for FedEx crew members and Feb. 15, 1995 waiver of understudy program for crew obtained. 10. Operational Airport as defined in Section 2.02 April 1, 1995
Cure periods for Milestone Dates 1 through 9 shall be thirty (30) days. Cure period for Milestone Date 10 shall be ninety (90) days. A-1 39 Blueprint Subic Bay International Airport Site Plan A-2 40 APPENDIX B EXCLUSIVE-USE SPACE Section 1.00. Exclusive-Use Space. FedEx shall lease under this Agreement Buildings #8045 and #8306. Section 2.00. Exclusive Ramp and Apron. The Exclusive Ramp to FedEx and the Apron Areas to be used by FedEx, including the Preferential Aircraft Apron, Overflow Aircraft Apron and Common-Use Apron along with the Exclusive-Use Space and the buildings for which the option of Section 5.03 of this Agreement shall apply are marked and identified in Appendix B-1. B-1 41 Appendix B-1.2 Blueprint Designation of Airport Apron B-2 42 APPENDIX C IMPROVEMENTS TO BE MADE BY SBMA Section 1.00. Improvements to Exclusive-Use Space. On or before the Operation Date or such other dates stated below, SBMA will deliver to FedEx each Exclusive-Use Space after having performed the following work: (a) Connection of each existing building in the Exclusive-Use Space to power for electrical requirements; (b) Connection of each existing building in the Exclusive-Use Space to telephone lines; (c) Connection of each existing building in the Exclusive-Use Space to water supply; (d) All sewer, waste water and storm drains will be inspected and prepared for use; (e) All air-conditioning units, central and window units, will be inspected and put in working order; (f) Fire sprinkler systems will be inspected, tested and made operable; (g) All windows and doors will be inspected and replaced as required; (h) All doors and locks will be inspected and put in working order; all doors will be labeled and keys supplied; (i) Hangar doors on Bldg. 8045 will be capable of being opened and closed by a means that is not detrimental to the doors, the building or the equipment used to effect same; (j) Toilets, sinks and showers will be inspected and repaired to usable condition; (k) By December 1, 1995, all electrical panels will be checked for proper load distribution. Loads will be redistributed as required; (l) By December 1, 1995, all electrical wiring, outlets and fixtures will be inspected; repairs and upgrade will be completed to put said wiring, outlets and fixtures in working order to the extent required for the power requirements of FedEx; (m) By December 1, 1995, all panels and breakers will be labeled; (n) SBMA will ensure that as much electricity as FedEx shall require, initially or at any other time, will be brought to FedEx facilities as required; (o) Inspect for corrosion; (p) Inspect and repair all gates and fences; and C-1 43 (q) As built plans will be provided for each building the extent same are within the possession or control of SBMA. Section 2.00. Improvements to Housing Units. All items detailed at Section 1.00 of this Appendix C where applicable to Housing Units shall be performed on each Housing Unit to be occupied by FedEx on or before the lease start date; provided, that in addition to the foregoing SBMA will paint interiors and exteriors and do basic landscaping work for each Housing Unit. C-2 44 APPENDIX D BUILDING LEASE RATES (in USD$ per square meter per month) Section 1.00. Lease Rates for Exclusive-Use Space. (a) The lease rates for the two buildings making up the Exclusive-Use Space as of the Operation Date shall be as follows (rates are in USD$): Bldg# 8045 8306 Std Lease 4.00 1.50 Rate Credit for 1.50 0 FedEx LI-II Agreed Lease 2.50 1.50 Rate
(b) FedEx shall make improvements of at least $863,000.00 for the entire amount of credit to apply. (c) Approximate areas for each building are as follows (subject to later survey, if required): 8045 - 9,597 sq.m; 8306 - 1,067 sq.m. (d) Exclusive Ramp is approximately 21,730 sq.m. (subject to later survey, if required) and the rental therefor has been blended into the lease rates for the Exclusive-Use Space. Section 2.00. Lease Rates of Other Buildings. The buildings set forth below are included among those reserved for FedEx under the option granted under Section 5.03 of the Agreement. Should FedEx exercise its option to lease any of the following buildings, the lease rate it shall pay shall be as set forth below. The following does not include all buildings that are subject to the option of Section 5.03. For those other buildings not listed below, should FedEx exercise its option on same, the lease rate shall be negotiated separately in accordance with Section 5.03. The Agreed Lease Rate shall be determined by subtracting from the Standard Lease Rate an amount equal to FedEx' estimated leasehold improvements on each such facility. Bldg# 8048 8066 8331 8301 Std Lease 3.00 1.50 1.50 1.50 Rate
D-1 45 APPENDIX E AERONAUTICAL FEES AND CHARGES ARTICLE 1 INTERNATIONAL FEES AND CHARGES Aircraft arriving at the Airport whose last point of departure is from a location outside of the Philippines will be levied the following charges for the use of runways, taxiways, apron parking areas, and lighting facilities. All rates are in US Dollars. These rates cover Federal Express aircraft and the aircraft of Vendor Carriers. Section 1.00. Landing Fees. Basis: Fees are computed on the maximum take off weight in each aircraft's certification and are applied to a complete aircraft cycle (one landing and one take-off). Section 1.01. First 28,000,000 kilograms. Landing Fees for the first 28,000,000 kilograms cumulative weight for FedEx aircraft landing at the Airport on an international flight during any calendar month shall be as set forth below:
Aircraft Weight Rate Per 1,000 kg - --------------- ----------------- First 50,000 kg. $3.35 Second 50,000 kg. $3.90 Third 50,000 kg. $4.50 Above 150,000 kg. $4.80
Landing Fees are to be calculated from a zero base for each individual aircraft cycle. Section 1.02. Above 28,000,000 kilograms. Landing fees for any FedEx aircraft landing at the Airport on an international flight during any calendar month after the 28,000,000 kilogram cumulative weight break has been reached shall be USD$2.50 per 1,000 kilograms irrespective of the MGTOW of the aircraft. Section 2.00. Parking Fees. Basis: Fees are computed based on the maximum take-off weight in each aircraft's certification. Section 2.01. First 50,000,000 kg. per month. Parking Fees for all aircraft prior to reaching of a cumulative weight, based on MGTOW of each FedEx aircraft, of 50,000,000 kilograms in any calendar month shall have the first four hours parking at the Airport free of charge. The rate for each aircraft after four hours shall be charged based on the MGTOW of that aircraft in accordance with the following schedule:
Aircraft Weight Rate after the First Four Hours - --------------- ------------------------------- 50,000 kg and below $3.00 per half-hour 50,0001 to 100,000 kg $6.00 per half hour
E-1 46 100,001 to 150,000 kg $9.00 per half hour Above 150,000 kg $13.00 per half hour
Section 2.02. After first 50,000,000 kilograms. For all FedEx aircraft parking at the Airport in any calendar month once the threshold of 50,000,000 kilograms of cumulative weight (based on MGTOW) has been reached, the following parking charges shall apply:
Aircraft Weight Rate for First Four Hours - --------------- ------------------------- 50,000 kg and below $50 50,001 to 100,000 kg $60 100,001 to 150,000 kg $80 Above 150,000 kg $100
Aircraft Weight Rate after the First Four Hours - --------------- ------------------------------- 50,000 kg and below $3.00 per half hour 50,0001 to 100,000 kg $6.00 per half hour 100,001 to 150,000 kg $9.00 per half hour Above 150,000 kg $13.00 per half hour
Section 3.00. Lighting Fees Exempted ARTICLE II DOMESTIC FEES AND CHARGES Aircraft arriving at the Airport whose last point of departure is from a location inside of the Philippines will be levied the following charges for the use of runways, taxiways, apron parking areas, and lighting facilities. All rates are in US Dollars. These rates cover Federal Express aircraft and the aircraft of Vendor Carriers. Section 1.01. Landing Fees. Basis: Fees are computed on the maximum take off weight in each aircraft's certification and are applied to a complete aircraft cycle (one landing and one take-off).
Aircraft Weight Rate Per 1,000 kg - --------------- ----------------- First 50,000 kg. $0.90 Second 50,000 kg. $1.05 Third 50,000 kg. $1.20 Above 150,000 kg. $1.30
Landing Fees are to be calculated from a zero base for each individual aircraft cycle. 2.00 Parking Fees Basis: Fees are computed on the maximum take off weight in each aircraft's certification E-2 47
Aircraft Weight First Four Hours - --------------- ---------------- First 50,000 kg. $25 Second 50,000 kg. $32 Third 50,000 kg. $42 Above 150,000 kg. $53
Aircraft Weight Rates after the First Four Hours - --------------- -------------------------------- First 50,000 kg. $1.50 per half hour Second 50,000 kg. $3.20 per half hour Third 50,000 kg. $5.00 per half hour Above 150,000 kg. $6.70 per half hour
Landing Fees are to be calculated from a zero base for each individual aircraft cycle. 3.00 Lighting Fees $20.00 per landing and $20.00 per take-off during the hours of 6:00 PM and 6:00 AM. E-3 EX-10.77 9 AMENDED AND RESTATED CREDIT AGREEMENT 1 Exhibit 10.77 AMENDED AND RESTATED CREDIT AGREEMENT among FEDERAL EXPRESS CORPORATION, THE LENDERS, and THE FIRST NATIONAL BANK OF CHICAGO, Individually and as Agent Dated as of May 12, 1995 2 TABLE OF CONTENTS
Page ---- ARTICLE I. DEFINITIONS 1 ARTICLE II. THE CREDITS 16 2.1. Commitment 16 2.2. Mandatory Payments; Termination 17 2.3. Ratable Loans; Types of Advances 17 2.4. Determination of Levels 17 2.5. Facility Fee; Agent's Fee; Reductions in Aggregate Commitment 17 2.6. Minimum Amount of Each Advance 18 2.7. Optional Principal Payments 18 2.8. Method of Selecting Types and Interest Periods for New Advances 18 2.9. Conversion and Continuation of Outstanding Advances 19 2.10. Changes in Interest Rate, etc 20 2.11. Rates Applicable After Maturity of Advances 20 2.12. Method of Payment 20 2.13. Notes; Telephonic Notices 20 2.14. Interest Payment Dates; Interest and Fee Basis 21 2.15. Notification of Advances, Interest Rates, Prepayments and Commitment Reductions 21 2.16. Lending Installations 21 2.17. Non-Receipt of Funds by the Agent 22 2.18. Withholding Tax Exemption 22 ARTICLE III. CHANGE IN CIRCUMSTANCES 23 3.1. Yield Protection 23 3.2. Changes in Capital Adequacy Regulations 23 3.3. Availability of Types of Advances 24 3.4. Funding Indemnification 24 3.5. Lender Statements; Survival of Indemnity 24 ARTICLE IV. CONDITIONS PRECEDENT 25 4.1. Closing 25 4.2. Each Advance 26
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Page ---- ARTICLE V. REPRESENTATIONS AND WARRANTIES 27 5.1. Corporate Existence and Standing 27 5.2. Authorization and Validity 27 5.3. No Conflict; Government Consent 27 5.4. Financial Statements 27 5.5. Taxes 28 5.6. Litigation and Contingent Obligations 28 5.7. Subsidiaries 28 5.8. ERISA 28 5.9. Accuracy of Information 28 5.10. Regulation U 29 5.11. Material Agreements 29 5.12. Compliance With Laws 29 5.13. Existing Liens 29 5.14. Investment Company Act 29 5.15. Citizenship 29 5.16. Status as Air Carrier 29 5.17. Pari Passu 30 ARTICLE VI. COVENANTS 30 6.1. Financial Reporting 30 6.2. Use of Proceeds 32 6.3. Notice of Default 32 6.4. Conduct of Business 32 6.5. Citizenship and Regulatory Certificates 32 6.6. Payment of Taxes 33 6.7. Insurance 33 6.8. Compliance with Laws 33 6.9. Maintenance of Properties 33 6.10. Inspection 33 6.11. Dividend Declarations and Restricted Investments 33 6.12. Leverage 34 6.13. Fixed Charge Coverage 34 6.14. Consolidated Adjusted Net Worth 34 6.15. Merger and Consolidation 34 6.16. Sales of Assets 35 6.17. Loans, Advances and Investments 36 6.18. Contingent Liabilities 37 6.19. Liens 38
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Page ---- ARTICLE VII. DEFAULTS 40 ARTICLE VIII. ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES 42 8.1. Acceleration 42 8.2. Amendments 42 8.3. Preservation of Rights 43 ARTICLE IX. GENERAL PROVISIONS 44 9.1. Survival of Representations 44 9.2. Governmental Regulation 44 9.3. Taxes 44 9.4. Headings 44 9.5. Entire Agreement 44 9.6. Several Obligations; Benefits of this Agreement 44 9.7. Expenses; Indemnification 44 9.8. Numbers of Documents 45 9.9. Severability of Provisions 45 9.10. Nonliability of Lenders 45 9.11. Choice of Law 45 9.12. Consent to Jurisdiction 45 9.13. Waiver of Jury Trial 46 9.14. Confidentiality 46 9.15. Accounting 46 9.16. Effect on Prior Agreement; Ratification 46 ARTICLE X. THE AGENT 47 10.1. Appointment 47 10.2. Powers 47 10.3. General Immunity 47 10.4. No Responsibility for Loans, Recitals, etc 47 10.5. Action on Instructions of Lenders 47 10.6. Employment of Agents and Counsel 48 10.7. Reliance on Documents; Counsel 48 10.8. Agent's Reimbursement and Indemnification 48 10.9. Rights as a Lender 48 10.10. Lender Credit Decision 49 10.11. Successor Agent 49 10.12. Distribution of Information 49
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Page ---- ARTICLE XI. SETOFF; RATABLE PAYMENTS 50 11.1. Setoff 50 11.2. Ratable Payments 50 ARTICLE XII. BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS 50 12.1. Successors and Assigns 50 12.2. Participations 51 12.2.1. Permitted Participants; Effect 51 12.2.2. Voting Rights 51 12.2.3. Benefit of Setoff 51 12.3. Assignments 52 12.3.1. Permitted Assignments 52 12.3.2. Required Assignments 52 12.3.3. Effect; Effective Date 53 12.4. Dissemination of Information 53 12.5. Tax Treatment 53 ARTICLE XIII. NOTICES 53 13.1. Giving Notice 53 13.2. Change of Address 54 ARTICLE XIV. COUNTERPARTS 54 EXHIBITS EXHIBIT "A" - Note 84 EXHIBIT "B" - Opinion of Counsel 86 EXHIBIT "C" - Assignment Agreement 90 EXHIBIT "D" - Loan/Credit Related Money Transfer Instruction 99
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Page ---- SCHEDULES SCHEDULE "1" - Significant Subsidiaries 100 SCHEDULE "2" - Compliance Calculations 101
7 FEDERAL EXPRESS CORPORATION AMENDED AND RESTATED CREDIT AGREEMENT This Agreement, dated as of May 12, 1995, is among Federal Express Corporation, the Lenders and The First National Bank of Chicago, as Agent. The parties hereto agree as follows: WHEREAS, the Borrower (this and other capitalized terms shall have the respective meanings set forth in Article I hereinbelow), the Agent, and certain lenders (the "Prior Lenders") are parties to that certain Credit Agreement dated as of May 7, 1993, as heretofore amended (as so amended the "Prior Agreement"), pursuant to which the Prior Lenders agreed to make available to the Borrower revolving credit loans on the terms and conditions set forth therein (hereinafter the "Prior Credit Facility"); and WHEREAS, the Borrower, the Agent, and the Lenders desire to restructure the Prior Credit Facility and to amend and restate the Prior Agreement in certain respects as more fully set forth herein, and to release those Prior Lenders which are not continuing as Lenders (hereinafter the "Withdrawing Lenders"); and WHEREAS, pursuant to the terms of this Agreement, on the Effective Date, (i) the Prior Credit Facility shall be restructured in the form of the credit facility described herein, (ii) all loans and other obligations of the Borrower to the Lenders outstanding as of such date shall be deemed to be loans and obligations outstanding under the revolving credit facility described herein, (iii) the Withdrawing Lenders shall no longer be parties to this Agreement, and (iv) all provisions of this Amended and Restated Credit Agreement not previously in effect shall become effective; NOW, THEREFORE, in consideration of the undertakings set forth herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree that, effective upon the Effective Date, the Prior Agreement is hereby amended and restated in its entirety to read as follows: ARTICLE I DEFINITIONS As used in this Agreement: "Acquisition" means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which the Borrower or any of its Subsidiaries (i) acquires any going business or all or substantially all of the assets of any firm, corporation or division thereof, whether through purchase of assets, merger or otherwise or Page 1 8 (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding partnership interests of a partnership. "Advance" means a borrowing hereunder consisting of the aggregate amount of the several Loans made by the Lenders to the Borrower of the same Type and, in the case of Fixed Rate Advances, for the same Interest Period. "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 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. "Agent" means The First National Bank of Chicago in its capacity as agent for the Lenders pursuant to Article X, and not in its individual capacity as a Lender, and any successor Agent appointed pursuant to Article X. "Aggregate Commitment" means the aggregate of the Commitments of all the Lenders, as reduced from time to time pursuant to the terms hereof. "Agreement" means this amended and restated credit agreement, as it may be amended or modified and in effect from time to time. "Alternate Base Rate" means, for any day, a rate of interest per annum equal to the higher of (i) the Corporate Base Rate for such day and (ii) the sum of the Federal Funds Effective Rate for such day plus 1/2% per annum. "Applicable Margin" means: (a) at all times that the Borrower's debt ratings are at Level I: .20% with respect to Eurodollar Advances and .325% with respect to Fixed CD Rate Advances; (b) at all times that the Borrower's debt ratings are at Level II: .225% with respect to Eurodollar Advances and .35% with respect to Fixed CD Rate Advances; (c) at all times that the Borrower's debt ratings are at Level III: Page 2 9 .25% with respect to Eurodollar Advances and .375% with respect to Fixed CD Rate Advances; (d) at all times that the Borrower's debt ratings are at Level IV: .35% with respect to Eurodollar Advances and .475% with respect to Fixed CD Rate Advances; and (e) at all times that the Borrower's debt ratings are at Level V or the Borrower's senior unsecured long- term debt is not rated: .425% with respect to Eurodollar Advances and .55% with respect to Fixed CD Rate Advances. Each change in the Applicable Margin resulting from a change in the rating of the Borrower's senior unsecured long-term debt by either S&P or Moody's shall take effect at the time such change in such rating is publicly announced by the relevant rating agency. "Article" means an article of this Agreement unless another document is specifically referenced. "Assessment Rate" means, for any CD Interest Period, the assessment rate per annum (rounded upwards to the next higher multiple of 1/100 of 1% if the rate is not such a multiple) payable to the Federal Deposit Insurance Corporation (or any successor) for the insurance of domestic deposits of First Chicago, as reasonably determined by the Agent on the first day of such CD Interest Period. "Authorized Officer" means any one of the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, or the Managing Director Corporate Finance and Assistant Treasurer of the Borrower or any other officer or employee of the Borrower designated in writing as an "Authorized Officer" under this Agreement by any one of the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, or the Managing Director Corporate Finance and Assistant Treasurer of the Borrower. "Beneficial Owner" means a Person deemed the "Beneficial Owner" of any securities as to which such Person or any of such Person's Affiliates is or may be deemed to be the beneficial owner pursuant to Rule 13d-3 or 13d-5 under the Securities Exchange Act of 1934 (as the same may from time to time be amended, modified or readopted), as well as any securities as to which such Person or any of such Person's Affiliates has the right to become such a beneficial owner (whether such right is exercisable immediately or only after the passage of time or the occurrence of a specified event) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, Page 3 10 rights, warrants or options, or otherwise. In determining the percentage of the outstanding Voting Stock with respect to which a Person is the Beneficial Owner, all shares as to which such Person is deemed the Beneficial Owner shall be deemed outstanding. "Borrower" means Federal Express Corporation, a Delaware corporation, and its successors and assigns. "Borrowing Date" means a date on which an Advance is made hereunder. "Borrowing Notice" is defined in Section 2.8. "Business Day" means (i) with respect to any borrowing, payment or rate selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago and New York for the conduct of substantially all of their commercial lending activities and on which dealings in United States dollars are carried on in the London interbank market and (ii) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago for the conduct of substantially all of their commercial lending activities. "Capitalized Lease" of a Person means any lease of Property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP. "Capitalized Lease Obligations" of a Person means the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with GAAP. "Capitalized Operating Lease Value" means the present value, using a discount rate equal to 12.5%, of the Borrower's future minimum lease payments for aircraft leases scheduled to terminate more than 365 days after their respective dates of execution. "CD Interest Period" means, with respect to a Fixed CD Rate Advance, a period of 30, 60, 90 or 180 days commencing on a Business Day selected by the Borrower pursuant to this Agreement. If such CD Interest Period would end on a day which is not a Business Day, such CD Interest Period shall end on the next succeeding Business Day. "Code" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time. "Commitment" means, for each Lender, the obligation of such Lender to make Loans not exceeding the amount set forth opposite its signature below, as such amount may be modified from time to time pursuant to the terms hereof. "Consolidated Adjusted Net Worth" means, at any date as of which the amount thereof is to be determined, (a) the sum of the amounts set forth as preferred stock, common stock, Page 4 11 capital in excess of par value or paid-in surplus and retained earnings on a consolidated balance sheet of the Borrower and the Consolidated Subsidiaries prepared as of such date in accordance with GAAP, minus (b) the sum of the amounts set forth on such consolidated balance sheet as (i) the cost of any shares of the Borrower's common stock held in the treasury and (ii) any surplus resulting from any write-up of assets after the date of this Agreement and (iii) the aggregate value of all goodwill, all determined in accordance with GAAP. "Consolidated Adjusted Total Assets" means, at any date as of which the amount thereof is to be determined, (a) the aggregate amount set forth as the assets of the Borrower and the Consolidated Subsidiaries on a consolidated balance sheet of the Borrower and the Consolidated Subsidiaries prepared as of such date in accordance with GAAP, minus (b) the aggregate book value as of such date of determination of all assets of the Borrower or a Consolidated Subsidiary subject on such date of determination to a Lien permitted by Section 6.19(j). "Consolidated Cash Flow" means, on a consolidated basis for the Borrower and its Consolidated Subsidiaries for the twelve most recent complete fiscal months, the sum of (i) income (loss) before income taxes, plus (ii) Interest Expense, plus (iii) Rent Expense, in each case as determined in accordance with GAAP. "Consolidated Net Income" means, for any period, the net income (or net loss) of the Borrower and the Consolidated Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP and after giving appropriate effect to any outside minority interests in the Consolidated Subsidiaries, excluding (a) any aggregate net gain arising from the sale or other disposition of any assets other than any such gain arising from the sale or other disposition of assets (including aircraft) in the ordinary course of business, (b) any gain arising from any write-ups of assets, (c) any unrealized capital gain or loss on any investment, (d) any portion of the earnings of any Consolidated Subsidiary which for any reason is unavailable for payment of dividends to the Borrower or another Consolidated Subsidiary, (e) any amount representing the interest of the Borrower and the Consolidated Subsidiaries in the undistributed earnings of any other Person (other than a Consolidated Subsidiary), and (f) the net income (or net loss) of any Person prior to the date it became a Consolidated Subsidiary. Page 5 12 "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Borrower in its consolidated financial statements in accordance with GAAP if such statements were prepared as of such date. "Contingent Obligation" of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement, take-or-pay contract or application for a Letter of Credit. "Continuing Director" means an individual who is a member of the Board of Directors of the Borrower on the date of this Agreement or who shall have become a member of the Board of Directors of the Borrower subsequent to such date and who shall have been nominated or elected by a majority of the other Continuing Directors then members of the Board of Directors of the Borrower. "Conversion/Continuation Notice" is defined in Section 2.9. "Controlled Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code. "Corporate Base Rate" means a rate per annum equal to the corporate base rate of interest announced by First Chicago from time to time, changing when and as said corporate base rate changes. "Current Market Price" means, with respect to any security on any date, the last sale price or, in case no such sale takes place on such date, the average of the closing bid and asked prices for such security, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange, Inc. or, if such security is not then listed or admitted to trading on the New York Stock Exchange, Inc., as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such security is listed or admitted to trading or, if such security is not then listed or admitted to trading on any national securities exchange, on the NASDAQ National Market System or, if such security is not then quoted on such National Market System, the average of the closing bid and asked prices for such security in the over-the-counter market, as reported by NASDAQ or such other system then in use, or, if on any such date such security is not then quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market-maker then making a market in such security selected by the Board of Directors of the Borrower or a duly authorized committee thereof; provided, Page 6 13 however, that if on any such date such security is not listed or admitted to trading on a national securities exchange or traded in the over-the-counter market, the "Current Market Price" of such security on such date shall mean the fair value thereof on such date as determined in good faith by the Board of Directors of the Borrower or a duly authorized committee thereof. "Current Maturities" means, as of any date with respect to the Long Term Debt or the Capitalized Lease Obligations of any Person, any portion of such Long Term Debt or Capitalized Lease Obligations, as the case may be, which would in accordance with GAAP be classified as a current liability of such Person. "Dealer" means a Lender, First Tennessee Bank, N.A., Union Planters National Bank of Memphis or any other national or state bank or trust company or dealer or broker of government securities having either (A) capital, surplus and undivided profits or (B) total equity of at least $250,000,000, or any affiliate thereof authorized to deal in the commercial products described in clauses (i), (ii), and (iii) of Section 6.17(e). "Default" means an event described in Article VII. "Effective Date" means the Business Day on or before June 1, 1995 on which (a) the Borrower, the Agent and the Lenders have executed this Agreement, (b) the Borrower has satisfied all of the terms and conditions of Section 4.1, and (c) the Borrower has paid all fees then due to the Agent and the Lenders in connection with this Agreement. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurodollar Advance" means an Advance which bears interest at a Eurodollar Rate. "Eurodollar Base Rate" means, with respect to a Eurodollar Advance for the relevant Eurodollar Interest Period, the rate determined by the Agent to be the arithmetic average of the rates reported to the Agent by each Reference Lender as the rate at which deposits in U.S. dollars are offered by such Reference Lender to first-class banks in the London interbank market at approximately 11 a.m. (London time) two Business Days prior to the first day of such Eurodollar Interest Period, in the approximate amount of such Reference Lender's relevant Eurodollar Loan and having a maturity approximately equal to such Eurodollar Interest Period. If any Reference Lender fails to provide such quotation to the Agent, then the Agent shall determine the Eurodollar Base Rate on the basis of the quotations of the remaining Reference Lender(s). "Eurodollar Interest Period" means, with respect to a Eurodollar Advance, a period of one, two, three, or six months commencing on a Business Day selected by the Borrower pursuant to this Agreement. Such Eurodollar Interest Period shall end on (but exclude) the day which corresponds numerically to such date one, two, three, or six months thereafter, provided, however, that if there is no such numerically corresponding day in such next, Page 7 14 second, third, or sixth succeeding month, such Eurodollar Interest Period shall end on the last Business Day of such next, second, third, or sixth succeeding month. If a Eurodollar Interest Period would otherwise end on a day which is not a Business Day, such Eurodollar Interest Period shall end on the next succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new calendar month, such Eurodollar Interest Period shall end on the immediately preceding Business Day. "Eurodollar Loan" means a Loan which bears interest at a Eurodollar Rate. "Eurodollar Rate" means, with respect to a Eurodollar Advance for the relevant Eurodollar Interest Period, the sum of (i) an amount equal to (a) the Eurodollar Base Rate applicable to such Eurodollar Interest Period, divided by (b) one minus the Reserve Requirement (expressed as a decimal), if any, applicable to such Eurodollar Interest Period, and (ii) the Applicable Margin. The Eurodollar Rate shall be rounded to the next higher multiple of 1/16 of 1% if the rate is not such a multiple. "FAA" means the Federal Aviation Administration or any other governmental agency succeeding to the jurisdiction thereof. "Facility Termination Date" means May 31, 2000 or any earlier date on which the Commitments are cancelled by the Borrower or otherwise terminated pursuant to this Agreement. "Fair Market Value" means (i) as to securities which are publicly traded, the average of the Current Market Prices of such securities for each day during the period of 10 consecutive trading days immediately preceding the date of determination and (ii) as to securities which are not publicly traded or any other property, the fair value thereof as determined in good faith by the Board of Directors of the Borrower or a duly authorized committee thereof. "Federal Aviation Act" means the Federal Aviation Act of 1958, as amended from time to time. "Federal Funds Effective Rate" means, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10 a.m. (Chicago time) on such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent in its sole discretion. "First Chicago" means The First National Bank of Chicago in its individual capacity, and its successors. Page 8 15 "Fixed CD Base Rate" means, with respect to a Fixed CD Rate Advance for the relevant CD Interest Period, the rate determined by the Agent to be the arithmetic average of the rate reported to the Agent by each Reference Lender as the prevailing bid rate for the purchase at face value at or before 10 a.m. (Chicago time) on the first day of such CD Interest Period by three New York or Chicago certificate of deposit dealers of recognized standing selected by such Reference Lender of certificates of deposit of such Reference Lender in the approximate amount of such Reference Lender's relevant Fixed CD Rate Loan and having a maturity approximately equal to such CD Interest Period, provided that if such quotations from such dealers are not available to such Reference Lender, such Reference Lender shall notify the Agent of a reasonably equivalent rate determined by it on the basis of a reliable alternative source for certificate of deposit rates reflecting comparable and current interest rates for such CD Interest Period selected by it in accordance with its usual business practices. If any Reference Lender fails to provide such quotation to the Agent, then the Agent shall determine the Fixed CD Base Rate on the basis of the quotations of the remaining Reference Lender(s). "Fixed CD Rate" means, with respect to a Fixed CD Rate Advance for the relevant CD Interest Period, a rate per annum equal to the sum of (i) an amount equal to (a) the Fixed CD Base Rate applicable to such CD Interest Period, divided by (b) one minus the Reserve Requirement (expressed as a decimal), if any, applicable to such CD Interest Period, and (ii) the Assessment Rate applicable to such CD Interest Period, plus (iii) the Applicable Margin. The Fixed CD Rate shall be rounded to the next higher multiple of 1/100 of 1% if the rate is not such a multiple. "Fixed CD Rate Advance" means an Advance which bears interest at a Fixed CD Rate. "Fixed CD Rate Loan" means a Loan which bears interest at a Fixed CD Rate. "Fixed Rate" means the Fixed CD Rate or the Eurodollar Rate. "Fixed Rate Advance" means an Advance which bears interest at a Fixed Rate. "Fixed Rate Loan" means a Loan which bears interest at a Fixed Rate. "Flight Equipment" means, collectively, aircraft, aircraft engines, appliances and spare parts, all as defined in the Federal Aviation Act, and related parts. "Floating Rate" means, for any day, a rate per annum equal to the Alternate Base Rate for such day, changing when and as the Alternate Base Rate changes. "Floating Rate Advance" means an Advance which bears interest at the Floating Rate. "Floating Rate Loan" means a Loan which bears interest at the Floating Rate. Page 9 16 "Funded Debt" means any Indebtedness (other than items characterized as Indebtedness pursuant to clause (vii) of the definition thereof) of the Borrower or any Consolidated Subsidiary that is outstanding on the date of determination. "GAAP" means generally accepted principles of accounting as in effect at the time of application to the provisions hereof provided that any modification in generally accepted accounting principles which is made within twelve months prior to any such application and which would result in a Default or Unmatured Default shall be disregarded. "Indebtedness" of a Person means without duplication, such Person's (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of Property or services (other than accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade), (iii) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, acceptances, or other instruments, (v) Capitalized Lease Obligations, (vi) net liabilities under interest rate swap, exchange or cap agreements, (vii) Contingent Obligations, and (viii) obligations created through asset securitization financing programs. "Interest Expense" means, for any period, the gross interest expense (without regard to any offsetting interest income or reduction for capitalized interest) of the Borrower and its Consolidated Subsidiaries determined on a consolidated basis in accordance with GAAP. "Interest Period" means a CD Interest Period or a Eurodollar Interest Period. "Investment" of a Person means any loan, advance (other than commission, travel and similar advances to officers and employees made in the ordinary course of business), extension of credit (other than accounts receivable arising in the ordinary course of business on terms customary in the trade), deposit account (other than a demand deposit account maintained in the ordinary course of business) or contribution of capital by such Person to any other Person or any investment in, or purchase or other acquisition of, the stock, partnership interests, notes, debentures or other securities of any other Person made by such Person. "Lenders" means the lending institutions listed on the signature pages of this Agreement and their respective successors and assigns. "Lending Installation" means, with respect to a Lender or the Agent, any office, branch, subsidiary or affiliate of such Lender or the Agent. "Letter of Credit" of a Person means a letter of credit or similar instrument which is issued upon the application of such Person or upon which such Person is an account party or for which such Person is in any way liable. "Level" means any of Level I, Level II, Level III, Level IV, or Level V. Page 10 17 "Level I" means, with respect to the Borrower's senior unsecured long-term public debt and subject to Section 2.4, a rating equal to or better than A- from S&P or A3 from Moody's. "Level II" means, with respect to the Borrower's senior unsecured long-term public debt and subject to Section 2.4, a rating equal to or better than BBB+ from S&P or Baa1 from Moody's but less than a rating that would place the Borrower at Level I. "Level III" means, with respect to the Borrower's senior unsecured long-term public debt and subject to Section 2.4, a rating equal to or better than BBB from S&P or Baa2 from Moody's but less than a rating that would place the Borrower at Level I or Level II. "Level IV" means, with respect to the Borrower's senior unsecured long-term public debt and subject to Section 2.4, a rating equal to or better than BBB- from S&P or Baa3 from Moody's but less than a rating that would place the Borrower at Level I, Level II or Level III. "Level V" means, with respect to the Borrower's senior unsecured long-term public debt and subject to Section 2.4, ratings lower than BBB- from S&P and Baa3 from Moody's. "Lien" means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement). "Loan" means, with respect to a Lender, such Lender's portion of any Advance. "Loan Documents" means this Agreement and the Notes. "Long Term Debt" means, as of any date with respect to any Person, all liabilities of such Person outstanding on such date which would in accordance with GAAP be classified as long term debt of such Person. "Material Adverse Effect" means a material adverse effect on (i) the business, Property, condition (financial or otherwise), results of operations, or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Borrower to perform its obligations under the Loan Documents, or (iii) the validity or enforceability of any of the Loan Documents or the rights or remedies of the Agent or the Lenders thereunder. "Moody's" means Moody's Investors Service, Inc. or, if Moody's shall cease rating Indebtedness of the Borrower and its ratings business with respect to Indebtedness of the Borrower shall have been transferred to a successor Person, such successor Person; provided, however, that if Moody's ceases rating securities similar to Indebtedness of the Borrower and its ratings business with respect to Indebtedness of the Borrower shall not have been transferred to any successor Person, then "Moody's" shall mean any other nationally Page 11 18 recognized rating agency (other than S&P) selected by the Borrower that rates any Indebtedness of the Borrower. "Multiemployer Plan" means a Plan maintained pursuant to a collective bargaining agreement or any other arrangement to which the Borrower or any member of the Controlled Group is a party to which more than one employer is obligated to make contributions. "Note" means a promissory note, in substantially the form of Exhibit "A" hereto, duly executed by the Borrower and payable to the order of a Lender in the amount of its Commitment, including any amendment, modification, renewal or replacement of such promissory note. "Notice of Assignment" is defined in Section 12.3.3. "Obligations" means all unpaid principal of and accrued and unpaid interest on the Notes, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the Borrower to the Lenders or to any Lender, the Agent or any indemnified party hereunder arising under the Loan Documents. "Participants" is defined in Section 12.2.1. "Payment Date" means the last day of each February, May, August, and November after the date of this Agreement. "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. "Person" means any natural person, corporation, firm, joint venture, partnership, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which the Borrower or any member of the Controlled Group may have any liability. "Prior Agreement" is defined in the recitals to this Agreement. "Prior Credit Facility" is defined in the recitals to this Agreement. "Prior Lenders" is defined in the recitals to this Agreement. "Property" of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned or leased by such Person. "Purchaser" is defined in Section 12.3.1. Page 12 19 "Reference Lenders" means First Chicago, The Chase Manhattan Bank, N.A., and National Westminster Bank PLC. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System. "Rent Expense" means, for any period, the rental expense of the Borrower and its Consolidated Subsidiaries determined on a consolidated basis in accordance with GAAP excluding rental expense with respect to leases of aircraft scheduled to terminate no more than 365 days after their respective dates of execution. "Reportable Event" means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code. "Required Lenders" means Lenders in the aggregate having at least 66-2/3% of the Aggregate Commitment or, if the Aggregate Commitment has been terminated, Lenders in the aggregate holding at least 66-2/3% of the aggregate unpaid principal amount of the outstanding Advances. "Reserve Requirement" means, with respect to a CD Interest Period or a Eurodollar Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on new non-personal time deposits of $100,000 or more with a maturity equal to that of such CD Interest Period (in the case of Fixed CD Rate Advances) or on Eurocurrency liabilities (in the case of Eurodollar Advances). "Restricted Investment" means any Investment other than an Investment permitted by Sections 6.17(a) through (j). "Restructuring Event" means any of the following: (1) any Person becoming the Beneficial Owner of Voting Stock of the Borrower having more than 30 percent of the voting Page 13 20 power of all of the then outstanding Voting Stock of the Borrower; (2) individuals who are not Continuing Directors constituting a majority of the Board of Directors of the Borrower; (3) the Borrower consolidating with or merging into any other Person, or any other Person consolidating with or merging into the Borrower, pursuant to a transaction in which capital stock of the Borrower then outstanding (other than capital stock held by the Borrower or capital stock held by any Person which is a party to such consolidation or merger) is changed or exchanged unless the Borrower is the surviving entity and no Default or Unmatured Default shall occur upon giving effect to such consolidation or merger; (4) the Borrower, in one transaction or a series of related transactions, conveying, transferring or leasing, directly or indirectly, all or substantially all of the assets of the Borrower and its Subsidiaries taken as a whole (other than to a Wholly-Owned Subsidiary of the Borrower); or (5) the Borrower or any of its Subsidiaries paying or effecting a dividend or distribution (including by way of recapitalization or reclassification) in respect of its capital stock (other than solely to the Borrower or any of its Wholly-Owned Subsidiaries and other than solely for capital stock of the Borrower), or purchasing, redeeming, retiring, exchanging or otherwise acquiring for value any of its capital stock (other than solely from the Borrower or any of its Wholly-Owned Subsidiaries and other than solely for capital stock of the Borrower), if the cash and Fair Market Value of the securities and assets paid or distributed in connection therewith (determined on the record date for such dividend or distribution or the effective date for such purchase, redemption, retirement, exchange or other acquisition), together with the cash and Fair Market Value of the securities and assets paid or distributed in connection with all other such dividends, distributions, purchases, redemptions, retirements, exchanges and acquisitions effected within the 12-month period preceding the record date for such dividend or distribution or the effective date for such purchase, redemption, retirement, exchange or other acquisition (determined on the respective record or effective dates for such other dividends, distributions, purchases, redemptions, retirements, exchanges and acquisitions), exceeds 30 percent of the aggregate Fair Market Value of all capital stock of the Borrower outstanding on the record date for such dividend or distribution or the effective date for such purchase, redemption, retirement, exchange or other acquisition (determined on such record or effective date). "S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., or, if S&P shall cease rating Indebtedness of the Borrower and its ratings business with respect to Indebtedness of the Borrower shall have been transferred to a successor Person, such successor Person; provided, however, that if S&P ceases rating securities similar to Indebtedness of the Borrower and its ratings business with respect to Indebtedness of the Borrower shall not have been transferred to any successor Person, then "S&P" shall mean any other nationally recognized rating agency (other than Moody's) selected by the Borrower that rates any Indebtedness of the Borrower. "Section" means a numbered section of this Agreement, unless another document is specifically referenced. "Significant Subsidiary" means, during each fiscal year of the Borrower, any Subsidiary of the Borrower which had revenues (determined in accordance with GAAP) for the immediately preceding fiscal year of the Borrower in excess of 1.0% of the consolidated Page 14 21 revenues (determined in accordance with GAAP) of the Borrower and the Consolidated Subsidiaries for such immediately preceding fiscal year. "Single Employer Plan" means a Plan maintained by the Borrower or any member of the Controlled Group for employees of the Borrower or any member of the Controlled Group. "Subsidiary" of a Person means (i) any corporation more than 50% of the outstanding Voting Stock of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, association, joint venture or similar business organization more than 50% of the ownership interests having power to direct the ordinary affairs thereof of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a "Subsidiary" shall mean a Subsidiary of the Borrower. "Substantial Portion" means, with respect to the Property of the Borrower and its Subsidiaries, Property which (i) represents more than 10% of the consolidated assets of the Borrower and its Subsidiaries as would be shown in the consolidated financial statements of the Borrower and its Subsidiaries as at the beginning of the twelve-month period ending with the month in which such determination is made, or (ii) is responsible for more than 10% of the consolidated net sales or of the consolidated net income of the Borrower and its Subsidiaries as reflected in the financial statements referred to in clause (i) above. "Tiger International" means Tiger International, Inc. a Delaware corporation. "Transferee" is defined in Section 12.4. "Type" means, with respect to any Advance, its nature as a Floating Rate Advance, Eurodollar Advance or Fixed CD Rate Advance. "Unfunded Liabilities" means the amount (if any) by which the present value of all vested nonforfeitable benefits under all Single Employer Plans exceeds the fair market value of all such Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plans. "Unmatured Default" means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default. "Voting Stock" means all outstanding shares of capital stock of the Borrower entitled to vote generally in the election of directors. "Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of the outstanding voting securities of which shall at the time be owned or controlled, directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (ii) any partnership, Page 15 22 association, joint venture or similar business organization 100% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. "Withdrawing Lenders" is defined in the recitals to this Agreement. The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. Page 16 23 ARTICLE II THE CREDITS 2.1. Commitment. From and including the date of this Agreement and prior to the Facility Termination Date, each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make Loans to the Borrower from time to time in amounts not to exceed in the aggregate at any one time outstanding the amount of its Commitment. Subject to the terms of this Agreement, the Borrower may borrow, repay and reborrow at any time prior to the Facility Termination Date. The Commitments to lend hereunder shall expire on the Facility Termination Date. 2.2. Mandatory Payments; Termination. (a) The Borrower will promptly give notice to the Agent and the Lenders of the occurrence of a Restructuring Event. If, within 30 days after the later of the occurrence of a Restructuring Event or the date on which the Agent and the Lenders have received notice from the Borrower that a Restructuring Event has occurred, the Agent on behalf of the Required Lenders notifies the Borrower in writing that the Required Lenders desire the prepayment and cancellation of this Agreement (such notice hereinafter a "Cancellation Notice"), then (i) the Borrower shall within 30 days after its receipt of such Cancellation Notice prepay in full the entire principal amount, if any, outstanding on the Notes and all of the other Obligations, and (ii) on the earlier of (1) the date that the Borrower prepays the Notes and all of the other Obligations pursuant to clause (i) of this sentence, or (2) the 30th day after the Borrower receives such Cancellation Notice, the outstanding balance of the Notes and all other Obligations shall mature and be due and payable in full and the Aggregate Commitment and the Commitment of each Lender shall be automatically and permanently terminated and reduced to zero. As of the date of such Cancellation Notice, the Borrower shall no longer be permitted to borrow additional Advances under this Agreement. (b) Any outstanding Advances and all other unpaid Obligations shall mature and be paid in full by the Borrower on the Facility Termination Date. 2.3. Ratable Loans; Types of Advances. Each Advance hereunder shall consist of Loans made from the several Lenders ratably in proportion to the ratio that their respective Commitments bear to the Aggregate Commitment. The Advances may be Floating Rate Advances, Fixed CD Rate Advances or Eurodollar Advances, or a combination thereof, selected by the Borrower in accordance with Sections 2.8 and 2.9. Not more than fifteen Fixed Rate Advances may be outstanding at any one time. 2.4. Determination of Levels. The applicable Level of the Borrower's senior unsecured long-term public debt rating will be determined as set forth in the respective definition of each Level unless there is a split of ratings between the rating given by S&P and the rating given by Moody's. In the event of a split in the Borrower's ratings, the higher of the Borrower's ratings will determine the applicable Level except as provided in the following sentence. In the event of a split of two or more ratings, the applicable Level will be Page 17 24 determined as set forth in the respective definition of each Level except that for purposes of applying such definitions the higher of the two ratings will be deemed to be reduced to the rating that is one rating below the actual rating. 2.5. Facility Fee; Agent's Fee; Reductions in Aggregate Commitment. The Borrower agrees to pay to the Agent for the account of each Lender a facility fee on the daily amount of such Lender's Commitment from the Effective Date to and including the Facility Termination Date in the amount of .10% per annum at all times that the Borrower's debt ratings are at Level I, .11% per annum at all times that the Borrower's debt ratings are at Level II, .125% per annum at all times that the Borrower's debt ratings are at Level III, .175% per annum at all times that the Borrower's debt ratings are at Level IV, and .20% per annum at all times that the Borrower's debt ratings are at Level V. Each change in the rate of the facility fee resulting from a change in the rating of the Borrower's senior unsecured long-term debt by either rating agency shall take effect at the time such change in such rating is publicly announced by the relevant rating agency. Such facility fee shall be payable on each Payment Date hereafter and on the Facility Termination Date. The Borrower shall pay to the Agent as compensation for its services hereunder the fees specified in the letter agreement of April 5, 1995, between the Agent and the Borrower as it may be amended or supplemented from time to time. The Borrower may permanently reduce the Aggregate Commitment in whole, or in part ratably among the Lenders in the minimum amount of $20,000,000 and in integral multiples of $10,000,000 in excess thereof, upon at least ten Business Days' written notice to the Agent, which notice shall specify the amount of any such reduction, provided, however, that the amount of the Aggregate Commitment may not be reduced below the aggregate principal amount of the outstanding Advances. All accrued facility fees shall be payable on the effective date of any termination of the obligations of the Lenders to make Loans hereunder. 2.6. Minimum Amount of Each Advance. Each Advance shall be in the minimum amount of $5,000,000 (and in integral multiples of $1,000,000 if in excess thereof), provided, however, that any Floating Rate Advance may be in the amount of the unused Aggregate Commitment. 2.7. Optional Principal Payments. The Borrower may from time to time pay, without penalty or premium, all outstanding Floating Rate Advances, or, in a minimum aggregate amount of $5,000,000 or any integral multiple thereof, any portion of the outstanding Floating Rate Advances upon one Business Day's prior notice to the Agent. A Fixed Rate Advance may not be paid prior to the last day of the applicable Interest Period except pursuant to an acceleration or a mandatory prepayment in accordance with this Agreement. 2.8. Method of Selecting Types and Interest Periods for New Advances. The Borrower shall select the Type of Advance and, in the case of each Fixed Rate Advance, the Interest Period applicable to each Advance from time to time. The Borrower shall give the Agent irrevocable notice (a "Borrowing Notice") not later than 10:00 a.m. (Chicago time) on the Borrowing Date of each Floating Rate Advance, at least one Business Day before the Page 18 25 Borrowing Date of each Fixed CD Rate Advance and at least three Business Days before the Borrowing Date for each Eurodollar Advance, specifying: (i) the Borrowing Date, which shall be a Business Day, of such Advance, (ii) the aggregate amount of such Advance, (iii) the Type of Advance selected, and (iv) in the case of each Fixed Rate Advance, the Interest Period applicable thereto. Not later than noon (Chicago time) on each Borrowing Date, each Lender shall make available its Loan or Loans, in funds immediately available in Chicago to the Agent at its address specified pursuant to Article XIII. Upon satisfaction or waiver in accordance with the terms of this Agreement of the applicable conditions precedent set forth in Article IV, the Agent will make the funds so received from the Lenders available to the Borrower at the Agent's aforesaid address. 2.9. Conversion and Continuation of Outstanding Advances. Floating Rate Advances shall continue as Floating Rate Advances unless and until such Floating Rate Advances are converted into Fixed Rate Advances. Each Fixed Rate Advance of any Type shall continue as a Fixed Rate Advance of such Type until the end of the then applicable Interest Period therefor, at which time such Fixed Rate Advance shall be automatically converted into a Floating Rate Advance unless the Borrower shall have given the Agent a Conversion/Continuation Notice requesting that, at the end of such Interest Period, such Fixed Rate Advance shall either continue as a Fixed Rate Advance of such Type for the same or another Interest Period or be converted into an Advance of another Type. Subject to the terms of Section 2.6, the Borrower may elect from time to time to convert all or any part of an Advance of any Type into any other Type or Types of Advances; provided that any conversion of any Fixed Rate Advance shall be made on, and only on, the last day of the Interest Period applicable thereto. The Borrower shall give the Agent irrevocable notice (a "Conversion/Continuation Notice") of each conversion of an Advance or continuation of a Fixed Rate Advance not later than 10:00 a.m. (Chicago time) on the date of the requested conversion, in the case of a conversion of any Advance into a Floating Rate Advance, at least one Business Day, in the case of a conversion into or continuation of a Fixed CD Rate Advance, or at least three Business Days, in the case of a conversion into or continuation of a Eurodollar Advance, prior to the date of the requested conversion or continuation, specifying: (i) the requested date, which shall be a Business Day, of such conversion or continuation; (ii) the aggregate amount and Type of the Advance which is to be converted or continued; and Page 19 26 (iii) the amount and Type(s) of Advance(s) into which such Advance is to be converted or continued and, in the case of a conversion into or continuation of a Fixed Rate Advance, the duration of the Interest Period applicable thereto. 2.10. Changes in Interest Rate, etc. Each Floating Rate Advance shall bear interest on the outstanding principal amount thereof, for each day from and including the date such Advance is made or is converted from a Fixed Rate Advance into a Floating Rate Advance pursuant to Section 2.9 to but excluding the date it becomes due or is converted into a Fixed Rate Advance pursuant to Section 2.9 hereof, at a rate per annum equal to the Floating Rate for such day. Changes in the rate of interest on that portion of any Advance maintained as a Floating Rate Advance will take effect simultaneously with each change in the Alternate Base Rate. Each Fixed Rate Advance shall bear interest from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such Fixed Rate Advance. No Interest Period may end after the Facility Termination Date. 2.11. Rates Applicable After Maturity of Advances. Notwithstanding anything to the contrary contained in Section 2.8 or 2.9, no Advance may be made as, converted into or continued as a Fixed Rate Advance (except with the consent of the Required Lenders) when any Default or Unmatured Default has occurred and is continuing. If any Advance is not paid at maturity, whether by acceleration or otherwise, (i) each Fixed Rate Advance shall bear interest for the remainder of the applicable Interest Period at the rate otherwise applicable to such Fixed Rate Advance for such Interest Period plus 1% per annum and at the end of each Interest Period shall automatically convert to a Floating Rate Advance bearing interest in accordance with clause (ii) of this Section, and (ii) each Floating Rate Advance shall bear interest at a rate per annum equal to the Floating Rate otherwise applicable to the Floating Rate Advance plus 1% per annum. 2.12. Method of Payment. All payments of the Obligations hereunder shall be made, without setoff, deduction, or counterclaim, in immediately available funds to the Agent at the Agent's address specified pursuant to Article XIII, or at any other Lending Installation of the Agent specified in writing by the Agent to the Borrower, by noon (local time) on the date when due. Each such payment shall be applied to any Advances and other amounts then due in accordance with the written instructions from the Borrower to the Agent accompanying such payment and shall be applied ratably by the Agent among the Lenders. Each payment delivered to the Agent for the account of any Lender shall be delivered promptly by the Agent to such Lender in the same type of funds that the Agent received at such Lender's address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by the Agent from such Lender. The Agent is hereby authorized to charge the account of the Borrower maintained with First Chicago for each payment of principal, interest and fees as it becomes due hereunder. 2.13. Notes; Telephonic Notices. Each Lender is hereby authorized to record the principal amount of each of its Loans and each repayment on the schedule attached to its Note or otherwise in accordance with its usual business practices, provided, however, that the Page 20 27 failure to so record shall not affect the Borrower's obligations under such Note. The Borrower hereby authorizes the Lenders and the Agent to extend, convert or continue Advances, effect selections of Types of Advances and to transfer funds based on telephonic notices made by any person or persons the Agent or any Lender in good faith believes to be an Authorized Officer acting on behalf of the Borrower. The Borrower agrees to deliver promptly to the Agent a written confirmation of each telephonic notice signed by an Authorized Officer. If the written confirmation differs in any material respect from the action taken by the Agent and the Lenders, the records of the Agent and the Lenders shall govern absent manifest error. 2.14. Interest Payment Dates; Interest and Fee Basis. Interest accrued on each Floating Rate Advance shall be payable on each Payment Date, commencing with the first such date to occur after the date hereof, on any date on which the Floating Rate Advance is prepaid, whether due to acceleration or otherwise, and at maturity. Interest accrued on that portion of the outstanding principal amount of any Floating Rate Advance converted into a Fixed Rate Advance on a day other than a Payment Date shall be payable on the date of conversion. Interest accrued on each Fixed Rate Advance shall be payable on the last day of its applicable Interest Period, on any date on which the Fixed Rate Advance is prepaid, whether by acceleration or otherwise, and at maturity. Interest accrued on each Fixed Rate Advance having an Interest Period longer than three months shall also be payable on the last day of each three-month interval during such Interest Period. Interest on Fixed Rate Advances shall be calculated for actual days elapsed on the basis of a 360-day year. All other interest and fees shall be calculated for actual days elapsed on the basis of a 365- or 366-day year, as appropriate. Interest shall be payable for the day an Advance is made but not for the day of any payment on the amount paid if payment is received prior to noon (local time) at the place of payment. If any payment of principal of or interest on an Advance shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest in connection with such payment. 2.15. Notification of Advances, Interest Rates, Prepayments and Commitment Reductions. Promptly after receipt thereof, the Agent will notify each Lender of the contents of each Aggregate Commitment reduction notice, Borrowing Notice, Conversion/Continuation Notice, and repayment notice received by it hereunder. The Agent will notify each Lender of the interest rate applicable to each Fixed Rate Advance promptly upon determination of such interest rate and will give each Lender prompt notice of each change in the Alternate Base Rate. Each Reference Lender agrees to furnish timely information for the purpose of determining the Eurodollar Rate or the Fixed CD Rate, as applicable. 2.16. Lending Installations. Each Lender may book its Loans at any Lending Installation selected by such Lender and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Notes shall be deemed held by each Lender for the benefit of such Lending Installation. Each Lender may, by written notice to the Agent and the Borrower, designate a Lending Installation through which Loans will be made by it and for whose account Loan payments are to be made. Page 21 28 2.17. Non-Receipt of Funds by the Agent. Unless the Borrower or a Lender, as the case may be, notifies the Agent prior to the date on which it is scheduled to make payment to the Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal, interest or fees to the Agent for the account of the Lenders, that it does not intend to make such payment, the Agent may assume that such payment has been made. The Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Lender or the Borrower, as the case may be, has not in fact made such payment to the Agent, the recipient of such payment shall, on demand by the Agent, repay to the Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Agent until the date the Agent recovers such amount at a rate per annum equal to (i) in the case of payment by a Lender, the Federal Funds Effective Rate for such day or (ii) in the case of payment by the Borrower, the interest rate applicable to the relevant Loan. 2.18. Withholding Tax Exemption. At least five Business Days prior to the first date on which interest or fees are payable hereunder for the account of any Lender, each Lender that is not incorporated under the laws of the United States of America, or a state thereof, agrees that it will deliver to each of the Borrower and the Agent two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, certifying in either case that such Lender is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes. Each Lender which so delivers a Form 1001 or 4224 further undertakes to deliver to each of the Borrower and the Agent two additional copies of such form (or a successor form) on or before the date that such form expires (currently, three successive calendar years for Form 1001 and one calendar year for Form 4224) or becomes obsolete or after the occurrence of any event requiring a change in the most recent forms so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by the Borrower or the Agent, in each case certifying that such Lender is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender advises the Borrower and the Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. Page 22 29 ARTICLE III CHANGE IN CIRCUMSTANCES 3.1. Yield Protection. If any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any interpretation thereof, or the compliance of any Lender therewith, (i) subjects any Lender or any applicable Lending Installation to any tax, duty, charge or withholding on or from payments due from the Borrower (excluding federal taxation of the overall net income of any Lender or applicable Lending Installation), or changes the basis of taxation of payments to any Lender in respect of its Loans or other amounts due it hereunder, or (ii) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation (other than reserves and assessments taken into account in determining the interest rate applicable to Fixed Rate Advances), or (iii) imposes any other condition the result of which is to increase the cost to any Lender or any applicable Lending Installation of making, funding or maintaining loans or reduces any amount receivable by any Lender or any applicable Lending Installation in connection with loans, or requires any Lender or any applicable Lending Installation to make any payment calculated by reference to the amount of loans held or interest received by it, by an amount deemed material by such Lender, then, within 15 days of demand by such Lender, the Borrower shall pay such Lender that portion of such increased expense incurred or reduction in an amount received which such Lender determines is attributable to making, funding and maintaining its Loans and its Commitment. 3.2. Changes in Capital Adequacy Regulations. If a Lender determines that the amount of capital required or expected to be maintained by such Lender, any Lending Installation of such Lender or any corporation controlling such Lender is increased as a result of a Change, then, within 15 days of demand by such Lender, the Borrower shall pay such Lender the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender determines is attributable to this Agreement, its Loans or its obligation to make Loans hereunder (after taking into account such Lender's policies as to capital adequacy). "Change" means (i) any change after the date of this Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of or change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the date of this Agreement which Page 23 30 affects the amount of capital required or expected to be maintained by any Lender or any Lending Installation or any corporation controlling any Lender. "Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled "International Convergence of Capital Measurements and Capital Standards," including transition rules, and any amendments to such regulations adopted prior to the date of this Agreement. 3.3. Availability of Types of Advances. If any Lender determines that maintenance of its Eurodollar Loans at a suitable Lending Installation would violate any applicable law, rule, regulation, or directive, whether or not having the force of law, or if the Required Lenders determine that (i) deposits of a type and maturity appropriate to match fund Fixed Rate Advances are not available or (ii) the interest rate applicable to a Type of Advance does not accurately reflect the cost of making or maintaining such Advance, then the Agent shall suspend the availability of the affected Type of Advance and require any Fixed Rate Advances of the affected Type to be converted to an unaffected type. Subject to the provisions of Article II hereof, the Borrower may select any unaffected Type for purposes of such conversion. If the Borrower fails to select a new Type of Advance, the affected Advances shall be converted to Floating Rate Advances. 3.4. Funding Indemnification. If any payment or conversion of a Fixed Rate Advance occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or a Fixed Rate Advance is not made on the date specified by the Borrower for any reason other than default by the Lenders, the Borrower will indemnify each Lender for any loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain the Fixed Rate Advance. 3.5. Lender Statements; Survival of Indemnity. To the extent reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its Fixed Rate Loans to reduce any liability of the Borrower to such Lender under Sections 3.1 and 3.2 or to avoid the unavailability of a Type of Advance under Section 3.3, so long as such designation is not disadvantageous to such Lender as determined by such Lender in its sole discretion. Each Lender shall deliver a written statement of such Lender as to the amount due, if any, under Section 3.1, 3.2 or 3.4. Such written statement shall set forth in reasonable detail the calculations upon which such Lender determined such amount and shall be final, conclusive and binding on the Borrower in the absence of manifest error. Determination of amounts payable under such Sections in connection with a Fixed Rate Loan shall be calculated as though each Lender funded its Fixed Rate Loan through the purchase of a deposit of the type and maturity corresponding to the deposit used as a reference in determining the Fixed Rate applicable to such Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the written statement shall be payable on demand after receipt Page 24 31 by the Borrower of the written statement. The obligations of the Borrower under Sections 3.1, 3.2 and 3.4 shall survive payment of the Obligations and termination of this Agreement. ARTICLE IV CONDITIONS PRECEDENT 4.1. Closing. The Lenders shall not be required to make the initial Advance hereunder unless on or before the Effective Date the Borrower has furnished to the Agent with sufficient copies for the Lenders: (i) Copies of the articles of incorporation of the Borrower, together with all amendments, and a certificate of good standing, both certified on or within 15 days prior to the Effective Date by the appropriate governmental officer in its jurisdiction of incorporation. (ii) Copies, certified as of the Effective Date by the Secretary or Assistant Secretary of the Borrower, of its by-laws and of its Board of Directors' resolutions (and resolutions of other bodies, if any are reasonably deemed necessary by counsel for any Lender) authorizing the execution, delivery, and performance of the Loan Documents. (iii) An incumbency certificate, executed as of the Effective Date by the Secretary or Assistant Secretary of the Borrower, which shall identify by name and title and bear the signature of the officers of the Borrower authorized to sign the Loan Documents and to make borrowings hereunder, upon which certificate the Agent and the Lenders shall be entitled to rely until informed of any change in writing by the Borrower. (iv) A certificate, dated the Effective Date, signed by the Chief Financial Officer or Treasurer of the Borrower, stating that on such date no Default or Unmatured Default has occurred and is continuing. (v) A written opinion of the Borrower's counsel, addressed to the Lenders in substantially the form of Exhibit "B" hereto. (vi) Notes payable to the order of each of the Lenders. (vii) Written money transfer instructions, in substantially the form of Exhibit "D" hereto, addressed to the Agent and signed by an Authorized Officer, together with such other related money transfer authorizations as the Agent may have reasonably requested. Page 25 32 (viii) A written representation and warranty by the Borrower that, as of the Effective Date, since February 28, 1995, there has been no change in the business, Property, prospects, condition (financial or otherwise) or results of operations of the Borrower and its Subsidiaries taken as a whole which could reasonably be expected to have a Material Adverse Effect. (ix) Payment of all fees due and owing to the Agent, the Prior Lenders, and the Lenders as at the Effective Date, including, without limitation, all accrued and unpaid facility fees under the Prior Agreement. (x) Such other documents as any Lender or its counsel may have reasonably requested. 4.2. Each Advance. The Lenders shall not be required to make any Advance, unless on the applicable Borrowing Date: (i) There exists no Default or Unmatured Default and no Default or Unmatured Default shall occur upon giving effect to the application of the proceeds of such Advance. (ii) The representations and warranties contained in Article V are true and correct as of such Borrowing Date except for changes in the Schedules hereto reflecting transactions permitted by this Agreement. (iii) All legal matters incident to the making of such Advance shall be satisfactory to the Lenders and their counsel. Each Borrowing Notice with respect to each such Advance shall constitute a representation and warranty by the Borrower that the conditions contained in Sections 4.2(i) and (ii) have been satisfied. Page 26 33 ARTICLE V REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Lenders that: 5.1. Corporate Existence and Standing. Each of the Borrower and its Significant Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted and where the failure to have such requisite authority would have a material adverse effect on the business of the Borrower and the Significant Subsidiaries taken as a whole. 5.2. Authorization and Validity. The Borrower has the corporate power and authority and legal right to execute and deliver the Loan Documents and to perform its obligations thereunder. The execution and delivery by the Borrower of the Loan Documents and the performance of its obligations thereunder have been duly authorized by proper corporate proceedings, and the Loan Documents constitute legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and subject also to the availability of equitable remedies if equitable remedies are sought. 5.3. No Conflict; Government Consent. Neither the execution and delivery by the Borrower of the Loan Documents, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Borrower or any of its Significant Subsidiaries or the Borrower's or any Significant Subsidiary's articles of incorporation or by-laws or the provisions of any material indenture, instrument or agreement to which the Borrower or any of its Significant Subsidiaries is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, or result in the creation or imposition of any Lien in, of or on the Property of the Borrower or a Significant Subsidiary pursuant to the terms of any such indenture, instrument or agreement. No order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with the execution, delivery and performance of, or the legality, validity, binding effect or enforceability of, any of the Loan Documents. 5.4. Financial Statements. The May 31, 1994 audited consolidated financial statements and February 28, 1995 unaudited consolidated financial statements of the Borrower and its Subsidiaries heretofore delivered to the Lenders were prepared in accordance with GAAP in effect on the dates such statements were prepared and fairly present the consolidated financial condition and operations of the Borrower and its Consolidated Subsidiaries at such Page 27 34 dates and the consolidated results of their operations for the periods then ended (except, in the case of such unaudited statements, for normal year-end adjustments). 5.5. Taxes. The Borrower and its Significant Subsidiaries have filed all United States federal tax returns and all other material tax returns which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by the Borrower or any of its Significant Subsidiaries, except such taxes, if any, as are being contested in good faith and as to which adequate reserves determined in accordance with GAAP have been provided. The charges, accruals and reserves on the books of the Borrower and its Significant Subsidiaries in respect of any taxes or other governmental charges are adequate. 5.6. Litigation and Contingent Obligations. Except for such matters as are referenced in the form of opinion of counsel attached hereto as Exhibit "B", there is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened against or affecting the Borrower or any of its Significant Subsidiaries which could reasonably be expected to have a Material Adverse Effect. Other than any liability incident to such litigation, arbitration or proceedings, the Borrower has no material contingent obligations not provided for or disclosed in the financial statements referred to in Section 5.4. 5.7. Subsidiaries. Schedule "1" hereto contains an accurate list of all of the presently existing Significant Subsidiaries of the Borrower, setting forth their respective jurisdictions of incorporation and the percentage of their respective capital stock owned by the Borrower or other Subsidiaries. All of the issued and outstanding shares of capital stock of such Subsidiaries have been duly authorized and issued and are fully paid and non-assessable. 5.8. ERISA. The Unfunded Liabilities of all Single Employer Plans do not in the aggregate exceed $80,000,000. Each Plan complies in all material respects with all applicable requirements of law and regulations, no Reportable Event has occurred with respect to any Plan, neither the Borrower nor any other member of the Controlled Group has withdrawn from any Plan or initiated steps to do so, and no steps have been taken to reorganize or terminate any Plan. 5.9. Accuracy of Information. No information, exhibit or report furnished by the Borrower or any of its Subsidiaries to the Agent or to any Lender in connection with the negotiation of, or compliance with, the Loan Documents contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. 5.10. Regulation U. Margin stock (as defined in Regulation U) constitutes less than 25% of the value of those assets of the Borrower and its Subsidiaries which are subject to any limitation on sale, pledge, or other restriction hereunder. Page 28 35 5.11. Material Agreements. Neither the Borrower nor any Subsidiary is a party to any agreement (including, without limitation, this Agreement) or instrument or subject to any charter or other corporate restriction which could reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement to which it is a party, which default could reasonably be expected to have a Material Adverse Effect. 5.12. Compliance With Laws. The Borrower and its Subsidiaries have complied in all material respects with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof, having jurisdiction over the conduct of their respective businesses or the ownership of their respective Property. Neither the Borrower nor any Subsidiary has received any notice to the effect, nor does any Authorized Officer have any actual knowledge, that its operations are not in material compliance with any of the requirements of applicable federal, state and local environmental, health and safety statutes and regulations or the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which non-compliance or remedial action could reasonably be expected to have a Material Adverse Effect. 5.13. Existing Liens. None of the assets of the Borrower or any of its Subsidiaries is subject to any Lien other than those permitted by Section 6.19. 5.14. Investment Company Act. Neither the Borrower nor any Subsidiary thereof is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 5.15. Citizenship. The Borrower is a citizen of the United States, as defined in 49 U.S.C. Section 40102(a)(15). The Borrower is not a national of any foreign country designated in Presidential Executive Order No. 8389 or 9193, as amended, and the regulations issued thereunder, as amended, or a national of any foreign country designated in the Foreign Assets Control Regulations or in the Cuban Assets Control Regulations of the United States Treasury Department, 31 C.F.R., Chapter V, as amended. 5.16. Status as Air Carrier. The Borrower is authorized to engage in all cargo domestic and international air service under certificates issued pursuant to 49 U.S.C. Section 41103 and 49 U.S.C. Section 41102(a), respectively, and the Borrower is the holder of a valid and effective operating certificate issued by the FAA pursuant to Part 121 of the Federal Aviation Regulations. Such certificates are in full force and effect and are adequate for the conduct of the business of the Borrower as now conducted. There are no actions, proceedings or investigations pending or, to the knowledge of any of its officers, threatened (or any basis therefor known to the Borrower) to amend, modify, suspend or revoke any such certificate in whole or in part, which would have any material adverse effect on any such certificate or any of the operations of the Borrower. Page 29 36 5.17. Pari Passu. All the payment obligations of the Borrower arising under or pursuant to the Loan Documents will at all times rank pari passu with all other unsecured and unsubordinated payment obligations and liabilities (including contingent obligations and liabilities) of the Borrower (other than those which are mandatorily preferred by laws or regulations of general application). ARTICLE VI COVENANTS During the term of this Agreement and so long as any Obligations are outstanding or any Commitment is in effect hereunder, unless the Required Lenders shall otherwise consent in writing: 6.1. Financial Reporting. The Borrower will maintain, for itself and each Subsidiary, a system of accounting established and administered in accordance with GAAP, and furnish to the Lenders: (i) Within 90 days after the close of each of its fiscal years, an unqualified audit report certified by independent certified public accountants of recognized national standing, acceptable to the Lenders, prepared in accordance with GAAP on a consolidated basis for itself and the Consolidated Subsidiaries, including a balance sheet as of the end of such period, related profit and loss and reconciliation of surplus statements, and a statement of cash flows, accompanied by (a) any management letter prepared by said accountants, and (b) a certificate of said accountants that, in the course of their examination necessary for their certification of the foregoing, they have obtained no knowledge of any Default or Unmatured Default, or if, in the opinion of such accountants, any Default or Unmatured Default shall exist, stating the nature and status thereof. (ii) Within 45 calendar days after the end of each of the first three quarters of each fiscal year of the Borrower, for itself and the Consolidated Subsidiaries, an unaudited consolidated balance sheet as at the close of such period and consolidated profit and loss and reconciliation of surplus statements and a statement of cash flows for the period from the beginning of such fiscal year to the end of such quarter, all certified as complete and accurate and prepared in accordance with GAAP by its Chief Financial Officer, Treasurer or Controller. (iii) Together with the financial statements required hereunder, a certificate signed by its Chief Financial Officer or Treasurer stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, Page 30 37 stating the nature and status thereof, and stating the steps the Borrower is taking to cure such Default or Unmatured Default. (iv) As soon as available, and in any event within 45 calendar days after the end of each of the first three quarters of each fiscal year of the Borrower and within 90 calendar days after the end of the fourth quarter of each fiscal year of the Borrower, a schedule in substantially the form of Schedule "2" hereto, certified as being accurate by the Borrower's Chief Financial Officer, Treasurer or Controller, showing, as of the end of such quarter, the Borrower's calculation, in form and detail satisfactory to the Agent, of the calculations required to be made to determine compliance with each of Section 6.12, Section 6.13, and Section 6.14. (v) Promptly upon becoming available, copies of: (a) All financial statements, reports, notices and proxy statements sent by the Borrower or any Significant Subsidiary to its stockholders. (b) All prospectuses (other than on Form S-8 or a similar form) of the Borrower or any Consolidated Subsidiary filed with the Securities and Exchange Commission or any other governmental agency succeeding to the jurisdiction thereof. (c) All regular and periodic reports filed by the Borrower or any Consolidated Subsidiary with any securities exchange or with the Securities and Exchange Commission or any other governmental agency succeeding to the jurisdiction thereof. (vi) As soon as possible and in any event within 10 days after receipt by the Borrower, a copy of (a) any notice or claim to the effect that the Borrower or any of its Subsidiaries is or may be liable to any Person as a result of the release by the Borrower, any of its Subsidiaries, or any other Person of any toxic or hazardous waste or substance into the environment, and (b) any notice alleging any violation of any federal, state or local environmental, health or safety law or regulation by the Borrower or any of its Subsidiaries, which, in either case, could reasonably be expected to have a Material Adverse Effect. (vii) Such other information (including non-financial information) as the Agent or any Lender may from time to time reasonably request. 6.2. Use of Proceeds. The Borrower will, and will cause each Subsidiary to, use the proceeds of the Advances as liquidity support for the issuance of commercial paper by the Borrower, for Acquisitions not prohibited under the following sentence, for general corporate purposes and working capital of the Borrower, and to repay outstanding Advances. The Borrower will not, nor will it permit any Subsidiary to, use any of the proceeds of the Page 31 38 Advances to purchase or carry any "margin stock" (as defined in Regulation U) or to make any Acquisition which has not been approved or consented to by the board of directors or equivalent governing body of the Person whose assets or equity interests are to be acquired. 6.3. Notice of Default. The Borrower will, and will cause each Subsidiary to, give prompt notice in writing to the Lenders of the occurrence of any Default or Unmatured Default and of any other development, financial or otherwise, which could reasonably be expected to have a Material Adverse Effect. 6.4. Conduct of Business. The Borrower will, and will cause each Significant Subsidiary to, carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted and to do all things necessary to remain duly incorporated, validly existing and in good standing as a domestic corporation in its jurisdiction of incorporation and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted and where the failure to have such requisite authority could reasonably be expected to have a Material Adverse Effect. 6.5. Citizenship and Regulatory Certificates. The Borrower will continue to be (a) a citizen of the United States, as defined in 49 U.S.C. Section 40102(a)(15), (b) authorized to engage in all cargo domestic and international air service under certificates issued pursuant to 49 U.S.C. Section 41103 and 49 U.S.C. Section 41102(a), respectively, (c) the holder of all other certificates, rights, permits, franchises and concessions from appropriate governments or governmental authorities necessary or appropriate to enable the Borrower to conduct its business in all material respects as presently being conducted, and (d) the holder of a valid and effective operating certificate issued by the FAA pursuant to Part 121 of the Federal Aviation Regulations. The Borrower will, and will cause each of its Subsidiaries to, use its best efforts to maintain, preserve and keep in full force and effect its certificates, rights, permits, franchises and concessions from appropriate governments or governmental authorities and use its best efforts from time to time to obtain appropriate renewals or replacements, provided, that nothing in this Section 6.5 shall prevent the Borrower or any of its Subsidiaries from abandoning, or permitting the amendment, expiration or termination of, any such certificate, right, permit, franchise or concession if, in the opinion of the Borrower, such abandonment, amendment, expiration or termination is in the interest of the Borrower and not prejudicial in any material respect to the Lenders. 6.6. Payment of Taxes. The Borrower will, and will cause each Significant Subsidiary to, pay and discharge all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any property belonging to it, and all lawful claims which, if unpaid, would become a Lien, except where failure to do any of the foregoing would not have a material adverse effect on the business of the Borrower and the Significant Subsidiaries taken as a whole and provided that neither the Borrower nor a Significant Subsidiary shall be required to pay any such tax, assessment, charge, levy or claim the payment of which is being contested in good faith and by appropriate proceedings; and make monthly accruals of all of the estimated liability of the Borrower and the Significant Subsidiaries for such taxes, assessments, charges and levies, determined in accordance with Page 32 39 GAAP, and establish adequate reserves determined in accordance with GAAP, for such thereof as may be contested, and reflect such accruals and reserves in all financial statements furnished hereunder. 6.7. Insurance. The Borrower will, and will cause each Subsidiary to, maintain with financially sound and reputable insurance companies insurance on all its respective Property in such amounts and covering such risks as is consistent with sound business practice, and the Borrower will furnish to any Lender upon request full information as to the insurance carried. 6.8. Compliance with Laws. The Borrower will, and will cause each Significant Subsidiary to, comply with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, except where failure to do so could not reasonably be expected to have a Material Adverse Effect. 6.9. Maintenance of Properties. The Borrower will, and will cause each Significant Subsidiary to, do all things necessary to maintain, preserve, protect and keep its Property in good repair, working order and condition, and make all necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times, except where failure to do any of the foregoing could not reasonably be expected to have a Material Adverse Effect. 6.10. Inspection. The Borrower will, and will cause each Subsidiary to, permit the Lenders, by their respective representatives and agents, to inspect any of the Property, corporate books and financial records of the Borrower and each Subsidiary, to examine and make copies of the books of accounts and other financial records of the Borrower and each Subsidiary, and to discuss the affairs, finances and accounts of the Borrower and each Subsidiary with, and to be advised as to the same by, their respective officers at such reasonable times and intervals as the Lenders may designate upon reasonable notice to the Borrower. 6.11. Dividend Declarations and Restricted Investments. The Borrower will not, nor will it permit any Consolidated Subsidiary to, declare any dividend on any of its shares payable more than 60 calendar days after the declaration date, or make any Restricted Investment except Restricted Investments made by the Borrower or a Consolidated Subsidiary provided that, after giving effect to any such Restricted Investment, (i) the aggregate amount of all such Restricted Investments existing on the date of such proposed action shall not exceed (x) $200,000,000 plus (y) 75% (or in the case of a deficit, minus 100%) of the Consolidated Net Income for the period commencing on June 1, 1992 and ending on and including the date of any such proposed action (the "Computation Period") plus (z) the aggregate amount of the net cash proceeds received by the Borrower during the Computation Period from the sale of its stock and Indebtedness of the Borrower convertible into stock of the Borrower (but only to the extent that any such Indebtedness has been converted into shares of such stock during such period), and (ii) there shall exist no Default or Unmatured Default. Page 33 40 6.12. Leverage. The Borrower will maintain at all times a ratio of (i) the sum of (a) the aggregate unpaid principal amount of all outstanding Funded Debt of the Borrower and its Consolidated Subsidiaries, plus (b) Capitalized Operating Lease Value of the Borrower, to (ii) the sum of (a) the items listed in clause (i) above plus (b) Consolidated Adjusted Net Worth, of not more than .765 to l. 6.13. Fixed Charge Coverage. The Borrower will at all times maintain a ratio of (a) Consolidated Cash Flow to (b) the sum of Interest Expense and Rent Expense, in an amount not less than 1.15 to 1. 6.14. Consolidated Adjusted Net Worth. The Borrower will maintain Consolidated Adjusted Net Worth at all times (i) on or after the Effective Date and prior to May 31, 1996 in an amount not less than $1.4 billion, and (ii) thereafter in an amount not less than the sum of $1.4 billion plus 50% of Consolidated Net Income earned in each fiscal year of the Borrower ending on or after May 31, 1996 but without regard to any net loss in any such fiscal year. 6.15. Merger and Consolidation. The Borrower will not, nor will it permit any Consolidated Subsidiary to, merge or consolidate with or into or enter into any analogous reorganization or transaction with any other Person, except (a) Any Consolidated Subsidiary or other corporation may merge or consolidate with the Borrower, provided that, after giving effect to any such merger or consolidation, (i) the Borrower shall be the continuing or surviving corporation and (ii) no Default or Unmatured Default shall exist, (b) Any Consolidated Subsidiary may merge with any other Consolidated Subsidiary, (c) Any Consolidated Subsidiary may be liquidated or dissolved, (d) Any Consolidated Subsidiary may merge or consolidate with any other Person, provided, however, that, unless after giving effect to any such merger or consolidation the Borrower owns, directly or indirectly, 100% of such Consolidated Subsidiary, (i) such merger or consolidation shall be deemed to be a sale of such Consolidated Subsidiary to such other Person pursuant to either Section 6.16(c) or 6.16(e) (as appropriate under the terms of Section 6.16) and (ii) such merger or consolidation shall be a violation of this Section 6.15 unless such deemed sale is permitted by either Section 6.16(c) or 6.16(e) and the Borrower complies with all of the terms of Section 6.16(c) or Section 6.16(e), as the case may be, regarding such deemed sale, and (e) Any other corporation may merge or consolidate with any Consolidated Subsidiary, provided that, after giving effect to any such merger or consolidation, (i) the continuing or surviving corporation shall be a Consolidated Subsidiary and (ii) no Default or Unmatured Default shall exist. Page 34 41 6.16. Sales of Assets. The Borrower will not, nor will it permit any Consolidated Subsidiary to, sell, transfer, convey (including, without limitation, any sale, transfer or conveyance related to a sale and leaseback transaction but excluding sales of inventory in the ordinary course of business) or lease (or enter into any commitment to sell, transfer, convey or lease) all or any part of its assets (whether in one or a series of transactions) except (a) Leases by the Borrower and the Consolidated Subsidiaries of Flight Equipment to others provided that the aggregate book value of all Flight Equipment leased to any other Person or Persons by the Borrower or any Consolidated Subsidiary shall not at any time exceed $500,000,000, (b) Sales of property by the Borrower or a Consolidated Subsidiary provided that at the time of any such sale or other disposition the Borrower or the Consolidated Subsidiary making such sale or disposition shall have previously acquired or shall be simultaneously acquiring, in contemplation of such sale or other disposition, substantially similar property, or shall have previously entered into, or shall be simultaneously entering into, a binding purchase agreement or purchase agreements to acquire substantially similar property, which property is acquired within three years of such sale or other disposition, (c) Sales of property (other than sales of property permitted by Section 6.16(e) but including any deemed sales of property pursuant to Section 6.15(d)) determined by the Borrower to be surplus or obsolete provided that the aggregate net book value of all such surplus or obsolete property sold in any one fiscal year of the Borrower shall not exceed 12.5% of Consolidated Adjusted Net Worth as of the last day of the fiscal year of the Borrower immediately preceding the fiscal year of the Borrower during which any such sale of assets shall take place, (d) Sales of any property in order concurrently or subsequently to lease as lessee such or similar property, provided that (i) any such sale takes place within 360 days after (A) in the case of personal property, the date on which the Borrower acquired such property, and (B) in the case of real property or fixtures, the later of the date on which the Borrower acquired such property or the date on which construction of all improvements on such property was completed, and (ii) after giving effect to the creation of the Capitalized Lease Obligations, if any, of the Borrower or a Consolidated Subsidiary resulting from the lease of such property by the Borrower or a Consolidated Subsidiary, the Borrower is in compliance with Section 6.12, (e) Sales (including any deemed sales pursuant to Section 6.15(d)) of property owned on February 7, 1989 by Tiger International or any of its Subsidiaries provided that (i) the property being sold is reasonably determined by the Borrower to be unnecessary for the operation of an integrated, worldwide all cargo air and ground transportation system, and (ii) all such property is sold for an amount at least equal to the fair market value thereof, and Page 35 42 (f) Sales of Property commonly known as "Federal Express Stage 3 Kits" in accordance with the Borrower's ordinary business practices. 6.17. Loans, Advances and Investments. The Borrower will not, nor will it permit any Consolidated Subsidiary to, make or suffer to exist any Investments, or commitments therefor, except (a) Marketable direct obligations of the United States of America, or an instrumentality or agency thereof, having a remaining term to maturity of not more than one year, (b) Certificates of deposit or other obligations having a remaining term to maturity of not more than one year and issued by a Lender, First Tennessee Bank, N.A., Union Planters National Bank of Memphis or any other national or state bank or trust company having capital, surplus and undivided profits in excess of $250,000,000 in the aggregate, (c) Other certificates of deposit having a remaining term to maturity of not more than one year and issued by a bank or other financial institution approved in accordance with the Borrower's corporate investment guidelines and procedures provided that the aggregate outstanding principal amount of all such certificates of deposit shall not at any one time exceed $1,000,000, (d) Time deposits in any currency having a remaining term to maturity of not more than one year and held by (i) foreign branches of American banks, each such bank having capital, surplus and undivided profits in excess of $250,000,000, or (ii) foreign banks, each such bank having total capital, surplus and undivided profits in excess of $250,000,000 or its equivalent in other currencies, (e) For a period not in excess of one year, (i) marketable direct obligations of the United States of America, or an instrumentality or agency thereof, or (ii) instruments fully supported by marketable direct obligations of the United States of America, or an instrumentality or agency thereof, or (iii) open market commercial paper maturing within one year after acquisition of such commercial paper, which is rated A1 or better by S&P or P1 or better by Moody's; in each case, purchased by the Borrower or a Consolidated Subsidiary and actually delivered to or held by a Dealer for the account of the Borrower or a Consolidated Subsidiary under a repurchase agreement with the Dealer from which such obligations or commercial paper was purchased obligating such Dealer to repurchase such obligations or commercial paper within fourteen calendar days after the date of such repurchase agreement, (f) Open market commercial paper maturing within one year after the acquisition thereof, which is rated A1 or better by S&P or P1 or better by Moody's, Page 36 43 (g) Investments in the capital stock of a Consolidated Subsidiary, (h) Loans and advances by the Borrower to a Consolidated Subsidiary, (i) Loans and advances by a Consolidated Subsidiary to the Borrower, (j) Investments in any Person not otherwise permitted by this Section 6.17, which together with all other Investments at the time outstanding under this Section 6.17(j), do not exceed 12.5% of Consolidated Adjusted Net Worth provided that at least 66-2/3% of such Investments are reasonably related to the same fields of enterprise as those in which the Borrower and the Consolidated Subsidiaries are now engaged, and (k) Restricted Investments made in compliance with Section 6.11. In determining from time to time the amount of the Investments permitted by this Section 6.17, loans and advances shall be taken at the principal amount thereof then remaining unpaid at the time of such determination and other Investments shall be taken at the original cost thereof, regardless of any subsequent appreciation or depreciation therein. 6.18. Contingent Liabilities. The Borrower will not, nor will it permit any Consolidated Subsidiary to, assume, guarantee (including entering into any contract which is, in economic effect, substantially equivalent to a guaranty), endorse, contingently agree to purchase or to provide funds for the payment of, agree to maintain the net worth or working capital or any other financial test of, or otherwise become liable upon, any obligation of, any Person, except (a) By the endorsement of negotiable instruments for deposit or collection (or similar transactions) in the ordinary course of business, (b) Guaranties of customs fees in the ordinary course of business, and (c) Any other Contingent Obligation which after having given effect thereto would not cause the Borrower to fail to be in compliance with Section 6.12. In determining from time to time the amount of guaranties and contingent liabilities permitted by this Section 6.18, guaranties and contingent liabilities shall be taken at the principal amount then remaining unpaid at the time of such determination on the indebtedness and obligations so guaranteed or related to such contingent liabilities. 6.19. Liens. The Borrower will not, nor will it permit any Consolidated Subsidiary to, create, incur, assume or suffer to exist, any Lien, or enter into, or make any commitment to enter into, any arrangement for the acquisition of any Property through conditional sales, lease-purchase or other title retention agreement, except Page 37 44 (a) Liens which may be hereafter created to secure payment of the Notes and all amounts due the Lenders and the Agent, as the case may be, under this Agreement, (b) Deposits or pledges, made in the ordinary course of business, to secure payment of workers' compensation, unemployment insurance, old age pensions or other social security obligations, (c) Deposits or pledges, made in the ordinary course of business, to secure performance of bids, tenders, contracts (other than contracts for Indebtedness), leases, public or statutory obligations, surety bonds, or other deposits or pledges for purposes of like general nature made in the ordinary course of business, (d) Deposits or pledges for the purpose of securing an appeal, stay or discharge in the course of legal proceedings, or Liens for judgments or awards which were not incurred in connection with Indebtedness or the obtaining of advances or credits, provided such deposits, pledges and Liens do not, in the aggregate for the Borrower and the Consolidated Subsidiaries, materially detract from the value of their assets or properties or materially impair the use thereof in the ordinary course of business and such appeal, judgment or award, as the case may be, is being diligently contested or litigated in good faith by appropriate proceedings being diligently conducted, and provided further there has been set aside on the books of the Borrower or the Consolidated Subsidiaries, as the case may be, reserves in accordance with GAAP with respect thereto, which reserves shall be maintained until the related liabilities are paid or otherwise discharged, and provided further execution is not levied upon any such judgment or award, (e) Liens for taxes, fees, assessments and governmental charges not delinquent or which are being contested in good faith by appropriate proceedings being diligently conducted, provided there has been set aside on the books of the Borrower or the Consolidated Subsidiaries, as the case may be, adequate reserves in accordance with GAAP with respect thereto, which reserves shall be maintained until the related liabilities are paid or otherwise discharged, and provided further, execution is not levied upon any such Lien, (f) Mechanics', carriers', workers', repairmen's or other like Liens arising in the ordinary course of business securing obligations which are not overdue for a period of more than 90 calendar days, or which are being contested in good faith by appropriate proceedings being diligently conducted provided there has been set aside on the books of the Borrower and the Consolidated Subsidiaries, as the case may be, adequate reserves in accordance with GAAP with respect thereto, which reserves shall be maintained until the related liabilities are paid or otherwise discharged, and provided further, execution is not levied upon any such Lien, (g) Lessors' interests under Capitalized Leases, Page 38 45 (h) Liens on property acquired or constructed with the proceeds of any tax-exempt airport bond financing, (i) Liens securing Indebtedness of a Consolidated Subsidiary to the Borrower, (j) Liens existing on the property of a corporation or other business entity immediately prior to its being consolidated with or merged into the Borrower or a Consolidated Subsidiary or its becoming a Consolidated Subsidiary, or Liens existing on any property acquired by the Borrower or a Consolidated Subsidiary at the time such is so acquired (whether or not the Indebtedness secured thereby shall have been assumed), provided that (i) no such Lien was created or assumed in contemplation of such consolidation or merger or such entity's becoming a Consolidated Subsidiary or such acquisition of property and (ii) each such Lien shall only cover the acquired property and, if required by the terms of the instrument originally creating such Lien, property which is an improvement to or is acquired for specific use in connection with such acquired property, (k) Liens on Flight Equipment acquired on or after the date of this Agreement which (i) secure the payment of all or any part of the purchase price of such Flight Equipment or improvements thereon, (ii) are limited to the Flight Equipment so acquired and improvements thereon, and (iii) attach to such Flight Equipment within one year after the acquisition or improvement of such Flight Equipment, and (l) Liens not otherwise permitted by Sections 6.19(a) through (k) provided that at all times the sum of (i) the aggregate principal amount of all outstanding Long Term Debt of the Consolidated Subsidiaries (excluding the Current Maturities of any such Long Term Debt and any Long Term Debt of a Consolidated Subsidiary owing to the Borrower) which is unsecured, plus (ii) the aggregate principal amount of all outstanding Long Term Debt of the Borrower or a Consolidated Subsidiary (excluding the Current Maturities of any such Long Term Debt and any Long Term Debt of a Consolidated Subsidiary owing to the Borrower) which is secured as permitted by this Section 6.19(l), does not exceed 8% of Consolidated Adjusted Total Assets. ARTICLE VII DEFAULTS The occurrence of any one or more of the following events shall constitute a Default: 7.1. Any representation or warranty made or deemed made by or on behalf of the Borrower or any of its Subsidiaries to the Lenders or the Agent under or in connection with Page 39 46 this Agreement, any Loan, or any certificate or information delivered in connection with this Agreement or any other Loan Document shall be materially false on the date as of which made or deemed made. 7.2. Nonpayment of principal of any Note when due, or nonpayment of interest upon any Note or of any facility fee or other obligations under any of the Loan Documents within five days after the same becomes due. 7.3. The breach by the Borrower of any of the terms or provisions of Section 6.2, 6.5, 6.11, 6.12, 6.13, 6.14, 6.15, 6.16, 6.17, 6.18, or 6.19. 7.4. The breach by the Borrower (other than a breach which constitutes a Default under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of this Agreement which is not remedied within five days after written notice from the Agent or any Lender. 7.5. Failure of the Borrower or any Consolidated Subsidiary to pay when due or within any applicable grace period any portion of either any single obligation constituting Indebtedness in excess of $20,000,000 (or the equivalent thereof in any other currency) or Indebtedness in an aggregate principal amount in excess of $60,000,000 (or the equivalent thereof in any other currency); or any default or other event shall occur under or with respect to either any agreement under which any single obligation constituting Indebtedness in excess of $20,000,000 (or the equivalent thereof in any other currency) was created or is governed, or any agreements under which Indebtedness in an aggregate principal amount in excess of $60,000,000 (or the equivalent thereof in any other currency) was created or is governed, the effect of which, in either case, is to cause, or to permit the holder or holders of such Indebtedness to cause, such Indebtedness to become due prior to its stated maturity; or either any single obligation constituting Indebtedness in excess of $20,000,000 (or the equivalent thereof in any other currency) or Indebtedness in an aggregate principal amount in excess of $60,000,000 (or the equivalent thereof in any other currency) shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled payment), prior to the stated maturity thereof; or the Borrower or any Consolidated Subsidiary shall not pay, or admit in writing its inability to pay, its debts generally as they become due. 7.6. The Borrower or any Consolidated Subsidiary shall (i) have an order for relief entered with respect to it under the Federal bankruptcy laws as now or hereafter in effect, (ii) make an assignment for the benefit of creditors, (iii) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any Substantial Portion of its Property, (iv) institute any proceeding seeking an order for relief under the Federal bankruptcy laws as now or hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (v) take any corporate action to authorize or effect any of the foregoing actions set forth in Page 40 47 this Section 7.6 or (vi) fail to contest in good faith any appointment or proceeding described in Section 7.7. 7.7. Without the application, approval or consent of the Borrower or any Consolidated Subsidiary, a receiver, trustee, examiner, liquidator or similar official shall be appointed for the Borrower or any Consolidated Subsidiary or any Substantial Portion of its Property, or a proceeding described in Section 7.6(iv) shall be instituted against the Borrower or any Consolidated Subsidiary and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of 45 consecutive days. 7.8. The Borrower or any Consolidated Subsidiary shall fail within 45 days to pay, bond or otherwise discharge any judgment or order for the payment of money in excess of $1,000,000, which is not stayed on appeal or otherwise being appropriately contested in good faith. 7.9. The Unfunded Liabilities of all Single Employer Plans shall exceed in the aggregate $80,000,000 or any Reportable Event shall occur in connection with any Plan. 7.10. An administrator, custodian or other representative, by or pursuant to any legislative act, resolution or rule (other than the Federal bankruptcy laws or any similar law, State or Federal, whether now or hereafter existing) or any order or decree of any court or any governmental board or agency (other than any order or decree issued pursuant to the Federal bankruptcy laws or any similar law, State or Federal, whether now or hereafter existing) shall take possession or control of all or such portions of the property of any one or more of the Borrower and the Consolidated Subsidiaries as would, in the sole opinion of the Required Lenders, materially interfere with the operation of the business of the Borrower and the Consolidated Subsidiaries, on a consolidated basis, and such possession or control shall continue for 45 calendar days. 7.11. The Borrower or any of its Subsidiaries shall be the subject of any proceeding or investigation pertaining to the release by the Borrower or any of its Subsidiaries, or any other Person of any toxic or hazardous waste or substance into the environment, or any violation of any federal, state or local environmental, health or safety law or regulation, which, in either case, could reasonably be expected to have a Material Adverse Effect. ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES 8.1. Acceleration. If any Default described in Section 7.6 or 7.7 occurs with respect to the Borrower, the obligations of the Lenders to make Loans hereunder shall automatically terminate and the Obligations shall immediately become due and payable without any election or action on the part of the Agent or any Lender. If any other Default occurs, the Page 41 48 Required Lenders (or the Agent, with the written consent of the Required Lenders) may terminate or suspend the obligations of the Lenders to make Loans hereunder, or declare the Obligations to be due and payable, or both, whereupon the Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which the Borrower hereby expressly waives. If, within 14 days after acceleration of the maturity of the Obligations or termination of the obligations of the Lenders to make Loans hereunder as a result of any Default (other than any Default as described in Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or decree for the payment of the Obligations due shall have been obtained or entered, the Required Lenders (in their sole discretion) shall so direct, the Agent shall, by notice to the Borrower, rescind and annul such acceleration and/or termination, provided that the Borrower certifies to the Lenders to their satisfaction that, upon giving effect to such rescission, no other Indebtedness of the Borrower shall be accelerated by virtue of a cross-acceleration to Indebtedness under this Agreement. 8.2. Amendments. Subject to the provisions of this Article VIII, the Required Lenders (or the Agent with the consent in writing of the Required Lenders) and the Borrower may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders or the Borrower hereunder or waiving any Default hereunder; provided, however, that no such supplemental agreement shall, without the consent of each Lender affected thereby: (i) Extend the maturity or the time of payment of any Loan or Note or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon or fees hereunder. (ii) Reduce the percentage specified in the definition of Required Lenders or amend, modify, or waive any provision requiring action by the Required Lenders to require action by any other Person in lieu of the Required Lenders. (iii) Extend the Facility Termination Date, or reduce the amount or extend the payment date for, the mandatory payments required under Section 2.2, or increase the amount of the Commitment of any Lender hereunder, or permit the Borrower to assign its rights under this Agreement. (iv) Amend, modify, or waive Section 2.2(a), Section 4.1, Section 4.2, this Section 8.2, or Section 12.1. No amendment of any provision of this Agreement relating to the Agent shall be effective without the written consent of the Agent. The Agent may waive payment of the fee required under Section 12.3.3 without obtaining the consent of any other party to this Agreement. 8.3. Preservation of Rights. No delay or omission of the Lenders or the Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a Page 42 49 waiver of any Default or an acquiescence therein, and the making of a Loan notwithstanding the existence of a Default or the inability of the Borrower to satisfy the conditions precedent to such Loan shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the Lenders required pursuant to Section 8.2, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Agent and the Lenders until the Obligations have been paid in full. ARTICLE IX GENERAL PROVISIONS 9.1. Survival of Representations. All representations and warranties of the Borrower contained in this Agreement shall survive delivery of the Notes and the making of the Loans herein contemplated. 9.2. Governmental Regulation. Anything contained in this Agreement to the contrary notwithstanding, no Lender shall be obligated to extend credit to the Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation. 9.3. Taxes. Any taxes (excluding income taxes on the overall net income of any Lender) or other similar assessments or charges payable or ruled payable by any governmental authority in respect of the Loan Documents shall be paid by the Borrower, together with interest and penalties, if any. 9.4. Headings. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents. 9.5. Entire Agreement. The Loan Documents embody the entire agreement and understanding among the Borrower, the Agent and the Lenders and supersede all prior agreements and understandings among the Borrower, the Agent and the Lenders relating to the subject matter thereof. 9.6. Several Obligations; Benefits of this Agreement. The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other (except to the extent to which the Agent is authorized to act as such). The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. This Agreement shall not be construed so as to confer any Page 43 50 right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns. 9.7. Expenses; Indemnification. The Borrower shall reimburse the Agent for any and all reasonable costs, internal charges and out-of-pocket expenses (including attorneys' fees and time charges of attorneys for the Agent, which attorneys may be employees of the Agent) paid or incurred by the Agent in connection with the preparation, negotiation, execution, delivery (subject to, with respect to all the foregoing, the terms of that certain commitment letter between the Agent and the Borrower dated April 5, 1995 as it may be amended or supplemented from time to time), amendment, and modification, of the Loan Documents. The Borrower also agrees to reimburse the Agent and the Lenders for any and all reasonable costs, internal charges and out-of-pocket expenses (including attorneys' fees and time charges of attorneys for the Agent and the Lenders, which attorneys may be employees of the Agent or the Lenders) paid or incurred by the Agent or any Lender in connection with the collection and enforcement of the Loan Documents and the protection of rights thereunder. The Borrower further agrees to indemnify the Agent and each Lender, its directors, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all expenses of litigation or preparation therefor whether or not the Agent or any Lender is a party thereto) which any of them may pay or incur arising out of or relating to this Agreement, the other Loan Documents, the transactions contemplated hereby or the direct or indirect application or proposed application of the proceeds of any Loan hereunder. The obligations of the Borrower under this Section shall survive the termination of this Agreement, the cancellation of the Commitments, and the payment of all outstanding Obligations. 9.8. Numbers of Documents. All statements, notices, closing documents, and requests hereunder shall be furnished to the Agent with sufficient counterparts so that the Agent may furnish one to each of the Lenders. 9.9. Severability of Provisions. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. 9.10. Nonliability of Lenders. The relationship between the Borrower and the Lenders and the Agent shall be solely that of borrower and lender. Neither the Agent nor any Lender shall have any fiduciary responsibilities to the Borrower. Neither the Agent nor any Lender undertakes any responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower's business or operations. 9.11. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW Page 44 51 OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 9.12. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS. 9.13. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER. 9.14. Confidentiality. The Agent and each Lender agrees to hold any confidential information which it may receive from the Borrower pursuant to this Agreement or in the course of an inspection pursuant to Section 6.10 in confidence, except for disclosure (i) to other Lenders and their respective Affiliates, each of whom shall be made aware of the terms of this Section 9.14 and shall agree to abide thereby, (ii) to legal counsel, accountants, and other professional advisors to the Agent or that Lender, (iii) to regulatory officials (provided that, to the extent practicable and permissible, the Agent and each Lender shall give the Borrower prior notice of such disclosure), (iv) as required by law, regulation, or legal process, (v) in connection with any legal proceeding to which the Agent or that Lender is a party, and (vi) permitted by Section 12.4; provided that, in connection with any disclosure permitted under clause (iv) or (v) hereinabove, the Agent or such Lender, as appropriate, shall give the Borrower prior notice of such disclosure unless such notice is prohibited by law, regulation, or process. 9.15. Accounting. Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP. Page 45 52 9.16. Effect on Prior Agreement; Ratification. The Borrower, the Agent, and the Lenders agree that, on the Effective Date, all indebtedness, liabilities and obligations of the Borrower to the Lenders outstanding under the Prior Agreement and the promissory notes delivered thereunder shall, to the extent not paid on such date, be deemed to be Obligations outstanding hereunder and under the Notes. Each Lender party to the Prior Agreement shall, promptly after receipt of its Note hereunder, return to the Borrower the promissory note received by it in connection with the Prior Agreement. As of the Effective Date, the Withdrawing Lenders shall cease to be "Lenders" for all purposes under this Agreement. The Borrower, the Agent, and the Lenders agree that (i) all terms and conditions of the Prior Agreement which are amended and restated by this Agreement shall remain effective until such amendment and restatement becomes effective hereunder, and (ii) the representations, warranties and covenants set forth herein shall become effective concurrently with the occurrence of the Effective Date. ARTICLE X THE AGENT 10.1. Appointment. The First National Bank of Chicago is hereby appointed Agent hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Agent to act as the agent of such Lender. The Agent agrees to act as such upon the express conditions contained in this Article X. The Agent shall not have a fiduciary relationship in respect of the Borrower or any Lender by reason of this Agreement. 10.2. Powers. The Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Agent shall have no implied duties to the Lenders, or any obligation to the Lenders to take any action thereunder except any action specifically provided by the Loan Documents to be taken by the Agent. 10.3. General Immunity. Neither the Agent nor any of its directors, officers, agents or employees shall be liable to the Borrower, the Lenders or any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except for its or their own gross negligence or willful misconduct. 10.4. No Responsibility for Loans, Recitals, etc. Neither the Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (i) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document; (iii) the satisfaction of Page 46 53 any condition specified in Article IV, except receipt of items required to be delivered to the Agent; or (iv) the validity, effectiveness or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith. 10.5. Action on Instructions of Lenders. The Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the requisite number of Lenders, and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders and on all holders of Notes unless the Required Lenders are not authorized to direct the Agent to so act or so fail to act under the terms of this Agreement. The Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action. 10.6. Employment of Agents and Counsel. The Agent may execute any of its duties as Agent hereunder and under any other Loan Document by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The Agent shall be entitled to advice of counsel concerning all matters pertaining to the agency hereby created and its duties hereunder and under any other Loan Document. 10.7. Reliance on Documents; Counsel. The Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, telex, telecopy, telefacsimile, statement, 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, in respect to legal matters, upon the opinion of counsel selected by the Agent, which counsel may be employees of the Agent. 10.8. Agent's Reimbursement and Indemnification. The Lenders agree to reimburse and indemnify the Agent ratably in proportion to their respective Commitments (i) for any amounts not reimbursed by the Borrower for which the Agent is entitled to reimbursement by the Borrower under the Loan Documents, (ii) for any other expenses incurred by the Agent on behalf of the Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents to the extent such expenses are or may be obligations of the Borrower to the Agent and (iii) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby, or the enforcement of any of the terms thereof or of any such other documents, provided that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Agent. The obligations of the Lenders under this Section 10.8 shall survive payment of the Obligations and termination of this Agreement. Page 47 54 10.9. Rights as a Lender. With respect to its Commitment, Loans made by it and the Note issued to it, the Agent shall have the same rights and powers hereunder and under any other Loan Document as any Lender and may exercise the same as though it were not the Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is a Lender, unless the context otherwise indicates, include the Agent in its individual capacity. The Agent may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Subsidiaries in which the Borrower or such Subsidiary is not restricted hereby from engaging with any other Person. The Agent, in its individual capacity, is not obligated to remain a Lender except as provided under Article XII. 10.10. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender and based on the financial statements prepared by the Borrower and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents. 10.11. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower, and the Agent may be removed at any time with or without cause by written notice received by the Agent from the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint, on behalf of the Borrower and the Lenders and with the consent of the Borrower (which shall not be unreasonably withheld), a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders and consented to by the Borrower and shall have accepted such appointment within thirty days after the retiring Agent's giving notice of resignation, then the retiring Agent may appoint, on behalf of the Lenders, a successor Agent, provided that the Borrower shall have the right to remove such successor Agent and replace it with a successor of its own designation with the consent of the Required Lenders (which shall not be unreasonably withheld). Such successor Agent shall be a commercial bank having capital and retained earnings of at least $250,000,000. 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 or removed Agent, and the retiring or removed Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents. After any retiring or removed Agent's resignation or removal hereunder as Agent, the provisions of this Article X 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 hereunder and under the other Loan Documents. 10.12. Distribution of Information. The Borrower authorizes the Agent, as the Agent may elect in its sole discretion, to discuss with and furnish to the Lenders or to any other Person having an interest in the Obligations (whether as a guarantor, pledgor of collateral, participant, purchaser or otherwise) all financial statements, audit reports and other Page 48 55 information pertaining to the Borrower and its Subsidiaries whether such information was provided by the Borrower or prepared or obtained by the Agent, subject to Section 9.14. Neither the Agent nor any of its employees, officers, directors or agents makes any representation or warranty regarding any audit reports or other analyses of the Borrower's and its Subsidiaries condition which the Agent may elect to distribute, whether such information was provided by the Borrower or prepared or obtained by the Agent, nor shall the Agent or any of its employees, officers, directors or agents be liable to any person or entity receiving a copy of such reports or analyses for any inaccuracy or omission contained in or relating thereto. ARTICLE XI SETOFF; RATABLE PAYMENTS 11.1. Setoff. In addition to, and without limitation of, any rights of the Lenders under applicable law, if the Borrower becomes insolvent, however evidenced, or any Default or Unmatured Default occurs, any and all deposits (including all account balances, whether provisional or final and whether or not collected or available) and any other Indebtedness at any time held or owing by any Lender to or for the credit or account of the Borrower may be offset and applied toward the payment of the Obligations owing to such Lender, whether or not the Obligations, or any part hereof, shall then be due. 11.2. Ratable Payments. If any Lender, whether by setoff or otherwise, has payment made to it upon its Loans (other than payments received pursuant to Section 3.1, 3.2 or 3.4) in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a portion of the Loans held by the other Lenders so that after such purchase each Lender will hold its ratable proportion of Loans. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral ratably in proportion to their Loans. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made to accomplish the intent of this Section. ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS 12.1. Successors and Assigns. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrower and the Lenders and their Page 49 56 respective successors and assigns, except that (i) the Borrower shall not have the right to assign its rights or obligations under the Loan Documents and (ii) any assignment by any Lender must be made in compliance with Section 12.3. Notwithstanding clause (ii) of this Section, any Lender may at any time, without the consent of the Borrower or the Agent, assign all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank; provided, however, that no such assignment shall release the transferor Lender from its obligations hereunder. The Agent may treat the payee of any Note as the owner thereof for all purposes hereof unless and until such payee complies with Section 12.3 in the case of an assignment thereof or, in the case of any other transfer, a written notice of the transfer is filed with the Agent. Any assignee or transferee of a Note agrees by acceptance thereof to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the holder of any Note, shall be conclusive and binding on any subsequent holder, transferee or assignee of such Note or of any Note or Notes issued in exchange therefor. 12.2. Participations. 12.2.1. Permitted Participants; Effect. Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender, any Note held by such Lender, any Commitment of such Lender or any other interest of such Lender under the Loan Documents. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the holder of any such Note for all purposes under the Loan Documents, all amounts payable by the Borrower under this Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents. 12.2.2. Voting Rights. Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Loan or Commitment in which such Participant has an interest which forgives principal, interest or fees or reduces the interest rate or fees payable with respect to any such Loan or Commitment, postpones any date fixed for any regularly-scheduled payment of principal of, or interest or fees on, any such Loan or Commitment, releases any guarantor of any such Loan or releases any substantial portion of collateral, if any, securing any such Loan. 12.2.3. Benefit of Setoff. Upon selling any participating interest to a Participant pursuant to Section 12.2.1, each Lender will have the option to, but shall not be required to, give the Borrower and the Agent written notice of the fact that it has made such a sale (without being required to specify the amount or any other Page 50 57 information concerning the participating interest sold) and the name of the purchasing Participant (each Participant named in such a notice is hereinafter referred to as an "Acknowledged Participant"). The Borrower agrees that each Acknowledged Participant shall be deemed to have the right of setoff provided in Section 11.1 as of the date of the Borrower's receipt of the aforementioned notice in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided that each Lender shall retain the right of setoff provided in Section 11.1 with respect to the amount of participating interests sold to each Acknowledged Participant. The Lenders agree to share with each Acknowledged Participant, and each Acknowledged Participant, by exercising the right of setoff provided in Section 11.1, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 11.2 as if each Acknowledged Participant were a Lender. 12.3. Assignments. 12.3.1. Permitted Assignments. Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time make one assignment to one bank or other entity (each a "Purchaser") of all of its rights and obligations under the Loan Documents. Any assignment under this Section 12.3 shall be substantially in the form of Exhibit "C" hereto or in such other form as may be agreed to by the parties thereto. Unless an acceleration of the Obligations has occurred and is continuing, the consent of the Borrower and the Agent shall be required prior to an assignment becoming effective with respect to a Purchaser which is not a Lender or an Affiliate thereof. Such consent shall not be unreasonably withheld. Notwithstanding anything in this Article XII to the contrary, nothing in this Agreement shall prohibit or limit the right of any Lender to make assignments (and no consent shall be required in connection with such assignments) of all or any part of its interests under the Loan Documents (i) to a Purchaser which is a Lender or an Affiliate thereof and (ii) after the occurrence and during the continuance of an acceleration of the Obligations, to any Purchaser. 12.3.2. Required Assignments. The Borrower shall have the right, by giving at least 15 Business Days' prior written notice to the affected Lender and the Agent, at any time when no Default or Unmatured Default has occurred and is continuing, to require any Lender to assign all of its rights and obligations under the Loan Documents to a Purchaser approved by the Borrower. Such assignment shall be substantially in the form of Exhibit "C" hereto or in such other form as may be agreed to by the parties thereto but shall be on terms and conditions reasonably satisfactory to the affected Lender. If the affected Lender is a Reference Lender, the Agent, with the consent of the Borrower (which shall not be unreasonably withheld), shall appoint a new Reference Lender from among the Lenders. The Borrower shall remain liable to the affected Lender for any indemnification provided under Section 3.4 with respect to Page 51 58 Loans of such Lender outstanding on the effective date of an assignment required under this Section 12.3.2. 12.3.3. Effect; Effective Date. Upon (i) delivery to the Agent of a notice of assignment, substantially in the form attached as Exhibit "I" to Exhibit "C" hereto (a "Notice of Assignment"), together with any consents required by Section 12.3.1, and (ii) payment of a $4,000 fee to the Agent for processing such assignment, such assignment shall become effective on the effective date specified in such Notice of Assignment. On and after the effective date of such assignment, such Purchaser shall for all purposes be a Lender under this Agreement and any other Loan Document executed by the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party hereto, and no further consent or action by the Borrower, the Lenders or the Agent shall be required to release the transferor Lender with respect to the percentage of the Aggregate Commitment and Loans assigned to such Purchaser and such Lender shall be immediately so released. Upon the consummation of any assignment to a Purchaser pursuant to this Section 12.3.3, the transferor Lender, the Agent and the Borrower shall make appropriate arrangements so that a replacement Note is issued to such transferor Lender and a new Note or, as appropriate, a replacement Note, is issued to such Purchaser, in each case in principal amounts reflecting their respective Commitments, as adjusted pursuant to such assignment. 12.4. Dissemination of Information. The Borrower authorizes each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a "Transferee") and any prospective Transferee any and all information in such Lender's possession concerning the creditworthiness of the Borrower and its Subsidiaries; provided that each Transferee and prospective Transferee agrees to be bound by Section 9.14 of this Agreement. 12.5. Tax Treatment. If any interest in any Loan Document is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 2.18. ARTICLE XIII NOTICES 13.1. Giving Notice. Except as otherwise permitted by Section 2.13 with respect to borrowing notices, all notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing or by telex or by facsimile and addressed or delivered to such party at its address set forth below its signature hereto or at such other address as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if delivered to the Borrower's delivery service and properly addressed, shall be deemed given when received; any notice, if Page 52 59 transmitted by telex or facsimile, shall be deemed given when transmitted (answerback confirmed in the case of telexes). 13.2. Change of Address. The Borrower, the Agent and any Lender may each change the address for service of notice upon it by a notice in writing to the other parties hereto. ARTICLE XIV COUNTERPARTS This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement shall be effective upon receipt by the Agent of original or faxed copies of such counterparts executed by the Borrower, the Agent and the Lenders. Page 53 60 IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed this Agreement as of the date first above written. FEDERAL EXPRESS CORPORATION By: /s/ CHARLES M. BUCHAS, JR. Charles M. Buchas, Jr. Vice President and Treasurer Federal Express Corporation 2007 Corporate Avenue Memphis, Tennessee 38132 Attn: Vice President and Treasurer Telephone: 901-395-4533 Telecopy: 901-395-3910 Copy all notices and credit matters to: Federal Express Corporation 2005 Corporate Avenue Memphis, Tennessee 38132 Attn: General Counsel Telephone: 901-395-3382 Telecopy: 901-395-3456 Page 54 61 COMMITMENT - ---------- $56,000,000 THE FIRST NATIONAL BANK OF CHICAGO, Individually and as Agent By: /s/ DAVID G. DIXON David G. Dixon Authorized Agent One First National Plaza Mail Suite 0362 Chicago, Illinois 60670 Attn: Transportation Division Administrative Coordinator Telephone: 312-732-8142 Telecopy: 312-732-3055 Copy all notices and credit matters to: The First National Bank of Chicago One First National Plaza Chicago, Illinois 60670-0362 Attn: Christina D. Zautcke Telephone: 312-732-1336 Telecopy: 312-732-3055 Copy all Borrowing Notices to: The First National Bank of Chicago One First National Plaza Mail Suite 0634 Chicago, Illinois 60670-0634 Attn: Gregory A. Baranowski Telephone: (312) 732-8573 Telecopy: (312) 732-4840 Page 55 62 COMMITMENT - ---------- $46,000,000 BANK OF AMERICA ILLINOIS By: /s/ TIMOTHY C. HINTZ Timothy C. Hintz Managing Director 555 S. Flower Street 11th Floor Los Angeles, California 90071 Attn: Timothy C. Hintz Telephone: (213) 228-2810 Telecopy: (213) 228-2756 Copy all notices and credit matters to: Bank of America National Trust and Savings Association 555 S. Flower Street 11th Floor Los Angeles, California 90071 Attn: Timothy C. Hintz Telephone: (213) 228-2810 Telecopy: (213) 228-2756 Copy all Borrowing Notices to: Bank of America National Trust and Savings Association Corporate Service Center #5693 1850 Gateway Boulevard Concord, California 94520 Attn: Milt Haverty Telephone: (510) 675-8254 Telecopy: (510) 675-7531 or 7532 Page 56 63 COMMITMENT - ---------- $46,000,000 BANK OF TOKYO TRUST COMPANY By: /s/ AMANDA S. RYAN Amanda S. Ryan Vice President 1251 Avenue of the Americas 12th Floor New York, New York 10116 Attn: Amanda S. Ryan Telephone: (212) 782-4322 Telecopy: (212) 782-6440 Copy all notices and credit matters to: The Bank of Tokyo Trust Company 1251 Avenue of the Americas 12th Floor New York, New York 10116 Attn: Amanda S. Ryan Telephone: (212) 782-4322 Telecopy: (212) 782-6440 Copy all Borrowing Notices to: The Bank of Tokyo Trust Company 1251 Avenue of the Americas 12th Floor New York, New York 10116 Attn: Matthew Croghan Telephone: (212) 782-4271 Telecopy: (212) 782-6402 Page 57 64 COMMITMENT - ---------- $46,000,000 CANADIAN IMPERIAL BANK OF COMMERCE By: /s/ KATHRYN W. SAX Kathryn W. Sax Vice President Two Paces West 2727 Paces Ferry Rd. Suite 1200 Atlanta, Georgia 30339 Attn: Kathryn W. Sax Telephone: (404) 319-4903 Telecopy: (404) 319-4954 Copy all notices and credit matters to: Canadian Imperial Bank of Commerce Two Paces West 2727 Paces Ferry Rd. Suite 1200 Atlanta, Georgia 30339 Attn: Kathryn W. Sax Telephone: (404) 319-4903 Telecopy: (404) 319-4954 Copy all Borrowing Notices to: Canadian Imperial Bank of Commerce Two Paces West 2727 Paces Ferry Rd. Suite 1200 Attn: Pluria Howell Telephone: (404) 319-4814 Telecopy: (404) 319-4950 Page 58 65 COMMITMENT - ---------- $46,000,000 THE CHASE MANHATTAN BANK, N.A. By: /s/ MATTHEW H. MASSIE Matthew H. Massie Vice President One Chase Manhattan Plaza 3rd Floor New York, New York 10081 Attn: Sherwood E. Exum, Managing Director Telephone: (212) 552-4655 Telecopy: (212) 552-5879 Copy all notices and credit matters to: The Chase Manhattan Bank, N.A. One Chase Manhattan Plaza 3rd Floor New York, New York 10081 Attn: Matthew H. Massie Telephone: (212) 552-4655 Telecopy: (212) 552-5879 Copy all Borrowing Notices to: The Chase Manhattan Bank, N.A. Two Chase Manhattan Plaza 5th Floor Credit Administration New York, New York 10081 Attn: Carlos Morales Telephone: (212) 552-4517 Telecopy: (212) 552-4455 Page 59 66 COMMITMENT - ---------- $46,000,000 CITICORP USA, INC. By: /s/ M. KHURSHID ZAMAN M. Khurshid Zaman Authorized Signer 399 Park Avenue 12th Floor/Zone 2 New York, New York 10043 Attn: M. Khurshid Zaman Telephone: (212) 559-0420 Telecopy: (212) 793-3734 Copy all notices and credit matters to: Citibank, N.A. 399 Park Avenue 12th Floor/Zone 2 New York, New York 10043 Attn: M. Khurshid Zaman Telephone: (212) 559-0420 Telecopy: (212) 793-3734 Copy all Borrowing Notices to: Citibank, N.A. Floor 7/Zone 2 1 Court Square Long Island City New York, New York 11120 Attn: Lillian Harvan Telephone: (718) 248-4392 Telecopy: (718) 248-4844 Page 60 67 COMMITMENT - ---------- $46,000,000 COMMERZBANK AG, ATLANTA AGENCY By: /s/ H. YERGY /s/ E. KAGERER H. Yergy E. Kagerer Vice President Asst Vice President Promenade Two, Suite 3500 1230 Peachtree Street, N.E. Atlanta, Georgia 30309 Attn: Corporate Banking Telephone: (404) 888-6500 Telecopy: (404) 888-6539 Copy all notices and credit matters to: Commerzbank AG, Atlanta Agency Promenade Two, Suite 3500 1230 Peachtree Street, N.E. Atlanta, Georgia 30309 Attn: Eric R. Kagerer Telephone: (404) 888-6517 Telecopy: (404) 888-6539 Copy all Borrowing Notices to: Commerzbank AG, Atlanta Agency Promenade Two, Suite 3500 1230 Peachtree Street, N.E. Atlanta, Georgia 30309 Attn: Ute Brune Telephone: (404) 888-6510 Telecopy: (404) 888-6539 Page 61 68 COMMITMENT - ---------- $46,000,000 NATIONAL WESTMINSTER BANK PLC, NEW YORK BRANCH By: /s/ MARIA AMARAL-LEBLANC Maria Amaral-LeBlanc Vice President NATIONAL WESTMINSTER BANK PLC, NASSAU BRANCH By: /s/ MARIA AMARAL-LEBLANC Maria Amaral-LeBlanc Vice President 175 Water Street, 29th Floor New York, New York 10038 Attn: Maria Amaral-LeBlanc Telephone: (212) 602-4229 Telecopy: (212) 602-4500 Copy all notices and credit matters to: National Westminster Bank PLC 175 Water Street, 29th Floor New York, New York 10038 Attn: Maria Amaral-LeBlanc Telephone: (212) 602-4229 Telecopy: (212) 602-4500 Copy all Borrowing Notices to: National Westminster Bank PLC 175 Water Street, 19th Floor New York, New York 10038 Attn: Nadira Fauder Telephone: (212) 602-4180 Telecopy: (212) 602-4118 Page 62 69 COMMITMENT - ---------- $46,000,000 NATIONSBANK OF GEORGIA, N.A. By: /s/ JOHN E. BALL John E. Ball Senior Vice President 600 Peachtree Street, N.E. 21st Floor Atlanta Georgia 30308-2213 Telephone: (615) 749-3469 Telecopy: (615) 749-4640 Copy all notices and credit matters to: NationsBank One NationsBank Plaza Fifth Floor Nashville, Tennessee 37239-1697 Attn: John E. Ball Telephone: (615) 749-3469 Telecopy: (615) 749-4640 Copy all Borrowing Notices to: NationsBank 100 North Tryon Charlotte, North Carolina 28255 Attn: Telephone: (704) 386-4576 Telecopy: (704) 386-8694 Page 63 70 COMMITMENT - ---------- $46,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ STEPHEN B. KING Stephen B. King Vice President 60 Wall Street New York, New York 10260 Attn: Stephen B. King Telephone: (212) 648-7415 Telecopy: (212) 648-5336 Copy all notices and credit matters to: Morgan Guaranty Trust Company of New York 60 Wall Street New York, New York 10260 Attn: Stephen B. King Timothy V. O'Donovan Vice President Telephone: (212) 648-7415/8111 Telecopy: (212) 648-5336 Copy all Borrowing Notices to: Multi-Option Unit - Loan Department c/o J. P. Morgan Services, Inc. 500 Stanton-Christiana Road Newark, Delaware 19713 Telephone: (302) 634-1800 Telecopy: (302) 634-1094 Page 64 71 COMMITMENT - ---------- $35,000,000 THE BANK OF NEW YORK By: /s/ GREGORY L. BATSON Gregory L. Batson Vice President One Wall Street, 22nd Floor New York, New York 10286 Attn: Gregory L. Batson Telephone: (212) 635-6898 Telecopy: (212) 635-6434 Copy all notices and credit matters to: The Bank of New York One Wall Street, 22nd Floor New York, New York 10286 Attn: Gregory L. Batson Telephone: (212) 635-6898 Telecopy: (212) 635-6434 Copy all Borrowing Notices to: The Bank of New York One Wall Street New York, New York 10286 Attn: Lorna O. Alleyne Telephone: (212) 635-6737 Telecopy: (212) 635-6399, 6877 Page 65 72 COMMITMENT - ---------- $35,000,000 THE FUJI BANK, LIMITED By: /s/ SHINICHIRO FUJIMOTO Shinichiro Fujimoto Joint General Manager Marquis One Tower, Suite 2100 245 Peachtree Center Ave., N.E. Atlanta, Georgia 30303-1208 Attn: Clarence J. Mahovlich Telephone: (404) 653-2100 Telecopy: (404) 653-2119 Copy all notices and credit matters to: The Fuji Bank, Limited Marquis One Tower 245 Peachtree Center Ave., N.E. Atlanta, Georgia 30303-1208 Attn: Clarence J. Mahovlich Telephone: (404) 653-2100 Telecopy: (404) 653-2119 Copy all Borrowing Notices to: The Fuji Bank, Limited Marquis One Tower 245 Peachtree Center Ave., N.E. Atlanta, Georgia 30303-1208 Attn: Connie Fowls Telephone: (404) 653-2100 Telecopy: (404) 653-2119 Page 66 73 COMMITMENT - ---------- $35,000,000 KREDIETBANK N.V. , GRAND CAYMAN BRANCH By: /s/ DIANE M. GRIMMIG Name: Diane M. Grimmig Title: Vice President By: /s/ ROBERT SNAUFFER Name: Robert Snauffer Title: Vice President 125 W. 55th Street New York, New York 10019 Attn: Senior Lending Officer Telephone: (212) 541-0600 Telecopy: (212) 956-5580 Copy all notices and credit matters to: Kredietbank N.V. 125 W. 55th Street New York, New York 10019 Attn: Senior Lending Officer Telephone: (212) 541-0600 Telecopy: (212) 956-5580 Nancy D. Halwig/Kojo Asakura Kredietbank N.V. Two Midtown Plaza, Suite 1750 1360 Peachtree St. Atlanta, Georgia 30309 Telephone: (404) 876-2556 Telecopy: (404) 876-3212 Copy all Borrowing Notices to: Lynda Resuma/Charlene Cumberbatch Kredietbank, N.V. 125 W. 55th Street New York, New York 10019 Attn: Loan Administration Telephone: (212) 541-0600 Telecopy: (212) 956-5580 Page 67 74 COMMITMENT - ---------- $35,000,000 THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By: /s/ SATORU OTSUBO Name: Satoru Otsubo Title: Joint General Manager 165 Broadway New York, New York 10006 Attn: Kathy Dorsch Telephone: (212) 335-4578 Telecopy: (212) 608-2371 Copy all notices and credit matters to: The Long-Term Credit Bank of Japan, Ltd. 245 Peachtree Center Ave. N.E. Marquis One Tower Suite 2801 Atlanta, Georgia 30303 Attn: Rebecca Sedlar-Silbert Vice President Telephone: (404) 659-7210 Telecopy: (404) 658-9751 Copy all Borrowing Notices to: The Long-Term Credit Bank of Japan, Ltd. 165 Broadway New York, New York 10006 Attn: Gennie Mayo Williams Analyst Telephone: (212) 335-4787 Telecopy: (212) 608-3452 Page 68 75 COMMITMENT - ---------- $35,000,000 MELLON BANK, N.A. By: /s/ MARK F. JOHNSTON Mark F. Johnston Assistant Vice President One Mellon Bank Center, Room 4530 Pittsburgh, PA 15258-0001 Attn: Telephone: (412) 236-2793 Telecopy: (412) 236-1914 Copy all notices and credit matters to: Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258-0001 Attn: Mark Johnston Telephone: (412) 236-2793 Telecopy: (412) 236-1914 Copy all Borrowing Notices to: Mellon Bank, N.A. 3 Mellon Bank Center, Room 2305 Pittsburgh, PA 15259 Attn: Janice Pappert Telephone: (412) 234-5049 Telecopy: (412)234-5049 Page 69 76 COMMITMENT - ---------- $35,000,000 SOCIETE GENERALE, SOUTHWEST AGENCY By: /s/ THIERRY NAMUROY Thierry Namuroy Vice President 4800 Trammell Crow Center 2001 Ross Avenue Dallas, Texas 75210 Attn: Ralph Saheb Telephone: (214) 979-2777 Telecopy: (214) 979-1104 Copy all notices and credit matters to: Societe Generale, Southwest Agency 1111 Bagby, Suite 2020 Houston, Texas 77002 Attn: Thierry Namuroy Telephone: (713) 759-6316 Telecopy: (713) 650-0824 Copy all Borrowing Notices to: Societe Generale, Southwest Agency 4800 Trammell Crow Center 2001 Ross Avenue Dallas, Texas 75210 Attn: Ralph Saheb Telephone: (214) 979-2777 Telecopy: (214) 979-1104 Page 70 77 COMMITMENT - ---------- $35,000,000 THE TORONTO-DOMINION BANK By: /s/ KIMBERLY BURLESON Kimberly Burleson Credit Manager Three First National Plaza, Suite 1900 Chicago, Illinois 60602 Attn: Dylan MacKenzie Managing Director/Corporate Accounts Telephone: (312) 977-2119 Telecopy: (312) 782-6337 Copy all notices and credit matters to: The Toronto-Dominion Bank 31 West 52nd Street New York, New York 10019 Attn: Tom Westdyk Manager/Corporate Finance Telephone: (212) 468-0581 Telecopy: (212) 262-1926 Copy all Borrowing Notices to: The Toronto-Dominion Bank 909 Fannin Suite 1700 Houston, Texas 77010 Attn: Kimberly Burleson Telephone: (713) 653-8241 Telecopy: (713) 951-9921 Page 71 78 COMMITMENT - ---------- $35,000,000 UNION BANK OF SWITZERLAND NEW YORK BRANCH By: /s/ ROBERT W. CASEY, JR. Robert W. Casey, Jr. Vice President By: /s/ LAURENT J. CHAIX Laurent J. Chaix Vice President 299 Park Avenue New York, New York 10171-0026 Attn: Robert W. Casey Telephone: (212) 821-3329 Telecopy: (212) 821-3383 Copy all notices and credit matters to: Union Bank of Switzerland 299 Park Avenue New York, New York 10171-0026 Attn: Robert W. Casey Telephone: (212) 821-3329 Telecopy: (212) 821-3383 Copy all Borrowing Notices to: Union Bank of Switzerland 299 Park Avenue New York, New York 10171-0026 Attn: Michael Peterson Loan Service Department Telephone: (212) 821-3230 Telecopy: (212) 821-3259 Page 72 79 COMMITMENT - ---------- $25,000,000 BANK OF HAWAII By: /s/ JOSEPH T. DONALSON Joseph T. Donalson Vice President 1839 South Alma School Road, Suite 150 Mesa, Arizona 85210 Attn: Joseph T. Donalson Telephone: (602) 752-8020 Telecopy: (602) 752-8007 Copy all notices and credit matters to: Bank of Hawaii 1839 South Alma School Road, Suite 150 Mesa, Arizona 85210 Attn: Joseph T. Donalson Telephone: (602) 752-8020 Telecopy: (602) 752-8007 Copy all Borrowing Notices to: Bank of Hawaii Attn: Iwalani Sabarre-Kapika Telephone: (808) 484-3584 Telecopy: (808) 484-3506 Page 73 80 COMMITMENT - ---------- $25,000,000 THE BANK OF NOVA SCOTIA By: /s/ CLAUDE ASHBY Claude Ashby Agent 600 Peachtree, N.E., Suite 2700 Atlanta, Georgia 30308 Attn: Claude Ashby Telephone: (404) 877-1560 Telecopy: (404) 888-8998 Copy all notices and credit matters to: The Bank of Nova Scotia 1100 Louisiana, Suite 3000 Houston, Texas 77002 Attn: Paul G. Gonin Telephone: (713) 759-3443 Telecopy: (713) 752-2425 Copy all Borrowing Notices to: The Bank of Nova Scotia 600 Peachtree, N.E., Suite 2700 Atlanta, Georgia 30308 Attn: Phyllis Walker Telephone: (404) 877-1557 Telecopy: (404) 888-8998 Page 74 81 COMMITMENT - ---------- $25,000,000 CREDIT SUISSE By: /s/ WILLIAM P. MURRAY Name: William P. Murray Title: Member Senior Management By: /s/ KRISTINN R. KRISTINSSON Name: Kristinn R. Kristinsson Title: Associate 12 East 49th Street New York, New York 10017 Attn: Kris Kristinsson Telephone: (212) 238-5206 Telecopy: (212) 238-5247 Copy all notices and credit matters to: Credit Suisse 191 Peachtree St. NE Suite 3500 Atlanta, Georgia 30303 Attn: Michel A. Odermatt Telephone: (404) 577-6100 Telecopy: (404) 577-9029 Copy all Borrowing Notices to: Credit Suisse 12 East 49th Street New York, New York 10017 Attn: Hazel Leslie Telephone: (212) 238-5218 Telecopy: (212) 238-5247 Page 75 82 COMMITMENT - ---------- $25,000,000 FIRST AMERICAN NATIONAL BANK By: /s/ WILLIAM R. STUTTS William R. Stutts Vice President 4894 Poplar Avenue Memphis, Tennessee 38117 Attn: William R. Stutts Telephone: (901) 762-5675 Telecopy: (901) 762-5665 Copy all notices and credit matters to: First American National Bank 4894 Poplar Avenue Memphis, Tennessee 38117 Attn: William R. Stutts Telephone: (901) 762-5675 Telecopy: (901) 762-5665 Copy all Borrowing Notices to: First American National Bank 4894 Poplar Avenue Memphis, Tennessee 38117 Attn: William R. Stutts Telephone: (901) 762-5675 Telecopy: (901) 762-5665 Page 76 83 COMMITMENT - ---------- $25,000,000 THE INDUSTRIAL BANK OF JAPAN, LIMITED, ATLANTA AGENCY By: /s/ JACKIE BRUNETTO Jackie Brunetto Vice President One Ninety One Peachtree Tower 191 Peachtree Street, Suite 3600 Atlanta, Georgia 30303-1757 Attn: Jackie Brunetto Telephone: (404) 420-3325 Telecopy: (404) 524-8509 Copy all notices and credit matters to: The Industrial Bank of Japan, Limited, Atlanta Agency One Ninety One Peachtree Tower 191 Peachtree Street, Suite 3600 Atlanta, Georgia 30303-1757 Attn: Jackie Brunetto Telephone: (404) 420-3325 Telecopy: (404) 524-8509 Copy all Borrowing Notices to: The Industrial Bank of Japan, Limited, Atlanta Agency One Ninety One Peachtree Tower 191 Peachtree Street, Suite 3600 Atlanta, Georgia 30303-1757 Attn: Business Operations Department Telephone: (404) 420-3307 Telecopy: (404) 577-6818 Page 77 84 COMMITMENT - ---------- $25,000,000 NBD BANK By: /s/ KIMBERLY R. ZAZULA Kimberly R. Zazula Second Vice President 611 Woodward Avenue Detroit, Michigan 48226 Attn: Kimberly R. Zazula Telephone: (313) 225-2228 Telecopy: (313) 225-2649 Copy all notices and credit matters to: NBD Bank 611 Woodward Avenue Detroit, Michigan 48226 Attn: Debbie Stuart Telephone: (313) 225-3443 Telecopy: (313) 225-2649 Copy all Borrowing Notices to: NBD Bank 611 Woodward Avenue Detroit, Michigan 48226 Attn: Debbie Stuart Telephone: (313) 225-3443 Telecopy: (313) 225-2649 Page 78 85 COMMITMENT - ---------- $25,000,000 ROYAL BANK OF CANADA By: /s/ D. G. CALANCIE D.G. Calancie Senior Manager Grand Cayman (North America No. 1) Branch Financial Square, 23rd Floor New York, New York 10005-3531 Attn: Manager, Loans Administration Telephone: (212) 428-6311 Telecopy: (212) 428-2372 Copy all notices and credit matters to: Royal Bank of Canada Financial Square, 24th Floor New York, New York 10005-3531 Attn: D.G. Calancie Telephone: (212) 428-6445 Telecopy: (212) 428-6459 Copy all Borrowing Notices to: Royal Bank of Canada Financial Square, 24th Floor New York, New York 10005-3531 Attn: D.G. Calancie Telephone: (212) 428-6445 Telecopy: (212) 428-6459 Page 79 86 COMMITMENT - ---------- $25,000,000 SAKURA BANK, LTD. By: /s/ HIROYASU IMANISHI Hiroyasu Imanishi Vice President and Senior Manager 245 Peachtree Center Avenue, N.E. Suite 2703 Atlanta, Georgia 30303 Attn: Charles S. Zimmerman Telephone: (404) 521-3111 Telecopy: (404) 521-1133 Copy all notices and credit matters to: Sakura Bank, Ltd. 245 Peachtree Center Avenue, N.E. Suite 2703 Atlanta, Georgia 30303 Attn: Christy Joel Telephone: (404) 521-3111 Telecopy: (404) 521-1133 Copy all Borrowing Notices to: Sakura Bank, Ltd. 245 Peachtree Center Avenue, N.E. Suite 2703 Atlanta, Georgia 30303 Attn: Christy Joel Telephone: (404) 521-3111 Telecopy: (404) 521-1133 Page 80 87 COMMITMENT - ---------- $25,000,000 TOKAI BANK, LTD., ATLANTA AGENCY By: /s/ NOBUO MINAMIKAWA Nobuo Minamikawa Deputy Manager and Senior Vice President Marquis Two Tower, Suite 2802 285 Peachtree Center Avenue, N.E. Atlanta, Georgia 30303 Attn: Nobuo Minamikawa Telephone: (404) 880-0000 Telecopy: (404) 653-0737 Copy all notices and credit matters to: Tokai Bank, Ltd., Atlanta Agency Marquis Two Tower, Suite 2802 285 Peachtree Center Avenue, N.E. Atlanta, Georgia 30303 Attn: Bruce R. Dearing Telephone: (404) 880-4601 Telecopy: (404) 653-0737 Copy all Borrowing Notices to: Tokai Bank, Ltd., Atlanta Agency Marquis Two Tower, Suite 2802 285 Peachtree Center Avenue, N.E. Atlanta, Georgia 30303 Attn: Constance Houghton Telephone: (404) 880-4623 Telecopy: (404) 653-0737 Page 81 88 COMMITMENT - ---------- $25,000,000 WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH By: /s/ ALAN S. BOOKSPAN Alan S. Bookspan Vice President 1211 Avenue of the Americas New York, New York 10036 Attn: Alan S. Bookspan Telephone: (212) 852-6023 Telecopy: (212) 852-6307 Copy all notices and credit matters to: Westdeutsche Landesbank Girozentrale 1211 Avenue of the Americas New York, New York 10036 Attn: David Smith Telephone: (212) 852-6155 Telecopy: (212) 852-6300 Copy all Borrowing Notices to: Westdeutsche Landesbank Girozentrale 1211 Avenue of the Americas New York, New York 10036 Attn: David Smith Telephone: (212) 852-6155 Telecopy: (212) 852-6300 Page 82 89 EXHIBIT "A" NOTE $________________________, FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Borrower"), promises to pay to the order of _____________________________ (the "Lender") the lesser of the principal sum of ___________________ Dollars or the aggregate unpaid principal amount of all Loans made by the Lender to the Borrower pursuant to Article II of the Amended and Restated Credit Agreement (as the same may be amended or modified, the "Agreement") hereinafter referred to, in immediately available funds at the main office of The First National Bank of Chicago in Chicago, Illinois, as Agent, together with interest on the unpaid principal amount hereof at the rates and on the dates set forth in the Agreement. The Borrower shall pay the principal of and accrued and unpaid interest on the Loans in full on the Facility Termination Date and shall make such mandatory payments as are required to be made under the terms of Section 2.2 of the Agreement. The Lender shall, and is hereby authorized to, record on the schedule attached hereto, or to otherwise record in accordance with its usual practice, the date and amount of each Loan and the date and amount of each principal payment hereunder. This Note is one of the Notes issued pursuant to, and is entitled to the benefits of, the Amended and Restated Credit Agreement, dated as of May 12, 1995 among the Borrower, The First National Bank of Chicago, individually and as Agent, and the lenders named therein, including the Lender, to which Agreement, as it may be amended from time to time, reference is hereby made for a statement of the terms and conditions governing this Note, including the terms and conditions under which this Note may be prepaid or its maturity date accelerated. Capitalized terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Agreement. FEDERAL EXPRESS CORPORATION By: Charles M. Buchas, Jr. Vice President and Treasurer Page 83 90 SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL TO NOTE OF FEDERAL EXPRESS CORPORATION, DATED MAY __, 1995
Principal Maturity Principal Amount of of Interest Amount Unpaid Date Loan Period Paid Balance - -----------------------------------------------------------------------------------------------------
Page 84 91 EXHIBIT "B" OPINION OF COUNSEL The Agent and the Lenders who are parties to the Amended and Restated Credit Agreement described below. _________________, 1995 Ladies and Gentlemen: This is in regard to the Amended and Restated Credit Agreement dated as of May 12, 1995 among Federal Express Corporation, the Lenders named therein and The First National Bank of Chicago, as Agent (the "Agreement"). Unless the context otherwise requires, all terms used in this opinion which are specifically defined in the Agreement shall have the meanings given such terms in the Agreement. I am the Senior Vice President and General Counsel of the Borrower and have acted as such in connection with the Agreement. I, or attorneys under my supervision, have made such examination and investigation as I or they have deemed necessary in order to give the following opinion. Based upon the foregoing, it is my opinion that: 1. The Borrower is a corporation duly incorporated and validly existing in good standing under the laws of the State of Delaware. The Borrower is duly authorized to execute and deliver the Agreement and the Notes and perform its obligations under the Agreement and the Notes and to borrow under the Agreement. The Borrower has all corporate power required to carry on its ordinary course of business. 2. Each Significant Subsidiary is a corporation duly incorporated and validly existing in good standing under the laws of the jurisdiction of its incorporation. 3. Each of the Borrower and each Significant Subsidiary is duly qualified as a foreign corporation in good standing to do business in all jurisdictions where the failure to so qualify would have a material adverse effect on the business of the Borrower and the Significant Subsidiaries taken as a whole. Page 85 92 4. The execution and delivery of the Agreement and the Notes by the Borrower, the borrowings by the Borrower under the Agreement and the performance by the Borrower of its obligations under the Agreement and the Notes have been duly authorized by all necessary corporate action and proceedings on the part of the Borrower and do not at this time: (a) require any consent of the Borrower's shareholders; or (b) contravene, or constitute a default under, any provision of any law or regulation applicable to the Borrower or of the certificate of incorporation or by-laws of the Borrower or of any material contract, agreement, judgment, order, decree, adjudication or other instrument binding upon the Borrower, or by which the Borrower or its property may be bound or affected, or result in the creation of any Lien on any property now owned by the Borrower or any Significant Subsidiary pursuant to the provisions of any agreement, indenture or other instrument binding upon it. 5. The Agreement and the Notes delivered as of the date hereof have been duly executed and delivered by the Borrower and constitute the legal, valid and binding obligations of the Borrower enforceable in accordance with their terms, except as such enforceability may be limited by bankruptcy or similar laws relating generally to the enforcement of creditors' rights and subject also to the availability of equitable remedies if equitable remedies are sought. 6. There is no action, suit, proceeding or investigation of which I am aware pending or threatened against or affecting the Borrower or any Significant Subsidiary before any court, regulatory commission, arbitration tribunal, governmental department, administrative agency or instrumentality which, if such action, suit, proceeding or investigation were determined adversely to the interest of the Borrower and the Significant Subsidiaries, would have a material, adverse effect on the business, condition (financial or otherwise) or operations of the Borrower or any Significant Subsidiary, except the excise tax dispute discussed in the Borrower's Annual Report on Form 10-K for the fiscal year ended May 31, 1994 as updated in the Borrower's Quarterly Report on Form 10-Q for the quarter ended February 28, 1995. 7. Neither the Borrower nor any Significant Subsidiary is in default or violation in any respect which would have a material adverse effect on the business or condition (financial or otherwise) of the Borrower or any Significant Subsidiary with respect to any law, rule, regulation, order, writ, judgment, injunction, decree, adjudication, determination or award presently in effect and applicable to it. 8. No approval, authorization, consent, adjudication or order of any governmental authority, which has not been obtained by the Borrower, is required to be obtained by the Borrower in connection with the execution and delivery of the Page 86 93 Agreement, the Notes, the borrowings under the Agreement or in connection with the performance by the Borrower of its obligations under the Agreement and the Notes. 9. The Borrower is not engaged principally or as one of its important activities in the business of extending credit for the purpose of purchasing or carrying any "margin stock" (as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System). 10. The Borrower is not an "investment company", within the meaning of the Investment Borrower Act of 1940, as currently in effect. 11. The laws of the State of Tennessee which limit interest rates or other amounts payable with respect to borrowed money or interest thereon are not applicable to the Agreement or the Notes. 12. The Borrower is not a national of any foreign country designated in Presidential Executive Order No. 8389 or 9193, as amended, and the regulations issued thereunder, as amended, or a national of any foreign country designated in the Foreign Assets Control Regulations or in the Cuban Assets Control Regulations of the United States Treasury Department, 31 C.F.R., Subtitle B, Chapter V, as amended. 13. The certificates issued to the Borrower pursuant to 49 U.S.C. Section 41102(a) and 49 U.S.C. Section 41103 and the operating certificates issued to the Borrower pursuant to Part 121 of the Federal Aviation Regulations are in full force and effect and are adequate for the conduct of the business of the Borrower as now conducted. There are no actions, proceedings or investigations pending or, to my knowledge, threatened (or any basis therefor known to me) to amend, modify, suspend or revoke any such certificate in whole or in part which would have any material adverse effect on any such certificate or the operations of the Borrower. This opinion is limited to the effect of the laws of the State of Tennessee, the General Corporation Law of the State of Delaware and the laws of the United States of America, and I express no opinion with respect to the laws of any other jurisdiction. As a result, I have with your permission assumed for purposes of this opinion that, notwithstanding the contrary choice of law provisions contained therein, the Loan Documents are governed by the laws of the State of Tennessee. This opinion may be relied upon by the Agent, the Lenders, and their respective permitted participants, assignees, and other transferees. It is understood that this opinion speaks as of the date given, notwithstanding any delivery as contemplated above on any other date. Page 87 94 EXHIBIT "C" ASSIGNMENT AGREEMENT This Assignment Agreement (this "Assignment Agreement") between ______________________ (the "Assignor") and ___________________(the "Assignee") is dated as of _____________, _____. The parties hereto agree as follows: 1. PRELIMINARY STATEMENT. The Assignor is a party to an Amended and Restated Credit Agreement (which, as it may be amended, modified, renewed or extended from time to time is herein called the "Credit Agreement") described in Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized terms used herein and not otherwise defined herein shall have the meanings attributed to them in the Credit Agreement. 2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to the Assignor's rights and obligations under the Credit Agreement such that after giving effect to such assignment the Assignee shall have purchased pursuant to this Assignment Agreement the percentage interest specified in Item 3 of Schedule 1 of all outstanding rights and obligations under the Credit Agreement relating to the facilities listed in Item 3 of Schedule 1 and the other Loan Documents. The aggregate Commitment (or Loans, if the applicable Commitment has been terminated) purchased by the Assignee hereunder is set forth in Item 4 of Schedule 1. 3. EFFECTIVE DATE. The effective date of this Assignment Agreement (the "Effective Date") shall be the later of the date specified in Item 5 of Schedule 1 or two Business Days (or such shorter period agreed to by the Agent) after a Notice of Assignment substantially in the form of Exhibit "I" attached hereto has been delivered to the Agent. Such Notice of Assignment must include any consents required to be delivered to the Agent by Section 12.3.1 of the Credit Agreement. In no event will the Effective Date occur if the payments required to be made by the Assignee to the Assignor on the Effective Date under Sections 4 and 5 hereof are not made on the proposed Effective Date. The Assignor will notify the Assignee of the proposed Effective Date no later than the Business Day prior to the proposed Effective Date. As of the Effective Date, (i) the Assignee shall have the rights and obligations of a Lender under the Loan Documents with respect to the rights and obligations assigned to the Assignee hereunder and (ii) the Assignor shall relinquish its rights and be released from its corresponding obligations under the Loan Documents with respect to the rights and obligations assigned to the Assignee hereunder. 4. PAYMENTS OBLIGATIONS. On and after the Effective Date, the Assignee shall be entitled to receive from the Agent all payments of principal, interest and fees with respect to the interest assigned hereby. The Assignee shall advance funds directly to the Agent with respect to all Loans and reimbursement payments made on or after the Effective Date with respect to the interest assigned hereby. [In consideration for the sale and assignment of Loans hereunder, (i) the Assignee shall pay the Assignor, on the Effective Date, an amount equal to Page 88 95 the principal amount of the portion of all Floating Rate Loans assigned to the Assignee hereunder and (ii) with respect to each Fixed Rate Loan made by the Assignor and assigned to the Assignee hereunder which is outstanding on the Effective Date, (a) on the last day of the Interest Period therefor or (b) on such earlier date agreed to by the Assignor and the Assignee or (c) on the date on which any such Fixed Rate Loan either becomes due (by acceleration or otherwise) or is prepaid (the date as described in the foregoing clauses (a), (b) or (c) being hereinafter referred to as the "Payment Date"), the Assignee shall pay the Assignor an amount equal to the principal amount of the portion of such Fixed Rate Loan assigned to the Assignee which is outstanding on the Payment Date. If the Assignor and the Assignee agree that the Payment Date for such Fixed Rate Loan shall be the Effective Date, they shall agree to the interest rate applicable to the portion of such Loan assigned hereunder for the period from the Effective Date to the end of the existing Interest Period applicable to such Fixed Rate Loan (the "Agreed Interest Rate") and any interest received by the Assignee in excess of the Agreed Interest Rate shall be remitted to the Assignor. In the event interest for the period from the Effective Date to but not including the Payment Date is not paid by the Borrower with respect to any Fixed Rate Loan sold by the Assignor to the Assignee hereunder, the Assignee shall pay to the Assignor interest for such period on the portion of such Fixed Rate Loan sold by the Assignor to the Assignee hereunder at the applicable rate provided by the Credit Agreement. In the event a prepayment of any Fixed Rate Loan which is existing on the Payment Date and assigned by the Assignor to the Assignee hereunder occurs after the Payment Date but before the end of the Interest Period applicable to such Fixed Rate Loan, the Assignee shall remit to the Assignor the excess of the prepayment penalty paid with respect to the portion of such Fixed Rate Loan assigned to the Assignee hereunder over the amount which would have been paid if such prepayment penalty was calculated based on the Agreed Interest Rate. The Assignee will also promptly remit to the Assignor (i) any principal payments received from the Agent with respect to Fixed Rate Loans prior to the Payment Date and (ii) any amounts of interest on Loans and fees received from the Agent which relate to the portion of the Loans assigned to the Assignee hereunder for periods prior to the Effective Date, in the case of Floating Rate Loans, or the Payment Date, in the case of Fixed Rate Loans, and not previously paid by the Assignee to the Assignor.]* In the event that either party hereto receives any payment to which the other party hereto is entitled under this Assignment Agreement, then the party receiving such amount shall promptly remit it to the other party hereto. 5. FEES PAYABLE BY THE ASSIGNEE. The [Assignee shall pay to the Assignor a fee on each day on which a payment of interest or facility fees is made under the Credit Agreement with respect to the amounts assigned to the Assignee hereunder (other than a payment of interest or commitment fees for the period prior to the Effective Date or, in the case of Fixed Rate Loans, the Payment Date, which the Assignee is obligated to deliver to the Assignor pursuant to Section 4 hereof). The amount of such fee shall be the difference between (i) the interest or fee, as applicable, paid with respect to the amounts assigned to the _______________ * Each Assignor may insert its standard payment provisions in lieu of the payment terms included in this Exhibit. Page 89 96 Assignee hereunder and (ii) the interest or fee, as applicable, which would have been paid with respect to the amounts assigned to the Assignee hereunder if each interest rate was ___ of 1% less than the interest rate paid by the Borrower or if the commitment fee was ___ of 1% less than the commitment fee paid by the Borrower, as applicable. In addition, the] Assignee agrees to pay ___% of the processing fee required to be paid to the Agent in connection with this Assignment Agreement. 6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S LIABILITY. The Assignor represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim. It is understood and agreed that the assignment and assumption hereunder are made without recourse to the Assignor and that the Assignor makes no other representation or warranty of any kind to the Assignee. Neither the Assignor nor any of its officers, directors, employees, agents or attorneys shall be responsible for (i) the due execution, legality, validity, enforceability, genuineness, sufficiency or collectability of any Loan Document, including without limitation, documents granting the Assignor and the other Lenders a security interest in assets of the Borrower or any guarantor, (ii) any representation, warranty or statement made in or in connection with any of the Loan Documents, (iii) the financial condition or creditworthiness of the Borrower or any guarantor, (iv) the performance of or compliance with any of the terms or provisions of any of the Loan Documents, (v) inspecting any of the Property, books or records of the Borrower, (vi) the validity, enforceability, perfection, priority, condition, value or sufficiency of any collateral securing or purporting to secure the Loans or (vii) any mistake, error of judgment, or action taken or omitted to be taken in connection with the Loans or the Loan Documents. 7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements requested by the Assignee and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment Agreement, (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, (iii) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto, (iv) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender, [and] (v) agrees that its payment instructions and notice instructions are as set forth in the attachment to Schedule 1, [and (vi) attaches the forms prescribed by the Internal Revenue Service of the United States certifying that the Assignee is entitled to receive payments under the Loan Documents without deduction or withholding of any United States federal income taxes].** _______________ ** to be inserted if the Assignee is not incorporated under the laws of the United States, or a state thereof. Page 90 97 8. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor harmless against any and all losses, costs and expenses (including, without limitation, reasonable attorneys' fees) and liabilities incurred by the Assignor in connection with or arising in any manner from the Assignee's non-performance of the obligations assumed under this Assignment Agreement. 9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee shall have the right or obligation pursuant to Article XII of the Credit Agreement to assign the rights which are assigned to the Assignee hereunder to any entity or person, provided that (i) any such subsequent assignment does not violate any of the terms and conditions of the Loan Documents or any law, rule, regulation, order, writ, judgment, injunction or decree and that any consent required under the terms of the Loan Documents has been obtained and (ii) unless the prior written consent of the Assignor is obtained, the Assignee is not thereby released from its obligations to the Assignor hereunder, if any remain unsatisfied, including, without limitation, its obligations under Sections 4, 5 and 8 hereof. 10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the Aggregate Commitment occurs between the date of this Assignment Agreement and the Effective Date, [the percentage interest specified in Item 3 of Schedule 1 shall remain the same, but the dollar amount purchased shall be recalculated based on the reduced Aggregate Commitment] [the dollar amount specified in Item 4 of Schedule 1 shall remain the same, but the percentage interest purchased shall be recalculated based on the reduced Aggregate Commitment].*** 11. ENTIRE AGREEMENT. This Assignment Agreement and the attached Notice of Assignment embody the entire agreement and understanding between the parties hereto and supersede all prior agreements and understandings between the parties hereto relating to the subject matter hereof. 12. GOVERNING LAW This Assignment Agreement shall be governed by the internal law, and not the law of conflicts, of the State of Illinois. 13. NOTICES. Notices shall be given under this Assignment Agreement in the manner set forth in the Credit Agreement. For the purpose hereof, the addresses of the parties hereto (until notice of a change is delivered) shall be the addresses set forth in the attachment to Schedule 1. _______________ *** At option of parties. Page 91 98 IN WITNESS WHEREOF, the parties hereto have executed this Assignment Agreement by their duly authorized officers as of the date first above written. [NAME OF ASSIGNOR] By: _______________________________ Title: _____________________________ [NAME OF ASSIGNEE] By: _______________________________ Title: _____________________________ Page 92 99 SCHEDULE 1 to Assignment Agreement 1. Description and Date of Credit Agreement: Amended and Restated Credit Agreement dated as of May 12, 1995 by and among Federal Express Corporation, the Lenders party thereto, and The First National Bank of Chicago, as Agent 2. Date of Assignment Agreement: ________________ 3. Amounts (As of Date of Item 2 above): a. Total of Commitments (Loans)* under Credit Agreement $ b. Assignee's Percentage purchased under the Assignment Agreement** % 4. Assignee's (Loan Amount)* Commitment Amount Purchased Hereunder: $ 5. Proposed Effective Date: ________________ Accepted and Agreed: [NAME OF ASSIGNOR] [NAME OF ASSIGNEE] By: By: Title: Title: ___________________ * If a Commitment has been terminated, insert outstanding Loans in place of Commitment ** Percentage taken to 10 decimal places Page 93 100 Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT Attach Assignor's Administrative Information Sheet, which must include notice address for the Assignor and the Assignee Page 94 101 EXHIBIT "I" to Assignment Agreement NOTICE OF ASSIGNMENT ___________________, To: FEDERAL EXPRESS CORPORATION 2007 Corporate Avenue, 4th Floor Memphis, Tennessee 38132 Attention: Vice President and Treasurer THE FIRST NATIONAL BANK OF CHICAGO One First National Plaza Mail Suite 0362 Chicago, Illinois 60670 From: [NAME OF ASSIGNOR] (the "Assignor") [NAME OF ASSIGNEE] (the "Assignee") 1. We refer to that Amended and Restated Credit Agreement (the "Credit Agreement") described in Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized terms used herein and not otherwise defined herein shall have the meanings attributed to them in the Credit Agreement. 2. This Notice of Assignment (this "Notice") is given and delivered to the Borrower and the Agent pursuant to Section 12.3.3 of the Credit Agreement. 3. The Assignor and the Assignee have entered into an Assignment Agreement, dated as of ___________, _____ (the "Assignment"), pursuant to which, among other things, the Assignor has sold, assigned, delegated and transferred to the Assignee, and the Assignee has purchased, accepted and assumed from the Assignor the percentage interest specified in Item 3 of Schedule 1 of all outstanding, rights and obligations under the Credit Agreement relating to the facilities listed in Item 3 of Schedule 1, including, without limitation, such interest in the Assignor's Commitment (if applicable) and the Loans owing to the Assignor relating to such facilities. The Effective Date of the Assignment shall be the later of the date specified in Item 5 of Schedule 1 to the Assignment ("Schedule 1") or two Business Days (or such shorter period as agreed to by the Agent) after this Notice of Assignment and any consents and fees required by Sections 12.3.1 and 12.3.3 of the Credit Agreement have been delivered to the Agent, provided that the Effective Date shall not occur if any condition precedent agreed to by the Assignor and the Assignee has not been satisfied. 4. The Assignor and the Assignee hereby give to the Borrower and the Agent notice of the assignment and delegation referred to herein. The Assignor will confer with the Agent before the date specified in Item 5 of Schedule 1 to determine if the Assignment Agreement will become effective on Page 95 102 such date pursuant to Section 3 hereof, and will confer with the Agent to determine the Effective Date pursuant to Section 3 hereof if it occurs thereafter. The Assignor shall notify the Agent if the Assignment Agreement does not become effective on any proposed Effective Date as a result of the failure to satisfy the conditions precedent agreed to by the Assignor and the Assignee. At the request of the Agent, the Assignor will give the Agent written confirmation of the satisfaction of the conditions precedent. 5. The Assignor or the Assignee shall pay to the Agent on or before the Effective Date the processing fee of $4,000 required by Section 12.3.3 of the Credit Agreement. 6. If Notes are outstanding on the Effective Date, the Assignor and the Assignee request and direct that the Agent prepare and cause the Borrower to execute and deliver new Notes or, as appropriate, replacements notes, to the Assignor and the Assignee. The Assignor and, if applicable, the Assignee each agree to deliver to the Agent the original Note received by it from the Borrower upon its receipt of a new Note in the appropriate amount. 7. The Assignee advises the Agent that its notice and payment instructions are set forth in the attachment to Schedule 1. 8. Each party consenting to the Assignment in the space indicated below hereby releases the Assignor from any obligations to it which have been assigned to the Assignee. NAME OF ASSIGNOR NAME OF ASSIGNEE By: By: Title: Title: ACKNOWLEDGED BY AND ACKNOWLEDGED BY AND CONSENTED TO CONSENTED TO THE FIRST NATIONAL BANK OF FEDERAL EXPRESS CORPORATION CHICAGO, AS AGENT By: By: Title: Title: [Attach photocopy of Schedule 1 to Assignment] Page 96 103 EXHIBIT "D" LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION To The First National Bank of Chicago, as Agent (the "Agent") under the Credit Agreement Described Below. Re: Amended and Restated Credit Agreement, dated as of May 12, 1995 (as the same may be amended or modified, the "Credit Agreement"), among Federal Express Corporation (the "Borrower"), the Agent, and the Lenders named therein Terms used herein and not otherwise defined shall have the meanings assigned thereto in the Credit Agreement. The Agent is specifically authorized and directed to act upon the following standing money transfer instructions with respect to the proceeds of Advances or other extensions of credit from time to time until receipt by the Agent of a specific written revocation of such instructions by the Borrower, provided, however, that the Agent may otherwise transfer funds as hereafter directed in writing by the Borrower in accordance with Section 13.1 of the Credit Agreement or based on any telephonic notice made in accordance with Section 2.13 of the Credit Agreement. Facility Identification Number(s) Customer/Account Name Transfer Funds To For Account No. Reference/Attention To Authorized Officer (Customer Representative) Date (Please Print) Signature Authorized Officer (Customer Representative) Date (Please Print) Signature Lender Officer Name Date (Please Print) Signature (Deliver Completed Form to Credit Support Staff For Immediate Processing) Page 97 104 SCHEDULE "1" SIGNIFICANT SUBSIDIARIES (See Section 5.7)
Significant Percent Jurisdiction of Subsidiary Ownership Organization - ---------------------------------- --------- ------------------ Federal Express Canada Ltd. 100% Canada Federal Express (Hong Kong) Limited(1) 100% Hong Kong
________________________ (1) Federal Express (Hong Kong) Limited is a wholly-owned subsidiary of Federal Express International, Inc. Federal Express International, Inc. is a wholly-owned subsidiary of Federal Express Corporation. Page 98 105 SCHEDULE "2" COMPLIANCE CALCULATIONS (See Section 6.1(iv)) SEE ATTACHED Page 99 EX-10.79 10 SALES AGREEMENT DATED 4/7/95 1 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. ================================================================================ AIRCRAFT SALES AGREEMENT BY AND BETWEEN AMERICAN AIRLINES, INC. AND FEDERAL EXPRESS CORPORATION DATED APRIL 7, 1995 ================================================================================ SALE OF TWELVE MCDONNELL DOUGLAS MODEL MD-11 AIRCRAFT GRANT OF OPTIONS ON SEVEN MCDONNELL DOUGLAS MODEL MD-11 AIRCRAFT ================================================================================ 2 TABLE OF CONTENTS
ARTICLE/SECTION PAGE - --------------- ---- ARTICLE 1 DEFINITIONS; CONSTRUCTION Section 1.01 Primary Definitions . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.02 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE 2 PURCHASE OF AIRCRAFT Section 2.01 Firm Aircraft, Purchase Prices and Delivery Dates . . . . . . . . 9 Section 2.02 Put Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 2.03 Purchase Options . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 2.04 Designation and Substitution of Airframes and Engines . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 2.05 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . 12 Section 2.06 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE 3 AIRCRAFT DELIVERY, TITLE, RISK OF LOSS Section 3.01 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 3.02 Inspection, Flight Checks and Discrepancies . . . . . . . . . . . 14 Section 3.03 [ * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ] Section 3.04 Delivery Procedure . . . . . . . . . . . . . . . . . . . . . . . 18 Section 3.05 Delayed Delivery . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 3.06 Delivery Condition . . . . . . . . . . . . . . . . . . . . . . . 20 Section 3.07 Adjustments to Purchase Price for Delivery Condition . . . . . . . . . . . . . . . . . . . . . . . 23 Section 3.08 Aircraft Delivery Certificate; Engine Delivery Certificate . . . . . . . . . . . . . . . . . . . . . . 23 Section 3.09 Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 3.10 Title and Risk of Loss . . . . . . . . . . . . . . . . . . . . . 24 ARTICLE 4 SPARE PARTS Section 4.01 MD-11 Spare Parts List . . . . . . . . . . . . . . . . . . . . . 25 Section 4.02 MD-11 Spare Parts Purchase Obligation. . . . . . . . . . . . . . 25
____________________ *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. i 3 Section 4.03 Spare Engine, Spare APU and Spare Thrust Reverser Purchase Obligation . . . . . . . . . . . . . . 26 Section 4.04 Effect of Expiration of Put Options on Certain Spare Parts Purchase Obligations . . . . . . . . . . . . . . . . 28 Section 4.05 Designation of MD-11 Spare Parts to be Acquired and Delivery . . . . . . . . . . . . . . . . . . . . . 28 Section 4.06 MD-11 Spare Parts Documentation . . . . . . . . . . . . . . . . . 29 ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01 American's Representations and Warranties . . . . . . . . . . . . 29 Section 5.02 No Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 5.03 FedEx's Representations . . . . . . . . . . . . . . . . . . . . . 31 ARTICLE 6 DOCUMENTATION Section 6.01 Availability of Documentation . . . . . . . . . . . . . . . . . . 32 Section 6.02 Technical Data and Documents . . . . . . . . . . . . . . . . . . 32 ARTICLE 7 ASSIGNMENT OF WARRANTIES, SERVICE LIFE POLICIES AND PATENT INDEMNITIES Section 7.01 Assignment of Warranties . . . . . . . . . . . . . . . . . . . . 34 ARTICLE 8 PAYMENT OF TAXES Section 8.01 Payment of Taxes by FedEx . . . . . . . . . . . . . . . . . . . . 35 Section 8.02 Tax Consequences of Certain Deliveries . . . . . . . . . . . . . 36 Section 8.03 After-Tax Basis . . . . . . . . . . . . . . . . . . . . . . . . . 37 ARTICLE 9 EXCUSABLE DELAY Section 9.01 Excusable Delay . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 9.02 Time Limits on Excusable Delays . . . . . . . . . . . . . . . . . 37 ARTICLE 10 INDEMNIFICATION Section 10.01 FedEx's Indemnification . . . . . . . . . . . . . . . . . . . . . 38 Section 10.02 American's Indemnification . . . . . . . . . . . . . . . . . . . 38 ARTICLE 11 INSURANCE Section 11.01 Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . 38 Section 11.02 Hull Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 11.03 Insurance Certificates . . . . . . . . . . . . . . . . . . . . . 39
ii 4 ARTICLE 12 DEFAULT AND REMEDIES Section 12.01 American Events of Default . . . . . . . . . . . . . . . . . . . 39 Section 12.02 FedEx Events of Default . . . . . . . . . . . . . . . . . . . . . 40 Section 12.03 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 12.04 Limitation of Damages . . . . . . . . . . . . . . . . . . . . . . 41 ARTICLE 13 DISPUTE RESOLUTION Section 13.01 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . 41 Section 13.02 Notice of Dispute . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 13.03 Dispute Resolution Through Negotiation . . . . . . . . . . . . . 41 Section 13.04 Dispute Resolution Through Mediation . . . . . . . . . . . . . . 42 Section 13.05 Dispute Resolution Through Arbitration . . . . . . . . . . . . . 42 Section 13.06 Forbearance During Resolution Process . . . . . . . . . . . . . . 43 Section 13.07 Limitation of Remedies . . . . . . . . . . . . . . . . . . . . . 43 Section 13.08 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 ARTICLE 14 CONDITIONS Section 14.01 Conditions to FedEx's Obligations . . . . . . . . . . . . . . . . 43 Section 14.02 Conditions to American's Obligations . . . . . . . . . . . . . . 44 ARTICLE 15 CONFIDENTIALITY Section 15.01 Confidentiality Obligations . . . . . . . . . . . . . . . . . . . 45 ARTICLE 16 FURTHER ASSURANCES Section 16.01 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 46 ARTICLE 17 MISCELLANEOUS Section 17.01 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Section 17.02 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Section 17.03 Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Section 17.04 No Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 17.05 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 17.06 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 17.07 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 17.08 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 17.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 17.10 Brokers' Commissions . . . . . . . . . . . . . . . . . . . . . . 48
iii 5 Section 17.11 No Remedy Exclusive . . . . . . . . . . . . . . . . . . . . . . . 48 Section 17.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 17.13 Survival of Provisions . . . . . . . . . . . . . . . . . . . . . 49
iv 6 EXHIBITS Exhibit A Aircraft Subject to Aircraft Purchase Agreement Exhibit B Aircraft Delivery Certificate Exhibit C Warranty Bills of Sale Exhibit D Data Relating to the Aircraft and Engines Exhibit E Designation of an Airframe for Delivery on Scheduled Delivery Date Exhibit F Designation of a Substitute Airframe for Delivery on Scheduled Delivery Date Exhibit G Form of Assignment of Assignable Manufacturer's Warranties Exhibit H Designation of Engines for Conveyance on Scheduled Delivery Date Exhibit I Put Option Exercise Exhibit J Purchase Option Notice Exhibit K Purchase Option Exercise Exhibit L Purchase Price Adjustment Formula-Airframe Exhibit M Purchase Price Adjustment Formula-Engines Exhibit N Purchase Price Adjustment Formula-Gear Exhibit O Purchase Price Adjustment Formula-APU Exhibit P Engine Delivery Certificate Exhibit Q Spare Parts Purchase Schedule and Prices Exhibit R Procedure for Engine Borescope Inspections Exhibit S Form of [ * ]Agreement Exhibit T Spares Purchase Price Adjustment Formula-Spare Engines Exhibit U High-Hour and High-Cycle Airframe Certificate __________________ *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. v 7 AIRCRAFT SALES AGREEMENT This AIRCRAFT SALES AGREEMENT (the "Agreement") is made on April 7, 1995 by and between AMERICAN AIRLINES, INC., a Delaware corporation ("American") and FEDERAL EXPRESS CORPORATION, a Delaware corporation ("FedEx"). RECITALS 1. American owns twelve (12) McDonnell Douglas Model MD-11 aircraft that American desires to sell. American has agreed to sell to FedEx and FedEx has agreed to buy from American twelve (12) of its McDonnell Douglas Model MD-11 aircraft. In addition, FedEx has agreed to grant to American put options to sell to FedEx up to seven (7) additional McDonnell Douglas Model MD-11 aircraft. 2. American and FedEx desire to document the terms and conditions for the sale and purchase of the Firm Aircraft, the Put Options with respect to the Put Option Aircraft and the Purchase Options with respect to the Put Option Aircraft, each as defined below. FOR AND IN CONSIDERATION of the mutual covenants contained in this Agreement and other good and valuable consideration, the receipt of which is hereby acknowledged FedEx and American (each a "Party" and together the "Parties") agree as follows: ARTICLE 1 DEFINITIONS; CONSTRUCTION Section 1.01. Primary Definitions. In addition to words and terms elsewhere defined in this Agreement, the following words and terms shall have the meanings set forth below: "Affiliate" shall mean any person, directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with American or FedEx, as the case may be. "Aircraft" shall mean any or all of the nineteen (19) McDonnell Douglas Model MD-11 aircraft, the U.S. Registration Numbers and Manufacturer's Serial Numbers of which are listed on Exhibit A, each such aircraft consisting of an Airframe, three Engines and the Gear, the APU and any and all Parts installed therein or thereon at Delivery. -1- 8 "Aircraft Delivery Certificate" shall mean a tender and acceptance certificate, in the form of Exhibit B, executed by FedEx and American concurrently with the Delivery of each Aircraft. "Aircraft Records" shall mean that portion of the Data listed under the caption "RECORDS" in Exhibit D. "Airframe" or "Airframes" shall mean one or more, as the case may be, of the McDonnell Douglas Model MD-11 airframes bearing one of the Manufacturer s Serial Numbers set forth in Exhibit A. "Airworthiness Directive" or "Airworthiness Directives" shall mean one or more of the airworthiness directives prescribed in Part 39 of the FAR or any successor regulation thereto to the extent such airworthiness directives apply to the Aircraft other than the Passenger Parts. "Airworthy" shall mean the condition of an Aircraft (1) which includes the existence of a validly issued, current individual aircraft FAA Certificate of Airworthiness with respect to the Aircraft and which satisfies all requirements for the effectiveness of such FAA Certificate of Airworthiness, (2) which complies with: (A) the MD-11 Type Design Data Certificate, including all applicable supplemental type certificates which have been incorporated on the Aircraft; (B) subject to the nondiscrimination covenant of American in Section 3.06(a)(ii), all applicable FAA Airworthiness Directives which are required to be complied with by the Scheduled Delivery Date of such Aircraft and the requirements for maintaining data substantiating the status and method of compliance for each such Airworthiness Directive; and (C) the Aircraft records requirements of FAR Section 121.380; and (3) in which such Aircraft s structure, systems and components are functioning in accordance with their intended use as set forth in FAA-approved documentation, including, but not limited to, any applicable original manufacturer's manuals, technical standard orders, parts manufacturing approval certificates or American engineering specification orders, provided, however, that clauses (1), (2) and (3) above are subject in all respects to any discrepancies or deviations of such Aircraft from, or failures of such Aircraft to comply with, the foregoing standards which are solely the result of the removal of the Passenger Parts from the Aircraft as contemplated by Sections 3.02 and 3.06(a)(x). "American ESM" shall mean the American Airlines MD-11 Engineering Specification Maintenance (ESM) Program as in effect on the Delivery Date of the Aircraft to which the standards in such program are being applied. "American Program" shall mean American's FAA-approved Maintenance Program for the Airframes and the Engines as in effect from time to time, including, without limitation, the American ESM. When used in Section 3.06 and Exhibits L, M, N and O (whether expressly used therein or whether used in the definition of -2- 9 any other defined term appearing therein), references to the American Program shall be to the American Program as in effect on the Delivery Date of the Aircraft to which the standards in such Section 3.06 and such exhibits are being applied. "American Serviceable Tag" shall mean a document containing appropriate entries detailing conformity to type design of the Spare Parts, and, if applicable, the maintenance certification of repair, which is properly executed in accordance with the American's General Maintenance Policy and Procedures Program. The American Serviceable Tags will be acceptable to FedEx when signed by an FAA-certified individual or accompanied by a certificate of repair or a certificate signifying conformity to type design and specifying that the Spare Parts are serviceable. The affixing of an American Serviceable Tag to a Spare Part shall signify that the Spare Part is in a serviceable condition for operation on American's fleet of McDonnell Douglas MD-11 aircraft and complies with applicable manufacturer's service bulletins, Airworthiness Directives, and the aircraft records requirements of FAR Section 121.380. "AMR Rate" shall mean [ * . ]. "APU" shall mean [ * . ]. "Average Unit Price" shall mean American's average unit price for any Spare Parts as shown on the books of American as of January 20, 1995. "Business Day" shall mean any day other than a Saturday, Sunday or other day on which banking institutions in Ft. Worth, Texas, New York, New York or Memphis, Tennessee are authorized or required by law to be closed. "C Check" shall mean any C check of a McDonnell Douglas Model MD-11 airframe as prescribed by the American Program. "Change Designation" shall mean a notice in the form set forth in Exhibit F exercising the right to substitute Airframes set forth in Section 2.04. "Citibank Prime" shall mean the rate of interest announced by Citibank, N.A. from time to time as its prime lending rate to its most credit worthy commercial customers, which rate shall not necessarily be its lowest lending rate. "Data" shall mean all of the manuals, documents, drawings, charts, records ____________________ *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. -3- 10 and other written materials described in Exhibit D, on whatever medium, and any successor, supplemental, modifying, amending or replacement manuals, documents, drawings, charts, records and other written materials, on whatever medium, all of which shall be current with the latest revisions available with respect thereto at the time such Data is delivered to FedEx. "Delayed Delivery Engine" or "Delayed Delivery Engines" shall mean one or more, as the case may be, of the Engine or Engines which (i) are conveyed with an Aircraft, but which are not installed on the Aircraft at Delivery, (ii) which American will deliver within ninety (90) days after the Delivery of such Aircraft and (iii) which, at the time of the Delivery of the Aircraft, American expects to be and which, upon its delivery by American to FedEx, must be in the condition required by Section 3.06 for Engines upon delivery to FedEx. "Delivery" shall mean, with respect to any Aircraft, the occurrence of all the following events, which events are to be performed in accordance with this Agreement: (a) tender of the Aircraft by American to FedEx as evidenced by American's execution and delivery to FedEx of an Aircraft Delivery Certificate with respect to such Aircraft, (b) acceptance by FedEx of the Aircraft, as evidenced by FedEx's execution and re-delivery of such Aircraft Delivery Certificate to American, (c) sale by transfer of title of the Aircraft by American to FedEx as evidenced by delivery to FedEx of the executed FAA Bill of Sale and the executed Warranty Bill of Sale, and (d) payment by FedEx to American of the Purchase Price for the Aircraft. "Delivery Condition" shall mean the condition that an Aircraft must be in at the time it is tendered by American to FedEx for Delivery as prescribed by Section 3.06. "Delivery Date" shall mean any date on which the Delivery of an Aircraft is complete. "Deposits" shall mean the cash deposits made by FedEx with American pursuant to Section 2.06. "Designation" shall mean a written notice in the form set forth in Exhibit E designating a particular Airframe for delivery on a Scheduled Delivery Date, either in connection with the sale of the Firm Aircraft, the exercise of a Put Option, or the exercise of a Purchase Option. "Direct Maintenance Costs" shall mean, with respect to a particular maintenance bill of work, all direct labor costs, the aggregate Average Unit Price of all materials and the cost of all outside services, less any warranty payments and reimbursements. -4- 11 "Engine" or "Engines" shall mean one or more, as the case may be, General Electric CF6-80C2D1F aircraft engines to be conveyed to FedEx under this Agreement as a part of an Aircraft, including Replacement Engines and Delayed Delivery Engines, but excluding Non-Conforming Engines. "Engine Designation" shall mean a written notice in the form set forth in Exhibit H designating the Engines to be conveyed by American to FedEx as a part of a Firm Aircraft, a Put Option Aircraft or a Purchase Option Aircraft. "Engine Heavy Maintenance" or "EHM" shall mean that engine maintenance build level in which there is complete refurbishment of all modules in a General Electric CF6-80C2D1F aircraft engine in accordance with the "Detailed Program Requirements" listed in American's Engineering Specification 6-3/DH/JP contained in American's GE-CF6-80C2 Engine Manual or in any successor engineering specification. "Engine Maintenance" shall mean a HSC, HSM or EHM. "Engine Records" shall mean that portion of the Data relating to the Engines and the Spare Engines, including that portion of the Data set forth under the caption "ENGINE RECORDS" in Exhibit D. "Engine Lease Agreement" shall mean an engine lease agreement substantially in the form attached hereto as Exhibit S. "Event of Default" shall mean, as to American, any of the events of default set forth in Section 12.01 and, as to FedEx, any of the events of default set forth in Section 12.02. "Excusable Delay" shall mean, subject to the time limitations set forth in Section 9.02, any delay in the timely discharge and performance by a Party of its obligations and duties under this Agreement to the extent such delay shall be the result of (i) the occurrence of a Force Majeure Event with respect to the Party whose performance is delayed, (ii) the fault of the other Party, whether such fault arises from the failure of the other Party to discharge and perform its obligations and duties hereunder or otherwise, (iii) any other event that excuses as a matter of applicable law a Party's timely performance of its contractual obligations and duties or (iv) with respect to American only, any damage to, partial destruction of, total loss of, or substantially complete or complete destruction of an Aircraft. "FAA" shall mean the United States Federal Aviation Administration or any successor agency thereto. -5- 12 "FAR" shall mean the United States Federal Aviation Regulations, 14 C.F.R Section 1 et seq., as promulgated pursuant to Title 49 Section 40101 et seq. of the United States Code, and any successor statute thereto, as such regulations are in effect from time to time. "FAA Bill of Sale" shall mean a Federal Aviation Administration Bill of Sale (AC Form 8050-2 or any successor form thereto) conveying title to the Aircraft to FedEx. "Firm Aircraft" shall mean any or all of the Aircraft to be sold by American to FedEx pursuant to Section 2.01. "First Interval Items" shall mean those maintenance significant items set forth in pages 52-1 through 52-2 (as revised on April 21, 1993), pages 53-1 through 53-44 (as revised on February 8, 1995), pages 54-1 through 54-6 (as revised through December 21, 1994), pages 55-1 through 55-12 (as revised on February 2, 1994) and pages 57-1 through 57-21 (as revised on February 8, 1995) of the American ESM which are required to be accomplished for the first time sixty (60) months after the delivery of an Airframe to American by the Manufacturer. "Force Majeure Event" shall mean any act of God, action or regulation of any governmental authority, fire, weather, flood, earthquake, accident, mechanical or electrical failure other than with respect to an Aircraft being delivered, act of the public enemy, war, civil disturbance, rebellion, insurrection, work stoppage, work slow down, other labor or work action, labor dispute, restraint of government or other cause or event beyond the control of the Party claiming the benefit of the occurrence of any such force majeure. "Gear" shall mean one or more, as the case may be, of the nose, center, left and right landing gears on any Airframe. "Hot Section/Compressor Maintenance" or "HSC" shall mean the engine maintenance build level in which there is refurbishment of the HPT Rotor, HPT 1st Stage Nozzle Assembly, the 2nd Stage Nozzle Assembly and the HPC Rotor as described in the American Program. "Hot Section Maintenance" or "HSM" shall mean the engine maintenance build level in which there is refurbishment of the HPT Rotor, HPT 1st Stage Nozzle Assembly, and the 2nd Stage Nozzle Assembly as described in the American Program. "Lien" shall mean any mortgage, pledge, security interest, lien, claim, encumbrance or other charge or rights of others of any kind on property. -6- 13 "Life Limited Part" or "Life Limited Parts" shall mean one or more, as the case may be, Parts which must be removed from an Engine, a Spare Engine, an APU or a Spare APU upon having been in such Engine, Spare Engine, APU or Spare APU for the maximum permissible calendar time, flight cycles or flight hours specified for such Part by its manufacturer. "Manufacturer" shall mean McDonnell Douglas Corporation as to the Airframes and General Electric Corporation as to the Engines. "MD-11 Spare Part" or "MD-11 Spare Parts" shall mean any or all Parts listed on the Spares List. "More Restrictive" shall mean that measure of the interval between maintenance events for an Airframe, Engine, Gear or APU or of the useful life or the interval between maintenance events of a Part which yields the lowest percentage of such interval remaining until the next such required maintenance event or the lowest percentage of such useful life, as applicable. "Non-Conforming Engine" or "Non-Conforming Engines" shall mean one or more, as the case may be, General Electric C6F-80C2D1F engines installed on an Aircraft which do not meet the delivery conditions for Engines set forth in Section 3.06, but which are otherwise in a condition suitable for the purpose of permitting ferry flights of the Aircraft on which such engines are installed to the facilities of one or more third party vendors for conversion of such Aircraft to a cargo configuration or for transition maintenance for such Aircraft. "Part" or "Parts" shall mean any item or items of avionics, appliances, parts, furnishings, instruments, accessories and equipment suitable for installation and use on an Aircraft. "Passenger Parts" shall mean any Parts installed in the passenger cabin of an Aircraft that relate to the passenger configuration of such Aircraft, but excluding any Part in the passenger cabin of an Aircraft which is necessary for the Aircraft to be modified into FedEx's freighter configuration, including, without limitation, the forward starboard lavatory, the slide rafts on the R1, R4, L1 and L4 doors and the forward starboard galley installed on such Aircraft. "Power Assurance Run Test" shall mean a power assurance run test on an Engine conducted in accordance with the procedures in Test No. 6 in Chapter 71-00-00-5-1 of the McDonnell Douglas Aircraft Maintenance Manual pertaining to McDonnell Douglas Model MD-11 aircraft. "Purchase Option" and "Purchase Options" shall have the meanings set forth in Section 2.03. -7- 14 "Purchase Option Aircraft" shall mean any Put Option Aircraft as to which FedEx has delivered a Purchase Option Exercise. "Purchase Option Exercise" shall mean a written notice given by FedEx to American exercising a Purchase Option as to any Put Option Aircraft, which notice shall be in the form attached hereto as Exhibit K. "Purchase Option Notice" shall mean a written notice, in the form attached hereto as Exhibit J, given by American to FedEx notifying FedEx of American's intent to offer for sale, or to otherwise permanently transfer possession of, any of the Put Option Aircraft other than pursuant to the Put Options or any agreements entered into by American pursuant to which American has granted a security interest in the Aircraft in connection with the financing of the Aircraft. "Purchase Price" shall mean, as applicable, the purchase price of a Firm Aircraft on a Scheduled Delivery Date as set forth in Section 2.01, of a Put Option Aircraft on a Scheduled Delivery Date as set forth in Section 2.02 and of a Purchase Option Aircraft applicable for the month of the Delivery of the Purchase Option Aircraft as set forth in Section 2.03, as adjusted in accordance with Section 3.07. "Put Option" and "Put Options" shall have the meanings set forth in Section 2.02. "Put Option Aircraft" shall mean any or all of the Aircraft as to which FedEx has granted to American options to sell such Aircraft to FedEx pursuant to Section 2.02. "Put Option Exercise" shall mean a written notice given by American to FedEx exercising a Put Option as to any Put Option Aircraft, which notice shall be in the form attached hereto as Exhibit I. "Replacement Engine" or "Replacement Engines" shall mean one or more, as the case may be, General Electric C6F-80C2D1F engines to be conveyed by American to FedEx in the stead of a Delayed Delivery Engine pursuant to Section 3.03, each of which engines meets the delivery condition requirements of Section 3.06 with respect to Engines. "Scheduled Delivery Date" shall mean a date on which an Aircraft is to be delivered as set forth in Section 2.01 as to the Firm Aircraft, and Section 2.02 as to the Put Option Aircraft and Section 2.03 as to any Purchase Option Aircraft or, as to any of the Aircraft, such other date as the Parties may agree in writing. "Second Interval Items" shall mean those maintenance significant items set forth in pages 52-1 through 52-2 (as revised on April 21, 1993), pages 53-1 through 53-44 (as revised on February 8, 1995), pages 54-1 through 54-6 (as revised through -8- 15 December 21, 1994), pages 55-1 through 55-12 (as revised on February 2, 1994) and pages 57-1 through 57-21 (as revised on February 8, 1995) of the American ESM which are required to be accomplished for the first time ninety (90) months after the delivery of an Airframe to American by the Manufacturer. "Shop Findings Report" shall mean a report stating the root cause of the failure of a Part and the materials used in returning such Part to a serviceable condition which is executed by an authorized repairman, all in accordance with the American Program. "Spare APU" and "Spare APU's" shall mean one or more, as the case may be, of the five_(5) APU's owned by American which are not installed on an Aircraft, which APU's shall include a shipping stand. "Spare Engine" and "Spare Engines" shall mean one or more, as the case may be, of the ten (10) General Electric CF6-80C2D1F engines owned by American that are not installed on the Aircraft. Each such engine shall be in a wing or tail quick engine change configuration and shall include an engine shipping stand suitable for such engines. "Spares List" shall mean the list of Parts dated as of January 20, 1995 which American is delivering to FedEx pursuant to Section 4.01. "Spare Part" and "Spare Parts" shall mean any or all of the MD-11 Spare Parts and the Spare APU's, the Spare Engines and the Spare Thrust Reversers. "Spares Purchase Price" shall mean the purchase price paid or to be paid for Spare Parts or portions thereof pursuant to Article 4. "Spare Thrust Reversers" shall mean one or more, as the case may be, of the three (3) pairs of thrust reverser assemblies usable on the Engines of the Aircraft which are not installed on an Aircraft. "Warranty Bill of Sale" shall mean a warranty bill of sale conveying title to an Aircraft to FedEx, which warranty bill of sale shall be in the form attached hereto as Exhibit C. Any defined term used in this Agreement and not expressly defined herein shall have the meaning ascribed to it in the FAR if such term is expressly defined in the FAR or, if not expressly defined in the FAR, such term shall have the meaning customarily ascribed to it in the aircraft industry. Section 1.02. Rules of Construction. The words "hereof," "herein," "hereunder," "hereto" and other words of similar import refer to this Agreement in its entirety. -9- 16 The terms "agree" and "agreements" contained herein are intended to include and mean "covenant" and "covenants". All references in this Agreement to articles, sections, subsections and other subdivisions refer to corresponding articles, sections, subsections and other subdivisions of this Agreement unless otherwise expressly provided. All references in this Agreement to exhibits shall refer to the exhibits to this Agreement unless otherwise provided. The article and section headings in this Agreement have been inserted solely for convenience and shall not be considered in construing this Agreement. ARTICLE 2 PURCHASE OF AIRCRAFT Section 2.01. Firm Aircraft, Purchase Prices and Delivery Dates. On the terms and subject to the conditions set forth herein, American agrees to sell to FedEx, and FedEx agrees to purchase from American, the Firm Aircraft, with one Firm Aircraft to be so sold and purchased on each Scheduled Delivery Date as set forth below. The Purchase Price of each Firm Aircraft to be delivered on each Scheduled Delivery Date and the latest date by which a Designation as to a Scheduled Delivery Date may be given are as set forth in the following table:
LATEST SCHEDULED DELIVERY DESIGNATION DELIVERY PURCHASE NUMBER DATE DATE PRICE ------ -------------- ---------------- ----------------- 1 7-May-95 17-Jan-96 $ 2 12-June-95 12-June-96 $ 3 16-Oct-95 16-Oct-96 $ 4 12-Feb-96 12-Feb-97 $ 5 11-June-96 11-June-97 $ 6 15-Oct-96 15-Oct-97 $ * 7 14-Jan-97 14-Jan-98 $ 8 17-June-97 17-June-98 $ 9 14-Oct-97 14-Oct-98 $ 10 17-Feb-98 17-Feb-99 $ 11 16-June-98 16-June-99 $ 12 13-Oct-98 13-Oct-99 $
Subject to Section 3.05(d), if due to the loss or, in American's sole discretion, substantially complete destruction of one or more Aircraft, American tenders to _______________ *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- 17 FedEx for Delivery pursuant to this Agreement fewer than twelve (12) Firm Aircraft, then on or before October 13, 1999 or such later date as the Parties agree will be the Scheduled Delivery Date for the twelfth (12th) Firm Aircraft, American will pay to FedEx $[* ] for each Firm Aircraft fewer than twelve (12) that American delivers to FedEx. American will make such payment by a wire transfer of immediately available funds. Section 2.02. Put Options. (a) FedEx hereby grants to American seven (7) options (the "Put Options" and each a "Put Option"), each of which shall give American the right to sell one Aircraft to FedEx on each of the Scheduled Delivery Dates set forth in the table in Section 2.02(c). Upon American's exercise of each Put Option, FedEx shall purchase one Aircraft on the terms and subject to the conditions set forth herein. (b) A Put Option will be exercisable as to an Aircraft by American giving to FedEx a Put Option Exercise on any date not later than the "Latest Exercise Date" as set forth in Section 2.02(c). (c) The latest date by which a Put Option may be exercised (each a "Latest Exercise Date"), the latest date by which a Designation for a Scheduled Delivery Date may be given, the Scheduled Delivery Dates for the Put Option Aircraft and the Purchase Price of each Put Option Aircraft are as set forth in the following table:
LATEST LATEST SCHEDULED DELIVERY EXERCISE DESIGNATION DELIVERY PURCHASE NUMBER DATE DATE DATE PRICE ------ ------------ --------------- ------------ ---------------- 13 15-Feb-00 $ 14 14-June-00 $ 15 11-Oct-00 $ 16 * * 14-Feb-01 $ * 17 12-June-01 $ 18 16-Oct-01 $ 19 12-Feb-02 $
(d) American and FedEx intend the exercise of the Put Options to be sequential and consistent with the schedule set forth above. If American fails to give FedEx a Put Option Exercise exercising a particular Put Option on or before the Latest Exercise Date for such Put Option, that Put Option will expire. If a Put Option expires, the remaining Put Options may be cancelled by FedEx giving to ___________________ *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. -11- 18 American written notice of such cancellation on or before the earlier of (i) the next following Latest Exercise Date set forth in Section 2.02(c) and (ii) the seventh (7th) day next following the day on which FedEx receives a written notice from American that FedEx has the right to cancel the remaining Put Options. If FedEx fails to give American timely written notice of the cancellation of the remaining, unexercised Put Options, the remaining, unexercised Put Options will remain in full force and effect. The failure of American to give to FedEx any notice that FedEx may cancel the remaining, unexercised Put Options shall not be a breach, default or Event of Default under the terms of this Agreement. Section 2.03. Purchase Options. (a) If American intends to offer any Put Option Aircraft not designated as a Firm Aircraft for sale to a third party, FedEx shall have the right, but not the obligation, to purchase such Put Option Aircraft from American on the terms and subject to the conditions set forth in this Section 2.03 (the "Purchase Options" and each, a "Purchase Option"). American shall give FedEx a Purchase Option Notice before American makes an offer to sell any or all of the Put Option Aircraft to any third party. FedEx may exercise the Purchase Options as to any or all of the Put Option Aircraft stated in a Purchase Option Notice by giving American a Purchase Option Exercise within fourteen (14) days after its receipt of the Purchase Option Notice. The failure of FedEx to give American a Purchase Option Exercise within [ * ] of its receipt of the Purchase Option Notice will entitle American to sell the Put Option Aircraft to any person or persons free of the Purchase Options, but such failure shall not be a breach by FedEx of, or a default or an Event of Default under, the terms of this Agreement. If FedEx does not exercise a Purchase Option as to a particular Put Option Aircraft, (i) American may offer for sale and may sell such Put Option Aircraft in such manner, at such time or times, for such price or prices and on such other terms and subject to such conditions as American, in its sole discretion, deems acceptable and (ii) American may nevertheless exercise the remaining, unexpired Put Options in accordance with the terms and subject to the conditions set forth in Section 2.02 without regard to any prior Purchase Option Notice. American will provide a Designation with respect to any Purchase Option Aircraft on or before the later to occur of (i) one year prior to the Scheduled Delivery Date and (ii) the thirtieth (30th) day after its receipt of a Purchase Option Exercise. (b) The Purchase Price for any Purchase Option Aircraft which is tendered by American for Delivery and which FedEx is obligated to purchase in or before January, 1996, shall be $[ * ]. The Purchase Price for any Purchase Option Aircraft which is tendered by American for Delivery and which FedEx is obligated ________________ *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. -12- 19 to purchase in any month thereafter shall be decreased by the amount of $[ * ] for each month after [ * ] to, but excluding, the month in which such tender for Delivery occurs. (c) The Scheduled Delivery Date of the Purchase Option Aircraft to be sold to FedEx by American pursuant to FedEx's exercise of a Purchase Option shall be the date or dates specified by American in the Purchase Option Notice as the Scheduled Delivery Date or Scheduled Delivery Dates of the Purchase Option Aircraft; provided, however, that no such Scheduled Delivery Date shall be less than [ * ] after the date of the Purchase Option Notice specifying such Scheduled Delivery Date. (d) If American sells one or more Purchase Option Aircraft to FedEx pursuant to FedEx's exercise of one or more Purchase Options or sells any Put Option Aircraft as to which FedEx does not exercise a Purchase Option after a Purchase Option Notice is given, the number of Put Options that American can exercise shall be reduced by a number equal to the number of Purchase Option Aircraft and/or Put Option Aircraft so sold. Any Put Options terminated by any such reduction shall be terminated in the reverse order of the Scheduled Delivery Dates to which the Put Options relate. The remaining Put Options shall remain in full force and effect. (e) If one or more Put Options expire or are terminated for any reason, American may dispose of an equivalent number of Aircraft free of the Purchase Options at any time thereafter and an equivalent number of Purchase Options will terminate simultaneously and automatically. Upon such expiration or termination, the terminated Purchase Options shall be without further force and effect, provided, however, that any such termination of Purchase Options shall not affect any prior exercise of any Purchase Option with respect to any Aircraft. American shall have the right to sell or otherwise dispose of such number of the Put Option Aircraft as to which Purchase Options are reduced free of the Purchase Options and the provisions of this Agreement and may determine which Put Option Aircraft are so free of the Purchase Options in its sole discretion. Section 2.04. Designation and Substitution of Airframes and Engines. (a) American will designate an Airframe from among all the Airframes as a Firm Aircraft, a Put Option Aircraft, or a Purchase Option Aircraft for Delivery on a Scheduled Delivery Date in accordance with Section 2.01, Section 2.02 and Section 2.03, respectively, by giving FedEx a Designation on or before the latest date for giving such Designation specified in the applicable such section. Each Airframe to _____________ *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- 20 be designated by American to be part of a Firm Aircraft, a Put Option Aircraft or a Purchase Option Aircraft to be delivered on any Scheduled Delivery Date as to which a Designation is given will be chosen by American in its sole discretion. American shall have the right as a result of operational considerations to substitute a different Airframe for a previously designated Airframe for delivery on a Scheduled Delivery Date by delivering a Change Designation (i) on any date before the [ * ] prior to such Scheduled Delivery Date or (ii) if such designation of a different Airframe for delivery on such Scheduled Delivery Date would not cause a material delay in the conversion of such different Airframe from a passenger configuration to a cargo configuration, on any date before the [ * ] prior to the original Scheduled Delivery Date, provided in either instance that, within [ * ] after its receipt of FedEx's invoice setting forth in detail the nature and amount of such costs, American reimburses FedEx for any incremental engineering costs, incremental transition maintenance costs and incremental modification costs incurred by FedEx solely as the result of the substitution of the Airframe. (b) No later than [ * ] prior to the Scheduled Delivery Date for an Aircraft, American shall designate to FedEx the three Engines to be conveyed to FedEx as part of such Aircraft to be delivered on such Scheduled Delivery Date by giving FedEx a completed Engine Designation. After designating such Engines, American will use its commercially reasonable efforts to avoid substituting other Engines for such designated Engines, but may do so upon written notice to FedEx, which notice shall be given by American as soon as practicable after it determines to substitute Engines. Each Engine to be designated by American to be a part of a Firm Aircraft, a Put Option Aircraft or a Purchase Option Aircraft to be delivered on the various Scheduled Delivery Dates as to which Designations are given will be chosen by American in its sole discretion. Section 2.05. Payment of Purchase Price. Each Purchase Price and each Spares Purchase Price payable to American by FedEx shall be net of any and all taxes, recording expenses, assessments, duties and similar governmental charges and fees charged on or with respect to the sale of the Aircraft, any and all of which amounts shall be paid by FedEx, subject, however, to the provisions of Section 3.01. The Purchase Price for each Aircraft shall be paid on the Delivery Date for such Aircraft, net of any applicable Deposit and the interest calculated at the AMR Rate. The Spares Purchase Price for any Spare Parts purchased pursuant to Article 4 shall be paid on the date the Spare Parts being sold to FedEx are delivered by American to FedEx. The Purchase Prices, the Spares Purchase Prices and any Deposits shall be paid by FedEx in United States Dollars by wire transfer of ________________ *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. -14- 21 immediately available funds to American's account at Chase Manhattan Bank in New York, New York, ABA No. 021000021 Account 910-1-019884, Reference, as applicable, Aircraft N[Insert Relevant FAA Registration Number] or MD-11 Spare Parts. Section 2.06. Deposits. FedEx will pay to American on the Business Day next following the date of execution of this Agreement a cash deposit in the amount of $[ * ] for each Firm Aircraft. FedEx will pay to American within the ten-day period next following the date on which each Put Option is exercised, a cash deposit of $[* ] in respect of the Put Option Aircraft as to which such Put Option is exercised. FedEx will pay to American upon the Business Day next following the exercise of any Purchase Option, a cash deposit of $[ * ] in respect of each Purchase Option Aircraft. [ * ]. If American shall fail to perform its obligation to deliver an Aircraft in accordance with this Agreement, American will return to FedEx, upon FedEx's written request, any Deposits made with respect to such Aircraft, with interest thereon calculated at a rate equal to the AMR Rate. The Deposit applicable to a particular Aircraft, with an amount of interest thereon calculated at the AMR Rate, will be applied to the payment of the Purchase Price of such Aircraft on the Delivery Date. Neither the retention of any Deposit by American in connection with the failure of FedEx to perform its obligations under this Agreement nor the return of any Deposit by American in connection with the failure of American to perform its obligations under this Agreement shall be the exclusive remedy of the non-defaulting Party in connection with any such default. Except as set forth above, American shall be entitled to retain any interest earned on the Deposits. ARTICLE 3 AIRCRAFT DELIVERY, TITLE, RISK OF LOSS Section 3.01. Delivery. American shall deliver each Firm Aircraft and any Put Option Aircraft as to which a Put Option is exercised and each Purchase Option Aircraft to FedEx on the Scheduled Delivery Date for each such Aircraft pursuant to the procedures set forth in this Article 3. American shall tender each Aircraft required to be delivered to FedEx under this Agreement by delivering an Aircraft Delivery Certificate (completed as to the tender related portion thereof) to FedEx with respect to such Aircraft. Delivery of each Aircraft shall be made at (i) __________________ *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. -15- 22 Dallas/Fort Worth International Airport ("DFW"), (ii) at the option of American, at an airport in the State of Nevada if American so advises FedEx at least seven (7) days prior to the Scheduled Delivery Date for such Aircraft or (iii) at such other location on FedEx's route system as American designates in writing to FedEx at least ninety (90) days prior to the Scheduled Delivery Date and to which FedEx consents, such consents not to be unreasonably withheld. If any Scheduled Delivery Date is not a Business Day, the Aircraft to be delivered shall be delivered and accepted on the Business Day next preceding the Scheduled Delivery Date. Section 3.02. Inspection, Flight Checks and Discrepancies. (a) FedEx shall have access to each Aircraft no later than [ * ] prior to the Scheduled Delivery Date for such Aircraft at American's maintenance facility at the Tulsa International Airport in Tulsa, Oklahoma ("TUL"). At such time, FedEx shall have the right to: (i) conduct all ground inspections reasonably necessary to determine whether the Aircraft is in Delivery Condition, including, but not limited to, engine borescopes conducted in accordance with Exhibit R, (ii) functionally ground and flight check such Aircraft in accordance with the requirements and procedures contained in the McDonnell Douglas Model MD-11 Production Flight Procedure Manual (the "MDAC PFPM") applicable to aircraft that are completing a C Check and (iii) conduct on each Engine being delivered (other than a Non-Conforming Engine) a Power Assurance Run Test to ensure that the exhaust gas temperature margin for such Engine conforms to the requirements of Section 3.06(i)(B)(4). Subject to Section 3.02(b), any such checks or test flights shall be of a reasonable duration. In determining if an Aircraft is in Delivery Condition, if there are differences in the tolerances stated in the MDAC PFPM and the American Program, the more lenient tolerances will apply. (b) The initial flight test of an Aircraft shall not be more than [ * ] in duration. American will permit at least [ * ] of FedEx to observe any functional flight check of an Aircraft made in conjunction with the Delivery of such Aircraft. During the functional flight check, American shall provide a pilot who shall function as pilot-in-command and who shall maintain operational control and responsibility for the Aircraft. FedEx shall provide a pilot who shall occupy a pilot's seat (left or right, at the discretion of the pilot-in-command). FedEx's pilot shall physically exercise the flight controls in such phases of flight as necessary to verify the functional operation of the Aircraft. Insurance for all functional flight checks shall be provided by American, at its sole expense under its existing insurance policies, provided, however, that any FedEx personnel who are to be present on such Aircraft during any such flight shall execute and ______________ *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. -16- 23 deliver to American prior to such flight a release and waiver of liability containing terms and conditions reasonably satisfactory to American. American shall provide the fuel necessary for such flight check. (c) Upon completion of functional ground and flight check of an Aircraft, American shall, at American's expense and in accordance with the applicable criteria set forth in the American Program: (i) correct and/or clear any items noted in the Aircraft's log book by American and which remain un-cleared or un-corrected at the Scheduled Delivery Date and (ii) correct and/or clear any discrepancies of the Aircraft from the Delivery Condition otherwise noted during the functional ground and flight checks of such Aircraft. If an additional flight check is required to demonstrate that a discrepancy from the Delivery Condition for such Aircraft has been corrected, such additional flight check shall be conducted in the manner set forth in Section 3.02(a) and (b). Any additional flight check made to inspect the correction of any discrepancy of such Aircraft from the required Delivery Condition previously noted shall be limited to the time necessary to inspect such discrepancy. If additional discrepancies from the Delivery Condition are noted during a subsequent flight check (or the original discrepancy is not satisfactorily corrected), American shall correct the discrepancy from the Delivery Condition noted during the subsequent flight check. Notwithstanding the foregoing, American shall not be required to correct or clear any items or discrepancies of the Aircraft from Delivery Condition that are (x) cosmetic in nature, (y) related solely to any Passenger Parts or (z) which the Parties agree in writing in the Aircraft Delivery Certificate to correct and/or clear after the Delivery of the Aircraft. (d) Upon completion of the items in Sections 3.02(a) through 3.02(c) on an Aircraft, FedEx shall execute and deliver to American the Aircraft Delivery Certificate for such Aircraft pursuant to which FedEx shall certify that it has accepted the Aircraft and that the Aircraft is in the Delivery Condition, except to the extent that (i) any remaining discrepancies of the Aircraft from the Delivery Condition are noted by the Parties in such Aircraft Delivery Certificate or (ii) the failure of the Aircraft to meet Delivery Condition requires an Adjustment (as defined below). Thereafter, American shall not change or alter the configuration or operate such Aircraft for any reason prior to Delivery (except as necessary to ferry such Aircraft to any other location at which Delivery will occur) without the prior written consent of FedEx. Section 3.03. [ * ___________________ *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. -17- 24 ] [ * ] [ * ] [ * ____________________ *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- 25 * ______________________ *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. -19- 26 * ____________________ *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. -20- 27 * ____________________ *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. -21- 28 Section 3.04. Delivery Procedure. At the time of Delivery of each Aircraft: (i) FedEx shall execute and deliver to American the Aircraft Delivery Certificate as provided in Section 3.02(d); (ii) American shall execute and deliver to FedEx the FAA Bill of Sale and the Warranty Bill of Sale; (iii) FedEx shall pay American the Purchase Price in accordance with Section 2.05, net of the Deposit applicable to the Aircraft being delivered and the interest accrued on such Deposit at the AMR Rate; (iv) Subject to the provisions of Section 6.01, American shall deliver to FedEx the Data with respect to such Aircraft; (v) American shall execute and deliver to FedEx an assignment of any warranties with respect to the Aircraft that are assignable by American by their terms and without the payment by American to the grantor of the warranty of more than a nominal amount; (vi) Concurrently with the delivery of the Warranty Bill of Sale described in clause (ii) above, American shall cause the FAA Bill of Sale executed by American to be filed and recorded with the FAA Aircraft Registry in Oklahoma City, Oklahoma and FedEx shall cause an Application for Registration of the Aircraft to be filed with the FAA Aircraft Registry. FedEx shall be responsible for all costs of filing or recording of the FAA Bill of Sale, the Application for Registration of the Aircraft and any such other acceptance certificates, delivery receipts and any other documents as shall be agreed to by the Parties as appropriate for the sale, purchase and Delivery of such Aircraft; (vii) At the time and upon completion of Delivery of each Aircraft, Messrs. Daugherty, Fowler & Peregrin, special FAA counsel to FedEx, shall confirm to FedEx that such counsel will furnish FedEx its opinion, addressed to FedEx, to the effect that: (A) the FAA Bill of Sale with respect to the Aircraft being delivered by American to FedEx and the FAA Application for Registration relating thereto have been duly filed with the FAA; (B) legal title to such Aircraft is vested in FedEx or its designee, and (C) such Aircraft, including the Engines conveyed to FedEx in connection with such Aircraft, is free and clear of all Liens, other than Liens arising by, through or under FedEx or its designee, if any, that has taken title to the Aircraft. Such opinion may be subject to the type of assumptions and qualifications regularly included by experienced FAA counsel in similar opinions; and (viii) If a Non-Conforming Engine which is not conveyed to FedEx pursuant to Section 3.03(d) is installed on the Aircraft at the Delivery Date, each of American -22- 29 and FedEx shall execute and deliver the Engine Lease Agreements with respect to such Non-Conforming Engine and applicable Delayed Delivery Engine. Section 3.05. Delayed Delivery. (a) If FedEx is obligated to accept delivery of and purchase an Aircraft tendered by American for delivery on a Scheduled Delivery Date, which Aircraft is in Delivery Condition and FedEx fails to accept such Aircraft for delivery in accordance with this Agreement, unless such failure is an Excusable Delay, FedEx will [* ] If American is unable to deliver an Aircraft on a Scheduled Delivery Date, unless such delay is an Excusable Delay (other than one arising as a result of a Force Majeure Event involving any work stoppage, work slow down, other labor or work action or labor dispute, if and to the extent such Excusable Delay exceeds four (4) weeks in duration), [ * ] The payment of any such amounts shall not be the exclusive remedy of American if FedEx fails to accept delivery of an Aircraft on a Scheduled Delivery Date other than in circumstances constituting an Excusable Delay nor the exclusive remedy of FedEx if American fails to deliver an Aircraft on a Scheduled Delivery Date other than in circumstances constituting an Excusable Delay. (b) Notwithstanding the foregoing, with respect to non-excusable delays resulting from American's actions or omissions, American shall not be required to pay interest on the Purchase Price of any Aircraft as set forth above if (i) delivery of such Aircraft is delayed for [ * ] or less and (ii) the aggregate number of days for which deliveries of all the Aircraft have been delayed [ * ] If, as to non-excusable delays resulting from American's actions or omissions, the number of days by which any delivery of an Aircraft is delayed exceeds [ * ] or the number of days by which all deliveries of Aircraft are delayed exceeds [ * ] in the aggregate, interest (computed as provided above) on the Purchase Price of the Aircraft as to which a delay in excess of [ * ] occurs (less the amount of applicable Deposit) or the aggregate Purchase Prices of the Aircraft as to which aggregate delays in excess of [ * ] occur (less the amount of applicable Deposit) shall be paid by American to FedEx as provided above for each day for which deliveries of the Aircraft by American are delayed. Notwithstanding the foregoing, with respect to non-excusable delays resulting from FedEx's actions or omissions, FedEx shall not be required to pay interest on the Purchase Price of any Aircraft as set forth above if (i) its acceptance ____________________ *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. -23- 30 of an Aircraft is delayed for [ * ] or less and (ii) the aggregate number of days for which FedEx's acceptances of all the Aircraft are delayed does not exceed [ * ] If, as to non-excusable delays resulting from FedEx's actions or omissions, the number of days by which any delivery of an Aircraft is delayed exceeds [ * ] or the number of days by which all deliveries of Aircraft are delayed exceeds [ * ] in the aggregate, interest (computed as provided above) on the Purchase Price of the Aircraft as to which the delay in excess of [ * ] occurs or the aggregate Purchase Prices of the Aircraft as to which aggregate delays in excess of [ * ] occur shall be paid by FedEx to American as provided for above for each day for which the acceptances of the Aircraft by FedEx are delayed. (c) If an Aircraft which has been designated for delivery to FedEx on a particular Scheduled Delivery Date sustains any damage or is partially destroyed and such damage or partial destruction can be repaired or restored and such Aircraft can be tendered for Delivery on the date (the "Partial Casualty Delivery Date") that is the later to occur of (i) the Scheduled Delivery Date with respect to such Aircraft or (ii) the date which is [ * ] after the occurrence of such damage or partial destruction, as promptly as practicable after the occurrence of the damage or destruction of such Aircraft, American shall notify FedEx in writing of such occurrence and whether American elects (i) at American's sole cost and expense, to repair or restore the damaged or partially destroyed Aircraft so that it will be in Delivery Condition or (ii) to substitute another Aircraft, if any, for the damaged Aircraft. Any repair required by damage to or partial destruction of the Aircraft shall not (i) impose any restrictions on the FAA-certified limitations, performance or operation as set forth in the Manufacturer s FAA-approved Airplane Flight Manual for the Aircraft or (ii) materially impair the fuel mileage performance of the Aircraft or (iii) increase the empty weight of the Aircraft by more than [ * ]pounds. (d) If, before the Delivery Date of any Committed Delivery (as defined below), one or more Aircraft (each a "Casualty Aircraft") are lost or, in American's sole judgment, substantially completely destroyed, or if American determines, in its sole judgment, that repairing any substantial damage to any Aircraft would be uneconomical, then American shall designate or re-designate other Aircraft, if any, pursuant to Section 2.04 (without regard to the times for taking actions set forth in such Section 2.04, but subject to Section 9.02) in order to deliver an Aircraft to FedEx for each Committed Delivery (as defined below) by the later to occur of (i) the Scheduled Delivery Date for each Committed Delivery or (ii) the date which is [ * ] after the occurrence of the loss or substantially complete destruction of _____________________ *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. -24- 31 such Aircraft (the "Casualty Delivery Date"); provided, however, that notwithstanding any such designation, one Committed Delivery per each such Casualty Aircraft shall automatically terminate in reverse chronological order of Scheduled Delivery Dates. If a Committed Delivery is terminated under this Section 3.05(d), American and FedEx shall have no further obligation to sell or purchase any Aircraft with respect to such Committed Delivery or sell or purchase any Spare Parts associated with such cancelled Committed Delivery. For purposes of this Section 3.05(d), the term "Committed Delivery" shall mean a commitment to sell and deliver any Firm Aircraft or any Aircraft as to which a Put Option has been properly exercised, whether or not a particular Aircraft had been designated for such delivery. Section 3.06. Delivery Condition. (a) At the time of the tender of an Aircraft by American to FedEx in connection with its Delivery, the Aircraft shall be in the following condition: (i) The Aircraft shall meet the following standards: (A) the Airframe of such Aircraft shall have: (1) [ * ] of the number of flight hours or calendar time, whichever is More Restrictive, between C Checks as prescribed by the American ESM remaining until its next C Check is required to be performed; (2) [ * ] of the interval in days prescribed by the American ESM as the time between accomplishment of the First Interval Items remaining until the date on which such items are required to be next performed; and (3) [ * ] of the interval in days prescribed by the American ESM as the time between accomplishment of the Second Interval Items remaining until the date on which such items are required to be next performed. (B) Each Engine conveyed with the Airframe shall have: (1) not more than [ * ] flight cycles since the latest to occur of a HSM, HSC or EHM as prescribed by the American Program; ________________ *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. -25- 32 (2) not more than [ * ] flight cycles since the last high pressure compressor refurbishment as prescribed by the American Program; (3) on its Life-Limited Parts, as specified by the Manufacturer's Engine Overhaul Manual, not more than the total flight cycles on the highest flight cycle Airframe (whether or not previously delivered to FedEx); and (4) an exhaust gas temperature ("EGT") margin of not less than [ * ] degrees Celsius as determined by a Power Assurance Run Test conducted as described in Section 3.02(a) in connection with the acceptance of the Aircraft by FedEx and an EGT margin of not less than [ * ] degrees Celsius at its last test cell run immediately following the latest Engine Maintenance to be accomplished. (C) each Gear installed on such Aircraft shall have [ * ] of the calendar time or flight cycles, whichever is More Restrictive, between major overhauls as prescribed by the American Program for such Gear remaining until the next scheduled overhaul for such Gear ("Gear Half Time"); and (D) the APU installed on such Aircraft shall have remaining at Delivery, [ * ] of the total flight cycles or hours, whichever is More Restrictive, in the service life of the parts in such APU which are life limited, as specified by the manufacturer of such APU ("APU Time Limit"). [ * ] (ii) The Airframe, each Engine conveyed to FedEx along with the Aircraft, each Gear, the APU installed on such Aircraft and all other life-limited parts comprising part of the Aircraft shall have been maintained by American on a non-discriminatory basis with all other McDonnell Douglas Model MD-11 aircraft then in operation by American. _______________ *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- 33 (iii) No Engine being transferred with the Aircraft shall be subject to any reduced inspection intervals or reduced calendar time, flight hours or flight cycles restrictions that require the removal of the Engine from an aircraft upon reaching such calendar time, flight hour, or flight cycle thresholds. The results of any engine borescope inspection conducted on an Engine pursuant to Section 3.02(a) shall indicate that such Engine is within the serviceable limits prescribed by the McDonnell Douglas Aircraft Maintenance Manual Chapter 72-00-07. (iv) The Aircraft, each Engine conveyed to FedEx at the time of the Delivery of the Aircraft, each Gear and the APU shall be in compliance with American's Part 121 Maintenance Program, the Aircraft shall be Airworthy and the Aircraft Records relating to such Aircraft, Engines, Gear and APU shall be in compliance with American's Part 121 Maintenance Program and the applicable Federal Aviation Regulations requiring the maintenance of such Aircraft Records. At the Scheduled Delivery Date, no deferred or carryover maintenance items shall exist with respect to the Aircraft, and all temporary repairs to the Aircraft shall have been made permanent. (v) The delivery of any Engine or other General Electric CF6-80C2D1F engine installed on an Aircraft upon its Delivery shall be subject in all respects to Section 3.03. (vi) The Aircraft shall be registered on the United States Federal Aviation Administration aircraft registry. (vii) The Aircraft shall be in a configuration which complies with American's operating specifications for McDonnell Douglas Model MD-11 aircraft at such time, except to the extent that any discrepancies or deviations from such operating specifications shall result from the removal of Passenger Parts from the Aircraft. (viii) The Aircraft (including the Engines to which title is conveyed therewith) shall be free of all Liens. (ix) Prior to the delivery of the Aircraft, American shall have painted over or stripped from the Aircraft any insignia, trademark or tradename on the Aircraft identifying the Aircraft as an American aircraft. (x) American may, at its sole option and expense, deliver an Aircraft after removing from such Aircraft any Passenger Parts. Any Passenger Parts removed from an Aircraft by American in accordance with the foregoing provisions shall be "AS IS" and may be retained by American, along with the -27- 34 Aircraft Records and other Data relating thereto, as its property, free of any Lien of FedEx. (b) EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, THE AIRCRAFT SHALL BE DELIVERED BY AMERICAN AND ACCEPTED BY FEDEX "WHERE IS", "AS IS" AND "WITH ALL FAULTS". (c) American shall not be responsible for compliance with any Airworthiness Directive outstanding with respect to any Aircraft on the Scheduled Delivery Date for such Aircraft if the final date for compliance with such Airworthiness Directive is after such date, provided that American shall not discriminate against any of the Firm Aircraft or Put Option Aircraft in connection with its compliance with Airworthiness Directives applicable to the McDonnell Douglas Model MD-11 aircraft in its fleet. American will require any lessee of an Aircraft that may be delivered to FedEx to comply with any Airworthiness Directive applicable to such leased Aircraft in the same manner as American complies with such Airworthiness Directive with respect to the Aircraft in its fleet. With respect to any Aircraft delivered by American to FedEx, American shall not have complied with or terminated any Airworthiness Directive applicable to McDonnell Douglas Model MD-11 airframes and the accessories thereto or General Electric CF6-80C2D1F engines by the use of FAA-approved alternative means of compliance, unless FedEx expressly approves compliance with or termination of such Airworthiness Directive by such alternative means or FedEx's then current FAA-approved maintenance program permits compliance with or termination of such Airworthiness Directive by such alternative means of compliance. Section 3.07. Adjustments to Purchase Price for Delivery Condition. [ * ] _________________ *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. -28- 35 Section 3.08. Aircraft Delivery Certificate; Engine Delivery Certificate. Subject to any discrepancies from the Delivery Condition expressly noted by the Parties in the applicable Aircraft Delivery Certificate, FedEx's execution and delivery of an Aircraft Delivery Certificate with respect to an Aircraft as to which a Delivery occurs shall be a binding acknowledgment and agreement by FedEx that the Aircraft delivered was in the Delivery Condition upon its Delivery to FedEx. Subject to any discrepancies from the delivery conditions set forth in Section 3.06 that are applicable solely to Engines that are expressly noted by the Parties in the applicable Engine Delivery Certificate, FedEx's execution and delivery of an Engine Delivery Certificate with respect to an Engine or Spare Engine which is delivered to FedEx by American shall be a binding acknowledgment and agreement by FedEx that such Engine or Spare Engine, as the case may be, was in the condition required by Section 3.06 upon its delivery to FedEx by American. Section 3.09. Liability. FEDEX HEREBY RELEASES AMERICAN FROM AND AMERICAN SHALL NOT BE LIABLE FOR ANY DEFECT, KNOWN OR UNKNOWN, LATENT OR PATENT, IN SUCH AIRCRAFT, THE ENGINES, ANY PART OR COMPONENT OF SUCH AIRCRAFT AND ANY SPARE PART DELIVERED TO IT ON SUCH DELIVERY DATE OR ANY OTHER DATE OR, EXCEPT AS EXPRESSLY SET FORTH HEREIN WITH RESPECT TO THE AIRCRAFT RECORDS AND/OR THE DATA, THE DATA, AND, EXCEPT AS EXPRESSLY AGREED BY THE PARTIES, ANY DELAYED DELIVERY OF ANY AIRCRAFT, ANY DELAYED DELIVERY ENGINE OR ANY SPARE PART, AND FOR ANY ACTUAL, INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES SUSTAINED BY FEDEX AS A RESULT OF ANY SUCH DEFECT OR DELAYED DELIVERY, INCLUDING, WITHOUT LIMITATION, LOSS OF REVENUE, LOSS OF USE OF THE AIRCRAFT, THE ENGINES, THE SPARE PART, OR THE DATA OR ANY INTERRUPTION IN FEDEX'S BUSINESS RESULTING FROM OR OCCASIONED BY FEDEX'S INABILITY TO USE THE AIRCRAFT, THE ENGINES OR, EXCEPT AS EXPRESSLY SET FORTH HEREIN, WITH RESPECT TO THE AIRCRAFT RECORDS, ENGINE RECORDS AND/OR THE DATA, THE DATA. Section 3.10. Title and Risk of Loss. (a) Concurrently with each Delivery of an Aircraft but not prior thereto, title to, and risk of loss of, damage to or destruction of such Aircraft (other than to or for any Non-Conforming Engine installed on such Aircraft, title to which American is not conveying to FedEx) shall pass from American to FedEx. FedEx shall not, by virtue of this Agreement -29- 36 (including, without limitation, as a result of the payment of any Deposit, the previous Delivery of another Aircraft or the delivery of any Spare Part by American to FedEx pursuant to this Agreement, or the designation or identification by American of any particular Aircraft as a Firm Aircraft, a Put Option Aircraft or the Aircraft to be delivered by American to FedEx on a particular Scheduled Delivery Date) acquire any insurable or other ownership interest in an Aircraft prior to the Delivery of such Aircraft by American to FedEx in accordance with the terms of this Agreement. (b) Title to, and risk of loss of, damage to and destruction of each Delayed Delivery Engine and each Replacement Engine delivered to FedEx by American shall pass to FedEx upon the delivery of such Delayed Delivery Engine or Replacement Engine to FedEx by American. Notwithstanding the foregoing, the risk of loss of, damage to or destruction of (i) any Non-Conforming Engine to which FedEx holds title shall be as set forth in Section 3.03(d) and (ii) any other Non-Conforming Engine and any Delayed Delivery Engine shall be governed by any applicable Engine Lease Agreement. Upon Delivery of an Aircraft, FedEx shall take title to any fuel on board of the Aircraft at no additional cost to FedEx. ARTICLE 4 SPARE PARTS Section 4.01. MD-11 Spare Parts List. (a) On the date of execution of this Agreement, American will provide FedEx with the Spares List which will be a list of rotable spare parts that American held in its inventory as of January 20, 1995 and that are unique to McDonnell Douglas Model MD-11 aircraft or that can be used on the McDonnell Douglas Model MD-11 and Model DC-10 aircraft but no other aircraft within American's fleet. The Spares List will set forth for each type of MD-11 Spare Part, American's and the manufacturer's part numbers for each type of MD-11 Spare Part, the quantity of each type of MD-11 Spare Part held by American at the date on which the Spares List is delivered and the Average Unit Price for each type of MD-11 Spare Part. The Spares List will be provided via electronic storage media mutually acceptable to American and FedEx. American will also provide FedEx with a hard copy of the Spares List. Section 4.02. MD-11 Spare Parts Purchase Obligation. (a) On each date on which FedEx is obligated to accept delivery of a Firm Aircraft pursuant to this Agreement, American will sell to FedEx, and FedEx will purchase from American, MD-11 Spare Parts having an average, aggregate Average Unit Price of $[ * ] for each Firm Aircraft as to which Delivery occurs or which FedEx is obligated to ____________________ *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. -30- 37 purchase; provided, however, that so long as the Delivery of three Aircraft occurs in each of the years from 1996 through 1999 (i) the aggregate Average Unit Prices of MD-11 Spare Parts that shall be sold by American to FedEx, and purchased by FedEx from American, in each year from 1996 through 1999 shall be $[ * ]. On each date on which FedEx is obligated to accept delivery of a Put Option Aircraft pursuant to the exercise of a Put Option or a Purchase Option Aircraft, American will sell to FedEx, and FedEx will purchase from American, MD-11 Spare Parts having an aggregate Average Unit Price of $[ * ] for each of the first eighteen (18) Aircraft and $[ * ] for the nineteenth (19th) Aircraft as to which Delivery occurs or which FedEx is obligated to purchase. (b) If the MD-11 Spare Parts are being purchased in conjunction with the purchase by FedEx of a Firm Aircraft or an Aircraft as to which American has exercised a Put Option, the Spares Purchase Price for such MD-11 Spare Parts shall be as set forth in Section 1 of Exhibit Q. If the MD-11 Spare Parts are being purchased in conjunction with the purchase by FedEx of any Purchase Option Aircraft, the Spares Purchase Price for such MD-11 Spare Parts shall be determined by reference to Section 2 of Exhibit Q. FedEx will pay to American the Spares Purchase Price for the portion of the MD-11 Spare Parts being purchased on the date such MD-11 Spare Parts are delivered to FedEx by American. (c) The MD-11 Spare Parts that American will sell to FedEx and FedEx will purchase from American in any lot of MD-11 Spare Parts pursuant to the first sentence of Section 4.02(a) will be a pro rata portion of each type of MD-11 Spare Part, based on a total of nineteen Aircraft. If the number of a particular type of MD-11 Spare Parts held by American on any Delivery Date does not permit the mix of MD-11 Spare Parts sold to FedEx in each such lot to be a perfectly pro rata portion of all of the various types of MD-11 Spare Parts, American and FedEx shall cooperate to set the mix of MD-11 Spare Parts so that the inventories of MD-11 Spare Parts of American and FedEx shall be as nearly pro rata as possible at all times. If for operational reasons American or FedEx shall desire to change the mix of MD-11 Spare Parts that American would deliver on any date, American and FedEx shall attempt in good faith, but shall not be obligated, to effect such change in the mix of MD-11 Spare Parts in order to accommodate each other's operational requirements. If American and FedEx shall change such a mix of MD-11 Spare Parts in any lot of MD-11 Spare Parts delivered to FedEx by American, the mix of MD-11 Spare Parts delivered to FedEx in the next lot shall contain such MD-11 Spare Parts as are necessary to cause compliance with requirements of the first two sentences of this Section 4.02(c) once such MD-11 Spare Parts are purchased by and delivered to FedEx. ______________ *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. -31- 38 Section 4.03. Spare Engine, Spare APU and Spare Thrust Reverser Purchase Obligation. (a) (i) American will sell to FedEx, and FedEx will purchase from American, on the dates and for the Spares Purchase Prices set forth in or determined as set forth in Exhibit Q, the Spare Engines set forth in Exhibit Q. If FedEx desires to change the quick engine change configuration of any Spare Engine delivered by American to FedEx, American shall provide to FedEx in exchange for conveyance by FedEx to American of the Parts removed from the Spare Engine in question, the Parts necessary to change the quick engine change configuration of such Spare Engine to a tail configuration or a wing configuration, as the case may be, if American has the necessary parts in its inventory of spare Parts and such spare Parts are determined by American, in good faith, to be surplus to its needs. If American delivers any such spare Parts to FedEx, FedEx shall deliver to American any of the Parts removed from such Spare Engine in connection with the change in the configuration of such Spare Engine. Upon its delivery by American to FedEx, each of the first five (5) Spare Engines delivered by American to FedEx will be in the condition an Engine is required by Section 3.06(a)(i)(B), 3.06(a)(iii) and 3.06(a)(iv) to be in upon its delivery by American to FedEx, and FedEx shall have the right to conduct an engine borescope on each such Spare Engine delivered in accordance with Exhibit R. The Spares Purchase Price for each of the first five (5) Spare Engines shall be adjusted in accordance with Exhibit M. (ii) American will, at its sole option, either (A) deliver each Spare Engine to be sold to and purchased by FedEx on one of the last five (5) Spare Engine delivery dates set forth in Exhibit Q (each a "Last Group Engine" and collectively, the "Last Group Engines") without such Last Group Engine having been operated on wing since its last EHM, in which case the Spares Purchase Price for such Last Group Engine shall be adjusted in accordance with Exhibit M, or (B) if any such Last Group Engine does not comply with the standard in clause (A) of this sentence, adjust the Spares Purchase Price of such Last Group Engine in accordance with the adjustment formula set forth in Exhibit T; provided, however, that the obligation set forth in clause (A) of this sentence shall be reduced as to and no longer apply to one (1) such Last Group Engine for each Spare Engine among the first five (5) Spare Engines delivered by American to FedEx that is delivered without having been operated on wing since its last EHM. Upon delivery of any Last Group Engine to which the obligation set forth in clause (A) of the first sentence of this Section 4.03(a)(ii) no longer applies, the Spares Purchase Price of such Last Group Engine shall be adjusted in accordance with Exhibit M (instead of Exhibit T). Each Last Group Engine delivered will be in the condition required by Section 3.06(a)(iii) and Section 3.06(a)(iv), and FedEx shall have the right to conduct an engine borescope on each such Last Group Engine delivered in accordance with Exhibit R. At the time of delivery of any Last Group Engine whose Spares Purchase Price is adjusted in accordance with clause (B) of the foregoing sentence, American will issue to -32- 39 FedEx a credit memorandum for [ * ] of the cost of an EHM (the "EHM Credit") on a General Electric CF6-80C2D1F engine operated by FedEx which was acquired from American (a "Purchased Engine"). The EHM Credit will be redeemable by FedEx at any time during the [ * ] period commencing on the date it is issued to pay a portion of the cost of the EHM performed on a Purchased Engine. Subject to the foregoing sentence, if any Last Group Engine does not comply with the standard in clause (A) of the first sentence of this Subsection 4.03(a)(ii), FedEx must use an EHM Credit, if one is available to it, to pay a portion of the cost of an EHM on such Last Group Engine to be accomplished by American when such Last Group Engine next requires an EHM. FedEx may apply two EHM Credits previously issued to it to the payment of the cost of the EHM on such engine. The cost of an EHM on an engine against which an EHM Credit may be applied shall be the cost of an EHM as set forth in Table A to Exhibit M for the year in which the EHM on such engine is accomplished. The costs set forth in Table A to Exhibit M do not include the cost of any Life Limited Parts replaced during an EHM. To use an EHM Credit, FedEx must deliver its engine to American at TUL or such other location to which American and FedEx mutually agree. Upon delivery of the engine to American's maintenance facility, American will perform the EHM work on the engine and provide the materials required in performing the EHM, other than Life Limited Parts. American will invoice FedEx for the balance of the cost of an EHM not covered by the application of the EHM Credit, including, without limitation, the cost of the Life Limited Parts replaced, within 30 days of the completion of the EHM. FedEx will pay the amount of American's invoice promptly after receipt of such invoice. FedEx will be responsible for the costs of packing and shipping the engines to and from American s maintenance facility for such an EHM. (b) American will sell to FedEx, and FedEx will purchase from American, on the dates and for the Spares Purchase Prices set forth in or determined as set forth in Exhibit Q, the Spare APU's set forth in Exhibit Q. Upon its delivery by American to FedEx, such Spare APU's will (i) be in serviceable condition with an American Serviceable Tag attached to it and (ii) will not have been installed on an aircraft subsequent to the Spare APU's last accomplished APU C&R (as defined below) or APU EHM (as defined below), which APU C&R or APU EHM shall have been accomplished through an American repair shop or a FAA-approved third party repair facility. "APU C&R" shall mean a check and repair of a Spare APU involving disassembly only to the extent required to correct malfunctions and/or obvious visual damage. "APU EHM" shall mean the complete disassembly and refurbishment of the LP Compressor and LP Turbine sections, HP Compressor and HP Turbine sections of a Spare APU and the check & repair of the gearbox and all components of the Spare APU. _____________ *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. -33- 40 (c) American will sell to FedEx, and FedEx will purchase from American, on the date and for the Spares Purchase Prices set forth in or determined as set forth in Exhibit Q, the Spare Thrust Reversers as set forth in Exhibit Q. Upon its delivery by American to FedEx, each Spare Thrust Reverser will (i) be in serviceable condition with an American Serviceable Tag attached to it and (ii) will not have been installed on an aircraft subsequent to the Spare Thrust Reversers last accomplished Reverser C&R (as defined below) or RHM (as defined below), which Reverser C&R or RHM shall have been accomplished through an American repair shop or a FAA-approved third party repair facility. "Reverser C&R" shall mean a check and repair of the Spare Thrust Reverser involving a complete tap check of the translating cowl and core cowl for delamination, an overall check of the unit for external damage, excessive wear or binding, a check of the flexdrive shaft cores and casings for condition, a check of the condition of the ballscrew actuators, rig of actuator/translating cowl system, and check of all latches and forward latch ring. "RHM" shall mean the maintenance build level involving the disassembly to the extent necessary to accomplish all the required checks and reconditioning of a Spare Thrust Reverser as specified in the American Program in which all components will be checked and repaired and sent to their appropriate repair sources for repair processing. Section 4.04. Effect of Expiration of Put Options on Certain Spare Parts Purchase Obligations. If (i) any Put Option expires as to a Put Option Aircraft or (ii) FedEx does not exercise a Purchase Option as to a Put Option Aircraft which has a Scheduled Delivery Date on which a Spare Engine, Spare APU or Spare Thrust Reversers is to be sold to FedEx, American will have no obligation to sell, and FedEx will have no obligation to purchase, such Spare Parts otherwise to be sold and purchased by the Parties on such Scheduled Delivery Date. If any remaining Put Options are not cancelled by FedEx in accordance with Section 2.02(d) after American fails to exercise a Put Option, the Scheduled Delivery Date on which each of the remaining, unpurchased Spare Engines, Spare APU's or Spare Thrust Reversers are to be sold by American to FedEx, and purchased by FedEx from American as set forth in Exhibit Q (an "Original Sale Date") shall be changed to be the Scheduled Delivery Date for a Put Option Aircraft as set forth in Exhibit Q next scheduled to occur after the Original Sale Date of each such Spare Engine, Spare APU or Spare Thrust Reversers (a "Modified Sale Date") and the obligation of American to sell and of FedEx to purchase the Spare Engines, Spare APU's and/or Spare Thrust Reversers on the last remaining, uncancelled Scheduled Delivery Date for a Put Option Aircraft as set forth in Exhibit Q shall be terminated and without further force or effect. If American shall sell, and FedEx shall be obligated to purchase, a Put Option Aircraft on the Modified Sale Date for any Spare Engine, Spare APU or Spare Thrust Reversers, American shall sell such Spare Part or Spare Parts scheduled to be sold and purchased by the Parties on such Modified Sale Date for the Spares Purchase Price or Spares Purchase Prices, as the case may -34- 41 be, on the Modified Sale Date as set forth in or determined in accordance with Exhibit Q. Section 4.05. Designation of MD-11 Spare Parts to be Acquired and Delivery. At least [ * ] days prior to the proposed date for the delivery of a lot of MD-11 Spares to be purchased by FedEx from American, FedEx shall notify American in writing of the date on which it will take delivery of such MD-11 Spare Parts, any particular mix of MD-11 Spare Parts that it desires to have in such lot of MD-11 Spare Parts and the destination within the forty-eight (48) contiguous United States to which the MD-11 Spare Parts are to be shipped. As to any other Spare Parts, [ * ] days prior to the proposed date of delivery FedEx shall give American written notice of the destination within the United States to which such Spare Parts are to be shipped. American shall ship all of the Spare Parts to Memphis, Tennessee, unless it is mutually agreed in writing that any or all of the Spare Parts will be shipped to another destination within the forty-eight (48) contiguous United States. Section 4.06. MD-11 Spare Parts Documentation. At the time of delivery of the MD-11 Spare Parts sold by American to FedEx, the MD-11 Spare Parts delivered will, to the best of American's then current knowledge, be free and clear of all Liens and will be serviceable condition. Such MD-11 Spare Parts will be packaged in accordance with ATA 300 specifications and be accompanied by an American Serviceable Tag. Any Spare Parts delivered to FedEx may be in a form modified by American in order to comply with applicable FAR's, Airworthiness Directives, manufacturer's service bulletins and recommendations for modification by the respective manufacturers of such Spare Parts. In addition, any Spare Parts delivered to FedEx by American shall be in compliance with any outstanding Airworthiness Directives and service bulletins required to be complied with or terminated on or before the delivery date of such Spare Parts. Upon FedEx's request at the time of the delivery of a particular MD-11 Spare Part, American will also provide FedEx with the last Shop Findings Report which American has in its records with respect to that MD-11 Spare Part if American regularly creates and retains Shop Findings Reports for such type of MD-11 Spare Part pursuant to the American Program. FedEx will not be required to accept any Spare Part tendered by American for sale to FedEx that does not meet the applicable requirements of FAR Section 43.9. American will make no representations or warranties with respect to the Spare Parts sold to FedEx pursuant to this provision other than that such Spare Parts are free and clear of all Liens and are serviceable. Subject to Section 7.01, American will assign any manufacturer's warranties that it owns and that are assignable by American without the consent or approval of the manufacturer (with the payment of no more than nominal consideration) in connection with the Spare _______________ *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. -35- 42 Parts at the time the Spare Parts are sold to FedEx. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, THE SPARE PARTS SHALL BE DELIVERED BY AMERICAN AND ACCEPTED BY FEDEX "WHERE IS", "AS IS" AND "WITH ALL FAULTS". ARTICLE 5 REPRESENTATIONS AND WARRANTIES Section 5.01. American's Representations and Warranties. (a) American hereby represents and warrants to FedEx as follows: (i) Organization and Existence. American is a corporation validly existing, duly organized and in good standing under the laws of the State of Delaware and is qualified to do business as a foreign corporation and is in good standing as such in the State of Texas. (ii) Due Authorization. American has all requisite corporate power and authority to execute and enter into this Agreement and to perform its obligations under this Agreement. The execution and delivery of this Agreement by American and the performance by American of its obligations hereunder have been duly authorized by all necessary corporate action, do not contravene any law, statute, rule, regulation, ordinance, writ, decree, judgment or injunction applicable to American, or result in the violation of, the breach of, or a default or event of default under any indenture, agreement, mortgage, contract, agreement, other instrument or document, or any contractual restriction to which American is a party, which is binding on it, which affects American or by which its assets are bound or affected to the extent that the contravention, violation or breach thereof or the occurrence of a default or event of default thereunder would have a material adverse effect on the ability of American to satisfy its obligations hereunder, and do not result in or require the creation of any lien, security interest or other charge or encumbrance upon or with respect to any of its assets. (iii) Approvals. Except for the necessary approvals under the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as amended, all authorizations, consents, approvals, waivers and other actions required by, and all notices to and filings required to be made with, all governmental authorities and regulatory bodies for the due execution, delivery and performance by American of this Agreement or the consummation of the transactions contemplated by this Agreement have been obtained. (iv) Enforceability. This Agreement constitutes the legally valid and binding obligation of American, enforceable against American in accordance -36- 43 with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or other laws affecting creditors rights generally or general equitable principles, whether applied in a court of law or in a proceeding at equity. (b) With respect to any Aircraft being delivered, American hereby represents and warrants to FedEx that upon Delivery of such Aircraft: (i) Except as expressly agreed to in writing by FedEx or as expressly permitted in this Agreement, the Aircraft shall be in the Delivery Condition; (ii) American shall have full power and lawful authority to convey its ownership interest in the Aircraft to FedEx; and (iii) upon execution, filing and recordation with the FAA of the FAA Bill of Sale and delivery of the Warranty Bill of Sale to FedEx, FedEx shall have received good legal and beneficial title to the Aircraft, including the Engines conveyed to FedEx in connection with such Aircraft, free and clear of all Liens, other than Liens arising by, through or under FedEx or any designee of FedEx that has taken title to the Aircraft. Section 5.02. No Warranties. EXCEPT FOR WARRANTIES OF TITLE AND ANY ASSIGNED MANUFACTURERS' WARRANTIES AND EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN WITH RESPECT TO THE AIRCRAFT RECORDS, THE AIRCRAFT, THE ENGINES, THE SPARE PARTS AND THE DATA SHALL BE PURCHASED "WHERE IS", "AS IS" AND "WITH ALL FAULTS" AND WITHOUT WARRANTIES OR REPRESENTATIONS OF ANY KIND, EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER WITH RESPECT TO ANY AIRCRAFT, THE ENGINES, THE SPARE PARTS OR DATA INCLUDING, BUT NOT LIMITED TO: ANY OBLIGATION OR LIABILITY IN NEGLIGENCE, STRICT LIABILITY OR TORT; AIRWORTHINESS; THE CONDITION, DESIGN, QUALITY OR CAPACITY OF THE AIRCRAFT OR THE DATA OR THEIR FITNESS FOR ANY PARTICULAR PURPOSE; COMPLIANCE OF THE AIRCRAFT, THE ENGINES, THE SPARE PARTS OR THE DATA WITH THE REQUIREMENTS OF ANY LAW, ORDER, RULE, REGULATION, SPECIFICATION OR CONTRACT PERTAINING THERETO; PATENT INFRINGEMENT; OR ABSENCE FROM KNOWN, PATENT OR LATENT DEFECTS. EXCEPT FOR WARRANTIES OF TITLE, AMERICAN SHALL NOT BE DEEMED TO MAKE OR HAVE MADE AND DISCLAIMS, AND FEDEX SHALL ACKNOWLEDGE AND CONFIRM THAT AMERICAN HAS NOT MADE ANY REPRESENTATIONS, WARRANTIES OR GUARANTIES OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, CONCERNING THE AIRCRAFT, THE DATA, ANY ENGINE, ANY PART OR ANY COMPONENT, OR ANY SPARE PART INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. -37- 44 AMERICAN IS NOT A MANUFACTURER OR A DEALER IN AIRCRAFT AND FEDEX HEREBY ACKNOWLEDGES AND CONFIRMS TO AMERICAN THAT EACH AIRCRAFT IS OF A MAKE, SIZE, DESIGN AND CAPACITY DESIRED BY FEDEX AND IS A USED AIRCRAFT. EXCEPT FOR THE EXPRESS WARRANTIES OF TITLE GIVEN BY AMERICAN OR MANUFACTURER'S WARRANTIES, FEDEX IRREVOCABLY AND UNCONDITIONALLY WAIVES THE BENEFIT OF ANY WARRANTY OR REPRESENTATION AMERICAN MAY BE DEEMED TO MAKE OR HAVE MADE AND ALL RIGHTS AND REMEDIES IT MAY HAVE AGAINST AMERICAN RELATING TO ANY OTHER REPRESENTATIONS AND WARRANTIES MADE BY AMERICAN, IF ANY, WHETHER THE REMEDIES ARISE BY LAW OR OTHERWISE, OR ARISE IN CONNECTION WITH ANY DAMAGES SUSTAINED BY FEDEX, INCLUDING, WITHOUT LIMITATION, ANY ACTUAL, INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES, INCLUDING WITHOUT LIMITATION, AS A RESULT OF ANY LOSS OF USE OF THE AIRCRAFT, THE ENGINES, ANY SPARE PART OR THE DATA OR ANY INTERRUPTION IN FEDEX'S BUSINESS RESULTING FROM OR OCCASIONED BY FEDEX'S INABILITY TO USE THE AIRCRAFT, THE ENGINES, ANY SPARE PART OR THE DATA. Section 5.03. FedEx's Representations. FedEx hereby represents and warrants to American as follows: (i) Organization and Existence. FedEx is a corporation validly existing, duly organized and in good standing under the laws of the State of Delaware and is qualified to do business as a foreign corporation and is in good standing as such in the State of Texas. (ii) Due Authorization. FedEx has all requisite corporate power and authority to execute and enter into this Agreement and to perform its obligations under this Agreement. The execution and delivery of this Agreement by FedEx and the performance by FedEx of its obligations hereunder have been duly authorized by all necessary corporate action, do not contravene any law, statute, rule, regulation, ordinance, writ, decree, judgment or injunction applicable to FedEx, or result in the violation of, the breach of or a default or event of default under any indenture, agreement, mortgage, contract, agreement, other instrument or document, or any contractual restriction to which FedEx is a party, which is binding on it, which affects FedEx or by which its assets are bound or affected to the extent that the contravention, violation or breach thereof or the occurrence of a default or event of default thereunder would have a material adverse effect on the ability of FedEx to satisfy its obligations hereunder, and do not result in or require the creation of any lien, security interest or other charge or encumbrance upon or with respect to any of its assets. -38- 45 (iii) Approvals. Except for the necessary approvals under the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as amended, all authorizations, consents, approvals, waivers and other actions required by, and all notices to and filings required to be made with, all governmental authorities and regulatory bodies for the due execution, delivery and performance by FedEx of this Agreement or the consummation of the transactions contemplated by this Agreement have been obtained. (iv) Enforceability. This Agreement constitutes the legally valid and binding obligation of FedEx, enforceable against FedEx in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, insolvency, fraudulent conveyance or transfer, moratorium or other laws affecting creditors rights generally or general equitable principles whether applied in a court of law or in a proceeding at equity. (v) Use of Aircraft Acquired pursuant to Purchase Option. Any Purchase Option Aircraft acquired by FedEx pursuant to an exercise of a Purchase Option will be converted into a cargo configuration. FedEx intends to operate any such Purchase Option Aircraft in its air freight business. ARTICLE 6 DOCUMENTATION Section 6.01. Availability of Documentation. FedEx may, upon giving American [ * ] review Aircraft and Engine specific historical engineering, operational and maintenance records, manuals and documentation forming a part of the Data and specific to the next Aircraft to be delivered. Such review will occur during the [ * ] period prior to the Scheduled Delivery Date for such Aircraft at American's Tulsa, Oklahoma Maintenance and Engineering Center. Such review shall be done during normal working hours and shall not unreasonably interfere with the business operations of American at such site. Section 6.02. Technical Data and Documents. (a) American shall provide to FedEx all Data applicable to each Aircraft, Engine and Spare Engine on or before the Delivery Date with respect to such Aircraft, provided, however, that any Aircraft Records or Engine Records generated within the [ * ] _________________ *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. -39- 46 immediately prior to the Delivery Date may be delivered to FedEx within the [ * ] next following the Delivery Date of the relevant Aircraft to FedEx. If FedEx shall need any other information pertaining to the Aircraft or an Engine thereon after the delivery of the Aircraft Records or Engine Records, as the case may be, during the [ * ] period immediately after the delivery of the Aircraft Records, upon FedEx's written request, American will search its records for such information. If such information is found, American shall deliver such information to FedEx at American's expense. American shall not be required to create any records regarding the Aircraft, any Engine or any Part that American is not required to retain in its records by the FAA under the American Program. If American is normally required by the FAA under the American Program to retain a particular Aircraft Record or Engine Record respecting an Aircraft or any Part thereof, but during the [ * ] period immediately after delivery of the Aircraft Records or Engine Records, as the case may be, such Aircraft Record or Engine Record or a part of such Aircraft Record or Engine Record is found to be missing, incomplete or in error with respect to any Aircraft delivered to FedEx, American will, at its sole option, either create an accurate and complete reconstruction of such Aircraft Record or Engine Record, replace the Part or Parts on the Aircraft as to which the missing, incomplete or erroneous Aircraft Record or Engine Record relates or take such other corrective action as shall permit FedEx to operate the Aircraft in accordance with its then current operations specifications, as approved by the FAA primary maintenance inspector assigned to FedEx. (b) At the Delivery Date of any Aircraft, the Aircraft Records and/or Engine Records relating to the Aircraft and Engines delivered to FedEx by American as provided above shall be, to the best of American's knowledge, accurate and complete in accordance with the aircraft records requirements of FAR 121.380 at the time of the delivery of such Aircraft Records and/or Engine Records to FedEx. To the extent any such Aircraft Record or Engine Record is not accurate or complete, FedEx's sole remedy shall be to cause American, at its sole option and expense, to research and correct such inaccurate or incomplete Aircraft Record or Engine Record, replace the Part or Parts on the Aircraft as to which the missing, incomplete or erroneous Aircraft Record or Engine Record relates, or take such other corrective action as shall permit FedEx to operate the Aircraft in accordance with its then current operations specifications, as approved by the FAA primary maintenance inspector assigned to FedEx. (c) If the FAA changes the regulations or issues national policy guidance related to existing regulations pertaining to any documentation required to _________________ *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. -40- 47 substantiate Airworthiness Directive compliance, American shall provide to FedEx, to the extent it is available, all such required documentation not previously delivered for any previously delivered Aircraft, Engine, Gear or APU. (d) Except as noted in Exhibit D, American shall provide to FedEx (i) one legible, reproducible copy of each item of Data that is not related to any particular Aircraft (which shall be delivered on the Delivery Date for the first Firm Aircraft) and the subsequent revisions thereto occurring prior to the last Delivery Date (each of which revisions shall be delivered on the Delivery Date next following the date on which the revision is issued), (ii) one legible, reproducible copy of any item of Data (other than the Aircraft Records) related to each Aircraft that is delivered to FedEx by American and (iii) originals (or if an original copy is not available, one legible reproducible copy) of the Aircraft Records with respect to each Aircraft that is delivered to FedEx by American. All items of Data delivered shall be in hard copy except as noted in Exhibit D. If American does not have hard copy, the Data shall be provided on microfilm or by other agreed medium. At FedEx's request, all manufacturer's manual revision services for the Aircraft, if any, shall be transferred to FedEx. (e) When Data are forwarded to FedEx, American shall include a list of those items using the reference numbers in Exhibit D. All Data not delivered with an Aircraft shall be forwarded to: Federal Express Corporation Tchulahoma Administration Building 3101 Tchulahoma Road Memphis, Tennessee 38118 Attn: Manager, Fleet Development ARTICLE 7 ASSIGNMENT OF WARRANTIES, SERVICE LIFE POLICIES AND PATENT INDEMNITIES Section 7.01. Assignment of Warranties. At Delivery of each Aircraft, an Assignment of Assignable Manufacturer's Warranties in the form of Exhibit G shall be executed by American and delivered to FedEx pursuant to which American will assign to FedEx, effective upon Delivery of such Aircraft, all of American's interests in any and all existing and assignable warranties, service life policies and patent indemnities of manufacturers and maintenance and overhaul providers relating to such Aircraft. Further, upon FedEx's request, American shall (i) give written notice to any such manufacturers and maintenance and overhaul providers of the assignment of such warranties, service life polices and patent indemnities to FedEx, -41- 48 and (ii) at FedEx's expense, take all such actions as may be reasonably requested by FedEx in assisting FedEx in the enforcement of its rights pursuant to this Article 7. Notwithstanding the foregoing, to the extent American may assign any warranty, service life policy and patent indemnity only with the consent of the provider of such, American will use its commercially reasonable efforts to obtain any required consent to such an assignment, provided, however, that American shall not be required to make any payment, give up any rights or make any other concession to any provider in order to obtain any such consent. In connection with the assignment of the Aircraft Support Services provisions of Exhibit C to the Purchase Agreement by and between the Manufacturer of the Airframes and American, dated August 3, 1989, as amended and supplemented (the "MD-11 Purchase Agreement"), FedEx agrees to be bound by the terms and provisions of Article 13 of, and Exhibit C to, the MD-11 Purchase Agreement, copies of which have been provided to FedEx. ARTICLE 8 PAYMENT OF TAXES Section 8.01. Payment of Taxes by FedEx. (a) The Purchase Price of an Aircraft and the Spares Purchase Prices do not include the amount of any sales, use, withholding, transfer or excise taxes whatsoever. Except as provided in Section 8.01(b) and Section 8.02 hereof, any and all taxes, excises, duties and assessments whatsoever (including any related penalty, interest or other additions to tax) arising out of the sale, transfer or delivery of the Aircraft or the Spare Parts under this Agreement, or the ownership, possession, condition, maintenance, use, operation or disposition of the Aircraft after Delivery or any Spare Parts after their delivery to FedEx, in any manner levied, assessed or imposed by any government or subdivision or agency thereof having jurisdiction, shall be the sole responsibility and liability of FedEx and FedEx shall indemnify and hold American harmless from any and all such taxes, excises, duties and assessments whatsoever. American and FedEx will cooperate in good faith and take such reasonable actions as are practicable to minimize or, if possible, eliminate any such taxes, excises, duties or assessments. (b) The indemnity provided for in Section 8.01(a) shall not extend to any of the following: (i) taxes based upon, measured by or with respect to the net income, gross receipts in the nature of an income tax not in the nature of a transfer tax, items of tax preference or minimum tax or excess profits, capital, franchise, net worth or conduct of business or other similarly-based taxes of American; (ii) any penalty, interest or other additions to taxes related to taxes imposed on American that would not have been imposed, but for the willful misconduct or gross negligence of American; or -42- 49 (iii) taxes, excises, duties or assessments imposed by the State of [.* ] (c) With respect to any tax which FedEx has assumed responsibility for under this Article 8, FedEx shall either (i) pay (x) at the Delivery Date for an Aircraft, (y) at the delivery date of any Engine sold to FedEx and not conveyed by American to FedEx at the Delivery Date for an Aircraft, or (z) at the delivery date for any Spare Parts sold by American to FedEx, all sales or other similar taxes payable with respect to the sale and/or purchase of such Aircraft, Engines or Spare Parts, respectively, or (ii) provide to American an exemption certificate, resale certificate, or other evidence reasonably acceptable to American that the sale and purchase of any Aircraft, Engine or Spare Part is exempt from any such tax. Other evidence includes, but is not limited to, a letter specifying the applicable taxing authority's statute, regulation, rule or case law authority providing for such exemption; provided, however, that acceptance of such certificates or other evidence by American shall not constitute willful misconduct or gross negligence by American for failure to collect taxes determined to be due. (d) If any tax, excise, duty or assessment described in this Section 8.01 for which FedEx has assumed the responsibility for payment pursuant to this Article 8 is levied, assessed or imposed upon American, American shall promptly give FedEx notice of such levy, assessment or imposition, whereupon FedEx shall promptly pay and discharge the same or, if permitted by law, may contest or protest such liability before payment. If American fails to notify FedEx, FedEx will be relieved of its indemnity obligations under this Section 8.01 with respect to that tax to the extent such failure materially adversely impacts FedEx. Upon the written request and at the sole expense of FedEx, American shall reasonably cooperate with FedEx in contesting or protesting the validity or application of any such tax (including, but limited to, permitting FedEx to proceed in American's name if required or permitted by law, provided, in each case, that such contest does not involve, or can be separated from, the contest of any tax or other issues unrelated to the transactions described in this Agreement). If proceeding in American's name, FedEx must first receive a power of attorney from American which American may not unreasonably withhold, and, further, any retention of outside counsel to assist FedEx must be mutually agreed upon by FedEx and American. In lieu of permitting FedEx to proceed using American's name, American may, if permitted by law, assign its claim to FedEx as the real party in interest with respect to such claim. FedEx also shall have the right to participate in any contest conducted by American with respect to a tax or other charge indemnifiable under this Article 8, including, without limitation, the right to attend conferences with the taxing authority and the right to review submissions to the taxing authority or any court to the extent, ___________________ *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. -43- 50 but only to the extent, such contest does not involve, or can be separated from, the contest of any tax or issues unrelated to the transactions contemplated in this Agreement. In the event American shall receive a refund of all or any part of such tax, excise, duty or assessment (including a refund of interest and penalties, if any, in connection therewith) which FedEx has paid and discharged, the amount of such refund shall promptly be remitted to FedEx by American, less any expenses of American associated with contesting and/or protesting the validity or application thereof which have not been previously reimbursed by FedEx. Section 8.02. Tax Consequences of Certain Deliveries. (a) If the delivery of the Aircraft at any destination other than one in [ * ] or [ * ] would result in an increased state, federal or local sales, transfer or similar tax being payable by FedEx in connection with the delivery of the Aircraft, FedEx may, in its sole discretion, withhold its consent to take the Delivery of such Aircraft in that state unless American agrees to indemnify FedEx for any such increased tax. (b) If the delivery of the Aircraft to FedEx in [ * ] results in any sales, transfer or similar tax being imposed on FedEx with respect to such Aircraft as a result of the tender of the Aircraft in [ * ], American will agree to indemnify FedEx or provide FedEx with a written statement from the taxing authority in [ * ] that such sale is exempt from tax in [ * ] and that, if the exemption is lost, American will indemnify FedEx for any tax due unless the loss was due to the negligence or willful misconduct of FedEx. (c) If any Spare Parts are delivered to FedEx at a location other than Tennessee, American shall indemnify FedEx for any (or an increased) federal, state or local sales, transfer or similar tax imposed on FedEx with respect to such Spare Parts unless such other delivery location was mutually agreed upon or was chosen at the request of FedEx in which case FedEx shall indemnify American if the delivery of any of the Spare Parts to FedEx would result in any or any increased federal, state or local sales, transfer or similar tax to American. If the delivery of any Spares Parts to FedEx would result in any (or an increased) federal, state or local sale, transfer or similar tax to American or FedEx, as the case may be, American and FedEx will choose a jurisdiction on FedEx's route system within the contiguous forty-eight (48) United States in which to make such delivery or re-delivery to minimize such tax or eliminate such tax, if possible. (d) If the delivery of a Delayed Delivery Engine or Replacement Engine by American to FedEx or the re-delivery of a Non-Conforming Engine to American by FedEx at the location of the Aircraft on which the Delayed Delivery Engine or Replacement Engine will be installed results in any (or an increased) federal, ________________ *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. -44- 51 foreign, state or local sales, transfer or similar tax being imposed on FedEx, American will indemnify FedEx for the tax or the increased amount of the tax to the extent, but only to the extent, that FedEx would not have been responsible for the payment of an equivalent amount of tax if the Delayed Delivery Engine or Replacement Engine had been installed on the Aircraft at the time of the Delivery of such Aircraft. Section 8.03. After-Tax Basis. Any payment of an indemnity pursuant to this Article 8 shall be made on a basis such that any payment received or deemed to have been received by an indemnified party shall be supplemented by a further payment to such party so that the sum of the two payments, after deduction of all taxes resulting from the receipt or accrual of such payments, shall be equal to the payment received or deemed to have been received. ARTICLE 9 EXCUSABLE DELAY Section 9.01. Excusable Delay. (a) Subject to Section 3.05, neither Party shall be responsible to the other Party for any Excusable Delay in the discharge and performance of its respective obligations and duties under this Agreement or for any delay or failure in the discharge and performance of its respective obligations and duties under this Agreement as a result of the action or omission of the other Party. Section 9.02. Time Limits on Excusable Delays. Notwithstanding the provisions of Section 3.05, if an Excusable Delay shall have caused the delay of the Delivery of an Aircraft on a Scheduled Delivery Date (i) until a date after the Partial Casualty Delivery Date as to any Aircraft described in Section 3.05(c), (ii) until a date after the Casualty Delivery Date, as to any substitute Aircraft as described in Section 3.05(d) or (iii) for a period of more than twenty-eight (28) consecutive days after the Scheduled Delivery Date in every other instance, the Party not claiming the right to delay performance of its obligations shall have the right (x) to terminate its obligations with respect to the Delivery of such Aircraft at any time prior to the Delivery of such Aircraft or a substitute Aircraft therefor or (y) to permit the other Party to complete its performance in connection with the Delivery of such Aircraft. If a Party chooses to terminate its obligations with respect to the Delivery of an Aircraft or a substitute Aircraft therefor, the Party claiming the Excusable Delay shall have no further obligation with respect to the Delivery of the Aircraft as to which the Excusable Delay occurred. To the extent an Excusable Delay relates to the performance of any obligation other than one respecting the Delivery of an Aircraft, such delay shall be an Excusable Delay for a period not to exceed twenty-eight (28) consecutive days from the date that performance was due. ARTICLE 10 INDEMNIFICATION -45- 52 Section 10.01. FedEx's Indemnification. After the Delivery of an Aircraft, Engines or Spare Parts to FedEx, FedEx shall defend, indemnify and hold harmless American, its Affiliates and each of their respective directors, officers, employees, independent contractors who are individuals, and permitted assignees (collectively the "American Indemnitees") from and against all claims, demands, suits, causes of action, obligations, liabilities, damages, losses and judgments, costs and expenses, WHETHER OR NOT ARISING FROM THE NEGLIGENCE OF SUCH INDEMNIFIED PARTIES, asserted against any of them by reason of injury or death of any person, or by reason of loss of or damage to property, including such Aircraft, Engines and Spare Parts, arising out of or in any manner connected with any of the Aircraft, Engines and Spare Parts, including, without limitation, the purchase, sale, ownership, possession, use, operation, flight testing (if the event giving rise to the American Indemnitees' right to indemnity involves the Aircraft and occurs while a pilot who is an employee or an agent of FedEx is in control of the Aircraft being flight tested), storage, maintenance, financing, sale, lease or sublease of any Aircraft, Engine or Spare Part. Section 10.02. American's Indemnification. American agrees to defend, indemnify and hold harmless FedEx, its Affiliates, and each of their respective directors, officers, employees, independent contractors who are individuals and permitted assignees from and against all claims, demands, suits, causes of action, obligations, liabilities, damages, losses and judgments, costs and expenses, asserted against any of them by reason of any claim adverse to FedEx's title to the Aircraft by any party claiming by or through American. ARTICLE 11 INSURANCE Section 11.01. Liability Insurance. Commencing with the delivery of the first Aircraft to FedEx, FedEx shall maintain until the [ * ] anniversary of the Delivery Date of each Aircraft, with insurance carriers reasonably acceptable to American, comprehensive airline liability insurance in an amount not less than USD $[ * ] which shall: include aircraft liability, cargo liability, and comprehensive general liability insurance; insure, inter alia, FedEx's indemnification obligations to the American Indemnitees; and name the American Indemnitees as additional insureds. The insurers shall waive any right of subrogation, set-off or counterclaim against the American Indemnitees as to the coverage of the American Indemnitees, breaches of representations and warranties ____________________ *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. -46- 53 by FedEx. In the event of cancellation of or material change in the policy, such insurance shall continue in force for the benefit of the American Indemnitees for at least thirty (30) days after written notice to American. Section 11.02. Hull Insurance. If FedEx, or any successor to FedEx's interest in the Aircraft, maintains hull insurance on the Aircraft, FedEx shall require its, or its successor's, hull insurers to waive any and all rights of subrogation, set-off, counterclaim and deduction, whether by attachment or otherwise, which they may have against the American Indemnitees, for any loss, damage or destruction of the Aircraft. Section 11.03. Insurance Certificates. Upon Delivery, FedEx shall furnish American with insurance certificates from certifying (a) that the policies of insurance required by this Article 11 are in full force and effect (together with required waivers of subrogation) and (b) that American shall be given thirty (30) days' prior written notice by the insurers in the event of either cancellation or material change in coverage or cancellation of the waivers of subrogation, except in the event of war risk coverage, in which case the notice period shall be seven (7) days or such other period as shall be customary in the insurance market. ARTICLE 12 DEFAULT AND REMEDIES Section 12.01. American Events of Default. The following events shall constitute Events of Default as to American: (a) American shall fail to deliver the Aircraft in accordance with the terms and conditions of this Agreement; (b) American shall fail to perform any other covenant of American contained in this Agreement, and such failure is not cured within [ * ] after written notice of such default is given by FedEx to American or, if such failure cannot be cured within [ * ] is not cured within [ * ] after receipt of such notice if American promptly commences taking and diligently pursues all necessary actions to cure such failure; (c) If any representation or warranty made by American herein or made in any statement or certificate furnished or required hereunder or in connection with the execution and delivery of this Agreement, proves untrue in any material adverse respect; ________________ *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. -47- 54 (d) If American shall file a voluntary petition in bankruptcy, shall be adjudicated as bankrupt or insolvent, shall file any petition or answer seeking any reorganization, composition, readjustment, liquidation or similar relief for itself under any present or future statute, law or regulation, shall seek or consent to or acquiesce in the appointment of any trustee, shall make any general assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due; or (e) If a petition shall be filed against American seeking any reorganization, composition, readjustment, liquidation or similar relief under any present or future statutes, law or regulation, and shall remain undismissed or unstayed for an aggregate of [ * ] (whether or not consecutive), or if any trustee, receiver or liquidator of either Party is appointed, which appointment shall remain unvacated or unstayed for an aggregate of [ * ] (whether or not consecutive). Section 12.02. FedEx Events of Default. The following events shall constitute Events of Default as to FedEx: (a) FedEx shall fail to accept delivery and pay the Purchase Price for any Aircraft tendered by American for delivery to FedEx in accordance with this Agreement; (b) FedEx shall fail to perform any other covenant of FedEx contained in this Agreement and such failure is not cured within [ * ] after written notice of such default is given by American to FedEx or, if such failure cannot be cured within [ * ] is not cured within [ * ] after receipt of such notice if FedEx promptly commences taking and diligently pursues all necessary actions to cure such failure; (c) If any representation or warranty made by FedEx herein or made in any statement or certificate furnished or required hereunder or in connection with the execution and delivery of this Agreement proves untrue in any material adverse respect; (d) If FedEx shall file a voluntary petition in bankruptcy, shall be adjudicated as bankrupt or insolvent, shall file any petition or answer seeking any reorganization, composition, readjustment, liquidation or similar relief for itself under any present or future statute, law or regulation, shall seek or consent to or acquiesce in the appointment of any trustee, shall make any general assignment for ________________ *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. -48- 55 the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due; or (e) If a petition shall be filed against FedEx seeking any reorganization, composition, readjustment, liquidation or similar relief under any present or future statutes, law or regulation, and shall remain undismissed or unstayed for an aggregate of [ * ] (whether or not consecutive), or if any trustee, receiver or liquidator of either party is appointed, which appointment shall remain unvacated or unstayed for an aggregate of [ * ] (whether or not consecutive). Section 12.03. Remedies. (a) Subject in all respects to Article 13, upon the occurrence of an Event of Default by American, FedEx (i) shall, at its option, be relieved from its obligation to accept delivery of and pay the Purchase Price for the Aircraft or to purchase any Spare Parts from American, (ii) may, at its option, terminate this Agreement and have the Deposits returned to it to the extent they have not been previously applied to the Purchase Price of an Aircraft, together with any interest thereon calculated at the AMR Rate, and (iii) shall have all other rights and remedies available to it at law and in equity, including, but not limited to, the equitable remedy of specific performance. (b) Subject in all respects to Article 13, upon the occurrence of an Event of Default by FedEx, American (i) shall retain the Deposits and the interest thereon relating to the Aircraft, (ii) may, at its option, be relieved from its obligation to deliver any Aircraft or sell any Spare Parts to FedEx, (iii) may, at its option, terminate this Agreement and (iv) shall have all other rights and remedies available to it at law and in equity, including, but not limited to, the equitable remedy of specific performance. Section 12.04. Limitation of Damages. NEITHER PARTY SHALL HAVE ANY LIABILITY FOR ANY INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES SUSTAINED BY THE OTHER PARTY ARISING OUT OF THE FIRST PARTY'S DEFAULT UNDER THE TERMS OF THIS AGREEMENT. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY REMEDIES IT MAY HAVE AS A RESULT OF ITS INCURRENCE OF ANY INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES ARISING OUT OF A DEFAULT BY THE OTHER PARTY UNDER THIS 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. ARTICLE 13 DISPUTE RESOLUTION -49- 56 Section 13.01. Dispute Resolution. American and FedEx desire to resolve any dispute or alleged dispute that may arise in connection with the interpretation of any provision in this Agreement or the performance by either of them of their obligations under this Agreement (a "Dispute") without resort to the courts. If any Dispute shall arise, American and FedEx agree to follow the procedure set forth in this Article 13 (the "ADR Procedure") to resolve such Dispute. Section 13.02. Notice of Dispute. The Party believing a Dispute to exist shall give the other Party written notice that the Dispute exists. Such notice shall set forth in reasonable detail the facts alleged to give rise to such Dispute, the provision or provisions of this Agreement giving rise to the obligations implicated in the Dispute, the nature of any default claimed to exist with respect to this Agreement and a statement of the manner in which such Party believes the Dispute should be resolved. Within five (5) Business Days after such notice is given the Party receiving such notice shall respond in writing to the Party giving the notice. Such response (the "Response") shall state whether the responding Party believes such Dispute exists, set forth its view of the facts alleged to give rise to the Dispute and, if the responding Party agrees that a Dispute exists, indicate what action the responding Party believes should be taken with respect to the claim that a Dispute exists. Section 13.03. Dispute Resolution Through Negotiation. If the Parties do not agree as to the action to be taken in resolution of the Dispute, American and FedEx shall have a meeting no later than the fifth (5th) Business Day following the date on which the Response is given. Such meeting shall be held in the offices of the Party receiving the original notice of the Dispute unless the Parties agree to meet elsewhere. Each of the Parties shall have in attendance at such meeting an executive who shall have the authority to make decisions and bind the Party he or she represents to any agreement that may be made by the Parties at such meeting (a "Company Representative"), as well as such other persons as the Parties may desire. At the meeting, the Parties shall negotiate in good faith in an attempt to agree if a Dispute exists, upon the exact nature of any Dispute agreed to exist, the manner in which any such Dispute should be resolved and the date by which the resolution of any such Dispute should be effected. If a resolution of such Dispute is not reached at the initial meeting, before adjourning the meeting, the Parties shall determine if an additional meeting or meetings should be held to negotiate further a resolution of the Dispute. If American and FedEx determine an additional meeting should be held, they shall agree to the time and place of such meeting. Any agreement as to the resolution of such Dispute reached during such negotiations shall be evidenced by a written agreement setting forth in reasonable detail the actions that the Parties agree will be taken to resolve or remedy the Dispute. Section 13.04. Dispute Resolution Through Mediation. If American and FedEx cannot resolve the Dispute pursuant to the procedure set forth in Section 13.03 above (the "Negotiation Procedure") within ten (10) Business Days after the -50- 57 first meeting held by the Parties pursuant to the Negotiation Procedure, American and FedEx shall mediate the Dispute through a panel of three mediators (the "Mediation Panel"). The Mediation Panel shall be appointed within ten (10) Business Days after the date on which the Parties determine that they cannot resolve the Dispute (the "Determination Date"). The Mediation Panel shall consist of a professional mediator appointed by American, a professional mediator appointed by FedEx and a professional mediator appointed by the two mediators appointed by American and FedEx. When possible, each mediator shall be familiar with the aircraft industry. The mediation shall take place on the fifteenth (15th) Business Day after the Determination Date or such earlier date as the Parties and the Mediation Panel may agree. Each Party shall prepare and submit to the Mediation Panel at least two (2) Business Days before the mediation occurs, written submissions setting forth their respective positions with respect to the Dispute. Each Party shall send a Company Representative and such other persons, including professional advisors, as they desire to such mediation. The Parties agree to work in good faith to reach an agreement settling the Dispute at the mediation. Any agreement as to the resolution of such Dispute reached during such mediation shall be evidenced by a written agreement setting forth in reasonable detail the actions that the Parties agree will be taken to resolve the Dispute. The mediation shall be deemed unsuccessful if so declared by the Mediation Panel. Section 13.05. Dispute Resolution Through Arbitration. American and FedEx agree that if they cannot resolve the Dispute pursuant to the Negotiation Procedure or mediation as described in Section 13.04 above (the "Mediation") within ten (10) Business Days after the commencement of the first meeting of the Parties with the Mediation Panel, they will submit the Dispute to binding arbitration (the "Arbitration") pursuant to the New York Arbitration Statute and the American Arbitration Association's (the "AAA") Commercial Arbitration Rules as in effect at the time of the submission of the Dispute to the AAA (the "CAR"). American and FedEx shall submit the Dispute to the AAA for binding arbitration within five (5) Business Days after the unsuccessful conclusion of the Mediation Process. The arbitration shall take place (i) in Dallas, Texas or such other place as American, FedEx and the arbitrators assigned to the case shall agree and (ii) on such date and at such time as the arbitrators shall establish. The Dispute shall be arbitrated by a panel of three arbitrators (the "Panel") who shall, if possible, each be experienced in the aircraft industry and who shall be chosen in accordance with the CAR. The Panel shall issue a reasoned decision and award of damages, specific performance or injunction. American and FedEx agree to abide by and perform any award rendered by the Panel. American and FedEx intend that the Dispute will be resolved by application of the laws of the State of New York and that the Panel s authority to make any award in the arbitration of the Dispute shall be based on and limited by the laws of the State of New York, the terms and conditions of this Agreement and the CAR. The Panel's determination of facts shall be final and binding on American and FedEx if there is substantial evidence in the record of such arbitration to support such determination, it being the intention of the Parties -51- 58 that the standard for any judicial review of the findings or award of the Panel be the same standard as applies in the case of appeals to actions of administrative agencies in the State of New York. Judgment on the award in the arbitration may be entered by any court having jurisdiction of the Dispute. Subject to the CAR, the Parties will endeavor in good faith to conclude the arbitration by no later than thirty (30) Business Days after it commences. Section 13.06. Forbearance During Resolution Process. American and FedEx agree to forbear from pursuing any remedy under this Agreement or otherwise available under law, including the institution of any lawsuit, while the ADR Procedure is in operation with respect to any Dispute. Section 13.07. Limitation of Remedies. American and FedEx agree that, notwithstanding anything to the contrary herein, in the laws of the State of New York, Tennessee or Texas or the CAR, the result of any agreement reached by them in the Mediation or any award made by the Arbitration Panel in the Arbitration shall be consistent with the terms and conditions of this Agreement and that any award shall be only a remedy that would available to a Party to this Agreement as a result of a breach of this Agreement had the ADR Procedure not been in effect. IN NO EVENT SHALL THE PANEL AWARD ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE, SPECIAL, EXEMPLARY OR OTHER THAN DIRECT DAMAGES. Section 13.08. Expenses. Each of American and FedEx shall pay its own out-of-pocket expenses in connection with the conduct of the ADR Procedure as to any Dispute. The costs and expenses of any Mediation, other than American's and FedEx's out-of-pocket expenses in connection therewith, shall be borne equally by American and FedEx. The costs and expenses of any Arbitration, other than American's and FedEx's out-of-pocket expenses in connection therewith, shall be payable in accordance with the CAR. ARTICLE 14 CONDITIONS Section 14.01. Conditions to FedEx's Obligations. The obligation of FedEx to accept any Aircraft and purchase any Spare Parts from American shall be subject to the following conditions precedent: (a) compliance by American with all applicable laws and regulations of all jurisdictions which are applicable to the transactions contemplated hereby, including, without limitation, the Hart-Scott-Rodino Anti-Trust Improvements Act of 1974, as amended; -52- 59 (b) receipt by FedEx of all necessary licenses, permits, approvals, consents, waivers and authorities which are applicable to the transactions contemplated hereby; (c) receipt by FedEx of a satisfactory opinion of counsel to American, which opinion may be rendered by in-house counsel, regarding due authorization, no conflicts with organization documents, agreements and instruments to which American is a party or its assets are bound or any court order, and enforceability of this Agreement and any ancillary agreements, and such other matters as may be reasonably requested. In such opinion, such counsel may assume that the documents, agreements and instruments are governed by Texas law and render their opinions based solely on the federal laws of the United States, the corporate laws of the State of Delaware and the laws of the State of Texas. Such opinion may be subject to the type of assumptions and qualifications regularly included by experienced corporate counsel in similar opinions; (d) the execution of this Agreement and consummation of the transactions contemplated by it shall not breach, or result in a default under, any document, agreement, statute, treaty, regulation or other regulatory directive, foreign or domestic, binding upon American or any of its respective Affiliates; (e) FedEx shall not be unable to perform its obligations with respect to one or more of the Aircraft as the result of the occurrence of a Force Majeure Event or other Excusable Delay (other than a Force Majeure Event or other Excusable Delay which is a result of the fault, act or omission of American); (f) the Aircraft shall be in Delivery Condition; and (g) the approval of this Agreement and the performance of the transactions contemplated by this Agreement by FedEx's board of directors. Section 14.02. Conditions to American's Obligations. The obligation of American to deliver any Aircraft and sell any Spare Parts to FedEx shall be subject to the following conditions precedent: (a) compliance by FedEx with all applicable laws and regulations of all jurisdictions which are applicable to the transactions contemplated hereby, including, without limitation, the Hart-Scott-Rodino Anti-Trust Improvements Act of 1974, as amended; (b) receipt by American of all necessary licenses, permits, approvals, consents, waivers, and authorities which are applicable to the transactions contemplated hereby; -53- 60 (c) receipt by American of a satisfactory opinion of counsel to FedEx, which opinion may be rendered by in-house counsel, regarding due authorization, no conflicts with organizational documents, agreements and instruments to which FedEx is a party or its assets are bound or any court order, and enforceability of this Agreement and any ancillary agreements, and such other matters as may be reasonably requested. In such opinion, such counsel may assume that the documents, agreements and instruments are governed by Tennessee law and render their opinions based solely on the federal laws of the United States, the corporate laws of the State of Delaware and the laws of the State of Tennessee. Such opinion may be subject to the type of assumptions and qualifications regularly included by experienced corporate counsel in similar opinions; (d) the execution of this Agreement and consummation of the transactions contemplated by it shall not breach, or result in a default under, any document, agreement, statute, treaty, regulation or other regulatory directive, foreign or domestic, binding upon FedEx or any of its Affiliates; (e) American shall not be unable to perform its obligations with respect to one or more of the Aircraft as the result of the occurrence of a Force Majeure Event, other Excusable Delay or the fault of FedEx; and (f) the approval of this Agreement and the performance of the transactions contemplated hereby by American's Chairman of the Board, Chief Executive Officer and President. ARTICLE 15 CONFIDENTIALITY Section 15.01. Confidentiality Obligations. (a) Each of American and FedEx agrees to keep the economic terms of this Agreement confidential and not to disclose, transfer, use or otherwise make available such information to any third party without the prior written consent of the other Party. Each of American and FedEx agrees to exercise care that is at least equal to the care it uses to protect the confidentiality of its own confidential and proprietary information of similar importance to prevent the disclosure to outside parties or unauthorized use of such information. Notwithstanding the above, American and FedEx may disclose confidential information to their respective officers, directors, employees and/or tax, legal and other professional advisors who are informed of the confidential nature of the information and of the restrictions on disclosure and use of the information as set forth herein and may disclose confidential information as required by law (including, but not limited to, pursuant to a request by the Internal Revenue -54- 61 Service or a state taxing authority for information). In the event of a breach of or a default under the terms of this Section 15.01, the non-breaching Party shall be entitled to pursue and seek all legal and equitable remedies available to it, including the equitable remedies of specific performance and injunction, which remedies shall not be deemed exclusive, but shall be cumulative. If either of the Parties desire to make a press release, information release or otherwise provide information to any third party for release to the news media with respect to the transactions contemplated by this Agreement, subject to its obligations under applicable securities laws, the Party desiring to make the release or provide the information shall provide the text of such release or information to the other Party for its review at least three (3) Business Days in advance of the proposed distribution of the release or information. Subject to legal requirements and other legally compelled disclosures, each Party shall obtain the prior written consent of the other Party to release of any such news or press release or information and the text of any written or oral statement or any release of information to be provided to the news media and the timing of the distribution of such information. (b) FedEx understands that certain of the information that may be provided to FedEx by American concerning the Airframes is the subject of a confidentiality agreement between American and the Manufacturer of the Airframes (the "Manufacturer Confidentiality Agreement"). FedEx agrees for the benefit of American and the Manufacturer of the Airframes (i) to be bound by the terms and conditions of the Manufacturer Confidentiality Agreement, (ii) that FedEx's use, possession and dissemination of such information to any person shall be subject to and governed by the Manufacturer Confidentiality Agreement and (iii) that the Manufacturer of the Airframes shall be a third party beneficiary of this Section 15.01(b) and entitled to enforce its respective rights under the Manufacturer Confidentiality Agreement against FedEx as if it were a party to this Agreement. ARTICLE 16 FURTHER ASSURANCES Section 16.01. Further Assurances. (a) American recognizes that in the course of (i) the conversion of the Aircraft from a passenger configuration to a cargo configuration and (ii) the transition of the Aircraft from the American Program to FedEx's FAA-approved maintenance program, issues will arise in which American may possess information and expertise regarding the Aircraft that FedEx would find useful, Aircraft Records or Engine Records that may be necessary to the transition of the Aircraft to FedEx's maintenance program, and other knowledge that will be useful to FedEx in connection with such activities. Subject to any restrictions on the disclosure of confidential information and consistent with the protection of its confidential information and proprietary information, including, without limitation, any trade secrets, American agrees to cooperate with FedEx and to assist FedEx by providing such confidential, proprietary and trade secret -55- 62 information pursuant to a mutually acceptable non-disclosure agreement and any non-confidential information regarding the Aircraft that American may possess which would be helpful to FedEx in achieving its goals. American also agrees to meet with representatives of FedEx and the FAA at mutually agreeable times and locations to discuss the Aircraft and American's maintenance of the Aircraft. In no event shall the assistance to be provided by American to FedEx require the incurrence by American of more than nominal expense. (b) American will provide to FedEx a supplemental type certificate (a "STC") and the substantiating data covering any modification of an Aircraft that is delivered to FedEx by American pursuant to this Agreement if that modification is designed by American. FedEx may use such STC to make the same modification covered by the STC to any other McDonnell Douglas Model MD-11 aircraft owned and operated by FedEx. American will not charge FedEx for the use of such a STC by FedEx on any of FedEx's McDonnell Douglas Model MD-11 aircraft. AMERICAN SHALL NOT BE DEEMED TO MAKE OR HAVE MADE AND DISCLAIMS, AND FEDEX SHALL ACKNOWLEDGE AND CONFIRM THAT AMERICAN HAS NOT MADE, ANY REPRESENTATIONS, WARRANTIES OR GUARANTIES OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, OR THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT OR OTHER RIGHT OF ANY THIRD PARTY CONCERNING ANY STC OR ANY MODIFICATION COVERED BY ANY STC. ARTICLE 17 MISCELLANEOUS Section 17.01. Notices. Unless otherwise specified in writing by the affected Party, all notices, approvals, requests, consents and other communications given pursuant to this Agreement shall be in writing and shall be deemed effective when received if hand-delivered, sent by facsimile (which facsimile shall be confirmed by the executed counterpart thereof being sent by another means for giving notice specified herein), Federal Express priority service (except for notices sent relating to defaults or Events of Default under this Agreement or with respect to the Put Options or the Purchase Options, which may be sent by any courier that provides a written confirmation of delivery), or sent by United States certified or registered mail, addressed as follows: If to American: American Airlines, Inc. 4333 Amon Carter Boulevard, MD 5566 Fort Worth, Texas 76155 Attention: Vice President Corporate and Fleet Planning Telephone No. (817) 967-1227 Facsimile No. (817) 967-2199 -56- 63 If to FedEx: Federal Express Corporation 2005 Corporate Avenue Memphis, Tennessee 38132 Attention: Vice President, Fleet Development and Acquisitions Telephone No. (901) 395-3830 Facsimile No. (901) 395-3828 Section 17.02. Exhibits. All exhibits described in this Agreement shall be deemed to be incorporated and made a part of this Agreement, except that if there is any inconsistency between this Agreement and the provisions of any Exhibit, the provisions of this Agreement shall control. Section 17.03. Assignments. This Agreement, and American's rights and obligations hereunder, shall not be assignable or delegable by American without the prior written consent of FedEx, which consent may be withheld in FedEx's sole discretion; provided, however, that American may assign its rights and delegate its obligations under this Agreement to another Affiliate of AMR Corporation without FedEx's consent so long as American shall remain primarily liable for the obligations under this Agreement, with such continuing obligations to be evidenced by such agreements and instruments as FedEx may reasonably request. American acknowledges and agrees that FedEx, one of FedEx's subsidiaries or a financial institution or other entity may be designated by FedEx as the contracting party with American hereunder and that this Agreement may be assigned by FedEx to any of such said entities without restriction and upon written notice to American so long as FedEx shall remain primarily liable for its obligations under this Agreement, with such continuing obligations to be evidenced by such agreements and instruments as American may reasonably request. Section 17.04. No Offset. The amounts payable by either Party to the other Party under this Agreement shall be absolute and unconditional and shall not be subject to any abatement, reduction, set off, defense, counterclaim or recoupment of or by the Party obligated to make such payment as a result of any claim, cause of action or other rights that such Party may have against the other Party. Section 17.05. Binding Effect. This Agreement and the rights and obligations of the Parties hereunder, shall be binding upon and inure to the benefit of each of the Parties, their respective permitted successors, assigns and legal representatives. Section 17.06. Applicable Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without regard to the laws of conflict of laws of the State of New York. -57- 64 Section 17.07. Entire Agreement. This Agreement shall constitute the entire agreement between the Parties with respect to the transactions contemplated herein and shall not in any manner be supplemented, amended or modified except by a written instrument executed on behalf of each of the Parties by their duly authorized representatives. Section 17.08. Expenses. Each of the Parties hereto shall be responsible for its own costs and expenses incurred in connection with the negotiation, preparation and execution of this Agreement. Section 17.09. Counterparts. This Agreement may be executed in separate counterparts, each of which when so executed shall be deemed to be an original and which, taken together, shall constitute one and the same instrument. Section 17.10. Brokers' Commissions. Each of FedEx and American represent to the other Party that each has negotiated this Agreement directly with the other and that no brokers are entitled to a commission as a result of their actions. FedEx and American agree to indemnify and hold one another harmless from and against all claims, demands, liabilities, damages, losses or judgments which may be suffered by the other and which arise out of the actions of or employment by the other with any agent or broker. Section 17.11. No Remedy Exclusive. Except as expressly set forth herein, no remedy herein conferred upon or reserved to a Party herein is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and in addition to every other remedy given under this Agreement or now or hereafter existing at law, in equity or by statute. Except as expressly set forth herein, no delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or 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 a Party to exercise any remedy reserved to it in this Agreement, it shall not be necessary to give any notice other than such notice as may be herein expressly required. Section 17.12. Severability. If any provision of this Agreement or any application of any provision of this Agreement to any person or circumstances shall be invalid or unenforceable to any extent, the remainder of this Agreement and the application of that provision to other persons or circumstances shall not be affected by the invalidity or unenforceability of the provision generally or as to any person or circumstance. The other provisions of this Agreement shall be enforced to the greatest extent permitted by applicable law and in a manner to give effect to the intent of the Parties to the greatest extent possible. Section 17.13. Survival of Provisions. The rights, benefits and obligations of the Parties under Section 3.09, Section 3.10, Article 5, Article 8, Article 10, Article -58- 65 11, Article 12 and Article 13 shall survive the completion of performance of this Agreement and its termination or expiration and continue in full force and effect thereafter in accordance with their respective terms. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.] -59- 66 IN WITNESS WHEREOF, American and FedEx do hereby execute this Agreement on the day and year first above written. FEDERAL EXPRESS CORPORATION By: /S/ James R. Parker -------------------------------------------- Name: James R. Parker Title: Vice President-Fleet Development & Acquisitions AMERICAN AIRLINES, INC. By: /S/ Jeffery M. Jackson -------------------------------------------- Name: Jeffery M. Jackson Title: Vice President-Corporate & Fleet Planning -60- 67 EXHIBIT A TO THE AIRCRAFT SALES AGREEMENT BETWEEN FEDERAL EXPRESS CORPORATION ("FEDEX") AND AMERICAN AIRLINES, INC. ("AMERICAN") DATED APRIL 7, 1995 (THE "AGREEMENT") AIRCRAFT SUBJECT TO AIRCRAFT PURCHASE AGREEMENT The McDonnell Douglas Model MD-11 aircraft bearing the U.S. Registration Numbers, Manufacturer's Serial Numbers, American Nose Numbers and American Fuselage or Line Numbers set forth below are the Aircraft subject to the Agreement.
REGISTRATION MANUFACTURER'S NOSE FUSELAGE OR NUMBER SERIAL NUMBER NUMBER LINE NUMBER ---------------- ----------------- ------ -------------- N1750B 48419 1AA 450 N1751A 48420 1AB 451 N1752K 48421 1AC 452 N1753 48487 1AD 469 N1754 48489 1AE 492 N1755 48490 1AF 499 N1756 48491 1AG 503 N1757A 48505 1AH 462 N1758B 48527 1AJ 504 N1759 48481 1AK 482 N1760A 48550 1AM 526 N1761R 48551 1AN 527 N1762B 48552 1AP 530 N1763 48553 1AR 531 N1764B 48554 1AS 535 N1765B 48596 1AT 537 N1766A 48597 1AU 540 N1767A 48598 1AV 550 N1768D 48436 1AL 483
A-1 68 EXHIBIT B TO THE AIRCRAFT SALES AGREEMENT BETWEEN FEDERAL EXPRESS CORPORATION ("FEDEX") AND AMERICAN AIRLINES, INC. ("AMERICAN") DATED APRIL 7, 1995 (THE "AGREEMENT") AIRCRAFT DELIVERY CERTIFICATE This Aircraft Delivery Certificate is given by American Airlines, Inc. ("American") and Federal Express Corporation ("FedEx") pursuant to the Agreement. Any capitalized term used herein and not expressly defined herein shall have the meaning ascribed to it in the Agreement. TENDER OF THE AIRCRAFT BY AMERICAN. American hereby tenders to FedEx for Delivery pursuant to the terms and subject to the conditions of the Agreement, the McDonnell Douglas Model MD-11 Aircraft described below: Registration Number: N -------------------- Manufacturer's Serial Number: -------------------- American Fuselage or Line Number: ------------------ American Nose Number: , ------------------ along with three (3) General Electric Company CF6-80C2D1F engines, bearing Manufacturer's Serial Numbers: Position (1) ----------------- Position (2) ----------------- Position (3) -----------------, (the "Delivered Aircraft") with the operating times and cycles as accumulated on the Aircraft up to the time of Delivery and the EGT margins as of the last test cell run accomplished immediately following the latest Engine Maintenance accomplished on each such Engine as described on B-1 69 Attachment 1 hereto and made a part hereof, together with the Aircraft Records, listed on Attachment 2 hereto and made a part hereof. American hereby restates and confirms each of its representations and warranties set forth in Section 5.01 of the Agreement. As of the date of this Certificate, (i) the high-time and high-cycle highest flight cycle Airframe not yet delivered by American to FedEx is the Airframe bearing U.S. Registration No. ____________, and Manufacturer's Serial No. _____________ and Nose No. _______________, and (ii) such Airframe ___________ flight hours and had ________________ flight cycles since it was new. Tender of the Aircraft is made by American at ________________________, at _____ /a.m./p.m. ____________ time, on this ______ day of __________________, ___, _____. AMERICAN AIRLINES, INC. By: ----------------------- Name: --------------------- Title: --------------------- ACCEPTANCE OF THE AIRCRAFT BY FEDEX. FEDERAL EXPRESS CORPORATION ("FedEx") hereby accepts and acknowledges receipt of the Delivered Aircraft from American, in accordance with the terms and conditions of the Agreement, at _____________________, at _______/a.m./p.m. __________ time, on ________________, ________, together with the Aircraft Records listed in Attachment 2 hereto and made a part hereof. By its execution and delivery of this Certificate, FedEx hereby (i) restates and confirms each of its representations and warranties set forth in Section 5.03 of the Agreement and (ii) acknowledges and agrees that upon delivery by American to FedEx, except as to those B-2 70 discrepancies expressly set forth in Attachment 1 and Attachment 3 to this certificate, the Delivered Aircraft was in Delivery Condition. FEDERAL EXPRESS CORPORATION By: --------------------------- Name: ------------------------- Title: ------------------------ DISCREPANCIES FROM DELIVERY CONDITION. American and FedEx hereby agree that the remaining discrepancy or discrepancies of the Delivered Aircraft from the Delivery Condition, if any, and the manner of, and deadline for, the correction of any such discrepancy or discrepancies are as set forth in Attachment 3 hereto. Dated: , . --------------------- --------- AMERICAN AIRLINES, INC. By: ---------------------------- Name: -------------------------- Title: ------------------------- FEDERAL EXPRESS CORPORATION By: ---------------------------- Name: -------------------------- Title: ------------------------- B-3 71 ATTACHMENT 1 TO AIRCRAFT DELIVERY CERTIFICATE AIRCRAFT HOURS AND CYCLES AS OF , -------------------- ------------ MCDONNELL DOUGLAS MODEL MD-11 AIRCRAFT REGISTRATION NUMBER: N_____; FUSELAGE OR LINE NUMBER ____; MANUFACTURER'S SERIAL NUMBER _________ AND NOSE NUMBER ___. A. AIRFRAME:
TO FIRST TOTAL SINCE TO NEXT INTERVAL TO SECOND INTERVAL NEW DELIVERY C CHECK ITEMS ITEMS FLIGHT HOURS ------------ ------------ ------------- -------------- FLIGHT CYCLES ------------ ------------ ------------- -------------- CALENDAR TIME ------------ ------------ ------------- --------------
B. GENERAL ELECTRIC COMPANY CF6-80C2D1F ENGINES:
TOTAL FLIGHT TOTAL CYCLES TOTAL CYCLES TOTAL CYCLES ENGINE MANUFACTURE'S TOTAL FLIGHT HOURS SINCE SINCE LAST SINCE LAST SINCE LAST POSITION SERIAL NUMBER CYCLES SINCE NEW HSM HSC EHM 1 ---------- ---------- ---------- ----------- ---------- ----------- 2 ---------- ---------- ---------- ----------- ---------- ----------- 3 ---------- ---------- ---------- ----------- ---------- -----------
The EGT margin of each of the Engines after (i) its last test cell run accomplished immediately following the latest Engine Maintenance accomplished on such Engine and (ii) the Power Assurance Run Test conducted pursuant to Section 3.02(a) of the Agreement was as follows: B-4 72
EGT MARGIN FOLLOWING EGT MARGIN FOLLOWING ENGINE POSITION LAST TEST CELL RUN POWER ASSURANCE RUN TEST --------------- ------------------ ------------------------ No. 1 degrees Celsius degrees Celsius ------- ------- No. 2 degrees Celsius degrees Celsius ------- ------- No. 3 degrees Celsius degrees Celsius ------- -------
The flight cycles or flight hours remaining to the limitation on each life limited part in each Engine are as set forth in Annex 1 to this Attachment 1 to the Aircraft Delivery Certificate. C. LANDING GEAR
TOTAL MANUFACTURER'S FLIGHT CYCLES TOTAL DAYS TOTAL CYCLES TO TOTAL DAYS TO POSITION SERIAL NUMBER SINCE NEW SINCE NEW NEXT OVERHAUL NEXT OVERHAUL -------- ------------- --------- --------- ------------- ------------- Nose --------------- ---------- ----------- ------------ --------- Left Main --------------- ---------- ----------- ------------ --------- Center Main --------------- ---------- ----------- ------------ --------- Right Main --------------- ---------- ----------- ------------ ---------
D. AUXILIARY POWER UNIT APU INSTALLED IN THE DELIVERED AIRCRAFT: MANUFACTURER'S SERIAL NUMBER --------------------- NUMBER OF FLIGHT CYCLES SINCE NEW --------------------- NUMBER OF FLIGHT HOURS SINCE NEW --------------------- B-5 73 LIFE LIMITED PARTS CONTAINED IN SUCH APU:
MANUFACTURER'S TOTAL FLIGHT TOTAL FLIGHT NUMBER OF CYCLES OR SERIAL CYCLES SINCE HOURS SINCE HOURS TO FIRST LIFE PART DESCRIPTION NUMBER NEW NEW LIMITED PART LIMITATION - ------------------------------------- -------------- ------------- ------------ ----------------------- First Stage Low Pressure Compressor -------------- ------------- ------------ ----------------------- Second Stage Low Pressure Compressor -------------- ------------- ------------ ----------------------- Third Stage Low Pressure Compressor -------------- ------------- ------------ ----------------------- High Pressure Turbine -------------- ------------- ------------ ----------------------- First Stage Low Pressure Turbine -------------- ------------- ------------ ----------------------- Second Stage Low Pressure Turbine -------------- ------------- ------------ -----------------------
Dated: , . -------------------------- --------- AMERICAN AIRLINES, INC. By: ----------------------- Name: --------------------- Title: -------------------- B-6 74 ANNEX 1 TO ATTACHMENT 1 TO AIRCRAFT DELIVERY CERTIFICATE FLIGHT CYCLES AND FLIGHT HOURS REMAINING ON LIFE LIMITED PARTS ON ENGINES
ENGINE NO. 1 ENGINE NO. 2 ENGINE NO. 3 FLIGHT HOURS FLIGHT HOURS FLIGHT HOURS PART DESCRIPTION OR CYCLES OR CYCLES OR CYCLES FAN ROTOR PARTS Disk, Fan Rotor Stage 1 ----------- ------------ ----------- Spool, Fan Rotor Stages 2-5 ----------- ------------ ----------- Fan, Forward Shaft ----------- ------------ ----------- Fan, Mid-Shaft ----------- ------------ ----------- HIGH PRESSURE COMPRESSOR ROTOR PARTS Disk, Stage 1 ----------- ------------ ----------- Disk, Stage 2 ----------- ------------ ----------- Disk, Stage 3-9 ----------- ------------ ----------- Disk, Stage 10 ----------- ------------ ----------- Spool/Shaft ----------- ------------ ----------- CDP Seal Disk ----------- ------------ ----------- HIGH PRESSURE TURBINE ROTOR PARTS Disk, Stage 1 ----------- ------------ ----------- Disk, Stage 2 ----------- ------------ ----------- Spacer/Impeller ----------- ------------ ----------- Vane, -Ring Diffuser ----------- ------------ ----------- LOW PRESSURE TURBINE ROTOR PARTS Disk, Stage 1 ----------- ------------ ----------- Disk, Stage 2 ----------- ------------ ----------- Disk, Stage 3 ----------- ------------ ----------- Disk, Stage 4 ----------- ------------ ----------- Disk, Stage 5 ----------- ------------ ----------- Shaft, LPTR ----------- ------------ -----------
B-7 75 ATTACHMENT 2 TO AIRCRAFT DELIVERY CERTIFICATE AIRCRAFT RECORDS AND ENGINE RECORDS DELIVERED WITH DELIVERED AIRCRAFT The following Aircraft Records (as defined in the Agreement) were delivered with the Delivered Aircraft: DRAWINGS/CHARTS: 1. Fuel Distribution Chart, Compass Correction Card, Major Avionic List, Drawings: FDM1062 or FDM1058, DDM1079 or DDM1080, FDM1063 or FDM1072 RECORDS: 1. Aircraft Flight Log (includes Aircraft, Engines, Components) with required certification 2. Heavy Maintenance Checks - History Log 3. Deferred Items List (Damage Log and FMR) 4. Last Bill-of-Work Prior to Delivery 5. Report 182Y (with required certification): - Time-Control Components with 3500 Hrs. or less to go and calendar 6. Report 188Y (with required certification): - Time Control Components by Cycles to go 7. Report 190Y (with required certification): - Airframe Time Control Components by Aircraft and Position - Engine Item Time Control Components by Aircraft and Position - Airframe Calendar Control Components by Aircraft and Position 8. Report ET026 (with required certification): - Component Time Control Status by S/N of Parts 9. Report ET049 (with required certification): - Component Time - Special Item by RSPAM 10. AD Summary Report with certification per attached Appendix 1, including accomplishment documents for the last action taken and stating specific method of compliance and any alternate means of compliance, if any, including FAA approval 11. Report EC014: - Modification History by AD/FAR Number 12. Report EC014: - Modification History by AA Job Number and cross reference 13. Report EC015: - Modification History by Service Bulletin Number - Limited to AD/FAR 14. Report EC015: - Modification History by Service Bulletin Number 15. Report D065: - Engine Life Limited Parts/Life Limited Parts 16. Report D066 (with required certification): - Engine Time Monitored Parts (including tags and tear-down reports) 17. Report CML011: - Engine Condition Monitoring - Last Run Before Delivery 18. Weight and Balance Report 19. Landing Gear Records B-8 76 20. Component Shop Records (including tags and tear-down reports) 21. APU Records 22. Engine Records 23. Aircraft Airframe Records 24. Accident Report or Accident-Free Certification Letter ENGINE RECORDS: 1. Aircraft Flight Log (includes Aircraft, Engines, Components) with certification per attached Appendix 1 2. Report 190Y (with required certification): - Engine Item Time Control Components by Aircraft and Position 3. Report D065 (with required certification): - Engine Life Limited Parts/Life Limited Parts 4. Airworthiness Directive Summary Report (with required certification) B-9 77 ATTACHMENT 3 TO AIRCRAFT DELIVERY CERTIFICATE DISCREPANCIES OF DELIVERED AIRCRAFT FROM DELIVERY CONDITION Any capitalized term used herein and not expressly defined herein shall have the meaning ascribed to it in the Agreement. The following remaining discrepancy or discrepancies from Delivery Condition exist with respect to the Delivered Aircraft (as defined in the Aircraft Delivery Certificate of which this Attachment 3 is a part): B-10 78 American and FedEx have agreed that the foregoing discrepancy or discrepancies will be corrected in the following manner and by the following date or dates: Dated: , . -------------------------- ------- AMERICAN AIRLINES, INC. By: ------------------------ Name: ----------------------- Title: ---------------------- FEDERAL EXPRESS CORPORATION By: ------------------------ Name: ----------------------- Title: ---------------------- B-11 79 EXHIBIT C TO THE AIRCRAFT SALES AGREEMENT BETWEEN FEDERAL EXPRESS CORPORATION ("FEDEX") AND AMERICAN AIRLINES, INC. ("AMERICAN") DATED APRIL 7, 1995 (THE "AGREEMENT") WARRANTY BILL OF SALE KNOW ALL MEN BY THESE PRESENTS: THAT the undersigned, [INSERT TRANSFEROR'S CORPORATE NAME], a Delaware Corporation ("Transferor"), has the power and right to convey the legal and beneficial title to that: [NOTE: INSERT THE FOLLOWING LANGUAGE IF THE WARRANTY BILL OF SALE RELATES TO AN AIRCRAFT:] [certain McDonnell Douglas MD-11 aircraft bearing Federal Aviation Administration Registration Number N_________ and Manufacturer s Serial Number _______________, together with three (3) General Electric Company CF6-80C2D1F turbofan jet engines [installed thereon], bearing Manufacturer's Serial Numbers ____________________, _____________________, and __________________________, together with all fixed equipment, parts, components and accessories installed on said aircraft and engines.] [NOTE: INSERT THE FOLLOWING LANGUAGE IF THE WARRANTY BILL OF SALE RELATES TO A SPARE ENGINE, [* ], A REPLACEMENT ENGINE OR A DELAYED DELIVERY ENGINE:] [certain General Electric Company CF6-80C2D1F turbofan jet engine, bearing Manufacturer's Serial Number ____________________, together with all fixed equipment, parts, components and accessories installed on said engine.] THAT for and in consideration of the sum of Ten Dollars ($10) and other valuable consideration, Transferee does, this ____ day of ________________, _________, grant, convey, transfer, bargain, sell, deliver and set over all of its rights, title and interests to and in the above described [aircraft, engines], [NOTE: INSERT THE FOREGOING WORD IF THE WARRANTY BILL OF SALE RELATES TO AN AIRCRAFT] [engine] [NOTE: INSERT THE FOREGOING IF THE WARRANTY BILL OF SALE RELATES TO AN ENGINE ALONE.], fixed equipment, parts, components and accessories unto [INSERT TRANSFEREE'S CORPORATE NAME], a Delaware corporation ("Transferee"). Transferor hereby warrants to Transferee, its successors and assigns, that there is hereby conveyed to Transferee title to the aforesaid [aircraft, engines]] [NOTE: INSERT THE FOREGOING WORD IF THE WARRANTY BILL OF SALE RELATES TO AN AIRCRAFT], [engine,] [NOTE: INSERT THE FOREGOING IF THE WARRANTY BILL OF SALE RELATES TO AN ENGINE ALONE.] fixed equipment, parts, components and accessories free and clear of all liens, encumbrances and rights of others arising by, through or under Transferor and that it shall warrant and defend such title forever against all claims and demands whatsoever; and that this bill of sale is made and delivered pursuant to the provisions of the Aircraft Sales Agreement between Transferor and Transferee, dated April 7, 1995. ________________ *Blank space contained information which has been filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 under the Securities Exchange Act of 1934. C-1 80 IN WITNESS WHEREOF, Transferor has executed this Warranty Bill of Sale on the _____ day of __________________________, __________. [INSERT TRANSFEROR'S CORPORATE NAME] By: --------------------------- Name: ------------------------- Title: ------------------------- C-2 81 EXHIBIT D TO THE AIRCRAFT SALES AGREEMENT BETWEEN FEDERAL EXPRESS CORPORATION ("FEDEX") AND AMERICAN AIRLINES, INC. ("AMERICAN") DATED APRIL 7, 1995 (THE "AGREEMENT") DATA RELATING TO THE AIRCRAFT AND ENGINES TO BE DELIVERED BY AMERICAN TO FEDEX PURSUANT TO ARTICLE 6 OF THE AGREEMENT Originals or copies of the following items of Data will be supplied in accordance with Section 6.02(d) on the specified medium or on microfiche, microfilm, paper, disk or any then current medium or a combination of these media, with revision updates revised as of the applicable Delivery Dates. The required certifications for Aircraft time and cycles, life-limited parts, Airworthiness Directives and hard-time components for Airframes and Engines shall be signed by a manager or higher management personnel in the Airworthiness, Quality Assurance, Quality Control or Aircraft/Powerplant Records department of American. Any required certification of any item of Data shall be in the form attached as Appendix 1 to this Exhibit D. MANUALS: 1. FAA Approved Aircraft Flight Manual 2. Aircraft Maintenance Manual (Microfilm) 3. Aircraft Overhaul Manual (Microfilm) 4. Aircraft Wiring Manual (Microfilm) 5. Aircraft Structure Repair Manual (Microfilm) 6. Aircraft Illustrated Parts Catalog (Microfilm) 7. Aircraft Weight and Balance Manual, Loading Manual, Basic & Supplement 8. McDonnell Douglas Procedure for Actual Weighing/Balancing of MD-11 Series Aircraft 9. Aircraft Minimum Equipment List & Configuration 10. McDonnell Douglas Aircraft Readiness Log 11. McDonnell Douglas Aircraft Detail Specification 12. CF6 Maintenance Manual (Microfilm-See Aircraft MM) 13. CF6 Overhaul Manual (Microfilm) 14. CF6 Illustrated Parts Catalog (Microfilm) 15. CF6 Service Bulletin (Microfilm) 16. Maintenance Check Manual (Microfilm) 17. Engineering Specification Maintenance Manual 18. AA Part Number versus Mfgr's Part Number (Fiche) D-1 82 DOCUMENTS: 1. Certificate of Airworthiness (on Aircraft) 2. Certificate of Registration (on Aircraft) 3. Sanitary Certificate (on Aircraft) 4. [Radio Station License (on Aircraft)] DRAWINGS/CHARTS: 1. Fuel Distribution Chart, Compass Correction Card, Major Avionic List, Drawings: FDM1062 or FDM1058, DDM1079 or DDM1080, FDM1063 or FDM1072 RECORDS: 1. Aircraft Flight Log (includes Aircraft, Engines, Components) with certification per attached Appendix 1 2. Heavy Maintenance Checks - History Log 3. Deferred Items List (Damage Log and FMR) 4. Last Bill-of-Work Prior to Delivery 5. Report 182Y (with certification per attached Appendix 1): - Time-Control Components with 3500 Hrs. or less to go and calendar 6. Report 188Y (with certification per attached Appendix 1): - Time Control Components by Cycles to go 7. Report 190Y (with certification per attached Appendix 1): - Airframe Time Control Components by Aircraft and Position - Engine Item Time Control Components by Aircraft and Position - Airframe Calendar Control Components by Aircraft and Position 8. Report ET026 (with certification per attached Appendix 1): - Component Time Control Status by S/N of Parts 9. Report ET049 (with certification per attached Appendix 1): - Component Time - Special Item by RSPAM 10. AD Summary Report with certification per attached Appendix 1, including accomplishment documents for the last action taken and stating specific method of compliance and any alternate means of compliance, if any, including FAA approval 11. Report EC014: - Modification History by AD/FAR Number 12. Report EC014: - Modification History by AA Job Number and cross reference 13. Report EC015: - Modification History by Service Bulletin Number - Limited to AD/FAR 14. Report EC015: - Modification History by Service Bulletin Number 15. Report D065: - Engine Life Limited Parts/Life Limited Parts 16. Report D066 (with certification per attached Appendix 1): - Engine Time Monitored Parts (including tags and tear-down reports) 17. Report CML011: - Engine Condition Monitoring - Last Run Before Delivery 18. Weight and Balance Report 19. Landing Gear Records 20. Component Shop Records (including tags and tear-down reports) D-2 83 21. APU Records 22. Engine Records 23. Aircraft Airframe Records 24. Accident Report or Accident-Free Certification Letter ENGINE RECORDS: 1. Aircraft Flight Log (includes Aircraft, Engines, Components) with certification per attached Appendix 1 2. Report 190Y (with certification per attached Appendix 1): - Engine Item Time Control Components by Aircraft and Position 3. Report D065 (with certification per attached Appendix 1): - Engine Life Limited Parts/Life Limited Parts 4. Airworthiness Directive Summary Report (with the certification per attached Appendix 1) D-3 84 APPENDIX 1 TO EXHIBIT D AIRCRAFT REGISTRATION NO. ____________ MANUFACTURER'S SERIAL NO. __________ DATE:__________________, ________ [TITLE] I HEREBY CERTIFY THAT THIS IS A TRUE AND ACCURATE RECORD TO THE BEST OF MY KNOWLEDGE. - ------------------------------------------- ------------------------------------------ SIGNATURE DATE - ------------------------------------------- ------------------------------------------ PRINTED NAME TITLE AIR CARRIER - ------------------------------------------- ---------------------------------- COMPANY NAME COMPANY CERTIFICATE TYPE AA4A025A - ------------------------------------------- COMPANY CERTIFICATE NUMBER
D-4 85 EXHIBIT E TO THE AIRCRAFT SALES AGREEMENT BETWEEN FEDERAL EXPRESS CORPORATION ("FEDEX") AND AMERICAN AIRLINES, INC. ("AMERICAN") DATED APRIL 7, 1995 (THE "AGREEMENT") DESIGNATION OF AN AIRFRAME FOR DELIVERY ON SCHEDULED DELIVERY DATE Any capitalized term used herein shall have the meaning ascribed to it in the Agreement. 1. The Scheduled Delivery Date for which the Designated Airframe (as defined below) is being designated is ________________________________. 2. The following are the identification numbers of the Airframe designated for delivery on the Scheduled Delivery Date set forth in Paragraph 1. above (the "Designated Airframe"): FAA Registration Number: N --------------------- Manufacturer's Serial Number: --------------------------------- Nose Number: ----------------------- Fuselage or Line Number: ------------------------------ 3. The total flight hours and flight cycles on the Designated Airframe since delivery of the Designated Airframe by the Manufacturer to American and the number of flight hours and flight cycles remaining on the Designated Airframe to certain C Checks as of the date and time of this Designation are as follows:
TOTAL SINCE TO NEXT TO FIRST INTERVAL TO SECOND INTERVAL NEW C CHECK ITEMS ITEMS FLIGHT HOURS ----------- ----------- ----------- ----------- FLIGHT CYCLES ----------- ----------- ----------- ----------- CALENDAR TIME ----------- ----------- ----------- -----------
4. The total flight hours and flight cycles remaining to the next major overhaul of each of the Gears that are installed on the Designated Airframe at the date and time of this Designation are as follows: E-1 86
TOTAL MANUFACTURER'S FLIGHT CYCLES TOTAL DAYS TOTAL CYCLES TO TOTAL DAYS TO POSITION SERIAL NUMBER SINCE NEW SINCE NEW NEXT OVERHAUL NEXT OVERHAUL -------- ------------- --------- --------- -------------- ------------- Nose ------------ ---------- ----------- ------------ ----------- Left Main ------------ ---------- ----------- ------------ ----------- Center Main ------------ ---------- ----------- ------------ ----------- Right Main ------------ ---------- ----------- ------------ -----------
5. The total flight hours or flight cycles since new for (x) the APU installed on the Designated Airframe and (y) the Life Limited Parts contained in such APU and the flight cycles or flight hours remaining to the first limit of the Life Limited Parts contained in the APU installed on the Designated Airframe at the date and time of this Designation are as follows: APU INSTALLED ON THE DESIGNATED AIRFRAME: MANUFACTURER S SERIAL NUMBER -------------------- NUMBER OF FLIGHT CYCLES SINCE NEW -------------------- NUMBER OF FLIGHT HOURS SINCE NEW -------------------- LIFE LIMITED PARTS CONTAINED IN SUCH APU:
MANUFACTURER'S TOTAL FLIGHT TOTAL FLIGHT NUMBER OF CYCLES OR SERIAL CYCLES SINCE HOURS SINCE HOURS TO FIRST LIFE PART DESCRIPTION NUMBER NEW NEW LIMITED PART LIMITATION - ----------------------------------- -------------- ------------ ------------ ------------------------ First Stage Low Pressure Compressor ---------- --------- --------- -------------------- Second Stage Low Pressure Compressor ---------- --------- --------- -------------------- Third Stage Low Pressure Compressor ---------- --------- --------- -------------------- High Pressure Turbine ---------- --------- --------- -------------------- First Stage Low Pressure Turbine ---------- --------- --------- -------------------- Second Stage Low Pressure Turbine ---------- --------- --------- --------------------
6. The estimated usage of the Aircraft from the date of this Designation until the Scheduled Delivery Date is __________________ flight cycles and _____________ flight hours. This Designation is made by American on the ____ day of _____________, _____ at _________, [a.m.] [p.m.], _______________________ time. E-2 87 AMERICAN AIRLINES, INC. By: ------------------------ Name: ---------------------- Title: --------------------- E-3 88 EXHIBIT F TO THE AIRCRAFT SALES AGREEMENT BETWEEN FEDERAL EXPRESS CORPORATION ("FEDEX") AND AMERICAN AIRLINES, INC. ("AMERICAN") DATED APRIL 7, 1995 (THE "AGREEMENT") DESIGNATION OF A SUBSTITUTE AIRFRAME FOR DELIVERY ON SCHEDULED DELIVERY DATE 1. This Designation of a Substitute Airframe for delivery on a Scheduled Delivery Date (this "Change Designation") is being provided by American to FedEx in order to designate an Airframe for delivery on the Scheduled Delivery Date indicated below in substitution for an Airframe previously designated by American for delivery to FedEx on such Scheduled Delivery Date (the "Previously Designated Airframe"). Any capitalized term used herein and not expressly defined herein shall have the meaning ascribed to it in the Agreement. 2. The Scheduled Delivery Date for which the Previously Designated Airframe was to be delivered and for which the Substitute Airframe (as defined below) is now being designated for delivery and sale to FedEx is ________________________________. 3. The following are the identification numbers of the Previously Designated Airframe: FAA Registration Number: N ------------------------- Manufacturer's Serial Number: -------------------------- Nose Number: -------------------------- Fuselage or Line Number: --------------------------- 4. The following are the identification numbers of the Airframe being substituted for the Previously Designated Airframe which is hereby designated for delivery on the Scheduled Delivery Date set forth in Paragraph 2. above in the stead of the Previously Designated Airframe (the "Substitute Airframe"): F-1 89 FAA Registration Number: N -------------------------- Manufacturer's Serial Number: ------------------------ Nose Number: ------------------------ Fuselage or Line Number: ------------------------- 5. The total flight hours and flight cycles on the Substitute Airframe since delivery of the Substitute Airframe by the Manufacturer to American and the number of flight hours and flight cycles remaining on the Substitute Airframe to the certain C Checks as of the date and time of this Change Designation are as follows:
TOTAL SINCE TO NEXT TO FIRST INTERVAL TO SECOND INSPECTION NEW C CHECK ITEMS ITEMS FLIGHT HOURS ----------- ----------- ----------- ----------- FLIGHT CYCLES ----------- ----------- ----------- ----------- CALENDAR TIME ----------- ----------- ----------- -----------
6. The total flight hours and flight cycles remaining to the next major overhaul of each of the Gears that are installed on the Substitute Airframe at the date and time of this Designation are as follows:
TOTAL MANUFACTURER'S FLIGHT CYCLES TOTAL DAYS TOTAL CYCLES TO TOTAL DAYS TO POSITION SERIAL NUMBER SINCE NEW SINCE NEW NEXT OVERHAUL NEXT OVERHAUL -------- ------------- --------- --------- -------------- ------------- Nose ----------- --------- --------- ----------- --------- Left Main ----------- --------- --------- ----------- --------- Center Main ----------- --------- --------- ----------- --------- Right Main ----------- --------- --------- ----------- ---------
7. The total flight hours or flight cycles since new for (x) the APU installed on the Substitute Airframe and (y) the Life Limited Parts contained in such APU and the flight cycles or flight hours remaining to the first limit of the Life Limited Parts contained in the APU installed on the Substitute Airframe at the date and time of this Change Designation are as follows: F-2 90 APU INSTALLED ON THE SUBSTITUTE AIRFRAME: MANUFACTURER'S SERIAL NUMBER --------------------- NUMBER OF FLIGHT CYCLES SINCE NEW --------------------- NUMBER OF FLIGHT HOURS SINCE NEW --------------------- LIFE LIMITED PARTS CONTAINED IN SUCH APU:
MANUFACTURER'S TOTAL FLIGHT TOTAL FLIGHT NUMBER OF CYCLES OR SERIAL CYCLES SINCE HOURS SINCE HOURS TO FIRST LIFE PART DESCRIPTION NUMBER NEW NEW LIMITED PART LIMITATION - ----------------------------------- -------------- ------------ ------------ ----------------------- First Stage Low Pressure Compressor ----------- ---------- --------- ------------------- Second Stage Low Pressure Compressor ----------- ---------- --------- ------------------- Third Stage Low Pressure Compressor ----------- ---------- --------- ------------------- High Pressure Turbine ----------- ---------- --------- ------------------- First Stage Low Pressure Turbine ----------- ---------- --------- ------------------- Second Stage Low Pressure Turbine ----------- ---------- --------- -------------------
This Change Designation is made by American on the ____ day of _____________, _____ at _________, [a.m.] [p.m.], _______________________ time. AMERICAN AIRLINES, INC. By: ------------------------ Name: ---------------------- Title: --------------------- F-3 91 EXHIBIT G TO THE AIRCRAFT SALES AGREEMENT BETWEEN FEDERAL EXPRESS CORPORATION ("FEDEX") AND AMERICAN AIRLINES, INC. ("AMERICAN") DATED APRIL 7, 1995 (THE "AGREEMENT") FORM OF ASSIGNMENT OF ASSIGNABLE MANUFACTURER'S WARRANTIES In connection with delivery of the Aircraft described in Annex A hereto, including the Engines conveyed therewith (the "Aircraft") by American Airlines, Inc. ("American") to Federal Express Corporation ("FedEx"), American hereby assigns and conveys to FedEx, its successors, assigns and legal representatives, all of American's right, title and interest in and to any and all of the manufacturer's, vendor's and other warranties relating to the Aircraft, including the Engines conveyed therewith (but not with respect to any Non-Conforming Engine) to the extent, but only to the extent, that such warranties are assignable without consent of the grantor of any such warranty or the payment of consideration to the grantor of any such warranty (the "Warranties") and all rights to enforce, exercise any rights with respect to or retain any recovery or benefit with respect to the Warranties, except to the extent that such rights and recoveries relate to work completed or to be completed by American or any of its affiliates in connection with its performance of its obligations under the Aircraft Sales Agreement between FedEx and American dated April 7, 1995 (the "Agreement") prior to or in connection with the Delivery (as defined in the Agreement) of the Aircraft. Notwithstanding the foregoing, American does not assign or convey to FedEx any outstanding claims or rights, whether liquidated or contingent, or know or unknown, that it may have against the grantor of any of the Warranties arising prior to the tender of the Aircraft by American for Delivery pursuant to the Agreement. Dated : , . -------------- --------- AMERICAN AIRLINES, INC. By: ---------------------------- Name: --------------------------- Title: -------------------------- G-1 92 ANNEX A TO ASSIGNMENT OF ASSIGNABLE MANUFACTURER'S WARRANTIES One McDonnell Douglas Model MD-11 Aircraft described below: Registration Number: N -------------------------- Manufacturer's Serial Number: -------------------------- American Fuselage or Line Number: ------------------------------ American Nose Number: , ----------------------------------- along with three (3) General Electric Company CF6-80C2D1F engines, bearing Manufacturer's Serial Numbers: Position (1) -------------------- Position (2) -------------------- Position (3) -------------------- G-2 93 EXHIBIT H TO THE AIRCRAFT SALES AGREEMENT BETWEEN FEDERAL EXPRESS CORPORATION ("FEDEX") AND AMERICAN AIRLINES, INC. ("AMERICAN") DATED APRIL 7, 1995 (THE "AGREEMENT") DESIGNATION OF ENGINES FOR CONVEYANCE ON SCHEDULED DELIVERY DATE Any capitalized term used in this Designation of Engines for conveyance on a Scheduled Delivery Date shall have the meaning ascribed to it in the Agreement unless expressly defined herein. 1. The Scheduled Delivery Date for which the Designated Airframe (as defined below) is being designated is ________________________________. 2. The following are the identification numbers of the Airframe designated for delivery on the Scheduled Delivery Date set forth in Paragraph 1. above (the "Designated Airframe"): FAA Registration Number: N Nose Number: -------- ----- Manufacturer's Serial No.: Fuselage or Line Number: ---------------- ------- 3. The following are the Engines to be conveyed with the Designated Airframe on the Scheduled Delivery Date set forth in Paragraph 1. above (the "Designated Engines"): GENERAL ELECTRIC COMPANY CF6-80C2D1F ENGINES:
TOTAL FLIGHT TOTAL FLIGHT TOTAL CYCLES TOTAL CYCLES TOTAL CYCLES ENGINE MANUFACTURER'S CYCLES HOURS SINCE SINCE LAST SINCE LAST SINCE LAST POSITION SERIAL NUMBER SINCE NEW NEW HSM HSC EHM 1 ------------ ---------- ----------- ---------- ----------- ----------- 2 ------------ ---------- ----------- ---------- ----------- ----------- 3 ------------ ---------- ----------- ---------- ----------- -----------
H-1 94 4. The flight cycles or flight hours remaining to the limitation on each life limited part in each Engine are as set forth in Annex 1 to this Designation of Engines for Delivery on Scheduled Delivery Date. 5. The EGT margin of each of the Designated Engines after (i) its last test cell run accomplished immediately following the latest Engine Maintenance accomplished on each such Designated Engine and (ii) the Power Assurance Run Test conducted pursuant to Section 3.02(a) of the Agreement was as follows:
EGT MARGIN FOLLOWING EGT MARGIN FOLLOWING ENGINE POSITION LAST TEST CELL RUN POWER ASSURANCE RUN TEST - --------------- --------------------------- ------------------------ No. 1 degrees Celsius degrees Celsius ------- ------- No. 2 degrees Celsius degrees Celsius ------- ------- No. 3 degrees Celsius degrees Celsius ------- -------
6. As of the date of this Engine Designation, (i) the highest flight cycle Airframe not yet delivered by American to FedEx is the Airframe bearing U.S. Registration No. __________________ and Manufacturer's Serial No. _________________ and (ii) such Airframe had ________________ flight cycles since it was new. This Engine Designation is made by American on the ____ day of _____________, _____ at _________, [a.m.] [p.m.], _______________________ time. AMERICAN AIRLINES, INC. By: -------------------------- Name: ------------------------ Title: ----------------------- H-2 95 ANNEX 1 TO DESIGNATION OF ENGINES FOR DELIVERY ON SCHEDULED DELIVERY DATE REMAINING FLIGHT CYCLES AND FLIGHT HOURS REMAINING ON LIFE LIMITED PARTS ON ENGINES
ENGINE NO. 1 ENGINE NO. 2 ENGINE NO. 3 FLIGHT HOURS FLIGHT HOURS FLIGHT HOURS PART DESCRIPTION OR CYCLES OR CYCLES OR CYCLES FAN ROTOR PARTS Disk, Fan Rotor Stage 1 ----------- ------------ ----------- Spool, Fan Rotor Stages 2-5 ----------- ------------ ----------- Fan, Forward Shaft ----------- ------------ ----------- Fan, Mid-Shaft ----------- ------------ ----------- HIGH PRESSURE COMPRESSOR ROTOR PARTS Disk, Stage 1 ----------- ------------ ----------- Disk, Stage 2 ----------- ------------ ----------- Disk, Stage 3-9 ----------- ------------ ----------- Disk, Stage 10 ----------- ------------ ----------- Spool/Shaft ----------- ------------ ----------- CDP Seal Disk ----------- ------------ ----------- HIGH PRESSURE TURBINE ROTOR PARTS Disk, Stage 1 ----------- ------------ ----------- Disk, Stage 2 ----------- ------------ ----------- Spacer/Impeller ----------- ------------ ----------- Vane, -Ring Diffuser ----------- ------------ ----------- LOW PRESSURE TURBINE ROTOR PARTS Disk, Stage 1 ----------- ------------ ----------- Disk, Stage 2 ----------- ------------ ----------- Disk, Stage 3 ----------- ------------ ----------- Disk, Stage 4 ----------- ------------ ----------- Disk, Stage 5 ----------- ------------ ----------- Shaft, LPTR ----------- ------------ -----------
H-3 96 EXHIBIT I TO THE AIRCRAFT SALES AGREEMENT BETWEEN FEDERAL EXPRESS CORPORATION ("FEDEX") AND AMERICAN AIRLINES, INC. ("AMERICAN") DATED APRIL 7, 1995 (THE "AGREEMENT") PUT OPTION EXERCISE 1. This Put Option Exercise is provided by American to FedEx pursuant to Section 2.02(b) of the Agreement. Any capitalized term used in this Put Option Exercise shall have the meaning ascribed to it in the Agreement. 2. American hereby exercises a Put Option granted by FedEx as set forth in Section 2.02 of the Agreement for the sale of a Put Option Aircraft to FedEx with respect to the following Scheduled Delivery Date:____________________ _______________________________, ______. A Designation and an Engine Designation will be provided by American to FedEx in accordance with Section 2.04 of the Agreement designating the Airframe and the Engines that will be tendered by American to FedEx on such Scheduled Delivery Date. This Put Option Exercise is made by American on the ____ day of _____________, _____. AMERICAN AIRLINES, INC. By: -------------------- Name: ------------------ Title: ----------------- I-1 97 EXHIBIT J TO THE AIRCRAFT SALES AGREEMENT BETWEEN FEDERAL EXPRESS CORPORATION ("FEDEX") AND AMERICAN AIRLINES, INC. ("AMERICAN") DATED APRIL 7, 1995 (THE "AGREEMENT") PURCHASE OPTION NOTICE 1. Pursuant to Section 2.03(a) of the Agreement, American hereby notifies FedEx that American intends to offer for sale _________________ [specify number of Put Option Aircraft] of the Put Option Aircraft. Any capitalized term used in this Purchase Option Notice shall have the meaning ascribed to it in the Agreement. 2. The Scheduled Delivery Dates for the Put Option Aircraft that American will be marketing are as follows: 1. , ------------------------------------- -------- 2. , ------------------------------------- -------- 3. , ------------------------------------- -------- 4. , ------------------------------------- -------- 5. , ------------------------------------- -------- 6. , ------------------------------------- -------- 7. , ------------------------------------- -------- Please be advised that pursuant to Section 2.03(a) of the Agreement, FedEx has a period of fourteen (14) days after its receipt of this Purchase Option Notice in which to exercise its Purchase Option under the terms of the Agreement. This Purchase Option Notice is given by American on the ____ day of _____________, _____. AMERICAN AIRLINES, INC. By: ------------------------- Name: ----------------------- Title: ---------------------- J-1 98 EXHIBIT K TO THAT CERTAIN AIRCRAFT SALES AGREEMENT BETWEEN FEDERAL EXPRESS CORPORATION ("FEDEX") AND AMERICAN AIRLINES, INC. ("AMERICAN") DATED APRIL 7, 1995 (THE "AGREEMENT") PURCHASE OPTION EXERCISE 1. This Purchase Option Exercise is provided by FedEx to American pursuant to Section 2.03(a) of the Agreement. Any capitalized term used in this Purchase Option Exercise shall have the meaning ascribed to it in the Agreement. 2. FedEx hereby exercises the Purchase Options granted by American as set forth in Section 2.03 of the Agreement for the purchase of _______________[specify number] Put Option Aircraft from American on the following Scheduled Delivery Date(s) as specified in American's Purchase Option Notice, dated _________________________, __________: 1. , ------------------------------------- -------- 2. , ------------------------------------- -------- 3. , ------------------------------------- -------- 4. , ------------------------------------- -------- 5. , ------------------------------------- -------- 6. , ------------------------------------- -------- 7. , ------------------------------------- -------- 3. A Deposit of [* ] as required by Section 2.06 of the Agreement is hereby tendered with this Purchase Option Exercise with respect to each Purchase Option Aircraft. 4. FedEx hereby restates and confirms its representation and warranty to American in Section 5.03(v) of the Agreement. __________________ *Blank space contained information which has been filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 under the Securities Exchange Act of 1934. K-1 99 This Purchase Option Exercise is given by FedEx on the ____ day of _____________, _____. FEDERAL EXPRESS CORPORATION By: --------------------------- Name: ------------------------- Title: ------------------------ K-2 100 EXHIBIT L TO THAT CERTAIN AIRCRAFT SALES AGREEMENT BETWEEN FEDERAL EXPRESS CORPORATION ("FEDEX") AND AMERICAN AIRLINES, INC. ("AMERICAN") DATED APRIL 7, 1995 (THE "AGREEMENT") PURCHASE PRICE ADJUSTMENT FORMULA -- AIRFRAME Any capitalized term used herein and not expressly defined herein shall have the meaning ascribed to it in the Agreement. [* ] * ______________________ *Blank space contained information which has been filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 under the Securities Exchange Act of 1934. L-1 101 * [* ] _____________________ *Blank space contained information which has been filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 under the Securities Exchange Act of 1934. L-2 102 TABLE A TO EXHIBIT L AMERICAN AIRLINES, INC. AIRFRAME MAINTENANCE The following table sets forth the estimated maintenance cost for accomplishment of a C Check, First Interval Items and Second Interval Items in twelve-month periods noted below.
TWELVE-MONTH PERIOD ENDED C CHECK FIRST INTERVAL SECOND INTERVAL MAY 31 COST ITEMS COST ITEMS COST * * * *
_____________________ *Blank space contained information which has been filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 under the Securities Exchange Act of 1934. L-3 103 EXHIBIT M TO THAT CERTAIN AIRCRAFT SALES AGREEMENT BETWEEN FEDERAL EXPRESS CORPORATION ("FEDEX") AND AMERICAN AIRLINES, INC. ("AMERICAN") DATED APRIL 7, 1995 (THE "AGREEMENT") PURCHASE PRICE ADJUSTMENT FORMULA -- ENGINES Any capitalized term used herein and not expressly defined herein shall have the meaning ascribed to it in the Agreement. [* ] * ______________________ *Blank space contained information which has been filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 under the Securities Exchange Act of 1934. M-1 104 * [* ] ______________________ *Blank space contained information which has been filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 under the Securities Exchange Act of 1934. M-2 105 TABLE A TO EXHIBIT M AMERICAN AIRLINES, INC. ENGINE HEAVY MAINTENANCE The following table sets forth the estimated maintenance cost for an HSM, HSC and EHM in the calendar years noted below.
CALENDAR YEAR EHM HSC HSM -------- ------- ------- --------- * * * *
_____________________ *Blank space contained information which has been filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 under the Securities Exchange Act of 1934. M-3 106 EXHIBIT N TO THAT CERTAIN AIRCRAFT SALES AGREEMENT BETWEEN FEDERAL EXPRESS CORPORATION ("FEDEX") AND AMERICAN AIRLINES, INC. ("AMERICAN") DATED APRIL 7, 1995 (THE "AGREEMENT") PURCHASE PRICE ADJUSTMENT FORMULA -- GEAR Any capitalized term used herein and not expressly defined herein shall have the meaning ascribed to it in the Agreement. [* ] ___________________ *Blank space contained information which has been filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 under the Securities Exchange Act of 1934. N-1 107 * [* ] ____________________ *Blank space contained information which has been filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 under the Securities Exchange Act of 1934. N-2 108 EXHIBIT O TO THAT CERTAIN AIRCRAFT SALES AGREEMENT BETWEEN FEDERAL EXPRESS CORPORATION ("FEDEX") AND AMERICAN AIRLINES, INC. ("AMERICAN") DATED APRIL 7, 1995 (THE "AGREEMENT") PURCHASE PRICE ADJUSTMENT FORMULA -- APU Any capitalized term used herein and not expressly defined herein shall have the meaning ascribed to it in the Agreement. [* ] * [* ] ________________ *Blank space contained information which has been filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 under the Securities Exchange Act of 1934. O-1 109 EXHIBIT P TO THAT CERTAIN AIRCRAFT SALES AGREEMENT BETWEEN FEDERAL EXPRESS CORPORATION ("FEDEX") AND AMERICAN AIRLINES, INC. ("AMERICAN") DATED APRIL 7, 1995 (THE "AGREEMENT") ENGINE DELIVERY CERTIFICATE This Engine Delivery Certificate is given by American Airlines, Inc. ("American") and Federal Express Corporation ("FedEx") pursuant to the Agreement. Any capitalized term used herein and not expressly defined herein shall have the meaning ascribed to it in the Agreement. TENDER OF EACH ENGINE. ____________________ ("Tenderor") hereby tenders to ____________________ ("Recipient") for delivery pursuant to the terms and subject to the conditions of the Agreement, ______ [specify number of engines] General Electric Company CF6-80C2D1F engines, bearing Manufacturer's Serial Number(s): ------------------------ ------------------------ ------------------------ (each a "Delivered Engine" and collectively, if applicable, the "Delivered Engines") with (i) if American is the Tenderor, the operating times and cycles as accumulated on each Engine up to the time of Delivery as described on Attachment 1A hereto and made a part hereof or (ii) if FedEx is the Tenderor, the operating times and cycles as accumulated on each Engine from the time FedEx took delivery of the Delivered Engine or Delivered Engines, as the case may be, from American up to the time of delivery of such Delivered Engine or Delivered Engines, as the case may be, pursuant to this Engine Delivery Certificate described on Attachment 1B hereto and made a part hereof, at _______/a.m./p.m. ____________ time, on ____________________, _________, together with any Data, listed on Attachment 2 hereto and made a part hereof. Tenderor hereby restates and confirms each of its representations and warranties set forth in Article 5 of the Agreement. P-1 110 Tender of each Engine is made by _________________ this ____ day of _____________________, _____. [AMERICAN AIRLINES, INC.] [FEDERAL EXPRESS CORPORATION] By: --------------------------- Title: --------------------- ACCEPTANCE OF EACH ENGINE. Recipient hereby accepts and acknowledges receipt of each Delivered Engine from Tenderor in accordance with the terms and conditions of the Agreement, which Delivered Engine or Delivered Engines has or have, as the case may be, the operating times and flight cycles as accumulated on the Aircraft up to the time of delivery as described on Attachment 1 hereto and made a part hereof, at ___________________, at _________/a.m./p.m. ____________ time, on ___________________, __________, together with the Data listed in Attachment 2 hereto and made a part hereof. Recipient hereby restates and confirms each of its representations set forth in Article 5 of the Agreement. If it is FedEx which is executing the Acceptance portion of this Engine Delivery Certificate and accepting a Delayed Delivery Engine or Replacement Engine, by its execution and delivery of this Certificate, FedEx hereby acknowledges and agrees that upon delivery by American to FedEx, except as to those discrepancies expressly set forth in Attachment 1 to this certificate, the Delivered Engine met the requirements for the condition of the Engines upon delivery as set forth in the Agreement. Acceptance of each Delivered Engine is made by _____________________ this _____ day of ______________________, ______. [FEDERAL EXPRESS CORPORATION] [AMERICAN AIRLINES, INC.] By: ----------------------------- Name: --------------------------- Title: -------------------------- HIGHEST FLIGHT CYCLE AIRFRAME CERTIFICATION. As of the date of this Certificate, (i) the highest flight cycle Airframe not yet delivered by American to FedEx is the Airframe bearing U.S. Registration No. __________________ and Manufacturer's Serial No. _________________ and (ii) such Airframe has _______________ flight cycles since it was new. AMERICAN AIRLINES, INC. By: ----------------------------- Name: --------------------------- Title: -------------------------- P-2 111 ATTACHMENT 1A TO ENGINE DELIVERY CERTIFICATE ENGINE INFORMATION AS OF ___________________, ______ GENERAL ELECTRIC COMPANY CF6-80C2D1F ENGINES:
TOTAL FLIGHT TOTAL FLIGHT TOTAL CYCLES TOTAL CYCLES TOTAL CYCLES ENGINE MANUFACTURER'S CYCLES HOURS SINCE SINCE LAST SINCE LAST SINCE LAST POSITION SERIAL NUMBER SINCE NEW NEW HSM HSC EHM 1 ------------ ---------- ----------- ---------- ----------- ----------- 2 ------------ ---------- ----------- ---------- ----------- ----------- 3 ------------ ---------- ----------- ---------- ----------- -----------
The EGT margin of each of the Delivered Engines after (i) its last test cell run accomplished immediately following the latest Engine Maintenance accomplished with respect to each such Delivered Engine and (ii) the Power Assurance Run Test conducted pursuant to Section 3.02(a) of the Agreement was as follows:
EGT MARGIN FOLLOWING EGT MARGIN FOLLOWING ENGINE POSITION LAST TEST CELL RUN POWER ASSURANCE RUN TEST --------------- -------------------------- ------------------------ No. 1 degrees Celsius degrees Celsius ------- ------- No. 2 degrees Celsius degrees Celsius ------- ------- No. 3 degrees Celsius degrees Celsius ------- -------
The flight cycles or flight hours remaining to the limitation on each life limited part in each Engine are as set forth in Annex 1 to this Attachment 1 to the Engine Aircraft Delivery Certificate. P-3 112 Dated: , . -------------------------- --------- AMERICAN AIRLINES, INC. By: -------------------------------- Name: ------------------------------ Title: ----------------------------- P-4 113 ANNEX 1 TO ATTACHMENT 1A TO ENGINE DELIVERY CERTIFICATE REMAINING FLIGHT CYCLES AND FLIGHT HOURS REMAINING ON LIFE LIMITED PARTS ON ENGINES
ENGINE NO. 1 ENGINE NO. 2 ENGINE NO. 3 FLIGHT HOURS FLIGHT HOURS FLIGHT HOURS PART DESCRIPTION OR CYCLES OR CYCLES OR CYCLES FAN ROTOR PARTS Disk, Fan Rotor Stage 1 ----------- ------------ ----------- Spool, Fan Rotor Stages 2-5 ----------- ------------ ----------- Fan, Forward Shaft ----------- ------------ ----------- Fan, Mid-Shaft ----------- ------------ ----------- HIGH PRESSURE COMPRESSOR ROTOR PARTS Disk, Stage 1 ----------- ------------ ----------- Disk, Stage 2 ----------- ------------ ----------- Disk, Stage 3-9 ----------- ------------ ----------- Disk, Stage 10 ----------- ------------ ----------- Spool/Shaft ----------- ------------ ----------- CDP Seal Disk ----------- ------------ ----------- HIGH PRESSURE TURBINE ROTOR PARTS Disk, Stage 1 ----------- ------------ ----------- Disk, Stage 2 ----------- ------------ ----------- Spacer/Impeller ----------- ------------ ----------- Vane, -Ring Diffuser ----------- ------------ ----------- LOW PRESSURE TURBINE ROTOR PARTS Disk, Stage 1 ----------- ------------ ----------- Disk, Stage 2 ----------- ------------ ----------- Disk, Stage 3 ----------- ------------ ----------- Disk, Stage 4 ----------- ------------ ----------- Disk, Stage 5 ----------- ------------ ----------- Shaft, LPTR ----------- ------------ -----------
P-5 114 ATTACHMENT 1B TO ENGINE DELIVERY CERTIFICATE ENGINE FLIGHT CYCLES AND FLIGHT HOURS AS OF , ------------------- ------ GENERAL ELECTRIC COMPANY CF6-80C2D1F ENGINES:
TOTAL FLIGHT CYCLES TOTAL FLIGHT HOURS ENGINE MANUFACTURER ACCUMULATED WHILE IN FEDEX'S ACCUMULATED WHILE IN FEDEX'S POSITION SERIAL NUMBER CONTROL CONTROL 1 ------------------ ---------------- --------------- 2 ------------------ ---------------- --------------- 3 ------------------ ---------------- ---------------
Dated: , . -------------------------- --------- FEDERAL EXPRESS CORPORATION By: ----------------------------- Name: --------------------------- Title: -------------------------- P-6 115 ATTACHMENT 2 TO ENGINE DELIVERY CERTIFICATE ENGINE RECORDS DELIVERED WITH DELIVERED ENGINE 1. Aircraft Flight Log (includes Aircraft, Engines, Components) with required certification 2. Report 190Y (with required certification ): - Engine Item Time Control Components by Aircraft and Position 3. Report D065 (with required certification): - Engine Life Limited Parts/Life Limited Parts 4. Airworthiness Directive Summary Report (with required certification) P-7 116 EXHIBIT Q TO AIRCRAFT SALES AGREEMENT BETWEEN AMERICAN AIRLINES, INC. ("AMERICAN:) AND FEDERAL EXPRESS CORPORATION ("FEDEX") DATED APRIL 7, 1995 (THE "AGREEMENT") SECTION 1--MD-11 SPARE PARTS PURCHASE DATES, PURCHASE OBLIGATIONS, AND DELIVERY OBLIGATIONS TO BE PURCHASED IN CONJUNCTION WITH DELIVERIES OF FIRM AIRCRAFT AND PUT OPTION AIRCRAFT SOLD PURSUANT TO THE PUT OPTIONS
SPARES PURCHASE SPARES PRICE OF SPARES PURCHASE A PAIR OF PURCHASE PRICE OF SPARE SCHEDULED AVERAGE PRICE TO BE NUMBER OF A SPARE SPARE THRUST DATE OR UNIT PRICE PAID FOR SPARE APU THRUST REVERSERS YEAR FOR THE MD-11 OF MD-11 MD-11 APU'S PURCHASED REVERSERS PURCHASED PURCHASE OF SPARE SPARE PARTS SPARE SCHEDULED ON SCHEDULE ON THE THE MD-11 PARTS TO BE PARTS TO BE TO BE THE DATE TO BE DATE SPARE PARTS PERCENTAGE PURCHASED PURCHASED PURCHASED SHOWN* PURCHASED SHOWN* - ----------- ---------- --------- --------- --------- ------ --------- ------ * * * * * * * *
[* ] [* ] _____________________ *Blank space contained information which has been filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 under the Securities Exchange Act of 1934. Q-1 117 EXHIBIT Q TO AIRCRAFT SALES AGREEMENT BETWEEN AMERICAN AIRLINES, INC. ("AMERICAN:) AND FEDERAL EXPRESS CORPORATION ("FEDEX") DATED APRIL 7, 1995 (THE "AGREEMENT") SECTION 2--MD-11 SPARE PARTS PURCHASE DATES, PURCHASE OBLIGATIONS, AND DELIVERY OBLIGATIONS TO BE PURCHASED IN CONJUNCTION WITH DELIVERIES OF PURCHASE OPTION AIRCRAFT SOLD PURSUANT TO THE PURCHASE OPTIONS Any capitalized term used herein shall have the meaning ascribed to it in the Agreement unless expressly defined herein. [* ]
MD-11 MD-11 SPARE SPARE MD-11 MONTH PARTS MONTH PARTS MONTH SPARE PARTS AND YEAR PERCENTAGE AND YEAR PERCENTAGE AND YEAR PERCENTAGE -------- ---------- -------- ---------- -------- ---------- * * * * * *
___________________ *Blank space contained information which has been filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 under the Securities Exchange Act of 1934. Q-2 118 EXHIBIT Q TO AIRCRAFT SALES AGREEMENT BETWEEN AMERICAN AIRLINES, INC. ("AMERICAN:) AND FEDERAL EXPRESS CORPORATION ("FEDEX") DATED APRIL 7, 1995 (THE "AGREEMENT") SECTION 3--SPARE ENGINE PURCHASE DATES AND PURCHASE PRICES Any capitalized term used herein shall have the meaning ascribed to it in the Agreement unless expressly defined herein. The dates on which FedEx shall purchase from American and American shall sell the Spare Engines to FedEx in conjunction with the sale of the Firm Aircraft and the Spares Purchase Price for each such Spare Engine are as follows:
SPARE PURCHASE PRICE SPARE ENGINE PURCHASE DATE FOR SPARE ENGINE -------------------------- ---------------- * *
In the event that all the Put Option Aircraft are purchased pursuant to an exercise of the Put Options by American or the Purchase Options by FedEx, FedEx will purchase from American and American will sell to FedEx on the following Spare Engines on the following dates:
SPARE PURCHASE PRICE ORIGINAL SALE DATE FOR SPARE ENGINE ------------------ ---------------- * *
[* ] _______________________ *Blank space contained information which has been filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 under the Securities Exchange Act of 1934. Q-3 119 EXHIBIT R TO THAT CERTAIN AIRCRAFT SALES AGREEMENT BETWEEN FEDERAL EXPRESS CORPORATION ("FEDEX") AND AMERICAN AIRLINES, INC. ("AMERICAN") DATED APRIL 7, 1995 (THE "AGREEMENT") PROCEDURES FOR ENGINE BORESCOPE INSPECTIONS CONDUCTED PURSUANT TO SECTION 3.02(A) OF THE AGREEMENT The borescope inspections of Engines to be conducted by FedEx pursuant to Section 3.02(a) of the Agreement shall be conducted in accordance with the procedures set forth in the following Maintenance Work Cards that are set forth in Section 7 (Maintenance Visits, Power Plant Inspect) of the American MD-11 Maintenance Check Manual, copies of which have been previously provided to FedEx by American (the "Work Cards"). Any capitalized term used herein and not expressly defined herein shall have the meaning ascribed to it in the Agreement.
CARD NO 4419 CARD NO. 4429 CARD NO. 4439 ENGINE #1 ENGINE #2 ENGINE #3 CARD CARD PAGE CARD PAGE NO. REVISION DATE NO. REVISION DATE. PAGE NO. REVISION DATE. 1 February 8, 1995 1 February 8, 1995 1 February 8, 1995 2 April 21, 1993 2 April 21, 1993 2 April 21, 1993 3 May 4, 1994 3 May 4, 1994 3 May 4, 1994 4 January 19, 1994 4 April 21, 1993 4 April 21. 1993 5 January 19, 1994 5 January 19, 1994 5 January 19, 1994 6 August 19, 1992 6 Sept. 30, 1992 6 Sept. 30, 1992 7 January 19, 1994 7 January 19, 1994 7 January 19, 1994 8 August 19, 1992 8 August 19, 1992 8 August 19, 1992 9 October 6, 1993 9 August 19, 1992 9 Sept. 1, 1994 10 January 19, 1994 10 August 19, 1992 10 August 19, 1992 11 April 10, 1991 11 January 19, 1994 11 January 19, 1994 12 April 10, 1991 12 April 10, 1991 12 April 10, 1991 13 January 19, 1994 13 April 10, 1991 13 April 10, 1991 14 March 25, 1992 14 January 19, 1994 14 January 19, 1994 15 January 19, 1994 15 March 25, 1992 15 March 25, 1992 16 April 10, 1991 16 January 19, 1994 16 January 19, 1994 17 April 10, 1991 17 April 10, 1994
The procedures set forth in the Work Cards shall not be revised for purposes of determining the procedures to be followed by FedEx in conducting borescope inspections pursuant to Section 3.02(a) of the Agreement with respect to any Engine even if the Work Cards are subsequently revised by American. R-1 120 EXHIBIT S TO THAT CERTAIN AIRCRAFT SALES AGREEMENT BETWEEN FEDERAL EXPRESS CORPORATION ("FEDEX") AND AMERICAN AIRLINES, INC. ("AMERICAN") DATED APRIL 7, 1995 (THE "AGREEMENT") FORM OF [* ] AGREEMENT ____________________ *Blank space contained information which has been filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 under the Securities Exchange Act of 1934. S-1 121 * ___________________ *Blank space contained information which has been filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 under the Securities Exchange Act of 1934. S-2 122 * __________________ *Blank space contained information which has been filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 under the Securities Exchange Act of 1934. S-3 123 * _______________________ *Blank space contained information which has been filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 under the Securities Exchange Act of 1934. S-4 124 * _____________________ *Blank space contained information which has been filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 under the Securities Exchange Act of 1934. S-5 125 EXHIBIT T TO THAT CERTAIN AIRCRAFT SALES AGREEMENT BETWEEN FEDERAL EXPRESS CORPORATION ("FEDEX") AND AMERICAN AIRLINES, INC. ("AMERICAN") DATED APRIL 7, 1995 (THE "AGREEMENT") Any capitalized term used herein and not expressly defined herein shall have the meaning ascribed to it in the Agreement. [* ] * ____________________ *Blank space contained information which has been filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 under the Securities Exchange Act of 1934. T-1 126 * [* ] ___________________ *Blank space contained information which has been filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 under the Securities Exchange Act of 1934. T-2 127 TABLE A TO EXHIBIT T AMERICAN AIRLINES, INC. ENGINE HEAVY MAINTENANCE The following table sets forth the estimated maintenance cost for an HSM, HSC and EHM in the years noted below.
YEAR EHM HSC HSM ---- --- --- --- * * * *
____________________ *Blank space contained information which has been filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 under the Securities Exchange Act of 1934. T-3 128 EXHIBIT U TO THAT CERTAIN AIRCRAFT SALES AGREEMENT BETWEEN FEDERAL EXPRESS CORPORATION ("FEDEX") AND AMERICAN AIRLINES, INC. ("AMERICAN") DATED APRIL 7, 1995 (THE "AGREEMENT") CERTIFICATE OF HIGH-HOUR AND HIGH-CYCLE AIRFRAME This Certificate of High-Hour and High-Cycle Airframe is given by Federal Express Corporation ("FedEx") pursuant to the Agreement. Any capitalized term used herein and not expressly defined herein shall have the meaning ascribed to it in the Agreement. FedEx hereby certifies that as of the date of this Certificate, (i) the highest flight cycle Airframe delivered to FedEx by American and accepted by FedEx pursuant to the Agreement was the Airframe bearing U.S. Registration No. ________________ and Manufacturer's Serial No. ______________ and (ii) such Airframe had _______________ flight cycles since it was new. In making the determination and certification of the number of flight hours and flight cycles on such Airframe, FedEx is relying, without investigation, on the information concerning the number of flight hours and flight cycles on the Airframe on its Delivery Date contained in the Aircraft Delivery Certificate that American delivered to FedEx in connection with the Delivery of the Aircraft of which the Airframe identified above is a part. Dated: --------------------------------------- FEDERAL EXPRESS CORPORATION By: ---------------------------------- Name: --------------------------------- Title: -------------------------------- U-1 EX-11.1 11 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11.1 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 ------------------------------- 1995 1994 1993 -------- -------- ------- Income before cumulative effect of change in accounting principle......... $ 297,588 $204,370 $109,809 Cumulative effect of change in accounting principle, net of tax benefit............. - - (55,943) --------- -------- -------- Net income applicable to common and common equivalent shares.................. $ 297,588 $204,370 $ 53,866 ========= ======== ======== Average shares of common stock outstanding............................... 55,988 55,333 54,370 Common Equivalent Shares: Assumed exercise of outstanding dilutive options........................ 2,438 2,867 2,213 Less shares repurchased from proceeds of assumed exercise of options............. (1,932) (2,188) (1,864) --------- -------- -------- Average common and common equivalent shares.................................... 56,494 56,012 54,719 ========= ======== ======== Earnings per share: Before cumulative effect of change in accounting principle.................... $ 5.27 $ 3.65 $ 2.01 Cumulative effect of change in accounting principle.................... - - (1.03) --------- -------- -------- Net earnings per share...................... $ 5.27 $ 3.65 $ .98 ========= ======== ========
- - 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, 1995, 1994, and 1993. EX-12.1 12 COMPUTATION OF RATIO OF EARNINGS 1 Exhibit 12.1 FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Unaudited)
Year Ended May 31, ------------------------------------------------ 1991 1992 1993 1994 1995 -------- --------- -------- -------- ------- (In thousands, except ratios) Earnings: Income (loss) before income taxes.................. $ 40,942 $(146,828) $203,576 $378,462 $522,084 Add back: Interest expense, net of capitalized interest........ 196,982 176,321 168,762 152,170 130,923 Amortization of debt issuance costs.............. 1,634 2,570 4,906 2,860 2,493 Portion of rent expense representative of interest factor...................... 292,840 299,012 262,724 285,261 329,370 -------- --------- -------- -------- -------- Earnings as adjusted............ $532,398 $ 331,075 $639,968 $818,753 $984,870 ======== ========= ======== ======== ======== Fixed Charges: Interest expense, net of capitalized interest.......... $196,982 $ 176,321 $168,762 $152,170 $130,923 Capitalized interest............ 35,442 26,603 31,256 29,738 27,381 Amortization of debt issuance costs................ 1,634 2,570 4,906 2,860 2,493 Portion of rent expense representative of interest factor........................ 292,840 299,012 262,724 285,261 329,370 -------- --------- -------- -------- -------- $526,898 $ 504,506 $467,648 $470,029 $490,167 ======== ========= ======== ======== ======== Ratio of Earnings to Fixed Charges 1.0 (A) 1.4 1.7 2.0 ======== ========= ======== ======== ========
(A) Earnings were inadequate to cover fixed charges by $173.4 million for the year ended May 31, 1992. EX-13.1 13 ANNUAL REPORT TO STOCKHOLDERS 1 EXHIBIT 13.1 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - -------------------------------------------------------------------------------- RESULTS OF OPERATIONS In 1995, the Company achieved record-high net income and earnings per share for the second consecutive year. Consolidated net income for 1995 was $298 million ($5.27 per share) compared with net income of $204 million ($3.65 per share) in 1994 and $54 million ($.98 per share) in 1993. Excluding the effect of adopting the new accounting standard for postretirement benefits other than pensions, 1993's net income would have been $110 million ($2.01 per share). Management has expanded and refined the Company's unparalleled worldwide network of express delivery services, which resulted in exceptional year-over-year increases in net income and earnings per share for the past three years. The Company has strategically invested in programs designed to promote long-term growth and overall profitability and provide the Company with the ability to effectively adapt to a continually changing business environment. Investments in aircraft, advanced technologies and employee productivity have been an integral part of the Company's history of providing competitively superior express delivery services. The Company's customers have increasingly required express services on a worldwide basis. Management recognized this demand and created a global express distribution network. The Company will continue to manage its resources to capture the greatest overall economic benefit in a growing worldwide express market. Consistent with the Company's global approach, management believes that the clearest method for evaluating results is on a consolidated basis. Revenues The following table shows a comparison of revenues for the years ended May 31:
- --------------------------------------------------------------------------------- In millions Percent Change -------------- 1995/ 1994/ 1995 1994 1993 1994 1993 U.S. domestic express $6,700 $6,142 $5,556 + 9 +11 International Priority (IP) 1,680 1,339 1,117 +25 +20 International Express Freight (IXF) and Airport-to-Airport (ATA) 580 505 570 +15 -11 Charter 115 113 112 + 1 + 1 Logistics services 106 248 263 -57 - 6 Other* 211 132 190 +59 -30 - ------------------------------------------------------------------ $9,392 $8,479 $7,808 +11 + 9 =================================================================================
*Includes sales of engine noise reduction kits 18 2 Federal Express Corporation and Subsidiaries 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 -------------- 1995/ 1994/ 1995 1994 1993 1994 1993 U.S. domestic express: Average daily packages 2,084 1,792 1,596 +16 +12 Revenue per package $ 12.61 $ 13.33 $ 13.65 - 5 - 2 IP: Average daily packages 164 133 115 +23 +16 Revenue per package $ 40.28 $ 39.21 $ 38.18 + 3 + 3 IXF/ATA: Average daily pounds 2,153 1,844 2,050 +17 -10 Revenue per pound $ 1.06 $ 1.06 $ 1.09 -- - 3 - ---------------------------------------------------------------------------------
Different economic and competitive conditions in the domestic and international express delivery markets have affected the Company during the past three years. Beginning in 1991 and continuing to the present, the Company has contended with intense competitive pressure in the U.S. domestic express market. Price has become a dominant consideration in choosing express delivery services. In an effort to increase volume, the Company offered new, lower-priced deferred services and increased the level of discounting. As a result, U.S. domestic average daily volumes increased as did express revenues. Revenue on a per package basis (yield) declined significantly. In contrast, the market for the Company's IP services is comparatively new. The Company benefits from its EXPRESSfreighter system which provides customers with reduced transit times, later drop-off opportunities and daily service on a worldwide basis that is generally unmatched by competitors. The combination of its EXPRESSfreighter system, aggressive marketing efforts and a recent improvement in global economic activity has resulted in significant year-over-year growth in average daily volume, revenue and yield. Significant growth in the Company's airfreight services played an important role in improving 1995 earnings. This improvement is primarily attributable to a favorable global airfreight market. In markets with high demand but limited capacity, the space-confirmed aspect of IXF (a higher-priced, time-definite service) creates competitive advantages over ATA (a lower-priced, space-available service). Additionally, management actions in 1994 and 1995 narrowed the price difference between IXF and ATA. Customers responded by using IXF rather than ATA, resulting in higher-yielding IXF comprising a greater percentage of airfreight pounds transported by the Company. 19 3 MANAGEMENT'S DISCUSSION AND ANALYSIS The decrease in Logistics services revenue in 1995 is due to the sale, effective May 1994, of the Company's German logistics subsidiary and the January 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 increase in Other revenues in 1995 is due primarily to increased sales of engine noise reduction kits. The decrease in other revenues in 1994 is due primarily to the sale of a U.S. domestic subsidiary. Operating Expenses Operating expenses for the years 1993, 1994 and 1995 have increased primarily because of increasing volumes. Presented below is the detail for the year-over-year percentage change in operating expenses:
- ----------------------------------------------------------------------------- Percent Change -------------- 1995/ 1994/ 1994 1993 Salaries and employee benefits + 8 + 8 Rentals and landing fees +16 + 7 Depreciation and amortization + 9 + 3 Fuel + 6 - 5 Maintenance and repairs +17 +15 Other +16 + 8 Total operating expenses +11 + 7 - -----------------------------------------------------------------------------
The increases in Salaries and employee benefits are primarily due to volume-related growth in the Company's U.S. domestic employment levels. A portion of the increase from 1993 to 1995 is attributable to increased provisions under the Company's variable incentive compensation plans which reflect increased earnings and, in 1995, a significant gain from the sale of certain businesses. (See Revenues above and Other Income and Expense and Income Taxes below for additional information.) Management expects this trend of increasing salaries and employee benefits to continue because of rising U.S. domestic express volumes. The increases in Rentals and landing fees for 1995 and 1994 are due to the leasing of additional aircraft. In 1995, the Company added, by operating lease, ten Airbus A310 and seven Airbus A300 aircraft. In 1994, the Company added, by operating lease, six MD-11 and two Airbus A300 aircraft. Management expects year-over-year increases in lease expense to continue as the Company enters into additional aircraft rental agreements during 1996 and thereafter. The increase in Fuel for 1995 is primarily attributable to increases in total flight hours (9%) and gallons consumed (10%), partially offset by a decline in average jet fuel price per gallon (5%). The decrease in fuel expense for 1994 reflects a reduction in gallons consumed (1%) and a decline in average jet fuel price per gallon (7%). Under the Omnibus Budget Reconciliation Act of 1993, a 4.3 cents per gallon increase in the excise tax on 20 4 Federal Express Corporation and Subsidiaries aviation fuel will become effective beginning in October 1995. Based upon 1995 consumption levels, this increase in excise tax would have increased the Company's annual aircraft fuel expense by approximately $27 million. Maintenance and repairs expense increased due to engine maintenance on B-727 and MD-11 aircraft. During 1994, regulatory directives required the Company to assess the engines of both aircraft types and, where applicable, take corrective action. The initial cycle of scheduled engine maintenance on the Company's MD-11 fleet, which began in 1994, also contributed to increased maintenance and repairs expense. As of the end of 1995, the Company had fully complied with the maintenance directive on the B-727 engines. Management expects to address the maintenance directive on the MD-11 engines concurrently with scheduled maintenance. Management believes the recent trend of increasing maintenance expense will subside in 1996 and then rise in 1997 as DC-10 aircraft begin a new cycle of scheduled engine maintenance. The increase in Other operating expenses for 1995 and 1994 is generally due to year-over-year volume growth. Advertising expense, temporary manpower, and expenses related to the transportation of packages by outside vendors comprise the most significant portion of these expenses. The cost of sales for engine noise reduction kits also caused an increase in other operating expenses in 1995. Operating Income The Company's operating income increased 11% in 1995 and 41% in 1994. U.S. domestic results were essentially flat in 1994 and declined significantly in 1995 because of lower margins attributable to the decrease in U.S. domestic express yields. In contrast, the Company's international results improved markedly in 1994 and 1995 because of growing IP and airfreight services. In 1995, the Company's international operations achieved the first full year of profitability. 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 19% and 12% in 1995 and 1994, respectively, are due to lower debt levels and reduced interest rates on borrowings. Other, net for 1995 includes a pre-tax gain of $35.7 million from the sale of two dedicated warehousing and distribution companies in the United Kingdom. This transaction resulted in an after-tax impact of $.27 per share, including the effect of additional variable compensation expenses. Other, net also includes $9.7 million received in 1995 from the bankruptcy estate of a firm engaged by the Company in 1990 to remit employee payroll taxes to appropriate authorities. These payments are a partial recovery of a $32 million loss recorded by the Company in 1991 caused by the failure of this firm to remit certain taxes. The Company may receive additional distributions from the firm's bankruptcy estate depending on the outcome of preference litigation and other pending bankruptcy matters against the firm. 21 5 MANAGEMENT'S DISCUSSION AND ANALYSIS The Company's effective tax rate for 1995 was 43.0% compared with 46.0% and 46.1% for 1994 and 1993, respectively. 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. During 1995, the Company changed the structure of its 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 and contributed to the lower 1995 tax rate. Based upon anticipated levels of income, capital acquisitions and other factors, the Company's effective tax rate for 1996 is expected to remain at a level similar to the 1995 rate, and the Company does not expect to be subject to the alternative minimum tax in future years. Outlook Management believes the competitive nature of the U.S. domestic express delivery market limits the Company's near-term ability to increase prices generally. Nonetheless, the Company continues to work to slow the rate of decline in its U.S. domestic yield through actions which include targeting selected customers for review and realignment of their discount levels, seeking higher yielding customers and promoting heavier package weights. However, reducing unit costs at a rate greater than the rate of yield decline continues to be the Company's primary focus for improving operating margins. Management intends to further reduce unit costs by applying information technologies that better coordinate the processing and delivery of packages. These technologies map courier routes, streamline station operations and balance flight schedules with expected demand. In addition, the Company is undertaking a comprehensive review of its procurement practices in order to optimize the value of goods and services purchased. The Airport Improvements Act, effective January 1995, eliminated many of the intrastate transportation regulations that restricted the use of the Company's lower-cost ground transportation system. Management believes that an expanded and well-directed use of trucking, which includes investments in hub automation and larger load carrying vehicles, will provide long-term cost savings. The Company is also developing regional hubs that will serve as distribution points for expanded trucking operations. Management believes that continued growth in the Company's international operations is a pivotal factor in improving overall earnings. As discussed above, the Company's international express business benefits from competitive advantages in certain markets. The Company has established an intra-Asian transloading facility at Subic Bay, Philippines. This facility will position the Company to capture more of the growing Far East express market. In addition to the Subic Bay facility, the Company plans to add new EXPRESSfreighter flights to locations in Europe and the Far East. These expansions will entail start-up costs which may restrain short-term profitability. In addition, from time to time, the regulatory environment for global aviation rights may impair the ability of the Company to operate its air network in the most efficient manner. With respect to airfreight, the 22 6 Federal Express Corporation and Subsidiaries Company believes that a forecasted increase in overall market capacity in 1996 for airfreight may slow the volume growth in IXF but provide additional opportunities for ATA. The Company manages its aircraft fleet to achieve improving efficiencies in unit costs for fuel consumption, maintenance and crew manning. MD-11 and Airbus A300 and A310 aircraft acquisitions are designed to support this improvement. These aircraft are expected to produce long-term benefits, despite their higher ownership cost. FINANCIAL CONDITION Liquidity Cash and cash equivalents totaled $358 million, a decrease of $35 million during 1995 compared with increases of $237 million and $77 million in 1994 and 1993, respectively. Cash provided from operations during 1995 was $1.0 billion compared with $767 million in 1994 and $725 million in 1993. The increase in cash provided from operations in 1995 is primarily due to higher net income in 1995 compared to 1994 and 1993. 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. Capital Resources The Company's operations are capital intensive, characterized by significant investments in aircraft, package handling facilities, sort equipment, vehicles, and computer and telecommunication 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 1995 totaled $1.1 billion and included four A310-200 aircraft, 15 Cessna 208 aircraft, deposits on future Airbus A300 aircraft, vehicles and ground support equipment, and customer automation and computer equipment. In comparison, prior year expenditures also totaled $1.1 billion and included five MD-11 aircraft, three B-727-200 aircraft, deposits on future Airbus A300 aircraft, vehicle and ground support equipment, and customer automation and computer equipment. All of the MD-11 aircraft acquired in 1994, along with a sixth aircraft acquired in 1993, were subsequently sold and leased back. For information on the Company's purchase commitments, see Note 11 of Notes to Consolidated Financial Statements. 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. Management's practice in recent years with respect to funding 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 23 7 MANAGEMENT'S DISCUSSION AND ANALYSIS 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 November 1994, the Company filed a shelf registration statement with the Securities and Exchange Commission relating to $465 million of equipment trust and pass through certificates. The Company can use these certificates to finance the purchase of aircraft or to finance the acquisition of aircraft in leveraged lease transactions. The Company believes its capital resources provide access to the most efficient capital markets with respect to any particular aircraft acquisition and are adequate for its future capital needs. These resources include backstop financing for 16 Airbus A300 aircraft, $465 million of equipment trust and pass through certificates, $210 million under an interim loan facility, $100 million of unsecured notes available under a June 1992 shelf registration and the public and private debt markets for leveraged lease financing. OTHER MATTERS Deferred Tax Assets At May 31, 1995, the Company had a net cumulative deferred tax asset of $60 million consisting of $440 million of deferred tax assets and $380 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. 24 8
CONSOLIDATED STATEMENTS OF INCOME Federal Express Corporation and Subsidiaries Years ended May 31 - ------------------------------------------------------------------------------------------ In thousands, except per share amounts 1995 1994 1993 REVENUES $ 9,392,073 $ 8,479,456 $ 7,808,043 - ------------------------------------------------------------------------------------------ OPERATING EXPENSES: Salaries and employee benefits (Notes 8 and 9) 4,425,202 4,104,800 3,807,493 Rentals and landing fees (Note 4) 818,599 703,028 658,138 Depreciation and amortization 652,287 599,357 579,896 Fuel 502,417 472,786 495,384 Maintenance and repairs 544,170 464,557 404,639 Other 1,858,254 1,604,296 1,485,320 - ------------------------------------------------------------------------------------------ 8,800,929 7,948,824 7,430,870 - ------------------------------------------------------------------------------------------ OPERATING INCOME 591,144 530,632 377,173 - ------------------------------------------------------------------------------------------ OTHER INCOME (EXPENSE): Interest, net (Note 1) (114,687) (142,392) (160,923) Other, net (Note 13) 45,627 (9,778) (12,674) - ------------------------------------------------------------------------------------------ (69,060) (152,170) (173,597) - ------------------------------------------------------------------------------------------ INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 522,084 378,462 203,576 PROVISION FOR INCOME TAXES (Note 7) 224,496 174,092 93,767 - ------------------------------------------------------------------------------------------ INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 297,588 204,370 109,809 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, NET OF TAX BENEFIT OF $34,287 (Note 9) -- -- (55,943) - ------------------------------------------------------------------------------------------ NET INCOME $ 297,588 $ 204,370 $ 53,866 ========================================================================================== EARNINGS PER SHARE (Note 6): Before cumulative effect of change in accounting principle $ 5.27 $ 3.65 $ 2.01 Cumulative effect of change in accounting principle (Note 9) -- -- (1.03) - ------------------------------------------------------------------------------------------ $ 5.27 $ 3.65 $ .98 ========================================================================================== AVERAGE SHARES OUTSTANDING (Note 6) 56,494 56,012 54,719 ==========================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 25 9 CONSOLIDATED BALANCE SHEETS
May 31 - -------------------------------------------------------------------------------------------------- In thousands 1995 1994 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 357,548 $ 392,923 Receivables, less allowance for doubtful accounts of $31,173 and $33,933 1,130,254 1,020,511 Spare parts, supplies and fuel 193,251 173,993 Deferred income taxes (Note 7) 115,801 113,035 Prepaid expenses and other 72,228 61,234 - -------------------------------------------------------------------------------------------------- Total current assets 1,869,082 1,761,696 - -------------------------------------------------------------------------------------------------- PROPERTY AND EQUIPMENT, AT COST (Notes 1, 3, 4 and 11): Flight equipment 3,006,693 2,828,021 Package handling and ground support equipment 1,841,108 1,583,428 Computer and electronic equipment 1,224,050 966,906 Other 1,625,860 1,511,870 - -------------------------------------------------------------------------------------------------- 7,697,711 6,890,225 Less accumulated depreciation and amortization 3,982,467 3,441,132 - -------------------------------------------------------------------------------------------------- Net property and equipment 3,715,244 3,449,093 - -------------------------------------------------------------------------------------------------- OTHER ASSETS: Goodwill (Note 1) 397,272 415,178 Equipment deposits and other assets (Note 11) 451,774 366,531 - -------------------------------------------------------------------------------------------------- Total other assets 849,046 781,709 - -------------------------------------------------------------------------------------------------- $6,433,372 $5,992,498 ==================================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets. 26 10
Federal Express Corporation and Subsidiaries - ---------------------------------------------------------------------------------- 1995 1994 LIABILITIES AND STOCKHOLDERS' INVESTMENT CURRENT LIABILITIES: Current portion of long-term debt (Note 3) $ 255,448 $ 198,180 Accounts payable 618,621 518,849 Accrued expenses (Note 2) 904,466 819,399 - ---------------------------------------------------------------------------------- Total current liabilities 1,778,535 1,536,428 - ---------------------------------------------------------------------------------- LONG-TERM DEBT, LESS CURRENT PORTION (Note 3) 1,324,711 1,632,202 - ---------------------------------------------------------------------------------- DEFERRED INCOME TAXES (Note 7) 55,956 3,563 - ---------------------------------------------------------------------------------- OTHER LIABILITIES (Note 1) 1,028,601 895,600 - ---------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES (Notes 4, 11 and 12) COMMON STOCKHOLDERS' INVESTMENT (Note 6): Common Stock, $.10 par value; 200,000 shares authorized; 56,174 and 55,885 shares issued 5,617 5,589 Additional paid-in capital 775,255 759,229 Retained earnings 1,466,427 1,162,160 - ---------------------------------------------------------------------------------- 2,247,299 1,926,978 Less treasury stock and deferred compensation 1,730 2,273 - ---------------------------------------------------------------------------------- Total common stockholders' investment 2,245,569 1,924,705 - ---------------------------------------------------------------------------------- $6,433,372 $5,992,498 ==================================================================================
27 11
CONSOLIDATED STATEMENTS OF CASH FLOWS Federal Express Corporation and Subsidiaries Years ended May 31 - ------------------------------------------------------------------------------------------------------------ In thousands 1995 1994 1993 OPERATING ACTIVITIES Net income $ 297,588 $ 204,370 $ 53,866 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 652,287 599,357 579,896 Provision for uncollectible accounts 36,334 45,763 33,552 Provision for deferred income taxes and other 25,976 3,810 19,910 Gain from disposals of property and equipment (39,997) (11,897) (5,648) Cumulative effect of accounting change -- -- 55,943 Changes in assets and liabilities, net of effects from purchases and dispositions of businesses: Increase in receivables (167,319) (173,902) (41,535) Increase in other current assets (24,101) (7,826) (5,813) Increase in accounts payable, accrued expenses and other liabilities 258,373 110,508 13,651 Other, net (8,424) (2,905) 21,259 - ------------------------------------------------------------------------------------------------------------ Cash provided by operating activities 1,030,717 767,278 725,081 - ------------------------------------------------------------------------------------------------------------ INVESTING ACTIVITIES Purchases of property and equipment, including deposits on aircraft of $113,073, $112,138 and $177,564 (1,060,761) (1,087,708) (1,023,723) Proceeds from dispositions of property and equipment: Sale-leaseback transactions -- 581,400 216,444 Reimbursements of A300 deposits 138,203 38,794 -- Other dispositions 59,523 46,148 5,984 Other, net 87,925 27,843 1,992 - ------------------------------------------------------------------------------------------------------------ Cash used in investing activities (775,110) (393,523) (799,303) - ------------------------------------------------------------------------------------------------------------ FINANCING ACTIVITIES Proceeds from debt issuances 45,460 10,777 878,499 Principal payments on debt (349,523) (198,243) (737,334) Proceeds from stock issuances 13,081 53,759 24,512 Other, net -- (2,581) (14,176) - ------------------------------------------------------------------------------------------------------------ Cash provided by (used in) financing activities (290,982) (136,288) 151,501 - ------------------------------------------------------------------------------------------------------------ CASH AND CASH EQUIVALENTS Increase (decrease) during the year (35,375) 237,467 77,279 Balance at beginning of year 392,923 155,456 78,177 - ------------------------------------------------------------------------------------------------------------ Balance at end of year $ 357,548 $ 392,923 $ 155,456 ============================================================================================================ SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for: Interest (net of capitalized interest) $ 138,833 $ 158,149 $ 162,648 Income taxes 185,964 167,209 188,943 Non-cash investing and financing activities: In November 1992, approximately $73,000,000 of secured debt related to a portion of the purchase price of one MD-11 aircraft acquired by the Company was assumed by a third party in a sale-leaseback of the aircraft. In March 1995, the Company issued three series of loan certificates totaling $50,300,000 in exchange for a leased B-747 aircraft. (See Note 3 Long-Term Debt for additional information.) - ------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 28 12
CONSOLIDATED STATEMENTS OF CHANGES IN Federal Express Corporation and Subsidiaries COMMON STOCKHOLDERS' INVESTMENT - -------------------------------------------------------------------------------------------------------------- In thousands, except shares Additional Common Paid-in Retained Treasury Deferred Stock Capital Earnings Stock Compensation BALANCE AT MAY 31, 1992 $5,410 $672,727 $ 906,555 $ (32) $(4,938) Purchase of treasury stock -- -- -- (472) -- Forfeiture of restricted stock -- -- -- (63) -- Issuance of common and treasury stock under employee incentive plans (655,938 shares) 64 26,658 (85) 531 (393) Amortization of deferred compensation -- -- -- -- 2,374 Foreign currency translation adjustment -- -- 9,179 -- -- Net income -- -- 53,866 -- -- - -------------------------------------------------------------------------------------------------------------- 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) ==============================================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 29 13 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 B-747 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 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, 1995 and 1994 were deferred gains of $293,000,000 and $230,234,000, 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, 1995 and 1994 were $216,683,000 and $185,508,000, 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, 1995 and 1994, were $294,000,000 and $270,000,000, 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 $27,381,000, $29,738,000 and $31,256,000, for 1995, 1994 and 1993, respectively. 30 14 Federal Express Corporation and Subsidiaries 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 $16,236,000 in 1995, $9,778,000 in 1994, and $7,839,000 in 1993. 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 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 $100,527,000 and $87,202,000 at May 31, 1995 and 1994, respectively. Foreign currency translation. The Company conducts a significant amount of its business and has a number of operating facilities in countries outside the United States. Translation gains and losses of 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 taxes on its foreign subsidiaries' earnings that are 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. Reclassifications. Certain amounts for 1994 and 1993 have been reclassified to conform to the 1995 presentation. 31 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 2: ACCRUED EXPENSES
May 31 - ------------------------------------------------------------------------------------------- In thousands 1995 1994 Compensated absences $192,785 $180,105 Insurance 176,806 156,906 Taxes other than income taxes 137,037 130,801 Employee benefits 127,870 86,352 Salaries 100,024 82,563 Aircraft overhaul 53,540 50,933 Other 116,404 131,739 - ------------------------------------------------------------------------------------------- $904,466 $819,399 ===========================================================================================
NOTE 3: LONG-TERM DEBT
May 31 - ------------------------------------------------------------------------------------------- In thousands 1995 1994 Unsecured notes payable, interest rates of 6.25% to 10.57%, due through 2013 $1,187,413 $1,384,942 - ------------------------------------------------------------------------------------------- Unsecured sinking fund debentures, interest rate of 9.63%, due through 2020 98,323 98,254 - ------------------------------------------------------------------------------------------- Capital lease obligations and tax exempt bonds, due through 2017, interest rates of 6.75% to 8.30% 255,100 255,100 Less bond reserve funds 11,096 11,096 - ------------------------------------------------------------------------------------------- 244,004 244,004 - ------------------------------------------------------------------------------------------- Other debt, interest rates of 9.68% to 9.98% 50,419 103,182 - ------------------------------------------------------------------------------------------- 1,580,159 1,830,382 Less current portion 255,448 198,180 - ------------------------------------------------------------------------------------------- $1,324,711 $1,632,202 ===========================================================================================
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, 1995. 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, 1995, approximately $692,000,000 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 32 16 Federal Express Corporation and Subsidiaries 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. In connection with the acquisition of four Airbus A310 aircraft, the Company issued, in March 1995, three series of loan certificates totaling $50,300,000 at rates of 9.68% to 9.98% with maturity dates from March 2002 to September 2007. These certificates relate to the buyout of a lease on a B-747 aircraft and are secured by a DC-10-30 aircraft. Scheduled annual principal maturities of long-term debt for the five years subsequent to May 31, 1995, are as follows: $255,400,000 in 1996; $26,200,000 in 1997; $126,600,000 in 1998; $257,400,000 in 1999 and $14,900,000 in 2000. The Company's long-term debt, exclusive of capital leases, had carrying values of $1,390,000,000 and $1,630,000,000 at May 31, 1995 and 1994, respectively, compared with fair values of approximately $1,470,000,000 and $1,740,000,000 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. 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 1995 1994 Package handling and ground support equipment $378,438 $372,194 Facilities 133,435 133,435 Computer and electronic equipment and other 7,175 7,152 - -------------------------------------------------------------------------------- 519,048 512,781 Less accumulated amortization 347,738 330,155 - -------------------------------------------------------------------------------- $171,310 $182,626 ================================================================================
Rent expense under operating leases for the years ended May 31 was as follows:
- -------------------------------------------------------------------------------- In thousands 1995 1994 1993 Minimum rentals $707,182 $621,174 $563,646 Contingent rentals 43,005 21,540 35,353 - -------------------------------------------------------------------------------- $750,187 $642,714 $598,999 ================================================================================
Contingent rentals are based on mileage under supplemental aircraft leases. 33 17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, 1995 follows:
- -------------------------------------------------------------------------------- In thousands Capital Leases Operating Leases 1996 $ 15,561 $ 645,572 1997 15,561 649,557 1998 15,561 609,832 1999 15,561 578,107 2000 15,561 540,459 Thereafter 371,643 6,287,674 - -------------------------------------------------------------------------------- $ 449,448 $9,311,201 ================================================================================
At May 31, 1995, 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, 1995, none of these shares had been issued. 34 18 Federal Express Corporation and Subsidiaries 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, 1992 3,653,803 $23.59-$70.19 Granted 260,750 36.88- 56.25 Exercised (643,563) 23.59- 56.63 Canceled (123,947) 34.31- 70.19 - -------------------------------------------------------------------------------- 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 ================================================================================ Exercisable at May 31, 1995 1,478,089 $30.56-$70.81 ================================================================================
At May 31, 1995, there were 198,005 shares available for future grants under the above-mentioned stock incentive plans. Under the terms of the Company's 1986 Restricted Stock Plan, shares of the Company's common stock are granted to key employees. Restrictions on the shares expire over a period of two to five years from their date of grant. The value of shares issued related to this plan is recorded as a reduction of common stockholders' investment and is being amortized to compensation expense as restrictions on such shares expire. The shares granted under this plan were 11,000 in 1994 and 12,500 in 1993. There were no shares granted in 1995. During 1995, 1994 and 1993, 3,750, 18,438 and 1,500 shares, respectively, were forfeited. At May 31, 1995, there were 14,688 shares available for future grants under this plan. At May 31, 1995, there were 3,381,558 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, 1995, a total of 2,765,243 shares at an average cost of $41.68 per share had been purchased and substantially all reissued under the above-mentioned plans. 35 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7: INCOME TAXES The components of the provision for income taxes for the years ended May 31 were as follows:
- -------------------------------------------------------------------------------- In thousands 1995 1994 1993 Current provision: Federal $ 137,041 $ 131,724 $64,130 Foreign 29,787 16,387 9,318 State 23,405 26,862 3,170 - -------------------------------------------------------------------------------- 190,233 174,973 76,618 - -------------------------------------------------------------------------------- Deferred provision (credit): Federal 24,058 2,263 6,899 Foreign 9,072 2,524 -- State 1,133 (5,668) 10,250 - -------------------------------------------------------------------------------- 34,263 (881) 17,149 - -------------------------------------------------------------------------------- $ 224,496 $ 174,092 $93,767 ================================================================================
The Company's operations included the following income (loss) with respect to entities in foreign locations for the years ended May 31:
- -------------------------------------------------------------------------------- In thousands 1995 1994 1993 Entities with pre-tax income $ 149,000 $ 127,000 $ 67,000 Entities with pre-tax losses (173,000) (210,000) (247,000) - -------------------------------------------------------------------------------- $ (24,000) $ (83,000) $(180,000) ================================================================================
Income (losses) from entities which are structured as foreign subsidiaries are not included in the U.S. consolidated income tax return. Approximately $29,000,000 and $14,000,000 of net foreign subsidiary income were not taxable for federal income tax purposes in 1995 and 1994, respectively. In 1993, approximately $7,000,000 of net foreign subsidiary losses were not deductible for federal income tax purposes. 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. 36 20 Federal Express Corporation and Subsidiaries A reconciliation of the statutory federal income tax rate to the Company's effective income tax rate for the years ended May 31 follows:
- ---------------------------------------------------------------------------- 1995 1994 1993 Statutory U.S. income tax rate 35.0% 35.0% 34.0% Increase resulting from: Goodwill amortization 1.0 1.3 2.5 Foreign operations 0.9 3.5 1.3 State income taxes, net of federal benefit 3.1 3.6 4.4 Other, net 3.0 2.6 3.9 - ---------------------------------------------------------------------------- 43.0% 46.0% 46.1% ============================================================================
The Omnibus Budget Reconciliation Act of 1993 increased the statutory U.S. income tax rate from 34% to 35% retroactive to January 1, 1993. The adverse impact of the increase in the statutory rate was offset in 1994 by a corresponding revaluation of the Company's deferred tax assets in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." The net impact of these adjustments was immaterial. At May 31, 1995, the Company had fully utilized the alternative minimum tax credit carryovers from 1991, 1992 and 1993. The significant components of deferred tax assets and liabilities as of May 31 were as follows:
- ----------------------------------------------------------------------------------------------------- In thousands 1995 1994 - ----------------------------------------------------------------------------------------------------- Deferred Deferred Deferred Deferred Tax Assets Tax Liabilities Tax Assets Tax Liabilities Depreciation $ -- $303,088 $ -- $285,524 Deferred gains on sales of assets 67,912 -- 45,969 -- Alternative minimum tax credits -- -- 55,844 -- Employee benefits 69,563 -- 66,875 -- Self-insurance reserves 165,197 -- 148,426 -- Other 137,063 76,802 137,205 59,323 - ----------------------------------------------------------------------------------------------------- $439,735 $379,890 $454,319 $344,847 =====================================================================================================
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. 37 21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table sets forth the funded status of the plans as of May 31:
- ---------------------------------------------------------------------------------------------- In thousands 1995 1994 Actuarial present value of the projected benefit obligation for service rendered to date $ 1,972,009 $ 1,800,187 Less plan assets at fair value 2,093,422 1,733,446 - ---------------------------------------------------------------------------------------------- Projected benefit obligation in excess of (less than) plan assets (121,413) 66,741 Unrecognized net gains from past experience different from that assumed and effects of changes in assumptions 123,929 21,555 Prior service cost not yet recognized in net periodic cost 6,449 (31,581) Unrecognized transition amount (3,679) (797) - ---------------------------------------------------------------------------------------------- Pension liability $ 5,286 $ 55,918 ============================================================================================== Accumulated benefit obligation $ 1,203,126 $ 1,106,076 ============================================================================================== Vested benefit obligation $ 1,140,545 $ 998,024 ==============================================================================================
Net periodic pension cost for the years ended May 31 included the following components:
- ---------------------------------------------------------------------------------------------- In thousands 1995 1994 1993 Service cost - benefits earned during the period $ 182,617 $ 176,861 $ 161,100 Interest cost on projected benefit obligation 143,408 127,959 117,086 Actual return on plan assets (192,939) (82,019) (160,977) Net amortization and deferral 19,333 (64,727) 36,055 - ---------------------------------------------------------------------------------------------- $ 152,419 $ 158,074 $ 153,264 ==============================================================================================
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 8.6% and 6.0%, respectively, in 1995, 8.1% and 6.0%, respectively, in 1994 and 8.0% and 6.0%, respectively, in 1993. The expected long-term rate of return on assets was 9.5% in 1995, 1994 and 1993. 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. The plan provides for discretionary contributions by the Company which are determined annually by the Board of Directors. Profit sharing expense was $52,200,000 in 1995, $36,800,000 in 1994 and $21,900,000 in 1993. 38 22 Federal Express Corporation and Subsidiaries 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 only to retirees of the former Tiger International, Inc. who retired prior to acquisition. Effective June 1, 1992, the Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions." This standard requires that the expected cost of providing postretirement benefits be charged to expense during the years employees render service. Prior to the adoption of SFAS No. 106, the Company charged retiree benefits to expense when paid. These amounts were not significant. The cumulative effect of adopting this standard was $90,230,000 before taxes ($55,943,000 after tax benefit, or $1.03 per share). The following table sets forth the accrued postretirement benefit cost as of May 31:
- -------------------------------------------------------------------------------- In thousands 1995 1994 Accumulated postretirement benefit obligation: Retirees $ 35,816 $ 34,581 Fully eligible active employees 24,400 25,698 Other active employees, not fully eligible 60,769 66,472 - -------------------------------------------------------------------------------- 120,985 126,751 Unrecognized net gain (loss) 25,421 (958) - -------------------------------------------------------------------------------- $146,406 $ 125,793 ================================================================================
Net postretirement benefit expense for the years ended May 31 was as follows:
- -------------------------------------------------------------------------------- In thousands 1995 1994 1993 Service cost $12,870 $ 12,392 $ 9,161 Interest cost 10,617 10,174 8,434 Transition obligation -- -- 90,230 - -------------------------------------------------------------------------------- $23,487 $ 22,566 $107,825 ================================================================================
Future medical benefit costs were estimated to increase at an annual rate of 11.0% during 1996, decreasing to an annual growth rate of 6.8% in 2005 and thereafter. Future dental benefit costs were estimated to increase at an annual rate of 8.8% during 1996, decreasing to an annual growth rate of 6.8% in 2004 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 1998. 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, 1995, or 1995 benefit expense. The weighted average discount 39 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS rates used in estimating the accumulated postretirement obligation were 8.6% and 7.7% at May 31, 1995 and 1994, 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 goods and documents. 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: 1995 $6,839,418 $ 2,552,655 $9,392,073 1994 6,199,940 2,279,516 8,479,456 1993 5,667,964 2,140,079 7,808,043 Operating Income (Loss): 1995 $ 465,527 $ 125,617 $ 591,144 1994 559,629 (28,997) 530,632 1993 559,140 (181,967) 377,173 Identifiable Assets: 1995 $5,321,811 $ 1,111,561 $6,433,372 1994 4,883,644 1,108,854 5,992,498 1993 4,432,578 1,360,486 5,793,064 - --------------------------------------------------------------------------------
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 $1,201,100,000, $1,020,000,000 and $928,600,000 for the years ended May 31, 1995, 1994 and 1993, respectively. 40 24 Federal Express Corporation and Subsidiaries NOTE 11: COMMITMENTS AND CONTINGENCIES The Company's annual purchase commitments under various contracts as of May 31, 1995 are as follows:
- -------------------------------------------------------------------------------- In thousands Aircraft- Aircraft Related(1) Other(2) Total 1996 $499,500 $135,400 $425,500 $1,060,400 1997 429,800 19,100 43,200 492,100 1998 486,000 15,300 33,700 535,000 1999 242,300 18,100 15,600 276,000 2000 124,200 9,900 -- 134,100 - --------------------------------------------------------------------------------
(1) Primarily aircraft modifications, rotables, and development and upgrade of aircraft simulators. (2) Primarily facilities, vehicles, computer and other equipment. The Company is committed to purchase 16 Airbus A300, three Airbus A310, 12 MD-11 and 35 Cessna 208B aircraft to be delivered through 2000. At May 31, 1995, deposits and progress payments of $318,983,000 had been made toward these purchases. At May 31, 1995, the Company had options to purchase up to 44 additional Airbus A300 for delivery beginning in 1999. In addition, the Company may be required to purchase seven MD-11 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 upper (or lower) 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, 1995, the Company had contracts with various financial institutions covering a total notional volume of 97.4 million gallons (approximately 16% of the Company's annual jet fuel consumption), with some contracts extending through August 1996. As of May 31, 1995, the Company had neither received nor made any payments related to these contracts. Based on current market prices, the fair value of these contracts at May 31, 1995, was approximately $141,000. NOTE 12: LEGAL PROCEEDINGS The Internal Revenue Service ("IRS") issued an Examination Report on October 31, 1991 asserting the Company underpaid federal excise taxes for the calendar quarters ended December 31, 1983 through March 31, 1987. The Examination Report contains a primary position and a mutually exclusive alternative position asserting the Company underpaid federal excise taxes by $54,000,000 and $26,000,000, respectively. Disagreeing with essentially all of the proposed adjustments contained in the Examination Report, the Company filed a Protest on March 16, 1992, which set forth the Company's defenses to both IRS positions and a claim for refund of overpaid federal excise taxes of $23,500,000. On March 19, 1993, the IRS issued another Examination Report to the Company asserting the Company underpaid federal excise taxes by $105,000,000 for the calendar quarters ended June 30, 1987 through March 31, 1991. On June 17, 1993, the Company filed a Protest contesting the March 19 Examination Report which set forth the Company's defenses to the IRS position and a claim for refund of overpaid federal excise taxes of $46,500,000. Interest would be payable on the amount of any refunds by the 41 25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS IRS to the Company or underpaid federal excise taxes payable by the Company to the IRS at statutorily determined rates. The interest rates payable by the Company for underpaid taxes are higher than the rates payable by the IRS on refund amounts. The Company is vigorously pursuing its Protests administratively with the IRS Appeals Division. If it is unsuccessful with the IRS Appeals Division, the Company intends to pursue its position in court. Pending resolution of this matter, the IRS can be expected to take positions similar to those taken in their Examination Reports for periods after March 31, 1991. Given the inherent uncertainties in the excise tax matter, management is currently unable to predict with certainty the outcome of this matter or the ultimate effect, if any, its resolution would have on the Company's financial condition or results of operations. No amount has been reserved for this contingency. 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. NOTE 13: UNUSUAL EVENTS In January 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. In 1995, the Company received $9,700,000 from the bankruptcy estate of a firm engaged by the Company in 1990 to remit payments of employee withholding taxes. This amount is 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 of these tax payments to appropriate authorities. The Company may receive additional distributions from the firm's bankruptcy estate depending on the outcome of preference litigation and other pending bankruptcy matters against the firm. NOTE 14: SUMMARY OF QUARTERLY OPERATING RESULTS (Unaudited)
- ------------------------------------------------------------------------------------------ In thousands, except earnings per share First Second Third Fourth Quarter Quarter Quarter Quarter 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 1994 Revenues $2,015,725 $2,121,525 $2,077,414 $2,264,792 Operating income 101,907 149,718 85,317 193,690 Income before income taxes 60,835 110,539 57,717 149,371 Net income 32,851 59,691 31,167 80,661 Earnings per share $ .60 $ 1.07 $ .55 $ 1.43 Average shares outstanding 55,186 55,850 56,445 56,569 - ------------------------------------------------------------------------------------------
42 26 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 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, 1995 and 1994, 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, 1995. 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, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended May 31, 1995, in conformity with generally accepted accounting principles. Arthur Andersen LLP Memphis, Tennessee June 29, 1995 43 27 SELECTED CONSOLIDATED FINANCIAL DATA
Years ended May 31 - ---------------------------------------------------------------------------------------------------- In thousands, except per share data and other operating data 1995 1994 1993 OPERATING RESULTS Revenues $9,392,073 $8,479,456 $7,808,043 Operating income 591,144 530,632 377,173 Income (loss) before income taxes 522,084 378,462 203,576 Income (loss) from continuing operations 297,588 204,370 109,809 Net income (loss) $ 297,588 $ 204,370 $ 53,866 PER SHARE DATA Earnings (loss) per share: Continuing operations $ 5.27 $ 3.65 $ 2.01 Discontinued operations -- -- -- Cumulative effect of changes in accounting principles -- -- (1.03) - ---------------------------------------------------------------------------------------------------- Net earnings (loss) per share $ 5.27 $ 3.65 $ .98 Average shares outstanding 56,494 56,012 54,719 Cash dividends -- -- -- FINANCIAL POSITION Property and equipment, net $3,715,244 $3,449,093 $ 3,476,268 Total assets 6,433,372 5,992,498 5,793,064 Long-term debt 1,324,711 1,632,202 1,882,279 Common stockholders' investment 2,245,569 1,924,705 1,671,381 OTHER OPERATING DATA Express package: Average daily package volume 2,247,594 1,925,105 1,710,561 Average pounds per package 6.3 6.0 5.8 Average revenue per pound* $ 2.31 $ 2.51 $ 2.62 Average revenue per package* $ 14.62 $ 15.12 $ 15.30 Airfreight: Average daily pounds 2,153,041 1,844,270 2,050,033 Average revenue per pound $ 1.06 $ 1.06 $ 1.09 Operating weekdays 255 257 255 Aircraft fleet: Airbus A300-600 9 2 -- Airbus A310-200 15 -- -- Boeing 747-100 -- -- -- Boeing 747-200 5 6 8 McDonnell Douglas MD-11 13 13 8 McDonnell Douglas DC-10-10 13 11 11 McDonnell Douglas DC-10-30 22 19 19 McDonnell Douglas DC-8 -- -- -- Boeing 727-100 68 69 80 Boeing 727-200 90 90 87 Cessna 208A 10 10 10 Cessna 208B 219 206 206 Fokker F-27 32 32 32 Vehicle fleet 35,900 30,900 28,100 Average number of employees (based on a standard full-time workweek) 94,201 88,502 84,104 - ----------------------------------------------------------------------------------------------------
*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. 44 28
Federal Express Corporation and Subsidiaries - --------------------------------------------------------------------------------------------- 1992 1991 1990 1989 1988 1987 1986 $ 7,550,060 $7,688,296 $7,015,069 $5,166,967 $3,882,817 $ 3,178,308 $ 2,573,229 22,967 252,126 387,355 414,787 379,452 364,743 344,021 (146,828) 40,942 218,423 298,332 302,328 311,885 305,085 (113,782) 5,898 115,764 166,451 187,716 166,952 192,671 $ (113,782) $ 5,898 $ 115,764 $ 184,551 $ 187,716 $ (65,571) $ 131,839 $ (2.11) $ .11 $ 2.18 $ 3.18 $ 3.56 $ 3.21 $ 3.86 -- -- -- -- -- (4.48) (1.22) -- -- -- .35 -- -- -- - --------------------------------------------------------------------------------------------- $ (2.11) $ .11 $ 2.18 $ 3.53 $ 3.56 $ (1.27) $ 2.64 53,961 53,350 53,161 52,272 52,670 51,905 49,840 -- -- -- -- -- -- -- $ 3,411,297 $3,624,026 $3,566,321 $3,431,814 $2,231,875 $ 1,861,432 $ 1,551,845 5,463,186 5,672,461 5,675,073 5,293,422 3,008,549 2,499,511 2,276,362 1,797,844 1,826,781 2,148,142 2,138,940 838,730 744,914 561,716 1,579,722 1,668,620 1,649,187 1,493,524 1,330,679 1,078,920 1,091,714 1,472,642 1,310,890 1,234,174 1,059,882 877,543 704,392 550,306 5.7 5.6 5.4 5.4 5.3 5.1 5.3 $ 2.90 $ 3.08 $ 3.13 $ 3.04 $ 3.10 $ 3.33 $ 3.40 $ 16.38 $ 17.33 $ 16.76 $ 16.28 $ 16.32 $ 16.97 $ 17.92 2,258,303 2,650,204 3,148,290 4,019,353 -- -- -- $ 1.22 $ 1.20 $ 1.13 $ 1.06 -- -- -- 254 255 255 255 257 254 254 -- -- -- -- -- -- -- -- -- -- -- -- -- -- 4 8 9 9 -- -- -- 9 10 10 12 -- -- -- 4 1 -- -- -- -- -- 11 11 10 8 8 8 6 17 16 16 16 13 11 9 -- -- 6 6 -- -- -- 85 92 89 80 47 39 35 66 57 41 26 21 21 18 10 10 37 38 38 39 34 206 183 147 109 71 27 -- 32 26 19 7 5 -- -- 30,400 32,800 31,000 28,900 21,000 18,700 14,500 84,162 81,711 75,102 58,136 48,556 41,047 31,582 - ---------------------------------------------------------------------------------------------
45 29
BOARD OF DIRECTORS Federal Express Corporation and Subsidiaries ROBERT H. ALLEN (2) J.R. HYDE, III (2) Private Investor and Managing Partner Chairman and Chief Executive Officer Challenge Investment Partners AutoZone,Inc. Investment firm Auto parts retail chain HOWARD H. BAKER, JR. (1) CHARLES T. MANATT (2) Partner Senior Partner Baker, Donelson, Bearman & Caldwell Manatt, Phelps & Phillips Law firm Law firm ANTHONY J.A. BRYAN (1) GEORGE J. MITCHELL (1) Chairman, Executive Committee Special Counsel Hospital Corporation International Verner, Liipfert, Bernhard, McPherson and Hand Owns, manages and builds hospitals and health-related Law firm facilities in various countries around the world JACKSON W. SMART, JR. (2*) ROBERT L. COX (1) Chairman and Chief Executive Officer Partner MSP Communications, Inc. Waring Cox Radio broadcasting company Law firm FREDERICK W. SMITH RALPH D. DENUNZIO (2) Chairman, President and Chief Executive Officer President Federal Express Corporation Harbor Point Associates, Inc. Private investment and consulting firm DR. JOSHUA I. SMITH (1) Chairman, President and Chief Executive Officer JUDITH L. ESTRIN The MAXIMA Corporation President and Chief Executive Officer Information and data processing firm Precept Software, Inc. Computer software company PETER S. WILLMOTT (1) Chairman and Chief Executive Officer PHILIP GREER (1*) Willmott Services, Inc. Senior Managing Principal Retail and consulting firm Weiss, Peck & Greer, L.L.C. Diversified investment management and securities firm (1) Audit Committee (2) Compensation Committee (*) Committee Chairman
46 30
SENIOR OFFICERS Federal Express Corporation and Subsidiaries FREDERICK W. SMITH JAMES A. MCKINNEY Chairman, President and Senior Vice President Chief Executive Officer President, FedEx Logistics Services WILLIAM J. RAZZOUK GILBERT D. MOOK Executive Vice President Senior Vice President Worldwide Customer Operations Central Support Services DAVID J. BRONCZEK JAMES A. PERKINS Senior Vice President Senior Vice President and Europe, Middle East and Africa Chief Personnel Officer T. MICHAEL GLENN DAVID F. REBHOLZ Senior Vice President Senior Vice President Marketing, Customer Service and Global Sales and Trade Services Corporate Communications TRACY G. SCHMIDT ALAN B. GRAF, JR. Senior Vice President Senior Vice President and Air Ground Terminals and Transportation Chief Financial Officer MARY ALICE TAYLOR DENNIS H. JONES Senior Vice President Senior Vice President and Americas and Caribbean Chief Information Officer THEODORE L. WEISE KENNETH R. MASTERSON Senior Vice President Senior Vice President, Air Operations General Counsel and Secretary JAMES S. HUDSON JOSEPH C. MCCARTY, III Vice President, Controller and Senior Vice President Chief Accounting Officer Asia Pacific
47 31 CORPORATE INFORMATION Form 10-K: A copy of the Company's Annual Report on Form 10-K (excluding exhibits), filed with the Securities and Exchange Commission is available free of charge. You will be mailed a copy upon request to Thomas L. Holland, Investor Relations Department, Federal Express Corporation, Box 727, Dept. 1854, Memphis, Tennessee 38194, (901) 395-3478. Stock listing: The Company's common stock is listed on The New York Stock Exchange under the ticker symbol FDX. Stockholders: At July 13, 1995, there were 8,243 stockholders of record. Market information: Following are high and low closing prices, by quarter, for Federal Express Corporation common stock in fiscal 1995 and 1994. No cash dividends have been declared.
- --------------------------------------------------------------------------------------------- Closing prices of common stock First Quarter Second Quarter Third Quarter Fourth Quarter FY 1995 HIGH $ 80.75 $ 70.75 $ 65.25 $ 69.63 LOW 64.00 56.50 53.88 59.88 - --------------------------------------------------------------------------------------------- FY 1994 High $ 60.25 $ 71.50 $ 77.50 $ 77.25 Low 44.63 55.25 68.25 64.88 - ---------------------------------------------------------------------------------------------
Annual meeting: The annual meeting of stockholders will be held at The Memphis Marriott, 2625 Thousand Oaks Boulevard, Memphis, Tennessee, on Monday, September 25, 1995, at 10:00 a.m., CDT. Registrar and transfer agent: First Chicago Trust Company of New York, Shareholder Services, P.O. Box 2500, Jersey City, NJ 07303-2500, (800) 446-2617 / Michael Phalen (312) 407-4885. Corporate headquarters: 2005 Corporate Avenue, Memphis, Tennessee 38132, (901) 369-3600. Inquiries: For financial information, contact Thomas L. Holland, Manager of Investor Relations, Federal Express Corporation, Box 727, Dept. 1854, Memphis, Tennessee 38194, (901) 395-3478. For general information, contact Shirlee M. Clark, Manager of Media Relations, Federal Express Corporation, Box 727, Dept. 1850, Memphis, Tennessee 38194, (901) 395-3463. Auditors: Arthur Andersen LLP, Memphis, Tennessee. 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, the Federal Express logo, FedEx, FedEx International Economy, FedEx PowerShip, FedEx PowerShip 3, FedEx PowerShip 2, FedEx Drop Box and FedEx Cosmos are registered service marks of Federal Express Corporation. Reg. U.S. Pat. & Tm. Off. The World On Time, FedEx SameDay, 1-800-Go-FedEx, FedEx World Service Center, FedEx ShipSite and FedEx Authorized ShipCenter are service marks and FedEx Ship is a trademark of Federal Express Corporation. [LOGO] Portions of this Annual Report were printed on recycled paper. EX-21.1 14 SUBSIDIARIES OF REGISTRANT 1 EXHIBIT 21.1 FEDERAL EXPRESS CORPORATION JURISDICTION OF ORGANIZATION OR REGISTRATION STATUS ----------------- ------ I. Federal Express Aviation Services, Incorporated Delaware Active ----------------------------------------------- A. Federal Express Aviation Delaware Active Services International, Ltd. II. Federal Express Canada Ltd. Canada Active -------------------------- III. Federal Express International, Delaware Active ------------------------------ Inc. --- A. Dencom Investments Northern Ireland Inactive Limited 1. Dencom Freight Northern Ireland Inactive Holdings Limited a. Federal Express Northern Ireland Inactive (N.I.) Limited b. Fedex (Ireland) Ireland Inactive Limited c. F.E.D.S. (Ireland) Ireland Inactive Limited B. Federal Express Australia Active (Australia) PTY Ltd. C. Federal Express Europe, Delaware Active Inc. 1. Federal Express Belgium Active Europe, Inc. & Co., V.O.F/S.N.C. 2. Federal Express Delaware Active European Services, Inc. 3. PIK Holdings Limited United Kingdom Active
1 2 JURISDICTION OF ORGANIZATION OR REGISTRATION STATUS ----------------- ------ D. Federal Express Delaware Inactive Europlex, Inc. E. Federal Express Delaware Active Holdings, S.A. 1. Federal Express Antigua Active (Antigua) Limited 2. Federal Express French West Indies Active (Antilles Francaises) S.A.R.L. 3. Federal Express Bahamas Active (Bahamas) Limited 4. Federal Express Barbados Active (Barbados) Limited 5. Federal Express Bermuda Active (Bermuda) Limited 6. Federal Express Cayman Islands Active Cayman Limited 7. Federal Express Dominican Republic Active (Dominicana) S.A. a. Inversiones Dominican Republic Active Geminis, S.A. b. Inversiones Piscis, Dominican Republic Active S.A. c. Inversiones Dominican Republic Active Sagitario, S.A. 8. Federal Express Brazil Inactive Entregas Rapidas, Ltd. 9. Federal Express Grenada Active (Grenada) Limited
2 3
JURISDICTION OF ORGANIZATION OR REGISTRATION STATUS ----------------- ------ 10. Federal Express Haiti Inactive (Haiti) S.A. 11. Federal Express Mexico Active Holdings y Compania (Mexico) S.N.C. de C.V. 12. Federal Express Jamaica Active (Jamaica) Limited 13. Federal Express (St. St. Kitts Active Kitts) Limited 14. Federal Express (St. St. Lucia Active Lucia) Limited 15. Federal Express (St. Netherland Antilles Active Maarten) N.V. a. Federal Express Netherland Antilles Active (Aruba) N.V. 16. Federal Express Turks & Caicos Active (Turks & Caicos) Islands Limited 17. Federal Express U.S. Virgin Active Virgin Islands, Inc. Islands F. Federal Express (Hong Hong Kong Liquidation Kong) Limited G. Federal Express France Active International (France) SNC H. Federal Express Mexico Active International Y Compania S.N.C. de C.V. I. Federal Express Italy Delaware Inactive Inc.
3 4
JURISDICTION OF ORGANIZATION OR REGISTRATION STATUS ----------------- ------ 1. Federal Express Italia Italy Liquidation SpA J. Federal Express (Japan) Japan Active K.K. K. Federal Express Limited United Kingdom Liquidation 1. Federal Express United Kingdom Inactive Finance P.L.C. 2. Federal Express United Kingdom Inactive International Limited 3. Federal Express Parcel United Kingdom Inactive Services Limited 4. Federal Express (U.K.) United Kingdom Active Limited a. Federal Express United Kingdom Active (U.K.) Pension Trustees Ltd. 5. Winchmore United Kingdom Inactive Developments Ltd. a. Concorde United Kingdom Inactive Advertising Limited L. Federal Express Delaware Active Luxembourg, Inc. M. Federal Express Pacific, Delaware Active Inc. 1. Federal Express Malaysia Active Services (M) Sdn. Bhd. 2. Udara Express Malaysia Active Courier Services Sdn. Bhd.
4 5
JURISDICTION OF ORGANIZATION OR REGISTRATION STATUS ----------------- ------ N. Federal Express Singapore Active (Singapore) PTE, LTD. O. Federal Express Thailand Active (Thailand) Limited P. Fedex (N. I.) Limited Northern Ireland Inactive IV. Federal Express Leasing Delaware Active ----------------------- Corporation ----------- V. Federal Express Logistics, Inc. Delaware Inactive ------------------------------- VI. Federal Express Missouri Inactive --------------- Redevelopment Corporation ------------------------- VII. FEDEX Aeronautics Delaware Active ----------------- Corporation ----------- VIII. Fedex Customs Brokerage Delaware Inactive ----------------------- Corporation ----------- IX. Fedex Foreign Sales Corporation U. S. Virgin Islands Active ------------------------------- X. Fedex International Delaware Active ------------------- Transmission Corporation ------------------------ XI. Fedex Partners, Inc. Delaware Active -------------------- XII. Tiger International Insurance Ltd. Cayman Islands Active ---------------------------------- XIII. Tiger Trading Company Delaware Inactive ---------------------
5 EX-23.1 15 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 EXHIBIT 23.1 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 Statements Nos. 2-74000, 2-95720, 33-20138, 33-38041 and 33-55055 and Form S-3 Registration Statements Nos. 33-47176, 33-50013, 33-51623 and 33-56569 of our reports dated June 29, 1995, included (or incorporated by reference) in Federal Express Corporation's Form 10-K for the year ended May 31, 1995. /S/ARTHUR ANDERSEN LLP ---------------------- ARTHUR ANDERSEN LLP Memphis, Tennessee, August 1, 1995 EX-24.1 16 POWERS OF ATTORNEY 1 EXHIBIT 24.1 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, William J. Razzouk, 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, 1995, 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 20th day of June, 1995. /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 2 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, William J. Razzouk, 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, 1995, 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 5th day of July, 1995. /s/ HOWARD H. BAKER, JR. ------------------------------------ Howard H. Baker, Jr. STATE OF TENNESSEE COUNTY OF SCOTT I, Cathy J. Burke, 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/ CATHY J. BURKE ------------------------------------ Notary Public My Commission Expires: June 24, 1998 3 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, William J. Razzouk, 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, 1995, 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 June, 1995. /s/ ANTHONY J. A. BRYAN ------------------------------------- Anthony J. A. Bryan STATE OF FLORIDA COUNTY OF PALM BEACH I, Patricia A. Gmyrek, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Anthony J. A. Bryan, 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/ PATRICIA A. GMYREK ------------------------------------- Notary Public My Commission Expires: March 30, 1997 4 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, William J. Razzouk, 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, 1995, 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 2nd day of June, 1995. /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: April 29, 1997 5 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, William J. Razzouk, 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, 1995, 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 21st day of June, 1995. /s/ RALPH D. DENUNZIO ------------------------------------- Ralph D. DeNunzio STATE OF NEW YORK COUNTY OF NEW YORK I, Pauline E. 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: February 28, 1996 6 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, William J. Razzouk, 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, 1995, 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 10th day of July, 1995. /s/ JUDITH L. ESTRIN ------------------------------------- Judith L. Estrin STATE OF PENNSYLVANIA COUNTY OF ALLEGHENY I, Patricia Ann Power, 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/ PATRICIA ANN POWER ------------------------------------- Notary Public My Commission Expires: December 6, 1996 7 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, William J. Razzouk, 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, 1995, 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, 1995. /s/ PHILIP GREER ----------------------------------- Philip Greer STATE OF NEW YORK COUNTY OF NEW YORK I, Kathleen M. Rode, 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/ KATHLEEN M. RODE -------------------------------------- Notary Public My Commission Expires: May 31, 1996 8 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, William J. Razzouk, 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, 1995, 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 21st day of June, 1995. /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: October 24, 1995 9 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, William J. Razzouk, 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, 1995, 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 6th day of July, 1995. /s/ CHARLES T. MANATT ------------------------------------- Charles T. Manatt DISTRICT OF COLUMBIA CITY OF WASHINGTON I, Zandra R. Williams, a Notary Public in and for the District of Columbia, 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/ ZANDRA R. WILLIAMS ------------------------------------- Notary Public My Commission Expires: March 14, 1996 10 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, William J. Razzouk, 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, 1995, 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 8th day of June, 1995. /s/ GEORGE J. MITCHELL ------------------------------------- George J. Mitchell DISTRICT OF COLUMBIA CITY OF WASHINGTON I, Victoria K. Wolf, a Notary Public in and for the District of Columbia, 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/ VICTORIA K. WOLF ------------------------------------- Notary Public My Commission Expires: August 31, 1997 11 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, William J. Razzouk, 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, 1995, 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, 1995. /s/ JACKSON W. SMART, JR. ------------------------------------- Jackson W. Smart, Jr. STATE OF ILLINOIS COUNTY OF COOK I, Esperanza Acosta, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Jackson W. Smart, 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/ ESPERANZA ACOSTA ------------------------------------- Notary Public My Commission Expires: February 8, 1997 12 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, William J. Razzouk, 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, 1995, 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 30th day of June, 1995. /s/ JOSHUA I. SMITH ------------------------------------- Joshua I. Smith STATE OF MARYLAND COUNTY OF PRINCE GEORGE'S 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: May 1, 1996 13 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, William J. Razzouk, 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, 1995, 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 12th day of June, 1995. /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: March 5, 1999 14 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, the Chief Financial Officer of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, William J. Razzouk 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, 1995, 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 5th day of June 1995. /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: October 24, 1995 15 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, the Executive Vice President, Worldwide Customer Operations, 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 officer, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1995, 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 6th day of June, 1995. /s/ WILLIAM J. RAZZOUK ------------------------------------- William J. Razzouk STATE OF TENNESSEE COUNTY OF SHELBY I, Sharon A. Smith, a Notary Public in and for said County, in the aforesaid State, do hereby certify that William J. Razzouk, 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/ SHARON A. SMITH ------------------------------------- Notary Public My Commission Expires: March 16, 1997 16 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 William J. Razzouk, 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, 1995, 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 5th day of June, 1995. /s/ FREDERICK W. SMITH ------------------------------------- Frederick W. Smith 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 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/ JOYCE J. JONES ------------------------------------- Notary Public My Commission Expires: August 12, 1998 17 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, William J. Razzouk 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, 1995, 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 13th day of July, 1995. /s/ JAMES S. HUDSON ------------------------------------- James S. Hudson STATE OF TENNESSEE COUNTY OF SHELBY I, Delores M. Wolfmeyer, 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/ DELORES M. WOLFMEYER ------------------------------------- Notary Public My Commission Expires: December 1, 1996 EX-27.1 17 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENTS OF INCOME AND THE CONSOLIDATED BALANCE SHEETS ON PAGES 25 - 27 OF EXHIBIT 13.1 OF THE COMPANY'S FORM 10-K FOR THE YEAR ENDED MAY 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR MAY-31-1995 JUN-01-1994 MAY-31-1995 357,548 0 1,161,427 31,173 193,251 1,869,082 7,697,711 3,982,467 6,433,372 1,778,535 1,324,711 5,617 0 0 2,239,952 6,433,372 0 9,392,073 0 8,800,929 0 0 114,687 522,084 224,496 0 0 0 0 297,588 5.27 5.27
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