<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 17, 1994
REGISTRATION NO. 33-51623
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
FEDERAL EXPRESS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 71-0427007
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
2005 CORPORATE AVENUE
MEMPHIS, TENNESSEE 38132
(901) 369-3600
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
KENNETH R. MASTERSON, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
FEDERAL EXPRESS CORPORATION
2005 CORPORATE AVENUE
MEMPHIS, TENNESSEE 38132
(901) 395-3388
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
COPIES TO:
JAMES D. PHYFE, ESQ.
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
(212) 450-4598
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT AS
DETERMINED IN LIGHT OF MARKET CONDITIONS AND OTHER FACTORS.
------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED FEBRUARY 17, 1994
PROSPECTUS [LOGO]
- -------------
PASS THROUGH TRUSTS
PASS THROUGH CERTIFICATES
------------------------
Up to $400,000,000 aggregate amount of Pass Through Certificates (the "Pass
Through Certificates") may be offered for sale from time to time pursuant to
this Prospectus and one or more Prospectus Supplements. The Pass Through
Certificates may be offered in one or more Series in amounts, at prices and on
terms to be determined at the time of sale. For each Series of Pass Through
Certificates offered pursuant to this Prospectus and a Prospectus Supplement, a
separate Pass Through Trust will be formed pursuant to a Pass Through Trust
Agreement (the "Pass Through Agreement") and a supplement thereto (a "Series
Supplement") between Federal Express Corporation (the "Corporation") and
NationsBank of South Carolina, National Association, not in its individual
capacity but solely as the Pass Through Trustee under such Pass Through Trust.
Each Pass Through Certificate in a Series will evidence a fractional undivided
interest in the related Pass Through Trust and will have no rights, benefits or
interest in respect of any other Pass Through Trust or the Trust Property held
in any other such Pass Through Trust. The Trust Property of each Pass Through
Trust will consist of equipment trust certificates (the "Equipment Trust
Certificates") issued as nonrecourse obligations by one or more Owner Trustees,
each acting not in its individual capacity but solely as the Owner Trustee of a
separate Owner Trust, in connection with leveraged lease transactions. The
Equipment Trust Certificates will be issued to finance a portion of the payment
to be made by each such Owner Trustee of the acquisition cost for specified
aircraft which are to be leased to the Corporation (the "Aircraft"). The
Prospectus Supplement relating to each offering will describe certain terms of
the Pass Through Certificates offered thereby, the respective Pass Through
Trusts, the Equipment Trust Certificates to be purchased by such Pass Through
Trusts, the leveraged lease transactions and the Aircraft relating to such
Equipment Trust Certificates.
With respect to each Aircraft, the Owner Trustee may issue one or more
Equipment Trust Certificates, each of which may have a different interest rate
and final maturity date. For each Series of Pass Through Certificates, the Pass
Through Trustee will purchase one or more Equipment Trust Certificates issued
with respect to each of one or more Aircraft such that all of the Equipment
Trust Certificates held in the related Pass Through Trust will have identical
interest rates, in each case equal to the rate applicable to the Pass Through
Certificates issued by such Pass Through Trust, and such that the latest
maturity date for such Equipment Trust Certificates will occur on or before the
final distribution date for such Pass Through Certificates. For any Aircraft,
except during the Pre-Funding Period, if any, with respect to such Aircraft, the
related Equipment Trust Certificates will be secured by a security interest in
such Aircraft and by the Lease relating thereto, including the right to receive
rent payable by the Corporation under such Lease. None of the Equipment Trust
Certificates held in the respective Pass Through Trusts will be obligations of,
or guaranteed by, the Corporation. For any Aircraft, however, except as
described under "Description of the Equipment Trust Certificates -- General"
relating to the Pre-Funding Period with respect to such Aircraft, the amounts
payable by the Corporation under the related Lease will be sufficient to pay in
full when due all principal of and interest on the related Equipment Trust
Certificates. During any Pre-Funding Period, the related Equipment Trust
Certificates will be secured by a collateral account funded by the net proceeds
of the sale of such Equipment Trust Certificates to the Pass Through Trustee and
by other security (which may include a letter of credit) to be described in the
applicable Prospectus Supplement. Funds in such collateral account, together
with such other security, will be available to pay any principal due and
interest accrued on such Equipment Trust Certificates during the Pre-Funding
Period, as well as to fund any mandatory prepayment of such Equipment Trust
Certificates during such Pre-Funding Period.
(CONTINUED ON FOLLOWING PAGE)
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------
The date of this Prospectus is , 1994.
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
Interest paid on the Equipment Trust Certificates held in each Pass Through
Trust will be passed through to the registered holders of the Pass Through
Certificates for such Pass Through Trust (for each Pass Through Trust, the
"Certificateholders") on the dates and at the rate per annum set forth in the
Prospectus Supplement relating to such Pass Through Certificates until the final
distribution date for such Pass Through Trust. Principal paid on the Equipment
Trust Certificates held in each Pass Through Trust will be passed through to the
Certificateholders in scheduled amounts on the dates set forth in the Prospectus
Supplement relating to such Pass Through Certificates until the final
distribution date for such Pass Through Trust.
The Pass Through Certificates represent interests in the related Pass
Through Trust only and all payments and distributions shall be made only from
the property of such Pass Through Trust. The Pass Through Certificates do not
represent an interest in or obligation of the Corporation.
The Pass Through Certificates may be sold to or through underwriters or
directly to other purchasers or through agents. The Prospectus Supplement
relating to each offering will set forth the names of any underwriters, dealers
or agents involved in the sale of the Pass Through Certificates in connection
with which this Prospectus is being delivered, the amounts, if any, to be
purchased by underwriters and the compensation, if any, of such underwriters or
agents.
Prior to their issuance, there will have been no market for the Pass Through
Certificates of any Series and there can be no assurance that one will develop.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporation does not intend to apply for the listing of any Series of Pass
Through Certificates on a national securities exchange. See "Plan of
Distribution."
This Prospectus may not be used to consummate sales of any Pass Through
Certificates unless accompanied by the Prospectus Supplement applicable to the
Pass Through Certificates being sold.
--------------------------
<PAGE>
AVAILABLE INFORMATION
Federal Express Corporation (the "Corporation") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy and information statements and other information filed by the
Corporation with the Commission can be inspected, and copies may be obtained at
prescribed rates, at the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as at the following Regional
Offices of the Commission: Chicago Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and New York Regional Office, 7 World
Trade Center, New York, New York 10048. Such material can also be inspected and
copied at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New
York, New York 10005, and The Toronto Stock Exchange, The Exchange Tower, Two
First Canadian Place, Toronto, Ontario M5X 1J2, Canada.
This Prospectus constitutes a part of a registration statement on Form S-3
(together with all amendments and exhibits, herein referred to as the
"Registration Statement") filed by the Corporation under the Securities Act of
1933, as amended (the "Securities Act"). This Prospectus does not contain all of
the information included in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
Reference is made to such Registration Statement and to the exhibits relating
thereto for further information with respect to the Corporation and the
securities offered hereby.
REPORTS TO PASS THROUGH CERTIFICATEHOLDERS
NationsBank of South Carolina, National Association ("NationsBank of South
Carolina"), in its capacity as Pass Through Trustee under each Pass Through
Trust, will provide the Certificateholders of each Pass Through Trust with
certain periodic statements concerning the distributions made from such Pass
Through Trust. See "Description of the Pass Through Certificates -- Statements
to Certificateholders."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission in accordance with the
provisions of the Exchange Act are incorporated herein by reference and made a
part hereof.
1. The Corporation's Annual Report on Form 10-K for the fiscal year ended May
31, 1993, filed August 13, 1993;
2. The Corporation's Quarterly Reports on Form 10-Q for the fiscal quarters
ended August 31, 1993, as amended by a Quarterly Report on Form 10-Q/A, and
November 30, 1993, filed October 14, 1993, October 25, 1993 and January 14,
1994, respectively; and
3. The Corporation's Current Reports on Form 8-K dated July 13, 1993, July 27,
1993, as amended by a Form 8-K/A dated July 28, 1993, September 2, 1993,
September 14, 1993, September 23, 1993, December 2, 1993 and December 13,
1993 and filed July 14, 1993, July 27, 1993, July 28, 1993, September 7,
1993, September 15, 1993, September 28, 1993, December 6, 1993 and December
14, 1993, respectively.
All documents filed by the Corporation pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and before the
termination of the offering made by this Prospectus shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein, or contained in this Prospectus, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
3
<PAGE>
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Corporation will furnish without charge to each person to whom this
Prospectus is delivered, on written or oral request of such person, a copy of
any or all documents incorporated by reference in this Prospectus, without
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Requests for such copies should be directed
to: Thomas B. Martin, Managing Director -- Public Relations, Federal Express
Corporation, by mail at Box 727, Memphis, Tennessee 38194-1850 or by telephone
at (901) 395-3490.
FEDERAL EXPRESS CORPORATION
The Corporation offers a wide range of express services for the
time-definite transportation of goods and documents throughout the world using
an extensive fleet of aircraft and vehicles and leading-edge information
technologies. Corporate headquarters are located at 2005 Corporate Avenue,
Memphis, Tennessee 38132, telephone (901) 369-3600.
RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
NOVEMBER
YEAR ENDED MAY 31, 30,
----------------------------- ----------
1989 1990 1991 1992 1993 1992 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges(a)........................ 1.9x 1.4x 1.0x (b) 1.4x 1.3x 1.7x
<FN>
- ------------------------
(a) Earnings included in the calculation of the ratio of earnings to fixed
charges represent income before income taxes plus fixed charges (other
than capitalized interest). Fixed charges include interest expense,
capitalized interest, amortization of debt issuance costs and a portion of
rent expense representative of interest.
(b) Earnings were inadequate to cover fixed charges by $173.4 million for the
year ended May 31, 1992.
</TABLE>
OUTLINE OF PASS THROUGH TRUST STRUCTURE
For each Series of Pass Through Certificates (as such terms are defined
below) offered pursuant to this Prospectus and related Prospectus Supplement, a
separate pass through trust (a "Pass Through Trust") will be formed pursuant to
a supplemental agreement (a "Series Supplement") between the Corporation and
NationsBank of South Carolina, National Association ("NationsBank of South
Carolina"), not in its individual capacity but solely as pass through trustee
(the "Pass Through Trustee"), in accordance with a Pass Through Trust Agreement
(the "Pass Through Agreement") between the Corporation and the Pass Through
Trustee, for the benefit of the registered holders (the "Certificateholders") of
the series (a "Series") of certificates (the "Pass Through Certificates")
evidencing fractional undivided interests in such Pass Through Trust. The
property held in each Pass Through Trust (the "Trust Property") will consist of
equipment trust certificates issued in connection with one or more leveraged
lease transactions (the "Equipment Trust Certificates"), as specified in the
applicable Prospectus Supplement.
As more fully described below under "Use of Proceeds," in connection with
each leveraged lease transaction, one or more Equipment Trust Certificates may
be issued, each of which may have different interest rates and final maturity
dates. Concurrently with the execution and delivery of each Series Supplement,
the Pass Through Trustee, on behalf of the related Pass Through Trust, will
enter into one or more participation agreements (each, a "Participation
Agreement") pursuant to which it will, among other things, purchase one or more
Equipment Trust Certificates, such that the Equipment Trust Certificates that
constitute the property of such Pass Through Trust will have identical interest
rates, in each
4
<PAGE>
case equal to the rate applicable to the Pass Through Certificates issued by
such Pass Through Trust, and such that the latest maturity date for such
Equipment Trust Certificates will occur on or before the final distribution date
applicable to such Pass Through Certificates. For each Pass Through Trust, the
aggregate amount of the related Series of Pass Through Certificates will equal
the aggregate principal amount of the Equipment Trust Certificates constituting
the Trust Property of such Pass Through Trust. The Pass Through Trustee will
distribute the amount of payments of principal, premium, if any, and interest
received by it as holder of the Equipment Trust Certificates to the
Certificateholders of the Pass Through Trust in which such Equipment Trust
Certificates are held. See "Description of the Pass Through Certificates" and
"Description of the Equipment Trust Certificates."
USE OF PROCEEDS
Each Series of Pass Through Certificates offered pursuant to this Prospectus
and a related Prospectus Supplement will be issued to facilitate the financing
of the debt portion of one or more leveraged lease transactions entered into or
to be entered into by the Corporation, as lessee, with respect to each of the
aircraft that are to be leased by the Corporation (the "Aircraft"), as specified
in the applicable Prospectus Supplement. Each Prospectus Supplement will specify
the type and model of each Aircraft relating to the Pass Through Certificates
offered thereby, the engines with which such Aircraft is or will be equipped,
and when such Aircraft was delivered new by the manufacturer. The proceeds from
the sale of such Pass Through Certificates will be used by the Pass Through
Trustee on behalf of the related Pass Through Trust to purchase Equipment Trust
Certificates. The Equipment Trust Certificates will be issued as nonrecourse
obligations by First Security Bank of Utah, National Association, not in its
individual capacity but solely as the owner trustee (the "Owner Trustee") of one
or more owner trusts (each, an "Owner Trust" created pursuant to a "Trust
Agreement") for the benefit of the owner participant named therein (each, an
"Owner Participant"), in connection with one or more leveraged lease
transactions, in each case to finance a portion of the acquisition cost of an
Aircraft (including any costs of modification required prior to commencement of
the lease of such Aircraft to the Corporation) paid or to be paid by the Owner
Trustee for such Aircraft which is to be leased by such Owner Trustee to the
Corporation pursuant to a separate lease agreement (each, a "Lease"), as
specified in the applicable Prospectus Supplement.
If, for any Aircraft, under the circumstances discussed below in
"Description of the Equipment Trust Certificates -- Delayed Lease Commencement"
the proceeds from the sale of the related Equipment Trust Certificates to the
applicable Pass Through Trusts are not applied by the Owner Trustee to pay the
acquisition cost (including any costs of modification required prior to
commencement of the related Lease) for such Aircraft on the date of the purchase
of such Equipment Trust Certificates by such Pass Through Trusts, such proceeds,
after deducting certain expenses of the Pass Through Certificate offering, will
be deposited by the Owner Trustee into a Collateral Account (as defined below).
Such Collateral Account, together with the other security pledged under the
related Indenture (see "Description of the Equipment Trust Certificates --
Security" below), will secure such Equipment Trust Certificates during the
related Pre-Funding Period (as defined below) and will be available to make
scheduled payments of principal, if any, and interest accrued on such Equipment
Trust Certificates during the Pre-Funding Period. If the Lease related to such
Aircraft does not commence on the cut-off date specified in the applicable
Prospectus Supplement or an event of loss occurs with respect to such Aircraft
during the Pre-Funding Period, funds in such Collateral Account, together with
such other security will be available to prepay such Equipment Trust
Certificates as described in such Prospectus Supplement. See "Description of the
Equipment Trust Certificates -- Delayed Lease Commencement" and "-- Mandatory
Prepayment During the Pre-Funding Period."
The Equipment Trust Certificates to be sold to any Pass Through Trust will
be issued by the Owner Trustee and authenticated by NationsBank of Georgia,
National Association ("NationsBank of Georgia"), as indenture trustee (the
"Indenture Trustee") under a separate trust indenture and security agreement
(each, an "Indenture") between the Owner Trustee and the Indenture Trustee. Each
Owner Participant will have provided or will be obligated to provide, from
sources other than the related
5
<PAGE>
Equipment Trust Certificates, the portion of the acquisition cost (including any
costs of modification required prior to commencement of the lease to the
Corporation) for the related Aircraft specified in the applicable Prospectus
Supplement. No Owner Participant, however, will be personally liable for any
amount payable under the related Indenture or the Equipment Trust Certificates
issued thereunder.
DIAGRAM OF PAYMENTS
The following diagram illustrates certain aspects of the payment flows in
the Pass Through Trust structure for a possible transaction among the
Corporation, the Owner Trustee, the related Owner Participant, the Indenture
Trustee, the Pass Through Trustee and the Certificateholders, assuming that each
Aircraft is leased by the Corporation upon issuance of the Pass Through
Certificates. One or more Equipment Trust Certificates will be issued for each
Aircraft included in a particular Pass Through Certificate offering. Each of
such Equipment Trust Certificates may have a different interest rate and final
maturity date and will be held in a separate Pass Through Trust. Each Pass
Through Trust may hold Equipment Trust Certificates relating to more than one
Aircraft. The number of Aircraft included in each offering and the interest
rates and final maturity dates of the Equipment Trust Certificates held by each
Pass Through Trust will be described in the applicable Prospectus Supplement.
The Corporation is to lease each Aircraft from the Owner Trustee under a
separate Lease and will make scheduled rental payments for each Aircraft under
the related Lease. As a result of the assignment under the related Indenture of
certain rights of the Owner Trustee under such Lease, the Corporation will make
these payments directly to the Indenture Trustee. From these rental payments the
Indenture Trustee will pay to the Pass Through Trustee for each Pass Through
Trust the interest or interest and principal due from the Owner Trustee on the
Equipment Trust Certificates issued under the related Indenture and held in such
Pass Through Trust. After such payments have been made the Indenture Trustee
will pay the remaining balance, if any, to the Owner Trustee for the benefit of
the related Owner Participant. The Pass Through Trustee for each Pass Through
Trust will distribute to the related Certificateholders payments received on the
Equipment Trust Certificates held in such Pass Through Trust. See "Description
of the Pass Through Certificates -- Payments and Distributions" and "Description
of the Equipment Trust Certificates -- Delayed Lease Commencement" for a
discussion of payments during any Pre-Funding Period.
[GRAPHIC--See Appendix A]
- ------------------------
* Each Aircraft will be subject to a separate Lease and a separate Indenture.
6
<PAGE>
DESCRIPTION OF THE PASS THROUGH CERTIFICATES
In connection with each offering of Pass Through Certificates, one or more
separate Pass Through Trusts will be formed, and one or more corresponding
Series of Pass Through Certificates will be issued, pursuant to the Pass Through
Agreement and one or more separate Series Supplements to be entered into between
the Corporation and the Pass Through Trustee. The following summary relates to
the Pass Through Agreement and each of the Series Supplements, the Pass Through
Trusts to be formed thereby and the Pass Through Certificates to be issued by
each Pass Through Trust, except as otherwise described in the applicable
Prospectus Supplement.
The discussion that follows is a summary and does not purport to be
complete. The summary includes descriptions of the material terms of the Pass
Through Agreement which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The Series Supplement relating to
each Series of Pass Through Certificates and the forms of the related
Indentures, Participation Agreements, Leases and Trust Agreements will be filed
as exhibits to a post-effective amendment to this Registration Statement, a
Current Report on Form 8-K, a Quarterly Report on Form 10-Q or an Annual Report
on Form 10-K, as applicable, to be filed with the Commission in connection with
the issuance of each such Series of Pass Through Certificates. This summary
makes use of terms defined in and is qualified in its entirety by reference to
the Pass Through Agreement. Each Prospectus Supplement will include a glossary
of certain defined terms used in connection with the Pass Through Certificates
offered thereby and the related Equipment Trust Certificates.
GENERAL
Unless otherwise provided in the applicable Series Supplement, the Pass
Through Certificates will be issued in fully registered, certificated form only.
Each Pass Through Certificate will represent a fractional undivided interest in
the separate Pass Through Trust formed by the Pass Through Agreement and the
related Series Supplement pursuant to which such Pass Through Certificate is
issued. The property of each Pass Through Trust will include the Equipment Trust
Certificates held in such Pass Through Trust, all monies at any time paid
thereon, all monies due and to become due thereunder and funds from time to time
deposited with the Pass Through Trustee in accounts relating to such Pass
Through Trust. Each Pass Through Certificate will represent a pro rata share of
the outstanding principal amount of the Equipment Trust Certificates and other
property held in the related Pass Through Trust and will be issued, unless
otherwise specified in the applicable Prospectus Supplement, in minimum
denominations of $1,000 or any integral multiple of $1,000. (Pass Through
Agreement, Article II)
Interest will be passed through to Certificateholders of each Pass Through
Trust at the rate per annum payable on the Equipment Trust Certificates held in
such Pass Through Trust, as set forth for such Pass Through Trust on the cover
page of the applicable Prospectus Supplement.
The Pass Through Certificates represent interests in the related Pass
Through Trust only and all payments and distributions shall be made only from
the Trust Property of such Pass Through Trust. The Pass Through Certificates do
not represent an interest in or obligation of the Corporation, the Pass Through
Trustee, any related Owner Participant, the Owner Trustee in its individual
capacity or any affiliate of any of the foregoing. Each Certificateholder by its
acceptance of a Pass Through Certificate agrees to look solely to the income and
proceeds from the property held in the related Pass Through Trust as provided in
the Pass Through Agreement and the applicable Series Supplement. (Pass Through
Agreement, Section 3.06)
The Pass Through Agreement does not and, except as otherwise described in
the applicable Prospectus Supplement, the Indentures will not, contain any debt
covenants or provisions that would afford Certificateholders protection in the
event of a highly leveraged transaction involving the Corporation.
PAYMENTS AND DISTRIBUTIONS
Upon commencement of the Lease for any Aircraft, the Corporation will make
scheduled rental payments for such Aircraft under the related Lease. After any
Pre-Funding Period for an Aircraft, these
7
<PAGE>
scheduled rental payments will be assigned under the applicable Indenture by the
Owner Trustee to the Indenture Trustee to provide the funds necessary to make
the corresponding payments of principal and interest due from the Owner Trustee
on the Equipment Trust Certificates issued under such Indenture. Until the
Corporation has entered into a Lease in connection with an Aircraft, the
Corporation will not be obligated to make any scheduled rental payments and
during the Pre-Funding Period, if any, for such Aircraft, even if such Lease has
commenced, the related Equipment Trust Certificates will not be secured by such
Aircraft or the related Lease, including any rental payments under such Lease.
During the Pre-Funding Period, if any, for such Aircraft, however, the related
Collateral Account, together with the related Additional Collateral (as defined
below), will be available to provide funds necessary to make the corresponding
scheduled payments of principal, if any, and interest accrued on the related
Equipment Trust Certificates during such Pre-Funding Period, and to pay the
portion, if any, of principal and interest due on the first payment date after
the Pre-Funding Period to the extent exceeding the amount of rent payable by the
Corporation on such payment date. See "Description of the Equipment Trust
Certificates -- Delayed Lease Commencement."
Except during any Pre-Funding Period or under certain circumstances
thereafter, after the Indenture Trustee has made principal and interest payments
to the Pass Through Trustee for each of the Pass Through Trusts on the related
Equipment Trust Certificates held in such Pass Through Trust, the Indenture
Trustee will pay the remaining balance, if any, of rental payments received from
the Corporation to the Owner Trustee for the benefit of the related Owner
Participant. The Pass Through Trustee for each such Pass Through Trust will
distribute to the Certificateholders of such Pass Through Trust payments
received on the Equipment Trust Certificates held in such Pass Through Trust as
described below. During the Pre-Funding Period, if any, for an Aircraft, the
Indenture Trustee will not make any payments to the Owner Trustee for the
benefit of the related Owner Participant.
Payments of principal of, and interest on the unpaid amount of, the
Equipment Trust Certificates held in each Pass Through Trust will be scheduled
to be received by the Pass Through Trustee on the dates specified in the
applicable Prospectus Supplement (such scheduled payments of principal of, and
interest on, the Equipment Trust Certificates are referred to herein as
"Scheduled Payments," and the dates specified for distributions of Scheduled
Payments to the Pass Through Trustee in the applicable Prospectus Supplement are
referred to herein as "Regular Distribution Dates"). For each Pass Through
Trust, the Pass Through Trustee will distribute on each Regular Distribution
Date to the related Certificateholders any Scheduled Payment received by the
Pass Through Trustee on such Regular Distribution Date. If a Scheduled Payment
is not received by the Pass Through Trustee on or before a Regular Distribution
Date but is received within five Business Days thereafter, it will be
distributed on the date received to the Certificateholders. Each such
distribution of a Scheduled Payment will be made by the Pass Through Trustee to
the Certificateholders of record of such Pass Through Trust on the fifteenth day
prior to such Regular Distribution Date, subject to certain exceptions. Each
such Certificateholder will be entitled to receive a pro rata share of any such
distribution. (Pass Through Agreement, Sections 5.01 and 5.02) If a Scheduled
Payment is received more than five Business Days after the applicable Regular
Distribution Date, it will be treated as a Special Payment and will be
distributed as described below.
After any prepayment of principal, any redemption or any default in respect
of some or all of the Equipment Trust Certificates held in any Pass Through
Trust, any Certificateholder of such Pass Through Trust should refer to the Pool
Balance and the Pool Factor (as such terms are defined below) for such Pass
Through Trust reported periodically by the Pass Through Trustee, in order to
calculate such Certificateholder's pro rata share of such Pass Through Trust.
See "Pool Factors" and "Statements to Certificateholders" below.
For any Pass Through Trust, any payments of principal, premium, if any, or
interest, other than Scheduled Payments, received by the Pass Through Trustee on
any of the Equipment Trust Certificates held in such Pass Through Trust,
including payments received (i) for the prepayment of such Equipment Trust
Certificates in connection with certain events specified in the applicable
Prospectus Supplement (including prepayments during any Pre-Funding Period),
(ii) upon the prepayment by the related Owner Trustee of such Equipment Trust
Certificates following a default in respect of such Equipment Trust
8
<PAGE>
Certificates, and (iii) on account of the sale of such Equipment Trust
Certificates by the Pass Through Trustee (such payments are referred to herein
as "Special Payments"), will be distributed on the dates determined as set forth
in the applicable Prospectus Supplement (each, a "Special Distribution Date"
and, together with the Regular Distribution Dates, the "Distribution Dates").
See "Description of the Equipment Trust Certificates -- Mandatory Prepayment
During the Pre-Funding Period" for a discussion of the funding of such
prepayments during the Pre-Funding Period. Prior to any Special Payment for any
Pass Through Trust, the Pass Through Trustee will notify the Certificateholders
of record of such Pass Through Trust of such Special Payment and the anticipated
Special Distribution Date therefor in accordance with the Pass Through
Agreement. Each distribution of a Special Payment, other than the final
distribution, for any Pass Through Trust will be made by the Pass Through
Trustee to the Certificateholders of record of such Pass Through Trust on the
fifteenth day prior to such Special Distribution Date, unless otherwise
specified in the applicable Prospectus Supplement. Each such Certificateholder
will be entitled to receive a pro rata share of any such distribution. (Pass
Through Agreement, Section 5.02) See "Description of the Equipment Trust
Certificates -- Prepayment" and "Description of the Pass Through Certificates --
Events of Default and Certain Rights Upon an Event of Default."
The Pass Through Agreement requires that the Pass Through Trustee establish
and maintain, for each Pass Through Trust and for the benefit of the related
Certificateholders, one or more non-interest bearing accounts (the "Certificate
Account") for the deposit of Scheduled Payments on the Equipment Trust
Certificates held in such Pass Through Trust and one or more accounts which
will, except in connection with Permitted Investments as discussed below, be
non-interest bearing (the "Special Payments Account") for the deposit of Special
Payments on such Equipment Trust Certificates. The Pass Through Trustee is
required to deposit any Scheduled Payments relating to a Pass Through Trust
received by it in the related Certificate Account and to deposit any Special
Payments so received by it in the related Special Payments Account pending
distribution thereof. (Pass Through Agreement, Section 5.01) Special Payments
that are not promptly distributed by the Pass Through Trustee will, to the
extent practicable, be invested by the Pass Through Trustee in Permitted
Investments pending the distribution of such funds on a Special Distribution
Date, and the income and earnings on such investments will be distributed with
such Special Payment. "Permitted Investments" are non-callable direct
obligations of the United States of America maturing on or prior to the day
required for the distribution of any such funds on a Special Distribution Date.
(Pass Through Agreement, Article I and Section 5.04)
Distributions by the Pass Through Trust from the Certificate Account or the
Special Payments Account of any Pass Through Trust on any Distribution Date will
be paid to each Certificateholder of record of such Pass Through Trust on the
applicable record date at its address appearing on the register maintained for
such Pass Through Trust. (Pass Through Agreement, Section 5.02) The final
distribution for each Pass Through Trust, however, will be made only upon
presentation and surrender of the Pass Through Certificates for such Pass
Through Trust at the office or agency of the Pass Through Trustee specified in
the notice given by the Pass Through Trustee of such final distribution. The
Pass Through Trustee will mail such notice of the final distribution to the
Certificateholders of such Pass Through Trust, specifying the date set for such
final distribution and the amount of such distribution. (Pass Through Agreement,
Section 12.01) See "Termination of Pass Through Trusts" below.
If any Distribution Date is not a Business Day, distributions scheduled to
be made on such Distribution Date may be made on the next succeeding Business
Day without additional interest. (Pass Through Agreement, Section 13.15)
POOL FACTORS
Except as provided below, the Pool Factor (as defined below) for any Pass
Through Trust will decline in proportion to the scheduled repayments of
principal on the Equipment Trust Certificates held in such Pass Through Trust as
described in the applicable Prospectus Supplement. Where any Equipment Trust
Certificate held in a Pass Through Trust has been prepaid, a scheduled repayment
of principal thereon has not been made or certain actions have been taken
following a default thereon, as discussed in the applicable Prospectus
Supplement or below in "Events of Default and Certain Rights Upon an Event of
9
<PAGE>
Default," the Pool Factor and the Pool Balance (as defined below) of such Pass
Through Trust will be recomputed after giving effect thereto and notice thereof
will be mailed to the Certificateholders of such Pass Through Trust. Each Pass
Through Trust will have a separate Pool Factor.
Unless otherwise described in the applicable Prospectus Supplement, the
"Pool Balance" for each Pass Through Trust indicates, as of any date, the
aggregate unpaid principal amount of the Equipment Trust Certificates held in
such Pass Through Trust on such date plus any amounts in respect of principal on
such Equipment Trust Certificates held by the Pass Through Trustee and not yet
distributed. The Pool Balance for each Pass Through Trust as of any Distribution
Date will be computed after giving effect to the payment of principal, if any,
on the Equipment Trust Certificates held in such Pass Through Trust and the
distribution thereof being made on that date. (Pass Through Agreement, Article
I)
Unless otherwise described in the applicable Prospectus Supplement, the
"Pool Factor" for each Pass Through Trust as of any Distribution Date is the
quotient (rounded to the seventh decimal place) computed by dividing (i) the
Pool Balance by (ii) the aggregate original principal amount of the Equipment
Trust Certificates held in such Pass Through Trust. The Pool Factor for each
Pass Through Trust as of any Distribution Date shall be computed after giving
effect to the payment of principal, if any, on the Equipment Trust Certificates
held in such Pass Through Trust and the distribution thereof being made on that
date. The Pool Factor for each Pass Through Trust will initially be 1.0000000;
thereafter, the Pool Factor for each Pass Through Trust will decline as
described above to reflect reductions in the Pool Balance of such Pass Through
Trust. For any Pass Through Trust, the amount of any Certificateholder's pro
rata share of the Pool Balance of such Pass Through Trust can be determined by
multiplying the original denomination of such Certificateholder's Pass Through
Certificate by the Pool Factor for such Pass Through Trust as of the applicable
Distribution Date. (Pass Through Agreement, Article I)
STATEMENTS TO CERTIFICATEHOLDERS
On each Distribution Date, the Pass Through Trustee will include with each
distribution of a Scheduled Payment or Special Payment to Certificateholders of
record of the related Pass Through Trust a statement, giving effect to such
distribution being made on such Distribution Date, setting forth the following
information (per $1,000 in aggregate amount of Pass Through Certificates for
such Pass Through Trust, as to (i) and (ii) below):
(i) the amount of such distribution allocable to principal and
allocable to premium, if any;
(ii) the amount of such distribution allocable to interest; and
(iii) the Pool Balance and the Pool Factor for such Pass Through Trust.
In addition, after the end of each calendar year, the Pass Through Trustee
will prepare for each Certificateholder of each Pass Through Trust at any time
during the preceding calendar year a report containing the sum of the amounts
determined pursuant to clauses (i) and (ii) above with respect to each such Pass
Through Trust for such calendar year or, in the event such person was a
Certificateholder during a portion of such calendar year, for the applicable
portion of such calendar year. (Pass Through Agreement, Section 5.03)
VOTING OF EQUIPMENT TRUST CERTIFICATES
The Pass Through Trustee, as holder of the Equipment Trust Certificates held
in each Pass Through Trust, has the right to vote and give consents and waivers
in respect of such Equipment Trust Certificates under the related Indentures.
The Pass Through Agreement sets forth the circumstances in which the Pass
Through Trust shall direct any action or cast any vote as the holder of the
Equipment Trust Certificates held in the applicable Pass Through Trust at its
own discretion and the circumstances in which the Pass Through Trustee shall
seek instructions from the Certificateholders of such Pass Through Trust. Prior
to an Event of Default (as defined below) with respect to any Pass Through
Trust, the principal amount of the Equipment Trust Certificates held in such
Pass Through Trust directing any action or being voted for or against any
proposal will be in proportion to the principal amount of Pass Through
Certificates held by the Certificateholders of such Pass Through Trust taking
the corresponding position. (Pass Through Agreement, Section 7.01)
10
<PAGE>
EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN EVENT OF DEFAULT
The Pass Through Agreement defines an event of default for any Pass Through
Trust (an "Event of Default") as the occurrence and continuance of an event of
default under one or more of the related Indentures (an "Indenture Event of
Default"). The Indenture Events of Default under the Indentures will be
described in the applicable Prospectus Supplement and will include events of
default under the related Leases ("Lease Events of Default"). Since the
Equipment Trust Certificates outstanding under an Indenture may be held in more
than one Pass Through Trust, a continuing Indenture Event of Default under such
Indenture would result in an Event of Default with respect to each such Pass
Through Trust. Unless otherwise provided in a Prospectus Supplement, all of the
Equipment Trust Certificates issued under the same Indenture will relate to a
specific Aircraft and there will be no cross-collateralization or cross-default
provisions in the Indentures. Consequently, events resulting in an Indenture
Event of Default under any particular Indenture will not necessarily result in
an Indenture Event of Default occurring under any other Indenture. If an
Indenture Event of Default occurs in fewer than all of the Indentures related to
a Pass Through Trust, the Equipment Trust Certificates issued pursuant to the
related Indentures with respect to which an Indenture Event of Default has not
occurred will continue to be held in such Pass Through Trust and payments of
principal of, premium, if any, and interest on such Equipment Trust Certificates
will continue to be distributed to the Certificateholders of such Pass Through
Trust as originally scheduled.
The Equipment Trust Certificates in any Pass Through Trust, and therefore
the related Pass Through Certificates, will not have the benefit of any debt
covenants or provisions in the Indentures relating to such Equipment Trust
Certificates or Pass Through Certificates that would afford the holders thereof
protection in the event of a highly leveraged transaction involving the
Corporation.
Under each Indenture the Owner Trustee will have the right under certain
circumstances to cure an Indenture Event of Default that results from the
occurrence of a Lease Event of Default under the related Lease. If the Owner
Trustee chooses to exercise such cure right, the Indenture Event of Default and
consequently the Event of Default under any Pass Through Trust holding the
related Equipment Trust Certificates will be deemed to be cured. See the
applicable Prospectus Supplement for a more detailed discussion of certain
provisions described in this paragraph.
The Pass Through Agreement provides that if an Indenture Event of Default
under an Indenture relating to Equipment Trust Certificates held in a Pass
Through Trust shall have occurred and be continuing, the Pass Through Trustee
(i) may vote all of the Equipment Trust Certificates issued under such Indenture
that are held in such Pass Through Trust, and (ii) upon the direction of the
Certificateholders evidencing fractional undivided interests aggregating not
less than a majority in interest of such Pass Through Trust shall vote a
corresponding majority of such Equipment Trust Certificates, in each case in
favor of directing the related Indenture Trustee to declare the unpaid principal
amount of all Equipment Trust Certificates issued under such Indenture and any
accrued and unpaid interest thereon to be due and payable. The Pass Through
Agreement also provides that if an Indenture Event of Default under an Indenture
relating to Equipment Trust Certificates held in a Pass Through Trust shall have
occurred and be continuing, the Pass Through Trustee may, and upon the direction
of the Certificateholders evidencing fractional undivided interests aggregating
not less than a majority in interest of such Pass Through Trust shall, vote all
of the Equipment Trust Certificates issued under such Indenture that are held in
such Pass Through Trust in favor of directing the related Indenture Trustee as
to the time, method and place of conducting any proceeding for any remedy
available to such Indenture Trustee or of exercising any trust or power
conferred on such Indenture Trustee under such Indenture. (Pass Through
Agreement, Sections 7.01 and 7.09)
The ability of the Certificateholders of any one Pass Through Trust to cause
the Indenture Trustee for any Equipment Trust Certificates held in such Pass
Through Trust to accelerate the payment on such Equipment Trust Certificates
under the related Indenture or to direct the exercise of remedies by such
Indenture Trustee under the related Indenture will depend, in part, upon the
proportion between the aggregate principal amount of the Equipment Trust
Certificates outstanding under such Indenture and
11
<PAGE>
held in such Pass Through Trust and the aggregate principal amount of all
Equipment Trust Certificates outstanding under such Indenture. Each Pass Through
Trust will hold Equipment Trust Certificates with different terms from those of
the Equipment Trust Certificates held in any other Pass Through Trust and,
therefore, the Certificateholders of a Pass Through Trust may have divergent or
conflicting interests from those of the Certificateholders of the other Pass
Through Trusts holding Equipment Trust Certificates relating to the same
Indenture. In addition, so long as the same institution or an affiliate of such
institution acts as Pass Through Trustee of each Pass Through Trust, in the
absence of instructions from the Certificateholders of any such Pass Through
Trust, the Pass Through Trustee for such Pass Through Trust could for the same
reason be faced with a potential conflict of interest upon an Indenture Event of
Default. In such event, the initial Pass Through Trustee has indicated that it
would resign as Pass Through Trustee of one or all of such Pass Through Trusts,
and a successor pass through trustee would be appointed in accordance with the
terms of the Pass Through Agreement and the applicable Series Supplement. See
"The Pass Through Trustee; the Indenture Trustee" below for a discussion of
resignation procedures.
As an additional remedy, if an Indenture Event of Default under an Indenture
has occurred and is continuing, the Pass Through Agreement provides that the
Pass Through Trustee of a Pass Through Trust holding Equipment Trust
Certificates issued under such Indenture may, and upon the direction of the
Certificateholders evidencing fractional undivided interests aggregating not
less than a majority in interest of such Pass Through Trust will, sell all or
part of such Equipment Trust Certificates for cash to any person at a price or
prices that it may reasonably deem advisable. Any proceeds received by the Pass
Through Trust upon any such sale will be deposited in the Special Payments
Account for such Pass Through Trust and will be distributed to the
Certificateholders of such Pass Through Trust on a Special Distribution Date.
(Pass Through Agreement, Sections 7.01 and 7.02) The market for Equipment Trust
Certificates in default may be very limited and there can be no assurance that
they could be sold for a reasonable price. Furthermore, so long as the same
institution or any affiliate of such institution acts as Pass Through Trustee of
each Pass Through Trust, it may be faced with a conflict in deciding from which
Pass Through Trust to sell Equipment Trust Certificates to available buyers. If
the Pass Through Trustee sells any such Equipment Trust Certificates with
respect to which an Indenture Event of Default exists for less than the
outstanding principal amount thereof, the Certificateholders of such Pass
Through Trust will receive a smaller amount of principal distributions than
anticipated and will not have any claim for the shortfall against the Pass
Through Trustee, the Corporation, the Owner Trustee or any related Owner
Participant. Furthermore, neither the Pass Through Trustee nor the
Certificateholders of such Pass Through Trust could take any action with respect
to any remaining Equipment Trust Certificates held in such Pass Through Trust so
long as no Indenture Event of Default existed with respect thereto.
For any Pass Through Trust, any amount distributed to the Pass Through
Trustee by the Indenture Trustee under any Indenture on account of the Equipment
Trust Certificates held in such Pass Through Trust following an Indenture Event
of Default under such Indenture will be deposited in the Special Payments
Account for such Pass Through Trust and will be distributed to the
Certificateholders of such Pass Through Trust on a Special Distribution Date. In
addition, if, following an Indenture Event of Default under any Indenture, the
related Owner Trustee exercises its option, if any, to prepay or purchase the
outstanding Equipment Trust Certificates issued under such Indenture as
described in the related Prospectus Supplement, the price paid by such Owner
Trustee to the Pass Through Trustee for such Equipment Trust Certificates held
in such Pass Through Trust will be deposited in the related Special Payments
Account and will be distributed to the Certificateholders of such Pass Through
Trust on a Special Distribution Date. (Pass Through Agreement, Sections 5.01 and
5.02)
Any funds representing payments received with respect to any Equipment Trust
Certificates held in a Pass Through Trust in default, or the proceeds from the
sale by the Pass Through Trustee of any such Equipment Trust Certificates, held
by the Pass Through Trustee in the Special Payments Account for such Pass
Through Trust will, to the extent practicable, be invested by the Pass Through
Trustee in Permitted Investments pending the distribution of such funds on a
Special Distribution Date. (Pass Through Agreement, Article I and Section 5.04)
12
<PAGE>
The Pass Through Agreement provides that the Pass Through Trustee will,
within 90 days after the occurrence of a default (as defined below) under any
Pass Through Trust, notify the Certificateholders of such Pass Through Trust by
mail of all uncured or unwaived defaults with respect to such Pass Through Trust
known to it. Under no circumstances, however, may the Pass Through Trustee give
such notice until the expiration of a period of 60 days from the occurrence of
such default. The Pass Through Trustee will be protected in withholding such
notice if it in good faith determines that the withholding of such notice is in
the interests of such Certificateholders, except in the case of default in the
payment of principal of, premium, if any, or interest on any of the Equipment
Trust Certificates held in such Pass Through Trust. The term "default," for the
purpose of the provision described in this paragraph only, means the occurrence
of any Event of Default with respect to a Pass Through Trust as described above,
except that in determining whether any such Event of Default has occurred any
grace period or notice in connection therewith shall be disregarded. (Pass
Through Agreement, Section 7.11)
The Pass Through Agreement provides that for each Pass Through Trust,
subject to the duty of the Pass Through Trustee during a default to act with the
required standard of care, the Pass Through Trustee is entitled to be
indemnified by the Certificateholders of such Pass Through Trust before
proceeding to exercise any right or power under such Pass Through Trust at the
request of such Certificateholders. (Pass Through Agreement, Section 8.03)
In certain cases, the Certificateholders of a Pass Through Trust evidencing
fractional undivided interests aggregating not less than a majority in interest
of such Pass Through Trust may on behalf of all the Certificateholders of such
Pass Through Trust waive any past default or Event of Default with respect to
such Pass Through Trust and thereby annul any direction given by such
Certificateholders to the Pass Through Trustee or the related Indenture Trustee
with respect thereto, except (i) a default in payment of the principal of,
premium, if any, or interest on any of the Equipment Trust Certificates held in
such Pass Through Trust and (ii) a default in respect of any covenant or
provision of the Pass Through Agreement or the related Series Supplement that
cannot be modified or amended without the consent of each Certificateholder of
such Pass Through Trust affected thereby. Any such waiver, however, will be
effective to waive any such past default or Event of Default if, but only if,
the correlative Indenture Event of Default has been waived under the related
Indenture by the requisite holders of the Equipment Trust Certificates
outstanding thereunder. (Pass Through Agreement, Section 7.10)
Each Indenture will provide that, with certain exceptions, the holders of a
majority in aggregate unpaid principal amount of the Equipment Trust
Certificates issued thereunder may on behalf of all such holders waive any past
default or Indenture Event of Default thereunder. If, as described above, the
Certificateholders of a Pass Through Trust elect to waive a past default or
Event of Default with respect to such Pass Through Trust, the principal amount
of the Equipment Trust Certificates issued under the related Indenture and held
in such Pass Through Trust will be counted in favor of the waiver of the
corresponding past default or Indenture Event of Default under the related
Indenture when the Indenture Trustee determines whether such past default or
Indenture Event of Default has been waived by the requisite majority in
aggregate unpaid principal amount of Equipment Trust Certificates under such
Indenture. If, for example, the Equipment Trust Certificates issued under an
Indenture held in a Pass Through Trust constitute only 45% in aggregate unpaid
principal amount of the Equipment Trust Certificates issued and unpaid under
such Indenture, even if all the Certificateholders of such Pass Through Trust
were to instruct the Pass Through Trustee not to waive a past default or Event
of Default with respect to such Pass Through Trust and, consequently, to vote
such Equipment Trust Certificates against the waiver of the corresponding past
default or Indenture Event of Default under such Indenture, the Equipment Trust
Certificates so voted by the Pass Through Trustee on behalf of such Pass Through
Trust would not alone be sufficient under the terms of such Indenture to compel
the Indenture Trustee to refrain from giving such waiver. Moreover, there would
be no assurance that the Certificateholders of any other Pass Through Trust
holding Equipment Trust Certificates issued under such Indenture would at such
time vote such Equipment Trust Certificates against such waiver. Therefore, if
the Certificateholders of a Pass Through Trust or Pass Through Trusts waive a
past default or Event of Default such that the principal amount of the Equipment
Trust Certificates held either individually in such Pass Through Trust
13
<PAGE>
or in the aggregate in such Pass Through Trusts constitutes the required
majority in aggregate unpaid principal amount under the applicable Indenture,
such past default or Indenture Event of Default under such Indenture will be
waived whether or not the Certificateholders of any other Pass Through Trust
holding Equipment Trust Certificates issued under such Indenture waive such past
default or Event of Default with respect to such other Pass Through Trust.
MODIFICATIONS OF THE AGREEMENTS
The Pass Through Agreement contains provisions permitting the Corporation
and the Pass Through Trustee to enter into an agreement supplemental to any Pass
Through Trust, without the consent of the Certificateholders of such Pass
Through Trust, to (i) provide for the formation of any Pass Through Trust and
the issuance of the related Pass Through Certificates, (ii) evidence the
succession of another corporation to the Corporation and the assumption by such
corporation of the Corporation's obligations under the Pass Through Agreement
and the applicable Series Supplement, (iii) add to the covenants of the
Corporation for the protection of the related Certificateholders, (iv) surrender
any right or power conferred upon the Corporation in the Pass Through Agreement
or any Series Supplement, (v) cure any ambiguity or correct or supplement any
defective or inconsistent provision of such Pass Through Agreement or the
applicable Series Supplement, or make any other provisions in regard to matters
or questions arising thereunder that will not adversely affect the interests of
the related Certificateholders, (vi) correct or amplify the description of
property that constitutes Trust Property or the conveyance of such property to
the Pass Through Trustee, (vii) evidence and provide for a successor Pass
Through Trustee for some or all of the Pass Through Trusts, (viii) modify,
eliminate or add to the provisions of the Pass Through Agreement or any Series
Supplement to the extent necessary to continue to qualify such Pass Through
Agreement or such Series Supplement under the Trust Indenture Act or any similar
federal statute enacted thereafter, (ix) make any other amendments or
modifications which shall only apply to any Pass Through Trust established
thereafter, or (x) add, eliminate or change any provision under the Pass Through
Agreement that will not adversely affect the interests of the
Certificateholders, provided that in each case such modification does not cause
the Pass Through Trust to become taxable as an "association," within the meaning
of Treasury Regulation Section 301.7701-4. (Pass Through Agreement, Section
11.01)
The Pass Through Agreement also provides that the Corporation and the Pass
Through Trustee, with the consent of the Certificateholders evidencing
fractional undivided interests aggregating not less than a majority in interest
of the affected Pass Through Trust, may execute supplemental agreements adding
any provisions to or changing or eliminating any of the provisions of the Pass
Through Agreement, to the extent relating to such Pass Through Trust, and the
applicable Series Supplement, or modifying the rights of such
Certificateholders. No such supplemental agreement may, however, without the
consent of each Certificateholder so affected, (a) reduce in any manner the
amount of, or delay the timing of, any receipt by the Pass Through Trustee of
payments on the Equipment Trust Certificates held in such Pass Through Trust, or
distributions in respect of any Pass Through Certificate of such Pass Through
Trust, or make distributions payable in coin or currency other than that
provided for in such Pass Through Certificates, or impair the right of any such
Certificateholder to institute suit for the enforcement of any payment when due,
(b) permit the disposition of any Equipment Trust Certificate held in such Pass
Through Trust, except as provided in the Pass Through Agreement or the
applicable Series Supplement, or permit the creation of any Lien on the Trust
Property or deprive any holder of any such Equipment Trust Certificate of the
benefit of the Lien of the related Indenture, except as provided therein, (c)
reduce the percentage of the aggregate fractional undivided interests of the
Pass Through Trust that is required to approve any supplemental agreement or any
waiver provided for in the Pass Through Agreement or such Series Supplement or
(d) cause the Pass Through Trust to become taxable as an "association," within
the meaning of Treasury Regulation Section 301.7701-4. (Pass Through Agreement,
Section 11.02)
14
<PAGE>
MODIFICATION, CONSENTS AND WAIVERS UNDER THE INDENTURE AND RELATED AGREEMENTS
If the Pass Through Trustee, as the holder of any Equipment Trust
Certificates held in a Pass Through Trust, receives a request for its consent to
any amendment, modification or waiver under the Indenture, or other document
relating to such Equipment Trust Certificates (including any Lease), the Pass
Through Trustee will mail a notice of such proposed amendment, modification or
waiver to each Certificateholder of such Pass Through Trust as of the date of
such notice. The Pass Through Trustee will request instructions from such
Certificateholders as to whether or not to consent to such amendment,
modification or waiver. The Pass Through Trustee will vote or consent with
respect to such Equipment Trust Certificates in the same proportion as the Pass
Through Certificates of such Pass Through Trust are actually voted by such
Certificateholders by a certain date. If an Event of Default relating to such
Indenture has occurred and is continuing under such Pass Through Trust, the Pass
Through Trustee may, in the absence of instructions from Certificateholders
holding a majority in interest of such Pass Through Trust, in its own discretion
consent to such amendment, modification or waiver, and may so notify the related
Indenture Trustee. (Pass Through Agreement, Section 11.08)
TERMINATION OF PASS THROUGH TRUSTS
The obligations of the Corporation and the Pass Through Trustee with respect
to a Pass Through Trust will terminate upon the distribution to the
Certificateholders of such Pass Through Trust of all amounts required to be
distributed to them pursuant to the Pass Through Agreement and the applicable
Series Supplement and the disposition of all property held in such Pass Through
Trust. The Pass Through Trustee will notify each Certificateholder of record of
such Pass Through Trust by mail of, among other things, the termination of such
Pass Through Trust, the amount of the proposed final payment and the proposed
date for the distribution of such final payment for such Pass Through Trust. The
final distribution for each Certificateholder of such Pass Through Trust will be
made only upon surrender of such Certificateholder's Pass Through Certificates
at the office or agency of the Pass Through Trustee specified in such
termination notice. (Pass Through Agreement, Section 12.01)
THE PASS THROUGH TRUSTEE; THE INDENTURE TRUSTEE
NationsBank of South Carolina will be the Pass Through Trustee for each of
the Pass Through Trusts. The Pass Through Trustee and any of its affiliates may
hold Pass Through Certificates in their own names. (Pass Through Agreement,
Section 8.05)
Unless otherwise specified in the related Prospectus Supplement, NationsBank
of Georgia, an affiliate of NationsBank of South Carolina, will be the Indenture
Trustee under the Indentures under which the Equipment Trust Certificates have
been or will be issued. An affiliate of NationsBank of Georgia acts as trustee
under other indentures with respect to other indebtedness of the Corporation.
The Corporation from time to time borrows from, and maintains deposit accounts
with, NationsBank of Georgia and its affiliates.
The Pass Through Trustee may resign under any or all of the Pass Through
Trusts at any time. If the Pass Through Trustee ceases to be eligible to
continue as Pass Through Trustee with respect to a Pass Through Trust or becomes
incapable of acting as Pass Through Trustee or becomes insolvent, the
Corporation may remove such Pass Through Trustee, or any Certificateholder of
such Pass Through Trust for at least six months may, on behalf of itself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of such Pass Through Trustee and the appointment of a successor trustee.
In addition, the Pass Through Trustee of any Pass Through Trust may be removed
without cause by the Certificateholders holding more than 50% in aggregate
amount of the related Pass Through Certificates. In the case of the resignation
or removal of the Pass Through Trustee, the Certificateholders holding more than
50% in aggregate amount of the related Pass Through Certificates may appoint a
successor Pass Through Trustee. The resignation or removal of the Pass Through
Trustee for any Pass Through Trust and the appointment of the successor trustee
for such Pass Through Trust does not become effective until acceptance of the
appointment by the successor trustee. (Pass Through Agreement, Article X)
Pursuant to such resignation and successor trustee provisions, it is possible
that a different trustee could be appointed to act as the successor trustee with
respect to each Pass Through
15
<PAGE>
Trust. All references in this Prospectus to the Pass Through Trustee are to the
trustee acting in such capacity under each of the Pass Through Trusts and should
be read to take into account the possibility that each of the Pass Through
Trusts could have a different successor trustee in the event of such a
resignation or removal.
The Pass Through Agreement provides that the Corporation will pay the Pass
Through Trustee's fees and expenses and that the Pass Through Trustee will have
a priority claim on the related Trust Property to the extent such fees and
expenses are not paid. The Pass Through Agreement further provides that the Pass
Through Trustee in its individual capacity will be entitled to indemnification
by the Corporation for, and will be held harmless against, any loss, liability
or expenses (other than income or similar taxes) incurred by the Pass Through
Trustee in its individual capacity in connection with the administration of any
Pass Through Trust, except to the extent incurred through its own willful
misconduct, bad faith or negligence or by reason of a breach of any of its
representations or warranties set forth in the Pass Through Agreement or the
applicable Series Supplement or any related documents. In certain circumstances,
the Pass Through Trustee will be entitled to be reimbursed from the applicable
Pass Through Trust for any tax (other than income or similar taxes) incurred in
its trust capacity in connection with the administration of any Pass Through
Trust. (Pass Through Agreement, Articles VIII and IX)
DESCRIPTION OF THE EQUIPMENT TRUST CERTIFICATES
The discussion that follows is a summary that does not purport to be
complete and is qualified in its entirety by the detailed information appearing
in the applicable Prospectus Supplement. The following summary includes
descriptions of the material terms of the Equipment Trust Certificates and the
Indentures. Except as otherwise indicated below or as described in the
applicable Prospectus Supplement, the following summary will apply to the
Equipment Trust Certificates, the Indenture, the Lease, the Participation
Agreement and the Collateral Agreement, if any, related to each Aircraft.
Additional provisions with respect to the Equipment Trust Certificates, the
Indentures, the Leases, the Participation Agreements and the Collateral
Agreements, if any, relating to any particular offering of Pass Through
Certificates will be described in the applicable Prospectus Supplement. To the
extent that any provision in any Prospectus Supplement is inconsistent with any
provision of this summary, the provision of such Prospectus Supplement will
control.
GENERAL
The Equipment Trust Certificates will be issued as nonrecourse obligations
by the Owner Trustee, in each case acting for an Owner Trust for the benefit of
an Owner Participant, and will be authenticated under an Indenture by the
Indenture Trustee. All of the Equipment Trust Certificates issued under the same
Indenture will relate to and, after the related Pre-Funding Period, if any, as
discussed below under "Delayed Lease Commencement," will be secured by a
specific Aircraft and will not be secured by any other Aircraft. The Owner
Trustee is to lease the related Aircraft to the Corporation pursuant to a Lease
between the Owner Trustee and the Corporation. See "Delayed Lease Commencement"
below for a discussion of the circumstances under which the Lease for an
Aircraft may commence after the date of issuance of the related Equipment Trust
Certificates. The Aircraft to be subject to each Lease and the Equipment Trust
Certificates issued under the related Indenture will be specified in the
applicable Prospectus Supplement. Upon the commencement of the Lease for any
Aircraft, the Corporation will be obligated to make rental payments under the
related Lease that will be sufficient to pay the principal of and interest on
the related Equipment Trust Certificates when and as due and payable except
that, with respect to a Delayed Lease Aircraft (as defined below), on the first
scheduled payment date after the related Pre-Funding Period, the difference
between the rental payment due on such date by the Corporation and the scheduled
payment of principal, if any, and interest then due on such Equipment Trust
Certificates will be payable from the related Collateral Account and the related
Additional Collateral. See "Delayed Lease Commencement" below. The Equipment
Trust Certificates will not, however, be obligations of, or guaranteed by, the
Corporation. The Corporation's obligations to pay rent and to cause other
payments to be made under each Lease will be general obligations of the
Corporation.
16
<PAGE>
Until the Corporation has entered into a Lease in connection with an
Aircraft, the Corporation will not be obligated to make any scheduled rental
payments and during the Pre-Funding Period, if any, for such Aircraft, even if
such Lease has commenced, the related Equipment Trust Certificates will not be
secured by such Aircraft or the related Lease, including any rental payments
under such Lease. During the Pre-Funding Period, if any, for such Aircraft,
however, the related Collateral Account, together with the related Additional
Collateral, will be available to provide funds necessary to make the scheduled
payments of principal, if any, and interest on the related Equipment Trust
Certificates during such Pre-Funding Period, including the portion, if any, of
principal and interest due on the first payment date after the Pre-Funding
Period to the extent exceeding the amount of rent payable by the Corporation
pursuant to the related Lease. See "Delayed Lease Commencement" below.
PRINCIPAL AND INTEREST PAYMENTS
Interest received by the Pass Through Trustee on the Equipment Trust
Certificates constituting Trust Property of each Pass Through Trust will be
passed through to the Certificateholder of such Pass Through Trust on a pro rata
basis on the dates and at the rate per annum set forth in the applicable
Prospectus Supplement. Interest on the Equipment Trust Certificates will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
Each Pass Through Trust will hold Equipment Trust Certificates on which
principal is payable in scheduled amounts and on specified dates as set forth in
the applicable Prospectus Supplement. Principal received by the Pass Through
Trustee on such Equipment Trust Certificates will be passed through to the
Certificateholders of such Pass Through Trust on a pro rata basis as set forth
in the Prospectus Supplement.
PREPAYMENT
The applicable Prospectus Supplement will describe the circumstances,
whether voluntary or involuntary, under which the related Equipment Trust
Certificates may or must be prepaid prior to the stated maturity date thereof,
in whole or in part, the premium, if any, applicable upon certain prepayments
and other terms applying to the prepayment of such Equipment Trust Certificates.
See "Mandatory Prepayment During the Pre-Funding Period" below for a discussion
of certain events which would require prepayment of Equipment Trust Certificates
related to an Aircraft during the related Pre-Funding Period.
SECURITY
For any Aircraft, except during the related Pre-Funding Period, if any, the
Equipment Trust Certificates issued under the related Indenture will be secured
by (i) an assignment by the Owner Trustee to the Indenture Trustee of the Owner
Trustee's rights (except for certain limited rights described below) under the
applicable Lease, including the right to receive rent and other payments
thereunder, (ii) a security interest granted to the Indenture Trustee in the
related Aircraft, subject to the rights of the Corporation under such Lease and
to certain other liens and encumbrances, and (iii) unless otherwise specified in
the applicable Prospectus Supplement, an assignment to the Indenture Trustee of
the Owner Trustee's rights related to such Aircraft and the related engines
under the agreements for the purchase and modification thereof. See
"Registration of the Aircraft" below. The assignment by the Owner Trustee to the
Indenture Trustee of its rights under each Lease will exclude rights of the
Owner Trustee and the related Owner Participant relating to (i) indemnification
by the Corporation for certain matters, (ii) proceeds of public liability
insurance payable to the Owner Trustee and the Indenture Trustee in their
respective individual capacities and to the Owner Participant under insurance
maintained by the Corporation under such Lease and (iii) proceeds of any
insurance policies separately maintained by such Owner Trustee in its individual
capacity or by such Owner Participant. The right of the Indenture Trustee,
however, to exercise any of the rights of the Owner Trustee under the related
Lease, except the right to receive payments of rent due thereunder, will be
subject to certain limitations as described in the applicable Prospectus
Supplement.
There will be no cross-collateralization provisions in the Indentures and
consequently the Equipment Trust Certificates issued in respect of one of the
Aircraft will not be secured by any other Aircraft or
17
<PAGE>
the Leases relating thereto. There will be no cross-default provisions in the
Indentures and consequently events resulting in an Indenture Event of Default
under any particular Indenture may not result in an Indenture Event of Default
occurring under any other Indenture.
Section 1110 of the United States Bankruptcy Code (the "Bankruptcy Code")
provides that the right of lessors, conditional vendors and holders of purchase
money equipment security interests with respect to aircraft used by air carriers
operating under certificates issued under Section 401 or 418 of the Aviation Act
to take possession of such aircraft in compliance with the provisions of the
lease, conditional sale contract or purchase money equipment security agreement,
as the case may be, is not affected by (a) the automatic stay provision of the
Bankruptcy Code, which provision enjoins the taking of any action against a
debtor by a creditor, (b) the provision of the Bankruptcy Code allowing the
trustee in reorganization to use, sell or lease property of the debtor and (c)
any power of the bankruptcy court to enjoin a repossession. Section 1110
provides, however, that the right of a lessor, conditional vendor or holder of a
purchase money equipment security interest to take possession of an aircraft in
the event of a default may not be exercised for 60 days following the date of
commencement of the reorganization proceedings (unless specifically permitted by
the bankruptcy court) and may not be exercised at all if, within such 60-day
period, the trustee in reorganization agrees to perform the debtor's obligations
that become due on or after such date and cures all existing defaults (other
than defaults resulting solely from the financial condition, bankruptcy,
insolvency or reorganization of the debtor). The Prospectus Supplement for each
offering will discuss the availability of the benefits of Section 1110 of the
Bankruptcy Code with respect to the related Aircraft.
For any Aircraft, if the applicable Prospectus Supplement provides that a
Pre-Funding Period will apply to such Aircraft, then during such Pre-Funding
Period the related Equipment Trust Certificates will not be secured by such
Aircraft or a related Lease. During such Pre-Funding Period, however, such
Equipment Trust Certificates will be secured by (i) an assignment of certain
rights of the Owner Trustee with respect to the related Delayed Lease Aircraft
under the Agreement to Lease (as defined below), (ii) the related Collateral
Account and (iii) certain additional security including, unless otherwise
specified in the applicable Prospectus Supplement, a letter of credit issued by
a bank (within the meaning of Section 3(a)(2) of the Securities Act) whose
obligations at the time of the relevant Pass Through Certificate offering carry
a credit rating at least as high as the Corporation's ("Additional Collateral").
See "Delayed Lease Commencement" below.
REGISTRATION OF THE AIRCRAFT
After commencement of a Lease, the Corporation will be required, except
under certain circumstances, to register and keep the related Aircraft
registered under the Federal Aviation Act of 1958, as amended (the "Aviation
Act"), in the name of the Owner Trustee, and to record and maintain the
recordation of the Indenture and the Lease relating to each such Aircraft under
the Aviation Act. Such recordation of the Indenture and the Lease, if any,
relating to each Aircraft will give the Indenture Trustee a perfected security
interest in each such Aircraft whenever it is located in the United States or
any of its territories and possessions and, with certain limited exceptions, in
those jurisdictions that have ratified or adhered to the Convention on the
International Recognition of Rights in Aircraft (the "Convention"). The
Corporation will be able, in certain circumstances, to re-register any Aircraft
in certain countries other than the United States. Unless otherwise specified in
the applicable Prospectus Supplement, prior to any such change in the
jurisdiction of registry, the related Indenture Trustee and the related Owner
Participant must receive certain assurances, including that such other country
would provide substantially equivalent protection for the rights of owner
participants, lessors and lenders in similar transactions as is provided under
United States law, except that, for the purpose of such determination, rights
and remedies similar to those available under Section 1110 of the Bankruptcy
Code will not be required in the absence of restrictions of rights and remedies
of lessors and secured parties that are similar to those imposed by Sections 362
and 363 of the Bankruptcy Code. Generally, each Aircraft may also be operated by
the Corporation or under lease, sublease or interchange agreements in countries
that are not parties to the Convention. The extent to which the Indenture
Trustee's security interest would be recognized in an Aircraft located in a
country that is not a party to the Convention, and the extent to which
18
<PAGE>
such security interest would be recognized in a jurisdiction adhering to the
Convention if the Aircraft is registered in a jurisdiction that is not a party
to the Convention, is uncertain. Moreover, in the case of any Indenture Event of
Default, the ability of the Indenture Trustee to realize upon its security
interest in the related Aircraft could be adversely affected as a legal or
practical matter if such Aircraft were registered or located outside the United
States.
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
The Corporation will be prohibited from consolidating with or merging into
any other corporation under circumstances in which the Corporation is not the
surviving corporation, or from transferring all or substantially all of its
assets as an entirety to any other corporation, unless among other things, (i)
the successor or transferee corporation is a U.S. Citizen, an "air carrier"
within the meaning of and operating under the Aviation Act and a corporation
organized and existing under the laws of the United States or a political
subdivision thereof, and such corporation expressly assumes all the obligations
of the Corporation contained in the related Indenture, Participation Agreement,
Agreement to Lease (as defined below), if any, Lease, and certain related
agreements, (ii) immediately after giving effect to such consolidation, merger
or transfer, the successor or transferee is in compliance with all the terms and
conditions of such documents and (iii) such consolidation, merger or transfer
does not (or would not, if prior to commencement of the related Lease) give rise
to a Lease Event of Default under the related Lease.
DELAYED LEASE COMMENCEMENT
If the Corporation and the Owner Trustee have entered into an agreement to
lease (an "Agreement to Lease") with respect to any Aircraft, as specified in
the applicable Prospectus Supplement, which contemplates modification of such
Aircraft in accordance with specifications of the Corporation, then the Lease
with respect to such Aircraft will commence only upon the satisfaction of
certain conditions relating to such Aircraft, including completion of such
modification and U.S. certification of the Aircraft. Any such Aircraft, until
commencement of a Lease with respect thereto and the Indenture Trustee's release
of funds from the related Collateral Account, which is expected to occur at the
same time as the commencement of such Lease, is referred to as a "Delayed Lease
Aircraft" and the period prior to the Indenture Trustee's release of such funds
is referred to as the "Pre-Funding Period."
In the case of Equipment Trust Certificates relating to a Delayed Lease
Aircraft, the proceeds from sale of such Equipment Trust Certificates to the
applicable Pass Through Trusts, after deducting certain expenses of the offering
of the related Pass Through Certificates, will be deposited by the Owner
Trustee, on the date of such sale, in a collateral account (a "Collateral
Account") established pursuant to a collateral agreement between the Owner
Trustee and the Indenture Trustee (a "Collateral Agreement"). Such Collateral
Account will be part of the related Indenture Estate and will secure payment of
the related Equipment Trust Certificates. In addition, certain rights of the
Owner Trustee in the related Agreement to Lease with respect to the related
Delayed Lease Aircraft will be assigned to the Indenture Trustee to secure such
Equipment Trust Certificates, and the Owner Trustee will be required to provide
to the Indenture Trustee Additional Collateral, including, unless otherwise
specified in the applicable Prospectus Supplement, a letter of credit, for such
Equipment Trust Certificates during the related Pre-Funding Period. See
"Security" above.
Funds in the Collateral Account will be invested at the risk of the Owner
Trustee in U.S. government obligations pursuant to the related Collateral
Agreement and further described in the applicable Prospectus Supplement.
Earnings on such investments will be retained in the Collateral Account pending
distribution as contemplated below.
Unless otherwise specified in an applicable Prospectus Supplement, the
Equipment Trust Certificates relating to a Delayed Lease Aircraft will be issued
in an amount such that the net proceeds thereof, together with expected earnings
on the investments in the Collateral Account, will be sufficient (i) to make
scheduled payments of principal, if any, and interest accrued on such Equipment
Trust Certificates during the related scheduled Pre-Funding Period specified in
such Prospectus Supplement and (ii) to finance a portion of the acquisition cost
of such Delayed Lease Aircraft (including any costs of modification required
prior to the commencement of the related Lease), as specified in such Prospectus
19
<PAGE>
Supplement. Accordingly, the principal amount of such Equipment Trust
Certificates at issuance will exceed the amount that will be applied to the
acquisition costs (including any costs of modification of such Aircraft prior to
the commencement of the related Lease) of the Delayed Lease Aircraft.
Subject to any mandatory prepayment contemplated below, under the Collateral
Agreement relating to a Delayed Lease Aircraft, on each date during the
scheduled Pre-Funding Period for the scheduled payments of principal, if any,
and interest on the related Equipment Trust Certificates, the Indenture Trustee
shall withdraw from the Collateral Account the amount necessary to make the
scheduled payment then due. If the Indenture Trustee shall not have released the
funds in the Collateral Account on the date scheduled for the commencement of
the Lease relating to such Delayed Lease Aircraft, then on each scheduled
payment date during the Pre-Funding Period that occurs after such scheduled
commencement date, the Indenture Trustee shall withdraw from the Collateral
Account the excess of the amount therein over the amount specified to be
retained in such Collateral Account to be applied to the acquisition costs
(including any costs of modification of such Aircraft prior to the commencement
of the related Lease) of the Delayed Lease Aircraft. If the amount withdrawn is
less than the scheduled payment then due, the Indenture Trustee shall draw the
deficiency from any available Additional Collateral and will apply such amount
to satisfy the corresponding payment obligation. On the first scheduled payment
date after any Pre-Funding Period with respect to a Delayed Lease Aircraft, the
Indenture Trustee shall withdraw from the Collateral Account the difference
between the scheduled payment then due and the rental payment due on such
payment from the Corporation.
MANDATORY PREPAYMENT DURING THE PRE-FUNDING PERIOD
To the extent that the Lease related to a Delayed Lease Aircraft has not
commenced on or prior to the cut-off date specified in the applicable Prospectus
Supplement as the last date of the related permitted Pre-Funding Period, a
"Deemed Event of Loss" will occur, the Collateral Account and, to the extent
necessary, any Additional Collateral will be drawn upon and the related
Equipment Trust Certificates will be prepaid at a prepayment price equal to the
aggregate principal amount of such Equipment Trust Certificates, together with
accrued but unpaid interest thereon to the date designated for such prepayment
specified in such Prospectus Supplement. Such Prospectus Supplement will specify
the date after such Deemed Event of Loss on which such prepayment is to be made.
With respect to any Delayed Lease Aircraft, the applicable Prospectus
Supplement also will set forth any mandatory prepayments of the related
Equipment Trust Certificates, and the prepayment price therefor, upon the
occurrence of any event of loss with respect to such Delayed Lease Aircraft
during such Pre-Funding Period.
PAYMENTS AND LIMITATIONS OF LIABILITY
All payments of principal of, premium, if any, and interest on any Equipment
Trust Certificates will be made only from the assets subject to the lien of the
related Indenture or the income and proceeds received by the Indenture Trustee
therefrom, including, during the Pre-Funding Period, if any, relating to an
Aircraft, the Collateral Account and any Additional Collateral provided in
connection with such Pre-Funding Period and, on and after the commencement of
the related Lease and, in the case of a Delayed Lease Aircraft, after the
related Pre-Funding Period, rent payable by the Corporation under the related
Lease. The Equipment Trust Certificates will not be direct obligations of, or
guaranteed by, the Corporation. The Corporation's obligations to pay rent and to
cause other payments to be made under each Lease will be general obligations of
the Corporation.
Neither the Owner Trustee nor the Indenture Trustee (in their individual
capacities) will be liable to any Certificateholder or, in the case of the Owner
Trustee, in its individual capacity, to the Corporation or the Indenture Trustee
for any amounts payable or for any liability under the Equipment Trust
Certificates or the Indentures, except as provided in the Indentures and the
Participation Agreements and except for the gross negligence or willful
misconduct of the Owner Trustee.
20
<PAGE>
INDENTURE EVENTS OF DEFAULT AND REMEDIES
For any Pass Through Trust, the applicable Prospectus Supplement will
describe the Indenture Events of Default under the Indentures related to the
Equipment Trust Certificates to be held by such Pass Through Trust, the remedies
that the related Indenture Trustees may exercise with respect to the related
Aircraft, either at their own initiative or upon instructions from holders of
the related Equipment Trust Certificates, and other provisions relating to the
occurrence of an Indenture Event of Default and the exercise of remedies. There
will be no cross-default provisions in the Indentures and events resulting in an
Indenture Event of Default under any particular Indenture will not necessarily
result in an Indenture Event of Default under any other Indenture.
THE LEASES
Upon the commencement of any Lease, the following terms will be applicable:
TERMS AND RENTALS. Each Aircraft will be leased by the Owner Trustee to the
Corporation for a term commencing on the date of the Corporation's acceptance
thereof pursuant to the related Participation Agreement and expiring on a date
not earlier than the latest maturity date of the Equipment Trust Certificates
issued with respect to such Aircraft, unless previously terminated or extended,
as permitted by the related Lease. The scheduled rental payments by the
Corporation under each Lease will be payable on the dates specified in the
applicable Prospectus Supplement. The respective payments will be assigned under
the related Indenture by the Owner Trustee to the Indenture Trustee to provide
the funds necessary to make payments of principal and interest due from such
Owner Trustee on the Equipment Trust Certificates issued under such Indenture.
Any Prospectus Supplement may provide that, under certain circumstances, the
scheduled rental payments under any applicable Lease may be adjusted; in that
case, however, each such Lease will provide that under no circumstances will the
adjusted rental payments that the Corporation will be unconditionally obligated
to make or cause to be made under such Lease after such adjustment be less than
the scheduled payments of principal and interest on the Equipment Trust
Certificates issued under the Indenture relating to such Lease. For any Delayed
Lease Aircraft, upon the commencement of the Lease for such Aircraft and after
the related Pre-Funding Period, the Corporation will be obligated to make
scheduled rental payments under the related Lease that will be sufficient to pay
in full when due all principal of and interest on, to the extent accrued from
and after the related Pre-Funding Period, the related Equipment Trust
Certificates, except that on the first scheduled payment date after the related
Pre-Funding Period, the difference between the rental payment due on such date
by the Corporation and the scheduled payment of principal, if any, and interest
then due on such Equipment Trust Certificates will be payable from the related
Collateral Account and the related Additional Collateral. See "Payments and
Limitations of Liability." Scheduled payments of principal and interest on the
Equipment Trust Certificates will be made on the dates specified in the
applicable Prospectus Supplement.
NET LEASE. The Corporation's obligations under each Lease in respect of the
related Aircraft will be those of a lessee under a "net lease." Accordingly, the
Corporation will be obligated to pay all costs of operating the Aircraft and its
expenses, to maintain, service, repair and overhaul the Aircraft so as to keep
the Aircraft in good condition, ordinary wear and tear excepted, and to enable
the airworthiness certification thereof to be maintained in good standing at all
times under the Aviation Act or, under certain circumstances, under the
applicable requirements of the aeronautical authority of another country of
registry. If, however, the Aircraft loses its airworthiness certification and
such loss is curable, and the Corporation, using its best efforts, undertakes
such cure promptly, diligently and continuously, then the Corporation will not
be in default with respect to such obligation. Generally, the Corporation will
be obligated to replace or cause to be replaced all parts that may from time to
time be incorporated or installed in or attached to any Aircraft (including in
or on any engine) and that may become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use. The
Corporation will have the right to make other alterations, modifications and
additions to an Aircraft so long as such alterations, modifications or additions
do not materially decrease the value or utility of such Aircraft or impair its
condition or airworthiness below its value, utility, condition and airworthiness
immediately prior to such alteration, modification or additions assuming that
such Aircraft
21
<PAGE>
was then in the condition and airworthiness required by the related Lease. Also,
in certain circumstances, the Corporation will be permitted to remove parts
(without replacement) from an Aircraft or any engine (and therefore from the
Lien of the applicable Indenture) if the Corporation deems such parts to be
obsolete or no longer suitable or appropriate for use on such Aircraft so long
as such removals do not decrease the utility, condition or airworthiness of such
Aircraft or any such engine, although the value of such Aircraft or any such
engine may be reduced by such removal. See the applicable Prospectus Supplement
for a description of certain limitations, if any, applicable to provisions
described in this paragraph.
INSURANCE. Unless otherwise indicated in the applicable Prospectus
Supplement, the Corporation will be obligated to carry insurance with insurers
of recognized responsibility with respect to each Aircraft at its own cost and
expense, in such amounts, against such risks, with such deductibles or self-
insurance amounts (i) in the case of hull insurance, as the Corporation
customarily maintains with respect to other aircraft in the Corporation's fleet
of the same type and model and operating on the same routes as the respective
Aircraft and (ii) in the case of liability insurance, as is usually carried by
similar corporations engaged in the same or similar business and similarly
situated as the Corporation, owning or operating aircraft similar to the
Aircraft. The Corporation will be permitted to maintain coverage below certain
stipulated values and may be permitted to self-insure in certain circumstances,
subject to certain limits. Therefore, there is no assurance that any insurance
will be carried in the future, or, if it is carried, as to the amount of such
insurance. The Corporation and any permitted sublessee of an Aircraft will be
named as insured parties under all insurance policies required by the related
Lease. The Indenture Trustee, the Owner Trustee and the related Owner
Participant will be named additional insureds, which will afford each of them
the rights but not the obligations of an additional insured. Unless otherwise
specified in the applicable Prospectus Supplement, liability insurance proceeds
will be distributed to the respective parties as their interests may appear and
hull insurance proceeds in excess of certain specified amounts will be
distributed to the related Indenture Trustee. See the applicable Prospectus
Supplement for a description of certain limitations, if any, applicable to
provisions described in this paragraph.
LEASE EVENTS OF DEFAULT; REMEDIES. The applicable Prospectus Supplement
will describe the Lease Events of Default under the related Leases, the remedies
that the Owner Trustee may exercise with respect to the related Aircraft, and
other provisions relating to the occurrence of a Lease Event of Default and the
exercise of remedies.
THE PARTICIPATION AGREEMENTS
The Corporation will be required to indemnify each Indenture Trustee, each
Owner Participant and each Owner Trustee, and certain parties affiliated with
the foregoing (but not including holders of the Equipment Trust Certificates or
the Certificateholders), for certain liabilities, losses, fees and expenses and
for certain other matters arising out of the transactions described herein or
relating to the applicable Aircraft or the use thereof. In addition, under
certain circumstances the Corporation will be required to indemnify such persons
against certain taxes, levies and duties and for certain other matters relating
to such transactions or the applicable Aircraft. Each Owner Participant will be
required to indemnify the holders of the Equipment Trust Certificates issued
with respect to the Aircraft in which such Owner Participant has an interest
under an Owner Trust for certain losses that may be suffered as a result of the
failure of such Owner Participant to discharge certain liens or claims on or
against the assets subject to the Lien of the applicable Indenture. Subject to
certain restrictions, each Owner Participant may convey all of its right, title
and interest relating to any Aircraft. Moreover, if so provided in the
applicable Prospectus Supplement, in certain limited instances the Corporation
may assume an Owner Trust's obligation under the related Equipment Trust
Certificates on a full recourse basis.
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Davis Polk & Wardwell, tax counsel to the Corporation, the
following discussion accurately describes the principal United States federal
income tax consequences of ownership and
22
<PAGE>
disposition of the Pass Through Certificates, and should be read in conjunction
with any additional discussion of federal income tax consequences included in
the applicable Prospectus Supplement. This opinion is based on laws,
regulations, rulings and decisions in effect as of the date hereof. Changes to
existing law, which could have retroactive effect, may alter the consequences
described below. This opinion does not purport to address federal income tax
consequences applicable to particular categories of investors, some of which
(for example, insurance companies and foreign investors) may be subject to
special rules. This summary discusses only Pass Through Certificates held as
capital assets for federal income tax purposes. Persons considering purchasing
interests in Pass Through Certificates should consult their own tax advisors
with regard to the application of the United States federal income tax laws to
their particular situations as well as any tax consequences arising under the
laws of any state, local or foreign jurisdiction. The Pass Through Trusts are
not indemnified for any federal income taxes that may be imposed upon them, and
the imposition of any such taxes on a Pass Through Trust could result in a
reduction in the amounts available for distribution to the Certificateholders of
such Pass Through Trust.
GENERAL
The Pass Through Trusts will not be classified as associations taxable as
corporations, but rather, will be classified as grantor trusts under subpart E,
Part 1 of Subchapter J of the Internal Revenue Code of 1986, as amended (the
"Code"), and each Certificateholder will be treated as the owner of a pro rata
undivided interest in each of the Equipment Trust Certificates and any other
property held in the related Pass Through Trust.
Each Certificateholder will be required to report on its federal income tax
return its pro rata share of the entire income from each of the Equipment Trust
Certificates and any other property held in the related Pass Through Trust in
accordance with such Certificateholder's method of accounting. A
Certificateholder using the cash method of accounting must take into account its
pro rata share of income as and when such income is considered to have been
received by the Pass Through Trustee. A Certificateholder using an accrual
method of accounting must take into account its pro rata share of income as it
accrues or is received by the Pass Through Trustee, whichever is earlier.
A purchaser of an interest in a Pass Through Certificate will be treated as
purchasing an interest in each Equipment Trust Certificate and any other
property in the related Pass Through Trust at a price determined by allocating
the purchase price paid for the Pass Through Certificate among such Equipment
Trust Certificates and other property in proportion to their fair market values
at the time of purchase of the Pass Through Certificate. Unless otherwise
indicated in a Prospectus Supplement, the Corporation anticipates that when all
the Equipment Trust Certificates have been acquired by the related Pass Through
Trust the purchase price paid for a Pass Through Certificate of such Pass
Through Trust by an original purchaser of such Pass Through Certificate should
be allocated among the Equipment Trust Certificates held in such Pass Through
Trust in proportion to their respective principal amounts.
If an Equipment Trust Certificate held by a Pass Through Trust is prepaid, a
Certificateholder will be considered to have sold his pro rata share of that
Equipment Trust Certificate, and will recognize the gain or loss equal to the
difference between its aggregate adjusted basis in the Equipment Trust
Certificate and the amount realized on the sale (except to the extent
attributable to accrued interest, which would be taxable as interest income if
not previously included in income). Subject to the market discount provisions of
the Code (described below), any such gain or loss will be long-term capital gain
or loss if the Equipment Trust Certificate is considered to have been held for
more than one year. Net capital gains of individuals are, under certain
circumstances, taxed at lower rates than items of ordinary income. With respect
to the Equipment Trust Certificates, although the matter is not entirely free
from doubt, an Owner Participant's conveyance of its interest in an Owner Trust
will not constitute a taxable event to the holders of interests in the related
Equipment Trust Certificates. If the Corporation were to assume an Owner Trust's
obligations under the related Equipment Trust Certificates upon a purchase of
the related Aircraft by the Corporation, such assumption would be treated as a
taxable exchange of the respective Equipment Trust Certificates resulting in the
recognition of taxable gain or loss under the rules discussed above. For this
purpose the
23
<PAGE>
amount realized will be equal to the fair market value of the
Certificateholder's pro rata share of the respective Equipment Trust
Certificates at such time. However, under proposed Treasury regulations not
currently in effect, the Corporation's assumption of the Owner Trust's
obligations under the circumstances described above would not be treated as a
taxable exchange of the Equipment Trust Certificates. It is impossible to
predict whether or in what form final or temporary regulations might be
promulgated and what the substance or effective date of such regulations might
be.
SALES OR EXCHANGES OF PASS THROUGH CERTIFICATES
A Certificateholder that sells or exchanges a Pass Through Certificate will
be considered to have sold his pro rata portion of the property held by the Pass
Through Trust, and will recognize gain or loss on the basis discussed in the
preceding paragraph.
MARKET DISCOUNT
A purchaser of a Pass Through Certificate generally will be considered to
have acquired an interest in an Equipment Trust Certificate at a "market
discount" to the extent the remaining principal amount of such Equipment Trust
Certificate allocable to the Pass Through Certificate exceeds the
Certificateholder's tax basis allocable to such Equipment Trust Certificate,
unless the excess does not exceed a prescribed DE MINIMIS amount. In the event
such excess exceeds the DE MINIMIS amount, the Certificateholder will be subject
to the market discount rules of Sections 1276 through 1278 of the Code with
regard to its interest in such Equipment Trust Certificate.
In the case of a sale or certain other disposition of indebtedness subject
to the market discount rules, Section 1276 of the Code requires that gain, if
any, from such sale or disposition be treated as ordinary income to the extent
such gain represents a market discount that has accrued during the period such
indebtedness was held. If such indebtedness is disposed of in a nontaxable
transaction (other than a nonrecognition transaction described in Code Section
1276(d)), accrued market discount will be includable as ordinary income as if
the Certificateholder had sold the Equipment Trust Certificate at its then
market value.
In the case of a partial principal payment on indebtedness subject to the
market discount rules, Section 1276 of the Code requires that such payment be
included in gross income as ordinary income to the extent such payment does not
exceed the market discount that has accrued during the period such indebtedness
was held. The amount of any accrued market discount later required to be
included in income upon a disposition or subsequent partial principal payment
will be reduced by the amount of accrued market discount previously included in
income.
Generally, market discount accrues under a straight line method or, at the
election of the taxpayer, a constant interest method. However, in the case of
installment obligations (such as the Equipment Trust Certificates), the manner
in which the market discount is to be accrued has been left to Treasury
regulations not yet promulgated. Until such Treasury regulations are issued, the
explanatory Conference Report to the Tax Reform Act of 1986 (the "Conference
Report") indicates that holders of installment obligations with a market
discount (which do not have original issue discount) may elect to accrue the
market discount either on the basis of a constant interest rate or as follows:
the amount of the market discount that is deemed to accrue is the amount of the
market discount that bears the same ratio to the total amount of the remaining
market discount that the amount of stated interest paid in the accrual period
bears to the total amount of stated interest remaining to be paid on the
installment obligation as of the beginning of such period.
Under Section 1277 of the Code, if in any taxable year interest paid or
accrued on indebtedness incurred or continued to purchase or carry indebtedness
subject to the market discount rules exceeds the interest currently includable
in income with respect to such indebtedness, deduction of the excess interest
must be deferred to the extent of the market discount allocable to the taxable
year. The deferred portion of any interest expense will generally be deductible
when such market discount is included in income upon the sale or other
disposition (including repayment) of the indebtedness.
24
<PAGE>
Section 1278 of the Code allows a taxpayer to make an election to include
market discount in his gross income currently. If such election is made, the
rules of Sections 1276 and 1277 (described above) will not apply to the
taxpayer.
PREMIUM
A Certificateholder will be considered to have acquired an interest in an
Equipment Trust Certificate at a premium to the extent such Certificateholder's
tax basis allocable to such Equipment Trust Certificate exceeds the remaining
principal amount of such Equipment Trust Certificate allocable to such
Certificateholder's Pass Through Certificate. In that event, a Certificateholder
that holds such Pass Through Certificate as a capital asset may elect (in
accordance with applicable Code provisions) to amortize such premium as an
offset to interest income under Section 171 of the Code with corresponding
reductions in the Certificateholder's tax basis in such Equipment Trust
Certificate. Generally, such amortization is on a constant yield basis. In the
case of installment obligations (such as the Equipment Trust Certificates),
however, the Conference Report indicates a Congressional intent that
amortization will be in accordance with the same rules that will apply to the
accrual of market discount on installment obligations. See "Market Discount."
Since the Equipment Trust Certificates may be called at a premium prior to
maturity, amortizable premium may be determined by reference to an early call
date. Due to the complexities of the amortizable premium rules, particularly
where there is more than one possible call date and the amount of any premium is
uncertain, Certificateholders are urged to consult their tax advisors as to the
amount of any such amortizable premium.
If a Certificateholder acquires an interest in an Equipment Trust
Certificate at a premium and elects to amortize such premium, and the Internal
Revenue Service successfully challenges the amount of amortization claimed for a
particular period, then such Certificate Owner would be precluded from
offsetting interest income on the Equipment Trust Certificate for such period
with the amount of the disallowed amortization, and the basis of such Equipment
Trust Certificate would be increased accordingly.
ORIGINAL ISSUE DISCOUNT
Under a reasonable interpretation of applicable Treasury regulations on
original issue discount, it is anticipated that the Equipment Trust Certificate
will not be issued with original issue discount.
BACKUP WITHHOLDING
Payments made on the Pass Through Certificates, and proceeds from the sale
or exchange of the Pass Through Certificates to or through certain brokers, may
be subject to a "backup" withholding tax of 31% unless the Certificateholder
complies with certain reporting procedures or is an exempt recipient under the
Code. Any such withholding amounts will be allowed as a credit against the
Certificateholder's federal income tax and may entitle such Certificateholder to
a refund, provided that the required information is furnished to the Internal
Revenue Service.
CERTAIN SOUTH CAROLINA TAXES
The Pass Through Trustee is a national banking association with its
corporate trust office in Columbia, South Carolina. Powell, Goldstein, Frazer &
Murphy, special South Carolina tax counsel for the Pass Through Trustee, has
advised the Corporation that, in its opinion, under currently applicable law,
assuming that each Pass Through Trust will not be classified as an association
taxable as a corporation for federal income tax purposes, but rather, will be
classified as a grantor trust under subpart E, Part I of Subchapter J of the
Code, and assuming that each Pass Through Trust does not otherwise engage in
business in South Carolina, (i) the Pass Through Trusts will not be subject to
any tax (including, without limitation, net or gross income, tangible or
intangible property, net worth, capital, franchise or doing business tax), fee
or other governmental charge under the laws of the State of South Carolina or
any political subdivision thereof and (ii) Certificateholders that are not
residents of or otherwise subject to tax in South Carolina will not be subject
to any tax (including, without limitation, net
25
<PAGE>
or gross income, tangible or intangible property, net worth, capital, franchise
or doing business tax), fee or other governmental charge under the laws of the
State of South Carolina or any political subdivision thereof as a result of
purchasing, owning (including receiving payments with respect to) or selling a
Pass Through Certificate.
Neither the Pass Through Trusts nor the Certificateholders will be
indemnified for any state or local taxes imposed on them, and the imposition of
any such taxes on a Pass Through Trust could result in a reduction in the
amounts available for distribution to the Certificateholders of such Pass
Through Trust.
ERISA CONSIDERATIONS
Unless otherwise indicated in the applicable Prospectus Supplement, Pass
Through Certificates may not be purchased by, or with the assets of, any
employee benefit plan subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or individual retirement account or
plan subject to Section 4975 of the Code. Certain governmental plans and
non-electing church plans, however, are not subject to Title I of ERISA or
Section 4975 of the Code and, therefore, may purchase the Pass Through
Certificates.
PLAN OF DISTRIBUTION
The Pass Through Certificates may be sold to or through underwriters,
directly to other purchasers or through agents.
The distribution of the Pass Through Certificates may be effected from time
to time in one or more transactions at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices.
In connection with the sale of Pass Through Certificates, underwriters or
agents may receive compensation from the Corporation or from purchasers of Pass
Through Certificates for whom they may act as agents in the form of discounts,
concessions or commissions. Underwriters may sell Pass Through Certificates to
or through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters or commissions from
the purchasers for whom they may act as agents. Underwriters, dealers and agents
that participate in the distribution of Pass Through Certificates may be deemed
to be underwriters, and any discounts or commissions received by them from the
Corporation and any profit on the resale of Pass Through Certificates by them
may be deemed to be underwriting discounts and commissions, under the Securities
Act. Any such underwriter or agent will be identified, and any such compensation
received from the Corporation will be described, in the applicable Prospectus
Supplement.
Under agreements which may be entered into by the Corporation, underwriters
and agents who participate in the distribution of Pass Through Certificates may
be entitled to indemnification by the Corporation against certain liabilities,
including liabilities under the Securities Act.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporation does not intend to apply for the listing of any Series of Pass
Through Certificates on a national securities exchange. If the Pass Through
Certificates of any Series are sold to or through underwriters, the underwriters
may make a market in such Pass Through Certificates, as permitted by applicable
laws and regulations. No underwriter would be obligated, however, to make a
market in such Pass Through Certificates, and any such market-making could be
discontinued at any time at the sole discretion of the underwriters.
Accordingly, no assurance can be given as to the liquidity of, or trading
markets for, the Pass Through Certificates of any Series.
Certain of the underwriters or agents and their associates may be customers
of, engage in transactions with, and perform services for, the Corporation in
the ordinary course of business.
26
<PAGE>
LEGAL MATTERS
Unless otherwise indicated in the applicable Prospectus Supplement, the
legality of the Pass Through Certificates offered hereby will be passed upon for
the Corporation by Davis Polk & Wardwell, 450 Lexington Avenue, New York, New
York 10017, and by counsel for any agents, dealers or underwriters
("Underwriters' Counsel"). Unless otherwise indicated in the applicable
Prospectus Supplement, both Davis Polk & Wardwell and Underwriters' Counsel may
rely on the opinion of Powell, Goldstein, Frazer & Murphy, counsel for
NationsBank of South Carolina, individually and as Pass Through Trustee, as to
matters relating to the authorization, execution and delivery of the Pass
Through Agreement and of each Series of Pass Through Certificates by the Pass
Through Trustee, and of Kenneth R. Masterson, Senior Vice President and General
Counsel of the Corporation, as to the Corporation's authorization, execution and
delivery of the Pass Through Agreement. At February 9, 1994, Mr. Masterson owned
2,500 shares of the Corporation's common stock and held options to purchase
69,000 shares of such common stock. Of the options granted, 34,400 were vested
at such date.
EXPERTS
The consolidated financial statements and schedules of the Corporation
included or incorporated by reference in the Corporation's Annual Report on Form
10-K for the year ended May 31, 1993 and incorporated by reference herein have
been audited by Arthur Andersen & Co., independent public accountants, as
indicated in their reports with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
With respect to the unaudited interim financial information for the quarters
ended August 31, 1993 and November 30, 1993, included in the Corporation's
Quarterly Reports on Form 10-Q for such periods, which are incorporated by
reference herein, Arthur Andersen & Co. has applied limited procedures in
accordance with professional standards for a review of such information.
However, their separate reports thereon state that they did not audit and they
do not express an opinion on that interim financial information. Accordingly,
the degree of reliance on their reports on that information should be restricted
in light of the limited nature of the review procedures applied. In addition,
the accountants are not subject to the liability provisions of Section 11 of the
Securities Act for their reports on the unaudited interim financial information
because neither of such reports is a "report" or a "part" of the Registration
Statement, of which this Prospectus is a part, prepared or certified by the
accountants within the meaning of Sections 7 and 11 of the Securities Act.
27
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
CORPORATION OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY,
THE PASS THROUGH CERTIFICATES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AT ANY TIME NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS OR IN THE AFFAIRS OF THE CORPORATION SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.......................... 3
Reports to Pass Through Certificateholders..... 3
Incorporation of Certain Documents by
Reference..................................... 3
Federal Express Corporation.................... 4
Ratio of Earnings to Fixed Charges............. 4
Outline of Pass Through Trust Structure........ 4
Use of Proceeds................................ 5
Diagram of Payments............................ 6
Description of the Pass Through Certificates... 7
Description of the Equipment Trust
Certificates.................................. 16
Federal Income Tax Consequences................ 22
Certain South Carolina Taxes................... 25
ERISA Considerations........................... 26
Plan of Distribution........................... 26
Legal Matters.................................. 27
Experts........................................ 27
</TABLE>
$400,000,000
[LOGO]
$400,000,000
PASS THROUGH CERTIFICATES
---------------------
PROSPECTUS
---------------------
, 1994
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Appendix A
A diagram is included following the second
paragraph of "Diagram of Payments." The diagram contains
boxes representing the parties identified in the second
paragraph of "Diagram of Payments," which are connected by
arrows demonstrating the cash flows described in the
paragraph.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are the estimated expenses of the issuance and distribution of
the securities (other than underwriting discounts and commissions) being
registered, all of which will be paid by or on behalf of the Registrant:
<TABLE>
<S> <C>
SEC Registration Fee............................................. $ 137,932
Printing and Engraving........................................... 50,000
Attorneys' Fees and Expenses..................................... 500,000
Trustees' Fees................................................... 10,500
Accounting Fees and Expenses..................................... 15,000
Blue Sky Fees and Expenses....................................... 30,000
Rating Agency Fees............................................... 120,000
Miscellaneous.................................................... 10,000
---------
Total........................................................ $ 873,432
---------
---------
</TABLE>
All of the above amounts, other than the SEC Registration Fee, are
estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) Reference is made to Section 145 of the Delaware General Corporation Law
("DGCL") as to indemnification by the Registrant of officers and directors.
(b) Section 13 of Article III of the by-laws of the Registrant provides for
indemnification of directors as follows:
Section 13. The corporation shall indemnify to the full extent authorized or
permitted by the General Corporation Law of the State of Delaware any person
made, or threatened to be made, a party to any threatened, pending or
completed action, suit or proceeding (whether civil, criminal,
administrative or investigative) by reason of the fact that he, his testator
or intestate is or was a director of the corporation or serves or served as
a director, officer, employee or agent of any other enterprise at the
request of the corporation.
Section 18 of Article V of the by-laws of the Registrant provides for
indemnification of officers as follows:
Section 18. The corporation shall indemnify to the full extent authorized or
permitted by the General Corporation Law of the State of Delaware any person
made, or threatened to be made, a party to any threatened, pending or
completed action, suit or proceeding (whether civil, criminal,
administrative or investigative) by reason of the fact that he, his testator
or intestate is or was an officer or Managing Director of the corporation or
serves or served as a director, officer, employee or agent of any other
enterprise at the request of the corporation.
(c) The Registrant has also entered into an indemnification agreement with
each of its directors based on the sections of the DGCL that recognize the
validity of additional indemnity rights granted by agreement. The
indemnification agreement alters or clarifies the statutory indemnity with
respect to the Registrant's directors in the following respects: (i) indemnity
is explicitly provided for settlements, fines and judgments in derivative
actions to the maximum extent permitted by Delaware law, (ii) prompt payment of
expenses is provided in advance of indemnification, provided the director
undertakes to repay such amount if it is finally determined the director is not
entitled to be indemnified and (iii) indemnification for all matters involving a
director as a party by reason of the person being a director unless the person
violates the law or the person's conduct is finally adjudged to have been
knowingly fraudulent, deliberately dishonest or willful misconduct. Therefore, a
director who has entered into the indemnification agreement will be entitled to
indemnification automatically according to its terms without
II-1
<PAGE>
prior independent review of such director's conduct and approval of the
indemnification payment by either disinterested directors, independent counsel
or the stockholders. Certain of the provisions of the indemnification agreement
have not been tested in court and remain subject to public policy considerations
with respect to their enforceability. The Registrant has been advised that
indemnification of a judgment or amounts paid in settlement in a derivative suit
may be contrary to public policy in the State of Delaware. Because substantial
uncertainty exists as to the validity of such payments, the Registrant will not
make an indemnification payment for fines, judgments or amounts paid in
settlement in a derivative suit without first obtaining an opinion of
independent counsel that such payment is permitted under Delaware law.
(d) The Underwriting Agreement filed as Exhibit 1 to the Registration
Statement provides, under certain circumstances, for indemnification for the
Registrant and certain other persons against certain liabilities.
(e) The Registrant has purchased insurance designed to protect the
Registrant and its directors and officers against losses arising from certain
claims, including claims under the Securities Act of 1933, as amended (the
"Securities Act").
ITEM 16. EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- --------- --------------------------------------------------------------------------------------------------------
<S> <C>
1 Form of Underwriting Agreement**
4.a.1 Form of Pass Through Trust Agreement between Federal Express Corporation and the Pass Through Trustee**
4.a.2 Form of Pass Through Certificate (included in 4.a.1)**
4.b Form of Trust Indenture and Security Agreement between the Owner Trustee and the Indenture Trustee,
relating to Equipment Trust Certificates (Filed as Exhibit 4(c) to Registrant's Registration Statement
on Form S-3, Commission File No. 33-52142, and incorporated herein by reference.)*
4.c Form of Participation Agreement among Federal Express Corporation, as Lessee, the Owner Participant, the
Owner Trustee, the Original Loan Participants, if any, the Indenture Trustee and the Pass Through
Trustee (Filed as Exhibit 4(e)(1) to Registrant's Registration Statement on Form S-3, Commission File
No. 33-52142, and incorporated herein by reference.)*
4.d Form of Trust Agreement between the Owner Participant and the Owner Trustee (Filed as Exhibit 4(f) to
Registrant's Registration Statement on Form S-3, Commission File No. 33-52142, and incorporated herein
by reference.)*
4.e Form of Lease Agreement between the Owner Trustee, as the Lessor, and Federal Express Corporation, as
Lessee (Filed as Exhibit 4(g) to Registrant's Registration Statement on Form S-3, Commission File No.
33-52142, and incorporated herein by reference.)*
4.f Form of letter of credit to be required during any Pre-Funding Period
4.g Form of Collateral Agreement between the Owner Trustee and the Indenture Trustee
<FN>
- ------------------------
* Separate Indentures, Participation Agreements and Lease Agreements will be
entered into with respect to each Aircraft in connection with any
particular offering of Pass Through Certificates. The Prospectus
Supplement for each offering of Pass Through Certificates will set forth
any material details in which such Indentures, Participation Agreements,
Transfer Agreements, Trust Agreements or Lease Agreements, as the case may
be, differ from the corresponding Exhibit for the form of such documents.
** Previously filed.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- --------- --------------------------------------------------------------------------------------------------------
<S> <C>
5.a Opinion of Davis Polk & Wardwell, counsel for Federal Express Corporation, relating to the Pass Through
Certificates**
5.b Opinion of Powell, Goldstein, Frazer & Murphy, counsel for the Pass Through Trustee**
5.c Opinion of Kenneth R. Masterson, Senior Vice President and General Counsel of Federal Express
Corporation, relating to the Pass Through Certificates**
8.a Tax Opinion of Davis Polk & Wardwell, counsel for Federal Express Corporation (included under the
caption "Federal Income Tax Consequences" in the Prospectus)
8.b Tax Opinion of Powell, Goldstein, Frazer & Murphy, special counsel for the Pass Through Trustee
(included under the caption "Certain South Carolina Taxes" in the Prospectus)
12 Computation of Ratio of Earnings to Fixed Charges (Filed as Exhibit 12 to Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended November 30, 1993, Commission File No. 1-7806, and
incorporated herein by reference.)
15 Letter regarding unaudited interim financial information (Filed as Exhibit 15.1 to Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 1993, Commission File No.
1-7806, and incorporated herein by reference.)
23.a Consent of Davis Polk & Wardwell, counsel for Federal Express Corporation (included in Exhibit 5.a)**
23.b Consent of Powell, Goldstein, Frazer & Murphy, counsel for the Pass Through Trustee (included in Exhibit
5.b)**
23.c Consent of Kenneth R. Masterson (included in Exhibit 5.c)**
23.d Consent of Arthur Andersen & Co., independent public accountants
24 Power of Attorney
25 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of NationsBank of
South Carolina, National Association, as Pass Through Trustee**
<FN>
- ------------------------
* Separate Indentures, Participation Agreements and Lease Agreements will be
entered into with respect to each Aircraft in connection with any
particular offering of Pass Through Certificates. The Prospectus
Supplement for each offering of Pass Through Certificates will set forth
any material details in which such Indentures, Participation Agreements,
Transfer Agreements, Trust Agreements or Lease Agreements, as the case may
be, differ from the corresponding Exhibit for the form of such documents.
** Previously filed.
</TABLE>
II-3
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement; provided,
however, the paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
Registration Statement is on Form S-3 and the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in
the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial BONA
FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Sections 13(a) or
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in this Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referred to in Item 15 of this
Registration Statement, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement No. 33-51623 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Memphis, State of
Tennessee, on this 17th day of February, 1994.
FEDERAL EXPRESS CORPORATION
(Registrant)
By /S/ ALAN B. GRAF, JR.
------------------------------------
Alan B. Graf, Jr.
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to registration statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------- ------------------------------------------- -----------------------
<S> <C> <C>
Chairman of the Board,
/S/ FREDERICK W. SMITH* President and Chief
-------------------------------- Executive Officer (Principal
Frederick W. Smith Executive Officer) and
Director
/S/ WILLIAM J. RAZZOUK*
-------------------------------- Executive Vice President,
William J. Razzouk Worldwide Customer Operations
/S/ ALAN B. GRAF, JR. Senior Vice President and
-------------------------------- Chief Financial Officer February 17, 1994
Alan B. Graf, Jr. (Principal Financial Officer)
/S/ GRAHAM R. SMITH*
-------------------------------- Vice President and Controller
Graham R. Smith (Principal Accounting Officer)
/S/ ROBERT H. ALLEN*
-------------------------------- Director
Robert H. Allen
/S/ HOWARD H. BAKER, JR.*
-------------------------------- Director
Howard H. Baker, Jr.
/S/ ANTHONY J.A. BRYAN*
-------------------------------- Director
Anthony J.A. Bryan
/S/ ROBERT L. COX*
-------------------------------- Director
Robert L. Cox
/S/ RALPH D. DENUNZIO*
-------------------------------- Director
Ralph D. DeNunzio
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------- ------------------------------------------- -----------------------
<S> <C> <C>
/S/ JUDITH L. ESTRIN*
-------------------------------- Director
Judith L. Estrin
/S/ PHILIP GREER*
-------------------------------- Director
Philip Greer
/S/ J.R. HYDE, III*
-------------------------------- Director
J.R. Hyde, III
/S/ CHARLES T. MANATT*
-------------------------------- Director
Charles T. Manatt
/S/ JACKSON W. SMART, JR.*
-------------------------------- Director
Jackson W. Smart, Jr.
/S/ JOSHUA I. SMITH*
-------------------------------- Director
Joshua I. Smith
/S/ PETER S. WILLMOTT*
-------------------------------- Director
Peter S. Willmott
*By: /S/ ALAN B. GRAF, JR.
----------------------------
Alan B. Graf, Jr. February 17, 1994
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<S> <C>
1 Form of Underwriting Agreement**
4.a.1 Form of Pass Through Trust Agreement between Federal Express Corporation and the Pass Through Trustee**
4.a.2 Form of Pass Through Certificate (included in 4.a.1)**
4.b Form of Trust Indenture and Security Agreement between the Owner Trustee and the Indenture Trustee,
relating to Equipment Trust Certificates (Filed as Exhibit 4(c) to Registrant's Registration Statement
on Form S-3, Commission File No. 33-52142, and incorporated herein by reference.)*
4.c Form of Participation Agreement among Federal Express Corporation, as Lessee, the Owner Participant, the
Owner Trustee, the Original Loan Participants, if any, the Indenture Trustee and the Pass Through
Trustee (Filed as Exhibit 4(e)(1) to Registrant's Registration Statement on Form S-3, Commission File
No. 33-52142, and incorporated herein by reference.)*
4.d Form of Trust Agreement between the Owner Participant and the Owner Trustee (Filed as Exhibit 4(f) to
Registrant's Registration Statement on Form S-3, Commission File No. 33-52142, and incorporated herein
by reference.)*
4.e Form of Lease Agreement between the Owner Trustee, as the Lessor, and Federal Express Corporation, as
Lessee (Filed as Exhibit 4(g) to Registrant's Registration Statement on Form S-3, Commission File No.
33-52142, and incorporated herein by reference.)*
4.f Form of letter of credit to be required during any Pre-Funding Period
4.g Form of Collateral Agreement between the Owner Trustee and the Indenture Trustee
5.a Opinion of Davis Polk & Wardwell, counsel for Federal Express Corporation, relating to the Pass Through
Certificates**
5.b Opinion of Powell, Goldstein, Frazer & Murphy, counsel for the Pass Through Trustee**
5.c Opinion of Kenneth R. Masterson, Senior Vice President and General Counsel of Federal Express
Corporation, relating to the Pass Through Certificates**
8.a Tax Opinion of Davis Polk & Wardwell, counsel for Federal Express Corporation (included under the
caption "Federal Income Tax Consequences" in the Prospectus)
8.b Tax Opinion of Powell, Goldstein, Frazer & Murphy, special counsel for the Pass Through Trustee
(included under the caption "Certain South Carolina Taxes" in the Prospectus)
12 Computation of Ratio of Earnings to Fixed Charges (Filed as Exhibit 12 to Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended November 30, 1993, Commission File No. 1-7806, and
incorporated herein by reference.)
<FN>
- ------------------------
* Separate Indentures, Participation Agreements and Lease Agreements will be
entered into with respect to each Aircraft in connection with any
particular offering of Pass Through Certificates. The Prospectus
Supplement for each offering of Pass Through Certificates will set forth
any material details in which such Indentures, Participation Agreements,
Transfer Agreements, Trust Agreements or Lease Agreements, as the case may
be, differ from the corresponding Exhibit for the form of such documents.
** Previously filed.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<S> <C>
15 Letter regarding unaudited interim financial information (Filed as Exhibit 15.1 to
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended November
30, 1993, Commission File No. 1-7806, and incorporated herein by reference.)
23.a Consent of Davis Polk & Wardwell, counsel for Federal Express Corporation (included
in Exhibit 5.a)**
23.b Consent of Powell, Goldstein, Frazer & Murphy, counsel for the Pass Through Trustee
(included in Exhibit 5.b)**
23.c Consent of Kenneth R. Masterson (included in Exhibit 5.c)**
23.d Consent of Arthur Andersen & Co., independent public accountants
24 Power of Attorney
25 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of NationsBank of South Carolina, National Association, as Pass Through
Trustee**
<FN>
- ------------------------
* Separate Indentures, Participation Agreements and Lease Agreements will be
entered into with respect to each Aircraft in connection with any
particular offering of Pass Through Certificates. The Prospectus
Supplement for each offering of Pass Through Certificates will set forth
any material details in which such Indentures, Participation Agreements,
Transfer Agreements, Trust Agreements or Lease Agreements, as the case may
be, differ from the corresponding Exhibit for the form of such documents.
** Previously filed.
</TABLE>
<PAGE>
[FORM OF LETTER OF CREDIT]
[Date ETC's are issued]
Irrevocable Letter of Credit No. ____
Expiry Date: Not later than _____, 199_
TO: NationsBank of Georgia, National Association
Not individually but solely as Indenture Trustee
under the Trust Indenture referred to below
600 Peachtree Street, N.E.
GA1-006-09-11
Atlanta, Georgia 30308
1. We hereby establish in your favor as trustee for the benefit of
certain certificate holders (in such capacity, and together with any successors
in such capacity under the Indenture referred to below, "YOU" or the "INDENTURE
TRUSTEE") under the Trust Indenture and Security Agreement (Federal Express
Trust No. __) (the "INDENTURE") dated as of ____________ __, 1994 between the
Indenture Trustee and First Security Bank of Utah, National Association (the
"OWNER TRUSTEE" or the "LESSOR"), this Irrevocable Letter of Credit ("LETTER OF
CREDIT") for an aggregate amount up to but not to exceed ________________ United
States dollars ($_______________) (the "STATED AMOUNT") available from time to
time in the amounts and subject to the conditions hereinafter provided.
Capitalized terms used in this Letter of Credit shall have the respective
meanings as provided in Schedule I hereto.
2. We hereby irrevocably authorize you to draw on us, in accordance
with the terms hereinafter set forth, an amount on the relevant Settlement Date
equal to (i) in
<PAGE>
the case of a Partial Draw, the Partial Draw Amount applicable to such
Settlement Date and (ii) in the case of a Final Draw, the Final Draw Amount
applicable to such Settlement Date. You may effect multiple Partial Draws
pursuant to paragraph 3(a)(ii)(A) hereof but only one Partial Draw pursuant to
paragraph 3(a)(ii)(B) hereof and only one Final Draw pursuant to paragraph 3(b)
hereof, provided that no drawing hereunder may exceed the Available Amount
hereof on the date of such drawing. Only one drawing may be paid on any
Settlement Date. The Available Amount shall automatically be reduced to zero on
the Termination Date (after giving effect to any drawings permitted on such
date). Each Partial Draw shall PRO TANTO automatically reduce the Stated Amount
of this Letter of Credit and no reinstatement shall occur.
3. Funds under this Letter of Credit are available to you from time
to time from the date hereof to the Termination Date against presentation (by
the time indicated below) of:
(a) if the relevant drawing is a Partial Draw, (i) your draft in the
form of Exhibit 1 hereto and (ii) a completed certificate signed in your
name by any two persons purporting to be your Vice Presidents and/or Senior
Vice Presidents in the form of (A) in the case of a Partial Draw pursuant
to Section 6(b) of the Collateral Agreement, Exhibit 2 hereto, and (B) in
the case of a Partial Draw pursuant to Section 6(d) of the Collateral
Agreement, Exhibit 3 hereto; and
(b) if the relevant drawing is a Final Draw, (i) your draft in the
form of Exhibit 1 hereto and (ii) a completed certificate signed in your
name by any two
<PAGE>
persons purporting to be your Vice Presidents and/or Senior Vice Presidents
in the form of Exhibit 4 hereto.
4. Each draft and certificate shall be dated the date of presentation
(which shall be a Business Day) and shall be presented at our office located at
[__________________________________________________________________] (or at any
other office in New York, New York which may be designated by us by written
notice delivered to you). If we receive any such draft and certificate at our
above-specified office, all in conformity with the terms and conditions of this
Letter of Credit, prior to 10:00 a.m. (New York City time) on any Business Day,
we will honor the draft by [2:00] p.m. (New York City time) on the relevant
Settlement Date. If we receive any such draft and certificate at such office on
or after 10:00 a.m. (New York City time) on any Business Day, for all purposes
hereof such draft and certificate shall be deemed presented on the next
succeeding Business Day. Payment under this Letter of Credit will be made by
wire transfer in Federal Funds to your account at ___________________ or such
other account in New York, New York; Atlanta, Georgia; or _____________ that you
may designate to us in writing. Following receipt of a draft and certificate
which are not in conformity with this Letter of Credit, we will promptly notify
you of such nonconformity and the reason therefor. By accepting this Letter of
Credit, you agree (i) to deliver to us a certificate in the form of Exhibit 5
hereto promptly after the occurrence of (a) if no drawing hereunder is made
pursuant to paragraph 3(a)(ii)(B) hereof, the first Payment Date occurring after
the Exchange Date or (b) if the Exchange Date has not occurred and no drawing
hereunder is made pursuant to paragraph 3(b) hereof, the date 30 days after the
Cut-off Date and upon receipt of such certificate (but after giving
<PAGE>
effect to any Partial Draw theretofore made hereunder) the amount of this Letter
of Credit shall be reduced to zero and (ii) to return the original hereof to us
promptly after the Termination Date.
5. The "Termination Date" shall be the earliest of 5:00 p.m., New
York time, (a) on the Settlement Date of any Final Draw, (b) on the Settlement
Date of any Partial Draw pursuant to paragraph 3(a)(ii)(B) hereof, (c) on the
date the Available Amount hereof is otherwise fully drawn or reduced to zero and
(d) [INSERT DATE WHICH IS 365 DAYS FROM SCHEDULED COMMENCEMENT DATE AND THE
NUMBER OF DAYS UNTIL THE NEXT SPECIAL DISTRIBUTION DATE AT LEAST 20 DAYS AFTER
SUCH 365TH DAY] (or if such date is not a Business Day, on the next succeeding
Business Day).
6. Any notice referred to herein that is to be given by us to you
shall be given by facsimile transmission addressed to you at NationsBank of
Georgia, National Association, 600 Peachtree Street, N.E. GA1-006-09-11,
Atlanta, Georgia 30308, telecopier: (404) 607-6534, Attention: Corporate Trust
Administration (or to such other address or facsimile number designated by you
by written notice delivered to us) and shall be effective upon receipt of the
appropriate answerback or confirmation by you of your receipt of the facsimile
transmission. We will also forward a copy of any notice sent by us to you by
overnight (or earlier) delivery service to the address set forth above. All
drawings and communications to us with respect to this Letter of Credit shall be
in writing and shall be addressed to us at [_________________________________
_______________________________], Attention: [_____________________], and shall
specifically refer to the number of this Letter of Credit.
<PAGE>
7. Except as set forth below, this Letter of Credit shall be governed
by the Uniform Customs and Practice for Documentary Credits (revision effective
January 1, 1994) International Chamber of Commerce Publication No. 500, and, as
to matters not covered therein, be governed by the law of the State of New York,
including without limitation the Uniform Commercial Code as in effect in such
State.
8. This Letter of Credit is not transferrable and the benefit hereof
may not be assigned except to a successor trustee to the Indenture Trustee.
9. This Letter of Credit sets forth in full our undertaking, and such
undertaking shall not in any way be modified, amended, amplified or limited by
reference to any document, instrument or agreement referred to herein, except as
provided in Schedule I and Exhibits 1 through 5 hereto and the notices referred
to herein; and any such reference shall not be deemed to incorporate herein by
reference any document, instrument or agreement except as set forth above.
Very truly yours,
[_________________________________],
[____________________]
By________________________________
Name:
Title:
By________________________________
Name:
Title:
<PAGE>
SCHEDULE I
to
Letter of Credit
----------------
Unless otherwise defined in this Schedule or the Letter of Credit,
capitalized terms used herein or therein shall have the meanings assigned
thereto in Schedule II to the Participation Agreement. Reference herein to any
agreement shall mean such agreement (other than the Lease and Lease Supplement)
as in effect on the date of the Letter of Credit.
"AVAILABLE AMOUNT" shall mean, subject to the second to last sentence
of paragraph 2 of the Letter of Credit, as of any Settlement Date the difference
between (i) the Stated Amount and (ii) the aggregate amount paid out pursuant to
prior drawings under the Letter of Credit.
"BASIC RENT" shall mean the aggregate periodic rent payable throughout
the Basic Term pursuant to Section 3.01 of the Lease.
"BUSINESS DAY" shall mean any day on which commercial banks are not
authorized or required to close in New York City and Memphis, Tennessee, and so
long as the Lien of the Indenture is in effect, in Atlanta, Georgia, and
Columbia, South Carolina, and thereafter in Salt Lake City, Utah.
"CERTIFICATES" shall mean the Equipment Trust Certificates (Federal
Express Trust No.___) issued by the Owner Trustee pursuant to the Indenture and
any certificate issued in exchange therefor or replacement thereof pursuant to
the Indenture.
"COLLATERAL AGREEMENT" shall mean the Collateral Agreement, dated as
of _________ 1994, between the Owner Trustee and the Indenture Trustee, as such
agreement is in effect on the date hereof.
"COMMENCEMENT DATE" shall mean the date on which the Aircraft is
leased by the Lessor to the Lessee under the Lease, which date shall also be the
date of the initial Lease Supplement.
"CUT-OFF DATE" shall mean the earlier to occur of (i) the date which
is 365 days after the Scheduled Commencement Date, or any earlier Business Day
(but in no event earlier than the Scheduled Commencement Date) specified as the
Cut-off Date by the Owner Trustee in an irrevocable written notice (including,
without limitation, in any such notice contemplated by Section 12 of the
Agreement to Lease) given to the Indenture Trustee not less than 30 days prior
thereto and (ii) 30 days after the date of any Pre-Lease Termination Notice in
accordance with Section 3 of the Agreement to Lease.
<PAGE>
"DEBT PORTION" shall mean the amount specified as such on Schedule IV
to the Participation Agreement.
"EXCHANGE DATE" shall mean the date on which the Indenture Trustee
releases the Debt Portion pursuant to Section 7(e) of the Collateral Agreement.
"FINAL DRAW" shall mean any draw under the Letter of Credit
contemplated by Section 6(c) of the Collateral Agreement.
"FINAL DRAW AMOUNT" shall mean the amount drawn or to be drawn
pursuant to a Final Draw.
"INTEREST PAYMENT DATE" shall mean each ________ and _________,
commencing _________, 1994
"LEASE" shall mean the Lease Agreement (Federal Express Corporation
Trust No. ______), in the form of Exhibit B to the Participation Agreement,
dated as of the Commencement Date or prior thereto, between the Lessor and the
Lessee, as said Lease may from time to time be supplemented or amended, or its
terms waived or modified, to the extent permitted by, and in accordance with,
the terms of the Indenture, including, without limitation, supplementation by
the Lease Supplement.
"LEASE SUPPLEMENT" shall mean the Lease Supplement, substantially in
the form of Exhibit A to the Lease, entered into between the Lessor and the
Lessee.
"PARTIAL DRAW" shall mean any draw under the Letter of Credit
contemplated by Section 6(b) or 6(d) of the Collateral Agreement.
"PARTIAL DRAW AMOUNT" shall mean the amount drawn or be drawn pursuant
to any Partial Draw.
"PAYMENT DATE" shall mean any Interest Payment Date or Sinking Fund
Redemption Date.
"PRE-FUNDING PREPAYMENT DATE" shall mean the date of any prepayment of
the Certificates required pursuant to Section 6.02(a)(vi) of the Indenture.
"PRE-FUNDING TERMINATION NOTICE" shall mean the Pre-Funding
Termination Notice provided pursuant to Section 3 of the Agreement to Lease.
<PAGE>
"PREPAYMENT PRICE" shall mean the aggregate amount required to be paid
pursuant to clause (i) of the last sentence of Section 6.02(b) of the Indenture
which amount shall be the sum of the aggregate principal amount of the
Certificates, accrued interest on the Certificates to the date of prepayment and
all other aggregate sums due to any Holder or the Indenture Trustee under the
Indenture, the Participation Agreement or the Lease.
"SCHEDULED COMMENCEMENT DATE" shall mean ____________.
"SETTLEMENT DATE" shall mean, with respect to any Partial Draw or
Final Draw, the first Business Day to fall on or after the fourth [__________]
Business Day to occur following the day of presentation pursuant to (and
determined in accordance with the provisions of) paragraph 4 of the Letter of
Credit and otherwise in conformity with all of the terms of the Letter of
Credit.
"SINKING FUND REDEMPTION DATE" shall mean the dates specified as such
in Section 6.06 of the Indenture.
"SINKING FUND REDEMPTION PRICE" shall have the meaning set forth in
Section 6.06 of the Indenture.
"SPECIFIED INVESTMENTS" shall have the meaning assigned thereto in the
Collateral Agreement.
"STATED AMOUNT" shall have the meaning assigned thereto in paragraph 1
of the Letter of Credit.
"TERMINATION DATE" shall have the meaning assigned thereto in
paragraph 5 of the Letter of Credit.
<PAGE>
EXHIBIT 1
to
Letter of Credit
----------------
[Place]
[Date], 199_
On [Settlement Date]
PAY TO U.S. $[not to exceed relevant
[Indenture Trustee] Partial Draw Amount or Final Draw Amount]
DOLLARS,
[Insert wire instructions]
FOR VALUE RECEIVED AND CHARGE TO ACCOUNT OF LETTER OF CREDIT
NO. _______________
To: [_________________________________________]
[Indenture Trustee]
By ___________________________
[Name and Title of Authorized
Representative of Indenture Trustee]
<PAGE>
EXHIBIT 2
to
Letter of Credit
----------------
CERTIFICATE FOR A PARTIAL DRAW
(Letter of Credit Paragraph 3(a)(ii)(A))
To: [_____________________________________]
The undersigned, duly authorized representatives of [Indenture
Trustee], beneficiary under that certain Irrevocable Letter of Credit No.
__________ dated __________ issued by [__________________________________
______________] (the "LETTER OF CREDIT"), hereby certify as follows:
1. The Exchange Date has not occurred prior to the date hereof and
the Payment Date to which this Partial Draw relates is
____________, 199_.
2. The Partial Draw Amount for such Payment Date is calculated as
follows:
(a) The amount of cash expected to $_________
be in the Collateral Account on
such Payment Date (giving effect to any
income from or proceeds of any Specified
Investments (as defined in the Collateral
Agreement) scheduled to mature on or prior
to such Payment Date)
(b) The Debt Portion $_________
(c) The excess of (a) over (b) $_________
(d) The aggregate amount of interest $_________
and any Sinking Fund Redemption
Price due with respect to the
Certificates as of such Payment Date
(e) The Partial Draw Amount for such $_________
Payment Date (I.E., the excess
of (d) over (c))
<PAGE>
3. The amount of the accompanying draft for the Partial Draw
Amount does not exceed the Available Amount under the Letter of
Credit as of the date for payment thereof.
4. The date hereof is a Business Day.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings given to them in the Letter of Credit (including Schedule I
thereto).
IN WITNESS WHEREOF, the undersigned have executed this Certificate as
of ____________________, 19__.
[Indenture Trustee]
By________________________
[Name and Title of Authorized
Representative of Indenture Trustee]
By_______________________
[Name and Title of
Authorized Representative
of Indenture Trustee]
<PAGE>
EXHIBIT 3
to
Letter of Credit
----------------
CERTIFICATE FOR A PARTIAL DRAW
(Letter of Credit Paragraph 3(a)(ii)(B))
To: [________________________________________]
The undersigned, duly authorized representatives of [Indenture
Trustee], beneficiary under that certain Irrevocable Letter of Credit No.
__________ dated __________ issued by [__________________________________
_____________] (the "LETTER OF CREDIT"), hereby certify as follows:
1. The Exchange Date occurred on _________ and the first Payment
Date thereafter is ______________.
2. The Partial Draw Amount for such Payment Date is as follows:
(a) The amount of cash expected to be in the $____________
Collateral Account on such Payment Date
(giving effect to income from or proceeds
of Specified Investments (as defined in the
Collateral Agreement) scheduled to mature
on or prior to such Payment Date)
(b) The excess of (i) the amount of any $____________
interest and any Sinking Fund
Redemption Price due with respect
to the Certificates as of such
Payment Date over (ii) the amount
of Basic Rent due on such Payment
Date pursuant to the Lease
(c) The Partial Draw Amount for such $____________
Payment Date (I.E., the excess of
(b) over (a))
<PAGE>
3. The amount of the accompanying draft for the Partial Draw Amount
does not exceed the Available Amount under the Letter of Credit
as of the date for payment thereof.
4. The date hereof is a Business Day.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings given to them in the Letter of Credit (including Schedule I
thereto).
IN WITNESS WHEREOF, the undersigned have executed this Certificate as
of ____________________, 19__.
[Indenture Trustee]
By________________________________
[Name and Title of Authorized
Representative of Indenture Trustee]
By________________________________
[Name and Title of Authorized
Representative of Indenture Trustee]
<PAGE>
EXHIBIT 4
to
Letter of Credit
CERTIFICATE FOR A FINAL DRAW
(Letter of Credit Paragraph 3(b))
To: [_________________________________________]
The undersigned, duly authorized representative of [Indenture
Trustee], beneficiary under that certain Irrevocable Letter of Credit No.
__________ dated __________ issued by [__________________________________
_____________] (the "LETTER OF CREDIT"), hereby certify as follows:
1. The Indenture Trustee has received notice of prepayment of the
Certificates pursuant to Section 6.02(a)(vi) of the Indenture and
the Pre-Funding Prepayment Date is to be ___________ __, 199_.
2. The Final Draw Amount is calculated as follows:
(a) The amount of cash expected $_____________
to be in the Collateral Account
on such Pre-Funding Prepayment
Date (giving effect to any
income from or proceeds of any
Specified Investment (as defined
in the Collateral Agreement)
scheduled to mature on or prior
to such Pre-Funding Prepayment Date)
(b) The aggregate Prepayment Price $_____________
due with respect to the
Certificates as of such Pre-
Funding Prepayment Date
(c) The Final Draw Amount (I.E., $_____________
the excess of (b) over (a))
3. The amount of the accompanying draft for the Partial Draw Amount
does not exceed the Available Amount as of the date for payment
thereof.
<PAGE>
4. The date hereof is a Business Day.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings given to them in the Letter of Credit (including Schedule I
thereto).
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Certificate as
of ____________________, 19__.
[Indenture Trustee]
By________________________________
[Name and Title of Authorized Representative
of Indenture Trustee]
By________________________________
[Name and Title of Authorized Representative
of Indenture Trustee]
<PAGE>
EXHIBIT 5
to
Letter of Credit
----------------
REDUCTION CERTIFICATE
(Letter of Credit Paragraph 4)
To: [__________________________________________]
The undersigned, duly authorized representative of [Indenture
Trustee], beneficiary under that certain Irrevocable Letter of Credit No.
__________ dated __________ issued by [__________________________________
________________] (the "LETTER OF CREDIT"), hereby certify as follows:
1. [The first Payment Date after the Exchange Date has occurred.]
[The date 30 days after the Cut-off Date has occurred.]*
2. The Stated Amount is reduced to zero and the Letter of Credit is
returned herewith to Westdeutsche Landesbank Girozentrale, New
York Branch.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings given to them in the Letter of Credit (including Schedule I
thereto).
IN WITNESS WHEREOF, the undersigned have executed this Certificate as
of ____________________, 19__.
[Indenture Trustee]
By________________________________
[Name and Title of Authorized Representative
of Indenture Trustee]
By________________________________
[Name and Title of Authorized Representative
of Indenture Trustee]
<PAGE>
* Insert appropriate language.
<PAGE>
Exhibit 4.g
COLLATERAL AGREEMENT (Trust No. )
---------------------------------------
THIS IS A COLLATERAL AGREEMENT (Trust No.____), dated as of ________,
1994 (this "Agreement"), between First Security Bank of Utah, National
Association, not individually but solely as Owner Trustee (the "Owner Trustee")
and NationsBank of Georgia, National Association, as Indenture Trustee.
Capitalized terms used but not defined herein shall have the respective meanings
set forth in or pursuant to Section 1 hereof.
WHEREAS, pursuant to the Participation Agreement, on the Closing Date
the Owner Trustee intends to issue and deliver to the Indenture Trustee for
authentication, and the Indenture Trustee intends to authenticate and deliver to
the Pass Through Trustee, one or more Certificates, the aggregate proceeds of
which are to be used, among other things, to finance a portion of the aggregate
amount of the Acquisition Cost of the related Aircraft.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and in order to provide Additional Collateral for
the Secured Obligations, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. The following terms shall have the meanings
set forth for such terms below. Capitalized terms used but not defined herein
shall have the respective meaning set forth in Schedule II hereto.
COLLATERAL. All Liquid Collateral and Demand Note Collateral.
COLLATERAL ACCOUNT. The deposit account established and maintained
pursuant to Section 3 hereof.
DEMAND NOTE COLLATERAL. The Demand Note together with proceeds
thereof.
DEMAND NOTE COLLATERAL ACCOUNT. Any separate account established
pursuant to Section 4(b) hereof.
ELIGIBLE DEPOSIT ACCOUNT. Either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution with corporate trust powers organized
under the laws of the United States or any state thereof, or the District of
Columbia, and whose deposits are insured by the Federal Deposit Insurance
Corporation, provided that such institution also must have a combined capital
and surplus of at least $100,000,000 and a rating of A or better from the
Thomson Bank Watch.
<PAGE>
ELIGIBLE INSTITUTION. A depository institution organized under the
laws of the United States or any one of the states thereof, or the District of
Columbia, or any domestic branch of a foreign bank, which in any such case at
all times (a) has either (x) a long-term unsecured debt rating of at least Aa2
by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's,
(b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y)
a short-term certificate of deposit rating of A-1+ by S&P and (c) is a member of
the Federal Deposit Insurance Corporation.
EXTENDED PRE-FUNDING PERIOD. The period from the Scheduled
Commencement Date to (and including) the earlier of the Exchange Date and any
Pre-Funding Prepayment Date.
LIQUID COLLATERAL. All amounts deposited from time to time in the
Collateral Account and all the products and proceeds of the foregoing,
including, but not limited to, all proceeds of the investment or conversion
thereof, voluntary or involuntary, into cash, Specified Investments or other
property, all rights to payment of any and every kind, and other forms of
obligations, and instruments and other property which at any time constitute all
or part or are included in the proceeds of any of the foregoing.
PARTIAL DRAW. Any draw under the Letter of Credit contemplated by
Section 6(b) or 6(d) hereof.
PARTIAL DRAW AMOUNT. The amount drawn pursuant to any Partial Draw.
SCHEDULED PRE-FUNDING PERIOD. The period from the Closing Date to
(and including) the Scheduled Commencement Date.
SPECIFIED INVESTMENTS. Any of the following: (a) direct obligations
of the United States of America and (b) obligations fully guaranteed by the
United States of America.
SECTION 2. [Intentionally Omitted]
SECTION 3. COLLATERAL ACCOUNT. (a) ESTABLISHMENT OF THE COLLATERAL
ACCOUNT. The Indenture Trustee shall establish, or cause to be established,
with itself or its designee, in its name as secured party hereunder, an
Eligible Deposit Account entitled "NationsBank of Georgia, National
Association, as secured party under the Trust Indenture and Security Agreement
(Trust No. ______) dated as of
-2-
<PAGE>
___________, 1994, with the Owner Trustee referred to therein".
(b) MAINTENANCE OF THE COLLATERAL ACCOUNT. If at any time the
Collateral Account ceases to be an Eligible Deposit Account, the Indenture
Trustee shall within 10 Business Days, establish a new Collateral Account
meeting the conditions specified in the definition of Eligible Deposit Account,
and shall transfer any cash or any investments in the Collateral Account to such
new Collateral Account.
(c) CONTROL OF COLLATERAL ACCOUNT. The Indenture Trustee shall have
exclusive dominion and control of the Collateral Account and all funds therein,
and shall make withdrawals from the Collateral Account only in accordance with
this Agreement.
SECTION 4. DEPOSITS AND DELIVERY OF COLLATERAL. (a) LIQUID
COLLATERAL. On the Closing Date, the Owner Trustee shall deposit, or shall
cause the deposit of, the Net Proceeds into the Collateral Account, and the
Indenture Trustee shall notify the Owner Trustee upon receipt thereof.
(b) DEMAND NOTE COLLATERAL. On the Closing Date, the Owner Trustee
shall deliver to the Indenture Trustee the Demand Note, in suitable form for
transfer by delivery, endorsed payable to the order of the Indenture Trustee, or
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to the Indenture Trustee. Any funds
constituting Demand Note Collateral, including any amounts paid pursuant to
demands contemplated by Section 6 hereof, shall be deposited into an Eligible
Deposit Account entitled "Demand Note Collateral Account, NationsBank of
Georgia, National Association, as secured party under the Trust Indenture and
Security Agreement (Trust No._____) dated as of __________, 1994, with the Owner
Trustee referred to therein", to be opened by the Indenture Trustee at the first
time of its receipt of any such funds. The Indenture Trustee shall have
exclusive dominion and control of any such Demand Note Collateral Account and
funds therein, and shall make withdrawals from such Demand Note Collateral
Account only in accordance with this Agreement.
SECTION 5. INVESTMENT OF FUNDS ON DEPOSIT IN THE COLLATERAL ACCOUNT.
(a) SPECIFIED INVESTMENTS. Funds deposited in the Collateral Account shall be
invested and reinvested by the Indenture Trustee, at the risk of the Owner
Trustee, in Specified Investments selected by the Indenture Trustee in
accordance with Section 5(b) below.
-3-
<PAGE>
The Indenture Trustee shall maintain possession of the negotiable instruments or
securities, if any, evidencing such Specified Investments and, in the case of
any Specified Investments in book-entry form, such Specified Investments shall
be credited to an account of the Indenture Trustee or its designee with the
applicable clearing agency designated by the Indenture Trustee. All proceeds of
and any income, interest and other payments and distributions on or with respect
to any Specified Investments shall be deposited in or credited to the Collateral
Account and thereafter shall be held, invested and applied by the Indenture
Trustee in accordance with this Agreement. The Indenture Trustee shall notify
the Owner Trustee of any losses incurred on Specified Investments in the
Collateral Account.
(b) MATURITY OF SPECIFIED INVESTMENTS. On the Closing Date, the
Indenture Trustee shall invest the amount deposited in the Collateral Account
pursuant to Section 4(a) hereof in the Specified Investments set forth in
Schedule I hereto. Such Specified Investments shall be held through maturity,
which Specified Investments shall mature on or prior to the Scheduled
Commencement Date. Any Specified Investments made after the Closing Date but
during the Scheduled Pre-Funding Period shall mature on or prior to the earliest
of the next subsequent Payment Date, any Pre-Funding Prepayment Date and the
Scheduled Commencement Date. Any Specified Investments made on or after the
Scheduled Commencement Date but during any Extended Pre-Funding Period shall
mature on or prior to (i) if a Commencement Date has been proposed pursuant to a
Delivery Notice under Section 3.01 of the Participation Agreement, such proposed
Commencement Date (or if such Commencement Date is postponed pursuant to a
Delivery Notice under Section 3.02 of the Participation Agreement, the
rescheduled Commencement Date specified therein), or (ii) if no such Delivery
Notice has been given, the earliest of the next subsequent Payment Date, any
Pre-Funding Prepayment Date and the Cut-off Date. Any Specified Investments
made on or after the Exchange Date shall mature on or prior to the next
subsequent Payment Date.
SECTION 6. CALCULATIONS, LETTER OF CREDIT DRAWS AND DEMAND NOTE
COLLECTIONS. (a) SCHEDULED PRE-FUNDING PERIOD DEBT SERVICE. No later than
9:00 A.M., New York time, four Business Days prior to each Payment Date during
the Scheduled Pre-Funding Period (except for any such Payment Date on a Pre-
Funding Prepayment Date, in which case Section 6(c) hereof shall apply), the
Indenture Trustee shall determine the lower of (x) the amount of cash expected
to be in the Collateral Account on such Payment Date (giving effect to any
income from or proceeds of any then-existing
-4-
<PAGE>
Specified Investments scheduled to mature prior to such Payment Date) and (y)
the excess of the amount of cash expected to be in the Collateral Account on
such Payment Date (giving effect to (1) any income from or proceeds of any then-
existing Specified Investments scheduled to mature on or prior to the Scheduled
Commencement Date and (2) any payment to be made on any other Payment Date prior
to the Scheduled Commencement Date) over the Debt Portion. The Indenture
Trustee shall, at or prior to such time of determination, notify the Owner
Trustee of (i) such lower amount of (x) and (y) above and (ii) the aggregate
amount of interest due with respect to the Certificates as of such Payment Date.
If the amount of clause (ii) above exceeds the amount of clause (i) above, the
Indenture Trustee shall demand the amount of such excess pursuant to the Demand
Note.
(b) EXTENDED PRE-FUNDING PERIOD DEBT SERVICE. No later than 9:00
A.M., New York time, four Business Days prior to each Payment Date during any
Extended Pre-Funding Period (except for any such Payment Date on a Pre-Funding
Prepayment Date, in which case Section 6(c) hereof shall apply), the Indenture
Trustee shall determine the excess of the amount of cash expected to be in the
Collateral Account on such Payment Date (giving effect to any income from or
proceeds of any then-existing Specified Investments scheduled to mature on or
prior to such Payment Date) over the Debt Portion. The Indenture Trustee shall,
at or prior to such time of determination, notify the Owner Trustee of (i) such
excess of the expected amount over the Debt Portion and (ii) the aggregate
amount of interest and any Sinking Fund Redemption Price due with respect to the
Certificates as of such Payment Date. If the amount of clause (ii) above
exceeds the amount of clause (i) above (any such excess, the "Debt Service
Shortfall"), the Indenture Trustee shall draw the amount of the Debt Service
Shortfall pursuant to the Letter of Credit. If the Debt Service Shortfall
exceeds the amount then available under the Letter of Credit, the Indenture
Trustee shall demand, pursuant to the Demand Note, the amount of such excess.
For the purposes of the first sentence of this Section 6(b), a Payment Date
shall be considered to be "during any Extended Pre-Funding Period" if (x) it is
to occur after the Scheduled Commencement Date but before the Cut-off Date and
(y) the Exchange Date has not occurred prior to the date that the determination
referred to in such sentence would otherwise be required.
(c) PRE-FUNDING PERIOD PREPAYMENTS. No later than 9:00 A.M., New
York time, four Business Days prior to the date of any prepayment of the
Certificates required pursuant to Section 6.02(a)(vi) of the Indenture (a "Pre-
-5-
<PAGE>
Funding Prepayment Date"), the Indenture Trustee shall determine the amount of
cash expected to be in the Collateral Account on such Pre-Funding Prepayment
Date (giving effect to any income from or proceeds of any then-existing
Specified Investments scheduled to mature on or prior to such Pre-Funding
Prepayment Date). The Indenture Trustee shall, at or prior to such time of
determination, notify the Owner Trustee of (i) such expected amount and (ii) the
aggregate Prepayment Price due with respect to the Certificates as of such Pre-
Funding Prepayment Date. If the amount of clause (ii) above exceeds the amount
of clause (i) above (any such excess, the "Prepayment Shortfall"), the Indenture
Trustee shall draw the amount of the Prepayment Shortfall pursuant to the Letter
of Credit. If the Prepayment Shortfall exceeds the amount then available under
the Letter of Credit, the Indenture Trustee shall demand, pursuant to the Demand
Note, the amount of such excess.
(d) DEBT SERVICE ON THE FIRST PAYMENT DATE AFTER THE EXCHANGE DATE.
No later than 9:00 A.M., New York time, four Business Days prior to the first
Payment Date occurring after the Exchange Date (unless Section 6(b) hereof shall
be applicable to such Payment Date), the Indenture Trustee shall determine the
amount of cash expected to be in the Collateral Account on such Payment Date
(giving effect to any income from or proceeds of any then-existing Specified
Investments scheduled to mature on or prior to such Payment Date). The
Indenture Trustee shall, at or prior to such time of determination, notify the
Owner Trustee of (i) such expected amount and (ii) the excess of (A) the sum of
the interest and any Sinking Fund Redemption Price due with respect to the
Certificates as of such Payment Date over (B) the amount of Basic Rent due from
the Lessee on such Payment Date pursuant to the Lease. If the amount of
clause (ii) above exceeds the amount of clause (i) above (any such excess, the
"Accrued Shortfall"), the Indenture Trustee shall draw the amount of the Accrued
Shortfall pursuant to the Letter of Credit. If the Accrued Shortfall exceeds
the amount then available under the Letter of Credit or the conditions for
drawing under the Letter of Credit are not met, the Indenture Trustee shall
demand the amount of such excess pursuant to the Demand Note.
SECTION 7. WITHDRAWALS AND CERTIFICATE PAYMENTS; RELEASE OF DEBT
PORTION. (a) SCHEDULED PRE-FUNDING PERIOD DEBT SERVICE. No later than 11:00
A.M., New York time, on each Payment Date as to which Section 6(a) hereof shall
be applicable, the Indenture Trustee shall withdraw from the Demand Note
Collateral Account (to the extent of any demand made pursuant to the last
sentence of Section 6(a) hereof) and then from the Collateral Account, and shall
pay to the
-6-
<PAGE>
Holders in accordance with Section 5.01(b) of the Indenture, an amount equal to
the aggregate amount of interest then due with respect to the Certificates.
(b) EXTENDED PRE-FUNDING PERIOD DEBT SERVICE. No later than
11:00 A.M., New York time, on each Payment Date as to which Section 6(b) hereof
shall be applicable, the Indenture Trustee (i) shall pay to the Holders in
accordance with Section 5.01(b) of the Indenture any Partial Draw Amount
received by the Indenture Trustee pursuant to a Partial Draw under Section 6(b)
hereof relating to such Payment Date and (ii) shall withdraw from the Demand
Note Collateral Account (to the extent of any demand made pursuant to the last
sentence of Section 6(b) hereof) and then from the Collateral Account, and shall
pay to the Holders in accordance with Section 5.01(b) of the Indenture, an
amount equal to the excess of (A) the aggregate amount of interest and any
Sinking Fund Redemption Price then due with respect to the Certificates over (B)
such Partial Draw Amount.
(c) PRE-FUNDING PERIOD PREPAYMENTS. No later than 11:00 A.M., New
York time, on any Pre-Funding Prepayment Date, the Indenture Trustee (i) shall
pay to the Holders in accordance with the last sentence of Section 5.02(a) of
the Indenture any amount received by the Indenture Trustee pursuant to a draw
under the Letter of Credit pursuant to Section 6(c) hereof and (ii) shall
withdraw from the Demand Note Collateral Account (to the extent of any demand
made pursuant to the last sentence of Section 6(c) hereof) and then from the
Collateral Account, and shall pay to the Holders in accordance with the last
sentence of Section 5.02(a) of the Indenture, an amount equal to the excess of
(A) the aggregate Prepayment Price then due with respect to the Certificates
over (B) such amount received pursuant to such draw under the Letter of Credit.
(d) PAYMENTS AFTER THE EXCHANGE DATE. No later than 11:00 A.M., New
York time, on any Payment Date as to which Section 6(d) hereof shall be
applicable, the Indenture Trustee (i) shall pay to the Holders in accordance
with Section 5.01(b) of the Indenture, any Partial Draw Amount pursuant to a
Partial Draw under Section 6(d) hereof and (ii) shall withdraw from the Demand
Note Collateral Account (to the extent of any demand made pursuant to the last
sentence of Section 6(d) hereof) and then from the Collateral Account, and shall
pay to the Holders in accordance with Section 5.01(b) of the Indenture, an
amount equal to the excess of (i) the aggregate amount of interest and any
Sinking Fund Redemption Price then due with respect
-7-
<PAGE>
to the Certificates over (ii) any Basic Rent then due from the Lessee pursuant
to the Lease.
(e) RELEASE OF DEBT PORTION ON EXCHANGE DATE. Subject to the
satisfaction or waiver of the conditions precedent to commencement of the Lease
or to the Indenture Trustee's obligations set forth in Section 4 of the
Agreement to Lease and Sections 4.02 and 4.03, as the case may be, of the
Participation Agreement (such satisfaction or waiver to be confirmed by a
certificate of the Owner Participant), on the Exchange Date the Indenture
Trustee shall release from the Collateral Account (i) any Demand Note Collateral
then held by the Indenture Trustee and (ii) an amount of Liquid Collateral equal
to the lesser of (A) the Debt Portion and (B) the amount actually in the
Collateral Account on the Exchange Date. Such amount so released pursuant to
clause (ii) above shall be used to finance a portion of the Purchase Price, the
Modification Cost (or such greater amount as is then payable by the Owner
Trustee with respect to the Aircraft pursuant to the Modification Agreement) and
the Parts Cost payable by the Owner Trustee as contemplated by Section 3.03(ii)
of the Participation Agreement.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE OWNER
TRUSTEE. (a) REPRESENTATIONS AND WARRANTIES. The Owner Trustee represents and
warrants that:
(i) except for the interests granted hereby, the Owner Trustee
is the owner and holder of the Collateral free from any claim,
security interest, encumbrance, lien, charge, or other right, title or
interest of any person; the Owner Trustee has full power and lawful
authority to enter into this Agreement and to grant, transfer, pledge
and assign the Collateral to the Indenture Trustee and to grant to the
Indenture Trustee a first and prior security interest therein as
herein provided, all of which have been duly authorized by all
necessary action; and
(ii) the Owner Trustee has not heretofore pledged or signed any
financing statement or security agreement (other than the Indenture)
which covers any of the Collateral.
(b) FURTHER ASSURANCES. The Owner Trustee shall, at its own expense,
take such actions and execute such other writings as may be necessary or as
reasonably requested by the Indenture Trustee to establish or perfect the
security interest created or purported to be created by the Indenture
-8-
<PAGE>
in the Collateral and to assist the Indenture Trustee's realization thereon. In
the event of any default in any execution by the Owner Trustee pursuant hereto,
the Indenture Trustee is authorized to execute any writings as the Owner
Trustee's agent and attorney-in-fact. The Owner Trustee will not enter into or
execute any security agreement or any financing statement covering the
Collateral, other than those in favor of the Indenture Trustee under the
Indenture.
(c) EXPENSES. In the event the Indenture Trustee shall incur or pay
any taxes, assessments, interests, costs, penalties or expenses incident to or
in connection with the holding, collection or protection of the Collateral, or
with the enforcement of any obligation of the Owner Trustee hereunder, the Owner
Trustee shall pay to the Indenture Trustee the full amount thereof upon demand,
and so long as the Indenture Trustee shall be entitled to any such payment, this
Agreement shall operate as security therefor.
SECTION 9. RIGHTS AND REMEDIES OF THE INDENTURE TRUSTEE UPON DEFAULT.
If an Indenture Event of Default shall have occurred and shall be continuing, or
if the Owner Trustee shall have defaulted in its obligation to pay any
outstanding Secured Obligation, the Indenture Trustee may exercise any of the
rights or remedies with respect to the Collateral set forth in the Indenture.
SECTION 10. STANDARD OF CARE. The Indenture Trustee may execute any
of its duties hereunder by or through agents or employees and shall be entitled
to retain or rely upon experts and to act in reliance upon the advice of such
experts concerning all matters pertaining to the agencies hereby created and its
duties hereunder, and shall not be liable for any action taken or omitted to be
taken by it in good faith in accordance with the advice of such experts. The
Indenture Trustee shall not be liable to the Owner Trustee for any error of
judgment or for any action taken or omitted to be taken by it hereunder, or in
connection herewith, except for its own gross negligence or willful misconduct;
nor shall the Indenture Trustee be responsible for the Specified Investments (or
any part thereof) or the performance thereof, except for its own gross
negligence or willful misconduct. The Indenture Trustee shall be entitled to
rely on any communication, instrument, paper or other document believed by it to
be genuine and correct and to have been signed or sent by the proper person or
persons. The Indenture Trustee shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral if the Collateral is
accorded
-9-
<PAGE>
treatment substantially equal to that which the Indenture Trustee accords its
own property.
SECTION 11. TERMINATION. This Agreement and the security interests
created with respect to the Collateral under the Indenture shall terminate upon
the earlier of (i) the payment in full of all Secured Obligations and (ii) the
Business Day after the first Payment Date after the Exchange Date, at which time
the Indenture Trustee shall execute and deliver to the Owner Trustee all
documents which the Owner Trustee shall reasonably request to evidence
termination of such security interest and shall return physical possession of
any Collateral then held by the Indenture Trustee to the Owner Trustee.
SECTION 12. MISCELLANEOUS. (a) CAPACITY IN WHICH ACTING. Each of
First Security Bank of Utah, National Association (or its permitted successors
or assigns) and the Indenture Trustee acts hereunder not in its individual
capacity but solely as trustee except as expressly provided herein and in the
other Operative Documents.
(b) NOTICES. Unless otherwise expressly specified or permitted by
the terms hereof, all notices, requests, demands, authorizations, directions,
consents, waivers or documents provided or permitted by this Agreement to be
made, given, furnished or filed shall be in writing and sent as required
pursuant to the Indenture, and shall be effective as of the time specified
therein.
(c) SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(d) NO ORAL MODIFICATIONS OR CONTINUING WAIVERS. No terms or
provisions of this Agreement may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party or other person
against whom enforcement of the change, waiver, discharge or termination is
sought and by any other party required to consent thereto pursuant to
Section 8.01 of the Indenture; and any waiver of the terms hereof shall be
effective only in the specific instance and for the specific purpose given.
(e) SUCCESSORS AND ASSIGNS. All covenants and agreements contained
herein shall be binding upon, and inure
-10-
<PAGE>
to the benefit of, each of the parties hereto and the successors and permitted
assigns of each, all as herein provided. This Agreement and the Collateral
shall not be affected by any amendment or supplement to the Trust Agreement or
by any other action taken under or in respect of the Trust Agreement, except
that each reference in this Agreement to the Trust Agreement shall mean the
Trust Agreement as amended and supplemented from time to time to the extent
permitted thereby and by the Indenture.
(f) HEADINGS. The headings of the various Articles and Sections
herein are for the convenience of reference only and shall not define or limit
any of the terms or provisions hereof.
(g) GOVERNING LAW; COUNTERPART FORM. THIS AGREEMENT SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE
OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
This Agreement may be executed by the parties hereto in separate counterparts,
each of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed this ___ day of __________, 1994 by their respective officers
thereunto duly authorized and acknowledge that this Indenture has been made and
delivered in the City of New York, and this Agreement shall be effective only
upon such execution and delivery.
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION,
not in its individual
capacity, except as otherwise
expressly provided herein, but
solely as Owner Trustee
By: ______________________________
Title:
NATIONSBANK OF GEORGIA,
NATIONAL ASSOCIATION,
not in its individual
capacity, except as otherwise
expressly provided herein, but
solely as Indenture Trustee
By: ______________________________
Title:
-12-
<PAGE>
SCHEDULE I
[Specified Investments on the Closing Date]
-13-
<PAGE>
Exhibit 23.d
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Form S-3 registration statement of our reports dated July 13,
1993, included (or incorporated by reference) in Federal Express Corporation's
Form 10-K for the year ended May 31, 1993, and to all references to our Firm
included in this registration statement.
/s/ ARTHUR ANDERSEN & CO.
Memphis, Tennessee,
February 14, 1994.
<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of FEDERAL EXPRESS CORPORATION, a Delaware
corporation (the "Corporation"), does hereby constitute and appoint Frederick W.
Smith, William J. Razzouk, Alan B. Graf, Jr. and Graham R. Smith, and each of
them, with full power of substitution and resubstitution, as his true and lawful
attorneys-in-fact and agents, with full power and authority to execute in the
name and on behalf of the undersigned as such Director, a Registration Statement
on Form S-3 to be filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, with respect to a shelf registration for
pass through certificates in an amount up to $400 million and any and all
amendments to such Registration Statement whether filed prior or subsequent to
the time such Registration Statement becomes effective; and hereby ratifies and
confirms all that such attorneys-in-fact and agents, or any of them, or their or
his substitute or substitutes may lawfully do or cause to be done by virtue of
these presents.
IN WITNESS WHEREOF, I have hereunto set by hand this 4th day of
-----
January , 1994.
- -----------
/s/ Anthony J.A. Bryan
------------------------------
Anthony J.A. Bryan
STATE OF Florida )
-------------- ss
COUNTY OF Palm Beach )
--------------
I, Patricia A. Gmyrek , a Notary Public in and for the aforesaid State
----------------------
and County, DO HEREBY CERTIFY that Anthony J.A. Bryan, personally known to me to
be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered the foregoing instrument as his free and voluntary act, for the uses
and purposes therein set forth.
/s/ PATRICIA A. GMYREK
------------------------------
NOTARY PUBLIC
