<PAGE>
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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTER ENDED NOVEMBER 30, 1998, OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO
__________.
COMMISSION FILE NUMBER: 333-39483
FDX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 62-1721435
(State of incorporation) (I.R.S. Employer
Identification No.)
6075 Poplar Avenue, Suite 300
Memphis, Tennessee 38119
(Address of principal (Zip Code)
executive offices)
(901) 369-3600
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock Outstanding Shares at December 31, 1998
Common Stock, par value $.10 per share 147,963,830
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<PAGE>
FDX CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
Condensed Consolidated Balance Sheets
November 30, 1998 and May 31, 1998............................................. 3-4
Condensed Consolidated Statements of Income
Three and Six Months Ended November 30, 1998 and 1997.......................... 5
Condensed Consolidated Statements of Cash Flows
Six Months Ended November 30, 1998 and 1997.................................... 6
Notes to Condensed Consolidated Financial Statements................................ 7-11
Review of Condensed Consolidated Financial Statements
by Independent Public Accountants.............................................. 12
Report of Independent Public Accountants............................................ 13
Management's Discussion and Analysis of Results of Operations
and Financial Condition........................................................ 14-23
PART II. OTHER INFORMATION
Legal Proceedings................................................................... 24
Exhibits and Reports on Form 8-K.................................................... 24
EXHIBIT INDEX....................................................................... E-1
</TABLE>
- 2 -
<PAGE>
FDX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
November 30,
1998 May 31,
(Unaudited) 1998
------------- ---------
<S> <C> <C>
(In thousands)
Current Assets:
Cash and cash equivalents................................... $ 664,443 $ 229,565
Receivables, less allowances of
$67,374,000 and $61,409,000............................... 2,102,834 1,943,423
Spare parts, supplies and fuel.............................. 332,050 364,714
Deferred income taxes....................................... 256,731 232,790
Prepaid expenses and other.................................. 56,245 109,640
----------- -----------
Total current assets.................................... 3,412,303 2,880,132
----------- -----------
Property and Equipment, at Cost.................................. 13,198,930 12,463,874
Less accumulated depreciation and amortization.............. 6,927,917 6,528,824
----------- -----------
Net property and equipment.............................. 6,271,013 5,935,050
----------- -----------
Other Assets:
Goodwill.................................................... 349,954 356,272
Equipment deposits and other assets......................... 520,636 514,606
----------- -----------
Total other assets...................................... 870,590 870,878
----------- -----------
$10,553,906 $ 9,686,060
=========== ===========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
- 3 -
<PAGE>
FDX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
November 30,
1998 May 31,
(Unaudited) 1998
-------------- ----------
<S> <C> <C>
(In thousands)
Current Liabilities:
Short-term borrowings...................................... $ 422,512 $ -
Current portion of long-term debt.......................... 114,087 257,529
Salaries, wages and benefits............................... 678,905 611,750
Accounts payable............................................. 1,099,123 1,145,410
Accrued expenses........................................... 890,939 789,150
----------- ----------
Total current liabilities.............................. 3,205,566 2,803,839
----------- ----------
Long-Term Debt, Less Current Portion............................ 1,362,013 1,385,180
Deferred Income Taxes........................................... 271,766 274,147
Other Liabilities............................................... 1,414,660 1,261,664
Commitments and Contingencies (Notes 7 and 8)
Common Stockholders' Investment:
Common Stock, $.10 par value;
400,000,000 shares authorized, 147,655,638
and 147,410,578 issued................................. 14,766 14,741
Additional paid-in capital................................. 998,979 992,821
Retained earnings ......................................... 3,331,513 2,999,354
Deferred compensation and other............................ (21,934) (18,409)
Cumulative foreign currency
translation adjustments.................................. (23,423) (27,277)
----------- ----------
Total common stockholders' investment.................. 4,299,901 3,961,230
----------- ----------
$10,553,906 $9,686,060
=========== ==========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
- 4 -
<PAGE>
FDX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
--------------------------- -------------------------
1998 1997 1998 1997
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
(In thousands, except per share amounts)
Revenues........................................ $ 4,209,237 $3,942,018 $8,291,539 $7,808,509
Operating Expenses:
Salaries and employee benefits.............. 1,756,999 1,614,592 3,505,115 3,251,633
Purchased transportation.................... 397,142 367,979 768,363 696,685
Rentals and landing fees.................... 347,717 336,254 679,228 628,647
Depreciation and amortization............... 252,196 236,713 502,373 466,857
Maintenance and repairs..................... 236,367 210,436 484,077 423,035
Fuel........................................ 153,710 186,330 303,141 365,068
Other....................................... 728,119 700,765 1,428,412 1,383,730
---------- ---------- --------- ---------
3,872,250 3,653,069 7,670,709 7,215,655
---------- ---------- --------- ---------
Operating Income................................. 336,987 288,949 620,830 592,854
Other Income (Expense):
Interest, net............................... (24,853) (32,110) (50,087) (61,778)
Other, net.................................. 270 (120) (2,991) 10,429
---------- ---------- --------- --------
(24,583) (32,230) (53,078) (51,349)
---------- ---------- --------- --------
Income Before Income Taxes....................... 312,404 256,719 567,752 541,505
Provision for Income Taxes....................... 129,648 106,895 235,617 226,904
---------- ---------- --------- ---------
Net Income....................................... $ 182,756 $ 149,824 $ 332,135 $ 314,601
========== ========== ========== =========
Earnings per common share:
Basic....................................... $ 1.24 $ 1.02 $ 2.25 $ 2.15
========== ========== ========== =========
Assuming dilution........................... $ 1.23 $ 1.00 $ 2.23 $ 2.11
========== ========== ========== =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
- 5 -
<PAGE>
FDX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
November 30,
----------------------------
1998 1997
---------- ---------
<S> <C> <C>
(In thousands)
Net Cash Provided by Operating Activities.................................... $887,115 $671,312
Investing Activities:
Purchases of property and equipment, including
deposits on aircraft of $100,000
and $6,392,000......................................................... (964,163) (824,303)
Proceeds from disposition of property
and equipment:
Sale-leaseback transactions......................................... 80,995 162,900
Reimbursements of A300 deposits..................................... 25,130 106,991
Other dispositions.................................................. 154,087 121,498
Other, net.............................................................. (692) 5,162
-------- --------
Net cash used in investing activities........................................ (704,643) (427,752)
-------- --------
Financing Activities:
Short-term borrowings, net.............................................. 422,512 -
Proceeds from long-term debt issuances.................................. - 267,105
Principal payments on long-term debt.................................... (167,690) (414,952)
Proceeds from stock issuances........................................... 5,753 8,007
Other, net.............................................................. (8,169) (11,337)
-------- --------
Net cash provided by (used in) financing
activities.................................................................. 252,406 (151,177)
-------- --------
Net increase in cash and cash equivalents.................................... 434,878 92,383
Cash and cash equivalents at beginning of period............................. 229,565 161,361
-------- --------
Cash and cash equivalents at end of period................................... $664,443 $253,744
-------- --------
-------- --------
Cash payments for:
Interest (net of capitalized interest).................................. $ 56,798 $ 60,886
-------- --------
-------- --------
Income taxes............................................................ $202,257 $212,053
-------- --------
-------- --------
Non-cash investing and financing activities:
Fair value of assets surrendered under
exchange agreements (with two airlines)............................... $ 26,006 $ 59,718
Fair value of assets acquired under
exchange agreements................................................... 14,300 47,606
-------- --------
Fair value of assets surrendered in excess
of assets acquired.................................................... $ 11,706 $ 12,112
-------- --------
-------- --------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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<PAGE>
FDX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BUSINESS COMBINATION AND BASIS OF PRESENTATION
On January 27, 1998, Federal Express Corporation ("FedEx") and Caliber
System, Inc. ("Caliber") became wholly-owned subsidiaries of a newly-formed
holding company, FDX Corporation (the "Company"). In this transaction, which was
accounted for as a pooling of interests, Caliber shareholders received 0.8
shares of the Company's common stock for each share of Caliber common stock.
Each share of FedEx common stock was automatically converted into one share of
the Company's common stock. There were approximately 146,800,000 of $0.10 par
value shares so issued or converted. The accompanying financial statements have
been restated to include the financial position and results of operations for
both FedEx and Caliber for all periods presented.
The Company operates on four, three-month quarters with a fiscal year
ending May 31. Prior to the current fiscal year, Caliber operated on a 13
four-week period calendar ending December 31, with 12 weeks in each of the
first three quarters and 16 weeks in the fourth quarter. FedEx's fiscal year
ending May 31 consisted of four, three-month quarters. The Company's
consolidated results of operations for the quarter ended November 30, 1997
comprise Caliber's prior year period from August 17, 1997 to November 8, 1997
consolidated with FedEx's quarter ended November 30, 1997.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These interim financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information, the
instructions to Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X,
and should be read in conjunction with the Company's Annual Report on Form 10-K
for the year ended May 31, 1998. Accordingly, significant accounting policies
and other disclosures normally provided have been omitted since such items are
disclosed therein.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments necessary to
present fairly the consolidated financial position of the Company as of
November 30, 1998 and the consolidated results of its operations for the
three and six-month periods ended November 30, 1998 and 1997, and its
consolidated cash flows for the six-month periods ended November 30, 1998 and
1997. Operating results for the three and six-month periods ended November
30, 1998 are not necessarily indicative of the results that may be expected
for the year ending May 31, 1999.
Effective June 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." The Statement
requires the Company to include within its financial statements information
on comprehensive income, which is defined as all activity impacting equity
from non-owner sources. For the Company, comprehensive income includes net
income and foreign currency translation adjustments. Total comprehensive
income, net of taxes, for the three months ended November 30, 1998 and 1997
was $200,055,000 and $143,165,000, respectively. For the six months ended
November 30, 1998 and 1997, total comprehensive income, net of taxes, was
$335,989,000 and $304,040,000, respectively.
Effective June 1, 1998, the Company also adopted Statement of Position
("SOP") 98-1, "Accounting for the Cost of Computer Software Developed or
Obtained for Internal Use." SOP 98-1 provides guidance on accounting for
these costs, requiring certain of them to be capitalized. For the three and
six months ended November 30, 1998, incremental costs of $9,200,000 and
$16,400,000, respectively, were capitalized.
- 7 -
<PAGE>
Certain prior period amounts have been reclassified to conform to the
current presentation.
(3) LONG-TERM DEBT
<TABLE>
<CAPTION>
November 30,
1998 May 31,
(Unaudited) 1998
------------- -----------
<S> <C> <C>
(In thousands)
Unsecured notes payable, interest rates of
7.60% to 10.57%, due through 2098.............................. $1,087,974 $1,253,770
Unsecured sinking fund debentures, interest
rate of 9.63%, due through 2020................................ 98,564 98,529
Capital lease obligations and tax exempt bonds,
interest rates of 5.35% to 7.88%,
due through 2017............................................... 254,032 253,425
Less bond reserves............................................. 9,024 9,024
---------- ----------
245,008 244,401
Other, interest rates of 9.68% to 9.98%.......................... 44,554 46,009
---------- ----------
1,476,100 1,642,709
Less current portion........................................... 114,087 257,529
---------- ----------
$1,362,013 $1,385,180
---------- ----------
---------- ----------
</TABLE>
(4) OTHER FINANCING ARRANGEMENTS
At November 30, 1998, short-term borrowings comprise commercial paper, net
of related discounts. Interest rates on these borrowings approximate 6.2%. As in
the past, the Company may from time to time refinance its commercial paper
borrowings with the facilities described below.
During November, the Company entered into an agreement to obtain a business
interruption facility as one component of contingency plans implemented in
response to a threatened strike by the Fedex Pilots Association ("FPA"). This
agreement became effective December 10, 1998 and provides for a commitment of
$1,000,000,000 through December 9, 1999. The facility, which bears interest at
LIBOR plus 200 basis points, is cancelable at any time by the Company or
immediately upon ratification of a collective bargaining agreement with the FPA.
The facility contains various covenants including restrictions on additional
indebtedness and potential collateralization of certain assets of the Company
and its subsidiaries if the Company's debt rating ceases to be investment grade.
In connection with entering into the business interruption facility
described above, the Company's existing $1,000,000,000 revolving credit
agreement with domestic and foreign banks was amended to allow for the
business interruption facility. Concurrently, the Company extended a portion
of the agreement. The revolving credit agreement comprises two parts. The
first part provides for a commitment of $800,000,000 through January 27,
2003. The second part, which expires initially on January 14, 1999 and was
amended to provide a one-year extension through January 14, 2000, provides
for a 364-day commitment of $200,000,000. Interest rates on borrowings under
this agreement are generally determined by maturities selected and prevailing
market conditions. Commercial paper borrowings are backed by unused
commitments under this revolving credit agreement and reduce the amount
available under the agreement. At November 30, 1998, $572,360,000 of the
commitment amount was available.
- 8 -
<PAGE>
(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 November 30, 1998, none of these shares had been issued.
(6) COMPUTATION OF EARNINGS PER SHARE
The calculation of basic and diluted earnings per share for the three and
six-month periods ended November 30, 1998 and 1997 was as follows (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
---------------------- ----------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income applicable to common
stockholders.................................. $182,756 $149,824 $332,135 $314,601
======== ======== ======== ========
Average shares of common stock
outstanding................................... 147,554 146,475 147,494 146,406
======== ======== ======== ========
Basic earnings per share......................... $ 1.24 $ 1.02 $ 2.25 $ 2.15
======== ======== ======== ========
Average shares of common stock
outstanding................................... 147,554 146,475 147,494 146,406
Common equivalent shares:
Assumed exercise of outstanding
dilutive options............................. 5,374 6,895 5,866 6,947
Less shares repurchased from
proceeds of assumed exercise
of options................................... (4,002) (4,092) (4,211) (4,359)
-------- -------- -------- --------
Average common and common equivalent shares...... 148,926 149,278 149,149 148,994
======== ======== ======== ========
Diluted earnings per share....................... $ 1.23 $ 1.00 $ 2.23 $ 2.11
======== ======== ======== ========
</TABLE>
(7) COMMITMENTS
As of November 30, 1998, the Company's purchase commitments for the
remainder of 1999 and annually thereafter under various contracts are as follows
(in thousands):
<TABLE>
<CAPTION>
Aircraft-
Aircraft Related(1) Other(2) Total
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
1999 (remainder) $ 77,600 $273,100 $312,000 $ 662,700
2000 641,800 565,400 177,100 1,384,300
2001 269,800 509,000 69,500 848,300
2002 240,600 156,200 18,100 414,900
2003 457,400 156,600 - 614,000
</TABLE>
(1) Primarily aircraft modifications, rotables and spare parts and engines.
(2) Vehicles, facilities, computers and other equipment.
FedEx is committed to purchase six Airbus A300s, 33 MD11s and 50 Ayres ALM
200s to be delivered through 2007. Deposits and progress payments of $68,594,000
have been made toward these purchases.
- 9 -
<PAGE>
FedEx has entered into agreements with two airlines to acquire 53 DC10
aircraft, spare parts, aircraft engines and other equipment, and maintenance
services in exchange for a combination of aircraft engine noise reduction kits
and cash. Delivery of these aircraft began in 1997 and will continue through
2001. Additionally, these airlines may exercise put options through December 31,
2003, requiring FedEx to purchase up to 29 additional DC10s along with
additional aircraft engines and equipment.
During the six-month period ended November 30, 1998, FedEx acquired six
Airbus A300s under operating leases. These aircraft were included as purchase
commitments as of May 31, 1998. At the time of delivery, FedEx sold its rights
to purchase these aircraft to third parties who reimbursed FedEx for its
deposits on the aircraft and paid additional consideration. FedEx then entered
into operating leases with each of the third parties who purchased the aircraft
from the manufacturer.
Lease commitments added since May 31, 1998 for the six Airbus A300s and one
MD11 purchased in the first quarter of 1999 and subsequently sold and leased
back, are as follows (in thousands):
<TABLE>
<S> <C>
1999 $ 19,800
2000 37,100
2001 36,800
2002 38,400
2003 38,200
Thereafter 788,700
</TABLE>
(8) LEGAL PROCEEDINGS
Customers of FedEx have filed four separate class-action lawsuits against
FedEx generally alleging that FedEx has breached its contract with the
plaintiffs in transporting packages shipped by them. These lawsuits allege that
FedEx continued to collect a 6.25% federal excise tax on the transportation of
property shipped by air after the tax expired on December 31, 1995, until it was
reinstated in August 1996. The plaintiffs seek certification as a class action,
damages, an injunction to enjoin FedEx from continuing to collect the excise tax
referred to above, and an award of attorneys' fees and costs. Three of those
cases were consolidated in Minnesota Federal District Court. That court stayed
the consolidated cases in favor of a case filed in Circuit Court of Greene
County, Alabama. The stay was lifted in July 1998. The complaint in the Alabama
case also alleges that FedEx continued to collect the excise tax on the
transportation of property shipped by air after the tax expired again on
December 31, 1996.
A fifth case, filed in the Supreme Court of New York, New York County,
containing allegations and requests for relief substantially similar to the
other four cases was dismissed with prejudice on FedEx's motion on October 7,
1997. The Court found that there was no breach of contract and that the other
causes of action were preempted by federal law. The plaintiffs have appealed.
This case originally alleged that FedEx continued to collect the excise tax on
the transportation of property shipped by air after the tax expired on December
31, 1996. The New York complaint was later amended to cover the first expiration
period of the tax (December 31, 1995 through August 27, 1996) covered in the
original Alabama complaint.
The air transportation excise tax expired on December 31, 1995, was
reenacted by Congress effective August 27, 1996, and expired again on December
31, 1996. The excise tax was then reenacted by Congress effective March 7, 1997.
The expiration of the tax relieved FedEx of its obligation to pay the tax during
the periods of expiration. The Taxpayer Relief Act of 1997, signed by President
Clinton in August 1997, extended the tax for 10 years through September 30,
2007.
- 10 -
<PAGE>
FedEx intends to vigorously defend itself in these cases. No amount has
been reserved for these contingencies.
The Company and its subsidiaries are subject to other legal proceedings and
claims which arise in the ordinary course of their 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.
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<PAGE>
REVIEW OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BY INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, independent public accountants, has performed a review
of the condensed consolidated balance sheet of the Company as of November 30,
1998, and the related condensed consolidated statements of income for the three
and six-month periods ended November 30, 1998 and 1997 and the condensed
consolidated statements of cash flows for the six-month periods ended November
30, 1998 and 1997, included herein, as indicated in their report thereon
included on page 13.
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<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of FDX Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of
FDX Corporation and subsidiaries as of November 30, 1998 and the related
condensed consolidated statements of income for the three and six-month periods
ended November 30, 1998 and 1997 and the condensed consolidated statements of
cash flows for the six-month periods ended November 30, 1998 and 1997. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of FDX Corporation and subsidiaries as
of May 31, 1998 and the related consolidated statements of income, changes in
common stockholders' investment and cash flows for the year then ended. In our
report dated July 8, 1998, we expressed an unqualified opinion on those
financial statements, which are not presented herein. In our opinion, the
accompanying condensed consolidated balance sheet of FDX Corporation and
subsidiaries as of May 31, 1998, is fairly stated in all material respects in
relation to the consolidated balance sheet from which it has been derived.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Memphis, Tennessee
December 16, 1998
- 13 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
For the second quarter ended November 30, 1998, the Company recorded
consolidated net income of $183 million ($1.23 per share, assuming dilution) on
revenues of $4.2 billion compared with net income of $150 million ($1.00 per
share, assuming dilution) on revenues of $3.9 billion for the same period in the
prior year. For the six months ended November 30, 1998, the Company recorded
consolidated net income of $332 million ($2.23 per share, assuming dilution) on
revenues of $8.3 billion compared with net income of $315 million ($2.11 per
share, assuming dilution) on revenues of $7.8 billion for the same period in the
prior year. These results reflect improved domestic operations at Federal
Express Corporation ("FedEx"), RPS, Inc. ("RPS") and Viking Freight,
Inc.("Viking").
The prior year's year-to-date results of operations included the impact of
the Teamsters strike against United Parcel Service ("UPS") in August 1997.
During the 12 operating days of the strike, FedEx delivered approximately
800,000 additional U.S. domestic express packages per day, and RPS delivered
approximately 300,000 additional packages per day. The Company analytically
calculated that the volume not retained at the end of the first quarter of 1998
contributed approximately $170 million in revenues and approximately $.25
additional earnings per share to that quarter.
Revenues
The following table shows a comparison of revenues (in millions):
<TABLE>
<CAPTION>
Second Quarter YTD Period
Ended Ended
November 30, November 30,
------------------- Percent ------------------- Percent
1998 1997 Change 1998 1997 Change
-------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
FedEx:
U.S. domestic express......................... $2,442 $2,266 + 8 $4,865 $4,601 + 6
International Priority (IP)................... 762 699 + 9 1,487 1,354 +10
International Express Freight
(IXF) and Airport-to-Airport
(ATA)..................................... 139 166 -17 272 317 -14
Charter, Logistics services
and other................................. 139 168 -17 275 324 -15
------ ------ ------ ------
3,482 3,299 + 6 6,899 6,596 + 5
----- ------ ------ ------
RPS .......................................... 481 420 +14 921 778 +18
Viking .......................................... 94 88 + 7 190 190 --
Other .......................................... 152 135 +13 282 245 +15
------ ------ ------ ------
$4,209 $3,942 + 7 $8,292 $7,809 + 6
====== ====== ====== ======
</TABLE>
- 14 -
<PAGE>
The following table shows a comparison of selected operating statistics
(packages, pounds and shipments in thousands):
<TABLE>
<CAPTION>
Second Quarter YTD Period
Ended Ended
November 30, November 30,
-------------------- Percent -------------------- Percent
1998 1997 Change 1998 1997 Change
-------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
FedEx:
U.S. domestic express:
Average daily packages.................... 2,860 2,732 + 5 2,791 2,712 + 3
Revenue per package....................... $13.55 $13.17 + 3 $13.51 $13.36 + 1
IP:
Average daily packages.................... 285 265 + 8 275 256 + 8
Revenue per package....................... $42.45 $41.89 + 1 $41.96 $41.73 + 1
IXF/ATA:
Average daily pounds...................... 2,719 2,984 - 9 2,669 2,816 - 5
Revenue per pound......................... $ .81 $ .88 - 8 $ .79 $ .89 -11
Operating weekdays............................ 63 63 129 127
RPS:
Average daily packages.................... 1,464 1,410 + 4 1,386 1,322 + 5
Revenue per package....................... $ 5.30 $ 5.05 + 5 $ 5.28 $ 5.03 + 5
Operating weekdays............................ 62 59 126 117
Viking:
Shipments per day......................... 13.1 12.9 + 1 12.9 14.9 -14
Revenue per hundred weight................ $ 9.76 $ 9.52 + 3 $ 9.70 $ 9.06 + 7
Operating weekdays............................ 62 59 127 117
</TABLE>
FedEx's U.S. domestic package revenue rose as both package volume and
revenue per package (yield) increased for the quarter and year-to-date periods.
During these periods, FedEx experienced increased volume of its higher-priced,
overnight services and increased average weight per package. Both of these
factors contributed to the rise in U.S. domestic yield for the quarter and
six-month periods. A threatened strike by the Fedex Pilots Association ("FPA")
in late November had a nominal negative effect on U.S. domestic package volume
growth. The year-to-date results for the prior year included the additional
volume during the UPS strike, which was primarily in the deferred service
category and generally at list price. Excluding the revenue and volume
associated with the UPS strike and the proceeds from a temporary fuel surcharge
in the prior year, U.S. domestic average daily package volume and yield
increased 5% and 3% year over year, respectively, for the six-month period.
Management expects total U.S. domestic express package volume in 1999 to
continue to grow at a lower rate than that experienced in the past two fiscal
years. Management believes that U.S. domestic yield should remain stable or
increase slightly, year over year, during the remainder of 1999 due to continued
effects of yield-management actions and FedEx's improved ability to capture
incremental revenue due to it based upon certain package characteristics, such
as weight and package dimensions. Actual results may vary depending on the
impact of domestic economic conditions, competitive pricing changes, customer
responses to yield-management initiatives and changing customer demand patterns.
FedEx's IP revenue increased 9% and 10% for the quarter and year-to-date
periods, respectively, as average daily packages and yields increased during
- 15 -
<PAGE>
these periods. FedEx's IP volume growth rates continue to lag behind those
experienced in prior years primarily due to weakness in Asian markets,
especially in U.S. outbound traffic to that region. IP yields increased 1% for
the quarter and year-to-date periods as FedEx initiated limited pricing changes
to offset various international currency fluctuations. Management expects IP
growth rates to be constrained during the remainder of the fiscal year,
primarily due to continuing international economic weakness. Management expects
IP yields to remain constant or improve slightly as a result of currency-related
pricing changes. Actual IP results will depend on international economic
conditions, actions by FedEx's competitors and regulatory conditions for
international aviation rights.
FedEx's airfreight (IXF/ATA) volume, revenue and yield declined year over
year for the quarter and six-month periods. IXF volume (a space-confirmed,
time-definite service) decreased 2% for the quarter and was flat year-to-date,
but yield declined 9% and 11% for the same periods. ATA volume (a lower-priced,
space-available service) decreased 23% and 16% for the quarter and year-to-date
periods, respectively, with yield lower by 13% and 14% for the same periods.
Management expects airfreight volume and yield to continue to decline, year over
year, through the balance of 1999. Due to the impact of difficult international
economic conditions on IP and airfreight traffic, management has adjusted
FedEx's expansion and aircraft deployment plans accordingly. Actual airfreight
results will depend on international economic conditions, actions by FedEx's
competitors, including capacity fluctuations, and regulatory conditions for
international aviation rights.
RPS's year-over-year revenue growth of 14% and 18% for the quarter and
year-to-date periods reflected three and nine additional operating days in these
current year periods. For the second quarter and six-month period ending
November 30, 1998, RPS's revenue increased 9% and 13% year over year after
adjusting for the additional operating days and the incremental revenue
associated with the UPS strike. This revenue growth is a result of 4% and 7%
increases in average daily volume, after adjusting for the prior year's
strike-related volume, and a 5% increase in yields for both periods. Yields
improved primarily as a result of various yield-management actions, including a
3.7% rate increase in February 1998.
RPS's year-over-year comparison for the third quarter will be impacted by a
difference in the number of operating weekdays in these periods. The current
year's third quarter will have 62 operating weekdays; whereas, the prior year's
third quarter (November 9, 1997 to February 28, 1998) had 75 operating weekdays.
Revenue increased 2% for the quarter and decreased 8% for the year-to-date
period on a daily basis considering three and ten additional operating days in
the current year for these periods. Viking's prior year year-to-date revenues
and shipment statistics reflect the operations of Central Freight Lines Inc.,
which was sold at the end of June 1997 in conjunction with Viking's
restructuring in March 1997. Revenue per hundredweight increased 3% and 7% for
the quarter and six months ended November 30, 1998, respectively.
Operating Expenses
The increase in salaries and employee benefits for the quarter and
year-to-date periods was primarily driven by volume-related increases at FedEx.
Salaries and wages, as well as group insurance, increased for these periods
primarily due to an increase in the number of employees.
- 16 -
<PAGE>
The increases in purchased transportation for the quarter and year-to-date
periods were primarily related to volume growth at RPS.
A 3% and 8% increase in rentals and landing fees for the quarter and
year-to-date periods, respectively, was primarily due to additional facilities
being leased by FedEx. The current year's expense includes additional building
leases at the Indianapolis and Alliance-Fort Worth hubs. In the second quarter,
supplemental aircraft lease and equipment lease expense declined year over year.
In the prior year's second quarter, supplemental leased aircraft had been added
to meet the demands of increased package volume during peak season and to
replace an MD11 destroyed in July 1997, whereas in the current quarter, leased
fleet aircraft were available for capacity needs. As of November 30, 1998, FedEx
had 93 wide-bodied aircraft under operating lease compared with 84 as of
November 30, 1997. During the six-month period, the additional leased fleet
aircraft contributed to the rise in rental and landing fees. The prior year's
first quarter expense was favorably impacted by approximately $9 million of a
$17 million net gain resulting from the destruction of a leased MD11 aircraft in
an accident in July 1997 (described below in Other Income and Expense).
Management expects year-over-year increases in lease expense to continue as
FedEx enters into additional aircraft rental agreements during 1999 and
thereafter. FedEx expects to be able to convert its A300 purchase commitments
into direct operating leases. (See Note 7 of Notes to Condensed Consolidated
Financial Statements.)
Maintenance and repairs expense increased 12% and 14% for the quarter and
year-to-date periods, respectively, primarily due to higher year-over-year
engine maintenance expense on MD11 and B727 aircraft. In the first quarter of
1998, an accrual for the disposition of leased B747 aircraft was increased $9
million, with the majority of this increase recorded as maintenance and repairs
expense. Management believes that maintenance and repairs expense will continue
a long-term trend of year-over-year increases for the foreseeable future due to
the increasing size and age of FedEx's fleet and the variety of aircraft types.
Fuel expense fell 18% and 17% for the quarter and six-month periods,
respectively, primarily as a result of declines in jet fuel price per gallon
(22% and 23%, respectively), partially offset by increases in jet fuel gallons
consumed (2% and 6%, respectively). The prior year's fuel expense included
payments made by FedEx under contracts which were designed to limit FedEx's
exposure to fluctuations in jet fuel prices. Effective August 1, 1997, FedEx
lifted its temporary 2% fuel surcharge that had been in place on certain U.S.
domestic and U.S. export shipments. This surcharge was implemented on February
3, 1997 to mitigate the impact of rising jet fuel prices.
Other operating expense increased 4% and 3% for the quarter and
year-to-date periods, respectively. Other operating expense includes temporary
labor and other outside service contracts, communications expense and the cost
of sales of engine noise reduction kits.
On October 30, 1998, contract negotiations between FedEx and the FPA
were discontinued. In November, the FPA began actively encouraging its
members to decline all overtime work and issued ballots seeking strike
authorization. To avoid service interruptions related to a threatened strike,
the Company and FedEx began strike contingency planning including entering
into agreements for additional third party air and ground transportation and
establishing special financing arrangements. Subsequently, the FPA agreed to
end all job actions for 60 days and negotiations resumed. Such negotiations
have resulted in a tentative agreement subject to ratification by the FPA
membership in February 1999. Costs associated with these contingency plans,
including contracts for supplemental airlift and ground transportation, are
expected to reduce pretax earnings between $110 million to $120 million,
adversely affecting FedEx's earnings for the second half of 1999. These costs
did not materially affect the second quarter.
- 17 -
<PAGE>
Operating Income
The Company's consolidated operating income increased 17% and 5% for the
quarter and year-to-date periods, respectively, from the prior year. Excluding
the impact of the UPS strike in the prior year, operating income increased 16%
for the year-to-date period due to improved results domestically at FedEx, RPS
and Viking.
FedEx's U.S. domestic operating income was $217 million and $422 million
for the quarter and year-to-date periods ended November 30, 1998. Prior year
amounts were $167 million and $408 million for these same periods. The prior
year's first quarter operating income included approximately $50 million related
to the UPS strike as well as proceeds from a 2% temporary fuel surcharge through
August 1, 1997. Excluding these prior year factors, operating income increased
30% and 26% for the quarter and year-to-date periods. These increases were due
to yield increases (2.9% and 2.6% for the quarter and year-to-date periods,
respectively) exceeding increases in cost per package (0.8% for the quarter and
year-to-date periods) and package volume growth of 5% for both of these periods.
Cost per package rose only slightly for the periods primarily due to lower jet
fuel prices, the effect of cost controls and increased productivity through
higher service levels. Sales of engine noise reduction kits contributed $28
million and $57 million to U.S. domestic operating income in the second quarter
and year-to-date periods ended November 30, 1998, compared with $34 million and
$71 million in the same periods in the prior year. FedEx's U.S. domestic
operating margins were 8.6% and 8.4% for the quarter and six-month periods,
respectively, compared with 7.1% and 8.5% (7.1% and 7.2%, excluding the
aforementioned prior year items) for the same periods in the prior year.
FedEx's international operating income was $34 million and $48 million for
the quarter and year-to-date periods, respectively, compared with $46 million
and $70 million for the same periods of the prior year. International operating
results declined as a result of slower IP volume growth and declining airfreight
volumes and yields at a time of year-over-year capacity increases. Fixed costs
associated with the increased capacity, including salaries and employee benefits
and aircraft lease expense, also negatively impacted international results, but
were partially offset by lower fuel costs. FedEx's international operating
margins were 3.5% and 2.5% for the quarter and year-to-date periods,
respectively, compared with 4.9% and 3.8% for the same periods in the prior
year.
RPS reported operating income of $61 million and $110 million for the
second quarter and first six months of 1999, respectively, compared with $54
million and $89 million for these periods of the prior year. The current quarter
and year-to-date periods have three and nine additional operating days,
respectively, as compared to the same periods of the prior year. The prior
year's results include approximately $6 million of operating income related to
the UPS strike. RPS achieved operating margins of 12.7% and 11.9% for the
quarter and year-to-date periods, respectively, compared with 12.9% and 11.4%
for the same periods in the prior year due to continued package volume growth
and yield-management actions.
Viking's operating income for the quarter and year-to-date periods was $7
million and $14 million, respectively, compared with $6 million and $1 million
in the prior year. Prior year results include the operations of divisions that
were subsequently sold or shut down. Viking's operating margins were 7.1% and
7.4% for the quarter and year-to-date periods, respectively, compared with 6.8%
and 0.5% for the same periods in the prior year.
Other Income and Expense
Net interest expense declined 23% and 19% for the quarter and year-to-date
periods, respectively, due to lower average debt levels at the Company.
- 18 -
<PAGE>
Other, net for the prior year's first quarter included a gain from an
insurance settlement for an MD11 aircraft destroyed in an accident in July 1997.
At that time, FedEx realized a net gain of $17 million from the insurance
settlement and the release from certain related liabilities on the leased
aircraft. Approximately $8 million of this gain was recorded in non-operating
income.
FINANCIAL CONDITION
Liquidity
Cash and cash equivalents totaled $664 million at November 30, 1998, an
increase of $435 million since May 31, 1998, reflecting additional short-term
borrowings in anticipation of potential job actions by the FPA. Cash provided
from operations for the first six months of 1999 was $887 million compared with
$671 million for the same period in the prior year. The Company currently has a
$1.0 billion bank revolving credit facility (of which $572 million was available
at November 30, 1998) that is generally used to finance temporary operating cash
requirements and to provide support for the issuance of commercial paper.
In December 1998, the Company established a $1.0 billion business
interruption facility with a 364-day maturity to fund, among other things,
working capital needs and contingency plan expenses in the event of an actual
or threatened business interruption due to labor issues with the FPA. In
addition, the Company amended its existing $1.0 billion revolving credit
agreement to allow for this business interruption facility. Concurrently, the
Company extended part of the agreement, previously expiring in January 1999,
to January 2000. See Note 4 of Notes to Condensed Consolidated Financial
Statements for additional information about the Company's financing
arrangements.
Management believes that cash flow from operations, the commercial paper
program, the bank revolving credit facility and the business interruption
facility will adequately meet the Company's working capital needs for the
foreseeable future.
Capital Resources
The Company's operations are capital intensive, characterized by
significant investments in aircraft, vehicles, computer and telecommunication
equipment, package handling facilities and sort equipment. The amount and timing
of capital additions depend on various factors including global economic
conditions, volume growth, new or enhanced services, geographical expansion of
services, competition, availability of satisfactory financing and actions of
regulatory authorities.
Capital expenditures for the first six months of 1999 totaled $964 million
and included one MD11, aircraft modifications, vehicles and ground support
equipment and customer automation and computer equipment. In comparison, prior
year expenditures totaled $824 million and included two MD11's, aircraft
modifications, vehicles and ground support equipment and customer automation and
computer equipment. An MD11 purchased in June 1998 was sold and leased back in
September 1998. In June and September 1997, two MD11's purchased in February and
June 1997 were sold and leased back. For information on the Company's purchase
commitments, see Note 7 of Notes to Condensed Consolidated Financial Statements.
Proceeds from the disposition of property and equipment for the
year-to-date period ended November 30, 1997 included proceeds from the sale of
Viking's southwestern division and other assets in conjunction with the
restructuring of Viking's operations.
- 19 -
<PAGE>
Management believes that the capital resources available to the Company
provide flexibility to access the most efficient markets for financing capital
acquisitions, including aircraft, and are adequate for the Company's future
capital needs.
Market Risk Sensitive Instruments and Positions
There have been no material changes in the Company's market risk sensitive
instruments and positions since May 31, 1998. A description of these instruments
and positions is disclosed in the Company's Annual Report on Form 10-K for the
year ended May 31, 1998.
Euro Currency Conversion
On January 1, 1999, the euro became the common legal currency of 11 of the
15 member countries of the European Union. On that date, the participating
countries fixed conversion rates between their existing sovereign currencies
("legacy currencies") and the euro. On January 4, 1999, the euro began trading
on currency exchanges and became available for non-cash transactions. The legacy
currencies will remain legal tender through December 31, 2001. Beginning January
1, 2002, euro-denominated bills and coins will be introduced, and by July 1,
2002, legacy currencies will no longer be legal tender.
The Company established euro task forces to develop and implement euro
conversion plans. The work of the task forces in preparing for the introduction
of the euro and the phasing out of the various legacy currencies includes
numerous facets such as converting information technology systems, adapting
billing and payment systems and modifying processes for preparing financial
reports and records. Costs associated with the euro project are being expensed
as incurred and are being funded entirely by internal cash flows.
Since January 1, 1999, the Company's subsidiaries have been prepared to
quote rates to customers, generate billings and accept payments in both euros
and legacy currencies. Based on the work of the Company's euro task forces to
date, the Company believes that the introduction of the euro, any price
transparency brought about by its introduction and the phasing out of the legacy
currencies are not likely to have a material impact on the Company's
consolidated financial position, results of operations or cash flows.
YEAR 2000 COMPLIANCE
Introduction
The Company's operating subsidiaries rely heavily on sophisticated
information technology ("IT") for their business operations. For example, FedEx
maintains electronic connections with more than a million customers via its
proprietary products and technologies. The Company's Year 2000 ("Y2K") computer
compliance issues are, therefore, broad and complex. The FedEx Y2K Project
Office, which was established in 1996, coordinates and supports FedEx's Y2K
compliance effort. The Company has engaged a major international consulting firm
to assist its subsidiaries in their Y2K program management.
The Company's Y2K compliance efforts are focused on business-critical
items. Hardware, software, systems, technologies and applications are considered
"business-critical" if a failure would either have a material adverse impact on
the Company's business, financial condition or results of operations or involve
a safety risk to employees or customers.
- 20 -
<PAGE>
State of Readiness
Generally, the Company believes that FedEx's Y2K compliance effort is on
schedule. The Company's other operating subsidiaries have accelerated their Y2K
programs, and they are now substantially on schedule.
FedEx's compliance effort for all business-critical infrastructure and
applications software (collectively, "IT Systems") is 95% complete. FedEx has
inventoried all IT Systems. Assessment/design (researching the compliance status
and determining the impact of, and renovation requirements for, IT Systems) and
renovation (making IT Systems compliant) are substantially complete. Testing,
which involves validating compliance, is approximately 95% complete. Within IT
Systems, certification of application software, which involves FedEx's
independent, internal review to verify that the appropriate testing process has
occurred, was approximately 95% complete as of December 31, 1998. Certification
of the operating system software and program product software, (collectively,
"infrastructure") at FedEx is 55% complete. FedEx's IT Systems compliance effort
is targeted to be 100% complete by September 1, 1999.
The Company's other operating subsidiaries have completed the inventory and
assessment phases relating to business-critical IT Systems. The remaining phases
relating to IT Systems are underway. The IT Systems compliance effort of the
Company's other operating subsidiaries is targeted to be 100% complete by
November 1, 1999.
The inventory and assessment phases of FedEx's Y2K program relating to
business-critical purchased hardware and software, customized software
applications, facilities/equipment and other embedded chip systems
(collectively, "Non-IT Systems") are 100% complete. The remaining phases
relating to FedEx's Non-IT Systems are targeted for completion by May 31,
1999. FedEx is 45% complete with the remediation effort on Non-IT Systems.
The inventory and assessment phases relating to the Non-IT Systems of the
Company's other operating subsidiaries are targeted for completion by July
31, 1999, with the remaining phases targeted to be complete by November 1,
1999.
Y2K Interfaces with Material Third Parties
FedEx and the Company's other operating subsidiaries are making concerted
efforts to understand the Y2K status of third parties (including, among others,
domestic and international government agencies, customs bureaus, U.S. and
international airports and air traffic control systems, vendors and suppliers)
whose Y2K non-compliance could either have a material adverse effect on the
Company's business, financial condition or results of operations or involve a
safety risk to employees or customers. All of the Company's operating
subsidiaries are actively encouraging Y2K compliance on the part of third
parties and are developing contingency plans in the event of their Y2K
non-compliance.
In conjunction with the International Air Transport Association (IATA) and
the Air Transport Association of America (ATA), FedEx is involved in a global
and industry-wide effort to understand the Y2K compliance status of airports,
air traffic systems, customs clearance and other U.S. and international
government agencies, and common vendors and suppliers.
FedEx's vendor and product compliance program includes the following tasks:
assessing vendor compliance status; product testing; tracking vendor compliance
progress; developing contingency plans, including identifying alternate
suppliers, as needed; addressing contract language; replacing, renovating or
upgrading parts; requesting presentations from vendors or making on-site
assessments, as required; and sending questionnaires. Failure to respond to
these questionnaires results in further mail or phone correspondence,
contingency plan development or vendor/product replacement. The Company's other
operating subsidiaries have begun to develop a supply chain dependency model to
assess the risk levels associated with the Y2K non-compliance of material third
parties.
- 21 -
<PAGE>
Testing
FedEx's Y2K testing effort includes functional testing of remedial
measures and regression testing to validate that changes have not altered
existing functionality. FedEx's test plans include sections which define the
scope of the testing effort, roles and responsibilities of test participants,
the test approach planned, software, hardware and data requirements, and test
environments/techniques to be used, as well as other sections defining the
test effort. System functionality for future date accuracy is being verified
and documented.
A separate homogenous Y2K mainframe environment has been created to test
all operating system software and program product software. The Y2K
environment is designed to accomplish future date "end to end" testing of the
larger applications and to validate interface communications between
applications. FedEx uses an independent, internal process to verify that the
appropriate testing process has occurred.
Costs to Address Y2K Compliance
Since 1996, the Company has incurred approximately $70 million in
expense on Y2K compliance which includes internal and external
software/hardware analysis, repair and related costs. The Company expects
that its Y2K compliance efforts will require additional total costs of
approximately $80 million, including capital expenditures of $14 million. In
order to provide a consistent, objective method for identifying financial
resources consumed for Y2K efforts, the Company classifies expenditures as
Y2K costs for reporting purposes if they remedy only Y2K risks and would
otherwise be unnecessary in the normal course of business.
The Company's Y2K compliance effort is being funded entirely by internal
cash flows. For the fiscal year ending May 31, 1999, Y2K expenditures are
expected to represent less than 10% of the Company's total IT expense budget.
Although there are opportunity costs to the Company's Y2K compliance effort,
management believes that no significant information technology projects have
been deferred due to this work.
Contingency Planning and Risks
FedEx has begun developing contingency plans for Y2K non-compliance.
These plans will include identifying alternate suppliers, vendors, procedures
and operational sites, generating supply/equipment lists, conducting staff
training and developing communication plans. Any significant incremental
costs associated with these plans will not become known until these plans are
fully developed. A FedEx-wide contingency planning task force has been formed
to ensure appropriate coverage and coordination of these plans and to
integrate these with FedEx's existing contingency plans. FedEx's goal for
completion of key Y2K contingency plans is January 31, 1999, with all other
Y2K contingency plans targeted for completion by September 30, 1999. FedEx
plans to establish a contingency command and control center by April 30, 1999
to address any issues caused by Y2K non-compliance, with key personnel on
call beginning in November 1999. The Company's other operating subsidiaries
are beginning to formulate their contingency plans for Y2K non-compliance.
Their goal for completion of key Y2K contingency plans is May 31, 1999.
Due to the general uncertainty inherent in the Company's Y2K compliance,
mainly resulting from the Company's dependence upon the Y2K compliance of the
government agencies, third-party suppliers, vendors and customers with whom
the Company deals, the Company is unable to determine at this time the most
reasonably likely worst case scenario. However, the Company believes that the
greatest Y2K exposure exists in the following areas: lack of readiness of
airports, air traffic and customs systems and the global utilities and
telecommunications infrastructure; lack of compliance and business continuance
- 22 -
<PAGE>
capabilities of suppliers, vendors, customers and independent contractors; and
lack of readiness of third party pick-up and delivery providers on whom FedEx
relies in some offshore locations. The Company believes, however, that the Y2K
programs in place at each of its operating subsidiaries, including related
contingency planning, should lessen significantly the possibility of substantial
interruptions of normal operations. While costs related to the lack of Y2K
compliance of third parties, business interruptions, litigation and other
liabilities related to Y2K issues could materially and adversely affect the
Company's business, results of operations and financial condition, the Company
expects its Y2K compliance efforts to reduce significantly the Company's level
of uncertainty about the impact of Y2K issues affecting both its IT Systems and
Non-IT Systems.
Statements in this "Management's Discussion and Analysis of Results of
Operations and Financial Condition" or made by management of the Company
which contain more than historical information may be considered
forward-looking statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995) which are subject to risks and uncertainties.
Actual results may differ materially from those expressed in the
forward-looking statements because of important factors identified in this
section.
- 23 -
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Note 7 Legal Proceedings in Part I is hereby incorporated by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
--------- -----------------------
<S> <C>
10.1 Credit Agreement dated as of December 10, 1998 among the
Company, Morgan Guaranty Trust Company of New York, as
Paying Agent, and certain Lenders.
10.2 Amendment No. 1 dated as of December 10, 1998 to Credit
Agreement dated as of January 15, 1998 among the Company,
The First National Bank of Chicago, as Agent, and certain
Lenders.
10.3 Amendment No. 2 (Temporary) dated as of December 10, 1998 to
Credit Agreement dated as of January 15, 1998 among the
Company, The First National Bank of Chicago, as Agent, and
certain Lenders.
12.1 Computation of Ratio of Earnings to Fixed Charges.
15.1 Letter re Unaudited Interim Financial Statements.
27 Financial Data Schedule (electronic filing only).
</TABLE>
(b) Reports on Form 8-K.
No Current Reports on Form 8-K were filed during the quarter ended November
30, 1998.
- 24 -
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FDX CORPORATION
(Registrant)
Date: January 11, 1999 /s/ JAMES S. HUDSON
----------------------------
JAMES S. HUDSON
CORPORATE VICE PRESIDENT
STRATEGIC FINANCIAL PLANNING & CONTROL
(PRINCIPAL ACCOUNTING OFFICER)
- 25 -
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- -------- ----------------------
<S> <C>
10.1 Credit Agreement dated as of December 10, 1998 among the Company,
Morgan Guaranty Trust Company of New York, as Paying Agent, and
certain Lenders.
10.2 Amendment No. 1 dated as of December 10, 1998 to Credit Agreement
dated as of January 15, 1998 among the Company, The First
National Bank of Chicago, as Agent, and certain Lenders.
10.3 Amendment No. 2 (Temporary) dated as of December 10, 1998 to
Credit Agreement dated as of January 15, 1998 among the Company,
The First National Bank of Chicago, as Agent, and certain
Lenders.
12.1 Computation of Ratio of Earnings to Fixed Charges.
15.1 Letter re Unaudited Interim Financial Statements.
27 Financial Data Schedule (electronic filing only).
</TABLE>
E-1
<PAGE>
[FDX Corporate Logo]
CREDIT AGREEMENT
Among
FDX CORPORATION,
THE LENDERS,
J.P. MORGAN SECURITIES INC.,
SALOMON SMITH BARNEY, INC.,
CHASE SECURITIES INC.,
CREDIT SUISSE FIRST BOSTON
and
FIRST CHICAGO CAPITAL MARKETS, INC.,
as Co-Arrangers,
CHASE SECURITIES INC. and J.P. MORGAN SECURITIES INC.,
As Joint Book Managers,
FIRST CHICAGO CAPITAL MARKETS, INC.,
as Documentation Agent,
CREDIT SUISSE FIRST BOSTON
and
THE CHASE MANHATTAN BANK,
as Co-Syndication Agents,
CITIBANK, N.A.,
as Administrative Agent
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Paying Agent
Dated as of December 10, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I: DEFINITIONS 1
ARTICLE II: THE CREDITS 19
2.1. COMMITMENTS..................................................................................19
2.2. MANDATORY PAYMENTS; TERMINATION..............................................................19
2.3. RATABLE LOANS; TYPES OF ADVANCES.............................................................20
2.4. RESERVED.....................................................................................20
2.5. FACILITY FEES; REDUCTIONS IN AGGREGATE COMMITMENT............................................20
2.6. MINIMUM AMOUNT OF EACH ADVANCE...............................................................20
2.7. OPTIONAL PRINCIPAL PAYMENTS..................................................................20
2.8. METHOD OF SELECTING TYPES AND INTEREST PERIODS FOR NEW ADVANCES..............................21
2.9. CONVERSION AND CONTINUATION OF OUTSTANDING ADVANCES..........................................21
2.10. INTEREST.....................................................................................22
2.11. RATES APPLICABLE AFTER MATURITY OF ADVANCES..................................................22
2.12. METHOD OF PAYMENT............................................................................22
2.13. EVIDENCE OF DEBT; TELEPHONIC NOTICES.........................................................23
2.14. INTEREST PAYMENT DATES; INTEREST AND FEE BASIS...............................................23
2.15. NOTIFICATION OF ADVANCES, INTEREST RATES, PREPAYMENTS AND COMMITMENT REDUCTIONS..............24
2.16. LENDING INSTALLATIONS........................................................................24
2.17. NON-RECEIPT OF FUNDS BY THE PAYING AGENT.....................................................24
2.18. WITHHOLDING TAX EXEMPTION....................................................................25
ARTICLE III: CHANGE IN CIRCUMSTANCES 25
3.1. YIELD PROTECTION.............................................................................25
3.2. CHANGES IN CAPITAL ADEQUACY REGULATIONS......................................................26
3.3. AVAILABILITY OF TYPES OF ADVANCES............................................................26
3.4. FUNDING INDEMNIFICATION......................................................................26
3.5. LENDER STATEMENTS; SURVIVAL OF INDEMNITY.....................................................27
ARTICLE IV: CONDITIONS PRECEDENT 27
4.1. CLOSING......................................................................................27
4.2. EACH ADVANCE.................................................................................29
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ARTICLE V: REPRESENTATIONS AND WARRANTIES 29
5.1. CORPORATE EXISTENCE AND STANDING.............................................................29
5.2. AUTHORIZATION AND VALIDITY...................................................................29
5.3. NO CONFLICT; GOVERNMENT CONSENT..............................................................30
5.4. FINANCIAL STATEMENTS.........................................................................30
5.5. TAXES........................................................................................30
5.6. LITIGATION AND CONTINGENT OBLIGATIONS........................................................31
5.7. SUBSIDIARIES.................................................................................31
5.8. ERISA........................................................................................31
5.9. ACCURACY OF INFORMATION......................................................................31
5.10. REGULATION U.................................................................................31
5.11. MATERIAL AGREEMENTS..........................................................................31
5.12. COMPLIANCE WITH LAWS.........................................................................31
5.13. EXISTING LIENS...............................................................................32
5.14. INVESTMENT COMPANY ACT.......................................................................32
5.15. CITIZENSHIP..................................................................................32
5.16. STATUS AS AIR CARRIER........................................................................32
5.17. PARI PASSU...................................................................................32
5.18. MATERIAL ADVERSE EFFECT......................................................................32
5.19. YEAR 2000 COMPLIANCE.........................................................................33
ARTICLE VI: COVENANTS 33
6.1. FINANCIAL REPORTING..........................................................................33
6.2. USE OF PROCEEDS..............................................................................35
6.3. NOTICE OF DEFAULT............................................................................35
6.4. CONDUCT OF BUSINESS..........................................................................36
6.5. CITIZENSHIP AND REGULATORY CERTIFICATES......................................................36
6.6. PAYMENT OF TAXES.............................................................................36
6.7. INSURANCE....................................................................................37
6.8. COMPLIANCE WITH LAWS.........................................................................37
6.9. MAINTENANCE OF PROPERTIES....................................................................37
6.10. INSPECTION...................................................................................37
6.11. DIVIDEND DECLARATIONS........................................................................37
6.12. LEVERAGE.....................................................................................37
6.13. FIXED CHARGE COVERAGE........................................................................37
6.14. RESTRICTED INVESTMENTS.......................................................................37
6.15. MERGER AND CONSOLIDATION.....................................................................38
6.16. SALES OF ASSETS..............................................................................38
6.17. LOANS, ADVANCES AND INVESTMENTS..............................................................39
6.18. CONTINGENT LIABILITIES.......................................................................41
6.19. LIENS........................................................................................42
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6.20. GUARANTIES...................................................................................44
6.21. CERTAIN OBLIGATIONS RESPECTING SUBSIDIARIES..................................................44
6.22. INDEBTEDNESS OF CALIBER AND SUBSIDIARIES.....................................................45
6.23. EXISTING REVOLVING CREDIT DOCUMENTS..........................................................45
6.24. VALUE OF DESIGNATED COLLATERAL...............................................................45
6.25. NO NEGATIVE PLEDGES..........................................................................46
6.26. GRANT OF SECURITY INTEREST IN COLLATERAL.....................................................46
6.27. APPROVAL OF FORMS OF SECURITY DOCUMENTS......................................................48
ARTICLE VII: DEFAULTS 48
7.1. BREACH OF REPRESENTATION OR WARRANTY.........................................................48
7.2. FAILURE TO PAY...............................................................................48
7.3. BREACH OF CERTAIN COVENANTS..................................................................48
7.4. BREACH OF OTHER COVENANTS, LOAN DOCUMENTS, EXISTING REVOLVING CREDIT DOCUMENTS OR EXISTING
L/C FACILITY DOCUMENTS.......................................................................48
7.5. CROSS-DEFAULT................................................................................49
7.6. VOLUNTARY BANKRUPTCY, ETC....................................................................49
7.7. INVOLUNTARY BANKRUPTCY, ETC..................................................................49
7.8. JUDGMENTS....................................................................................50
7.9. ERISA........................................................................................50
7.10. SEIZURE......................................................................................50
7.11. ENVIRONMENTAL MATTERS........................................................................50
7.12. INVALIDITY, ETC. OF LOAN DOCUMENTS; FAILURE OF SECURITY......................................50
ARTICLE VIII: ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES 51
8.1. ACCELERATION.................................................................................51
8.2. AMENDMENTS...................................................................................51
8.3. PRESERVATION OF RIGHTS.......................................................................52
ARTICLE IX: GENERAL PROVISIONS 53
9.1. SURVIVAL OF REPRESENTATIONS..................................................................53
9.2. GOVERNMENTAL REGULATION......................................................................53
9.3. TAXES........................................................................................53
9.4. HEADINGS.....................................................................................53
9.5. ENTIRE AGREEMENT.............................................................................53
9.6. SEVERAL OBLIGATIONS; BENEFITS OF THIS AGREEMENT..............................................53
9.7. EXPENSES; INDEMNIFICATION....................................................................53
9.8. NUMBERS OF DOCUMENTS.........................................................................54
9.9. SEVERABILITY OF PROVISIONS...................................................................54
9.10. NONLIABILITY OF LENDERS......................................................................54
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9.11. CHOICE OF LAW................................................................................54
9.12. CONSENT TO JURISDICTION......................................................................54
9.13. WAIVER OF JURY TRIAL.........................................................................55
9.14. CONFIDENTIALITY..............................................................................55
9.15. ACCOUNTING...................................................................................55
9.16. RELEASE OF GUARANTORS........................................................................55
ARTICLE X: THE PAYING AGENT 56
10.1. APPOINTMENT..................................................................................56
10.2. POWERS.......................................................................................56
10.3. GENERAL IMMUNITY.............................................................................56
10.4. NO RESPONSIBILITY FOR LOANS, RECITALS, ETC...................................................57
10.5. ACTION ON INSTRUCTIONS OF LENDERS............................................................57
10.6. EMPLOYMENT OF AGENTS AND COUNSEL.............................................................57
10.7. RELIANCE ON DOCUMENTS; COUNSEL...............................................................57
10.8. Paying AGENT'S REIMBURSEMENT AND INDEMNIFICATION.............................................58
10.9. RIGHTS AS A LENDER...........................................................................58
10.10. LENDER CREDIT DECISION.......................................................................58
10.11. SUCCESSOR PAYING AGENT.......................................................................58
10.12. DISTRIBUTION OF INFORMATION..................................................................59
ARTICLE XI: SETOFF; RATABLE PAYMENTS 59
11.1. SETOFF.......................................................................................59
11.2. RATABLE PAYMENTS.............................................................................60
ARTICLE XII: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS 60
12.1. SUCCESSORS AND ASSIGNS.......................................................................60
12.2. PARTICIPATIONS...............................................................................60
12.2.1. PERMITTED PARTICIPANTS; EFFECT 60
12.2.2. VOTING RIGHTS 61
12.2.3. BENEFIT OF SETOFF 61
12.3. ASSIGNMENTS..................................................................................61
12.3.1. PERMITTED ASSIGNMENTS 61
12.3.2. REQUIRED ASSIGNMENTS 62
12.3.3. EFFECT; EFFECTIVE DATE 63
12.4. DISSEMINATION OF INFORMATION.................................................................63
12.5. TAX TREATMENT................................................................................63
ARTICLE XIII: NOTICES 64
13.1. GIVING NOTICE................................................................................64
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13.2. CHANGE OF ADDRESS............................................................................64
ARTICLE XIV: COUNTERPARTS 64
EXHIBIT "A"-FORM OF GUARANTY 1
EXHIBIT "B"-OPINION OF COUNSEL 1
EXHIBIT "C"-ASSIGNMENT AGREEMENT 1
EXHIBIT "D"-FORM OF RELEASE OF SECURITY DOCUMENTS 1
SCHEDULE "1"-REAL ESTATE AND AIRCRAFT 3
SCHEDULE "2"-SIGNIFICANT SUBSIDIARIES 4
SCHEDULE "3"-COMPLIANCE CALCULATIONS 5
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EXECUTION COPY
FDX CORPORATION
CREDIT AGREEMENT
This Agreement, dated as of December 10, 1998, is among FDX
CORPORATION, the Lenders and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Paying Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Acknowledged Participant" is defined in Section 12.2.3.
"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 Person or division thereof, whether
through purchase of assets, merger or otherwise or (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.
"Adjusted Net Income" means, on a consolidated basis, for the Borrower
and its Consolidated Subsidiaries for the twelve most recent complete fiscal
months, income (loss) before income taxes MINUS, to the extent included in
determining income (loss) before income taxes, any net loss or gain realized in
connection with any sale or disposition of any asset (other than in the ordinary
course of business) or any extraordinary or non-recurring loss or gain resulting
from an actual or threatened business interruption relating to any self-help
actions or strike, by members of the FPA, or contingency plans related thereto,
provided that the aggregate amount of the foregoing reductions to income (loss)
before income taxes shall not exceed $1,000,000,000.
"Administrative Agent" means the Person designated as such on the cover
page of this Agreement.
<PAGE>
"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 Eurodollar 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.
"Aggregate Commitment" means the aggregate of the Commitments of all of
the Lenders, as reduced from time to time pursuant to the terms hereof. As of
the Effective Date, the Aggregate Commitment equals $1,000,000,000.
"Agreement" means this Credit Agreement, as it may be amended or
modified and in effect from time to time.
"Aircraft Mortgage" means an Aircraft Mortgage and Security Agreement
to be executed by FedEx pursuant to Section 6.26, substantially in the form
approved pursuant to Section 6.27.
"Applicable Margin" means 1.625% per annum.
"Appraisal Report" means, with respect to any aircraft or engine, an
extended desktop appraisal of the Appraiser, which does not include any on-site
inspection of such aircraft or engine or its maintenance records, but may
include consideration of maintenance status information that is provided to the
Appraiser from the client and/or aircraft operator, and may include adjustments
from the mid-time, mid-life baseline to account for the actual maintenance
status of such aircraft or engine.
"Appraiser" means BK Associates, or another independent appraiser
selected by the Borrower with the prior written consent of the Paying Agent.
"Article" means an article of this Agreement unless another document is
specifically referenced.
"Authorized Officer" means any one of the Chief Executive Officer, the
Executive Vice President and Chief Financial Officer, the Treasurer, or the
Staff 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 Executive Vice President and Chief Financial Officer, the
Treasurer, or the Staff Director Corporate Finance and Assistant Treasurer of
the Borrower.
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"Base Rate" means, for any day, a rate of interest per annum equal to
the higher of (i) the Prime Rate for such day and (ii) the sum of (x) the
Federal Funds Effective Rate for such day plus (y) 1/2%.
"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,
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.
"BK Associates" means BK Associates, Inc, an independent aircraft
appraisal firm.
"Borrower" means FDX Corporation, a Delaware corporation.
"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 New York for the conduct of substantially all of their
commercial lending activities.
"Caliber" means Caliber System, Inc., an Ohio corporation.
"Caliber Collateral" is defined in Section 6.26.
"Caliber Operating Income" means, as of any date, the operating income
(or loss) of Caliber and its consolidated Subsidiaries for the four most recent
fiscal quarters then ended, determined on a consolidated basis in accordance
with GAAP.
"Caliber Stock" means the capital stock of Caliber and the Subsidiaries
of Caliber other than the Designated Immaterial Subsidiaries.
"Cancellation Notice" is defined in Section 2.2.
3
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"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 and the Consolidated
Subsidiaries' future minimum lease payments for aircraft leases scheduled to
terminate more than 365 days after their respective dates of execution.
"Co-Arrangers" means the Persons designated as such on the cover page
of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Collateral" means all the Property and interests in Property now owned
or hereafter acquired by the Borrower and its Subsidiaries upon which a Lien is
granted or purported to be granted under any of the Security Documents.
"Collateral Trust Agreement" means a Collateral Trust Agreement to be
executed pursuant to Section 6.26, substantially in the form approved pursuant
to Section 6.27.
"Commitment" means, with respect to 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.
"Computation Period" is defined in Section 6.17.
"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, 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
4
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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 any 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) Adjusted Net Income, 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.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Borrower
(or FedEx, for any date prior to the date the Borrower was established as the
parent of FedEx) 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
5
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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.
"Co-Syndication Agents" means the Persons designated as such on the
cover page of this Agreement.
"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 Stock Market, Inc. or, if such security is
not then quoted on the Nasdaq Stock Market, Inc., the average of the closing bid
and asked prices for such security in the over-the-counter market, as reported
by the Nasdaq Stock Market, Inc. 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, 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.
6
<PAGE>
"Dealer" means a Lender 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.
"Designated Collateral" means (i) all now owned and hereafter acquired
or arising (a) capital stock of Caliber and its domestic operating Subsidiaries
(other than any Designated Immaterial Subsidiaries), (b) accounts receivable of
FedEx and its Subsidiaries, (c) intercompany indebtedness owed to the Borrower
by its Subsidiaries and (d) motor vehicles (other than passenger vehicles) and
real estate of FedEx and its Subsidiaries, except such motor vehicles and real
estate which are subject to Liens as of the date hereof (such real estate to
include, without limitation, the real estate set forth on Schedule "1" attached
hereto), and (ii) all aircraft (including airframes and engines) of FedEx listed
on Schedule "1" attached hereto and such additional unencumbered aircraft
(including airframes and engines) as the Borrower may designate in writing to
the Paying Agent from time to time.
"Designated Immaterial Subsidiaries" means, during each fiscal year of
the Borrower, any Subsidiary of Caliber which had revenues (determined in
accordance with GAAP) for the immediately preceding fiscal year of Caliber not
in excess of 2.0% of the consolidated revenues (determined in accordance with
GAAP) of Caliber and the consolidated Subsidiaries of Caliber for such
immediately preceding fiscal year.
"Documentation Agent" means the Person designated as such on the cover
page of this Agreement.
"Effective Date" means the Business Day on or before December 22, 1998
on which (a) the Borrower, the Paying 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 Paying
Agent, the Co-Arrangers and the Lenders in connection with this Agreement.
"Eligible Receivables" means, at any date of determination thereof, and
with respect to any Person, the aggregate of all Receivables of such Person at
such date (net of maximum discounts, allowances, retainage and any other amounts
deferred with respect thereto), which is not, except as otherwise agreed by the
Paying Agent in its sole discretion exercised in a commercially reasonable
manner, of any of the following types:
(i) (A) it arises out of a sale the original terms of which
provide for payment more than 90 days after the date of the original
invoice issued by such Person in connection with such sale or (B) it is
more than 60 days past due, according to the original terms of sale; or
7
<PAGE>
(ii) it arises out of a sale not made in the ordinary course
of such Person's business or a sale to a Person which is an Affiliate
of such Person or controlled by an Affiliate of such Person; or
(iii) it fails to meet or violates any warranty,
representation or covenant contained in this Agreement or any of the
other Loan Documents; or
(iv) the account debtor is also a supplier or creditor of any
Borrower or Guarantor and the Receivable is subject to any contractual
right of setoff by the account debtor, and such account debtor has not
entered into an agreement with the Paying Agent with respect to the
waiver of rights of setoff, or the account debtor has disputed
liability with respect to such Receivable, or made any claim with
respect to any other Receivable due from such account debtor to such
Person, in which case the Receivable shall be ineligible to the extent
of such dispute, claim or setoff (without duplication); or
(v) the account debtor has filed a petition for bankruptcy or
any other petition for relief under the federal bankruptcy code or
similar statute, or made an assignment for the benefit of creditors, or
any petition or other application for relief under the federal
bankruptcy code or any similar statute has been filed against the
account debtor, or the account debtor has failed, suspended its
business operations, become insolvent, suffered a receiver or a trustee
to be appointed for any of its assets or affairs, or is generally
failing to pay its debts as they become due; or
(vi) the sale is to an account debtor which is not located in
the United States or Canada, unless the account debtor's obligations
with respect to such sale are secured by a letter of credit, guaranty
or eligible bankers' acceptance having terms, and from such issuers and
confirmation banks, as are acceptable to the Paying Agent in its sole
discretion exercised in a commercially reasonable manner; or
(vii) the sale is on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment, or any other repurchase
or return basis; or
(viii) the Paying Agent believes, in the exercise of its
reasonable credit judgment, that collection of such Receivable is
insecure or that such Receivable may not be paid by reason of the
account debtor's financial inability to pay; or
(ix) the account debtor is the United States of America or any
department, agency or instrumentality thereof, unless such Person
assigns its right to payment of such Receivable to the Paying Agent
pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C.
Section 3727); or
(x) the goods, the delivery of which has given rise to such
Receivable, have not been delivered to or, if delivered, have been
rejected by the account debtor or the services, the performance of
which has given rise to such Receivable, have not been performed by
such Person and accepted by the account debtor; or
8
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(xi) the amount of the Receivable(s) owing to FedEx and its
Subsidiaries in the aggregate by any account debtor exceeds (A) a
concentration limit of ten percent (10%) of the aggregate amount of the
Receivables of FedEx and its Subsidiaries at such time, or (B) such
other credit or concentration limit determined by the Paying Agent, in
the exercise of its reasonable credit judgment, at any time or times
hereafter, in which case such Receivable(s) shall be ineligible to the
extent such Receivable(s) exceed(s) such limits; or
(xii) to the extent such Receivable constitutes Collateral,
the Paying Agent, as collateral agent as contemplated by Section 6.26,
does not have a senior, perfected security interest in such Receivable
or such Receivable is subject to a Lien which is not permitted under
Section 6.19; or
(xiii) the sale is to an account debtor with respect to which
fifty percent (50%) or more of all Receivables owing by such account
debtor are ineligible for any reason (except with respect to those
categories of ineligibility where the Paying Agent determines in its
sole discretion exercised in a commercially reasonable manner that this
clause shall not apply); or
(xiv) such Receivable arises out of or in connection with a
retainage or similar arrangement (I.E., the payment of such Receivable
is subject to further performance), in which case that portion of such
Receivable subject to such arrangement shall be ineligible until such
time as the requisite performance has been completed.
"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 Interest Period, the rate determined by the Paying Agent to be the
arithmetic average of the rates reported to the Paying 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 Interest Period, in the approximate amount of such Reference Lender's
relevant Eurodollar Loan and having a maturity approximately equal to such
Interest Period. If any Reference Lender fails to provide such quotation to the
Paying Agent, then the Paying Agent shall determine the Eurodollar Base Rate on
the basis of the quotations of the remaining Reference Lender(s).
"Eurodollar Loan" means a Loan which bears interest at a Eurodollar
Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the sum of (i) an amount equal to (a) the Eurodollar
Base Rate applicable to such Interest Period, divided by (b) one minus the
Reserve Requirement (expressed as a decimal), if any, applicable to such
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.
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"Existing L/C Facility Documents" means the Syndicated Revolving
Standby Letter of Credit Facility dated as of July 7, 1998, among the Borrower,
the issuing banks named therein, The Sumitomo Bank, Limited, as agent
thereunder, and the co-agents named therein, and all instruments, agreements and
contractual obligations entered into in connection therewith, as amended by that
certain First Amendment and Second Amendment (Temporary) thereto , each of even
date herewith, and as the same may be further amended, supplemented or otherwise
modified from time to time.
"Existing Revolving Credit Documents" means the Credit Agreement dated
as of January 15, 1998 among the Borrower, the lenders named therein and The
First National Bank of Chicago, as agent thereunder, and all instruments,
agreements and contractual obligations entered into in connection therewith, as
amended by that certain Amendment No. 1 and Amendment No. 2 (Temporary) thereto,
each of even date herewith, and as the same may be amended, supplemented or
otherwise modified from time to time.
"FAA" means the Federal Aviation Administration or any other
governmental agency succeeding to the jurisdiction thereof.
"Facility" means the Commitments and the Loans.
"Facility Fee Percentage" means .375% per annum.
"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.
"FDX Collateral" is defined in Section 6.26.
"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. (New York
time) on such day on such transactions received by the Paying Agent from three
Federal funds brokers of recognized standing selected by the Paying Agent in its
sole discretion.
"FedEx" means Federal Express Corporation, a Delaware corporation.
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"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 Base
Rate for such day, changing when and as the 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.
"FPA" means the FedEx Pilots Association.
"FPA Membership" means those flight crewmembers at FedEx who are active
members of the FPA in accordance with the constitution and by-laws of the FPA.
"Funded Debt" means any Indebtedness (other than items characterized as
Indebtedness pursuant to clause (vii) of the definition thereof) of the Borrower
and its Consolidated Subsidiaries 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.
"Granting Lender" is defined in Section 12.3.1.
"Guarantor" means FedEx, RPS, Caliber, Viking Freight, Inc., a
California corporation, and Roberts Express, Inc., an Ohio corporation, and each
other Subsidiary that executes the Guaranty in accordance with Section 6.20
hereof.
"Guaranty" means that certain Guaranty of even date herewith, executed
by each Guarantor, substantially in the form of Exhibit "A" attached hereto.
"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.
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"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, 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 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, second, third, or sixth succeeding month, such
Interest Period shall end on the last Business Day of such next, second, third,
or sixth succeeding month. If an Interest Period would otherwise end on a day
which is not a Business Day, such 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 Interest Period shall end on
the immediately preceding Business Day.
"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.
"Investment Grade Rating" means an S&P Rating greater than or equal to
BBB- or a Moody's Rating greater than or equal to Baa3.
"Labor Agreement Date" is defined in Section 2.2.
"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 Paying
Agent, any office, branch, subsidiary or affiliate of such Lender or the Paying
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.
"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).
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"Loan" means each loan made pursuant to Section 2.1.
"Loan Documents" means this Agreement, the Guaranty and, after the
execution and delivery thereof and before the release thereof in accordance with
Section 6.26, the Security Documents.
"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 (excluding
the effects of an actual or threatened business interruption, including but not
limited to self-help actions or a strike, by members of the FPA, or contingency
plans related thereto) 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 Paying Agent or the
Lenders thereunder.
"Maturity Date" means December 9, 1999, or any earlier date on which
the Loans become due and payable pursuant to the terms hereof.
"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 such securities shall not have been transferred to any successor
Person, then "Moody's" shall mean any other nationally recognized rating agency
(other than S&P) selected by the Borrower that rates any Indebtedness of the
Borrower.
"Moody's Rating" means, at any particular time, the rating issued by
Moody's with respect to the Borrower's senior unsecured non-credit enhanced
long-term public debt.
"Morgan Guaranty" means Morgan Guaranty Trust Company of New York in
its individual capacity, and its successors.
"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.
"1996 Caliber Indenture" means that certain Indenture dated as of
August 1, 1996 between Caliber and The Chase Manhattan Bank, as Trustee, as the
same may be amended, supplemented or otherwise modified from time to time.
"Notice of Assignment" is defined in Section 12.3.3.
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"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Loans (including, without limitation, interest accruing at the
then-applicable rate provided herein after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), all accrued and unpaid
fees and all expenses, reimbursements, indemnities and other obligations of the
Borrower to the Lenders or to any Lender, the Paying Agent or any indemnified
party hereunder arising under the Loan Documents.
"Participants" is defined in Section 12.2.1.
"Paying Agent" means Morgan Guaranty Trust Company of New York in its
capacity as contractual representative for the Lenders pursuant to Article X,
and not in its individual capacity as a Lender, and any successor Paying Agent
appointed pursuant to Article X.
"Payment Date" means the last day of each January, April, July and
October 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, limited liability company, 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.
"Pledge Agreements" means the pledge agreements to be executed by the
Borrower and certain Subsidiaries pursuant to Section 6.26, substantially in the
form approved pursuant to Section 6.27.
"Prime Rate" means the per annum rate of interest publicly announced by
Morgan Guaranty in New York City from time to time as its Prime Rate, changing
when and as said Prime Rate changes.
"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.
"Rating" means the Moody's Rating or the S&P Rating.
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"Real Estate Mortgages" means the mortgages and deeds of trust to be
executed by FedEx pursuant to Section 6.26, substantially in the form approved
pursuant to Section 6.27.
"Receivable" means all present and future "accounts", as such term is
defined in section 9-106 of the Uniform Commercial Code as in effect in the
State of New York, and shall include, without limitation, all accounts
receivable, related contract rights and all forms of obligations whatsoever
owing, whether now existing or hereafter arising and wherever arising, and
whether or not they have been earned by performance; together with all
promissory notes, instruments and documents of title representing any of the
foregoing, all rights in merchandise or goods (including returned goods) which
any of the same may represent, all right, title, security and guaranties with
respect to any of the foregoing, including any right of stoppage in transit and
all insurance proceeds and corporate and other business records relating to any
of the foregoing; together with all proceeds thereof.
"Reference Lenders" means Morgan Guaranty, Citibank, N.A. and The First
National Bank of Chicago.
"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
stock 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 has 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 51%
of the Aggregate Commitment or, if the Aggregate Commitment has been terminated,
Lenders in the aggregate holding at least 51% of the aggregate unpaid principal
amount of the outstanding Advances.
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"Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities.
"Restructuring Event" means any of the following: (1) any Person or
group (within the meaning of the Securities Exchange Act of 1934 and the rules
of the Securities and Exchange Commission thereunder as in effect on the date
thereof) becoming the Beneficial Owner of Voting Stock of the Borrower having
more than 30 percent of the voting 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, or
individuals who are not appointed or designated by the Borrower constituting a
majority of the Board of Directors of FedEx or RPS; (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) FedEx or RPS consolidating with or
merging into any other Person which is not a Subsidiary of the Borrower, or any
other such Person consolidating with or merging into FedEx or RPS, pursuant to a
transaction in which capital stock of FedEx or RPS then outstanding (other than
capital stock held by FedEx or RPS, respectively, or capital stock held by any
such Person which is a party to such consolidation or merger) is changed or
exchanged unless FedEx or RPS, as the case may be, is the surviving entity and
no Default or Unmatured Default shall occur upon giving effect to such
consolidation or merger; (5) 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, or of FedEx or RPS (other than to a Wholly-Owned
Subsidiary of the Borrower); (6) the Borrower and one or more of its
Wholly-Owned Subsidiaries ceasing to own and control eighty percent (80%) of the
issued and outstanding capital stock of FedEx and RPS; or (7) 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
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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).
"RPS" means RPS, Inc., a Delaware corporation.
"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 such securities 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.
"S&P Rating" means, at any particular time, the rating issued by S&P
with respect to the Borrower's senior unsecured non-credit enhanced long-term
public debt.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Security Agreements" means the security agreements to be executed
pursuant to Section 6.26, substantially in the form approved pursuant to Section
6.27.
"Security Documents" means the Collateral Trust Agreement, the Pledge
Agreements, the Aircraft Mortgage, the Real Estate Mortgages and the Security
Agreements.
"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 2.0% of the consolidated 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.
"SPC" is defined in Section 12.3.1.
"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.
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"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 of the consolidated assets of FedEx and its
Subsidiaries, as would be shown in the consolidated financial statements of
FedEx and its Subsidiaries, in the case of financial statements dated prior to
the date the Borrower was established as the parent of FedEx), 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 (or of FedEx and
its Subsidiaries) as reflected in the financial statements referred to in clause
(i) above.
"Supermajority 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.
"Termination Date" means December 9, 1999, or any earlier date on which
the Commitments are canceled by the Borrower or otherwise terminated pursuant to
this Agreement.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Advance, its nature as a Floating
Rate Advance or Eurodollar 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 Person 100% of the ownership interests
having ordinary voting power of which shall at the time be so owned or
controlled.
"Year 2000 Problem" means the risk that computer applications used by
the Borrower or any of its Subsidiaries (or their respective suppliers and
vendors) may be unable to recognize or
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properly perform date-sensitive functions involving certain dates prior to and
any date after December 31, 1999.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
ARTICLE II
THE CREDITS
2.1. COMMITMENTS. From and including the date of this Agreement and
prior to the 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 Loans at any time prior to the
Termination Date. The Commitments shall expire on the Termination Date.
2.2. MANDATORY PAYMENTS; TERMINATION. (a) The Borrower will promptly
give notice to the Paying 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 Paying Agent and the Lenders have
received notice from the Borrower that a Restructuring Event has occurred, the
Paying 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 outstanding principal amount of the Loans, if any, and
all of the other Obligations, and (ii) on the earlier of (1) the date that the
Borrower prepays the Loans 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 Loans and all other
Obligations shall mature and be due and payable in full and the Aggregate
Commitment and the Commitments 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) The Borrower will give notice to the Paying Agent and the Lenders
on the date (the "Labor Agreement Date") on which a comprehensive collective
bargaining agreement between FedEx and the FPA is ratified by the FPA
Membership. On the Labor Agreement Date, the Aggregate Commitment and the
Commitments of each Lender shall be automatically and permanently terminated and
reduced to zero. As of the Labor Agreement Date, the Borrower shall no longer be
permitted to borrow additional Advances under this Agreement. The Borrower
unconditionally promises to pay the unpaid principal amount of each Loan and all
other Obligations to the extent not previously required to be paid under this
Agreement on the earlier of (i) 180 days after the date of the Labor Agreement
Date or (ii) the Maturity Date.
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(c) The Borrower unconditionally promises to pay the unpaid principal
amount of each Loan on the Maturity Date. The Borrower also unconditionally
promises to pay all other Obligations on the Maturity 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 or Eurodollar Advances, or a combination
thereof, selected by the Borrower in accordance with Sections 2.8 and 2.9. Not
more than fifteen Eurodollar Advances may be outstanding at any one time.
2.4. RESERVED.
2.5. FACILITY FEES; REDUCTIONS IN AGGREGATE COMMITMENT. (a) The
Borrower agrees to pay to the Paying Agent for the account of each Lender a
facility fee on the daily amount of such Lender's Commitment, whether drawn or
undrawn (or if such Commitment has terminated, on the aggregate outstanding
principal balance of such Lender's Loans), from the Effective Date to and
including the Maturity Date, at a per annum rate equal to the Facility Fee
Percentage. Such facility fee shall be payable on each Payment Date hereafter
and on the Maturity Date.
(b) Reserved.
(c) 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 three Business Days' written notice to the Paying 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 $10,000,000 (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 $10,000,000 or any integral multiple thereof, any
portion of the outstanding Floating Rate Advances, upon one Business Day's prior
notice to the Paying Agent. A Eurodollar Advance may not be paid prior to the
last day of the applicable Interest Period except (i) pursuant to an
acceleration or a mandatory prepayment in accordance with this Agreement, or
(ii) if the Borrower complies with all funding indemnification requirements
under Section 3.4.
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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
Eurodollar Advance, the Interest Period applicable to each Advance from time to
time. The Borrower shall give the Paying Agent irrevocable notice (a "Borrowing
Notice") not later than 10:00 a.m. (New York time) on the Borrowing Date of each
Floating 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 Eurodollar Advance, the Interest Period
applicable thereto.
Not later than 1:00 p.m. (New York time) on each Borrowing Date, each Lender
shall make available its Loan or Loans, in funds immediately available in New
York to the Paying 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 Paying Agent will
make the funds so received from the Lenders available to the Borrower at the
Paying 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 Eurodollar Advances. Each Eurodollar Advance of
any Type shall continue as a Eurodollar Advance of such Type until the end of
the then applicable Interest Period therefor, at which time such Eurodollar
Advance shall be automatically converted into a Floating Rate Advance unless the
Borrower shall have given the Paying Agent a Conversion/Continuation Notice
requesting that, at the end of such Interest Period, such Eurodollar Advance
shall either continue as a Eurodollar Advance of such Type for the same or
another Interest Period or be converted into a Floating Rate Advance. 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 Eurodollar Advance shall be made
on, and only on, the last day of the Interest Period applicable thereto. The
Borrower shall give the Paying Agent irrevocable notice (a
"Conversion/Continuation Notice") of each conversion of an Advance or
continuation of a Eurodollar Advance not later than 10:00 a.m. (New York time)
on the date of the requested conversion, in the case of a conversion of any
Advance into a Floating Rate Advance, or at least three Business Days prior to
the date of the requested conversion or continuation, in the case of a
conversion into or continuation of a Eurodollar Advance, specifying:
(i) the requested date, which shall be a Business Day, of such
conversion or continuation;
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(ii) the aggregate amount and Type of the Advance which is to be
converted or continued; and
(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 Eurodollar Advance, the duration of the Interest Period
applicable thereto.
2.10. INTEREST. 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 Eurodollar Advance into a Floating
Rate Advance pursuant to Section 2.9 to but excluding the date it becomes due or
is converted into a Eurodollar 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 Base Rate. Each
Eurodollar 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 a rate per annum equal to the Eurodollar Rate applicable
thereto. No Interest Period for any Loans may end after the Maturity 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 Eurodollar 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 Eurodollar Advance shall bear interest for the remainder
of the applicable Interest Period at the rate otherwise applicable to such
Eurodollar 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 Paying Agent at the Paying Agent's address specified
pursuant to Article XIII, or at any other Lending Installation of the Paying
Agent specified in writing by the Paying 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 Paying Agent accompanying such payment and shall be applied
ratably by the Paying Agent among the Lenders. Each payment delivered to the
Paying Agent for the account of any Lender shall be delivered promptly by the
Paying Agent to such Lender in the same type of funds that the Paying Agent
received at such Lender's address specified pursuant to Article XIII or at any
Lending Installation specified in a notice received by the Paying Agent from
such Lender. The Borrower authorizes the Paying Agent to charge the Borrower's
account maintained with Morgan Guaranty for each payment of principal, interest
and fees as it becomes due hereunder.
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2.13. EVIDENCE OF DEBT; TELEPHONIC NOTICES. (a) Each Lender shall
maintain in accordance with its usual practice an account or accounts evidencing
the indebtedness of the Borrower to such Lender resulting from each Loan made by
such Lender, including the amounts of principal and interest payable and paid to
such Lender from time to time hereunder.
(b) The Paying Agent shall maintain accounts in which it shall record
(i) the amount of each Loan made hereunder, the Type thereof and the Interest
Period, if any, applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) the amount of any sum received by the Paying Agent hereunder
for the account of the Lenders and each Lender's share thereof.
(c) The entries made in the accounts maintained pursuant to subsections
(a) or (b) of this Section shall be PRIMA FACIE evidence of the existence and
amounts of the obligations recorded therein; PROVIDED that the failure of any
Lender or the Paying Agent to maintain such accounts or any error therein shall
not in any manner affect the obligation of the Borrower to repay the Loans in
accordance with the terms of this Agreement.
(d) Any Lender may request that the Loans made by it each be evidenced
by a promissory note. In such event, the Borrower shall prepare, execute and
deliver to such Lender one promissory note, payable to the order of such Lender
(or, if requested by such Lender, to such Lender and its registered assigns) and
in a form approved by the Paying Agent. Thereafter, the Loans evidenced by such
promissory note and interest thereon shall at all times (including after
assignment pursuant to Section 12.3) be represented by one or more promissory
notes in such form payable to the order of the payee named therein (or, if such
promissory note is a registered note, to such payee and its registered assigns).
(e) The Borrower authorizes the Lenders and the Paying 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
Paying 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
Paying 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 Paying Agent and the Lenders, the records of the
Paying 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 Eurodollar Advance on a day
other than a Payment Date shall be payable on the date of conversion. Interest
accrued on each Eurodollar Advance shall be payable on the last day of its
applicable Interest Period, on
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any date on which the Eurodollar Advance is prepaid, whether by acceleration or
otherwise, and at maturity. Interest accrued on each Eurodollar 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
Eurodollar 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 Paying 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 Paying Agent will notify each Lender of the
interest rate applicable to each Eurodollar Advance promptly upon determination
of such interest rate and will give each Lender prompt notice of each change in
the Base Rate. Each Reference Lender agrees to furnish timely information for
the purpose of determining the Eurodollar Rate.
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 Loans shall be deemed held by each Lender for
the benefit of such Lending Installation. Each Lender may, by written notice to
the Paying 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.
2.17. NON-RECEIPT OF FUNDS BY THE PAYING AGENT. Unless the Borrower or
a Lender, as the case may be, notifies the Paying Agent prior to the date on
which it is scheduled to make payment to the Paying 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 Paying Agent for the account of the
Lenders, that it does not intend to make such payment, the Paying Agent may
assume that such payment has been made. The Paying 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 Paying Agent, the
recipient of such payment shall, on demand by the Paying Agent, repay to the
Paying 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 Paying Agent until the date the Paying 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.
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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 Paying 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 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 Paying 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 Paying
Agent, in each case certifying that such Lender is entitled to receive payments
under this Agreement 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 Paying
Agent that it is not capable of receiving payments without any deduction or
withholding of United States federal income tax.
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 Eurodollar
Rate), or
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(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 after 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 Commitments.
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 after demand
by such Lender, the Borrower shall pay such Lender the amount necessary to
compensate such Lender 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 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 Eurodollar Advances are not
available or (ii) the interest rate applicable to a Eurodollar Advance does not
accurately reflect the cost of making or maintaining such Advance, then the
Paying Agent shall suspend the availability of Eurodollar Advances and require
any Eurodollar Advances to be converted to Floating Rate Advances.
3.4. FUNDING INDEMNIFICATION. If any payment or conversion of a
Eurodollar Advance occurs on a date which is not the last day of the applicable
Interest Period, whether because of
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acceleration, prepayment or otherwise, or a Eurodollar 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 Eurodollar
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 Eurodollar Loans to reduce any liability of the Borrower to such
Lender under Sections 3.1 and 3.2 or to avoid the unavailability of Eurodollar
Advances 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 Eurodollar Loan shall be calculated as though each Lender
funded its Eurodollar Loan through the purchase of a deposit of the type and
maturity corresponding to the deposit used as a reference in determining the
Eurodollar 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 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:
(a) on or before the Effective Date the Paying Agent shall have
received, with sufficient copies for the Lenders:
(i) Counterpart signature pages of this Agreement executed by each
party hereto;
(ii) Counterparts of the Guaranty, executed by each Guarantor;
(iii) Copies of the charter of the Borrower and each Guarantor,
together with all amendments, and a certificate of good
standing for each such Person, all certified on or within 15
days prior to the Effective Date by the appropriate
governmental officer in such Person's jurisdiction of
incorporation;
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(iv) Copies, certified as of the Effective Date by the Secretary or
Assistant Secretary of the Borrower and each Guarantor, 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;
(v) Incumbency certificates, executed as of the Effective Date by
the Secretary or Assistant Secretary of the Borrower and each
Guarantor, which shall identify by name and title and bear the
signature of the officers of the Borrower or such Guarantor,
as the case may be, authorized to sign the Loan Documents and
to make borrowings hereunder, upon which certificate the
Paying Agent and the Lenders shall be entitled to rely until
informed of any change in writing by the Borrower;
(vi) 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;
(vii) A written opinion of the Borrower's counsel, addressed to the
Lenders in substantially the form of Exhibit "B" hereto. The
Borrower requests its counsel to issue such opinion;
(viii) The Company shall have paid all fees and expenses due and
payable on or before the Effective Date;
(ix) A written representation and warranty by the Borrower that, as
of the Effective Date, since May 31, 1998, 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;
(x) A summary of the Eligible Receivables of FedEx and its
Subsidiaries as of November 30, 1998, and a calculation of the
value of the Designated Collateral (determined in accordance
with Section 6.26(b)), in each case in form satisfactory to
the Paying Agent; and
(xi) such other documents as any Lender or its counsel may
reasonably request; and
(b) the following additional conditions precedent have been satisfied:
(i) amendments to the Existing Revolving Credit Documents and the
Existing L/C Facility Documents shall have been executed and
delivered, to permit the execution, delivery and performance
of the Loan Documents, and copies of such amendments shall
have been delivered to the Paying Agent; and
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(ii) no amounts shall be outstanding under the Existing Revolving
Credit Documents.
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.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
5.1. CORPORATE EXISTENCE AND STANDING. Each of the Borrower, each of
the Guarantors and each of the 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, the Guarantors and the Significant Subsidiaries
taken as a whole.
5.2. AUTHORIZATION AND VALIDITY. The Borrower and each of the
Guarantors has the corporate power and authority and legal right to execute and
deliver the Loan Documents executed (or, with respect to the Security Documents,
to be executed) by it and to perform its obligations thereunder. The execution
and delivery by the Borrower and the Guarantors of the Loan Documents and the
performance of their respective obligations thereunder have been duly authorized
by proper corporate proceedings, and the Loan Documents constitute (or, with
respect to the Security Documents, when executed will constitute) legal, valid
and binding obligations of the Borrower and the Guarantors, enforceable in
accordance with their respective terms, except as enforceability may be limited
by bankruptcy, insolvency or similar laws affecting the
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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 Borrower's nor any
Guarantor's execution and delivery 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, any Guarantor or any of the
Significant Subsidiaries or the Borrower's, any Guarantor's or any Significant
Subsidiary's articles or certificate of incorporation or by-laws or the
provisions of any indenture, instrument or agreement to which the Borrower, any
Guarantor or any of the 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, except pursuant to the Security Documents, result in or require
the creation or imposition of any Lien in, of or on the Property of the
Borrower, any Guarantor or any Significant Subsidiary pursuant to the terms of
any such indenture, instrument or agreement. Except for the (i) 1996 Caliber
Indenture and (ii) certain additional Indebtedness in an aggregate principal
amount of not greater than $50,000,000, none of the Borrower, any Guarantor or
any Subsidiary is a party to any indenture, instrument or agreement that
requires the Indebtedness governed thereby to be equally and ratably secured
with the Obligations as a result of the execution and delivery of any of the
Security Documents. 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 (other than filings in connection with the
Security Documents).
5.4. FINANCIAL STATEMENTS. The May 31, 1998 audited consolidated
financial statements and August 31, 1998 unaudited consolidated financial
statements of the Borrower and its Consolidated 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 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.
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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
and its Significant Subsidiaries have no material contingent obligations not
provided for or disclosed in the financial statements referred to in Section
5.4.
5.7. SUBSIDIARIES. Schedule "2" 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 Paying 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 or pledge, or any other
restriction, hereunder.
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
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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. FedEx is a citizen of the United States, as defined
in 49 U.S.C. Sec. 40102(a)(15) (a "Citizen"). Each other Subsidiary that must be
a Citizen in order to conduct its business as currently conducted is a Citizen.
Neither FedEx nor any such other Subsidiary is 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. FedEx, and each other Subsidiary that must
be so authorized in order to conduct its business as currently conducted, (i) is
authorized to engage in all cargo domestic and international air service under
certificates issued pursuant to 49 U.S.C. Sec. 41103 and 49 U.S.C. Sec.
41102(a), respectively, and (ii) 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 and its Subsidiaries 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 or its Subsidiaries.
5.17. PARI PASSU. All the payment obligations of the Borrower and the
Guarantors 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 and the Guarantors (other than obligations under the Existing Revolving
Credit Documents, provided that no Default has occurred hereunder, and
obligations which are mandatorily preferred by laws or regulations of general
application).
5.18. MATERIAL ADVERSE EFFECT. Since May 31, 1998 there has been no
change in the business, Property, prospects, condition (financial or otherwise)
or results of operations of the
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Borrower and its Subsidiaries taken as a whole which could reasonably be
expected to have a Material Adverse Effect.
5.19. YEAR 2000 COMPLIANCE. The Borrower has (i) initiated a review and
assessment of all areas within the business and operations of the Borrower and
any of its Subsidiaries (including those areas affected by suppliers and
vendors) that could be adversely affected by the Year 2000 Problem, (ii)
developed a plan and timeline for addressing the Year 2000 Problem on a timely
basis and (iii) to the date hereof, implemented such plan in accordance with
such timetable. The Borrower reasonably believes that all computer applications
(including those of suppliers and vendors) that are material to the business or
operations of the Borrower or any of its Subsidiaries will, on a timely basis,
be able to properly perform date-sensitive functions for all dates before and
from and after January 1, 2000, except to the extent that a failure to do so
could not reasonably be expected to have a Material Adverse Effect.
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
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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) 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, and from time to time as
reasonably requested by the Paying Agent, for Caliber and its
Subsidiaries on a consolidated basis, a certificate signed by
the Borrower's Chief Financial Officer, Treasurer or
Controller certifying as to, (i) for such period, the Caliber
Operating Income and (ii) at the end of such period, the
aggregate principal amount of all outstanding Indebtedness of
Caliber and its Subsidiaries.
(iv) 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, stating the nature and
status thereof, and stating the steps the Borrower is taking
to cure such Default or Unmatured Default.
(v) 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 "3"
hereto, certified as 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 Paying Agent, of the calculations
required to be made to determine compliance with each of
Sections 6.12, 6.13 and 6.24.
(vi) Promptly upon becoming available, copies of:
(a) All financial statements, reports, notices and proxy
statements sent by the Borrower, any Guarantor or any
Significant Subsidiary to its public stockholders (if
any).
(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.
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(vii) 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.
(viii) Promptly after any Authorized Officer learns thereof, notice
of any change in any Rating, or any publicly-announced
decision by Moody's or S&P to consider a change in any Rating.
(ix) On or before January 15, 1999, and thereafter from time to
time as reasonably requested by the Paying Agent within 15
Business Days after each such request, an Appraisal Report
setting forth the fair market value of the airframes and
engines of FedEx included in Schedule "1".
(x) Not more than 15 Business Days after the end of each calendar
month following the Effective Date, or more frequently as the
Paying Agent may reasonably request from time to time, a
report summarizing the Eligible Receivables of FedEx and its
Subsidiaries as of the end of such month or such other date.
(xi) Within 15 Business Days after the Paying Agent may reasonably
request from time to time, an appraisal setting forth the fair
market value of all or any part of the Designated Collateral
described in clause (iv) of Section 6.26(b).
(xii) Such other information (including non-financial information)
as the Paying 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 its Subsidiaries (including working capital needs in connection
with self-help actions or a strike by members of the FPA, or contingency plans
related thereto), and to repay outstanding Advances. The Borrower will not, nor
will it permit any Subsidiary to, use any of the proceeds of the 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
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and of any other development, financial or otherwise, which could reasonably be
expected to have a Material Adverse Effect.
6.4. CONDUCT OF BUSINESS. Except as permitted by Sections 6.15 and
6.16, the Borrower will, and will cause each Guarantor and 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 (except for changes in the conduct of business resulting from an
actual or threatened business interruption, including but not limited to
self-help actions or a strike, by members of the FPA, or contingency plans
related thereto) 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 cause
FedEx and each other applicable Subsidiary to continue to be (a) a citizen of
the United States, as defined in 49 U.S.C. Sec. 40102(a)(15), (b) authorized to
engage in all cargo domestic and international air service under certificates
issued pursuant to 49 U.S.C. Sec. 41103 and 49 U.S.C. Sec. 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 and its Subsidiaries
to conduct their 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
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 and provided that neither the Borrower nor a 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
Subsidiaries for such taxes, assessments, charges and levies, determined in
accordance with GAAP, and establish adequate reserves determined in accordance
with GAAP,
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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
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
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. 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.
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, PLUS (b) Capitalized Operating Lease Value, to (ii) the sum of (a) the
items listed in clause (i) above PLUS (b) Consolidated Adjusted Net Worth, of
not more than .70 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 1.2 to 1.
6.14. RESERVED.
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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 (other than Caliber) 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 Wholly-Owned Subsidiary (other than Caliber) may
merge with any other Wholly-Owned Subsidiary,
(c) Any Consolidated Subsidiary other than Caliber, FedEx or
RPS may be liquidated or dissolved,
(d) Any Consolidated Subsidiary (other than Caliber) may
merge or consolidate with any other Person, provided that, after giving
effect to any such merger or consolidation, no Default or Unmatured
Default shall exist, and provided, further, 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, (ii) no Default or Unmatured
Default shall exist, and (iii) the Borrower owns, directly or
indirectly, 100% of such Consolidated Subsidiary.
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 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 such Consolidated Subsidiary shall not at any time
exceed $500,000,000;
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(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 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 or the applicable
Consolidated Subsidiary acquired such property, and (B) in the case of
real property or fixtures, the later of the date on which the Borrower
or the applicable Consolidated Subsidiary 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) Dispositions in connection with the restructuring at
Viking Freight, Inc. which was publicly announced prior to the date
hereof; and
(f) Sales of Property commonly known as "Federal Express
Stage 3 Kits" in accordance with FedEx's ordinary business practices.
Notwithstanding any provision of this Section 6.16 to the contrary, the Borrower
will not, nor will it permit any Consolidated Subsidiary to, make any such sale,
transfer, conveyance or lease of any Collateral or Designated Collateral without
the prior written consent of the Required Lenders, except that the Borrower and
its Consolidated Subsidiaries may sell, transfer, convey or lease, in accordance
with the foregoing provisions of this Section 6.16, Designated Collateral
consisting of motor vehicles and real estate without such written consent,
provided that after giving effect thereto, the Borrower is in compliance with
Section 6.24.
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
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(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 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;
(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 any
other Consolidated Subsidiary or to the Borrower;
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(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) Investments made by the Borrower or a Consolidated
Subsidiary provided that, after giving effect to any such Investment,
(i) the aggregate amount of all such Investments existing on the date
of such proposed action shall not exceed (x) $750,000,000 plus (y) 75%
(or in the case of a deficit, minus 100%) of the Consolidated Net
Income for the period commencing on June 1, 1997 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.
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) the Guaranties;
(b) By the endorsement of negotiable instruments for deposit
or collection (or similar transactions) in the ordinary
course of business;
(c) Guaranties of customs fees in the ordinary course of
business;
(d) 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; and
(e) Guaranties included or required under the Existing
Revolving Credit Documents and the Existing L/C Facility
Documents.
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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:
(a) Liens which may be hereafter created to secure payment of
the Obligations;
(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
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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;
(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;
(l) Liens on the Designated Collateral granted in accordance
with Section 6.26; and
(m) Liens not otherwise permitted by Sections 6.19(a) through
(l) 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 any 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(m), does
not exceed 8% of Consolidated Adjusted Total Assets.
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Notwithstanding any provision of this Section 6.19 to the contrary, the Borrower
will not, and will not permit any Consolidated Subsidiary to, create, incur,
assume or suffer to exist, any Lien on any of the Designated Collateral, except
in accordance with clause (l) of this Section 6.19, or enter into, or make any
commitment to enter into, any arrangement for the acquisition of any Designated
Collateral through conditional sales, lease-purchase or other title retention
agreements, except Liens securing a principal amount of not more than
$200,000,000 in the aggregate.
6.20. GUARANTIES. (a) Within thirty (30) days after acquiring or
establishing any Subsidiary that constitutes a Significant Subsidiary (other
than Federal Express Canada Ltd. or Federal Express (Hong Kong) Limited) upon
its acquisition or establishment or the consummation of any transactions
contemplated at the time of its establishment, the Borrower shall cause such
Significant Subsidiary to execute the Guaranty pursuant to an Addendum thereto
in the form of Annex I to the Guaranty, and to deliver documentation similar to
that described in Section 4.1(a)(iii), (iv), (v) and (vii) relating to the
authorization for, execution and delivery of, and validity of such Significant
Subsidiary's obligations as a Guarantor, such documentation to be in form and
substance reasonably satisfactory to the Paying Agent.
(b) If at any time the Guarantors do not consist of Subsidiaries of the
Borrower which, in the aggregate, had revenues (determined in accordance with
GAAP) for the immediately preceding fiscal year of the Borrower in excess of 90%
of the consolidated revenues (determined in accordance with GAAP) of the
Borrower and the Consolidated Subsidiaries for such immediately preceding fiscal
year, then the Borrower shall promptly cause one or more additional Subsidiaries
each to execute the Guaranty pursuant to an Addendum thereto in the form of
Annex I to the Guaranty, and to deliver documentation similar to that described
in Section 4.1(a)(iii), (iv), (v) and (vii) relating to the authorization for,
execution and delivery of, and validity of such Subsidiary's obligations as a
Guarantor, such documentation to be in form and substance reasonably
satisfactory to the Paying Agent, so that the aggregate consolidated revenues
(determined in accordance with GAAP) of the Guarantors for such fiscal year
equal or exceed 90% of the consolidated revenues (determined in accordance with
GAAP) of the Borrower and the Consolidated Subsidiaries for such fiscal year.
6.21. NEGATIVE COVENANTS IN SUBSIDIARY AGREEMENTS. The Borrower will
not permit any of its Subsidiaries to enter into, after the date hereof, any
agreement, instrument or indenture that, directly or indirectly, contains
negative covenants restricting any of the following (or otherwise prohibits or
restricts, or has the effect of prohibiting or restricting, any of the
following):
(i) the incurrence or payment of Indebtedness owed to the Borrower
or any other Subsidiary of the Borrower;
(ii) the granting of Liens;
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(iii) the declaration or payment of dividends; and
(iv) the making of loans, advances or other Investments to or in the
Borrower or any other Subsidiary of the Borrower.
6.22. INDEBTEDNESS OF CALIBER AND SUBSIDIARIES. None of Caliber or its
Subsidiaries will directly or indirectly create, incur, assume or otherwise
become or remain liable with respect to (a) any Indebtedness of the types set
forth in clauses (i), (iii), (iv), (v), (vi), (vii) and (viii) of the definition
of "Indebtedness", or (b) Indebtedness consisting of purchase-money obligations
representing the deferred purchase price of Property, except:
(i) all such Indebtedness existing under the 1996 Caliber Indenture
or otherwise existing on the date hereof and reflected in the
consolidated financial statements of the Borrower and its
Consolidated Subsidiaries;
(ii) such Indebtedness owed to the Borrower or any Wholly-Owned
Subsidiary of the Borrower; and
(iii) other Indebtedness in an aggregate principal amount not to
exceed $50,000,000.
6.23. EXISTING REVOLVING CREDIT DOCUMENTS. At any time when no Default
exists, the Borrower shall make no prepayments of principal under the Existing
Revolving Credit Documents unless the principal amount of all Obligations
hereunder has been paid in full. The Borrower shall not request any "Advance"
(as defined in the Existing Revolving Credit Documents) unless the Aggregate
Commitment is at such time utilized in full.
6.24. VALUE OF DESIGNATED COLLATERAL AND COLLATERAL; AIRCRAFT CASUALTY.
(a) The aggregate value of the Designated Collateral shall at all times equal or
exceed 1.75 TIMES the sum of (i) the Aggregate Commitment, or if the Aggregate
Commitment has been terminated, the aggregate outstanding principal amount of
the Obligations, (ii) the "Aggregate Commitment" (as defined in the Existing
Revolving Credit Documents), or if such "Aggregate Commitment" has been
terminated, the aggregate outstanding principal amount of the "Obligations" (as
defined in the Existing Revolving Credit Documents) and (iii) the aggregate
amount of the "Commitments" (as defined in the Existing L/C Facility Documents),
or if such "Commitments" have been terminated, the aggregate outstanding
principal amount of the "Obligations" (as defined in the Existing L/C Facility
Documents).
(b) The Borrower and its applicable Subsidiaries shall be required to
grant Liens on Designated Collateral as provided in Section 6.26(a) only to the
extent necessary so that the value, as determined pursuant to Section 6.26(b),
of all such Collateral as to which a Lien is granted, equals or exceeds, at all
times prior to the release of such Liens pursuant to Section 6.26(c), 1.75 TIMES
the sum of (i) the Aggregate Commitment, or if the Aggregate Commitment has been
terminated, the aggregate outstanding principal amount of the Obligations, (ii)
the
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"Aggregate Commitment" (as defined in the Existing Revolving Credit
Documents), or if such "Aggregate Commitment" has been terminated, the aggregate
outstanding principal amount of the "Obligations" (as defined in the Existing
Revolving Credit Documents) and (iii) the aggregate amount of the "Commitments"
(as defined in the Existing L/C Facility Documents), or if such "Commitments"
have been terminated, the aggregate outstanding principal amount of the
"Obligations" (as defined in the Existing L/C Facility Documents), provided
that, if at any time the aggregate value of such Collateral is less than the
amount required by this sentence, then the Borrower shall (i) promptly notify
the Paying Agent of such shortfall, and (ii) promptly grant Liens on additional
Designated Collateral, in accordance with Section 6.26(a), to the extent
necessary to reduce such shortfall to zero.
(c) If any airframe or engine set forth on Schedule "1" hereto shall be
destroyed or materially damaged, regardless of the cause of such destruction or
damage, then the Borrower shall promptly notify the Paying Agent thereof and,
within 45 days thereafter, designate in writing one or more airframes and/or
engines, as applicable, in each case free and clear of any Lien, to be added to
Schedule "1" hereto, as provided in the definition of "Designated Collateral",
having an aggregate value, in accordance with Section 6.26 hereof, equal to or
exceeding the value of the destroyed or damaged airframe or engine. If the
damaged or destroyed airframe or engine constitutes part of the Collateral, then
the Borrower shall, or shall cause its Subsidiaries to, enter into such
amendments to the Aircraft Mortgage as the Paying Agent may reasonably request
in order to grant to Morgan Guaranty, as collateral agent for the Lenders and
for the lenders under the Existing Revolving Credit Documents and the Existing
L/C Facility Documents, a first priority Lien on such replacement airframes or
engines.
6.25. NO NEGATIVE PLEDGES. From and after the date hereof, neither the
Borrower nor any of its Subsidiaries shall limit, restrict or delay its right or
power to sell, assign, pledge, grant any Lien on, transfer, dispose of or
otherwise encumber the Designated Collateral or any part thereof, including,
without limitation, any such restriction on capital stock, except as provided on
the date hereof in the Loan Documents, the Existing Revolving Credit Documents
or the Existing L/C Facility Documents.
6.26. GRANT OF SECURITY INTEREST IN COLLATERAL. (a) Promptly (but in
any event within 10 Business Days) after any one or more dates on which either
Rating ceases to be an Investment Grade Rating, the Borrower shall, to the
extent provided for in Section 6.24(b), (i) grant, and cause its Subsidiaries to
grant, to Morgan Guaranty, as collateral agent for the Lenders and for the
lenders under the Existing Revolving Credit Documents and the Existing L/C
Facility Documents, a first priority Lien on the Designated Collateral other
than Designated Collateral owned by Caliber and its Subsidiaries (the "FDX
Collateral"), which Lien shall equally and ratably secure the Obligations under
the Loan Documents and the obligations under each of the Existing Revolving
Credit Documents and the Existing L/C Facility Documents, and (ii) cause Caliber
and Caliber's Subsidiaries to grant, to a collateral trustee designated by
Morgan Guaranty, a first priority Lien on all the capital stock of Caliber's
Subsidiaries which constitute part of the
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Designated Collateral (the "Caliber Collateral"), which Lien shall equally and
ratably secure the Obligations under the Loan Documents, the obligations under
each of the Existing Revolving Credit Documents and the Existing L/C Facility
Documents and the notes issued under the 1996 Caliber Indenture. All such Liens
granted pursuant to this Section 6.26 shall be granted in the following order:
first, on the capital stock of Caliber and all Caliber Collateral; second, on
the airframes and engines of FedEx; third, on all (and not part) of the accounts
receivable of FedEx and its Subsidiaries; and fourth, as designated by the
Paying Agent, on the motor vehicles and real estate of FedEx and its
Subsidiaries and the intercompany indebtedness owed to the Borrower by its
Subsidiaries, in each case, to the extent constituting part of the Designated
Collateral. From time to time, the Borrower and its Subsidiaries shall execute
and deliver, or cause to be executed and delivered, such additional agreements,
instruments, certificates (including, without limitation, any good standing
certificates), legal opinions or documents, and take all such actions, as the
Paying Agent may reasonably request, for the purposes of implementing or
effectuating this Section 6.26 or the Security Documents, or of more fully
perfecting, preserving or renewing the rights of the Paying Agent and the
Lenders with respect to the Collateral (or with respect to any additions thereto
or replacements or proceeds thereof or with respect to any other Property or
assets hereafter acquired by the Borrower or its Subsidiaries which is or may be
deemed to be part of the Collateral) pursuant hereto or thereto.
(b) Designated Collateral and Collateral shall at all times be
valued as follows:
(i) the value of the Caliber Stock shall equal 9.0 times Caliber
Operating Income, less the aggregate principal amount of all
outstanding Indebtedness (including, without limitation,
intercompany indebtedness) of Caliber and its Subsidiaries;
(ii) the value of the airframes and engines listed on Schedule "1"
shall equal the fair market value thereof set forth in the most
recently delivered Appraisal Report delivered pursuant to
Section 6.1, and prior to the delivery of the first such
Appraisal Report, such Property shall be valued at
$1,892,600,000;
(iii) the value of the accounts receivable of FedEx and its
Subsidiaries shall equal 0.75 times the aggregate amount of
Eligible Receivables of FedEx and its Subsidiaries, as
determined on the report of Eligible Receivables most recently
delivered pursuant to Section 4.1 or Section 6.1; and
(iv) the value of the motor vehicles and real estate of FedEx and its
Subsidiaries and the intercompany indebtedness owed to the
Borrower by its Subsidiaries shall equal the fair market value
thereof as determined in the most recent appraisal provided by a
nationally recognized firm of appraisers pursuant to Section
6.1, and prior to the delivery of the first such appraisal with
respect to any such Property, such Property shall be valued at
$633,300,000.
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(c) Any Liens granted under this Section 6.26 shall be released by
Morgan Guaranty, as collateral agent, pursuant to a Release of Security
Documents substantially in the form of Exhibit "D" attached hereto, at the
written request of the Borrower if the S&P Rating and Moody's Rating both become
Investment Grade Ratings, but shall be reinstated on any one or more additional
dates thereafter on which either Rating ceases to be an Investment Grade Rating.
Notwithstanding the foregoing, (i) all such Liens shall be released pursuant to
a Release of Security Documents substantially in the form of Exhibit "D"
attached hereto when all of the Obligations have been paid in full and the
Commitments have been terminated, and (ii) the Lien on any asset sold or
otherwise disposed of in accordance with Section 6.16 shall be released promptly
after the Borrower's written request therefor.
6.27. APPROVAL OF FORMS OF SECURITY DOCUMENTS. The Borrower shall, as
soon as practicable, and in any event no later than the later of (i) January 15,
1999 and (ii) seven Business Days after the Paying Agent delivers drafts of such
documents to the Borrower, give written notice to the Paying Agent that it has
approved a final form of each Security Document which is in form and substance
satisfactory to the Paying Agent and the agents under the Existing Revolving
Credit Documents and the Existing L/C Facility Documents.
ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events shall
constitute a Default:
7.1. BREACH OF REPRESENTATION OR WARRANTY. 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 Paying Agent under or in connection with 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. FAILURE TO PAY. Nonpayment of principal of any Loan when due, or
nonpayment of interest on any Loan or of any facility fee or other obligations
under any of the Loan Documents within five days after the same becomes due.
7.3. BREACH OF CERTAIN COVENANTS. The breach by the Borrower of any of
the terms or provisions of Section 6.2, 6.3, 6.5, 6.11, 6.12, 6.13, 6.15, 6.16,
6.17, 6.18, 6.19, 6.22, 6.23, 6.24, 6.25 or 6.26.
7.4. BREACH OF OTHER COVENANTS, LOAN DOCUMENTS, EXISTING REVOLVING
CREDIT DOCUMENTS OR EXISTING L/C FACILITY DOCUMENTS. 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 or any other Loan Document
which is not remedied within five days after
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written notice from the Paying Agent or any Lender; or the occurrence of any
"Default" (as defined in any of the Existing Revolving Credit Documents) or any
"Event of Default" (as defined in the Existing L/C Facility Documents).
7.5. CROSS-DEFAULT. 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.
7.6. VOLUNTARY BANKRUPTCY, ETC. The Borrower or any Consolidated
Subsidiary shall (i) fail to pay, or admit in writing its inability to pay, its
debts generally as they become due, (ii) have an order for relief entered with
respect to it under the Federal bankruptcy laws as now or hereafter in effect,
(iii) make an assignment for the benefit of creditors, (iv) 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, (v) 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, (vi) take any corporate
action to authorize or effect any of the foregoing actions set forth in this
Section 7.6 or (vii) fail to contest in good faith any appointment or proceeding
described in Section 7.7.
7.7. INVOLUNTARY BANKRUPTCY, ETC. 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(v) 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.
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7.8. JUDGMENTS. 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. ERISA. 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. SEIZURE. 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. ENVIRONMENTAL MATTERS. 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.
7.12. INVALIDITY, ETC. OF LOAN DOCUMENTS; FAILURE OF SECURITY. At any
time, for any reason (i) any provision of any Loan Document shall at any time
for any reason cease to be valid and binding and enforceable against the
Borrower or any Guarantor, or the validity, binding effect or enforceability
thereof against the Borrower or any Guarantor shall be contested by any Person,
or the Borrower or any Guarantor shall deny that it has any or further liability
or obligation thereunder, or any Loan Document shall be terminated, invalidated
or set aside, or be declared ineffective or inoperative or in any way cease to
give or provide to the Lenders and the Paying Agent the benefits purported to be
created thereby, or (ii) Liens in favor of the Paying Agent or the Lenders
shall, while the Security Documents are in effect or purported to be in effect
pursuant hereto, be invalidated or otherwise cease to be in full force and
effect, or such Liens shall be subordinated or shall not have the priority
contemplated hereby or by the Security Documents.
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ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. ACCELERATION. If any Default described in Section 7.6 or 7.7
occurs as a result of any action taken by or against 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 Paying Agent or any Lender. If any other
Default occurs, the Required Lenders (or the Paying 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
Paying 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-default or cross-acceleration to Indebtedness under this Agreement.
8.2. AMENDMENTS. Subject to the provisions of this Article VIII, the
Required Lenders (or the Paying 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
reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest thereon or fees
hereunder.
(ii) Reduce the percentages specified in the definitions of
Required Lenders or Supermajority Lenders, respectively, or
amend, modify or waive any provision requiring action by the
Required Lenders or the Supermajority Lenders to require
action by any other Person in lieu of the Required Lenders or
the Supermajority Lenders, respectively.
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(iii) Extend the Termination Date or the Maturity Date, reduce the
amount or extend the payment date for the mandatory payments
required under Section 2.2, 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, Sections 6.24(a) or (b), this Section 8.2, or Section
12.1.
(v) Release FedEx or RPS from any of their material obligations
under the Guaranty.
(vi) Release all or substantially all of the Collateral, or release
the Borrower or any Guarantor from any of its material
obligations under the Security Documents, in each case other
than pursuant to Section 6.26(c) or 9.16;
and provided further, however, that no such supplemental agreement shall,
without the consent of the Supermajority Lenders, amend, modify or waive Section
6.24(c), Section 6.26 or the last sentence of Section 6.16.
No amendment of any provision of this Agreement relating to the Paying Agent
shall be effective without the written consent of the Paying Agent. The Paying
Agent may waive payment of the fee required under Section 12.3.3 without
obtaining the consent of any other party to this Agreement. No amendment of
Section 12.3.1 of this Agreement affecting any SPC shall be effective without
the written consent of such SPC.
8.3. PRESERVATION OF RIGHTS. No delay or omission of the Lenders or the
Paying Agent to exercise any right under the Loan Documents shall impair such
right or be construed to be a 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 Paying Agent and the Lenders until the Obligations have been
paid in full.
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ARTICLE IX
GENERAL PROVISIONS
9.1. SURVIVAL OF REPRESENTATIONS. All representations and warranties of
the Borrower contained in this Agreement shall survive delivery of this
Agreement 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 Paying Agent and the Lenders and
supersede all prior agreements and understandings among the Borrower, the Paying
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. 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 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
Co-Arrangers and the Paying Agent for any and all reasonable costs, internal
charges and out-of-pocket expenses (including attorneys' fees and time charges
of attorneys for the Co-Arrangers and the Paying Agent, which attorneys may be
employees of the Co-Arrangers and the Paying Agent) paid or incurred by the
Co-Arrangers and the Paying Agent in connection with the preparation,
negotiation, execution, delivery, amendment, modification or waiver, of the Loan
Documents and the creation, perfection, modification and release of the Liens
contemplated by the Security Documents; provided, however, that such costs,
charges and expenses shall not include the fees or expenses of any outside
counsel other than Sidley & Austin, counsel to the Paying Agent. The
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Borrower also agrees to reimburse the Paying 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 Paying Agent and the
Lenders, which attorneys may be employees of the Paying Agent or the Lenders)
paid or incurred by the Paying 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 Paying 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 Paying 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, provided, however,
that the Borrower shall not have an obligation pursuant to this Section to
indemnify any Person for any such amounts which result from the willful
misconduct or gross negligence of such Person, as determined by a court of
competent jurisdiction. 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 Paying Agent with sufficient
counterparts so that the Paying 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 Paying Agent shall be solely that of borrower and
lender. Neither the Paying Agent nor any Lender shall have any fiduciary
responsibilities to the Borrower. Neither the Paying 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 LAWS OF THE STATE OF NEW YORK, 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 New York state
court sitting in New York, New York 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
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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 Paying 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 Paying Agent or any Lender
or any Affiliate of the Paying 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 New York, New York.
9.13. WAIVER OF JURY TRIAL. THE BORROWER, THE PAYING 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 Paying 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 Paying Agent or that Lender, (iii) to regulatory
officials (provided that, to the extent practicable and permissible, the Paying
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 Paying 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 Paying 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.
9.16. RELEASE OF GUARANTORS. Upon the consummation of any liquidation,
dissolution, merger, consolidation, sale or other transfer of a Guarantor other
than Caliber, FedEx or RPS (collectively, a "Transfer"), and provided (i) no
Default or Unmatured Default has occurred and is continuing or would occur as a
result of such Transfer, and (ii) the Liens and security interests contemplated
by the Security Documents are not then in effect or purported to be in effect,
such Guarantor shall automatically be released from all of its obligations under
the Guaranty, and, if the Borrower so requests, the Lenders shall promptly
execute an instrument, in form and substance reasonably satisfactory to the
Borrower and the Paying Agent, evidencing such release.
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ARTICLE X
THE PAYING AGENT
10.1. APPOINTMENT. Morgan Guaranty is hereby appointed Paying Agent
hereunder and under each other Loan Document, and each of the Lenders
irrevocably authorizes the Paying Agent to act as the contractual representative
of such Lender with the rights and duties expressly set forth herein and in the
other Loan Documents. The Paying Agent agrees to act as such contractual
representative upon the express conditions contained in this ARTICLE X. The
defined terms "Paying Agent", "Co-Arranger", "Documentation Agent",
"Co-Syndication Agent" and Administrative Agent" are used in this Agreement
solely as a matter of market convention. Each Lender expressly understands and
agrees that none of such Persons shall have any fiduciary responsibilities to
any Lender by reason of this Agreement and that the Paying Agent is merely
acting as the representative of the Lenders with only those duties as are
expressly set forth in this Agreement and the other Loan Documents. In its
capacity as the Lenders' contractual representative, the Paying Agent does not
assume any fiduciary duty to any of the Lenders and is acting as an independent
contractor, the rights and duties of which are limited to those expressly set
forth in this Agreement and the other Loan Documents. Each of the Lenders hereby
agrees to assert no claim against the Paying Agent on any agency theory or any
other theory of liability for breach of fiduciary duty, all of which claims each
Lender waives. None of the Co-Arrangers or the Administrative Agent, as such,
shall have any duties under or in connection with this Agreement or the other
Loan Documents.
10.2. POWERS. The Paying Agent shall have and may exercise such powers
under the Loan Documents as are specifically delegated to the Paying Agent by
the terms of each thereof, together with such powers as are reasonably
incidental thereto. The Paying Agent shall have the right to negotiate and
approve the form, terms and provisions of the Security Documents, and to enter
into the Security Documents for the benefit of the Lenders, in accordance with
Section 6.26 (but in any event subject to Section 8.2). Any action taken by the
Paying Agent in accordance with the provisions of this Agreement, the Security
Documents or the other Loan Documents, and the exercise by the Paying Agent of
the powers set forth herein or therein, together with such other powers as are
reasonably incidental thereto, are hereby authorized by, and shall be binding
upon, each of the Lenders. The Paying 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 Paying
Agent. Without limiting the generality of the foregoing, the Paying Agent shall
not be required to take any action with respect to any Default except as
expressly provided in Article VII.
10.3. GENERAL IMMUNITY. None of the Paying Agent or its Affiliates, nor
any of their respective 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 that any such Person shall not have
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such immunity for acts or omissions it takes which are both (i) not at the
request or with the consent of the Required Lenders, and (ii) instances of its
own gross negligence or willful misconduct.
10.4. NO RESPONSIBILITY FOR LOANS, RECITALS, ETC. The Paying Agent
shall be deemed not to have knowledge of any Default or Unmatured Default unless
and until written notice thereof is given to the Paying Agent by the Borrower or
a Lender, and neither the Paying Agent or its Affiliates, nor any of their
respective directors, officers, agents or employees shall be responsible for or
have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this Agreement, (ii) the contents
of any certificate, report or other document delivered hereunder or in
connection herewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein, (iv) the
validity, enforceability, effectiveness or genuineness of this Agreement or any
other agreement, instrument or document, or (v) the satisfaction of any
condition set forth in Article IV or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the Paying Agent.
10.5. ACTION ON INSTRUCTIONS OF LENDERS. The Paying 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 Loans. The Paying 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 Paying Agent may execute
any of its duties as Paying 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 Paying Agent shall be
entitled to seek advice of counsel (who may be counsel for the Borrower)
concerning all matters pertaining to its duties hereunder and under any other
Loan Document.
10.7. RELIANCE ON DOCUMENTS; COUNSEL. The Paying Agent shall be
entitled to rely upon any 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, (i) in respect to legal matters, upon the opinion of
counsel selected by the Paying Agent, which counsel may be employees of the
Paying Agent, (ii) in respect of accounting and related matters, upon
accountants selected by the Paying Agent, and (iii) in respect of other matters,
upon experts selected by the Paying Agent.
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10.8. PAYING AGENT'S REIMBURSEMENT AND INDEMNIFICATION. The Lenders
agree to reimburse and indemnify the Paying Agent, its Affiliates and their
respective directors, officers, agents and employees, as applicable, ratably in
proportion to their respective Commitments (i) for any amounts not reimbursed by
the Borrower for which the Paying Agent is entitled to reimbursement by the
Borrower under the Loan Documents, (ii) for any other expenses incurred by the
Paying Agent or any of such Persons 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 Paying Agent or any of such Persons 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 Paying Agent or any such Persons 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 Paying Agent.
The obligations of the Lenders under this Section 10.8 shall survive payment of
the Obligations and termination of this Agreement.
10.9. RIGHTS AS A LENDER. With respect to its Commitment and the Loans
made by it, the Paying 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 Paying Agent, and the term "Lender" or "Lenders" shall, at any
time when the Paying Agent is a Lender, unless the context otherwise indicates,
include the Paying Agent in its individual capacity. The Paying 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 Paying 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 Paying 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 Paying 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 PAYING AGENT. The Paying Agent may resign at any time
by giving written notice thereof to the Lenders and the Borrower, and the Paying
Agent may be removed at any time with or without cause by written notice
received by the Paying Agent from the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to
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appoint, on behalf of the Borrower and the Lenders and with the consent of the
Borrower (which shall not be unreasonably withheld), a successor Paying Agent.
If no successor Paying 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 Paying Agent's giving notice
of resignation, then the retiring Paying Agent may appoint, on behalf of the
Lenders, a successor Paying Agent, provided that the Borrower shall have the
right to remove such successor Paying 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 Paying Agent shall be a commercial bank
having capital and retained earnings of at least $250,000,000. Upon the
acceptance of any appointment as Paying Agent hereunder by a successor Paying
Agent, such successor Paying Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring or removed
Paying Agent, and the retiring or removed Paying Agent shall be discharged from
its duties and obligations hereunder and under the other Loan Documents. After
any retiring or removed Paying Agent's resignation or removal hereunder as
Paying 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 Paying Agent hereunder and under the other Loan Documents.
10.12. DISTRIBUTION OF INFORMATION. The Borrower authorizes the Paying
Agent, as the Paying 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
information pertaining to the Borrower and its Subsidiaries whether such
information was provided by the Borrower or prepared or obtained by the Paying
Agent, subject to Section 9.14. Neither the Paying 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 Paying Agent may elect to distribute, whether
such information was provided by the Borrower or prepared or obtained by the
Paying Agent, nor shall the Paying 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. Except as expressly set forth herein, the Paying Agent shall have no
duty to disclose, and shall not be liable for the failure to disclose, any
information relating to the Borrower or any of the Subsidiaries that is
communicated to or obtained by the bank serving as Paying Agent, or any of such
bank=s Affiliates, in any capacity.
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
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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 (other than pursuant to the Security Documents) 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 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 Paying Agent, assign all
or any portion of its rights under this Agreement to a Federal Reserve Bank;
provided, however, that no such assignment shall release the transferor Lender
from its obligations hereunder. The Paying Agent may treat each Lender as the
owner of the Loans made by such Lender for all purposes hereof unless and until
such Lender 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 Paying Agent. Any assignee or transferee of a Loan 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 owner of any Loan, shall be
conclusive and binding on any subsequent holder, transferee or assignee of such
Loan.
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 and from time to time
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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 evidencing any such Loan, 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 owner of all Loans made by it 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 Paying 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 requires the approval of all of the Lenders pursuant to Section
8.2.
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 Paying Agent written notice of the fact that it has made such a
sale (without being required to specify the amount or any other
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 and from time to time, make one or more assignments to one
or more banks or other entities (each a "Purchaser") of all or any part
of its rights and obligations under the Loan Documents. Any assignment
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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 Paying 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, (a) 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, and (b) any Lender (a "Granting Lender")
may grant to a special purpose funding vehicle (a "SPC") identified as
such in writing from time to time by the Granting Lender to the Paying
Agent and the Borrower, the option to provide to the Borrower all or
any part of any Loan that such Granting Lender would otherwise be
obligated to make to the Borrower pursuant to this Agreement; PROVIDED
that (i) nothing herein shall constitute a commitment by any SPC to
make any Loan, (ii) if an SPC elects not to exercise such option or
otherwise fails to provide all or any part of such Loan, the Granting
Lender shall be obligated to make such Loan pursuant to the terms
hereof. The making of a Loan by an SPC hereunder shall utilize the
Commitment of the Granting Lender to the same extent, and as if, such
Loan were made by such Granting Lender. Each party hereto agrees that
no SPC shall be liable for any indemnity or similar payment obligation
under this Agreement (all liability for which shall remain with the
Granting Lender). In furtherance of the foregoing, each party hereto
agrees (which agreement shall survive the termination of this
Agreement) that, prior to the date that is one year and one day after
the payment in full of all outstanding commercial paper or other senior
indebtedness of any SPC, it will not institute against, or join any
other person in instituting against, such SPC any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings
under the laws of the United States or any State thereof. In addition,
notwithstanding anything to the contrary contained in this Section
12.3, any SPC may (i) with notice to, but without the prior written
consent of, the Borrower and the Paying Agent and without paying any
processing fee therefor, assign all or any part of its interests in any
Advances to its Granting Lender or to any financial institutions
(consented to by the Borrower and the Paying Agent) providing liquidity
and/or credit support to or for the account of such SPC to support the
funding or maintenance of Loans and (ii) disclose on a confidential
basis any non-public information relating to its Loans to any rating
agency, commercial paper dealer or provider of any surety, guarantee or
credit or liquidity enhancement to such SPC.
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 Paying 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
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shall be on terms and conditions reasonably satisfactory to the
affected Lender. If the affected Lender is a Reference Lender, the
Paying 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
Loans of such Lender outstanding on the effective date of an assignment
required under this Section 12.3.2, as well as for all other
Obligations owed to such Lender under this Agreement as of such
effective date.
12.3.3. EFFECT; EFFECTIVE DATE. Upon (i) delivery to the
Paying 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 by the assignor or assignee of a $4,000 fee to the
Paying 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 Paying Agent
shall be required to release the transferor Lender with respect to the
Commitments 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
Paying Agent and the Borrower shall make appropriate arrangements so
that, to the extent one or more notes have been issued to evidence any
of the transferred Loans, a replacement note is issued to such
transferor Lender and, if so requested by such Purchaser, a new note
or, as appropriate, 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.
63
<PAGE>
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 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 Paying 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 Paying Agent of original or
faxed copies of such counterparts executed by the Borrower, the Paying Agent and
the Lenders.
64
<PAGE>
IN WITNESS WHEREOF, the Borrower, the Lenders and the Paying Agent have
executed this Agreement as of the date first above written.
FDX CORPORATION
By: /s/ Charles M. Buchas, Jr.
-------------------------------------------
Charles M. Buchas, Jr.
Corporate Vice President and Treasurer
FDX Corporation
2600 Thousand Oaks Boulevard
Suite 3110
Memphis, Tennessee 38118
Attn: Treasurer
Telephone: 901-224-7040
Telecopy: 901-224-7061
Copy all notices and credit matters to:
FDX Corporation
6075 Poplar Avenue
Suite 300
Memphis, Tennessee 38119
Attn: General Counsel
Telephone: 901-395-3382
Telecopy: 901-395-5034
<PAGE>
CO-ARRANGERS:
MORGAN GUARANTY TRUST
COMMITMENT: COMPANY OF NEW YORK,
$60,000,000 Individually and as Paying Agent
By: /s/ Diana H. Imhof
-------------------------------------------
Diana H. Imhof
Vice President
60 Wall Street
5th Floor
New York, New York 10260-0060
Attn: Diana H. Imhof
Telephone: 212-648-1356
Telecopy: 212-648-5018
Copy all notices and credit matters to:
Morgan Guaranty Trust Company of New York
60 Wall Street
5th Floor
New York, New York 10260-0060
Attn: Diana H. Imhof
Telephone: 212-648-1356
Telecopy: 212-648-5018
Copy all Borrowing Notices to:
Morgan Guaranty Trust Company of New York
c/o J. P. Morgan Services, Inc.
500 Stanton-Christiana Road
Newark, Delaware 19713-2107
Attn: Thomas Lazlo/Scott Kasprenski
Telephone: 302-634-1893/1874
Telecopy: 302-634-1852
67
<PAGE>
THE FIRST NATIONAL BANK OF
COMMITMENT: CHICAGO
$60,000,000
By: /s/
-------------------------------------------
Authorized Agent
One First National Plaza
Mail Suite 0362
Chicago, Illinois 60670
Attn: Transportation Division
Administrative Coordinator
Telephone: 312-732-8142
Telecopy: 312-732-3885
Copy all notices and credit matters to:
The First National Bank of Chicago
One First National Plaza
Mail Suite 0336
Chicago, Illinois 60670-0362
Attn: Christina Jamieson
Telephone: 312-732-1336
Telecopy: 312-732-7455
Copy all Borrowing Notices to:
The First National Bank of Chicago
One First National Plaza
Mail Suite 0634
Chicago, Illinois 60670-0634
Attn: Mattie Reed
Telephone: 312-732-5219
Telecopy: 312-732-4840
68
<PAGE>
THE CHASE MANHATTAN BANK
COMMITMENT:
$60,000,000
By: /s/ Matthew H. Massie
--------------------------------------------
Matthew H. Massie
Managing Director
270 Park Avenue
38th Floor
New York, New York 10017
Attn: Matthew H. Massie
Telephone: 212-270-5432
Telecopy: 212-270-5100
Copy all notices and credit matters to:
The Chase Manhattan Bank
270 Park Avenue
38th Floor
New York, New York 10017
Attn: Vilma Francis
Telephone: 212-270-5484
Telecopy: 212-270-4016
All Borrowing Notices to:
The Chase Manhattan Bank
One Chase Plaza
8th Floor
c/o The Loan & Agency Services Group
New York, New York 10081
Attn: Mo-Lin Sum
Telephone: 212-552-7312
Telecopy: 212-552-5650
69
<PAGE>
CITIBANK, N.A.
COMMITMENT:
$60,000,000
By: /s/
-------------------------------------------
Name:
Title:
399 Park Avenue
12th Floor/Zone 2
New York, New York 10043
Attn: Portfolio Management
Telephone: 212-559-6413
Telecopy: 212-793-3734
Copy all notices and credit matters to:
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Attn: Tom Boyle
Telephone: 212-559-6149
Telecopy: 212-793-1246
Copy all Borrowing Notices to:
Citibank, N.A.
Global Loan Support Services
Two Penns Way Suite 200
New Castle, DE 19720
Attn: Timothy E. Smith
Telephone: 302-894-6059
Telecopy: 302-894-6120
70
<PAGE>
CREDIT SUISSE FIRST BOSTON
COMMITMENT:
$60,000,000
By: /s/Thomas G. Muoio /s/Robert N. Finney
-------------------------------------------
Thomas G. Muoio Robert N. Finney
Title: Vice President Managing Director
Eleven Madison Avenue
New York, New York 10010-3629
Attn: Thomas G. Muoio
Telephone: 212-325-9098
Telecopy: 212-325-8319
Copy all notices and credit matters to:
Credit Suisse First Boston
Eleven Madison Avenue
New York, New York 10010-3629
Attn: Thomas G. Muoio
Telephone: 212-325-9098
Telecopy: 212-325-8319
Copy all Borrowing Notices to:
Credit Suisse First Boston
Eleven Madison Avenue
New York, New York 10010-3629
Attn: Patti Matos
Telephone: 212-325-9754
Telecopy: 212-325-6508
71
<PAGE>
SENIOR MANAGING AGENTS:
BANK OF AMERICA NATIONAL TRUST
COMMITMENT: AND SAVINGS ASSOCIATION
$55,000,000
By: /s/ Mary Therese Carlson
---------------------------------------------
Mary Therese Carlson
Vice President
231 South LaSalle Street
10th Floor
Chicago, Illinois 60697
Attn: Mary Therese Carlson
Telephone: 312-828-7968
Telecopy: 312-828-1997
Copy all notices and credit matters to:
Bank of America National Trust
and Savings Association
231 South LaSalle Street
10th Floor
Chicago, Illinois 60697
Attn: Lee Nunery
Telephone: 312-234-5621
Telecopy: 312-234-5601
Copy all Borrowing Notices to:
Bank of America National Trust
and Savings Association
Corporate Service Center #5693
1850 Gateway Boulevard
Concord, California 94520
Attn: Kelsey Robinson
Telephone: 925-675-7719
Telecopy: 925-675-7531
72
<PAGE>
COMMERZBANK AKTIENGESELLSCHAFT,
COMMITMENT: ATLANTA AGENCY
$55,000,000
By: /s/ Eric Kagerer
---------------------------------------------
Name: Eric Kagerer
Title: Vice President
By: /s/ Subash Viswanathan
--------------------------------------------
Name: Subash Viswanathan
Title: Vice President
1230 Peachtree Street, N.E.
Suite 3500
Atlanta, GA 30309
Attn: Eric Kagerer
Telephone: 404-888-6517
Telecopy: 404-888-6539
Copy all notices and credit matters to:
1230 Peachtree Street, N.E.
Suite 3500
Atlanta, GA 30309
Attn: Eric Kagerer/Amy Greiner
Telephone: 404-888-6517/404-888-6510
Telecopy: 404-888-6539
Copy all administrative/ operational matters to:
2 World Financial Center
33rd Floor
New York, NY 10281-1050
Attn: Dianne Morgenegg/Christine Scaffidi
Telephone: 212-266-7562/212-266-7204
Telecopy: 212-266-7593
73
<PAGE>
CO-AGENTS:
BANCA COMMERCIALE ITALIANA,
COMMITMENT: NEW YORK BRANCH
$50,000,000
By: /s/ C. Dougherty
--------------------------------------------
Name: C. Dougherty, VP
Title:
By: /s/ Karen Purelis
--------------------------------------------
Name: Karen Purelis, VP
Title:
One William Street
New York, NY 10004
Attn: John Michalisin
Telephone: 212-607-3918
Telecopy: 212-809-2124
Copy all Borrowing Notices to:
Banca Commerciale Italiana
One William Street
New York, NY 10004
Attn: Tony O'Mahony
Telephone: 212-607-3852
Telecopy: 212-809-2124
74
<PAGE>
THE BANK OF NOVA SCOTIA
COMMITMENT
$50,000,000
By: /s/ A.S. Norsworthy
--------------------------------------------
Name: A.S. Norsworthy
Title: Sr. Team Leader Loan Operations
The Bank of Nova Scotia
Atlanta Agency
600 Peachtree Street N.E.
Suite 2700
Atlanta, Georgia 30308
Attn: Phyllis Walker
Telephone: 404-877-1552
Telecopy: 404-888-8998
With a copy to:
The Bank of Nova Scotia
Houston Representative Office
1100 Louisiana, Suite 3000
Houston, Texas 77002
Attn: Paul G. Gonin
Telephone: 713-759-3443
Telecopy: 713-752-2425
75
<PAGE>
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
COMMITMENT
$50,000,000
By: /s/ Joseph P. Devoe
--------------------------------------------
Name: Joseph P. Devoe
Title: Vice President
1251 Avenue of the Americas, 12th Floor
New York, NY 10020-1104
Attn: Joseph P. Devoe
Telephone: 212-782-4318
Telecopy: 212-782-4979
Copy all Borrowing Notices to:
Bank of Tokyo-Mitsubishi Trust Company
1251 Avenue of the Americas, 12th Floor
New York, NY 10020-1104
Attn: Rolando Uy, Operations Officer
Telephone: 212-782-5637
Telecopy: 212-782-5635
76
<PAGE>
FIRST UNION NATIONAL BANK
COMMITMENT
$50,000,000
By: /s/
--------------------------------------------
Name:
Title: V.P.
1339 Chestnut St.
11th Floor Widener Bldg.
Philadelphia, PA 19107
Attn: Michael J. Labrum,
Vice President
Telephone: 215-973-7045
Telecopy: 215-786-7704
Copy all administrative/operations matters to:
First Union National Bank
1339 Chestnut St.
11th Floor Widener Bldg.
Philadelphia, PA 19107
Attn: John McDonald
Assistant Vice President
Telephone: 215-973-3961
Telecopy: 215-973-6054
77
<PAGE>
UNION PLANTERS BANK, N.A.
COMMITMENT:
$50,000,000.00
By: /s/ Leonard L. McKinnon
---------------------------------------------
Leonard L. McKinnon
Senior Vice President
6200 Poplar Avenue
4th Floor
Memphis, TN 38119
Attn: Leonard L. McKinnon
Telephone: 901-580-5481
Telecopy: 901-580-5451
Copy all notices and credit matters to:
Union Planters Bank, N.A.
6200 Poplar Avenue
HQ4
Memphis, TN 38119
Attn: Leonard L. McKinnon
Telephone: 901-580-5481
Telecopy: 901-580-5451
Copy all Borrowing Notices to:
Union Planters Bank, N.A.
6200 Poplar Avenue
HQ4
Memphis, TN 38119
Attn: Shea Buchignani
Telephone: 901-580-5583
Telecopy: 901-580-5451
78
<PAGE>
WACHOVIA BANK, N.A.
COMMITMENT:
$50,000,000
By: /s/ Karin E. Reel
--------------------------------------------
Name: Karin E. Reel
Title: Vice President
191 Peachtree Street, N.E.
Atlanta, GA 30303
Attn: Karin E. Reel
Telephone: 404-332-5187
Telecopy: 404-332-5016
Copy all notices and credit matters to:
Wachovia Bank, N.A.
191 Peachtree Street, N.E.
Atlanta, GA 30303
Attn: Karin E. Reel
Telephone: 404-332-5187
Telecopy: 404-332-5016
Copy all Borrowing Notices to:
Wachovia Bank, N.A.
191 Peachtree Street, N.E.
Atlanta, GA 30303
Attn: Jay Corbett
Telephone: 404-332-1039
Telecopy: 404-332-5016
79
<PAGE>
PARTICIPANTS:
THE FUJI BANK, LIMITED,
COMMITMENT: NEW YORK BRANCH
$34,000,000
By: /s/ Raymond Ventura
--------------------------------------------
Name: Raymond Ventura
Title: Vice President & Manager
Two World Trade Center, 79th Floor
New York, NY 10048
Attn: Raymond Ventura, U.S. Corporate Finance
Telephone: 212-898-2062
Telecopy: 212-321-9407
Copy all notices and credit matters to:
The Fuji Bank, Limited, New York Branch
Two World Trade Center, 79th Floor
New York, NY 10048
Attn: Felix Amerasinghe/U.S. Corporate Finance
Telephone: 212-898-2597
Telecopy: 212-488-8216
Copy all Borrowing Notices to:
The Fuji Bank, Limited, New York Branch
Two World Trade Center, 79th Floor
New York, NY 10048
Attn: Tina Catapano/Loan Administration
Telephone: 212-898-2099
Telecopy: 212-488-8216
80
<PAGE>
INTERNATIONAL TRANSPORT FINANCE LIMITED
COMMITMENT
$34,000,000
By: /s/ Constance Laudenschlager
--------------------------------------------
Constance Laudenschlager
Title: Director
By: /s/ Lori Nabhan
--------------------------------------------
Lori Nabhan
Title: Marketing Representative
c/o LTCB
165 Broadway
New York, NY 10006
Attn: Constance Laudenschlager/Lori
Nabhan
Telephone: 212-335-4596/4537
Telecopy: 212-608-3058
Copy all notices and credit matters to:
International Transport Finance Limited
c/o LTCB
165 Broadway
New York, NY 10006
Attn: Constance Laudenschlager/Lori
Nabhan
Telephone: 212-335-4596/4537
Telecopy: 212-608-3058
Copy all Borrowing Notices to:
International Transport Finance Limited
c/o LTCB
165 Broadway
New York, NY 10006
Attn: Constance Laudenschlager/Lori
Nabhan
Telephone: 212-335-4596/4537
Telecopy: 212-608-3058
81
<PAGE>
KBC BANK N.V.
COMMITMENT
$34,000,000
By: /s/ Robert Snauffer /s/ Michael V. Curran
--------------------------------------------
Name: Robert Snauffer Michael V. Curran
Title: First Vice President Vice President
KBC Bank N.V.
New York Branch
125 West 55th Street
New York, NY 10019
Attn: Lynda Resuma, Loan Administration
Telephone: 212-541-0657
Telecopy: 212-956-5581
Copy all notices and credit matters to:
KBC Bank N.V.
Atlanta Representative Office
1349 West Peachtree Street, Suite 1750
Atlanta, GA 30309
Attn: Jackie Brunetto, Vice President
Telephone: 404-876-2556
Telecopy: 404-876-3212
Copy all Borrowing Notices to:
KBC Bank N.V.
Atlanta Representative Office
1349 West Peachtree Street, Suite 1750
Atlanta, GA 30309
Attn: Jackie Brunetto, Vice President
Telephone: 404-876-2556
Telecopy: 404-876-3212
82
<PAGE>
MELLON BANK, N.A.
COMMITMENT
$34,000,000
By: /s/ Mark F. Johnston
--------------------------------------------
Name: Mark F. Johnston
Title: A V.P.
Three Mellon Bank Center - Room 1203
Pittsburgh, PA 15259-0003
Telecopy: 412-209-6138
Copy all notices and credit matters to:
Mellon Bank, N.A.
Three Mellon Bank Center - Room 1203
Pittsburgh, PA 15259-0003
Attn: Mark Johnston
Telephone: 412-236-2793
Telecopy: 412-236-1914
Copy all Borrowing Notices to:
Mellon Bank, N.A.
Three Mellon Bank Center - Room 1203
Pittsburgh, PA 15259-0003
Attn: Lloyd Martin-Loan Administration
Telephone: 412-234-9448
Telecopy: 412-209-6138
83
<PAGE>
THE BANK OF NEW YORK
COMMITMENT
$34,000,000
By: /s/ Ann Marie Hughes
--------------------------------------------
Name: Ann Marie Hughes
Title: Vice President
One Wall Street
22nd Floor
New York, NY 10286
Attn: Ann Marie Hughes
Telephone: 212-635-1339
Telecopy: 212-635-6434
Copy all administrative and operations matters to:
The Bank of New York
One Wall Street
22nd Floor
New York, NY 10286
Attn: Annette Megargel
Telephone: 212-635-6780
Telecopy: 212-635-6399
84
<PAGE>
THE NORTHERN TRUST COMPANY
COMMITMENT:
$34,000,000
By: /s/ James E.T. Monhart
--------------------------------------------
Name: James E.T. Monhart
Title: S VP
50 S. LaSalle Street, 11th Floor
Chicago, IL 60076
Attn: James Monhart
Telephone: 312-444-5646
Telecopy: 312-444-5055
Copy all administrative and operational matters to:
The Northern Trust Company
50 S. LaSalle Street, 11th Floor
Chicago, IL 60076
Attn: Linda Honda
Telephone: 312-444-3532
Telecopy: 312-630-1566
85
<PAGE>
SUNTRUST BANK, NASHVILLE, N.A.
COMMITMENT
$30,000,000
By: /s/ Bryan W. Ford
---------------------------------------------
Name: Bryan W. Ford
Title: Vice President
6410 Poplar Avenue, Suite 320
Memphis, Tennessee 38119
Telephone: 901-762-9868
Telecopy: 901-766-7565
Copy all notices and credit matters to:
Suntrust Bank, Nashville, N.A.
6410 Poplar Avenue, Suite 320
Memphis, Tennessee 38119
Attn: Renee DeRubeis Drake
Telephone: 901-762-9868
Telecopy: 901-766-7565
Copy all Borrowing Notices to:
Suntrust Bank, Nashville, N.A.
P.O. Box 305110
Commercial Loan Operation
Nashville, Tennessee 37230-5110
Attn: Leigh Anne Gregory/Tina Marie Edwards
Telephone: 615-748-5461/4031
Telecopy: 615-748-4611
86
<PAGE>
FIRST TENNESSEE BANK
COMMITMENT NATIONAL ASSOCIATION
$26,000,000
By: /s/ James H. Moore, Jr.
--------------------------------------------
Name: James H. Moore, Jr.
Title: Vice President
165 Madison Avenue, 9th Floor
Memphis, TN 38103-2723
Attn: Sonel Patel
Telephone: 901-523-4118
Telecopy: 901-523-4267
Copy all notices and credit matters to:
First Tennessee Bank National Association
165 Madison Avenue, 9th Floor
Memphis, TN 38103-2723
Attn: Jim Moore
Telephone: 901-523-4108
Telecopy: 901-523-4267
87
<PAGE>
THE SUMITOMO BANK, LIMITED
COMMITMENT
$20,000,000
By: /s/ Gary Franke
---------------------------------------------
Name: Gary Franke
Title: Vice President and Manager
Suntrust Plaza
Suite 4420
303 Peachtree Street
Atlanta, GA 30308
Attn: Gary Franke
Telephone: 404-526-8511
Telecopy: 404-521-1187
Copy all administrative/ operational notices to:
The Sumitomo Bank, Limited
277 Park Avenue
New York, NY 10072
Attn: Yvette Dowling
Telephone: 212-224-4069
Telecopy: 212-224-4537
88
<PAGE>
FIRST AMERICAN NATIONAL BANK
COMMITMENT:
$10,000,000
By: /s/ William R. Stutts
--------------------------------------------
Name: William R. Stutts
Title: Senior Vice President
6000 Poplar Ave., Suite 300
Memphis, TN 38119
Attn: William R. Stutts
Telephone: 901-762-5675
Telecopy: 901-762-5665
Copy all administrative and operational matters to:
First American National Bank
490 Metroplex Drive
Nashville, TN 37211
Attn: Frenisa Joy
Telephone: 615-365-5683
Telecopy: 615-365-5684
89
<PAGE>
EXHIBIT "A"
FORM OF GUARANTY
THIS GUARANTY (this "Guaranty") is made as of the 10th day of December,
1998, by Federal Express Corporation, a Delaware corporation, RPS, Inc., a
Delaware corporation, Caliber System, Inc., an Ohio corporation, Viking Freight,
Inc., a California corporation, and Roberts Express, Inc., an Ohio corporation
(collectively, the "Initial Guarantors" and along with any Significant
Subsidiaries which become parties to this Agreement by executing an Addendum
hereto in the form attached as Annex I, the "Guarantors") in favor of the Paying
Agent, for the ratable benefit of the Lenders, under (and as defined in) the
Credit Agreement referred to below. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings ascribed to them in the Credit
Agreement.
WITNESSETH:
WHEREAS, FDX Corporation, a Delaware corporation (the "Borrower"),
Morgan Guaranty Trust Company of New York, as paying agent (the "Paying Agent"),
and certain Lenders have entered into a certain Credit Agreement dated as of
December 10, 1998 (as the same may be amended, modified, supplemented and/or
restated, and as in effect from time to time, the "Credit Agreement"),
providing, subject to the terms and conditions thereof, for extensions of credit
to be made by the Lenders to the Borrower;
WHEREAS, it is a condition precedent to the initial extensions of
credit by the Lenders under the Credit Agreement that each of the Guarantors
execute and deliver this Guaranty, whereby each of the Guarantors shall
guarantee the payment when due, subject to SECTION 8 hereof, of any and all of
the Obligations; and
WHEREAS, in consideration of the financial and other support that the
Borrower has provided, and such financial and other support as the Borrower may
in the future provide, to the Guarantors, and in order to induce the Lenders and
the Paying Agent to enter into the Credit Agreement, each of the Guarantors is
willing to guarantee the obligations of the Borrower under the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION l. DEFINITIONS. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein.
SECTION 2. REPRESENTATIONS, WARRANTIES AND COVENANTS. Each of the
Guarantors represents and warrants (which representations and warranties shall
be deemed to have been renewed at the time of the making of any Advance) that:
<PAGE>
(a) It is a corporation, limited liability company,
partnership or other commercial entity duly incorporated or formed, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or formation and has all requisite authority to conduct its
business as a foreign Person in each jurisdiction in which its business is
conducted, except where the failure to have such requisite authority would not
have a Material Adverse Effect.
(b) It has the power and authority and legal right to execute
and deliver this Guaranty and to perform its obligations hereunder. The
execution and delivery by it of this Guaranty and the performance by it of its
obligations hereunder have been duly authorized by proper proceedings, and this
Guaranty constitutes a legal, valid and binding obligation of such Guarantor
enforceable against such Guarantor in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally.
(c) Neither the execution and delivery by it of this Guaranty,
nor the consummation by it of the transactions herein contemplated, nor
compliance by it with the terms and provisions hereof, will violate any law,
rule, regulation, order, writ, judgment, injunction, decree or award binding on
it or its certificate or articles of incorporation or by-laws, limited liability
company or partnership agreement or the provisions of any indenture, instrument
or material agreement to which it 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 its property
pursuant to the terms of any such indenture, instrument or material agreement.
No order, consent, approval, license, authorization, or validation of, or
filing, recording or registration with, or exemption by, any governmental
authority, is required to authorize, or is required in connection with the
execution, delivery and performance by it of, or the legality, validity, binding
effect or enforceability of, this Guaranty.
In addition to the foregoing, each of the Guarantors covenants
that, so long as any Lender has any Commitment outstanding under the Credit
Agreement or any amount payable under the Credit Agreement or any other
Obligations shall remain unpaid, it will, and, if necessary, will enable the
Borrower to, fully comply with those covenants and agreements of the Borrower
applicable to such Guarantor set forth in the Credit Agreement.
SECTION 3. THE GUARANTY. Subject to SECTION 8 hereof, each of the
Guarantors hereby unconditionally guarantees, jointly with the other Guarantors
and severally, the full and punctual payment when due (whether at stated
maturity, upon acceleration or otherwise) of the Obligations, (the foregoing,
subject to the provisions of SECTION 8 hereof, being referred to collectively as
the "Guaranteed Obligations"). Upon failure by the Borrower to pay punctually
any such amount, each of the Guarantors agrees that it shall forthwith on demand
pay such amount at the place and in the manner specified in the Credit Agreement
or the relevant Loan Document, as the case may be. Each of the Guarantors hereby
agrees that this Guaranty is an absolute, irrevocable and unconditional guaranty
of payment and is not a guaranty of collection.
2
<PAGE>
SECTION 4. GUARANTY UNCONDITIONAL. Subject to SECTION 8 hereof, the
obligations of each of the Guarantors hereunder shall be unconditional and
absolute and, without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by:
(i) any extension, renewal, settlement, indulgence, compromise,
waiver or release of or with respect to the Guaranteed
Obligations or any part thereof or any agreement relating
thereto, or with respect to any obligation of any other
guarantor of any of the Guaranteed Obligations, whether (in
any such case) by operation of law or otherwise, or any
failure or omission to enforce any right, power or remedy with
respect to the Guaranteed Obligations or any part thereof or
any agreement relating thereto, or with respect to any
obligation of any other guarantor of any of the Guaranteed
Obligations;
(ii) any modification or amendment of or supplement to the Credit
Agreement or any other Loan Document, including, without
limitation, any such amendment which may increase the amount
of the Obligations guaranteed hereby;
(iii) any release, surrender, compromise, settlement, waiver,
subordination or modification, with or without consideration,
of any collateral securing the Guaranteed Obligations or any
part thereof, any other guaranties with respect to the
Guaranteed Obligations or any part thereof, or any other
obligation of any person or entity with respect to the
Guaranteed Obligations or any part thereof, or any
nonperfection or invalidity of any direct or indirect security
for the Guaranteed Obligations;
(iv) any change in the corporate, partnership or other existence,
structure or ownership of the Borrower or any other guarantor
of any of the Guaranteed Obligations, or any insolvency,
bankruptcy, reorganization or other similar proceeding
affecting the Borrower or any other guarantor of the
Guaranteed Obligations, or any of their respective assets or
any resulting release or discharge of any obligation of the
Borrower or any other guarantor of any of the Guaranteed
Obligations;
(v) the existence of any claim, setoff or other rights which the
Guarantors may have at any time against the Borrower, any
other guarantor of any of the Guaranteed Obligations, the
Paying Agent, any Lender or any other Person, whether in
connection herewith or in connection with any unrelated
transactions, PROVIDED that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory
counterclaim;
(vi) the enforceability or validity of the Guaranteed Obligations
or any part thereof or the genuineness, enforceability or
validity of any agreement relating thereto or with respect to
any collateral securing the Guaranteed Obligations or any part
thereof, or any other invalidity or unenforceability relating
to or against the Borrower or any other guarantor of any of
the Guaranteed Obligations, for any reason related to the
Credit Agreement, any other Loan Document, or any provision of
applicable
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law or regulation purporting to prohibit the payment by the
Borrower or any other guarantor of the Guaranteed Obligations,
of any of the Guaranteed Obligations;
(vii) the failure of the Paying Agent to take any steps to perfect
and maintain any security interest in, or to preserve any
rights to, any security or collateral for the Guaranteed
Obligations, if any;
(viii) the election by, or on behalf of, any one or more of the
Lenders, in any proceeding instituted under Chapter 11 of
Title 11 of the United States Code (11 U.S.C. 101 et seq.)
(the "Bankruptcy Code"), of the application of Section
1111(b)(2) of the Bankruptcy Code;
(ix) any borrowing or grant of a security interest by the Borrower,
as debtor-in-possession, under Section 364 of the Bankruptcy
Code;
(x) the disallowance, under Section 502 of the Bankruptcy Code, of
all or any portion of the claims of any of the Lenders or the
Paying Agent for repayment of all or any part of the
Guaranteed Obligations;
(xi) the failure of any other Guarantor to sign or become party to
this Guaranty or any amendment, change, or reaffirmation
hereof; or
(xii) any other act or omission to act or delay of any kind by the
Borrower, any other guarantor of the Guaranteed Obligations,
the Paying Agent, any Lender or any other Person or any other
circumstance whatsoever which might, but for the provisions of
this SECTION 4, constitute a legal or equitable discharge of
any Guarantor's obligations hereunder.
SECTION 5. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN
CERTAIN CIRCUMSTANCES. Except as otherwise provided in Section 9.16 of the
Credit Agreement, each of the Guarantors' obligations hereunder shall remain in
full force and effect until all Guaranteed Obligations shall have been paid in
full and the Commitments under the Credit Agreement shall have terminated or
expired. If at any time any payment of any portion of the Obligations is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of the Borrower or otherwise, each Guarantor's
obligations hereunder with respect to such payment shall be reinstated as though
such payment had been due but not made at such time.
SECTION 6. GENERAL WAIVERS. Each of the Guarantors irrevocably waives
acceptance hereof, presentment, demand or action on delinquency, protest, the
benefit of any statutes of limitations and, to the fullest extent permitted by
law, any notice not provided for herein, as well as any requirement that at any
time any action be taken by any Person against the Borrower, any other guarantor
of the Guaranteed Obligations, or any other Person.
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SECTION 7. SUBORDINATION OF SUBROGATION RIGHTS. Until the Obligations
have been indefeasibly paid in full in cash, the Guarantors (i) shall have no
right of subrogation with respect to such Obligations and (ii) waive any right
to enforce any remedy which the Lenders or the Paying Agent now have or may
hereafter have against the Borrower, any endorser or any guarantor of all or any
part of the Obligations or any other Person, and the Guarantors waive any
benefit of, and any right to participate in, the security or collateral given to
the Lenders and the Paying Agent, if any, to secure the payment or performance
of all or any part of the Obligations or any other liability of the Borrower to
the Lenders. Should any Guarantor have the right, notwithstanding the foregoing,
to exercise its subrogation rights, each Guarantor hereby expressly and
irrevocably (a) subordinates any and all rights at law or in equity to
subrogation, reimbursement, exoneration, contribution, indemnification or setoff
that the Guarantor may have to the indefeasible payment in full in cash of the
Obligations and (b) waives any and all defenses available to a surety, guarantor
or accommodation co-obligor until the Obligations are indefeasibly paid in full
in cash. Each Guarantor acknowledges and agrees that this subordination is
intended to benefit the Paying Agent and the Lenders and shall not limit or
otherwise affect such Guarantor's liability hereunder or the enforceability of
this Guaranty, and that the Paying Agent, the Lenders and their respective
successors and assigns are intended third party beneficiaries of the waivers and
agreements set forth in this SECTION 7.
SECTION 8. LIMITATION. Notwithstanding any provision herein contained
to the contrary, each Guarantor's liability under this Guaranty (which liability
is in any event in addition to amounts for which such entity may be primarily
liable) shall be limited to an amount not to exceed as of any date of
determination the greater of:
(a) the net amount of all Loans advanced to the Borrower
under this Agreement and then re-loaned or otherwise transferred to, or for the
benefit of, such Guarantor; and
(b) the amount which could be claimed by the Paying Agent and
the Lenders from such Guarantor under this Guaranty without rendering such claim
voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or
under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent
Conveyance Act or similar statute or common law after taking into account, among
other things, such Guarantor's right of contribution and indemnification from
each other Guarantor under SECTION 9.
SECTION 9. CONTRIBUTION WITH RESPECT TO GUARANTY OBLIGATIONS.
(a) To the extent that any Guarantor shall make a payment
under this Guaranty (a "Guarantor Payment") which, taking into account all other
Guarantor Payments then previously or concurrently made by any other Guarantor,
exceeds the amount which such Guarantor would otherwise have paid if each
Guarantor had paid the aggregate Obligations satisfied by such Guarantor Payment
in the same proportion that such Guarantor's "Allocable Amount" (as defined
below) (as determined immediately prior to such Guarantor Payment) bore to the
aggregate Allocable Amounts of each of the Guarantors as determined immediately
prior to the making of such Guarantor Payment, THEN, following indefeasible
payment in full in cash of the Obligations and termination of the Commitments,
such Guarantor shall be entitled to receive contribution and
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indemnification payments from, and be reimbursed by, each other Guarantor for
the amount of such excess, PRO RATA based upon their respective Allocable
Amounts in effect immediately prior to such Guarantor Payment.
(b) As of any date of determination, the "Allocable Amount"
of any Guarantor shall be equal to the maximum amount of the claim which could
then be recovered from such Guarantor under this Guaranty without rendering such
claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy
Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform
Fraudulent Conveyance Act or similar statute or common law.
(c) This SECTION 9 is intended only to define the relative
rights of the Guarantors and nothing set forth in this SECTION 9 is intended to
or shall impair the obligations of the Guarantors, jointly and severally, to pay
any amounts as and when the same shall become due and payable in accordance with
the terms of this Agreement.
(d) The parties hereto acknowledge that the rights of
contribution and indemnification hereunder shall constitute assets of the
Guarantor to which such contribution and indemnification is owing.
(e) The rights of the indemnifying Guarantors against other
Guarantors under this SECTION 9 shall be exercisable upon the full and
indefeasible payment of the Obligations and the termination of the Commitments.
SECTION 10. STAY OF ACCELERATION. If acceleration of the time for
payment of any of the Obligations is stayed upon the insolvency, bankruptcy or
reorganization of the Borrower, all such amounts otherwise subject to
acceleration under the terms of the Credit Agreement, or any other Loan Document
shall nonetheless be payable by each of the Guarantors hereunder forthwith on
demand by the Paying Agent.
SECTION 11. NO WAIVERS. No failure or delay by the Paying Agent or any
Lender in exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies provided in this Guaranty, the Credit
Agreement, and the other Loan Documents shall be cumulative and not exclusive of
any rights or remedies provided by law.
SECTION 12. SUCCESSORS AND ASSIGNS. This Guaranty is for the benefit of
the Paying Agent and the Lenders and their respective successors and permitted
assigns and in the event of an assignment of any amounts payable under the
Credit Agreement, or the other Loan Documents in accordance with the respective
terms thereof, the rights hereunder, to the extent applicable to the
indebtedness so assigned, may be transferred with such indebtedness. This
Guaranty shall be binding upon each of the Guarantors and their respective
successors and assigns.
SECTION 13. CHANGES IN WRITING. Neither this Guaranty nor any provision
hereof may be changed, waived, discharged or terminated orally, but only in
writing signed by each of the
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Guarantors and the Paying Agent with the consent of the Lenders required for
such change, waiver, discharge or termination pursuant to the terms of the
Credit Agreement.
SECTION 14 GOVERNING LAW. ANY DISPUTE BETWEEN ANY GUARANTOR AND THE
PAYING AGENT OR ANY LENDER ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS
GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS, AND WHETHER ARISING IN CONTRACT,
TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL
LAWS (WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF NEW
YORK.
SECTION 15. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.
(A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (B), EACH
OF THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG
THEM IN CONNECTION WITH, THIS GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS
WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED
EXCLUSIVELY BY STATE OR FEDERAL COURTS LOCATED IN NEW YORK, BUT THE PARTIES
HERETO ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A
COURT LOCATED OUTSIDE OF NEW YORK. EACH OF THE PARTIES HERETO WAIVES IN ALL
DISPUTES BROUGHT PURSUANT TO THIS SUBSECTION (A) ANY OBJECTION THAT IT MAY HAVE
TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(B) OTHER JURISDICTIONS. EACH OF THE GUARANTORS AGREES THAT THE PAYING
AGENT, ANY LENDER OR ANY INDEMNITEE SHALL HAVE THE RIGHT TO PROCEED AGAINST SUCH
GUARANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO
(1) OBTAIN PERSONAL JURISDICTION OVER SUCH GUARANTOR OR (2) ENFORCE A JUDGMENT
OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PERSON. EACH OF THE GUARANTORS
AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING
BROUGHT BY SUCH PERSON TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
SUCH PERSON. EACH OF THE GUARANTORS WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED A PROCEEDING DESCRIBED
IN THIS SUBSECTION (B).
(C) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO OR
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<PAGE>
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS
GUARANTY OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH. EACH OF THE PARTIES HERETO AGREES AND CONSENTS THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS GUARANTY WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(D) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER
PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY, THE
PROVISIONS OF THIS SECTION 15, WITH ITS COUNSEL.
SECTION 16. NO STRICT CONSTRUCTION. The parties hereto have
participated jointly in the negotiation and drafting of this Guaranty. In the
event an ambiguity or question of intent or interpretation arises, this Guaranty
shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Guaranty.
SECTION 17. TAXES, EXPENSES OF ENFORCEMENT, ETC. All payments required
to be made by any of the Guarantors hereunder shall be made without setoff or
counterclaim and free and clear of and without deduction or withholding for or
on account of, any present or future taxes, levies, imposts, duties or other
charges of whatsoever nature imposed by any government or any political or
taxing authority thereof, PROVIDED, HOWEVER, that if any of the Guarantors is
required by law to make such deduction or withholding, such Guarantor shall
forthwith pay to the Paying Agent or any Lender, as applicable, such additional
amount as results in the net amount received by the Paying Agent or any Lender,
as applicable, equaling the full amount which would have been received by the
Paying Agent or any Lender, as applicable, had no such deduction or withholding
been made. The Guarantors also agree to reimburse the Paying Agent and the
Lenders for any reasonable costs, internal charges and out-of-pocket expenses
(including reasonable attorneys' fees and time charges of attorneys for the
Paying Agent and the Lenders, which attorneys may be employees of the Paying
Agent or the Lenders) paid or incurred by the Paying Agent or any Lender in
connection with the collection and enforcement of amounts due under the Loan
Documents, including without limitation this Guaranty.
SECTION 18. SETOFF. At any time after all or any part of the Guaranteed
Obligations have become due and payable (by acceleration or otherwise), each
Lender and the Paying Agent may, without notice to any Guarantor and regardless
of the acceptance of any security or collateral for the payment hereof,
appropriate and apply toward the payment of all or any part of the Guaranteed
Obligations (i) any indebtedness due or to become due from such Lender or the
Paying Agent to any Guarantor, and (ii) any moneys, credits or other property
belonging to any Guarantor, at any time held by or coming into the possession of
such Lender or the Paying Agent or any of their respective affiliates.
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SECTION 19. FINANCIAL INFORMATION. Each Guarantor hereby assumes
responsibility for keeping itself informed of the financial condition of the
Borrower and any and all endorsers and/or other Guarantors of all or any part of
the Guaranteed Obligations, and of all other circumstances bearing upon the risk
of nonpayment of the Guaranteed Obligations, or any part thereof, that diligent
inquiry would reveal, and each Guarantor hereby agrees that none of the Lenders
or the Paying Agent shall have any duty to advise such Guarantor of information
known to any of them regarding such condition or any such circumstances. If any
Lender or the Paying Agent, in its sole discretion, undertakes at any time or
from time to time to provide any such information to a Guarantor, such Lender or
the Paying Agent shall be under no obligation (i) to undertake any investigation
not a part of its regular business routine, (ii) to disclose any information
which such Lender or the Paying Agent, pursuant to accepted or reasonable
commercial finance or banking practices, wishes to maintain confidential or
(iii) to make any other or future disclosures of such information or any other
information to such Guarantor.
SECTION 20. SEVERABILITY. Wherever possible, each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION 21. MERGER. This Guaranty represents the final agreement of
each of the Guarantors with respect to the matters contained herein and may not
be contradicted by evidence of prior or contemporaneous agreements, or
subsequent oral agreements, between the Guarantor and any Lender or the Paying
Agent.
SECTION 22. EXECUTION IN COUNTERPARTS. This Guaranty 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 Guaranty by signing
any such counterpart.
SECTION 23. HEADINGS. Section headings in this Guaranty are for
convenience of reference only and shall not govern the interpretation of any
provision of this Guaranty.
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IN WITNESS WHEREOF, each of the Guarantors has caused this Guaranty to
be duly executed by its authorized officer as of the day and year first above
written.
FEDERAL EXPRESS CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
RPS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
CALIBER SYSTEM, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
VIKING FREIGHT, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
ROBERTS EXPRESS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
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ANNEX I TO GUARANTY
Reference is hereby made to the Guaranty (the "Guaranty") made as of
the 10th day of December, 1998 by Federal Express Corporation, a Delaware
corporation, RPS, Inc., a Delaware corporation, Caliber System, Inc., an Ohio
corporation, Viking Freight, Inc., a California corporation, and Roberts
Express, Inc., an Ohio corporation (collectively, the "Initial Guarantors" and
along with any Significant Subsidiaries which have become parties thereto and
together with the undersigned, the "Guarantors") in favor of the Paying Agent,
for the ratable benefit of the Lenders, under the Credit Agreement. Capitalized
terms used herein and not defined herein shall have the meanings given to them
in the Guaranty. By its execution below, the undersigned [NAME OF NEW
GUARANTOR], a ____________________, agrees to become, and does hereby become, a
Guarantor under the Guaranty and agrees to be bound by such Guaranty as if
originally a party thereto. By its execution below, the undersigned represents
and warrants as to itself that all of the representations and warranties
contained in SECTION 2 of the Guaranty are true and correct in all respects as
of the date hereof.
IN WITNESS WHEREOF, [NAME OF NEW GUARANTOR], a ______________, has
executed and delivered this Annex I counterpart to the Guaranty as of this
__________ day of _________, ____.
[NAME OF NEW GUARANTOR]
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
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EXHIBIT "B"
OPINION OF COUNSEL
The Paying Agent and the Lenders who are parties to the Credit Agreement
described below.
December 10, 1998
Ladies and Gentlemen:
This is in regard to the Credit Agreement dated as of December 10, 1998
among FDX Corporation, the Lenders named therein and Morgan Guaranty Trust
Company of New York, as Paying 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 Corporate Vice President and Corporate 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
perform its obligations under the Agreement 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, and each Guarantor as of the
date hereof, 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 and
Guarantor as of the date hereof 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>
4. The execution and delivery of the Loan Documents by the
Borrower and each of the Guarantors, the borrowings by the Borrower
under the Agreement and the performance by the Borrower and the
Guarantors of their respective obligations under the Loan Documents
have been duly authorized by all necessary corporate action and
proceedings on the part of the Borrower and each Guarantor and do not
at this time:
(a) require any consent of the Borrower's or any
Guarantor's shareholders; or
(b) contravene, or constitute a default under, any
provision of any law or regulation applicable to the Borrower
or any Guarantor or of the certificate or articles of
incorporation or by-laws of the Borrower or any Guarantor or
of any material contract, agreement, judgment, order, decree,
adjudication or other instrument, including, without
limitation, the 1996 Caliber Indenture, binding upon the
Borrower or any Guarantor, or by which the Borrower or any
Guarantor or any of their respective property may be bound or
affected, or result in the creation of any Lien (other than
the Liens created pursuant to the Security Documents) on any
property now owned by the Borrower, any Guarantor or any
Significant Subsidiary pursuant to the provisions of any
agreement, indenture or other instrument binding upon it.
5. The Loan Documents delivered as of the date hereof have
been duly executed and delivered by the Borrower and each of the
Guarantors, and constitute the legal, valid and binding obligations of
the Borrower and the Guarantors, respectively, to the extent each is a
party thereto, 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, any Guarantor 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, the Guarantors and the Significant Subsidiaries, would
have a material, adverse effect on the business, condition (financial
or otherwise) or operations of the Borrower, any Guarantor or any
Significant Subsidiary, except as discussed in the Borrower's Annual
Report on Form 10-K for the fiscal year ended May 31, 1998 as updated
in the Borrower's Quarterly Report on Form 10-Q for the quarter ended
August 31, 1998.
7. Neither the Borrower nor any Guarantor or 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, any Guarantor 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.
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8. No approval, authorization, consent, adjudication or order
of any governmental authority, which has not been obtained by the
Borrower or any Guarantor, is required to be obtained by the Borrower
or any Guarantor in connection with the execution and delivery of the
Loan Documents delivered as of the date hereof, the borrowings under
the Agreement or in connection with the performance by the Borrower or
any of the Guarantors of their respective obligations under the Loan
Documents.
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 Company 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.
12. FedEx 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 FedEx pursuant to 49 U.S.C.
Section 41102(a) and 49 U.S.C. Section 41103 and the operating
certificates issued to FedEx 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 and its Subsidiaries
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 and its Subsidiaries.
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.
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This opinion may be relied upon by the Paying 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.
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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 a 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 Commitments (or Loans, if
the applicable Commitments have been terminated) purchased by the Assignee
hereunder are 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 Paying Agent)
after a Notice of Assignment substantially in the form of Exhibit "I" attached
hereto has been delivered to the Paying Agent. Such Notice of Assignment must
include any consents required to be delivered to the Paying 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. PAYMENT OBLIGATIONS. On and after the Effective Date, the Assignee
shall be entitled to receive from the Paying Agent all payments of principal,
interest and fees with respect to the interest assigned hereby. The Assignee
shall advance funds directly to the Paying 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 the principal amount of the portion of all Floating Rate Loans
assigned to the Assignee hereunder and (ii) with respect to each Eurodollar Loan
made by the Assignor and assigned to the Assignee
<PAGE>
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 Eurodollar 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 Eurodollar 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 Eurodollar 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 Eurodollar 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. If 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 Eurodollar 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 Eurodollar Loan sold by the Assignor to the Assignee hereunder at the
applicable rate provided by the Credit Agreement. If a prepayment of any
Eurodollar 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 Eurodollar Loan, the Assignee
shall remit to the Assignor the excess of the prepayment indemnity paid with
respect to the portion of such Eurodollar Loan assigned to the Assignee
hereunder over the amount which would have been paid if such prepayment
indemnity had been calculated based on the Agreed Interest Rate. The Assignee
will also promptly remit to the Assignor (i) any principal payments received
from the Paying Agent with respect to Eurodollar Loans prior to the Payment Date
and (ii) any amounts of interest on Loans and fees received from the Paying
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 Eurodollar Loans, and not previously
paid by the Assignee to the Assignor.]1 If 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 facility fees for the
period prior to the Effective Date or, in the case of Eurodollar 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 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 were of 1% less than the interest rate paid by
the Borrower or if the facility fee were of 1% less than the facility fee paid
by the Borrower, as
- ---------------------
(1) Each Assignor may insert its standard payment provisions in lieu
of the payment terms included in this Exhibit.
2
<PAGE>
applicable. In addition, the] Assignee agrees to pay % of the processing fee
required to be paid to the Paying 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 Paying 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
Paying Agent to take such action on its behalf and to exercise such powers under
the Loan Documents as are delegated to the Paying 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].(2)
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'
- --------------------------
(2) To be inserted if the Assignee is not incorporated under the laws
of the United States, or a state thereof.
3
<PAGE>
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 interests 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 amounts specified in Item
4 of Schedule 1 shall remain the same, but the percentage interests purchased
shall be recalculated based on the reduced Aggregate Commitment].(3)
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 New York.
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.
- ---------------------------
(3) At option of parties.
4
<PAGE>
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:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
[NAME OF ASSIGNEE]
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
5
<PAGE>
SCHEDULE 1
to Assignment Agreement
1. Description and Date of Credit Agreement:
Credit Agreement dated as of December 10, 1998 by and among FDX
Corporation, the Lenders party thereto, and Morgan Guaranty Trust Company
of New York, as Paying Agent
2. Date of Assignment Agreement:______________ ,_____
3. Amounts (As of Date of Item 2 above):
a. Total of Commitment
(Loans)(4) under
Credit Agreement $_____________
b. Assignee's Percentage
purchased under the
Assignment Agreement(5) _____________%
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:
--------------------------- ------------------------
- ----------------------------------
(4) If the Commitment has been terminated, insert outstanding Loans in
place of Commitment.
(5) Percentage taken to 10 decimal places.
6
<PAGE>
Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
Attach Assignor's Administrative Information Sheet, which
must include notice address for the Assignor and the
Assignee
7
<PAGE>
EXHIBIT "I"
to Assignment Agreement
NOTICE
OF ASSIGNMENT
-------------
,
------------- -------
To: FDX CORPORATION
2600 Thousand Oaks Boulevard
Suite 3110
Memphis, Tennessee 38118
Attn: Treasurer
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
60 Wall Street
22nd Floor
New York, New York 10260-0060
Attn: James Condon
From: [NAME OF ASSIGNOR] (the "Assignor")
[NAME OF ASSIGNEE] (the "Assignee")
1. We refer to the 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 Paying 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 facility identified in Item 3 of Schedule 1, including, without
limitation, such interest in the Assignor's Commitments (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 Paying 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 Paying 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.
8
<PAGE>
4. The Assignor and the Assignee hereby give to the Borrower and the
Paying Agent notice of the assignment and delegation referred to herein. The
Assignor will confer with the Paying Agent before the date specified in Item 5
of Schedule 1 to determine if the Assignment Agreement will become effective on
such date pursuant to Section 3 hereof, and will confer with the Paying Agent to
determine the Effective Date pursuant to Section 3 hereof if it occurs
thereafter. The Assignor shall notify the Paying 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 Paying Agent, the Assignor will give the
Paying Agent written confirmation of the satisfaction of the conditions
precedent.
5. The Assignor or the Assignee shall pay to the Paying 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 evidencing the Assignor's Loans are outstanding on the
Effective Date, the Assignor and the Assignee request and direct that the Paying
Agent prepare and cause the Borrower to execute and deliver new notes or, as
appropriate, replacement notes, to the Assignor and the Assignee. The Assignor
and, if applicable, the Assignee each agree to deliver to the Paying Agent the
original notes received by it from the Borrower upon its receipt of new notes in
the appropriate amounts.
7. The Assignee advises the Paying 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 and assumed by the Assignee.
NAME OF ASSIGNOR NAME OF ASSIGNEE
By: By:
------------------------------ ---------------------------
Name: Name:
--------------------------- ------------------------
Title: Title:
--------------------------- ------------------------
Acknowledged by and Acknowledged by and
Consented to: Consented to:
MORGAN GUARANTY TRUST FDX CORPORATION
COMPANY OF NEW YORK,
as Paying Agent
By: By:
------------------------------ ---------------------------
Name: Name:
--------------------------- ------------------------
Title: Title:
--------------------------- -----------------------
9
<PAGE>
[Attach photocopy of Schedule 1 to Assignment]
10
<PAGE>
EXHIBIT "D"
FORM OF RELEASE OF SECURITY DOCUMENTS
--------- --, ----
FDX CORPORATION
2600 Thousand Oaks Boulevard
Suite 3110
Memphis, Tennessee 38118
Attn: Treasurer
[Insert any applicable Subsidiaries]
Ladies and Gentlemen:
Reference is hereby made to the Credit Agreement dated as of December
10, 1998 among FDX Corporation, the Lenders named therein and Morgan Guaranty
Trust Company of New York, as Paying Agent (the "Agreement"). Unless the context
otherwise requires, all terms used in this release which are specifically
defined in the Agreement shall have the meanings given such terms in the
Agreement.
The Borrower and certain of its Subsidiaries have granted to the Paying
Agent for the benefit of (i) the Lenders and (ii) the lenders under each of the
Existing Revolving Credit Documents and the Existing L/C Facility Documents, a
Lien in certain Property (the "Specified Property") of such Persons, which
Property constitutes Designated Collateral, pursuant to the Security Documents
specified on Schedule "1" attached hereto (the "Specified Security Documents").
The Paying Agent, on behalf of itself, each of the Lenders, and the lenders
under each of the Existing Revolving Credit Documents and the Existing L/C
Facility Documents, hereby releases all Liens held by the Paying Agent for the
benefit of such Persons on the Specified Property pursuant to the Specified
Security Documents.
The Paying Agent further agrees to execute and deliver to you such
other documents, instruments and agreements, and to take such other action, as
you may request, from time to time, to give effect to the provisions of this
letter.
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Paying Agent
By:
--------------------------------
<PAGE>
Schedule "1"
to Release of Security Documents
LIST OF SPECIFIED SECURITY DOCUMENTS
------------------------------------
2
<PAGE>
AMENDMENT NO. 1
DATED AS OF DECEMBER 10, 1998
TO
CREDIT AGREEMENT
DATED AS OF JANUARY 15, 1998
THIS AMENDMENT NO. 1 TO THE CREDIT AGREEMENT (the "Amendment") is made
as of December 10, 1998 by and among FDX Corporation, a Delaware corporation
(the "Borrower"), the Lenders and The First National Bank of Chicago, in its
capacity as agent ("Agent"). Defined terms used herein and not otherwise defined
herein shall have the meanings given to them in that certain Credit Agreement
dated as of January 15, 1998 by and among the Borrower, the Lenders, First
Chicago Capital Markets, Inc., as Arranger, J.P. Morgan Securities Inc., as
Co-Arranger and Syndication Agent, Chase Securities Inc., as Co-Arranger and
Documentation Agent, and the Agent (the "Credit Agreement").
WITNESSETH
WHEREAS, the Borrower, the Lenders and the Agent are parties to the
Credit Agreement;
WHEREAS, the Borrower, the Lenders and the Agent have agreed to amend
the Credit Agreement on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrower, the Lenders and the Agent agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT. Effective as of December 10, 1998
subject to the satisfaction of the conditions precedent set forth in SECTION 4
below, the Credit Agreement is hereby amended as follows:
1.1. Article I is amended as follows:
(a) The definitions of "Applicable Tranche A Facility Fee
Percentage" and "Applicable Tranche B Facility Fee Percentage" are
amended in their entirety to read as follows:
"'Applicable Tranche A Facility Fee Percentage' means, subject
to the following provisions of this definition, the per annum
rate corresponding to the Level in effect from time to time,
as set forth in the following table:
<PAGE>
<TABLE>
<CAPTION>
Level Applicable Tranche A Facility Fee Percentage
- ----- --------------------------------------------
<S> <C>
I .100%
II .125%
III .150%
IV .200%
V .250%
</TABLE>
Each change in the Applicable Tranche A Facility Fee
Percentage resulting from a change in a Rating shall take
effect at the time such change in such Rating is publicly
announced by the relevant rating agency."
"'Applicable Tranche B Facility Fee Percentage' means, subject
to the following provisions of this definition, the per annum
rate corresponding to the Level in effect from time to time,
as set forth in the following table:
<TABLE>
<CAPTION>
Level Applicable Tranche B Facility Fee Percentage
- ----- --------------------------------------------
<S> <C>
I .075%
II .100%
III .125%
IV .175%
V .225%
</TABLE>
Each change in the Applicable Tranche B Facility Fee
Percentage resulting from a change in a Rating shall take
effect at the time such change in such Rating is publicly
announced by the relevant rating agency."
(b) The definitions of "Applicable Tranche A Margin" and
"Applicable Tranche B Margin" are amended in their entirety to read as
follows:
"'Applicable Tranche A Margin' means, subject to the following
provisions of this definition, the per annum rate of interest
corresponding to the Level in effect from time to time, as set
forth in the following table:
2
<PAGE>
<TABLE>
<CAPTION>
Level Applicable Tranche A Margin
- ----- ---------------------------
<S> <C>
I .275%
II .375%
III .475%
IV .675%
V 1.125%
</TABLE>
Each change in the Applicable Tranche A Margin resulting from
a change in a Rating shall take effect at the time such change
in such Rating is publicly announced by the relevant rating
agency."
"'Applicable Tranche B Margin' means, subject to the following
provisions of this definition, the per annum rate of interest
corresponding to the Level in effect from time to time, as set
forth in the following table:
<TABLE>
<CAPTION>
Level Applicable Tranche B Margin
- ----- ---------------------------
<S> <C>
I .300%
II .400%
III .500%
IV .700%
V 1.15%
</TABLE>
Each change in the Applicable Tranche B Margin resulting from
a change in a Rating shall take effect at the time such change
in such Rating is publicly announced by the relevant rating
agency."
(c) The definition of "Consolidated Cash Flow" is amended in
its entirety to read as follows:
"'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) Adjusted
Net Income, PLUS (ii) Interest Expense, PLUS (iii) Rent
Expense, in each case as determined in accordance with GAAP."
(d) The definition of "Material Adverse Effect" is amended in
its entirety to read as follows:
3
<PAGE>
"Material Adverse Effect" means a material adverse effect
(excluding the effects of an actual or threatened business
interruption, including but not limited to self-help actions
or a strike, by members of the FedEx Pilots Association in
late 1998 or 1999, or contingency plans related thereto) 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.
(e) The definitions of "Moody's Rating" and "S&P Rating" are
amended to add the phrase "non-credit enhanced" after the word
"unsecured" in the second line of each such definition.
(f) The following definitions are added to Article I in
appropriate alphabetical order:
"Adjusted Net Income" means, on a consolidated basis, for the
Borrower and its Consolidated Subsidiaries for the twelve most
recent complete fiscal months, income (loss) before income
taxes MINUS, to the extent included in determining income
(loss) before income taxes, any net loss or gain realized in
connection with any sale or disposition of any asset (other
than in the ordinary course of business) or any extraordinary
or non-recurring loss or gain resulting from an actual or
threatened business interruption relating to any self-help
actions or strike, by members of the FedEx Pilots Association
in late 1998 or 1999, or contingency plans related thereto,
provided that the aggregate amount of the foregoing reductions
to income (loss) before income taxes shall not exceed
$1,000,000,000.
"L/C Facility" means the Syndicated Revolving Standby Letter
of Credit Facility dated as of July 7, 1998, among the
Borrower, the issuing banks named therein, The Sumitomo Bank,
Limited, as agent thereunder, and the co-agents named therein,
and all instruments, agreements and contractual obligations
entered into in connection therewith, as amended by that
certain First Amendment and Second Amendment (Temporary)
thereto, each dated as of December 10, 1998, and as the same
may be further amended, modified or supplemented from time to
time.
"Year 2000 Problem" means the risk that computer applications
used by the Borrower or any of its Subsidiaries (or their
respective suppliers and vendors) may be unable to recognize
or properly perform date-sensitive functions involving certain
dates prior to and any date after December 31, 1999.
1.2 Section 2.5 is amended to add the following at the end
thereof:
4
<PAGE>
"(e) The Borrower agrees to pay to the Agent, for the
account of each Lender, for each calendar month in which the
average daily amount of all Advances outstanding hereunder
during such calendar month exceeds 25% of the average daily
Aggregate Commitment during such month, a utilization fee on
the average daily amount of Advances outstanding during such
calendar month, at a per annum rate equal to 0.125%. Such
utilization fee shall be payable in arrears on each Payment
Date hereafter and on the Tranche A Facility Termination Date
and the Tranche B Facility Termination Date."
1.3 The first sentence of Section 5.4 is deleted and the
following is substituted therefor:
"5.4. FINANCIAL STATEMENTS. The May 31, 1998 audited
consolidated financial statements and August 31, 1998
unaudited consolidated financial statements of the Borrower
and its Consolidated 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 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)."
1.4 The Credit Agreement is amended to add the following after
Section 5.17:
"5.18 YEAR 2000 COMPLIANCE. The Borrower has (i)
initiated a review and assessment of all areas within the
business and operations of the Borrower and any of its
Subsidiaries (including those areas affected by suppliers and
vendors) that could be adversely affected by the Year 2000
Problem, (ii) developed a plan and timeline for addressing the
Year 2000 Problem on a timely basis and (iii) to the date
hereof, implemented such plan in accordance with such
timetable. The Borrower reasonably believes that all computer
applications (including those of suppliers and vendors) that
are material to the business or operations of the Borrower or
any of its Subsidiaries will, on a timely basis, be able to
properly perform date-sensitive functions for all dates before
and from and after January 1, 2000, except to the extent that
a failure to do so could not reasonably be expected to have a
Material Adverse Effect."
1.5 Section 6.13 is amended in its entirety to read as
follows:
"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 1.20 to 1 through May 31, 2000, and 1.25 to 1
thereafter."
5
<PAGE>
1.6 Section 6.18 is amended to delete the "and" at the end of
clause (c) and the period at the end of clause (d), and add the
following immediately thereafter:
"; and
(e) Guaranties included or required under the L/C
Facility."
1.7 Section 6.20 is amended to:
(a) add "(other than Federal Express Canada Ltd. or
Federal Express (Hong Kong) Limited)" after the
phrase "Significant Subsidiary" in the second line
thereof.
(b) add "(a)" after the words "Section 4.1" in the sixth
line of clause (a) and in the seventh line of clause
(b).
1.8 Section 6.21 is amended in its entirety to read as
follows:
"6.21. NEGATIVE COVENANTS IN SUBSIDIARY AGREEMENTS.
The Borrower will not permit any of its Subsidiaries to enter
into, after the date hereof, any agreement, instrument or
indenture that, directly or indirectly, contains negative
covenants restricting any of the following (or otherwise
prohibits or restricts, or has the effect of prohibiting or
restricting, any of the following):
(i) the incurrence or payment of Indebtedness
owed to the Borrower or any other Subsidiary
of the Borrower;
(ii) the granting of Liens;
(iii) the declaration or payment of dividends; and
(iv) the making of loans, advances or other
Investments to or in the Borrower or any
other Subsidiary of the Borrower."
1.9 Schedule 2 of the Credit Agreement is hereby replaced with
Schedule 2 attached to Amendment No. 1 hereto.
2. WAIVER. Subject to the satisfaction of the conditions precedent set
forth in SECTION 4 of this Amendment and the accuracy of the representations and
warranties set forth in SECTION 5 of this Amendment, the Agent and Lenders waive
the Borrower's noncompliance with Section 6.21 of the Credit Agreement as a
result of the execution of guaranties by certain of the Borrower's Subsidiaries
in connection with the L/C Facility. The foregoing waiver is only effective to
the extent set forth in this SECTION 2. Nothing herein constitutes a waiver of
any other Default or Unmatured Default under the Credit Agreement or of any
other provision of the Credit
6
<PAGE>
Agreement, and except as provided in this SECTION 2, the foregoing waiver does
not affect or diminish the right of the Lenders and the Agent to require strict
performance by the Borrower of each provision of the Credit Agreement and the
Loan Documents.
3. EXTENSION OF TRANCHE B FACILITY TERMINATION DATE. Each of the
Lenders listed on EXHIBIT B attached hereto consents to the extension of the
Tranche B Facility Termination Date to January 14, 2000, subject to Section 2.19
of the Credit Agreement, and waives its right under Section 2.19 to revoke such
consent.
4. CONDITIONS OF EFFECTIVENESS. This Amendment shall become effective
as of the date set forth above when the Agent shall have received:
(i) a counterpart of this Amendment executed by the Borrower,
the Agent and Lenders constituting the Required Lenders; PROVIDED,
HOWEVER, that as to each Lender listed on EXHIBIT B, Section 3 hereof
shall become effective only when the Agent shall have received a
counterpart of this Amendment executed by each such Lender;
(ii) a counterpart of the Acknowledgment attached hereto as
EXHIBIT A executed by each of the Guarantors; and
(iii) such documents evidencing corporate existence, action
and authority of the Borrower and the Guarantors as the Agent may
reasonably request.
5. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower
represents and warrants that:
(a) This Amendment, and the Credit Agreement as previously
executed and as amended hereby, constitute legal, valid and binding
obligations of the Borrower and are enforceable against the Borrower in
accordance with their terms.
(b) Upon the effectiveness of this Amendment, the Borrower
reaffirms all covenants, representations and warranties made in the
Credit Agreement.
(c) No Default or Unmatured Default has occurred and is
continuing.
6. EFFECT ON CREDIT AGREEMENT.
(a) During the period that this Amendment is effective, each
reference in the Credit Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import shall mean and be a
reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended above, the Credit Agreement
and all other Loan Documents, instruments and agreements executed
and/or delivered in connection therewith, shall remain in full force
and effect, and are hereby ratified and confirmed.
7
<PAGE>
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a
waiver of any right, power or remedy of the Agent or the Lenders, nor
constitute a waiver of any provision of the Credit Agreement or any
other Loan Documents, instruments and agreements executed and/or
delivered in connection therewith.
(d) In the event of any inconsistency between the provisions
of this Amendment and the provisions of that certain Amendment No. 2
(Temporary) dated as of December 10, 1998 among the Borrower, the Agent
and the Lenders (the "Temporary Amendment"), the Temporary Amendment
shall govern and control, so long as such Temporary Amendment is in
effect.
7. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of Illinois.
8. HEADINGS. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
9. COUNTERPARTS. This Amendment may be executed by one or more of the
parties to the Amendment on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
8
<PAGE>
IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have
executed this Amendment as of the date first above written.
FDX CORPORATION
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
THE FIRST NATIONAL BANK OF
CHICAGO, as Agent
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
THE CHASE MANHATTAN BANK
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
KREDIETBANK N.V., GRAND
CAYMAN BRANCH
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
<PAGE>
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
BANK OF TOKYO-MITSUBISHI
TRUST COMPANY
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
CITICORP USA, INC.
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
COMMERZBANK
AKTIENGESELLSCHAFT, ATLANTA
AGENCY
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
NATIONSBANK, N.A.
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
<PAGE>
CIBC INC.
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
THE FUJI BANK, LIMITED
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
MELLON BANK, N.A.
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
KEYBANK NATIONAL ASSOCIATION
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
FIRST AMERICAN NATIONAL BANK
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
BANK OF HAWAII
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
<PAGE>
THE BANK OF NEW YORK
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
THE BANK OF NOVA SCOTIA
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
CREDIT SUISSE FIRST BOSTON
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
DEUTSCHE VERKEHRS BANK
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
THE SANWA BANK, LIMITED
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
SUNTRUST BANK, NASHVILLE, N.A.
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
<PAGE>
BANCA NAZIONALE DEL LAVORO
SPA
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
THE SUMITOMO BANK, LIMITED
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
<PAGE>
EXHIBIT A
TO
AMENDMENT NO. 1
DATED AS OF DECEMBER 10, 1998
TO
CREDIT AGREEMENT
DATED AS OF JANUARY 15, 1998
ACKNOWLEDGMENT
--------------
Each of the undersigned hereby (i) acknowledges receipt of a copy of
Amendment No. 1 dated as of December 10, 1998 to the Credit Agreement dated as
of January 15, 1998 by and among the Borrower, the Lenders, First Chicago
Capital Markets, Inc., as Arranger, J.P. Morgan Securities Inc., as Co-Arranger
and Syndication Agent, Chase Securities Inc., as Co-Arranger and Documentation
Agent, and the Agent (the "Credit Agreement"), (ii) reaffirms the terms and
conditions of that certain Guaranty dated as of January 27, 1998 (the
"Guaranty") and (iii) acknowledges and agrees that the Guaranty (A) remains in
full force and effect and (B) is hereby ratified and confirmed.
FEDERAL EXPRESS CORPORATION
By:
-------------------------------
Name:
-----------------------------
Title:
-----------------------------
RPS, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
-----------------------------
CALIBER SYSTEM, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
-----------------------------
<PAGE>
VIKING FREIGHT, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
-----------------------------
ROBERTS EXPRESS, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
-----------------------------
Dated as of December 10, 1998
<PAGE>
EXHIBIT B
LENDERS CONSENTING TO
TRANCHE B FACILITY TERMINATION DATE EXTENSION
THE FIRST NATIONAL BANK OF CHICAGO
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
THE CHASE MANHATTAN BANK
KREDIETBANK N.V.
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
CITICORP USA, INC.
COMMERZBANK AKTIENGESELLSCHAFT, ATLANTA AGENCY
NATIONSBANK, N.A.
THE FUJI BANK, LIMITED
MELLON BANK, N.A.
KEYBANK NATIONAL ASSOCIATION
FIRST AMERICAN NATIONAL BANK
BANK OF HAWAII
THE BANK OF NEW YORK
THE BANK OF NOVA SCOTIA
CREDIT SUISSE FIRST BOSTON
DEUTSCHE VERKEHRS BANK
THE SANWA BANK, LIMITED
SUNTRUST BANK
BANCA NAZIONALE DEL LAVORO SPA
THE SUMITOMO BANK, LIMITED
<PAGE>
AMENDMENT NO. 2 (TEMPORARY)
DATED AS OF DECEMBER 10, 1998
TO
CREDIT AGREEMENT
DATED AS OF JANUARY 15, 1998
THIS AMENDMENT NO. 2 (TEMPORARY) TO THE CREDIT AGREEMENT (the
"Amendment") is made as of December 10, 1998 by and among FDX Corporation, a
Delaware corporation (the "Borrower"), the Lenders and The First National Bank
of Chicago, in its capacity as agent ("Agent"). Defined terms used herein and
not otherwise defined herein shall have the meanings given to them in that
certain Credit Agreement dated as of January 15, 1998 by and among the Borrower,
the Lenders, First Chicago Capital Markets, Inc., as Arranger, J.P. Morgan
Securities Inc., as Co-Arranger and Syndication Agent, Chase Securities Inc., as
Co-Arranger and Documentation Agent, and the Agent (as amended by that certain
Amendment No. 1 dated as of the date hereof, the "Credit Agreement").
WITNESSETH
WHEREAS, the Borrower, the Lenders and the Agent are parties to the
Credit Agreement;
WHEREAS, the Borrower wishes to enter into a new Credit Agreement of
even date herewith among the Borrower, the lenders parties thereto and Morgan
Guaranty Trust Company of New York, as Paying Agent, as the same may be amended,
modified or supplemented from time to time (the "New Credit Agreement"), to
finance, among other things, the working capital needs of the Borrower in the
event of an actual or threatened business interruption and to finance
contingency plans related thereto;
WHEREAS, the New Credit Agreement will terminate on the date (the "New
Facility Termination Date") when (i) all of the "Obligations" (as defined in the
New Credit Agreement) have been paid in full and (ii) all of the "Commitments"
(as defined in the New Credit Agreement) have been terminated in accordance with
the terms of the New Credit Agreement;
WHEREAS, the Borrower, the Lenders and the Agent have agreed to amend
the Credit Agreement on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrower, the Lenders and the Agent agree as follows:
<PAGE>
1. TEMPORARY AMENDMENTS TO CREDIT AGREEMENT. Effective as of December
10, 1998 subject to the satisfaction of the conditions precedent set forth in
SECTION 2 below, and remaining in effect only until the New Facility Termination
Date, the Credit Agreement is hereby amended as follows:
1.1. Article I is amended as follows:
(a) The definitions of "Applicable Tranche A Margin" and
"Applicable Tranche B Margin" are amended in their entirety to read as
follows:
"`Applicable Tranche A Margin' means, subject to the following
provisions of this definition, the per annum rate of interest
corresponding to the Level in effect from time to time, as set
forth in the following table:
<TABLE>
<CAPTION>
Level Applicable Tranche A Margin
<S> <C>
I 1.900%
II 1.875%
III 1.850%
IV 1.800%
V 1.750%
</TABLE>
Each change in the Applicable Tranche A Margin resulting from
a change in a Rating shall take effect at the time such change
in such Rating is publicly announced by the relevant rating
agency."
"`Applicable Tranche B Margin' means, subject to the following
provisions of this definition, the per annum rate of interest
corresponding to the Level in effect from time to time, as set
forth in the following table:
<TABLE>
<CAPTION>
Level Applicable Tranche B Margin
<S> <C>
I 1.925%
II 1.900%
III 1.875%
IV 1.825%
V 1.775%
</TABLE>
2
<PAGE>
Each change in the Applicable Tranche B Margin resulting from
a change in a Rating shall take effect at the time such change
in such Rating is publicly announced by the relevant rating
agency."
(b) The definition of "Loan Documents" is amended in its
entirety to read as follows:
"Loan Documents" means this Agreement, the Guaranty and, after
the execution and delivery thereof and before the release
thereof in accordance with Section 6.26, the Security
Documents.
(c) The definition of "Material Adverse Effect" is amended in
its entirety to read as follows:
"Material Adverse Effect" means a material adverse effect
(excluding the effects of an actual or threatened business
interruption, including but not limited to self-help actions
or a strike, by members of the FedEx Pilots Association, or
contingency plans related thereto) 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.
(d) The following new definitions are added to Article I in
appropriate alphabetical order:
"Adjusted Net Income" means, on a consolidated basis, for the
Borrower and its Consolidated Subsidiaries for the twelve most
recent complete fiscal months, income (loss) before income
taxes MINUS, to the extent included in determining income
(loss) before income taxes, any net loss or gain realized in
connection with any sale or disposition of any asset (other
than in the ordinary course of business) or any extraordinary
or non-recurring loss or gain resulting from an actual or
threatened business interruption relating to any self-help
actions or strike, by members of the FedEx Pilots Association,
or contingency plans related thereto, provided that the
aggregate amount of the foregoing reductions to income (loss)
before income taxes shall not exceed $1,000,000,000.
"Aircraft Mortgage" means an Aircraft Mortgage and Security
Agreement to be executed by FedEx pursuant to Section 6.26,
substantially in the form approved pursuant to Section 6.27.
"Amendment No. 2" means that certain Amendment No. 2
(Temporary), dated as of December 10, 1998, by and among the
Borrower, the Lenders party thereto and the Agent.
3
<PAGE>
"Appraisal Report" means, with respect to any aircraft or
engine, an extended desktop appraisal of the Appraiser, which
does not include any on-site inspection of such aircraft or
engine or its maintenance records, but may include
consideration of maintenance status information that is
provided to the Appraiser from the client and/or aircraft
operator, and may include adjustments from the mid-time,
mid-life baseline to account for the actual maintenance status
of such aircraft or engine.
"Appraiser" means BK Associates, or another independent
appraiser selected by the Borrower with the prior written
consent of Morgan.
"BK Associates" means BK Associates, Inc., an independent
aircraft appraisal firm.
"Caliber Collateral" is defined in Section 6.26.
"Caliber Operating Income" means, as of any date, the
operating income (or loss) of Caliber and its consolidated
Subsidiaries for the four most recent fiscal quarters then
ended, determined on a consolidated basis in accordance with
GAAP.
"Caliber Stock" means the capital stock of Caliber and the
Subsidiaries of Caliber other than the Designated Immaterial
Subsidiaries.
"Collateral" means all the Property and interests in Property
now owned or hereafter acquired by the Borrower and its
Subsidiaries upon which a Lien is granted or purported to be
granted under any of the Security Documents.
"Collateral Trust Agreement" means a Collateral Trust
Agreement to be executed pursuant to Section 6.26,
substantially in the form approved pursuant to Section 6.27.
"Designated Collateral" means (i) all now owned and hereafter
acquired or arising (a) capital stock of Caliber and its
domestic operating Subsidiaries (other than any Designated
Immaterial Subsidiaries), (b) accounts receivable of FedEx and
its Subsidiaries, (c) intercompany indebtedness owed to the
Borrower by its Subsidiaries and (d) motor vehicles (other
than passenger vehicles) and real estate of FedEx and its
Subsidiaries), except such motor vehicles and real estate
which are subject to Liens as of the date of Amendment No. 2
(such real estate to include, without limitation, the real
estate listed on SCHEDULE 1 attached to such Amendment No. 2),
and (ii) all aircraft (including airframes and engines) of
FedEx listed on SCHEDULE 1 attached to Amendment No. 2 hereto
and such additional unencumbered aircraft (including airframes
and engines) as the Borrower may designate in writing to the
Agent from time to time.
4
<PAGE>
"Designated Immaterial Subsidiaries" means, during each fiscal
year of the Borrower, any Subsidiary of Caliber which had
revenues (determined in accordance with GAAP) for the
immediately preceding fiscal year of Caliber not in excess of
2.0% of the consolidated revenues (determined in accordance
with GAAP) of Caliber and the consolidated Subsidiaries of
Caliber for such immediately preceding fiscal year.
"Eligible Receivables" means, at any date of determination
thereof, and with respect to any Person, the aggregate of all
Receivables of such Person at such date (net of maximum
discounts, allowances, retainage and any other amounts
deferred with respect thereto), which is not, except as
otherwise agreed by Morgan in its sole discretion exercised in
a commercially reasonable manner, of any of the following
types:
(i) (A) it arises out a sale the original terms
of which provide for payment more than 90
days after the date of the original invoice
issued by such Person in connection with
such sale or (B) it is more than 60 days
past due according to the original terms of
sale; or
(ii) it arises out of a sale not made in the
ordinary course of such Person's business or
a sale to a Person which is an Affiliate of
such Person or controlled by an Affiliate of
such Person; or
(iii) it fails to meet or violates any warranty,
representation or covenant contained in this
Agreement or any of the other Loan
Documents; or
(iv) the account debtor is also a supplier or
creditor of any Borrower or Guarantor and
the Receivable is subject to any contractual
right of setoff by the account debtor, and
such account debtor has not entered into an
agreement with Morgan with respect to the
waiver of rights of setoff, or the account
debtor has disputed liability with respect
to such Receivable, or made any claim with
respect to any other Receivable due from
such account debtor to such Person, in which
case the Receivable shall be ineligible to
the extent of such dispute, claim or setoff
(without duplication); or
(v) the account debtor has filed a petition for
bankruptcy or any other petition for relief
under the federal bankruptcy code or similar
statute, or made an assignment for the
benefit of creditors, or any petition or
other application for relief under the
federal bankruptcy code or any similar
statute has been filed against the account
debtor, or the account debtor has failed,
suspended its business operations, become
insolvent, suffered a receiver or a trustee
to be
5
<PAGE>
appointed for any of its assets or affairs,
or is generally failing to pay its debts as
they become due; or
(vi) the sale is to an account debtor which is
not located in the United States or Canada,
unless the account debtor's obligations with
respect to such sale are secured by a letter
of credit, guaranty or eligible bankers'
acceptance having terms, and from such
issuers and confirmation banks, as are
acceptable to Morgan in its sole discretion
exercised in a commercially reasonable
manner; or
(vii) the sale is on a bill-and-hold, guaranteed
sale, sale-and-return, sale on approval,
consignment, or any other repurchase or
return basis; or
(viii) Morgan believes, in the exercise of its
reasonable credit judgment, that collection
of such Receivable is insecure or that such
Receivable may not be paid by reason of the
account debtor's financial inability to pay;
or
(ix) the account debtor is the United States of
America or any department, agency or
instrumentality thereof, unless such Person
assigns its rights to payment of such
Receivable to Morgan pursuant to the
Assignment of Claims Act of 1940, as amended
(31 U.S.C. Section 3727); or
(x) the goods, the delivery of which has given
rise to such Receivable, have not been
delivered to or, if delivered, have been
rejected by the account debtor or the
services, the performance of which has given
rise to such Receivable, have not been
performed by such Person and accepted by the
account debtor; or
(xi) the amount of the Receivable(s) owing to
FedEx and its Subsidiaries in the aggregate
by any account debtor exceeds (A) a
concentration limit of ten percent (10%) of
the aggregate amount of the Receivables of
FedEx and its Subsidiaries at such time, or
(B) such other credit or concentration limit
determined by Morgan, in the exercise of its
reasonable credit judgment, at any time or
times hereafter, in which case such
Receivable(s) shall be ineligible to the
extent such Receivable(s) exceed(s) such
limits; or
(xii) to the extent such Receivable constitutes
Collateral, Morgan, as collateral agent as
contemplated by Section 6.26, does not have
a senior, perfected security interest in
such Receivable or such
6
<PAGE>
Receivable is subject to a Lien which is not
permitted under Section 6.19; or
(xiii) the sale is to an account debtor with
respect to which fifty percent (50%) or more
of all Receivables owing by such account
debtor are ineligible for any reason (except
with respect to those categories of
ineligibility where Morgan determines in its
sole discretion exercised in a commercially
reasonably manner that this clause shall not
apply); or
(xiv) such Receivable arises out of or in
connection with a retainage or similar
arrangement (I.E., the payment of such
Receivable is subject to further
performance), in which case that portion of
such Receivable subject to such arrangement
shall be ineligible until such time as the
requisite performance has been completed.
"FDX Collateral" is defined in Section 6.26.
"FDX Rating" means the Moody's FDX Rating or the S&P FDX
Rating.
"Investment Grade Rating" means an S&P FDX Rating greater than
or equal to BBB- or a Moody's FDX Rating greater than or equal
to Baa3.
"Moody's FDX Rating" means, at any particular time, the rating
issued by Moody's with respect to the Borrower's senior
unsecured non-credit enhanced long-term public debt.
"Morgan" means Morgan Guaranty Trust Company of New York, and
its successors.
"New Credit Agreement" means the Credit Agreement, dated as of
December 10, 1998, by and among the Borrower, the lenders
party thereto and Morgan, as Paying Agent, as amended,
modified or supplemented from time to time.
"New Credit Agreement Documents" means the New Credit
Agreement and all instruments, agreements and contractual
obligations entered into in connection therewith, as amended,
modified or supplemented from time to time.
"Paying Agent" means the "Paying Agent" (as defined in the New
Credit Agreement.)
"Pledge Agreements" means the pledge agreements to be executed
by the Borrower and certain Subsidiaries pursuant to Section
6.26, substantially in the form approved pursuant to Section
6.27.
7
<PAGE>
"Real Estate Mortgages" means the mortgages and deeds of trust
to be executed by FedEx pursuant to Section 6.26,
substantially in the form approved pursuant to Section 6.27.
"Receivable" means all present and future "accounts", as such
term is defined in section 9-106 of the Uniform Commercial
Code as in effect in the State of Illinois, and shall include,
without limitation, all accounts receivable, related contract
rights and all forms of obligations whatsoever owing, whether
now existing or hereafter arising and wherever arising, and
whether or not they have been earned by performance; together
with all promissory notes, instruments and documents of title
representing any of the foregoing, all rights in merchandise
or goods (including returned goods) which any of the same may
represent, all right, title, security and guaranties with
respect to any of the foregoing, including any right of
stoppage in transit and all insurance proceeds and corporate
and other business records relating to any of the foregoing;
together with all proceeds thereof.
"S&P FDX Rating" means, at any particular time, the rating
issued by S&P with respect to the Borrower's senior unsecured
non-credit enhanced long-term public debt.
"Security Agreements" means the security agreements to be
executed pursuant to Section 6.26, substantially in the form
approved pursuant to Section 6.27.
"Security Documents" means the Collateral Trust Agreement,
Pledge Agreements, the Aircraft Mortgage, the Real Estate
Mortgages and the Security Agreements.
1.2 Section 2.7 of the Credit Agreement is amended to add the
following sentence at the end thereof:
"Notwithstanding any provision of this Section 2.7 to the
contrary, when no Default exists, the Borrower shall make no
prepayments of any Advance hereunder unless all 'Advances' (as
defined in the New Credit Agreement ) have been repaid in
full."
1.3 The following new Section 4.3 is added immediately after
Section 4.2:
"4.3 ADDITIONAL CONDITION TO EACH ADVANCE. The
Lenders shall not be required to make any Advance, unless on
the applicable Borrowing Date, the 'Aggregate Commitment' (as
defined in the New Credit Agreement) shall have been fully
utilized. Each Borrowing Notice with respect to each such
Advance shall constitute a representation and warranty by the
Borrower that the condition contained in this Section 4.3 has
been satisfied."
1.4 Section 5.3 is amended in its entirety to read as follows:
8
<PAGE>
" 5.3. NO CONFLICT; GOVERNMENT CONSENT. Neither the
Borrower's nor any Guarantor's execution and delivery 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,
any Guarantor or any of the Significant Subsidiaries or the
Borrower's, any Guarantor's or any Significant Subsidiary's
articles or certificate of incorporation or by-laws or the
provisions of any indenture, instrument or agreement to which
the Borrower, any Guarantor or any of the 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, except pursuant to the Security Documents,
result in or require the creation or imposition of any Lien
in, of or on the Property of the Borrower, any Guarantor or
any Significant Subsidiary pursuant to the terms of any such
indenture, instrument or agreement. Except for (i) that
certain Indenture between Caliber and The Chase Manhattan
Bank, as Trustee, dated as of August 1, 1996 (the "Caliber
Indenture") and (ii) certain additional Indebtedness in an
aggregate amount of not greater than $50,000,000, none of the
Borrower, any Guarantor or any Subsidiary is a party to any
indenture, instrument or agreement that requires the
Indebtedness governed thereby to be equally and ratably
secured with the Obligations as a result of the execution and
delivery of any of the Security Documents. 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 (other than filings in connection
with the Security Documents).
1.5 Section 5.17 is amended in its entirety to read as
follows:
"5.17. PARI PASSU. All the payment obligations of the
Borrower and the Guarantors 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 and the Guarantors (other than obligations
under the New Credit Agreement Documents, PROVIDED that no
Default has occurred thereunder, and obligations mandatorily
preferred by laws or regulations of general application)."
1.6 The Credit Agreement is amended to add the following after
Section 5.18:
"5.19 MATERIAL ADVERSE EFFECT. Since May 31, 1998,
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."
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1.7 Section 6.1 is amended in its entirety to read as follows:
"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) 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, and from time to
time as reasonably requested by Morgan, for
Caliber and its Subsidiaries on a consolidated
basis, a certificate signed by the Borrower's
Chief Financial Officer, Treasurer or
Controller, certifying as to (i) for such
period, the Caliber Operating Income and (ii)
at the end of such period, the aggregate
principal amount of all outstanding
Indebtedness of Caliber and its Subsidiaries.
(iv) Together with the financial statements required
hereunder, a certificate signed by its Chief
Financial Officer or Treasurer stating
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that no Default or Unmatured Default exists, or
if any Default or Unmatured Default exists,
stating the nature and status thereof, and
stating the steps the Borrower is taking to
cure such Default or Unmatured Default.
(v) 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
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
Sections 6.12, 6.13 and 6.24.
(vi) Promptly upon becoming available, copies of:
(a) All financial statements, reports, notices
and proxy statements sent by the Borrower,
any Guarantor or any Significant
Subsidiary to its public stockholders (if
any).
(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.
(vii) 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.
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(viii) Promptly after any Authorized Officer learns
thereof, notice of any change in any Rating or
any publicly-announced decision by Moody's or
S&P to consider a change in any Rating.
(ix) On or before January 15, 1999, and thereafter
from time to time as reasonably requested by
Morgan within 15 Business Days after each such
request, an Appraisal Report setting forth the
fair market value of the airframes and engines
of FedEx included in SCHEDULE 1 attached to
Amendment No. 2 hereto.
(x) Not more than 15 Business Days after the end
of each calendar month following the Effective
Date (as defined in the New Credit Agreement),
or more frequently as Morgan may reasonably
request from time to time, a report
summarizing the Eligible Receivables of FedEx
and its Subsidiaries as of the end of such
month or such other date.
(xi) Within 15 Business Days after Morgan may
reasonably request from time to time, an
appraisal setting forth the fair market value
of all or any part of the Designated
Collateral described in clause (iv) of Section
6.26(b).
(xii) Such other information (including
non-financial information) as the Agent or any
Lender may from time to time reasonably
request."
1.8 Section 6.4 is amended to add "(except for changes in the
conduct of business resulting from an actual or threatened business
interruption, including but not limited to self-help actions or a
strike, by members of the FedEx Pilots Association, or contingency
plans related thereto)" after the word "conducted" in the fourth line.
1.9 Section 6.15 is amended to add the phrase "(other than
Caliber)" after the word "Subsidiary" in the first line of clause (a),
clause (b), and clause (d), and to add "Caliber," before the word
"FedEx" in clause (c).
1.10 Section 6.16 is amended to add the following immediately
after clause (f):
"Notwithstanding any provision of this Section 6.16 to the
contrary, the Borrower will not, nor will it permit any
Consolidated Subsidiary to, make any such sale, transfer,
conveyance or lease of any Collateral or Designated Collateral
without the prior written consent of the Required Lenders,
except that the Borrower and its Consolidated Subsidiaries may
sell, transfer, convey or lease, in accordance with the
foregoing provisions of Section 6.16, Designated Collateral
consisting of motor vehicles and real estate without such
written consent, provided that after giving effect thereto,
the Borrower is in compliance with Section 6.24."
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1.11 Section 6.18(e) is amended in its entirety to read as
follows:
"(e) Guaranties included or required under the
New Credit Agreement Documents and the L/C Facility."
1.12 Section 6.19 is amended to:
(a) delete paragraph (l) in its entirety and substitute the
following therefor:
"(l) Liens on Designated Collateral granted in
accordance with Section 6.26; and"
(b) add the following immediately after clause (l):
"(m) Liens not otherwise permitted by Sections 6.19(a)
through (l) 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 any 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(m), does not exceed 8% of Consolidated Adjusted Total
Assets.
Notwithstanding any provision of this Section 6.19 to the
contrary, the Borrower will not, and will not permit any
Consolidated Subsidiary to, create, incur, assume or suffer to
exist, any Lien on any of the Designated Collateral except in
accordance with clause (l) of this Section 6.19, or enter
into, or make any commitment to enter into, any arrangement
for the acquisition of any Designated Collateral through
conditional sales, lease-purchase or other title retention
agreements, except Liens securing a principal amount of not
more than $200,000,000 in the aggregate."
1.13 Section 6.21 is amended to delete the words "The
Borrower" at the beginning thereof and replace them with "Except for
the New Credit Agreement Documents, the Borrower".
1.14 The following provisions are added after Section 6.21:
"6.22 INDEBTEDNESS OF CALIBER AND SUBSIDIARIES. None
of Caliber or its Subsidiaries will directly or indirectly
create, incur, assume or otherwise become or remain liable
with respect to (a) any Indebtedness of the types set forth in
clauses
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(i), (iii), (iv), (v), (vi), (vii) and (viii) of the
definition of "Indebtedness", or (b) Indebtedness consisting
of purchase-money obligations representing the deferred
purchase price of Property, except:
(i) all such Indebtedness existing under the
Caliber Indenture or otherwise existing on the
date hereof and reflected in the consolidated
financial statements of the Borrower and its
Consolidated Subsidiaries;
(ii) such Indebtedness owed to the Borrower; and
(iii) other Indebtedness in an aggregate principal
amount not to exceed $50,000,000.
6.23 NEW CREDIT AGREEMENT DOCUMENTS. At any time when
no Default exists, the Borrower shall not voluntarily reduce
the "Commitments" (as defined in the New Credit Agreement) in
part. Nothing in this Section 6.23 shall prohibit the Borrower
from terminating the "Commitments" (as defined in the New
Credit Agreement) in full.
6.24 VALUE OF DESIGNATED COLLATERAL AND COLLATERAL;
AIRCRAFT CASUALTY. (a) The aggregate value of the Designated
Collateral shall at all times equal or exceed 1.75 TIMES the
sum of (i) the Aggregate Commitment, or if the Aggregate
Commitment has been terminated, the aggregate outstanding
principal amount of the Obligations, (ii) the "Aggregate
Commitment" (as defined in the New Credit Agreement), or if
such "Aggregate Commitment" has been terminated, the aggregate
outstanding principal amount of the "Obligations" (as defined
in the New Credit Agreement) and (iii) the aggregate amount of
the "Commitments" (as defined in the L/C Facility), or if such
"Commitments" have been terminated, the aggregate outstanding
principal amount of the "Obligations" (as defined in the L/C
Facility).
(b) The Borrower and its applicable Subsidiaries
shall be required to grant Liens on Designated Collateral as
provided in Section 6.26(a) only to the extent necessary so
that the value, as determined pursuant to Section 6.26(b), of
all such Collateral as to which a Lien is granted, equals or
exceeds, at all times prior to the release of such Liens
pursuant to Section 6.26(c), 1.75 TIMES the sum of (i) the
Aggregate Commitment, or if the Aggregate Commitment has been
terminated, the aggregate outstanding principal amount of the
Obligations, (ii) the "Aggregate Commitment" (as defined in
the New Credit Agreement), or if such "Aggregate Commitment"
has been terminated, the aggregate outstanding principal
amount of the "Obligations" (as defined in the New Credit
Agreement) and (iii) the aggregate amount of the "Commitments"
(as defined in the L/C Facility), or if such "Commitments"
have been terminated, the aggregate
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outstanding principal amount of the "Obligations" (as defined
in the L/C Facility), provided that, if at any time the
aggregate value of such Collateral is less than the amount
required by this sentence, then the Borrower shall (i)
promptly notify the Agent of such shortfall, and (ii) promptly
grant Liens to Morgan on additional Designated Collateral, in
accordance with Section 6.26(a), to the extent necessary to
reduce such shortfall to zero.
(c) If any airframe or engine set forth on SCHEDULE 1
attached to Amendment No. 2 hereto shall be destroyed or
materially damaged, regardless of the cause of such
destruction or damage, then the Borrower shall promptly notify
the Agent thereof and, within 45 days thereafter, designate in
writing one or more airframes and/or engines, as applicable,
in each case free and clear of any Lien, to be added to such
SCHEDULE 1, as provided in the definition of "Designated
Collateral", having an aggregate value, in accordance with
Section 6.26 hereof, equal to or exceeding the value of the
destroyed or damaged airframe or engine. If the damaged or
destroyed airframe or engine constitutes part of the
Collateral, then the Borrower shall, or shall cause its
Subsidiaries to, enter into such amendments to the Aircraft
Mortgage as Morgan may reasonably request in order to grant to
Morgan, as the collateral agent for the Lenders and for the
lenders under the New Credit Agreement Documents and the L/C
Facility (the "Collateral Agent"), a first priority Lien on
such replacement airframes or engines.
6.25 NO NEGATIVE PLEDGE. From and after the date
hereof, neither the Borrower nor any of its Subsidiaries shall
limit, restrict or delay, its right or power to sell, assign,
pledge, grant any Lien on, transfer, dispose of or otherwise
encumber the Designated Collateral or any part thereof,
including, without limitation, any such restriction on capital
stock, except as provided on the date hereof in the Loan
Documents, the New Credit Agreement Documents or the L/C
Facility.
6.26 GRANT OF SECURITY INTEREST IN COLLATERAL. (a)
Promptly (but in any event within 10 Business Days) after any
one or more dates on which either FDX Rating ceases to be an
Investment Grade Rating, the Borrower shall, to the extent
provided for in Section 6.24 (b), (i) grant, and cause its
Subsidiaries to grant, to the Collateral Agent, a first
priority Lien on the Designated Collateral other than
Designated Collateral owned by Caliber and its Subsidiaries
(the "FDX Collateral"), which Lien shall equally and ratably
secure the Obligations under the Loan Documents and the
obligations under each of the New Credit Agreement Documents
and the L/C Facility, and (ii) cause Caliber and Caliber's
Subsidiaries to grant, to a collateral trustee designated by
Morgan, a first priority Lien on all the capital stock of
Caliber's Subsidiaries which constitute part of the Designated
Collateral (the "Caliber Collateral"), which Lien shall
equally and ratably secure the Obligations under the Loan
Documents, the obligations under each of the New Credit
Agreement Documents and the L/C Facility and the notes issued
under the
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Caliber Indenture. All such Liens granted pursuant to this
Section 6.26 shall be granted in the following order: first,
on the capital stock of Caliber and all Caliber Collateral;
second, on the airframes and engines of FedEx; third, on all
(and not part) of the accounts receivable of FedEx and its
Subsidiaries; and fourth, as designated by Morgan, on the
motor vehicles and real estate of FedEx and its Subsidiaries,
and the intercompany indebtedness owed to the Borrower by its
Subsidiaries, in each case, to the extent constituting part of
the Designated Collateral. From time to time, the Borrower and
its Subsidiaries shall execute and deliver, or cause to be
executed and delivered, such additional agreements,
instruments, certificates (including without limitation any
good standing certificates), legal opinions or documents, and
take all such actions, as Morgan may reasonably request, for
the purposes of implementing or effectuating this Section 6.26
or the Security Documents, or of more fully perfecting,
preserving or renewing the rights of Morgan and the Lenders
with respect to the Collateral (or with respect to any
additions thereto or replacements or proceeds thereof or with
respect to any other Property or assets hereafter acquired by
the Borrower or its Subsidiaries which is or may be deemed to
be part of the Collateral) pursuant hereto or thereto.
(b) Designated Collateral and Collateral shall at all
times be valued as follows:
(i) the value of the Caliber Stock shall equal
9.0 times Caliber Operating Income, less the
aggregate principal amount of all
outstanding Indebtedness (including, without
limitation, intercompany indebtedness) of
Caliber and its Subsidiaries;
(ii) the value of the airframes and engines
listed on SCHEDULE 1 attached to Amendment
No. 2 hereto shall equal the fair market
value thereof set forth in the most recently
delivered Appraisal Report delivered
pursuant to Section 4.1 or 6.1, and prior to
the delivery of the first such Appraisal
Report, such Property shall be valued at
$1,892,600,000.
(iii) the value of the accounts receivable of
FedEx and its Subsidiaries shall equal 0.75
TIMES the aggregate amount of Eligible
Receivables of FedEx and its Subsidiaries,
as determined on the report of Eligible
Receivables most recently delivered pursuant
to Section 4.1 or Section 6.1; and
(iv) the value of the motor vehicles and real
estate of FedEx and its Subsidiaries and the
intercompany indebtedness owed to the
Borrower by its Subsidiaries shall equal the
fair market value thereof as determined in
the most recent appraisal provided by a
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nationally recognized firm of appraisers
pursuant to Section 6.1, and prior to the
delivery of the first such appraisal with
respect to any such Property, such Property
shall be valued at $633,300,000.
(c) Any Liens granted under this Section 6.26 shall
be released at the written request of the Borrower in
accordance with the Security Documents if the S&P FDX Rating
and Moody's FDX Rating both become Investment Grade Ratings,
but shall be reinstated on any one or more additional dates
thereafter on which either FDX Rating ceases to be an
Investment Grade Rating. Notwithstanding the foregoing, (i)
all such Liens shall be released when all of the "Obligations"
(under and as defined in the New Credit Agreement) have been
paid in full and the "Commitments" (under and as defined in
the New Credit Agreement) have been terminated, and (ii) the
Lien on any asset sold or otherwise disposed of in accordance
with Section 6.16 shall be released promptly after the
Borrower's written request therefor.
6.27. APPROVAL OF FORMS OF SECURITY DOCUMENTS. The
Borrower shall, as soon as practicable, and in any event no
later than the later of (i) January 15, 1999 and (ii) seven
Business Days after Morgan delivers drafts of such documents
to the Borrower, give written notice to Morgan that it has
approved a final form of each Security Document which is in
form and substance satisfactory to the Agent and the agents
under the New Credit Agreement Documents and under the L/C
Facility."
1.15 Section 7.3 is amended to delete such section in its
entirety and substitute the following therefor:
" 7.3. BREACH OF CERTAIN COVENANTS. The breach by the
Borrower of any of the terms or provisions of Section 6.2,
6.3, 6.5, 6.11, 6.12, 6.13, 6.14, 6.15, 6.16, 6.17, 6.18,
6.19, 6.22, 6.23, 6.24, 6.25 or 6.26."
1.16 Section 7.4 is amended in its entirety to read as
follows:
" 7.4. BREACH OF OTHER COVENANTS, LOAN DOCUMENTS, NEW
CREDIT AGREEMENT DOCUMENTS OR L/C FACILITY. 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 or any other Loan Document which
is not remedied within five days after written notice from the
Agent or any Lender; or the occurrence of any "Default" (as
defined in the New Credit Agreement) or any "Event of Default"
(as defined in the L/C Facility)."
1.17 Section 7.12 is amended in its entirety to read as
follows:
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"7.12. INVALIDITY, ETC. OF LOAN DOCUMENTS; FAILURE OF
SECURITY. At any time, for any reason (i) any provision of any Loan
Document shall at any time for any reason cease to be valid and binding
and enforceable against the Borrower or any Guarantor, or the validity,
binding effect or enforceability thereof against the Borrower or any
Guarantor shall be contested by any Person, or the Borrower or any
Guarantor shall deny that it has any or further liability or obligation
thereunder, or any Loan Document shall be terminated, invalidated or
set aside, or be declared ineffective or inoperative or in any way
cease to give or provide to the Lenders and the Agent the benefits
purported to be created thereby, or (ii) Liens in favor of the Lenders
or any collateral agent for the Lenders shall, while the Security
Documents are in effect or purported to be in effect pursuant hereto,
be invalidated or otherwise cease to be in full force and effect, or
such Liens shall be subordinated or shall not have the priority
contemplated hereby or by the Security Documents."
1.18 Section 8.2 is amended in its entirety to read as
follows:
"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 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 Tranche A Facility Termination
Date, extend the Tranche B Facility
Termination Date other than as provided in
Section 2.19, 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, Sections 6.24(a)
or (b), this Section 8.2, or Section 12.1.
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(v) Release FedEx or RPS from any of their
material obligations, respectively, under
the Guaranty.
(vi) Release all or substantially all of the
Collateral, or release the Borrower or any
Guarantor from any of its material
obligations under the Security Documents, in
each case other than pursuant to Section
6.26(c) or 9.16;
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."
1.19 Section 9.16 is amended in its entirety to read as
follows:
"9.16. RELEASE OF GUARANTORS. Upon the consummation
of any liquidation, dissolution, merger, consolidation, sale
or other transfer of a Guarantor other than Caliber, FedEx or
RPS (collectively, a "Transfer"), and provided (i) no Default
or Unmatured Default has occurred and is continuing or would
occur as a result of such Transfer, and (ii) the Liens and
security interests contemplated by the Security Documents are
not then in effect or purported to be in effect, such
Guarantor shall automatically be released from all of its
obligations under the Guaranty, and, if the Borrower so
requests, the Lenders shall promptly execute an instrument, in
form and substance reasonably satisfactory to the Borrower and
the Agent, evidencing such release."
1.20 Section 10.2 is amended in its entirety to read as
follows:
"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 the right to negotiate and approve the form,
terms and provisions of the Security Documents, and to enter
into the Security Documents for the benefit of the Lenders, in
accordance with Section 6.26. Any action taken by the Agent in
accordance with the provisions of the Security Documents, and
the exercise by the Agent of the powers set forth therein,
together with such other powers as are reasonably incidental
thereto, are hereby authorized by, and shall be binding upon,
each of the Lenders. 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."
1.21 Section 11.2 is amended to add "(other than pursuant to
the Security Documents)" after the word "collateral" in the sixth line.
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1.22 SCHEDULE 2 of the Credit Agreement is hereby replaced
with SCHEDULE 2 attached to Amendment No. 2 hereto.
2. CONDITIONS OF EFFECTIVENESS. This Amendment shall become effective
as of the date set forth above when each of the following conditions has been
satisfied:
(a) the Agent shall have received a counterpart of this
Amendment executed by the Borrower, the Agent and Lenders, and a
counterpart of the Acknowledgment attached hereto as Exhibit A,
executed by each of the Guarantors; PROVIDED, however, that SECTION
1.18 of this Amendment shall only become effective when the Agent shall
have received a counterpart of this Amendment executed by the Borrower,
the Agent and each of the Lenders;
(b) the Borrower has furnished to the Agent such documents
evidencing corporate existence, action and authority of the Borrower
and the Guarantors as the Agent may reasonably request;
(c) the L/C Facility shall have been amended to permit the
execution, delivery and performance of the Loan Documents;
(d) the New Credit Agreement shall have been executed and
delivered by the parties thereto and shall have become effective in
accordance with its terms; and
(e) the Agent shall have received a summary of the Eligible
Receivables of FedEx and its Subsidiaries as of November 30, 1998, and
a calculation of the value of the Designated Collateral (determined in
accordance with Section 6.26(b)), in each case in form satisfactory to
the Agent.
3. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower
represents and warrants that:
(a) This Amendment, and the Credit Agreement as previously
executed and as amended hereby, constitute legal, valid and binding
obligations of the Borrower and are enforceable against the Borrower in
accordance with their terms.
(b) Upon the effectiveness of this Amendment, the Borrower
reaffirms all covenants, representations and warranties made in the
Credit Agreement.
(c) No Default or Unmatured Default has occurred and is
continuing.
4. EFFECT ON CREDIT AGREEMENT.
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(a) During the period that this Amendment is effective, each
reference in the Credit Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import shall mean and be a
reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended above, the Credit Agreement
and all other Loan Documents, instruments and agreements executed
and/or delivered in connection therewith, shall remain in full force
and effect, and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a
waiver of any right, power or remedy of the Agent or the Lenders, nor
constitute a waiver of any provision of the Credit
Agreement or any other Loan Documents, instruments and agreements
executed and/or delivered in connection therewith.
(d) In the event of any inconsistency between the provisions
of this Amendment and the provisions of that certain Amendment No. 1
dated as of December 10, 1998 among the Borrower, the Agent and the
Lenders, this Amendment shall govern and control so long as this
Amendment remains in effect.
5. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of Illinois.
6. HEADINGS. Section headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
7. COUNTERPARTS. This Amendment may be executed by one or more of the
parties to the Amendment on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
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21
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the date first above written.
FDX CORPORATION
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
THE FIRST NATIONAL BANK OF
CHICAGO, as Agent
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
THE CHASE MANHATTAN BANK
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
KREDIETBANK N.V., GRAND
CAYMAN BRANCH
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
<PAGE>
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
BANK OF TOKYO-MITSUBISHI
TRUST COMPANY
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
CITICORP USA, INC.
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
COMMERZBANK
AKTIENGESELLSCHAFT, ATLANTA AGENCY
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
NATIONSBANK, N.A.
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
CIBC INC.
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
<PAGE>
THE FUJI BANK, LIMITED
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
MELLON BANK, N.A.
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
KEYBANK NATIONAL ASSOCIATION
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
FIRST AMERICAN NATIONAL BANK
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
BANK OF HAWAII
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
THE BANK OF NEW YORK
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
<PAGE>
THE BANK OF NOVA SCOTIA
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
CREDIT SUISSE FIRST BOSTON
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
DEUTSCHE VERKEHRS BANK
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
THE SANWA BANK, LIMITED
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
SUNTRUST BANK, NASHVILLE, N.A.
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
BANCA NAZIONALE DEL LAVORO
SPA
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
<PAGE>
THE SUMITOMO BANK, LIMITED
By: /s/
----------------------
Name:
----------------------
Title:
----------------------
<PAGE>
EXHIBIT A
TO
AMENDMENT NO. 2 (TEMPORARY)
DATED AS OF DECEMBER 10, 1998
ACKNOWLEDGMENT
--------------
Each of the undersigned (i) acknowledges receipt of a copy of
Amendment No. 2 (Temporary) dated as of December 10, 1998, to the Credit
Agreement dated as of January 15, 1998 by and among the Borrower, the
Lenders, First Chicago Capital Markets, Inc., as Arranger, J.P. Morgan
Securities Inc., as Co-Arranger and Syndication Agent, Chase Securities Inc.,
as Co-Arranger and Documentation Agent, and the Agent (the "Credit
Agreement"), (ii) reaffirms the terms and conditions of that certain Guaranty
dated as of January 27, 1998 (the "Guaranty") and (iii) acknowledges and
agrees that the Guaranty (A) remains in full force and effect and (B) is
hereby ratified and confirmed.
FEDERAL EXPRESS CORPORATION
By:
-------------------------------
Name:
-----------------------------
Title:
-----------------------------
RPS, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
-----------------------------
CALIBER SYSTEM, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
-----------------------------
<PAGE>
VIKING FREIGHT, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
-----------------------------
ROBERTS EXPRESS, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
-----------------------------
Dated as of December 10, 1998
<PAGE>
EXHIBIT 12.1
FDX CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
Year Ended May 31, November 30,
1994 1995 1996 1997 1998 1997 1998
--------- ---------- ---------- --------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
(In thousands, except ratios)
Earnings:
Income before income taxes............. $540,131 $ 693,564 $ 702,094 $425,865 $ 899,518 $541,505 $567,752
Add back:
Interest expense, net of
capitalized interest............... 152,170 130,923 109,249 110,080 135,696 66,498 54,606
Amortization of debt
issuance costs..................... 2,860 2,493 1,628 1,328 1,481 679 431
Portion of rent expense
representative of
interest factor.................... 288,716 333,971 393,775 439,729 508,325 246,350 279,980
-------- ---------- ---------- -------- ---------- -------- --------
Earnings as adjusted................... $983,877 $1,160,951 $1,206,746 $977,002 $1,545,020 $855,032 $902,769
======== ========== ========== ======== ========== ======== ========
Fixed Charges:
Interest expense, net of
capitalized interest................. $152,170 $ 130,923 $ 109,249 $110,080 $ 135,696 $ 66,498 $ 54,606
Capitalized interest................... 29,738 27,381 44,654 45,717 33,009 16,953 20,960
Amortization of debt
issuance costs....................... 2,860 2,493 1,628 1,328 1,481 679 431
Portion of rent expense
representative of
interest factor...................... 288,716 333,971 393,775 439,729 508,325 246,350 279,980
-------- ---------- ---------- -------- ---------- -------- --------
$473,484 $ 494,768 $ 549,306 $596,854 $ 678,511 $330,480 $355,977
======== ========== ========== ======== ========== ======== ========
Ratio of Earnings to Fixed Charges..... 2.1 2.3 2.2 1.6 2.3 2.6 2.5
======== ========== ========== ======== ========== ======== ========
</TABLE>
<PAGE>
EXHIBIT 15.1
December 16, 1998
FDX Corporation
6075 Poplar Avenue
Memphis, Tennessee 38119
We are aware that FDX Corporation will be incorporating by reference in its
previously filed Registration Statement No. 333-45037 its Report on Form 10-Q
for the quarter ended November 30, 1998, which includes our report dated
December 16, 1998 covering the unaudited interim financial information contained
therein. Pursuant to Regulation C of the Securities Act of 1933, that report is
not considered part of this registration statement prepared or certified by
our firm or a report prepared or certified by our firm within the meaning of
Sections 7 and 11 of the Act.
Very truly yours,
/s/ Arthur Andersen LLP
Arthur Andersen LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS OF
INCOME ON PAGES 3-5 OF THE COMPANY'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED
NOVEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> NOV-30-1998
<CASH> 664,443
<SECURITIES> 0
<RECEIVABLES> 2,170,208
<ALLOWANCES> 67,374
<INVENTORY> 332,050
<CURRENT-ASSETS> 3,412,303
<PP&E> 13,198,930
<DEPRECIATION> 6,927,917
<TOTAL-ASSETS> 10,553,906
<CURRENT-LIABILITIES> 3,205,566
<BONDS> 1,362,013
0
0
<COMMON> 14,766
<OTHER-SE> 4,285,135
<TOTAL-LIABILITY-AND-EQUITY> 10,553,906
<SALES> 0
<TOTAL-REVENUES> 8,291,539
<CGS> 0
<TOTAL-COSTS> 7,670,709
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,087
<INCOME-PRETAX> 567,752
<INCOME-TAX> 235,617
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 332,135
<EPS-PRIMARY> 2.25
<EPS-DILUTED> 2.23
</TABLE>
