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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED MAY 31, 1996.
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED) FOR THE TRANSITION PERIOD FROM ______________
TO ______________.
COMMISSION FILE NUMBER 1-7806
FEDERAL EXPRESS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 71-0427007
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2005 CORPORATE AVENUE, MEMPHIS, TENNESSEE 38132
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (901) 369-3600
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
Common Stock, par value $.10 per share New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /x/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S) 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. / /
As of July 31, 1996, 56,944,841 shares of the Registrant's Common Stock were
outstanding and the aggregate market value of the voting stock held by non-
affiliates of the Registrant (based on the average bid and asked prices of such
stock on the New York Stock Exchange) was approximately $4,030,802,040.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the fiscal year ended May
31, 1996 are incorporated by reference into Parts II and IV.
Portions of the Proxy Statement for the Annual Meeting of Stockholders to
be held October 1, 1996 are incorporated by reference into Part III.
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TABLE OF CONTENTS
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PART I
ITEM 1. Business......................................................... 1
ITEM 2. Properties....................................................... 11
ITEM 3. Legal Proceedings................................................ 13
ITEM 4. Submission of Matters to a Vote of Security Holders.............. 14
Executive Officers of the Registrant............................. 15
PART II
ITEM 5. Market for the Registrant's Common Stock and Related Stockholder
Matters.......................................................... 18
ITEM 6. Selected Financial Data........................................... 18
ITEM 7. Management's Discussion and Analysis.............................. 18
ITEM 8. Financial Statements and Supplementary Data....................... 18
ITEM 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............................ 18
PART III
ITEM 10. Directors and Executive Officers of the Registrant.............. 18
ITEM 11. Executive Compensation.......................................... 19
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.. 19
ITEM 13. Certain Relationships and Related Transactions.................. 19
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.... 19
FINANCIAL STATEMENT SCHEDULE INDEX
Report of Independent Public Accountants on Financial Statement Schedule.... S-1
SCHEDULE II Valuation and Qualifying Accounts............................. S-2
EXHIBIT INDEX............................................................... E-1
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PART I
ITEM 1. BUSINESS
INTRODUCTION AND RECENT DEVELOPMENTS
- ------------------------------------
Federal Express Corporation (the "Company") was incorporated in Delaware on
June 24, 1971 and began operations in 1972. The Company offers a wide range of
express services for the time-definite transportation of documents, packages and
freight throughout the world using an extensive fleet of aircraft and vehicles
and leading-edge information technologies.
During fiscal year 1996, the Company continued to expand and improve its
global network of aviation, ground and information links between the major
trading centers of the Americas, Europe and Asia. The most significant
expansion was the launch of the Company's FedEx AsiaOne/R/ network. With
FedEx AsiaOne, the Company now connects Asia's major cities with late-in-the day
pickups and door-to-door, next-business-day deliveries, and provides Asia-to-
North America daily all-cargo flights. The Company also allocated larger
aircraft to its three daily trans-Atlantic flights, added a fifth daily trans-
Pacific flight and became the only U.S. all-cargo carrier authorized to fly into
and out of the People's Republic of China.
In September 1995, the Company unveiled FedEx First Overnight,/SM/ an 8:00
a.m. next business day delivery service from almost anywhere in the U.S. to more
than 90 major U.S. markets and, in March 1996, began FedEx International
First,/SM/ an 8:00 a.m. one to two business day delivery service for import
shipments to more than 90 U.S. cities from 18 business centers around the world.
The Company also added new Airbus A300 aircraft and introduced new innovative
technologies aimed at improving customer satisfaction while reducing the
resources required to serve customer needs, including the introduction of
shipment status tracking on the Company's World Wide Web page
(http://www.fedex.com).
FEDEX SERVICES
- --------------
The Company offers four U.S. domestic overnight delivery services: FedEx
First Overnight, FedEx Priority Overnight,/R/ FedEx Standard Overnight/R/
and FedEx/R/ Overnight Freight. Overnight document and package service
extends to virtually the entire United States population and overnight freight
service covers all major and most medium-size metropolitan areas. Packages and
documents are either picked up from shippers by Company couriers or are dropped
off by shippers at Company facilities, FedEx World Service Centers,/R/
FedEx/R/ Drop Boxes, FedEx ShipSites/R/ or FedEx Authorized ShipCenters/SM/
strategically located throughout the country.
The Company's newest overnight delivery service is FedEx First Overnight.
This next business day service offers scheduled delivery by 8:00 a.m. to over 90
U.S. cities from anywhere in the United States (except Hawaii) for packages
weighing up to 150 pounds. FedEx Priority Overnight, scheduled for delivery in
most communities no later than 10:30 a.m. local time the following business day,
is designed for packages weighing up to 150 pounds. Also available are Saturday
delivery service and Saturday pick-up for delivery the following Monday. FedEx
Standard Overnight is similar to, though more economical than, FedEx Priority
Overnight with delivery scheduled no later than 3:00 p.m. local time the
following business day in most communities. Company-provided packaging (FedEx
Letter Envelope, FedEx Pak, FedEx Box, FedEx Tube and FedEx Diagnostic Specimen
Envelope) is provided as part of these overnight services. FedEx Overnight
Freight is scheduled for delivery by noon or 4:30 p.m. the following business
day, depending on the recipient's location, and is designed for individual
shipments
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weighing 151 to 750 pounds. Shipments exceeding 750 pounds will be
accepted if advance approval is obtained.
Two U.S. domestic second-day services are available for less urgent
shipments: FedEx 2Day/SM/ and FedEx 2Day Freight./SM/ FedEx 2Day is designed
for packages weighing up to 150 pounds. FedEx 2Day shipments are scheduled for
delivery in most communities no later than 4:30 p.m. (7:00 p.m. for shipments
destined for private residences) the second business day following pick-up.
FedEx 2Day Freight is a time-definite U.S. domestic freight service for
individual shipments weighing 151 to 1,500 pounds. Shipments exceeding 1,500
pounds will be accepted if advance approval is obtained. Shipments are
scheduled for delivery no later than 4:30 p.m. the second business day in all
major and most medium-size metropolitan areas.
U.S. domestic overnight and second-day services are primarily used by
customers for shipment of time-sensitive documents and goods, high-value
machines and machine parts, computer parts, software and consumer items from
manufacturers, distributors and retailers and to retailers, manufacturers and
consumers. Company employees handle virtually every shipment from origin to
destination.
The Company's Collect On Delivery (C.O.D.) service provides the fastest
payment return in the express industry. C.O.D. payments are returned to
shippers within one or two business days compared to competitors' services which
can take as long as 45 days. Like the Company's other domestic services, C.O.D.
service offers money-back guarantees on timely delivery and on the Company's
ability to track and provide the status of any package in its system.
FedEx SameDay/SM/ service is for urgent shipments to virtually any U.S.
destination. This service is available seven days a week, 24 hours a day, where
available, and is designed for packages weighing up to 70 pounds that cannot
wait until the next day to be delivered.
The Company introduced FedEx Express Saver/SM/ Freight in 1996, a distance-
based, one, two or three business-day, time-definite service. FedEx Express
Saver Freight shipments are committed for delivery by 4:30 p.m. to virtually all
locations in the continental United States. This service is designed as an
express alternative to time-indefinite "less-than-truckload" shipments.
In addition to the services discussed above, the Company offers various
international document and package delivery services and international freight
services. FedEx International First/SM/is the Company's fastest international
service with delivery of import shipments by 8:00 a.m. within one to two
business days to more than 90 U.S. cities from 18 business centers around the
world. Customs clearance is included as part of this service.
FedEx International Priority/R/ ("IP") is a time-definite service for
documents and packages weighing up to 150 pounds. Customs clearance is included
as part of this service. The broker selection option for IP service permits
customers to designate their own customs broker for clearance. Pick-up and
delivery are provided from any point in the Company's global network. Delivery
is generally scheduled within one to three business days depending on the origin
and destination of the shipment and commodity limitations imposed by authorities
in the destination country. Size, weight and commodity limitations vary
according to destination.
FedEx International Priority/R/ Freight is an expansion of IP service and
is a time-definite service for international shipments weighing 151 to 1,500
pounds. Customs clearance is included as part of this service or customers are
permitted to designate their own customs broker for clearance where not
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prohibited by destination country laws. Pick-up and delivery are provided from
many points in the Company's domestic and international network around the
world. Delivery is generally scheduled within one to three business days
depending on the origin and destination of the shipment and commodity
limitations imposed by authorities in the destination country. Size, weight and
commodity limitations vary according to destination.
FedEx International Priority Plus/R/ is an overnight service for packages
(up to 70 pounds) and documents shipped from New York City to Amsterdam,
Brussels, Buenos Aires, Dublin, Frankfurt (documents only), Geneva, London,
Madrid (documents only), Milan (documents only), Paris, Rio De Janeiro
(documents only), Rome (documents only), Sao Paulo (documents only) and Zurich.
IP Plus shipments must be picked up or dropped off in most locations by 3:00
p.m. for delivery the next business day.
EXPRESSfreighter/R/ routing, discussed below, allows overnight service from
major locations in Europe and Asia to be scheduled for 10:30 a.m. delivery on
the next business day to many United States destinations and to major business
centers in Canada and Mexico.
More economical than IP service, FedEx International Priority Direct
Distribution/SM/ is a time-definite service for larger bulk shipments destined
to several different recipients in one country. Once the bulk shipment arrives
in the destination country and the entire shipment clears, the individual
packages are separated and delivered to the recipients. Weight and size
restrictions are the same as for IP service, with transit time one to two days
longer.
FedEx International MailService/R/ provides for the pick-up,
transportation and sorting of nondutiable, printed material and certain low-
value, dutiable items which are tendered for delivery to postal services
throughout the world. Generally, material sent by FedEx International
MailService for premium service is delivered to recipients within four to seven
days, while receipt of material sent by FedEx International MailService for
standard service takes seven to eleven days.
FedEx International Economy/SM/ is a deferred, customs-cleared service for
shipments of unlimited weight (except individual boxes within the shipment may
not exceed 150 pounds). This service is available Monday through Friday only
between the United States and Canada with a delivery commitment of two to three
business days by 5:00 p.m. This service offers customers cost-effective rates,
customs clearance, package tracking and the Company's money-back guarantee on
service commitments.
FedEx International Express Freight,/R/ a freight service for shipments
of nearly any weight, size or shape, is available between major markets in North
America, Asia, Australia, Europe and South America. This service, providing
scheduled delivery from one to three business days depending on destination, is
designed for shippers desiring time-definite, committed delivery with the option
of customs clearance provided by the Company. Commodity limitations vary
according to destination.
FedEx International Airport-to-Airport/SM/ is an international airfreight
service designed for freight forwarders and agents who do not require a time-
definite, committed delivery. Space-available service is offered to and from
virtually any airport around the world for airfreight shipments of nearly any
weight, size or shape, with arrival at the destination airport from two to four
days after tender of the shipment. If the Company's aircraft do not serve the
destination airport, another carrier's services are used pursuant to an
"interline" agreement or other arrangement with such carrier. Commodity
limitations vary according to destination.
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CHARTER SERVICES AND CRAF PARTICIPATION
- ---------------------------------------
The Company offers commercial and military charter services which
supplement the utilization of aircraft capacity when not needed in the Company's
scheduled operations. In addition to providing these charter services, the
Company participates in the Civil Reserve Air Fleet ("CRAF") program. Under
this program, the Department of Defense may requisition for military use certain
of the Company's wide-bodied aircraft in the event of a declared need, including
a national emergency. The Company is compensated for the operation of any
aircraft requisitioned under the CRAF program at standard contract rates
established each year in the normal course of awarding contracts. Through its
participation in the CRAF program, the Company is entitled to bid on peacetime
military cargo charter business. The Company, together with a consortium of
other carriers, currently contracts with the U.S. Government for charter
flights. The Company, while continuing to participate in the CRAF program and
continuing to bid on military charters with respect to the carriage of cargo,
discontinued military passenger flights at the end of September 1992.
During fiscal 1996, revenues from charter operations accounted for
approximately 0.9% of the Company's total revenues and approximately 1.2% and
1.3% of total revenues during fiscal 1995 and 1994, respectively.
LOGISTICS, ELECTRONIC COMMERCE AND CATALOG
- ------------------------------------------
Logistics, Electronic Commerce and Catalog ("LECC"), formerly FedEx
Logistics Services, is a division of the Company which offers a full range of
global and regional logistics, information and marketing solutions as well as
other innovative services. LECC focuses on markets where delivering high-speed,
time-definite, information-intensive solutions provide significant customer
value. In 1996, LECC expanded its information systems focus to solutions that
enable customers to do business electronically -- ranging from order-entry to
after-sales support. The combination of these electronic commerce capabilities
and the Company's global transportation and information network will allow the
Company's customers to redesign their supply chains to reduce cost and improve
service to their customers.
LECC solutions include FedEx PowerPartner,/R/ an electronic order entry
system, FedEx interNetShip,/SM/ FedEx Ship/R/ and the FedEx POWERSHIP/R/
options discussed below, FedEx Express Distribution Center/SM/ facilities and
services such as EMerge,/R/ FedEx Repair and Return and FedEx International
Priority DirectDistribution. FedEx Express Distribution Center facilities are
part of LECC's inventory management and warehouse service. LECC customers
warehouse their time-sensitive goods in the Company's distribution facilities,
and the Company in turn accepts and fills customer orders and delivers the goods
to the end user through the Company's global transportation network.
EMerge is designed for customers that source components in multiple
locations. EMerge consolidates shipments en route so that components from
different U.S. locations are delivered the same day. FedEx Repair and Return is
a domestic door-to-door, fast cycle repair service where the Company manages the
pickup, repair and return of defective computers and other electronics products.
Woven throughout these solutions and services is the Marketing Advantage
Program. Through this consulting program, LECC offers advice to catalogers and
direct marketers regarding customized promotional strategies, telemarketing
training, operational support and international mailing services. This program
helps the Company's customers improve their businesses by marketing their use of
FedEx value-added logistics and electronic commerce services to their customers.
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LECC has offices and operating locations in Memphis and other key U.S.
cities, the United Kingdom, Belgium, France, the Netherlands, the United Arab
Emirates, Singapore, Hong Kong, the Philippines and Japan to serve its customers
globally.
PRICING
- -------
The Company periodically publishes list prices in its Service Guides for
the majority of its services. In general, domestic shipping rates are based on
the service selected, weight, size, any ancillary service charge and whether or
not the shipment is picked up by a Company courier or dropped off by the
customer at a Company location. International rates are based on the type of
service provided and vary with size, weight and destination. The Company offers
its customers volume discounts generally based on actual or potential average
daily revenue produced. Discounts are determined by reference to several local
and national revenue bands developed by the Company. In general, the more
revenue a particular customer produces, the greater the discount. Of the more
than two million current customers of the Company, a significant portion
participates in its discount program.
SERVICE REVENUES
- ----------------
The following table shows the amount of revenues generated for each class
of service offered for the fiscal years ending May 31 (amounts in thousands):
1996 1995 1994
----------- ---------- ----------
FedEx Priority Overnight $ 4,170,254 $3,908,837 $3,737,022
FedEx Standard Overnight 1,616,538 1,374,440 1,178,628
FedEx 2Day 1,365,430 1,284,297 1,110,543
Domestic freight services 132,122 132,672 115,365
International priority services 1,996,827 1,679,830 1,338,795
International freight services 554,143 580,315 504,738
Charter 92,389 115,062 113,446
LECC and other* 345,916 316,620 380,919
----------- ---------- ----------
Total $10,273,619 $9,392,073 $8,479,456
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*Includes revenues generated by the specialized services summarized above
under "Logistics, Electronic Commerce and Catalog." Also, includes revenues
from sales of aircraft engine noise-reduction kits, non-U.S. intra-country
operations and Warren Transport, Inc. (sold September 1993).
SEASONALITY OF BUSINESS
- -----------------------
The Company's express package business and international airfreight
business are both seasonal in nature. Historically, the domestic package
business experiences an increase in late November and December. International
business, particularly in the Asia to U.S. markets, peaks in October and
November due to domestic holiday sales. The latter part of the Company's third
fiscal quarter and late summer, being post-winter holiday and summer vacation
seasons, have historically exhibited lower volumes relative to other periods.
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OPERATIONS
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The Company's global transportation and distribution services are provided
through an extensive worldwide network consisting of numerous aviation and
ground transportation operating rights and authorities, 559 aircraft,
approximately 36,900 vehicles, sorting facilities, FedEx World Service Centers,
FedEx Drop Boxes, FedEx ShipSites, FedEx Authorized ShipCenters and
sophisticated package tracking, billing and communications systems.
The Company's primary U.S. domestic sorting facility, the SuperHub located
in Memphis, serves as the center of the Company's multiple hub-and-spokes U.S.
domestic system. A second national hub is located in Indianapolis. In addition
to these national hubs, the Company operates regional hubs in Newark and Oakland
and major metropolitan sorting facilities in Los Angeles and Chicago.
Facilities in Anchorage, Alaska and Subic Bay, the Philippines, serve as sorting
facilities for express package and freight traffic moving to and from Asia,
Europe and North America. Major sorting and freight handling facilities are
located at Narita Airport in Japan, Charles de Gaulle Airport in Paris and
Stansted Airport outside London.
The Company's EXPRESSfreighter flights provide faster international service
through direct flights between major markets in Asia, Europe and North America.
For example, EXPRESSfreighter flights from Hong Kong, Osaka, Singapore, Taipei
and Tokyo to the Company's facility in Anchorage and from there to the SuperHub
in Memphis allow for next business day delivery by 10:30 a.m. in the United
States and to major business centers in Canada, Mexico and the Caribbean. Cargo
on EXPRESSfreighter flights bound for Europe is flown for second-day delivery to
sixteen European cities. Westbound from Europe, EXPRESSfreighter service is
available from Amsterdam, Antwerp, Basel, Brussels, Frankfurt, London,
Luxembourg, Milan, Paris and Zurich for 10:30 a.m. next-day delivery in most of
North America.
Throughout its worldwide network, the Company operates city stations and
employs a staff of customer service agents, cargo handlers and couriers who pick
up and deliver shipments in the station's service area. In some cities, the
Company operates FedEx World Service Centers which are staffed, store-front
facilities located in high-traffic, high-density areas. Unmanned FedEx Drop
Boxes provide customers the opportunity to drop off packages at locations in
office buildings, shopping centers and corporate or industrial parks. The
Company has also formed alliances with certain retailers to extend this customer
convenience network to over 7,000 drop-off sites in retail stores. In
international regions where low package traffic makes the Company's direct
presence less economical, Global Service Participants have been selected to
complete deliveries.
The Company has an advanced package tracking and billing system, FedEx
Cosmos, that utilizes hand-held electronic scanning equipment and computer
terminals. This system provides proof of delivery information, an
electronically reproduced airbill for the customer and information regarding the
location of a package within the Company's system. For international shipments,
the Company has developed FedEx ExpressClear, a worldwide electronic customs
clearance system, which speeds up customs clearance by allowing customs agents
in destination countries to review information about shipments before they
arrive. The Company has 16 computerized telephone customer service centers in
the United States which handle thousands of customer calls daily. In general,
the Company's international locations handle customer calls locally.
The Company provides many of its customers FedEx PowerShip/R/ 2, a
computer system, which provides package tracking, produces shipping labels,
calculates shipping charges, invoices the customer daily and produces customized
reports. For customers that ship 100 or more packages a day, the Company
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offers FedEx PowerShip Plus software, which performs the same functions as FedEx
PowerShip 2 but can be integrated with the customer's own computer systems for
customer service, accounting, inventory control and financial analysis purposes.
FedEx PowerShip PassPort is an automated shipping system which is automatically
updated with the Company's system information, such as routing codes and rates.
FedEx PowerShip 3 enables customers who ship as few as three packages per day to
enjoy the advantage of automated shipping.
The Company also offers FedEx Ship software, free of charge, that can be
used on a personal computer. FedEx Ship allows customers to generate plain-
paper airbills on a laser printer, track shipments, order FedEx pickups and
maintain a database of shipping addresses and activity using modems and their
own personal computers. In 1996, the Company introduced shipment status
tracking on its World Wide Web page. From the Web site, shippers can retrieve
precise details on the status of their shipments any time of day from anywhere
in the world. In July 1996, the Company introduced FedEx interNetShip which
provides shipment processing capability on the World Wide Web.
FUEL SUPPLIES AND COSTS
- -----------------------
During 1996 the Company purchased aviation fuel from various suppliers
under contracts which vary in length from 12 to 36 months and which provide for
specific amounts of fuel to be delivered. Certain of these contracts extend
through May 1999. The fuel represented by these contracts is purchased at
market price which may fluctuate daily. The Company believes that, barring a
substantial disruption in supplies of crude oil, these agreements will ensure
the availability of an adequate supply of fuel for the Company's needs for the
immediate future. However, a substantial reduction of oil supplies from oil
producing regions or refining capacity, or other events causing a substantial
reduction in the supply of aviation fuel, could have a significant adverse
effect on the Company.
The Company has also entered into contracts which are designed to limit its
exposure to fluctuations in jet fuel prices. Under these contracts, the Company
makes (or receives) payments based on the difference between a specified lower
(or upper) limit and the market price of jet fuel, as determined by an index of
spot market prices representing various geographic regions. The difference is
recorded as an increase or decrease in fuel expense. At May 31, 1996, the
Company had contracts with various financial institutions covering a total
notional volume of 365.3 million gallons (approximately 54% of the Company's
annual jet fuel consumption), with some contracts extending through May 1997.
During 1996, the Company received $1,977,000 under jet fuel contracts.
The following table sets forth the Company's costs for aviation fuel and
its percentage of total operating expense for the previous five fiscal years:
TOTAL COST PERCENTAGE OF TOTAL
FISCAL YEAR (IN THOUSANDS) OPERATING EXPENSE
- ------------- -------------- --------------------
1996 $461,401 4.8%
1995 394,225 4.5
1994 374,561 4.7
1993 403,597 5.4
1992 414,481 5.5
Approximately 40% of the Company's requirement for vehicle fuel is
purchased in bulk. The remainder of the Company's requirement is satisfied by
retail purchases with various discounts. The
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percentage of total operating expense for vehicle fuel purchases for each of the
last five fiscal years has not exceeded 1.5%.
COMPETITION
- -----------
The U.S. domestic express market is highly competitive and sensitive to
both price and service. Competitors in this market include other express
package concerns, principally United Parcel Service and Airborne Express,
passenger airlines offering package express services, regional express delivery
concerns, airfreight forwarders and the United States Postal Service.
The international express package and freight markets are also highly
competitive. Ability to compete effectively internationally depends principally
upon price, frequency and capacity of scheduled service, extent of geographic
coverage and reliability. The Company currently holds certificates of authority
to serve more foreign countries than any other United States all-cargo air
carrier and its extensive, scheduled international route system allows it to
offer single-carrier service to many points not offered by its principal all-
cargo competitors. This international route system, combined with an integrated
air and ground network, enables the Company to offer international customers
more extensive single-carrier service to a greater number of domestic points
than can be provided currently by competitors. However, many of the Company's
competitors in the international market are government owned, controlled, or
subsidized carriers which may have greater resources, lower costs, less profit
sensitivity and more favorable operating conditions than the Company. The
Company's principal competitors in the international market are foreign national
air carriers, United States passenger airlines and all-cargo airlines and other
express package companies including United Parcel Service and DHL.
REGULATION
- ----------
Air
Under the Federal Aviation Act of 1958, as amended, both the Department of
Transportation ("DOT") and the Federal Aviation Administration ("FAA") exercise
regulatory authority over the Company. The DOT's authority relates primarily to
economic aspects of air transportation. The DOT's jurisdiction extends to
aviation route authority, pricing oversight and to other regulatory matters,
including the transfer of route authority between carriers. The Company holds
various certificates of public convenience and necessity issued by the DOT,
authorizing the Company to engage in domestic and international air
transportation of property and mail on a worldwide basis. The Company's
international authority permits it to carry cargo and mail from several points
in its domestic route system to numerous points throughout the world. The DOT
regulates international routes, fares, rates and practices and is authorized to
investigate and take action against discriminatory treatment of United States
air carriers abroad. The right of a United States carrier to serve foreign
points is subject to the DOT's approval and generally requires a bilateral
agreement between the United States and the foreign government. The carrier
must then be granted the permission of such foreign government to provide
specific flights and services. The regulatory environment for global aviation
rights may from time to time impair the ability of the Company to operate its
air network in the most efficient manner. The FAA's regulatory authority
relates primarily to safety aspects of air transportation, including aircraft
standards and maintenance, personnel and ground facilities. The Company holds
an operating certificate granted by the FAA pursuant to Part 121 of the Federal
Aviation Regulations. This certificate is of unlimited duration and remains in
effect so long as the Company maintains its standards of safety and meets the
operational requirements of the regulations.
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Ground
The ground transportation performed by the Company is integral to its air
transportation services. Prior to January 1996, the Company conducted its
interstate motor carrier operations pursuant to common and contract carrier
authorities issued by the Interstate Commerce Commission ("ICC"). The ICC
Termination Act of 1995 abolished the ICC and transferred responsibility for
interstate motor carrier registration to the Federal Highway Administration of
the DOT ("FHA"). Carriers already holding ICC authority were not required to
register with the FHA. The Bureau of Motor Carrier Safety of the FHA regulates
the safety aspects of the Company's motor vehicle operations.
The enactment of the Federal Aviation Administration Authorization Act of
1994 abrogated the authority of states to regulate the rates, routes or services
of intermodal all-cargo air carriers and most motor carriers. States may now
only exercise jurisdiction over safety and insurance. The Company is registered
in those states that require registration.
Communication
Because of the extensive use of radio and other communication facilities in
its aircraft and ground transportation operations, the Company is subject to the
Federal Communications Commission Act of 1934, as amended. Additionally, the
Federal Communications Commission regulates and licenses the Company's
activities pertaining to satellite communications.
Environmental
Pursuant to the Federal Aviation Act, the FAA, with the assistance of the
Environmental Protection Agency, is authorized to establish standards governing
aircraft noise. The Company's present aircraft fleet is in compliance with
current noise standards of the Federal Aviation Regulations. The Company's
aircraft are also subject to, and are in compliance with, the regulations
limiting the level of engine smoke emissions. In addition to federal regulation
of aircraft noise, certain airport operators have local noise regulations which
limit aircraft operations by type of aircraft and time of day. These
regulations have had a restrictive effect on the Company's aircraft operations
in some of the localities where they apply but do not have a material effect on
any of the Company's significant markets. Congress' passage of the Airport
Noise and Capacity Act of 1990 established a National Noise Policy which enabled
the Company to plan for noise reduction and better respond to local noise
constraints.
Certain regulations under the Clean Water Act, the Clean Air Act and the
Resource Conservation and Recovery Act impact the Company's operations. The
Company is most directly affected by regulations pertaining to underground
storage tanks, hazardous waste handling, vehicle and equipment emissions and the
discharge of effluents from properties and equipment owned or operated by the
Company.
EMPLOYEES
- ---------
At July 1, 1996, the Company employed approximately 70,692 permanent full-
time and 43,516 permanent part-time employees, of which approximately 22% are
employed in Memphis. Employees of the Company's international branches and
subsidiaries in the aggregate comprise approximately 11% of all employees. The
Company believes its relationship with its employees is excellent.
Following the Company's flight crewmembers' decision to form a collective
bargaining unit, the Company and the Air Line Pilots Association ("ALPA") began
negotiations toward a comprehensive
9
<PAGE>
collective bargaining agreement in 1993. In October 1994, ALPA petitioned the
National Mediation Board (the "NMB") to provide mediation to assist in contract
negotiations, and the NMB appointed two mediators. In October 1995, the NMB
released the parties from mediation and the parties entered a "cooling off"
period. No agreement was reached during the "cooling off" period so the parties
instituted "self-help" activities. In January 1996, ALPA voluntarily suspended
all self-help activities and a tentative agreement was reached on March 18,
1996. However, in June 1996, the ALPA membership, pursuant to a vote, did not
ratify the tentative agreement. In July 1996, the FedEx Pilots Association, an
independent collective bargaining organization, filed an application with the
NMB seeking an election to determine the collective bargaining representative
for the Company's flight crewmembers. The NMB has ruled on this application for
election and has ordered an election to be held during September and October
1996.
Attempts by other labor organizations to organize certain other groups of
employees have been initiated. Although the Company cannot predict the outcome
of these labor activities or their effect on the Company or its employees, if
any, the Company is responding to these organization attempts.
FINANCIAL INFORMATION ABOUT FOREIGN AND U.S. DOMESTIC OPERATIONS
- ----------------------------------------------------------------
For information concerning financial results for U.S. domestic and
international operations for the three years ended May 31, 1996, 1995 and 1994,
refer to Note 10 of Notes to Consolidated Financial Statements contained in the
Company's 1996 Annual Report to Stockholders, which Note is incorporated herein
by reference.
10
<PAGE>
ITEM 2. PROPERTIES
The Company's principal owned or leased properties include its aircraft,
vehicles, national, regional and metropolitan sorting facilities, administration
buildings, FedEx World Service Centers, FedEx Drop Boxes and data processing and
telecommunications equipment.
AIRCRAFT AND VEHICLES
- ---------------------
The Company's aircraft fleet at July 1, 1996 consisted of the following:
MAXIMUM GROSS
STRUCTURAL PAYLOAD
DESCRIPTION NUMBER (POUNDS PER AIRCRAFT)**
- ----------- ------ -----------------------
Boeing B747-200 3* 250,000
McDonnell Douglas MD11 19* 198,500
McDonnell Douglas DC10-30 22* 172,000
McDonnell Douglas DC10-10 13* 142,000
Airbus A300-600 17* 117,700
Airbus A310-200 26* 74,200
Boeing B727-200 95* 59,500
Boeing B727-100 68* 38,000
Fokker F27-500 24 14,000
Fokker F27-600 8 12,500
Cessna 208B 254 3,500
Cessna 208A 10 3,000
---
Total 559
- -------------------------
*3 B747-200, 18 MD11, 17 DC10-30, 4 DC10-10, 17 A300, 16 A310, 13 B727-200 and 5
B727-100 aircraft are subject to operating leases.
**Maximum gross structural payload includes revenue payload and container
weight.
The A300s and A310s are two-engine, wide-bodied aircraft which have a
longer range and more capacity than B727s. The MD11s are three-engine, wide-
bodied aircraft which have a longer range and larger capacity than DC10s. The
DC10s are three-engine, wide-bodied aircraft which have been specially modified
to meet the Company's cargo requirements. The B747s are four-engine, wide-
bodied aircraft. The B727s are three-engine aircraft configured for cargo
service. The Company's Fokker F27 and Cessna 208 turbo-prop aircraft are leased
to unaffiliated operators to support Company operations in areas where demand
does not justify use of a larger aircraft. An inventory of spare engines and
parts is maintained for each aircraft type.
In addition, the Company "wet leases" approximately 44 smaller piston-
engine and turbo-prop aircraft which feed packages to and from airports served
by the Company's larger jet aircraft. The wet lease agreements call for the
owner-lessor to provide flight crews, insurance and maintenance, as well as fuel
and other supplies required to operate the aircraft. The Company's wet lease
agreements are for terms not exceeding one year and are generally cancelable
upon 30 days notice.
11
<PAGE>
At July 1, 1996, the Company operated approximately 36,900 ground transport
vehicles, including pick-up and delivery vans, larger trucks called container
transport vehicles and over-the-road tractors and trailers.
AIRCRAFT PURCHASE COMMITMENTS
- -----------------------------
At July 1, 1996, the Company was committed under various contracts to
purchase eight Airbus A300, 11 Airbus A310 and nine McDonnell Douglas MD11
aircraft to be delivered through 2000. In addition, the Company may be required
to purchase seven MD11 aircraft for delivery beginning no later than 2000 under
a put option agreement.
SORTING AND HANDLING FACILITIES
- -------------------------------
At July 1, 1996, the Company operated the following sorting and handling
facilities:
<TABLE>
<CAPTION>
SORTING LEASE
SQUARE CAPACITY EXPIRATION
LOCATION ACRES FEET (PER HOUR)* LESSOR YEAR
-------- ----- ------- ----------- ------ ----------
<S> <C> <C> <C> <C> <C>
NATIONAL
- --------
Memphis, Tennessee 395 2,742,196 491,000 Memphis-Shelby County Airport 2014
Authority
Indianapolis, Indiana 120 645,000 153,000 Indianapolis Airport 2016
Authority
REGIONAL
- --------
Newark, New Jersey 56 554,000 108,000 Port Authority of New 2010
York and New Jersey
Oakland, California 21 191,000 50,000 City of Oakland 2011
METROPOLITAN
- ------------
Los Angeles, California 25 130,000 53,000 City of Los Angeles 2009
Chicago, Illinois 55 419,000 47,000 City of Chicago 2018
Anchorage, Alaska+ 42 208,000 3,600 Alaska Department of 2013
Transportation and Public
Facilities
Subic Bay, 11 169,800 16,000 Subic Bay 2002
The Philippines++ Metropolitan Authority
</TABLE>
- ------------------------
* Documents and packages
+ Handles international express package and freight shipments to and from Asia,
Europe and North America.
++ Handles intra-Asia express package and freight shipments.
12
<PAGE>
The Company's facilities at the Memphis International Airport also consist
of aircraft hangars, flight training and fuel facilities, administrative offices
and warehouse space. The Company leases these facilities from the Memphis-
Shelby County Airport Authority under several leases. The leases cover land,
the administrative and sorting buildings, other facilities, ramps and certain
related equipment. The Company has the option to purchase certain equipment
(but not buildings or improvements to real estate) leased under such leases at
the end of the lease term for a nominal sum. The leases obligate the Company to
maintain and insure the leased property and to pay all related taxes,
assessments and other charges. The leases are subordinate to, and the Company's
rights thereunder could be affected by, any future lease or agreement between
the Authority and the United States Government.
In addition to the facilities noted above, the Company has major
international sorting and freight handling facilities located at Narita Airport
in Japan, Charles de Gaulle Airport in Paris, France and Stansted Airport
outside London, England. The Company is also developing a regional sorting hub
in Fort Worth, Texas which is expected to become operational in 1998.
ADMINISTRATIVE AND OTHER PROPERTIES AND FACILITIES
- --------------------------------------------------
The Company has facilities housing administrative and technical operations
on approximately 200 acres adjacent to the Memphis International Airport. Of
the seven buildings located on this site, four are subject to long-term leases,
and the other three are owned by the Company. The Company also leases 65
facilities in the Memphis area for its corporate headquarters, warehouse
facilities and administrative offices.
The Company owns 16 and leases 789 facilities for city station operations
in the United States. In addition, 122 city stations are owned or leased
throughout the Company's international network. The majority of these leases
are for terms of five to ten years. The Company believes that suitable
alternative facilities are available in each locale on satisfactory terms, if
necessary. As of July 1, 1996, the Company leased space for 405 FedEx World
Service Centers in the United States and had placed approximately 33,604 Drop
Boxes. The Company also owns stand-alone mini-centers located on leaseholds in
parking lots adjacent to office buildings, shopping centers and office parks of
which 231 were operating at July 1, 1996. Internationally, the Company leases
space for 14 FedEx World Service Centers and has approximately 662 FedEx Drop
Boxes.
The Company leases central processing units and most of the disk drives,
printers and terminals used for data processing. Owned equipment consists
primarily of Digitally Assisted Dispatch Systems ("DADS") terminals used in
communications between dispatchers and couriers, computerized routing, tracing
and billing equipment used by customers and mobile radios used in the Company's
vehicles. The Company also leases space on C-Band and Ku-Band satellite
transponders for use in its telecommunications network.
ITEM 3. LEGAL PROCEEDINGS
On May 14, 1996, a class-action suit was filed by customers of the Company
in the United States District Court for the District of Minnesota. The
complaint generally alleges that the Company breached its contract with the
plaintiffs in transporting packages shipped by them by continuing to collect a
6.25% federal excise tax on the transportation of property shipped by air after
the tax expired on December 31, 1995. The plaintiffs assert that the benefit to
the Company is believed to be in excess of $30,000,000. The plaintiffs seek
certification as a class action, damages, an injunction to enjoin the Company
from
13
<PAGE>
continuing to collect the excise tax referred to above and an award of
attorneys fees and costs. Other customers of the Company filed two separate
lawsuits, one in California state court during April 1996 and one in Minnesota
state court during June 1996, containing substantially similar allegations and
requests for relief.
During June 1996, the Company reached an agreement with the plaintiffs in
all three lawsuits to consolidate the three lawsuits in the United States
District Court for the District of Minnesota. The plaintiffs are in the process
of filing the necessary motions to accomplish this consolidation.
The Company intends to vigorously defend itself in these cases. No amount
has been reserved for these contingencies.
In November 1987, The Flying Tiger Line Inc. ("Flying Tigers"), a company
acquired by the Company in 1989, received a notice from the United States
Environmental Protection Agency ("EPA") identifying Flying Tigers as a
potentially responsible party ("PRP") in connection with a "Superfund" site
located in Monterey Park, California. The site is a 190-acre landfill which
operated from 1948 through 1984. In June 1985, the EPA began a remedial
investigation of the site to identify the extent of contamination. The EPA
estimates that approximately .1% of the waste disposed at the site is
attributable to Flying Tigers. Flying Tigers participated in a partial
settlement relating to remedial actions for management of contamination and site
control. Partial consent decrees were entered in the United States District
Court for the Central District of California in 1989 and 1992, which provided,
in part, for payments of $109,000 and $230,000, respectively, by Flying Tigers
and Federal Express to the partial-settlement escrow account. However, the
Company does not expect all outstanding issues to be resolved for several years.
Due to several variables which are beyond the Company's control, it is
impossible to accurately estimate the Company's potential share of the remaining
costs, but based on Flying Tigers' relatively insignificant contribution of
waste to the site, the Company believes that its remaining liability will not be
material.
The Company is subject to other legal proceedings and claims which arise in
the ordinary course of its business. In the opinion of management, the
aggregate liability, if any, with respect to these other actions will not
materially adversely affect the financial position or results of operations of
the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year ended May 31, 1996.
14
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding executive officers of the Company is as follows
(included herein pursuant to Instruction 3 to Item 401(b) of Regulation S-K and
General Instruction G(3) of Form 10-K):
OFFICER, YEAR FIRST
ELECTED AS OFFICER AGE POSITIONS HELD WITH COMPANY
------------------- --- ---------------------------
FREDERICK W. SMITH 51 Chairman, President and Chief Executive
1971 Officer since April 1983; Chief Executive
Officer since April 1977; Chairman since
February 1975; and President from June 1971
to February 1975. Founder of the Company.
ALAN B. GRAF, JR. 42 Executive Vice President and Chief Financial
1987 Officer since February 1996; Senior Vice
President and Chief Financial Officer from
December 1991 to February 1996; Vice
President and Treasurer from August 1987 to
December 1991; and various management
positions in finance and a senior financial
analyst from 1980 to 1987.
KENNETH R. MASTERSON 52 Executive Vice President, General Counsel and
1980 Secretary since February 1996; Senior Vice
President, General Counsel and Secretary from
September 1993 to February 1996; Senior Vice
President and General Counsel from February
1981 to September 1993; and Vice President -
Legal from January 1980 to February 1981.
THEODORE L. WEISE 52 Executive Vice President - Worldwide
1977 Operations since February 1996; Senior Vice
President - Air Operations from August 1991
to February 1996; Senior Vice President -
United States and Canada from June 1990 to
August 1991; Senior Vice President - Domestic
Ground Operations from March 1987 to June
1990; Senior Vice President - Central Support
Services from October 1986 to March 1987;
Senior Vice President/General Manager - FedEx
World Service Centers from March 1983 to
October 1986; Senior Vice President -
Operations Planning from March 1979 to March
1983; Vice President - Operations Resource
and Corporate Planning from September 1978 to
March 1979; Vice President - Special Projects
and Advanced Planning from April 1977 to
September 1978; and Director of Special
Projects from 1972 to 1977.
DAVID J. BRONCZEK 42 Senior Vice President - Europe, Middle East
1987 and Africa since June 1995; Senior Vice
President - Europe, Africa and Mediterranean
from June 1993 to June 1995; Vice President -
Canadian Operations from February 1987 to
March 1993; and several sales and operations
managerial positions from 1976 to 1987.
15
<PAGE>
MICHAEL L. DUCKER 42 Senior Vice President - Asia and Pacific
1991 since October 1995; Vice President - South
Pacific from June 1992 to October 1995; Vice
President - Italy and Southeast Europe from
November 1991 to June 1992; and various
operating management positions and a package
sorter and checker from 1975 to 1991.
LEONARD B. FEILER 40 Senior Vice President - Central Support
1991 Services since February 1996; Vice President
- Global Operations Planning and Control from
January 1995 to February 1996; Vice President
- Systems Form Planning and Engineering from
July 1992 to January 1995; Vice President -
Finance - FEDEX Aeronautics Corporation from
September 1991 to July 1992; various
management positions in finance and a senior
financial analyst from 1979 to 1991.
T. MICHAEL GLENN 40 Senior Vice President - Marketing, Customer
1985 Service and Corporate Communications since
June 1994; Senior Vice President - Marketing
and Corporate Communications from December
1993 to June 1994; Senior Vice President -
Worldwide Marketing, Catalog Services and
Corporate Communications from June 1993 to
December 1993; Senior Vice President -
Catalog and Remail Services from September
1992 to June 1993; Vice President - Marketing
from August 1985 to September 1992, various
management positions in sales and marketing
and senior sales specialist from 1981 to 1985.
DENNIS H. JONES 44 Senior Vice President and Chief Information
1986 Officer since December 1991; Vice President -
Customer Automation and Invoicing from
December 1986 to December 1991; and various
management positions in finance and a
financial analyst from 1975 to 1986.
JOSEPH C. MCCARTY, III 51 Senior Vice President - Latin America and
1983 Caribbean since October 1995; Senior Vice
President - Asia Pacific from June 1995 to
October 1995; Senior Vice President - Asia,
Pacific and Middle East from November 1991 to
June 1995; Vice President - International
Legal from March 1987 to November 1991; Vice
President - Properties & Facilities from
November 1984 to March 1987; and Vice
President - Legal from February 1983 to
November 1984.
GILBERT D. MOOK 53 Senior Vice President - Air Operations since
1985 February 1996; Senior Vice President -
Central Support Services from November 1994
to February 1996; Vice President - Properties
and Facilities from March 1988 to November
1994; Vice President - Satellite Systems from
June 1985 to March 1988; Director - Satellite
Systems from 1983 to 1985.
JAMES A. PERKINS 52 Senior Vice President and Chief Personnel
1979 Officer since June 1979 and various personnel
managerial positions from 1974 to 1979.
16
<PAGE>
DAVID F. REBHOLZ 43 Senior Vice President - Global Sales and
1988 Trade Services since June 1993; Vice
President - Central Region - Americas and
Caribbean from October 1991 to June 1993;
Vice President - Customer Service from
December 1988 to October 1991; and Regional
Sales Director-Western Region and various
operating management positions from 1976 to
1988.
TRACY G. SCHMIDT 39 Senior Vice President - Air Ground Terminals
1990 and Transportation since July 1994; Vice
President - Corporate Financial Planning from
January 1990 to July 1994; and various
management positions in finance from 1980 to
1990.
MARY ALICE TAYLOR 46 Senior Vice President - United States and
1985 Canada since October 1995; Senior Vice
President - Americas and Caribbean from
October 1994 to October 1995; Senior Vice
President - Central Support Services from
September 1991 to October 1994; Regional Vice
President - Ground Operations - Southern
Region from May 1988 to September 1991; Vice
President - Logistics and Publishing Services
from November 1985 to May 1988. Various
management positions in finance and
management information consultant from 1980
to 1985.
LAURIE A. TUCKER 39 Senior Vice President - Logistics, Electronic
1991 Commerce and Catalog since April 1996; Vice
President - Customer Automation and Invoicing
from December 1991 to April 1996; and various
management positions and financial analyst
from 1978 to 1991.
JAMES S. HUDSON 47 Vice President, Controller and Chief
1992 Accounting Officer since December 1994; Vice
President - Finance - Europe, Africa and
Mediterranean from July 1992 to December
1994; various management positions in finance
from 1974 to 1992.
Officers are elected by, and serve at the discretion of, the Board of
Directors. There is no arrangement or understanding between any officer and any
person, other than a director or executive officer of the Company acting in his
or her official capacity, pursuant to which any officer was selected. There are
no family relationships between any executive officer and any other executive
officer or director of the Company. There has been no event involving any
executive officer under any bankruptcy act, criminal proceeding, judgment or
injunction during the past five years.
17
<PAGE>
PART II
Information for Items 5 through 8 of this Report appears in the Company's
1996 Annual Report to Stockholders as indicated in the following table and is
incorporated herein by reference.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
Information regarding market information, stockholders and dividends is
contained in the Corporate Information section of the Company's 1996 Annual
Report to Stockholders, on page 44 under the headings, "Stock Listing,"
"Stockholders" and "Market Information" and is incorporated herein by reference.
No cash dividends have been declared.
PAGE IN ANNUAL REPORT
TO STOCKHOLDERS
---------------
ITEM 6. SELECTED FINANCIAL DATA
Selected Consolidated Financial Data........... 40
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Statements of Income.............. 23
Consolidated Balance Sheets.................... 24
Consolidated Statements of Cash Flows.......... 26
Consolidated Statements of Changes in
Common Stockholders' Investment............... 27
Notes to Consolidated Financial Statements..... 28
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS NOT
ON ACCOUNTING AND FINANCIAL DISCLOSURE APPLICABLE
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding members of the Company's Board of Directors is
presented in sections "Voting Securities and Principal Holders Thereof -Security
Ownership of Management and Certain Beneficial Owners," "Election of Directors,"
"Meetings and Committees," "Compensation of Directors," and "Transactions with
Management and Others". On pages 1 through 7 and page 14 of the Definitive Proxy
18
<PAGE>
Statement for the Company's 1996 Annual Meeting of Stockholders which will be
held October 1, 1996 and is incorporated herein by reference. Information
regarding executive officers of the Company is included above in Part I of this
Form 10-K under the caption "Executive Officers of the Registrant" pursuant to
Instruction 3 to Item 401(b) of Regulation S-K and General Instruction G(3) of
Form 10-K. Information required by Item 405 of Regulation S-K is presented in
"Section 16(a) Beneficial Ownership Reporting Compliance" on page 16 of the
Definitive Proxy Statement and is incorporated herein by reference.
Information for Items 11 through 13 of this Report appears in the
Definitive Proxy Statement for the Company's 1996 Annual Meeting of Stockholders
to be held on October 1, 1996, as indicated in the following table and is
incorporated herein by reference.
PAGE IN PROXY
STATEMENT
-------------
ITEM 11. EXECUTIVE COMPENSATION
Compensation Information............................ 8
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Voting Securities and Principal Holders Thereof...... 2
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others.............. 14
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The consolidated financial statements of the Company, together with the
report thereon of Arthur Andersen LLP, dated July 1, 1996, are presented on
pages 23 through 39 of the Company's 1996 Annual Report to Stockholders and are
incorporated herein by reference. With the exception of the aforementioned
information and the information incorporated by reference in Items 5, 6, 7 and 8
hereof, the Company's 1996 Annual Report to Stockholders is not to be deemed as
filed as part of this Report.
19
<PAGE>
2. FINANCIAL STATEMENT SCHEDULE PAGE NUMBER
IN FORM 10-K
------------
Report of Independent Public Accountants on Financial Statement
Schedule......................................................... S-1
Schedule II - Valuation and Qualifying Accounts.................... S-2
All other financial statement schedules have been omitted because they are not
applicable or the required information is included in the consolidated financial
statements, or the notes thereto, contained in the Company's 1996 Annual Report
to Stockholders and incorporated herein by reference.
3. EXHIBITS
The documents attached hereto as Exhibits 3.1, 3.2, 4.1 through 4.26, 10.1
through 10.88, 11, 12, 13, 21, 23 and 24 are being filed in connection with this
Report and incorporated herein by reference.
The Exhibit Index on pages E-1 through E-12 is incorporated herein by
reference.
(b) REPORTS ON FORM 8-K
During the last quarter of the period covered by this Report on Form 10-K,
the Registrant filed two Current Reports on Form 8-K.
The first Current Report was dated March 14, 1996 and contained
Registrant's press release dated March 14, 1996 and Appendix A to a preliminary
official statement. The second Current Report was dated April 30, 1996 and
contained a discussion of legal proceedings. These reports were filed as Item 5
or Item 7 Current Reports.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
FEDERAL EXPRESS CORPORATION
(Registrant)
BY: /s/ JAMES S. HUDSON
--------------------------------------
James S. Hudson
Vice President and Controller
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf of
the Registrant in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
--------- -------- ----
/s/ FREDERICK W. SMITH* Chairman, President and
- ---------------------------- Chief Executive Officer
Frederick W. Smith and Director
(Principal Executive Officer)
/s/ ALAN B. GRAF, JR.* Executive Vice President and
- ---------------------------- Chief Financial Officer
Alan B. Graf, Jr. (Principal Financial Officer)
/s/ JAMES S. HUDSON Vice President and Controller August 8, 1996
- ---------------------------- (Principal Accounting Officer)
James S. Hudson
/s/ ROBERT H. ALLEN * Director
- ----------------------------
Robert H. Allen
/s/ HOWARD H. BAKER, JR.* Director
- ----------------------------
Howard H. Baker, Jr.
/s/ ROBERT L. COX * Director
- ----------------------------
Robert L. Cox
/s/ RALPH D. DENUNZIO * Director
- ----------------------------
Ralph D. DeNunzio
<PAGE>
SIGNATURE CAPACITY DATE
--------- -------- ----
/s/ JUDITH L. ESTRIN * Director
- ----------------------------
Judith L. Estrin
/s/ PHILIP GREER * Director
- ----------------------------
Philip Greer
/s/ J. R. HYDE, III * Director
- ----------------------------
J. R. Hyde, III
/s/ CHARLES T. MANATT * Director
- ----------------------------
Charles T. Manatt
/s/ GEORGE J. MITCHELL * Director
- ----------------------------
George J. Mitchell
/s/ JACKSON W. SMART, JR.* Director
- ----------------------------
Jackson W. Smart, Jr.
/s/ JOSHUA I. SMITH * Director
- ----------------------------
Joshua I. Smith
/s/ PETER S. WILLMOTT * Director
- ----------------------------
Peter S. Willmott
*By: /s/ JAMES S. HUDSON August 8, 1996
----------------------
James S. Hudson
Attorney-in-Fact
<PAGE>
S-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To Federal Express Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Federal Express Corporation's 1996
Annual Report to Stockholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated July 1, 1996. Our audit was made for the
purpose of forming an opinion on those statements taken as a whole. The
financial statement schedule on page S-2 is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
The financial statement schedule has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
-----------------------------------------
ARTHUR ANDERSEN LLP
Memphis, Tennessee,
July 1, 1996
<PAGE>
S-2
SCHEDULE II
FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED MAY 31, 1996, 1995 AND 1994
(In thousands)
<TABLE>
<CAPTION>
ADDITIONS
----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS(A) YEAR
- ----------- ---------- ---------- ---------- ------------- ----------
Allowance for
Doubtful Accounts
- -------------------
<S> <C> <C> <C> <C> <C>
1996............... $31,173 $38,963 $1,700 $41,027 $30,809
======= ======= ====== ======= =======
1995............... $33,933 $36,334 - $39,094 $31,173
======= ======= ====== ======= =======
1994............... $31,308 $45,763 - $43,138 $33,933
======= ======= ====== ======= =======
</TABLE>
(A) Accounts written off net of recoveries.
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
3.1 Restated Certificate of Incorporation of Registrant as
amended (Filed as Exhibit 3.1 to Registrant's FY95 Third
Quarter Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)
3.2 By-laws of Registrant (Filed as Exhibit 3.2 to Registrant's
FY93 Annual Report on Form 10-K, Commission File No. 1-7806,
and incorporated herein by reference.)
4.1 Indenture dated as of April 1, 1987 between Registrant and
The Bank of New York ("BONY"), as Trustee, relating to
Registrant's 10% Senior Notes due April 15, 1999. (Filed as
Exhibit 10.36 to Registrant's FY88 Annual Report on Form 10-
K, Commission File No. 1-7806, and incorporated herein by
reference.)
4.2 Supplemental Indenture No. 2 dated as of April 18, 1989
between Registrant and BONY, relating to Registrant's 10%
Senior Notes due April 15, 1999. (Filed as Exhibit 4(a) to
Registrant's Current Report on Form 8-K dated April 25, 1989,
Commission File No. 1-7806, and incorporated herein by
reference.)
4.3 Supplemental Indenture No. 3 dated as of April 21, 1989
between Registrant and BONY and form of note relating to
Registrant's 10% Senior Notes due April 15, 1999. (Filed as
Exhibit 4(b) to Registrant's Current Report on Form 8-K dated
April 25, 1989, Commission File No. 1-7806, and incorporated
herein by reference.)
4.4 Indenture dated as of May 15, 1989 between Registrant and
BONY relating to Registrant's unsecured debt securities.
(Filed as an exhibit to Registrant's Registration Statement
No. 33-28796 on Form S-3 and incorporated herein by
reference.)
4.5 Supplemental Indenture No. 2 dated as of August 11, 1989
between Registrant and BONY. (Filed as Exhibit 4.2 to
Registrant's Registration Statement No. 33-30415 on Form S-3
and incorporated herein by reference.)
4.6 Supplemental Indenture No. 3 dated as of October 15, 1989
between Registrant and BONY relating to Registrant's 9 5/8%
Sinking Fund Debentures due October 15, 2019. (Filed as
Exhibit 4.2 to Registrant's Current Report on Form 8-K dated
October 16, 1989, Commission File No. 1-7806, and
incorporated herein by reference.)
4.7 Supplemental Indenture No. 5 dated as of August 15, 1990
between Registrant and BONY. (Filed as Exhibit 4(c) to
Registrant's Current Report on Form 8-K dated August 28,
1990, Commission File No. 1-7806, and incorporated herein by
reference.)
4.8 Indenture dated May 15, 1989 including Supplemental Indenture
Nos. 2, 3 and 5 dated as described above, between Registrant
and BONY, relating to Registrant's Medium-Term Notes, Series
B, the last of which is due August 15, 2006, Registrant's 9
7/8% Notes due April 1, 2002, Registrant's 9.65% Notes due
June 15, 2012 and Registrant's 6 1/4% Notes due April 15,
1998. (Filed as described above.)
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4.9 Form of Fixed Rate Medium-Term Note, Series B, the last of
which is due August 15, 2006. (Filed as Exhibit 4.4 to
Registrant's Registration Statement No. 33-40018 on Form S-3
and incorporated herein by reference.)
4.10 Form of Floating Rate Medium-Term Note, Series B, the last of
which is due August 15, 2006. (Filed as Exhibit 4.5 to
Registrant's Registration Statement No. 33-40018 on Form S-3
and incorporated herein by reference.)
4.11 Form of 9 7/8% Note due April 1, 2002. (Filed as Exhibit 4.1
to Registrant's Current Report on Form 8-K dated March 23,
1992, Commission File No. 1-7806, and incorporated herein by
reference.)
4.12 Form of 9.65% Note due June 15, 2012. (Filed as Exhibit 4.1
to Registrant's Current Report on Form 8-K dated June 18,
1992, Commission File No. 1-7806, and incorporated herein by
reference.)
4.13 Form of 6 1/4% Note due April 15, 1998. (Filed as Exhibit 4.1
to Registrant's Current Report on Form 8-K dated April 21,
1993, Commission File No. 1-7806, and incorporated herein by
reference.)
4.14 Indenture dated as of July 1, 1996 between the Registrant and
The First National Bank of Chicago, as Trustee, relating to
Registrant's unsecured debt securities.
4.15 Pass Through Trust Agreement dated as of February 1, 1993, as
amended and restated as of October 1, 1995, between
Registrant and BONY, as Pass Through Trustee, relating to
Registrant's 1993 Pass Through Certificates, Series A1, A2,
B1, B2, C1 and C2, 1995 Pass Through Certificates, Series A1,
A2, B1, B2 and B3 and 1996 Pass Through Certificates, Series
A1 and A2. (Filed as Exhibit 4.a.1 to Registrant's Current
Report on Form 8-K dated October 26, 1995, Commission File
No. 1-7806, and incorporated herein by reference.)
4.16 Form of 8.04% and 8.76% 1993 Pass Through Certificates,
Series A1 and A2 due November 22, 2007 and May 22, 2015,
respectively. (Filed as Exhibit 4(a)(2) to Registrant's
Current Report on Form 8-K dated February 4, 1993, Commission
File No. 1-7806, and incorporated herein by reference.)
4.17 Form of 6.68% and 7.63% 1993 Pass Through Certificates,
Series B1 and B2 due January 1, 2008 and January 1, 2015,
respectively. (Filed as Exhibit 4.a.2 to Registrant's Current
Report on Form 8-K dated September 23, 1993, Commission File
No. 1-7806, and incorporated herein by reference.)
4.18 Form of 7.15% and 7.96% 1993 Pass Through Certificates,
Series C1 and C2 due September 28, 2012 and March 28, 2017,
respectively. (Filed as Exhibit 4.a.2 to Registrant's Current
Report on Form 8-K dated December 2, 1993, Commission File
No. 1-7806, and incorporated herein by reference.)
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4.19 Form of 7.63% and 8.06% 1995 Pass Through Certificates,
Series A1 and A2 due January 5, 2014 and January 5, 2016,
respectively. (Filed as Exhibit 4.a.2 to Registrant's Current
Report on Form 8-K dated August 16, 1995, Commission File No.
1-7806, and incorporated herein by reference.)
4.20 Form of 6.05%, 7.11% and 7.58% 1995 Pass Through
Certificates, Series B1, B2 and B3 due March 19, 1996,
January 2, 2014 and July 2, 2019, respectively. (Filed as
Exhibit 4.a.2 to Registrant's Current Report on Form 8-K
dated October 26, 1995, Commission File No. 1-7806, and
incorporated herein by reference.)
4.21 Form of 7.85% and 8.17% 1996 Pass Through Certificates,
Series A1 and A2 due January 30, 2015 and January 30, 2018,
respectively. (Filed as Exhibit 4.a.2 to Registrant's Current
Report on Form 8-K dated June 5, 1996, Commission File No. 1-
7806, and incorporated herein by reference.)
4.22 Pass Through Trust Agreement dated as of March 1, 1994
between Registrant and BONY, as Pass Through Trustee,
relating to Registrant's 1994 Pass Through Certificates,
Series A310-A1, A310-A2 and A310-A3. (Filed as Exhibit 4.a.1
to Registrant's Current Report on Form 8-K dated March 16,
1994, Commission File No. 1-7806, and incorporated herein by
reference.)
4.23 Form of 7.53%, 7.89% and 8.40% 1994 Pass Through
Certificates, Series A310-A1, A310-A2 and A310-A3 due
September 23, 2006, September 23, 2008 and March 23, 2010,
respectively. (Filed as Exhibit 4.a.2 to Registrant's Current
Report on Form 8-K dated March 16, 1994, Commission File No.
1-7806, and incorporated herein by reference.)
4.24 Pass Through Trust Agreement dated as of June 1, 1996 between
Registrant and State Street Bank and Trust Company, as Pass
Through Trustee. (Filed as Exhibit 4(a)(1) to Registrant's
Registration Statement No. 333-07691 on Form S-3 and
incorporated herein by reference.)
4.25 Loan Agreement dated March 27, 1995, between Registrant and
certain lenders relating to the financing of Airbus A310
aircraft. A copy of this loan agreement will be furnished to
the Commission upon request pursuant to Regulation S-K Item
601(4)(iii)(A). (Filed as Exhibit 4.23 to Registrant's FY95
Annual Report on Form 10-K, Commission File No. 1-7806, and
incorporated herein by reference.)
4.26 Facility Agreement dated as of April 1, 1996 between
Registrant and Morgan Guaranty Trust Company of New York, as
agent. Confidential treatment has been requested for
confidential commercial and financial information, pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934.
10.1 Indenture dated as of August 1, 1979 between the Memphis
Shelby County Airport Authority (the "Authority") and BONY,
as Trustee. (Refiled as Exhibit 10.1 to Registrant's FY90
Annual Report on Form 10-K, Commission File No. 1-7806, and
incorporated herein by reference.)
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10.2 Second Supplemental Indenture dated as of May 1, 1982 between
the Authority and BONY relating to 8.30% Special Facilities
Revenue Bonds, Series 1982B due September 1, 2012. (Refiled
as Exhibit 10.2 to Registrant's FY93 Annual Report on Form
10-K, Commission File No. 1-7806, and incorporated herein by
reference.)
10.3 Third Supplemental Indenture dated as of November 1, 1982
between the Authority and BONY. (Refiled as Exhibit 10.3 to
Registrant's FY93 Annual Report on Form 10-K, Commission File
No. 1-7806, and incorporated herein by reference.)
10.4 Fourth Supplemental Indenture dated as of December 1, 1984
between the Authority and BONY relating to 7 7/8% Special
Facilities Revenue Bonds, Series 1984 due September 1, 2009.
(Refiled as Exhibit 10.4 to Registrant's FY95 Annual Report
on Form 10-K, Commission File No. 1-7806, and incorporated
herein by reference.)
10.5 Fifth Supplemental Indenture dated as of July 1, 1992 between
the Authority and BONY relating to 6 3/4% Special Facilities
Revenue Bonds, Refunding Series 1992 due September 1, 2012.
(Filed as Exhibit 10.5 to Registrant's FY92 Annual Report on
Form 10-K, Commission File No. 1-7806, and incorporated
herein by reference.)
10.6 Guaranty dated as of August 1, 1979 from Registrant to BONY.
(Refiled as Exhibit 10.5 to Registrant's FY90 Annual Report
on Form 10-K, Commission File No. 1-7806, and incorporated
herein by reference.)
10.7 Reaffirmation of Guaranty dated as of May 1, 1982 from
Registrant to BONY relating to Special Facilities Revenue
Bonds, Series 1982B. (Refiled as Exhibit 10.7 to Registrant's
FY93 Annual Report on Form 10-K, Commission File No. 1-7806,
and incorporated herein by reference.)
10.8 Reaffirmation of Guaranty dated as of December 1, 1984 from
Registrant to BONY relating to Special Facilities Revenue
Bonds, Series 1984. (Refiled as Exhibit 10.10 to Registrant's
FY93 Annual Report on Form 10-K, Commission File No. 1-7806,
and incorporated herein by reference.)
10.9 Reaffirmation of Guaranty dated as of July 30, 1992 from
Registrant to BONY relating to Special Facilities Revenue
Bonds, Refunding Series 1992. (Filed as Exhibit 10.11 to
Registrant's FY92 Annual Report on Form 10-K, Commission File
No. 1-7806, and incorporated herein by reference.)
10.10 Consolidated and Restated Lease Agreement dated as of August
1, 1979 between the Authority and Registrant. (Refiled as
Exhibit 10.11 to Registrant's FY90 Annual Report on Form 10-
K, Commission File No. 1-7806, and incorporated herein by
reference.)
10.11 First Supplemental Lease Agreement dated as of April 1, 1981
between the Authority and Registrant. (Filed as Exhibit 10.13
to Registrant's FY92 Annual Report on Form 10-K, Commission
File No. 1-7806, and incorporated herein by reference.)
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10.12 Second Supplemental Lease Agreement dated as of May 1, 1982
between the Authority and Registrant. (Refiled as Exhibit
10.14 to Registrant's FY93 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.13 Third Supplemental Lease Agreement dated November 1, 1982
between the Authority and Registrant. (Filed as Exhibit 28.22
to Registrant's FY93 Second Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.14 Fourth Supplemental Lease Agreement dated July 1, 1983
between the Authority and Registrant. (Filed as Exhibit 28.23
to Registrant's FY93 Second Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.15 Fifth Supplemental Lease Agreement dated February 1, 1984
between the Authority and Registrant. (Filed as Exhibit 28.24
to Registrant's FY93 Second Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.16 Sixth Supplemental Lease Agreement dated April 1, 1984
between the Authority and Registrant. (Filed as Exhibit 28.25
to Registrant's FY93 Second Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.17 Seventh Supplemental Lease Agreement dated June 1, 1984
between the Authority and the Registrant. (Filed as Exhibit
28.26 to Registrant's FY93 Second Quarter Report on Form 10-
Q, Commission File No. 1-7806, and incorporated herein by
reference.)
10.18 Eighth Supplemental Lease Agreement dated July 1, 1988
between the Authority and Registrant. (Filed as Exhibit 28.27
to Registrant's FY93 Second Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.19 Ninth Supplemental Lease Agreement dated July 12, 1989
between the Authority and Registrant. (Filed as Exhibit 28.28
to Registrant's FY93 Second Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.20 Tenth Supplemental Lease Agreement dated October 1, 1991
between the Authority and Registrant. (Filed as Exhibit 28.29
to Registrant's FY93 Second Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.21 Eleventh Supplemental Lease Agreement dated as of July 1,
1994 between the Authority and Registrant.
10.22 Twelfth Supplemental Lease Agreement dated July 1, 1993
between the Authority and Registrant. (Filed as Exhibit 10.23
to Registrant's FY93 Annual Report on Form 10-K, Commission
File No. 1-7806, and incorporated herein by reference.)
10.23 Thirteenth Supplemental Lease Agreement dated as of June 1,
1995 between the Authority and Registrant.
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10.24 Fourteenth Supplemental Lease Agreement dated as of January
1, 1996 between the Authority and Registrant.
10.25 Special Facility Lease Agreement dated as of August 1, 1979
between the Authority and Registrant. (Refiled as Exhibit
10.15 to Registrant's FY90 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.26 First Special Facility Supplemental Lease Agreement dated as
of May 1, 1982 between the Authority and Registrant. (Filed
as Exhibit 10.25 to Registrant's FY93 Annual Report on Form
10-K, Commission File No. 1-7806, and incorporated herein by
reference.)
10.27 Second Special Facility Supplemental Lease Agreement dated as
of November 1, 1982 between the Authority and Registrant.
(Filed as Exhibit 10.26 to Registrant's FY93 Annual Report on
Form 10-K, Commission File No. 1-7806, and incorporated
herein by reference.)
10.28 Third Special Facility Supplemental Lease Agreement dated as
of December 1, 1984 between the Authority and Registrant.
(Refiled as Exhibit 10.25 to Registrant's FY95 Annual Report
on Form 10-K, Commission File No. 1-7806, and incorporated
herein by reference.)
10.29 Fourth Special Facility Supplemental Lease Agreement dated as
of July 1, 1992 between the Authority and Registrant. (Filed
as Exhibit 10.20 to Registrant's FY92 Annual Report on Form
10-K, Commission File No. 1-7806, and incorporated herein by
reference.)
10.30 Special Facility Lease Agreement dated as of July 1, 1993
between the Authority and Registrant. (Filed as Exhibit 10.29
to Registrant's FY93 Annual Report on Form 10-K, Commission
File No. 1-7806, and incorporated herein by reference.)
10.31 Special Facility Ground Lease Agreement dated as of July 1,
1993 between the Authority and Registrant. (Filed as Exhibit
10.30 to Registrant's FY93 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.32 Indenture dated as of July 1, 1993 between the Authority and
BONY, as Trustee, relating to 6.20% Special Facility Revenue
Bonds, Series 1993, due July 1, 2014. (Filed as Exhibit 10.31
to Registrant's FY93 Annual Report on Form 10-K, Commission
File No. 1-7806, and incorporated herein by reference.)
10.33 Guaranty dated as of July 1, 1993 from Registrant to BONY
relating to 6.20% Special Facility Revenue Bonds, Series
1993. (Filed as Exhibit 10.32 to Registrant's FY93 Annual
Report on Form 10-K, Commission File No. 1-7806, and
incorporated herein by reference.)
10.34 Ground Lease dated as of February 27, 1979 between the City
of Los Angeles and The Flying Tiger Line Inc. ("FTL"). (Filed
as Exhibit 28.1 to Registrant's FY93 Second Quarter Report on
Form 10-Q, Commission File No. 1-7806, and incorporated
herein by reference.)
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10.35 First Amendment dated September 18, 1979, to Ground Lease,
dated February 27, 1979, between the City of Los Angeles and
FTL. (Filed as Exhibit 28.2 to Registrant's FY93 Second
Quarter Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)
10.36 Second Amendment dated March 9, 1983 to Ground Lease, dated
February 27, 1979, between the City of Los Angeles and FTL.
(Filed as Exhibit 28.3 to Registrant's FY93 Second Quarter
Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)
10.37 Interim Exchange Agreement dated as of September 11, 1990
between the City of Los Angeles and Registrant. (Filed as
Exhibit 28.4 to Registrant's FY93 Second Quarter Report on
Form 10-Q, Commission File No. 1-7806, and incorporated
herein by reference.)
10.38 Lease Agreement dated as of May 7, 1985 between the City of
Oakland and Registrant. (Filed as Exhibit 28.5 to
Registrant's FY93 Second Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.39 Affirmative Action Agreement dated as of May 14, 1985, to
Lease Agreement dated May 7, 1985, between the City of
Oakland and Registrant. (Filed as Exhibit 28.6 to
Registrant's FY93 Second Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.40 First Supplemental Agreement dated August 5, 1986, to Lease
Agreement dated May 7, 1985, between the City of Oakland and
Registrant. (Filed as Exhibit 28.7 to Registrant's FY93
Second Quarter Report on Form 10-Q, Commission File No. 1-
7806, and incorporated herein by reference.)
10.41 Second Supplemental Agreement dated February 17, 1987, to
Lease Agreement dated May 7, 1985, between the City of
Oakland and Registrant. (Filed as Exhibit 28.8 to
Registrant's FY93 Second Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.42 Third Supplemental Agreement dated February 1989, to Lease
Agreement dated May 7, 1985, between the City of Oakland and
Registrant. (Filed as Exhibit 28.9 to Registrant's FY93
Second Quarter Report on Form 10-Q, Commission File No. 1-
7806, and incorporated herein by reference.)
10.43 Amendment dated August 1, 1989, to Lease Agreement dated May
7, 1985, between the City of Oakland and Registrant. (Refiled
as Exhibit 10.40 to Registrant's FY95 Annual Report on Form
10-K, Commission File No. 1-7806, and incorporated herein by
reference.)
10.44 Lease and First Right of Refusal Agreement dated July 22,
1988 between the State of Alaska, Department of
Transportation and Public Facilities and Registrant. (Filed
as Exhibit 28.10 to Registrant's FY93 Second Quarter Report
on Form 10-Q, Commission File No. 1-7806, and incorporated
herein by reference.)
10.45 Development Agreement dated July 22, 1988, to Lease and First
Right of Refusal Agreement dated July 22, 1988, between the
State of Alaska, Department of Transportation and Public
Facilities and Registrant. (Filed as Exhibit 28.11 to
Registrant's FY93 Second Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
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10.46 Supplement No. 1 dated May 19, 1989, to Development Agreement
dated July 22, 1988, between the State of Alaska, Department
of Transportation and Public Facilities and Registrant.
(Filed as Exhibit 28.12 to Registrant's FY93 Second Quarter
Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)
10.47 Supplement No. 1 dated July 19, 1989, to Lease and First
Right of Refusal Agreement dated July 22, 1988, between the
State of Alaska, Department of Transportation and Public
Facilities and Registrant. (Filed as Exhibit 28.13 to
Registrant's FY93 Second Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.48 Right-of-Way Agreement dated September 19, 1989, to Lease and
First Right of Refusal Agreement dated July 22, 1988, between
the State of Alaska, Department of Transportation and Public
Facilities and Registrant. (Filed as Exhibit 28.14 to
Registrant's FY93 Second Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.49 Supplement No. 2 dated April 23, 1991, to Lease and First
Right of Refusal Agreement dated July 22, 1988, between the
State of Alaska, Department of Transportation and Public
Facilities and the Registrant. (Filed as Exhibit 28.15 to
Registrant's FY93 Second Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.50 Lease Agreement dated October 1, 1983 between The Port
Authority of New York and New Jersey and Registrant. (Filed
as Exhibit 28.16 to Registrant's FY93 Second Quarter Report
on Form 10-Q, Commission File No. 1-7806, and incorporated
herein by reference.)
10.51 Supplement No. 1, dated October 1, 1983 to Lease Agreement
dated October 1, 1983 between The Port Authority of New York
and New Jersey and Registrant. (Filed as Exhibit 28.17 to
Registrant's FY93 Second Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.52 Supplement No. 2 dated September 1, 1985 to Lease Agreement
dated October 1, 1983 between The Port Authority of New York
and New Jersey and Registrant. (Filed as Exhibit 28.18 to
Registrant's FY93 Second Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.53 Supplement No. 3 dated June 1, 1992 to Lease Agreement dated
October 1, 1983 between The Port Authority of New York and
New Jersey and Registrant. (Filed as Exhibit 28.19 to
Registrant's FY93 Second Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.54 Supplement No. 4 dated March 1, 1993 to Lease Agreement dated
October 1, 1983 between The Port Authority of New York and
New Jersey and Registrant. (Filed as Exhibit 10.51 to
Registrant's FY95 Annual Report on Form 10-K, Commission File
No. 1-7806, and incorporated herein by reference.)
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10.55 Supplement No. 5 dated February 1, 1994 to Lease Agreement
dated October 1, 1983 between The Port Authority of New York
and New Jersey and Registrant. (Filed as Exhibit 10.52 to
Registrant's FY95 Annual Report on Form 10-K, Commission File
No. 1-7806, and incorporated herein by reference.)
10.56 Amended and Restated Airport Use Agreement and Terminal
Facilities Lease dated as of January 1, 1985 between the City
of Chicago and FTL. (Filed as Exhibit 28.20 to Registrant's
FY93 Second Quarter Report on Form 10-Q, Commission File No.
1-7806, and incorporated herein by reference.)
10.57 Cargo Building Site Lease dated September 23, 1987 between
the City of Chicago and FTL. (Filed as Exhibit 28.21 to
Registrant's FY93 Second Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.58 Amended and Restated Land Lease Agreement dated August 1993
between Registrant and the Indianapolis Airport Authority.
(Filed as Exhibit 10.52 to Registrant's FY94 Annual Report on
Form 10-K, Commission File No. 1-7806, and incorporated
herein by reference.)
10.59 Indenture dated as of September 1, 1993 between the City of
Indianapolis, Indiana and NBD Bank, N.A., as Trustee,
relating to the City of Indianapolis Airport Facility Revenue
Refunding Bonds, Series 1994, due April 1, 2017. (Filed as
Exhibit 10.1 to Registrant's FY94 First Quarter Report on
Form 10-Q, Commission File No. 1-7806, and incorporated
herein by reference.)
10.60 Loan Agreement between the City of Indianapolis and
Registrant. (Filed as Exhibit 10.2 to Registrant's FY94 First
Quarter Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)
10.61 Form of Promissory Note to the City of Indianapolis. (Filed
as Exhibit 10.3 to Registrant's FY94 First Quarter Report on
Form 10-Q, Commission File No. 1-7806, and incorporated
herein by reference.)
10.62 Indenture dated as of October 1, 1994 between Indianapolis
Airport Authority and NBD Bank, N. A., as Trustee, relating
to 7.10% Special Facilities Revenue Bonds, Series 1994 due
January 15, 2017. (Filed as Exhibit 10.1 to Registrant's FY95
Second Quarter Report on Form 10-Q, Commission File No. 1-
7806, and incorporated herein by reference.)
10.63 Guaranty dated as of October 1, 1994 from Registrant to NBD
Bank, N.A. relating to 7.10% Special Facilities Revenue
Bonds, Series 1994 due January 15, 2017. (Filed as Exhibit
10.2 to Registrant's FY95 Second Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.64 Land and Special Facilities Lease Agreement dated as of
October 1, 1994 between Registrant and the Indianapolis
Airport Authority relating to 7.10% Special Facilities
Revenue Bonds, Series 1994 due January 15, 2017. (Filed as
Exhibit 10.3 to Registrant's FY95 Second Quarter Report on
Form 10-Q, Commission File No. 1-7806, and incorporated
herein by reference.)
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10.65 Lease Agreement dated October 9, 1994 between the Registrant
and Subic Bay Metropolitan Authority. (Filed as Exhibit 10.62
to Registrant's FY95 Annual Report on Form 10-K, Commission
File No. 1-7806, and incorporated herein by reference.)
10.66 Indenture dated as of April 1, 1996 between AllianceAirport
Authority, Inc. and The First National Bank of Chicago, as
Trustee, relating to AllianceAirport Authority, Inc. Special
Facilities Revenue Bonds, Series 1996 (Federal Express
Corporation Project) due April 1, 2021.
10.67 Guaranty dated as of April 1, 1996 from Registrant to The
First National Bank of Chicago relating to AllianceAirport
Authority, Inc. Special Facilities Revenue Bonds, Series 1996
(Federal Express Corporation Project) due April 1, 2021.
10.68 Land and Special Facilities Lease Agreement dated as of April
1, 1996 between Registrant and AllianceAirport Authority,
Inc. relating to AllianceAirport Authority, Inc. Special
Facilities Revenue Bonds, Series 1996 (Federal Express
Corporation Project) due April 1, 2021.
10.69 Assignment and Assumption Agreement dated April 10, 1996
between AllianceAirport Authority, Inc. and the City of Fort
Worth, Texas relating to AllianceAirport Authority, Inc.
Special Facilities Revenue Bonds, Series 1996 (Federal
Express Corporation Project) due April 1, 2021.
10.70 1980 Stock Incentive Plan and Form of Stock Option Agreement
pursuant to 1980 Stock Incentive Plan, as amended. (Filed as
Exhibit 10.59 to Registrant's FY93 Annual Report on Form 10-
K, Commission File No. 1-7806, and incorporated herein by
reference.)
10.71 1983 Stock Incentive Plan and Form of Stock Option Agreement
pursuant to 1983 Stock Incentive Plan, as amended. (Filed as
an exhibit to Registrant's Registration Statement No. 2-95720
on Form S-8 and incorporated herein by reference.)
10.72 1984 Stock Incentive Plan and Form of Stock Option Agreement
pursuant to 1984 Stock Incentive Plan, as amended. (Filed as
an exhibit to Registrant's Registration Statement No. 2-95720
on Form S-8 and incorporated herein by reference.)
10.73 1987 Stock Incentive Plan and Form of Stock Option Agreement
pursuant to 1987 Stock Incentive Plan, as amended. (Filed as
an exhibit to Registrant's Registration Statement No. 33-
20138 on Form S-8 and incorporated herein by reference.)
10.74 1989 Stock Incentive Plan and Form of Stock Option Agreement
pursuant to 1989 Stock Incentive Plan, as amended. (Filed as
Exhibit 10.26 to Registrant's FY90 Annual Report on Form 10-
K, Commission File No. 1-7806, and incorporated herein by
reference.)
10.75 1993 Stock Incentive Plan and Form of Stock Option Agreement
pursuant to 1993 Stock Incentive Plan, as amended. (1993
Stock Incentive Plan was filed as Exhibit A to Registrant's
FY93 Definitive Proxy Statement, Commission File No. 1-7806,
and incorporated herein by reference, and the form of stock
option agreement was filed as Exhibit 10.61 to Registrant's
FY94 Annual Report on Form 10-K, Commission File No. 1-7806,
and incorporated herein by reference.)
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- ------- ----------------------
10.76 Amendment to Registrant's 1980, 1983, 1984, 1987 and 1989
Stock Incentive Plans. (Filed as Exhibit 10.27 to
Registrant's FY90 Annual Report on Form 10-K, Commission File
No. 1-7806, and incorporated herein by reference.)
10.77 Amendment to Registrant's 1983, 1984, 1987, 1989 and 1993
Stock Incentive Plans. (Filed as Exhibit 10.63 to
Registrant's FY94 Annual Report on Form 10-K, Commission File
No. 1-7806, and incorporated herein by reference.)
10.78 1995 Stock Incentive Plan and Form of Stock Option Agreement
pursuant to 1995 Stock Incentive Plan. (1995 Stock Incentive
Plan was filed as Exhibit A to Registrant's FY95 Definitive
Proxy Statement, Commission File No. 1-7806, and incorporated
herein by reference, and the form of stock option agreement
was filed as Exhibit 99.2 to Registrant's Registration
Statement No. 333-03443 on Form S-8, and incorporated herein
by reference.)
10.79 1986 Restricted Stock Plan and Form of Restricted Stock
Agreement pursuant to 1986 Restricted Stock Plan. (Filed as
Exhibit 10.28 to Registrant's FY90 Annual Report on Form 10-
K, Commission File No. 1-7806, and incorporated herein by
reference.)
10.80 1995 Restricted Stock Plan and Form of Restricted Stock
Agreement pursuant to 1995 Restricted Stock Plan. (1995
Restricted Stock Plan filed as Exhibit B to Registrant's FY95
Definitive Proxy Statement, Commission File No. 1-7806, and
incorporated herein by reference.)
10.81 Registrant's Retirement Parity Pension Plan. (Filed as
Exhibit 10.67 to Registrant's FY93 Annual Report on Form 10-
K, Commission File No. 1-7806, and incorporated herein by
reference.)
10.82 First Amendment to Registrant's Retirement Parity Pension
Plan. (Filed as Exhibit 10.1 to Registrant's FY95 First
Quarter Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)
10.83 Management Performance Bonus Plan. (Description of the
performance bonus plan contained in the Definitive Proxy
Statement for Registrant's 1996 Annual Meeting of
Stockholders, under the heading "Report on Executive
Compensation of the Compensation Committee of the Board of
Directors" is incorporated herein by reference.)
10.84 Registrant's Retirement Plan for Outside Directors. (Filed as
Exhibit 10.30 to Registrant's FY90 Annual Report on Form 10-
K, Commission File No. 1-7806, and incorporated herein by
reference.)
10.85 Long-term Performance Bonus Plans. (Description of the long-
term performance bonus plans contained in the Definitive
Proxy Statement for Registrant's 1996 Annual Meeting of
Stockholders, under the heading "Long-term Incentive Plans -
Awards in Last Fiscal Year" is incorporated herein by
reference.)
E-11
<PAGE>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
10.86 Amended and Restated Credit Agreement dated May 12, 1995
among Registrant and The First National Bank of Chicago,
individually and as agent, and certain lenders. (Filed as
Exhibit 10.77 to Registrant's FY95 Annual Report on Form 10-
K, Commission File No. 1-7806, and incorporated herein by
reference.)
10.87 Purchase Agreement between AVSA and Registrant for purchase
of Airbus A300 aircraft. Confidential treatment has been
granted for confidential commercial and financial
information, pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934. (Filed as Exhibit 10.36 to Registrant's
FY91 Annual Report on Form 10-K, Commission File No. 1-7806,
and incorporated herein by reference.)
10.88 Sales Agreement dated April 7, 1995 between Registrant and
American Airlines, Inc. for the purchase of MD11 aircraft.
Confidential treatment has been granted for confidential
commercial and financial information, pursuant to Rule 24b-2
under the Securities Exchange Act of 1934. (Filed as Exhibit
10.79 to Registrant's FY95 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by
reference.)
11 Statement re Computation of Earnings Per Share.
12 Statement re Computation of Ratio of Earnings to Fixed
Charges.
13 Registrant's Annual Report to Stockholders for the fiscal
year ended May 31, 1996.
21 Subsidiaries of Registrant.
23 Consent of Independent Public Accountants.
24 Powers of Attorney.
E-12
<PAGE>
Exhibit 4.14
Execution Copy
================================================================================
TRUST INDENTURE
_______________
Dated as of July 1, 1996
between
FEDERAL EXPRESS CORPORATION, as Issuer
and
THE FIRST NATIONAL BANK OF CHICAGO, as Trustee
_______________
DEBT SECURITIES
================================================================================
<PAGE>
Reconciliation and tie between
Trust Indenture Act of 1939 (the "Trust Indenture Act") and Indenture
<TABLE>
<CAPTION>
TRUST INDENTURE ACT SECTION INDENTURE SECTION
- ------------------------------
<S> <C>
(S) 310 (a)(1)............... 609
(a)(2)..................... 609
(b)........................ 610
(S) 311(b)(4)................. 613
(b)(6)..................... 613
(S) 312 (a).................. 701
(b)........................ 702
(c)........................ 702
(S) 313 (a).................. 703
(b)(2)..................... 703
(c)........................ 703
(d)........................ 703
(S) 314 (a).................. 704
(c)(1)..................... 102
(c)(2)..................... 102
(e)........................ 102
(f)........................ 102
(S) 316 (a) (last sentence).. 101
(a)(1)(A).................. 502, 512
(a)(1)(B).................. 513
(b)........................ 508
(S) 317 (a)(1)............... 503
(a)(2)..................... 504
(b)........................ 1003
(S) 318 (a).................. 107
</TABLE>
_________________________
This reconciliation and tie shall not, for any purpose, be deemed to be a part
of the Indenture.
NOTE: Section 318(c) of the Trust Indenture Act provides that the provisions of
Sections 310-317 are a part of and govern every qualified indenture,
whether or not physically contained therein.
<PAGE>
TABLE OF CONTENTS
PAGE
----
Parties................................................................. 1
Recitals of the Company................................................. 1
ARTICLE ONE
Definitions and Other Provisions of General Application
Section 101. Definition:
Act................................................................ 2
Additional Amounts................................................. 2
Affiliate.......................................................... 2
Authenticating Agent............................................... 2
Board of Directors................................................. 2
Board Resolution................................................... 2
Business Day....................................................... 3
Commission......................................................... 3
Company............................................................ 3
Company Request; Company Order..................................... 3
Conversion Event................................................... 3
Corporate Trust Office............................................. 3
Corporation........................................................ 3
Currency........................................................... 3
CUSIP Number....................................................... 3
Defaulted Interest................................................. 3
Depository......................................................... 4
Dollars............................................................ 4
ECU................................................................ 4
European Monetary System........................................... 4
European Union..................................................... 4
Event of Default................................................... 4
Foreign Currency................................................... 4
Global Security.................................................... 4
Government Obligations............................................. 4
Holder............................................................. 5
Indenture.......................................................... 5
Indexed Security................................................... 5
Interest........................................................... 5
Interest Payment Date.............................................. 5
- -------------------------
NOTE: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
PAGE
----
Maturity........................................................... 5
Officer's Certificate.............................................. 5
Opinion of Counsel................................................. 5
Original Issue Discount Security................................... 5
Outstanding........................................................ 5
Paying Agent....................................................... 7
Person............................................................. 7
Place of Payment................................................... 7
Predecessor Security............................................... 7
Redemption Date.................................................... 7
Redemption Price................................................... 7
Regular Record Date................................................ 7
Responsible Officer................................................ 7
Securities......................................................... 7
Security Register and Security Registrar........................... 7
Special Record Date................................................ 8
Stated Maturity.................................................... 8
Subsidiary......................................................... 8
Trustee............................................................ 8
Trust Indenture Act................................................ 8
Vice President..................................................... 8
Section 102. Compliance Certificates and Opinions.................... 8
Section 103. Form of Documents Delivered to Trustee.................. 9
Section 104. Acts of Holders......................................... 9
Section 105. Notices, Etc. to Trustee and Company.................... 10
Section 106. Notice to Holders; Waiver............................... 10
Section 107. Conflict with Trust Indenture Act....................... 11
Section 108. Effect of Headings and Table of Contents................ 11
Section 109. Successors and Assigns.................................. 11
Section 110. Separability Clause..................................... 11
Section 111. Benefits of Indenture................................... 11
Section 112. Governing Law........................................... 12
Section 113. Legal Holidays.......................................... 12
Section 114. Language of Notices..................................... 12
Section 115. Counterparts............................................ 12
ARTICLE TWO
Security Forms
Section 201. Forms Generally........................................... 12
Section 202. Form of Trustee's Certificate of Authentication........... 13
Section 203. Global Securities......................................... 13
ii
<PAGE>
PAGE
----
ARTICLE THREE
The Securities
Section 301. Amount Unlimited; Issuable in Series...................... 14
Section 302. Denominations............................................. 17
Section 303. Execution, Authentication, Delivery and Dating............ 18
Section 304. Temporary Securities...................................... 19
Section 305. Registration, Transfer and Exchange....................... 20
Section 306. Mutilated, Destroyed, Lost and Stolen Securities.......... 22
Section 307. Payment of Interest; Interest Rights Preserved............ 23
Section 308. Persons Deemed Owners..................................... 25
Section 309. Cancellation.............................................. 25
Section 310. Computation of Interest................................... 25
ARTICLE FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of Indenture................... 26
Section 402. Application of Trust Money................................ 27
ARTICLE FIVE
Remedies
Section 501. Events of Default......................................... 27
Section 502. Acceleration of Maturity; Rescission and Annulment........ 29
Section 503. Collection of Indebtedness and
Suits for Enforcement by Trustee......................... 30
Section 504. Trustee May File Proofs of Claim.......................... 30
Section 505. Trustee May Enforce Claims
Without Possession of Securities......................... 31
Section 506. Application of Money Collected............................ 32
Section 507. Limitation on Suits....................................... 32
Section 508. Unconditional Right of Holders
to Receive Principal Premium and Interest................ 33
Section 509. Restoration of Rights and Remedies........................ 33
Section 510. Rights and Remedies Cumulative............................ 33
Section 511. Delay or Omission Not Waiver.............................. 33
Section 512. Control by Holders........................................ 34
iii
<PAGE>
PAGE
----
Section 513. Waiver of Past Defaults................................... 34
Section 514. Undertaking for Costs..................................... 34
Section 515. Waiver of Stay or Extension Laws.......................... 35
ARTICLE SIX
The Trustee
Section 601. Certain Duties and Responsibilities...................... 35
Section 602. Notice of Defaults........................................ 36
Section 603. Certain Rights of Trustee................................. 37
Section 604. Not Responsible for Recitals or Issuance of Securities.... 38
Section 605. May Hold Securities....................................... 38
Section 606. Money Held in Trust....................................... 38
Section 607. Compensation and Reimbursement............................ 38
Section 608. Intentionally Left Blank.................................. 39
Section 609. Corporate Trustee Required; Eligibility................... 39
Section 610. Resignation and Removal; Appointment of Successor......... 40
Section 611. Acceptance of Appointment by Successor.................... 41
Section 612. Merger, Conversion, Consolidation
or Succession to Business............................... 43
Section 613. Preferential Claims....................................... 43
Section 614. Appointment of Authenticating Agent....................... 43
ARTICLE SEVEN
Holders' Lists and Reports By Trustee and Company
Section 701. Company to Furnish Trustee Names and Addresses
of Holders............................................... 45
Section 702. Preservation of Information; Communications to Holders.... 46
Section 703. Reports by Trustee........................................ 47
Section 704. Reports by Company........................................ 47
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
Section 801. Company May Consolidate, Etc. on Certain Terms............ 48
Section 802. Successor Corporation Substituted......................... 49
iv
<PAGE>
PAGE
----
ARTICLE NINE
Supplemental Indentures
Section 901. Supplemental Indentures Without Consent of Holders........ 49
Section 902. Supplemental Indentures with Consent of Holders........... 50
Section 903. Execution of Supplemental Indentures...................... 51
Section 904. Effect of Supplemental Indentures......................... 52
Section 905. Conformity with Trust Indenture Act....................... 52
Section 906. Reference in Securities to Supplemental Indentures........ 52
ARTICLE TEN
Covenants
Section 1001. Payment of Principal, any Premium, Interest
and Additional Amounts................................. 52
Section 1002. Maintenance of Office or Agency.......................... 52
Section 1003. Money for Securities Payments to be Held in Trust........ 53
Section 1004. Corporate Existence...................................... 54
Section 1005. Statement as to Default.................................. 55
Section 1006. Additional Amounts....................................... 55
ARTICLE ELEVEN
Redemption of Securities
Section 1101. Applicability of Article................................. 56
Section 1102. Election to Redeem; Notice to Trustee.................... 56
Section 1103. Selection by Trustee of Securities to be Redeemed........ 56
Section 1104. Notice of Redemption..................................... 57
Section 1105. Deposit of Redemption Price.............................. 58
Section 1106. Securities Payable on Redemption Date.................... 58
Section 1107. Securities Redeemed in Part.............................. 58
ARTICLE TWELVE
Intentionally Left Blank
v
<PAGE>
PAGE
----
ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
Section 1301. Applicability of Article; Company's Option
to Effect Defeasance or Covenant Defeasance............ 59
Section 1302. Defeasance and Discharge................................ 59
Section 1303. Covenant Defeasance..................................... 60
Section 1304. Conditions to Defeasance or Covenant Defeasance......... 60
Section 1305. Deposited Money and Government Obligations to be
Held in Trust; Other Miscellaneous Provisions.......... 62
ARTICLE FOURTEEN
Sinking Funds
Section 1401. Applicability of Article................................ 63
Section 1402. Satisfaction of Sinking Fund Payments with Securities... 63
Section 1403. Redemption of Securities for Sinking Fund............... 64
ARTICLE FIFTEEN
Securities in Foreign Currencies
Section 1501. Applicability of Article................................. 64
SCHEDULE I Supplemental Indenture....................................
EXHIBIT A Form of Debt Security.....................................
vi
<PAGE>
TRUST INDENTURE
---------------
INDENTURE, dated as of July 1, 1996, between Federal Express
Corporation, a Delaware Corporation (the "Company") and The First National Bank
of Chicago, a national banking association organized under the laws of the
United States of America, as trustee (the "Trustee").
RECITALS
WHEREAS, the Company has duly authorized the execution and delivery of
this Indenture to provide for the issuance from time to time of its senior
unsecured debentures, bonds, notes or other evidences of indebtedness (herein
called the "Securities"), unlimited as to principal amount, to bear such rates
of interest, to mature at such time or times, to be issued in one or more series
and to have such other provisions as shall be fixed as hereinafter provided;
WHEREAS, the Company has duly authorized the execution and delivery of
this Indenture. All things necessary to make this Indenture a valid agreement
of the Company, in accordance with its terms, have been done; and
WHEREAS, this Indenture is subject to the provisions of the Trust
Indenture Act of 1939, as amended, and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder that are required to
be part of this Indenture and, to the extent applicable, shall be governed by
such provisions.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders (as herein defined) thereof, it is mutually covenanted
and agreed, for the equal and proportionate benefit of all Holders of the
Securities or of any series thereof, as follows:
ARTICLE ONE
Definitions and Other Provisions of General Application
Section 101. Definitions.
------------
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
<PAGE>
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" or "GAAP" with respect to any
computation required or permitted hereunder shall mean such accounting
principles as are generally accepted in the United States of America as of the
date of such computation; and
(4) the words "herein," "hereof," "hereto" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
Certain terms used principally in certain Articles hereof are defined
in those Articles.
"Act" when used with respect to any Holder, has the meaning specified
in Section 104.
"Additional Amounts" means any additional amounts which are required
hereby or by any Security, under circumstances specified herein or therein, to
be paid by the Company in respect of certain taxes, assessments or other
governmental charges imposed on Holders specified therein and which are owing to
such Holders.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee to
act on behalf of the Trustee to authenticate Securities of one or more series.
"Board of Directors" means the board of directors of the Company or
any duly authorized committee of the board of directors of the Company.
"Board Resolution" means a copy of one or more resolutions certified
by the Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on the date
of such certification, delivered to the Trustee.
2
<PAGE>
"Business Day" means any day other than Saturday, Sunday or other day
on which banking institutions in New York, Illinois or Tennessee are authorized
or obligated by law to close.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, as
amended, or, if at any time after the execution of this Indenture such
Commission is not existing and performing the duties now assigned to it under
the Trust Indenture Act, then the body performing such duties at such time.
"Company" means Federal Express Corporation or any successor
Corporation which shall have become such under this Indenture.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its President or any Vice President and
delivered to the Trustee.
"Conversion Event" means the cessation of use of (i) a Foreign
Currency both by the government of the country or the confederation which issued
such Foreign Currency and for the settlement of transactions by a central bank
or other public institutions of or within the international banking community,
(ii) the ECU both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Union or (iii) any
currency unit or composite currency other than the ECU for the purposes for
which it was established.
"Corporate Trust Office" means the principal corporate trust office of
the Trustee at which at any particular time its corporate trust business shall
be principally administered, which office at the date of original execution of
this Indenture is located at One First National Plaza, Suite 0126, Chicago,
Illinois 60670-0126.
"Corporation" includes corporations and limited liability companies
and, except for purposes of Article Eight, associations, companies and business
trusts.
"Currency," with respect to any payment, deposit or other transfer in
respect of the principal of or any premium or interest on or any Additional
Amounts with respect to any Security, means Dollars or the Foreign Currency, as
the case may be, in which such payment, deposit or other transfer is required to
be made by or pursuant to the terms hereof or such Security and, with respect to
any other payment, deposit or transfer pursuant to or contemplated by the terms
hereof or such Security, means Dollars.
"CUSIP Number" means the alphanumeric designation assigned to a
Security by Standard & Poor's Ratings Group, CUSIP Service Bureau.
"Defaulted Interest" has the meaning specified in Section 307.
3
<PAGE>
"Depository" means, with respect to the Securities of any series
issuable upon original issuance in whole or in part in the form of one or more
Global Securities, the clearing agency registered under the Securities Exchange
Act of 1934, as amended, specified for that purpose as contemplated by Section
301.
"Dollars" means a dollar or other equivalent unit of legal tender for
payment of debts in the United States of America.
"ECU" means the European Currency Units as defined and revised from
time to time by the Counsel of the European Community.
"European Monetary System" means the European Monetary System
established by the Resolution of December 5, 1978 of the Council of the European
Community.
"European Union" means the European Community, the European Coal and
Steel Community and the European Atomic Energy Community.
"Event of Default" has the meaning specified in Section 501.
"Foreign Currency" means any currency, currency unit or composite
currency, including, without limitation, the ECU, issued by the government of
one or more countries other than the United States or by any recognized
confederation or association of such governments.
"Global Security" means a Security bearing the legend specified in
Section 203 evidencing all or part of a series of Securities, issued to the
Depository with respect to such series or its nominee and registered in the name
of such Depository or nominee.
"Government Obligations" means securities which are (x) direct
obligations of the United States of America or the other government or
governments in the confederation which issued the Foreign Currency in which the
principal of or any premium or interest on any Security or any Additional
Amounts in respect thereof shall be payable, in each case where the payment or
payments thereunder are supported by the full faith and credit of such
government or governments, or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America or such other governments or governments, in each case where the payment
or payments thereunder are unconditionally guaranteed as a full faith and credit
obligation by the United States of America or such other governments or
governments, which, in either case, are not callable or redeemable at the option
of the issuer thereof, and shall also include a depository receipt issued by a
bank as custodian with respect to any such Government Obligation or a specific
payment of principal of or interest on any such Government Obligation held by
such custodian for the account of the holder of a depository receipt, provided
that (except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such
4
<PAGE>
depository receipt from any amount received by the custodian in respect to the
Government Obligation or the specific payment of principal of or interest on the
Government Obligation evidenced by such depository receipt.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indenture" means this instrument as it may from time to time be
supplemented or amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof and shall include the terms of
each particular series of Securities established as contemplated by Section 301.
"Indexed Security" means a Security the terms of which provide that
the principal amount thereof payable at Stated Maturity may be more or less than
the principal face amount thereof at original issuance.
"Interest," with respect to any Original Issue Discount Security which
by its terms bears interest only after Maturity, means interest payable after
Maturity and, when used with respect to a Security which provides for the
payment of Additional Amounts pursuant to Section 1006, includes such Additional
Amounts.
"Interest Payment Date," with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.
"Maturity," with respect to any Security, means the date on which the
principal of such Security, or an installment of principal, becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, notice of redemption or repurchase or otherwise and
includes the Redemption Date.
"Officer's Certificate" means a certificate signed by the Chairman of
the Board, the President or any Vice President of the Company, and delivered to
the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be an
employee of or of counsel to the Company, or other counsel reasonably
satisfactory to the Trustee.
"Original Issue Discount Security" means any Security issued pursuant
to this Indenture which provides for declaration of an amount less than the
principal face amount thereof to be due and payable upon acceleration of the
Maturity pursuant to Section 502.
"Outstanding," when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
5
<PAGE>
(i) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Securities for whose payment at the Maturity thereof money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and segregated
in trust by the Company (if the Company shall act as its own Paying Agent)
for the Holders of such Securities; provided that, if such Securities are
to be redeemed, notice of such redemption has been duly given pursuant to
this Indenture or provision therefor satisfactory to the Trustee has been
made;
(iii) Securities for whose payment or redemption money or Government
Obligations as contemplated by Section 1304 in the necessary amount have
been theretofore deposited with the Trustee (or another trustee satisfying
the requirements of Section 609) in trust for the Holders of such
Securities in accordance with Section 1305; and
(iv) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, unless there shall have been
presented to the Trustee proof satisfactory to it that such Securities are
held by a bona fide purchaser in whose hands such Securities are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, (i) the principal
amount of an Original Issue Discount Security that shall be deemed to be
Outstanding shall be equal to the amount of the principal thereof that would be
due and payable as of the date of such determination upon acceleration of the
Maturity thereof pursuant to Section 502, (ii) the principal amount of any
Indexed Security that may be counted in making such determination and that shall
be deemed outstanding for such purpose shall be equal to the principal face
amount of such Indexed Security at original issuance, unless otherwise provided
in this Indenture, (iii) the principal amount of a Security denominated in a
Foreign Currency shall be the Dollar equivalent, determined on the date of
original issuance of such Security, of the principal amount (or, in the case of
an Original Issue Discount Security, the Dollar equivalent on the date of
original issuance of such Security of the amount determined as provided in (i)
above) of such Security, and (iv) Securities owned by the Company or any other
obligor or any Affiliate of the Company or of such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor or any Affiliate of the Company or of such other obligor.
6
<PAGE>
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Person" means any individual, Corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Place of Payment," with respect to the Securities of any series,
means the place where the principal of (and premium, if any), interest on, and
Additional Amounts with respect to, the Securities of that series are payable as
provided in or pursuant to this Indenture or such Securities.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Redemption Date," with respect to any Security or portion thereof to
be redeemed, means the date fixed for such redemption by or pursuant to this
Indenture or such Security.
"Redemption Price," with respect to any Security or portion thereof to
be redeemed, means the price at which it is to be redeemed pursuant to this
Indenture or such Security.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Securities of any series means the date specified in or pursuant to
this Indenture or such Security as the "Regular Record Date."
"Responsible Officer," means any officer of the Trustee in its
Corporate Trust Office and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of
knowledge of and familiarity with the particular subject.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture, provided, however, that if at any time there is more than
one Person acting as Trustee under this Indenture, "Securities" with respect to
any such Person shall mean securities authenticated and delivered under this
Indenture, exclusive, however, of Securities of any series as to which such
Person is not Trustee.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
7
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"Special Record Date" for the payment of any Defaulted Interest on any
Security means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity," with respect to any Security or any installment of
principal thereof or interest thereon or any Additional Amounts, means the date
established by or pursuant to this Indenture or such Security as the fixed date
on which the principal of such Security or such installment of principal or
interest is, or such Additional Amounts are, due and payable.
"Subsidiary" means any Corporation of which at the time of
determination the Company or one or more Subsidiaries owns or controls, directly
or indirectly, more than 50% of the shares of voting stock. For the purposes of
this definition, "voting stock" means stock which ordinarily has voting power
for the election of directors, whether at all times or only so long as no senior
class of stock has such voting power by reason of any contingency.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder. If
at any time there is more than one such Person, "Trustee" shall mean such Person
and as used with respect to the Securities of any series shall mean the Trustee
with respect to Securities of such series.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, as in force at the date as of which this instrument was executed,
except as provided in Section 905.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
Section 102. Compliance Certificates and Opinions.
-------------------------------------
Except as otherwise expressly provided in this Indenture, upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee an
Officer's Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with or
an Opinion of Counsel stating that, in the opinion of such counsel, all such
conditions precedent, if any, have been complied with, except that, in the case
of any such application or request as to which the furnishing of such documents
or any of them is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished. Any Officer's Certificate will comply with Section
314(e) of the Trust Indenture Act.
8
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Section 103. Form of Documents Delivered to Trustee.
---------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon an Opinion of Counsel, unless such
officer knows, or in the exercise of reasonable care should know, that the
opinion with respect to the matters upon which the certificate or opinion is
based are erroneous. Any such Opinion of Counsel may be based, insofar as it
relates to factual matters, upon a certificate or opinion of, or representations
by, an officer or officers of the Company stating that the information with
respect to such factual matters is in the possession of the Company, unless such
counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture or any Security, they may, but need not, be
consolidated and form one instrument.
Section 104. Acts of Holders.
----------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing. Except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any reasonable manner which the Trustee
deems sufficient and in accordance with such reasonable rules as the Trustee may
determine; and the Trustee may in any instance require further proof with
respect to any of the matters referred to in this Section.
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(c) The ownership of Securities shall be proved by the Security
Register.
(d) If the Company shall solicit from the Holders of Securities of any
series any request, demand, authorization, direction, notice, consent, waiver or
other Act, the Company may, at its option, fix in advance a record date for the
determination of Holders of Securities entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other Act, but the Company
shall have no obligation to do so. Any such record date shall be fixed at the
Company's discretion. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent and waiver or other Act may be sought
or given before or after the record date, but only the Holders of Securities of
record at the close of business on such record date shall be deemed to be
Holders of Securities for the purpose of determining whether Holders of the
requisite proportion of Securities of such series Outstanding have authorized or
agreed or consented to such request, demand, authorization, direction, notice,
consent, waiver or other Act, and for that purpose the Securities of such series
Outstanding shall be computed as of such record date.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee, any
Security Registrar, any Paying Agent or the Company in reliance thereon, whether
or not notation of such action is made upon such Security.
Section 105. Notices, Etc. to Trustee and Company.
-------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with:
(1) the Trustee by any Holder or the Company shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing to or with
the Trustee at its Corporate Trust Office; or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to the Company at 2007
Corporate Avenue, Memphis, Tennessee 38132, attention Vice President and
Treasurer, or at any other address previously furnished in writing to the
Trustee by the Company.
Section 106. Notice to Holders; Waiver.
--------------------------
Where this Indenture or any Security provides for notice to Holders of
any event, such notice shall be sufficiently given (unless otherwise herein or
in such
10
<PAGE>
Security expressly provided) if in writing and mailed, first-class
postage prepaid, to each Holder affected by such event, at the Holder's address
as it appears in the Security Register, not later than the latest date, or not
earlier than the earliest date, prescribed for the giving of such notice. In
any case where notice to Holders is given by mail, neither the failure to mail
such notice, nor any defect in any notice so mailed, to any particular Holder
shall affect the sufficiency of such notice with respect to other Holders. Any
notice which is mailed in the manner herein provided shall be conclusively
presumed to have been duly given or provided.
Where this Indenture or any Security provides for notice in any
manner, such notice may be waived in writing by the Person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
Section 107. Conflict with Trust Indenture Act.
----------------------------------
If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Indenture by any of
the provisions of the Trust Indenture Act, such required provision shall
control.
Section 108. Effect of Headings and Table of Contents.
-----------------------------------------
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 109. Successors and Assigns.
-----------------------
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
Section 110. Separability Clause.
--------------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 111. Benefits of Indenture.
----------------------
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and
11
<PAGE>
the Holders, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
Section 112. Governing Law.
--------------
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of Tennessee.
Section 113. Legal Holidays.
---------------
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the
Securities) payment of interest or principal (and premium, if any) or any
Additional Amounts need not be made at such Place of Payment on such date, but
may be made on the next succeeding Business Day at such Place of Payment with
the same force and effect as if made on the Interest Payment Date or Redemption
Date, or at the Stated Maturity, and no interest shall accrue with respect to
such payments for the period from and after such Interest Payment Date,
Redemption Date or Stated Maturity, as the case may be, to the next succeeding
Business Day.
Section 114. Language of Notices.
--------------------
Any request, demand, authorization, direction, notice, consent,
election or waiver required or permitted under this Indenture shall be in the
English language, except that, if the Company so elects, any published notice
may be in an official language of the country of publication.
Section 115. Counterparts.
-------------
This Indenture may be executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
instrument.
ARTICLE TWO
Security Forms
Section 201. Forms Generally.
----------------
The Securities of each series shall be in substantially the form
attached hereto as Exhibit A as shall be established by or pursuant to a Board
Resolution or in one or more indentures supplemental hereto, in each case with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture, and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may be consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution of the Securities.
12
<PAGE>
If any form of Securities of any series is established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at the same time as or prior to the delivery of the
Company Order contemplated by Section 303 for the authentication and delivery of
such Securities.
The definitive Securities may be produced in any manner determined by
the officers executing such Securities, as evidenced by their execution of such
Securities.
Unless otherwise provided in or pursuant to this Indenture or any
Securities, the Securities shall be issuable in registered form without coupons
and shall not be issuable upon the exercise of warrants.
Section 202. Form of Trustee's Certificate of Authentication.
------------------------------------------------
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
The First National Bank of Chicago,
as Trustee
By: ___________________________
Authorized Officer
Section 203. Global Securities.
------------------
Unless otherwise provided in or pursuant to this Indenture or any
Securities, the Securities shall be issued in global form. Any such Security
may provide that it or any number of such Securities shall represent the
aggregate amount of all Outstanding Securities of such series (or such lessor
amount as is permitted by the terms thereof) from time to time endorsed thereon
and may also provide that the aggregate amount of Outstanding Securities
represented thereby may from time to time be increased or reduced to reflect
exchanges. Any endorsement of any Security in global form to reflect the
amount, or any increase or decrease in the amount, or changes in the rights of
Holders, of Outstanding Securities represented thereby shall be made in such
manner and by such Person as shall be specified therein or in the Company Order
to be delivered pursuant to Section 303 or 304 with respect thereto.
Subject to the provisions of Section 303 and, if applicable, Section
304, the Trustee shall deliver and redeliver any Security in permanent global
form in the manner and upon instructions given by the Person specified therein
or in the applicable Company Order. If a Company Order pursuant to Section 303
or 304 has been, or simultaneously is, delivered, any instructions by the
Company with respect to a
13
<PAGE>
Security in global form shall be in writing but need
not be accompanied by or contained in an Officer's Certificate and need not be
accompanied by an Opinion of Counsel.
Notwithstanding the provisions of Section 307, unless otherwise
specified in or pursuant to this Indenture or any Securities, payment of
principal of, any premium and interest on, and any Additional Amounts in respect
of, any Security in global form shall be made to the Person specified therein.
Notwithstanding the provisions of Section 308 and except as provided
in the preceding paragraph, the Company, the Trustee and any agent of the
Company and the Trustee shall treat as the Holder, the holder of such global
Security in registered form.
Any Global Security authenticated and delivered hereunder shall bear a
legend in substantially the following form:
"This Security is a Global Security within the meaning of the
Indenture hereinafter referred to and is registered in the name of a
Depository or a nominee of a Depository. This Security is exchangeable for
Securities registered in the name of a Person other than the Depository or
its nominee only in the limited circumstances described in the Indenture,
and no transfer of this Security (other than a transfer of this Security as
a whole by the Depository to a nominee of the Depository or by a nominee of
the Depository to the Depository or another nominee of the Depository) may
be registered except in such limited circumstances."
ARTICLE THREE
The Securities
Section 301. Amount Unlimited; Issuable in Series.
-------------------------------------
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and (subject to Section 303)
set forth in an Officer's Certificate, or established in one or more indentures
supplemental hereto, prior to the issuance of Securities of any series (subject
to the last paragraph of this Section 301):
(1) the title of the Securities and the series in which such
Securities shall be included (which shall distinguish the Securities of the
series from all other Securities);
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<PAGE>
(2) any limit upon the aggregate principal amount of the Securities of
the series which may be authenticated and delivered under this Indenture (except
for Securities authenticated and delivered upon registration of transfer of, or
in exchange for, or in lieu of, other Securities of the series pursuant to
Section 304, 305, 306, 906 or 1107 and except for any Securities which, pursuant
to Section 303 are deemed never to have been authenticated and delivered
hereunder);
(3) the date or dates on which the principal of the Securities of the
series is payable;
(4) the Person to whom any interest on any Security of the series
shall be payable if other than the Person in whose name that Security (or one or
more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest, the rate or rates, which may be fixed or
variable, at which the Securities of the series shall bear interest, if any, if
the rate is variable, the manner of calculation thereof, the date or dates from
which such interest shall accrue, the Interest Payment Dates on which such
interest shall be payable and the Regular Record Date for the interest payable
on any Interest Payment Date;
(5) the place or places where the principal of (and premium, if any)
and interest, if any, on Securities of the series shall be payable;
(6) the date or dates on which, the period or periods within which,
the price or prices at which and the terms and conditions upon which Securities
of the series may be redeemed, in whole or in part, at the option of the
Company;
(7) the obligation, if any, of the Company to redeem or purchase
Securities of the series pursuant to any sinking fund or analogous provisions or
at the option of a Holder thereof and the date or dates on which, the period or
periods within which, the price or prices at which and the terms and conditions
upon which Securities of the series shall be redeemed or purchased, in whole or
in part, pursuant to such obligation and any provisions for the remarketing of
such securities so redeemed or purchased;
(8) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which Securities of the series shall be issuable;
(9) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section 502 or
the method by which such portion is to be determined;
(10) the application, if any, of either or both of Section 1302 and
Section 1303 to the Securities of the series;
15
<PAGE>
(11) if other than Dollars, the Foreign Currency in which payment of
the principal of, any premium or interest on or any Additional Amounts with
respect to any of such Securities shall be payable;
(12) if the principal of (and premium, if any) or interest, if any, on
the Securities of that series are to be payable, at the election of the Company
or a holder thereof, in a currency (including a composite currency) other than
that in which the Securities are stated to be payable, the date or dates on
which, the period or periods within which, and the terms and conditions upon
which, such election may be made;
(13) if the amount of payments of principal of (and premium if any) or
interest, if any, on the Securities of the series may be determined with
reference to an index, formula or other method or methods based on a currency
(including a composite currency) other than that in which the Securities are
stated to be payable, the terms and conditions upon which and the manner in
which such amounts shall be determined and paid or payable;
(14) if the amount of payments of principal of, any premium or
interest on the Securities of the series may be determined with reference to an
index, the manner in which such amounts shall be determined;
(15) whether any Securities of the series are to be issuable upon
original issuance in the form of one or more Global Securities and, if so, (i)
the Depository with respect to such Global Security or Securities and (ii) the
circumstances under which any such Global Security may be exchanged for
Securities registered in the name of, and any transfer of such Global Security
may be registered to, a Person other than such Depository or its nominee, if
other than as set forth in Section 305;
(16) whether and under what circumstances Additional Amounts on such
Securities or any of them shall be payable;
(17) the notice, if any, to Holders regarding the determination of
interest on a floating rate Security and the manner of giving such notice, and
the basis upon which interest shall be calculated if other than that of a 360-
day year of twelve 30-day months;
(18) intentionally left blank;
(19) any deletions from, modifications of or additions to the Events
of Default or covenants of the Company with respect to any Securities, whether
or not such Events of Default or covenants are consistent with the Events of
Default or covenants set forth herein;
(20) if any of such Securities are to be issuable in global form and
are to be issuable in definitive form (whether upon original issue or upon
exchange of a temporary Security) only upon receipt of certain certificates or
other documents or
16
<PAGE>
satisfaction of other conditions, then the form and terms of
such certificates, documents or conditions;
(21) if there is more than one Trustee, the identify of the Trustee
and, if not the Trustee, the identity of each Security Registrar, Paying Agent
or Authenticating Agent with respect to such Securities; and
(22) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture) and any deletions from or
modifications or additions to this Indenture in respect of such series.
All Securities of any one series shall be substantially identical
except as to denomination, currency, rate of interest, or method of determining
the rate of interest, if any, Maturity, and the date from which interest, if
any, shall accrue and except as may otherwise be provided in or pursuant to such
Board Resolution referred to above and (subject to Section 303) set forth in the
Officer's Certificate referred to above or in any indenture supplemental hereto.
If any of the terms of the series are established by action taken pursuant to a
Board Resolution, a copy of the Board Resolution shall be delivered to the
Trustee at the same time as or prior to the delivery of the Officer's
Certificate setting forth the terms of the series.
Notwithstanding any contrary terms of this Section 301, the terms of
the Securities of any series may provide, without limitation, that the
Securities shall be authenticated and delivered by the Trustee on original issue
from time to time upon telephonic or written order of Persons designated in the
Officer's Certificate or supplemental indenture and that such Persons are
authorized to determine, consistent with such Officer's Certificate or any
supplemental indenture, such terms and conditions of the Securities of such
series as are specified in such certificate or supplemental indenture. All
Securities of any one series may be reopened for issuances of additional
Securities of such series or to establish additional terms of such series of
Securities.
Section 302. Denominations.
--------------
Unless otherwise provided in or pursuant to this Indenture, the
principal of, any premium and interest on and any Additional Amounts with
respect to the Securities shall be payable in Dollars. The Securities of each
series shall be issuable only in fully registered form without coupons in such
denominations as shall be specified pursuant to Section 301. In the absence of
any such provision with respect to the Securities of any series, the Securities
of such series shall be issuable in denominations of $1,000 and any integral
multiple thereof. Securities not denominated in Dollars shall be issuable in
such denominations as are established with respect to such Securities in or
pursuant to this Indenture.
17
<PAGE>
Section 303. Execution, Authentication, Delivery and Dating.
-----------------------------------------------
The Securities shall be executed on behalf of the Company by its
President or any Vice President, under its corporate seal reproduced thereon
attested by its Secretary or any Assistant Secretary. The signature of any of
these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were the proper officers of the Company when their signatures were affixed
to such Securities shall bind the Company, notwithstanding that such individuals
or any of them have ceased to hold such offices prior to the authentication and
delivery of such Securities or did not hold such offices at the date of such
Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Securities. If the
form or terms of the Securities of the series have been established in or
pursuant to one or more Board Resolutions or indentures supplemental hereto as
permitted by Sections 201 and 301, in authenticating such Securities and
accepting the additional responsibilities under this Indenture in relation to
such Securities, the Trustee shall be entitled to receive, and (subject to
Section 601) shall be fully protected in relying upon:
(1) an Opinion of Counsel to the effect that:
(a) if the form of such Securities has been established by or pursuant
to Board Resolution as permitted by Section 201, that such form has been
established in conformity with the provisions of this Indenture;
(b) if the terms of such Securities have been established by or
pursuant to Board Resolution as permitted by Section 301, that such terms have
been established in conformity with the provisions of this Indenture;
(c) this Indenture has been qualified under the Trust Indenture Act;
and
(d) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any conditions
specified in such Opinion of Counsel, will constitute valid and legally binding
obligations of the Company, enforceable in accordance with their terms, subject
to bankruptcy, insolvency, reorganization, moratorium and other laws of general
applicability relating to or affecting the enforcement of creditors' rights and
to general equity principles and will entitle the Holders thereof to the
benefits of this Indenture; and
18
<PAGE>
(2) an Officer's Certificate stating that, to the best knowledge of
the Person executing such certificate, no event which is, or after notice or
lapse of time would become, an Event of Default with respect to any of the
Securities shall have occurred and be continuing.
Notwithstanding the provisions of Section 301 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver an Opinion of Counsel, Officer's
Certificate or the Company Order otherwise required at or prior to the time of
authentication of each Security of such series if such documents are delivered
at or prior to the time of authentication upon original issuance of the first
Security of such series to be issued.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by, or on behalf of, the Trustee or by the Authenticating Agent by
manual signature. Such certificate upon any Security shall be conclusive
evidence, and the only evidence, that such Security has been duly authenticated
and delivered hereunder.
Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Security to the Trustee for cancellation as
provided in Section 309 together with a written statement (which need not comply
with Section 102 and need not be accompanied by an Opinion of Counsel) stating
that such Security has never been issued and sold by the Company, for all
purposes of this Indenture such Security shall be deemed never to have been
authenticated and delivered hereunder and shall not be entitled to the benefits
of this Indenture.
The Trustee shall not be required to authenticate or to cause an
Authentication Agent to authenticate any Securities if the issue of such
Securities pursuant to this Indenture will affect the Trustee's own rights,
duties or immunities under the Securities and this Indenture or otherwise in a
manner which is not reasonably acceptable to the Trustee.
Section 304. Temporary Securities.
---------------------
Pending the preparation of definitive Securities of any series, the
Company may execute and deliver to the Trustee, and, upon Company Order, the
Trustee shall authenticate and deliver in the manner provided in Section 303,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers of the Company executing such Securities may determine, as
evidenced by their execution of such Securities. Such temporary Securities may
be in global form.
19
<PAGE>
If temporary Securities of any series are issued, the Company will
cause definitive Securities to be prepared without unreasonable delay. After
the preparation of definitive Securities of such series, the temporary
Securities of such series shall be exchangeable for definitive Securities of
such series upon surrender of the temporary Securities at the office or agency
of the Company in a Place of Payment for that series, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Securities
of any series the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Securities of
the same series and of like tenor of authorized denomination containing terms
and provisions that are identical to those of any temporary Securities. Until
so exchanged the temporary Securities of any series shall in all respects be
entitled to the same benefits under this Indenture as definitive Securities of
the same series.
Section 305. Registration, Transfer and Exchange.
------------------------------------
The Company shall cause to be kept at the Corporate Trust Office a
register (the register maintained in such office and in any other office or
agency of the Company in a Place of Payment being herein sometimes collectively
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. The Trustee is hereby appointed
"Security Registrar" for the purpose of registering Securities and transfers of
Securities as herein provided.
The Company shall have the right to remove and replace from time to
time the Security Registrar for any series of Securities; provided that no such
--------
removal or replacement shall be effective until a successor Security Registrar
with respect to such series of Securities shall have been appointed by the
Company and shall have accepted such appointment by the Company. In the event
that the Trustee shall not be or shall cease to be Security Registrar with
respect to a series of Securities, it shall have the right to examine the
Security Register for such series at all reasonable times. There shall be only
one Security Register for each series of Securities.
Upon surrender for registration of transfer of any Security of any
series at the office or agency of the Company in a Place of Payment for such
series, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of the same series, of any authorized denominations and of a like
aggregate principal amount and tenor containing identical terms and provisions.
At the option of the Holder, Securities of any series may be exchanged
for other Securities of the same series containing identical terms and
provisions in any authorized denominations and of a like aggregate principal
amount and tenor, upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
20
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All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or the Holder's attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906 or 1107 not involving any transfer.
Except as otherwise provided herein, the Company shall not be required
(i) to issue, register the transfer of or exchange Securities of any series
during a period beginning at the opening of business 15 days before the day of
the mailing of a notice of redemption of Securities of such series selected for
redemption under Section 1103 and ending at the close of business on the day of
such mailing, or (ii) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part.
Notwithstanding the foregoing, except as otherwise specified as
contemplated by Section 301, any Global Security of any series shall be
exchangeable for definitive Securities only if: (a) such Depository is
unwilling, unable or ineligible to continue as Depository with respect to such
Global Security and a successor depository is not appointed by the Company
within 90 days or if at any time the Depository with respect to such Global
Security ceases to be a clearing agency registered under the Securities Exchange
Act of 1934, as amended, or (b) the Company executes and delivers to the Trustee
a Company Order providing that such Global Security shall be so exchangeable and
the transfer thereof so registrable.
If the beneficial owners of interests in a Global Security are
entitled to exchange such interests for definitive Securities as the result of
an event described in the preceding sentence, then without unnecessary delay but
in any event not later than the earliest date on which such interests may be so
exchanged, the Company shall deliver to the Trustee definitive Securities in
such form and denominations as are required by or pursuant to this Indenture,
and of the same series, containing identical terms and in aggregate principal
amount equal to the principal amount of such Global Security, executed by the
Company. On or after the earliest date on which such interests may be so
exchanged, such Global Security shall be surrendered from time to time by the
Depository and in accordance with instructions given to the Trustee and the
Depository (which instructions shall be in writing but need not be contained in
21
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or accompanied by an Officers Certificate or be accompanied by an Opinion of
Counsel), as shall be specified in the Company Order with respect thereto to the
Trustee, as the Company's agent for such purpose, to be exchanged, in whole or
in part, for definitive Securities as described above without charge.
The Trustee shall authenticate and make available for delivery, in
exchange for each portion of such surrendered Global Security, a like aggregate
principal amount of definitive Securities of the same series of authorized
denominations and of like tenor as the portion of such Global Security to be
exchanged, which shall be in the form of Securities, as shall be specified by
the beneficial owner thereof, provided, however, that no such exchanges may
-----------------
occur during a period beginning at the opening of business 15 days before any
selection of Securities of the same series to be redeemed and ending on the
relevant Redemption Date.
Promptly following any such exchange in part, such global Security
shall be returned by the Trustee to such Depository in accordance with the
instructions of the Company referred to above. If a Security is issued in
exchange for any portion of a Global Security after the close of business at the
office or agency for such Security where such exchange occurs on or after (i)
any Regular Record Date for such Security and before the opening of business at
such office or agency on the next Interest Payment Date, or (ii) any Special
Record Date for such Security and before the opening of business at such office
or agency on the related proposed date for payment of interest or Defaulted
Interest, as the case may be, interest shall not be payable on such Interest
Payment Date or proposed date for payment, as the case may be, in respect of
such Security, but shall be payable on such Interest Payment Date or proposed
date for payment, as the case may be, only to the Person to whom interest in
respect of such portion of such Global Security shall be payable in accordance
with the provisions of this Indenture.
Section 306. Mutilated, Destroyed, Lost and Stolen Securities.
-------------------------------------------------
If (i) any mutilated Security is surrendered to the Trustee or if
there shall be delivered to the Company and the Trustee evidence to their
satisfaction of the destruction, loss or theft of any Security and (ii) there
shall be delivered to the Company and the Trustee such indemnity as may be
required by them to save each of them and any agent of either of them harmless,
then, in the absence of notice to the Company or the Trustee that such Security
has been acquired by a bona fide purchaser, the Company shall execute and upon
its request the Trustee shall authenticate and deliver, in lieu of any such
mutilated, destroyed, lost or stolen Security, a new Security of the same series
containing identical terms and of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
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Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute a separate
obligation of the Company, whether or not the destroyed, lost or stolen Security
shall be at any time enforceable by anyone, and shall be entitled to all the
benefits of this Indenture equally and proportionately with any and all other
Securities of the same series duly issued hereunder.
The provisions of this Section, as amended or supplemented pursuant to
this Indenture, are exclusive and shall preclude (to the extent lawful) all
other rights and remedies with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities.
Section 307. Payment of Interest; Interest Rights Preserved.
-----------------------------------------------
Unless otherwise provided as contemplated by Section 301 with respect
to any series of Securities, interest on and any Additional Amounts with respect
to any Security which is payable, and is punctually paid or duly provided for,
on any Interest Payment Date shall be paid to the Person in whose name that
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest.
Any interest on, and any Additional Amounts with respect to, any
Security of any series which is payable, but is not punctually paid or duly
provided for, on any Interest Payment Date (herein called "Defaulted Interest")
shall forthwith cease to be payable to the Holder on the relevant Regular Record
Date by virtue of having been such Holder, and such Defaulted Interest may be
paid by the Company, at its election in each case, as provided in Clause (1) or
(2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Person in whose name the Securities of such series (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Security of such series and the date of the proposed payment, and at the
same time the Company shall deposit with the Trustee an amount of money
equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment. Such money
when deposited will be held in trust for the benefit of the Persons
entitled to such Defaulted Interest as in this Clause provided. Thereupon
the Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than 15 days and
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not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder of Securities of such series at the Holder's address as it
appears in the Security Register, not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so mailed, such
Defaulted Interest shall be paid to the Persons in whose names the
Securities of such series (or their respective Predecessor Securities) are
registered at the close of business on such Special Record Date and shall
no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent with
the requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment pursuant
to this Clause, such manner of payment shall be deemed practicable by the
Trustee.
Unless otherwise provided in or pursuant to this Indenture or the
Securities of any particular series pursuant to the provisions of this
Indenture, at the option of the Company, interest on Securities may be paid by
mailing a check to the address of the Person entitled thereto as such address
shall appear in the Security Register or by transfer to an account maintained by
the payee with a bank located in the United States.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
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Section 308. Persons Deemed Owners.
----------------------
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of (and premium, if
any) and (subject to Sections 305 and 307) interest on and any Additional
Amounts with respect to such Security and for all other purposes whatsoever,
whether or not any payment with respect to such Security shall be overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
No Holder of any beneficial interest in any Global Security held on
its behalf by a Depository shall have any rights under this Indenture with
respect to such Global Security, and such Depository may be treated by the
Company, the Trustee, and any agent of the Company or the Trustee as the owner
of such Global Security for all purposes whatsoever. None of the Company, the
Trustee, any Paying Agent or the Security Registrar will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests of a Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
Section 309. Cancellation.
-------------
All Securities surrendered for payment, redemption, registration of
transfer, exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by it. The Company may at any time deliver to
the Trustee for cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner whatsoever
and may deliver to the Trustee (or to an Authenticating Agent for delivery to
the Trustee) for cancellation any Securities previously authenticated hereunder
which the Company has not issued and sold, and all Securities so delivered shall
be promptly canceled by the Trustee. No Securities shall be authenticated in
lieu of or in exchange for any Securities canceled as provided in this Section,
except as expressly permitted by this Indenture. All canceled Securities held
by the Trustee shall be disposed of as directed by a Company Order.
Section 310. Computation of Interest.
------------------------
Except as otherwise specified pursuant to Section 301 for Securities
of any series, interest on the Securities of each series shall be computed on
the basis of a 360-day year of twelve 30-day months.
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ARTICLE FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of Indenture.
----------------------------------------
This Indenture shall upon Company Request cease to be of further
effect with respect to any series of Securities specified in such Company
Request (except as to rights of registration of transfer or exchange of
Securities), and the Trustee on receipt of the Company Request, at the expense
of the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture as to such series, when:
(1) either
(A) all Securities of such series theretofore authenticated and
delivered (other than (i) Securities of such series which have been
destroyed, lost or stolen and which have been replaced or paid as
provided in Section 306 and (ii) Securities of such series for whose
payment money has theretofore been deposited in trust or segregated
and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust, as provided in Section 1003) have been
delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee
for cancellation:
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) if redeemable at the option of the Company are to be
called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds in
trust for the purpose an amount sufficient to pay and discharge the
entire indebtedness on such Securities not theretofore delivered to
the Trustee for cancellation, for principal (and premium, if any) and
interest and any Additional Amounts to the date of such deposit (in
the case of Securities which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be.
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(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officer's Certificate
or an Opinion of Counsel, stating that all conditions precedent herein
relating to the satisfaction and discharge of this Indenture with respect
to such Securities have been complied with.
In the event there are Securities of two or more series hereunder, the
Trustee shall be required to execute an instrument acknowledging satisfaction
and discharge of this Indenture only if requested to do so with respect to
Securities of such series as to which it is Trustee and if the other conditions
thereto are met.
Notwithstanding the satisfaction and discharge of this Indenture with
respect to the Securities of any series, the obligations of the Company to the
Trustee under Section 607, the obligations of the Trustee to any Authenticating
Agent under Section 614 and, if money shall have been deposited with the Trustee
pursuant to subclause (B) of clause (1) of this Section, the obligations under
Sections 304, 305, 306, 1002 and 1003, and the obligation to pay Additional
Amounts, if any, with respect to such Securities as contemplated by Section 1006
(but only to the extent that any Additional Amounts payable with respect to such
Securities exceed the amount deposited in respect of such Additional Amounts
pursuant to Section 401(1)(B), shall survive.
Section 402. Application of Trust Money.
---------------------------
Subject to the provisions of the penultimate paragraph of Section
1003, all money and Government Obligations deposited with the Trustee pursuant
to Section 401 and Article 13 shall be held in trust and applied by it, in
accordance with the provisions of the Securities of the series for which such
deposit was made and this Indenture, to the payment, either directly or through
any Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal (and
premium, if any), interest and Additional Amounts for whose payment such money
and Government Obligations has been deposited with the Trustee; but such money
and Government Obligations need not be segregated from other funds except to the
extent required by law.
ARTICLE FIVE
Remedies
Section 501. Events of Default.
------------------
"Event of Default," wherever used herein with respect to the
Securities of any series, means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any
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order, rule or regulation of any administrative or governmental body), unless
such event is specifically deleted or modified in or pursuant to the
supplemental indenture, Board Resolution or Officer's Certificate establishing
the terms of such series pursuant to this Indenture:
(1) default in the payment of any interest upon any Security of such
series when it becomes due and payable, and continuance of such default for
a period of 30 days;
(2) default in the payment of the principal of (or premium, if any,
on) any Security of such series at its Maturity;
(3) default in the performance, or breach, of any covenant, agreement
or warranty of the Company in this Indenture (other than a covenant,
agreement or warranty a default in whose performance is elsewhere in this
Section specifically dealt with or which has expressly been included in
this Indenture solely for the benefit of series of Securities other than
such series) and continuance of such default for a period of 60 days after
there has been given, by registered or certified mail, to the Company by
the Trustee or to the Company and the Trustee by the Holders of at least
50% in principal amount of the Outstanding Securities of such series a
written notice specifying such default and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder;
(4) default in the deposit of any sinking fund payment when and as due
by the terms of a Security of such series;
(5) the entry by a court having jurisdiction of a decree or order
adjudging the Company a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company under federal bankruptcy law or
any other applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance
of any such decree or order unstayed and in effect for a period of 60
consecutive days;
(6) the commencement by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the commencement of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under
federal bankruptcy law or any other applicable federal or state law, or the
consent by it to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or similar official
of the Company or of any substantial part of its property, or the making by
it of a general assignment for the benefit of creditors, or the admission
by it in writing of its inability to pay
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its debts generally as they become due, or the taking of corporate action
by the Company in furtherance of any such action; or
(7) any other Event of Default provided pursuant to Section 301 with
respect to Securities of such series.
Section 502. Acceleration of Maturity; Rescission and Annulment.
---------------------------------------------------
If an Event of Default with respect to Securities of any series at the
time Outstanding occurs and is continuing, then in every such case the Trustee
or the Holders of not less than 50% in principal amount of the Outstanding
Securities of such series may declare the principal amount of all the Securities
of such series to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders), and upon any such declaration
such principal amount shall become immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before the Stated Maturity thereof,
the Holders of a majority in principal amount of the Outstanding Securities of
such series, by written notice to the Company and the Trustee, may rescind and
annul such declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay:
(A) all overdue installments of interest on and any Additional
Amounts with respect to all Securities of such series;
(B) the principal of (and premium, if any on) any Securities of
such series which have become due otherwise than by such declaration
of acceleration and interest thereon at the rate borne by the
Securities of such series and any Additional Amounts;
(C) to the extent that payment of such interest or Additional
Amounts is lawful, interest upon overdue interest or Additional
Amounts at the rate borne by the Securities of such series; and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default with respect to the Securities of such
series, other than the non-payment of the principal of Securities of such
series which have become due solely by such declaration of acceleration,
have been cured or waived as provided in Section 513.
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No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
----------------------------------------------------------------
The Company covenants that if:
(1) default is made in the payment of any interest on any Securities
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium, if
any, on) any Securities at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities, the whole amount then due and payable
on such Securities for principal (and premium, if any) and interest and, to the
extent that payment of such interest shall be legally enforceable, interest on
any overdue principal (and premium, if any) and on any overdue interest, at the
rate borne by the Securities and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sum so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon such Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon such Securities, wherever
situated.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of the Securities of such
series by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
Section 504. Trustee May File Proofs of Claim.
---------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the
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Trustee shall have made any demand on the Company for the payment of overdue
principal (and premium, if any) or interest or Additional Amounts) shall be
entitled and empowered, by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest and Additional Amounts owing and unpaid in
respect of the Securities and to file such other papers and documents as
may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and of
the Holders allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
Section 505. Trustee May Enforce Claims Without Possession of Securities.
------------------------------------------------------------
All rights of action and claims under this Indenture or the Securities
may be prosecuted by the Trustee without the possession of any of the Securities
or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name as trustee
of an express trust and any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, be for the ratable benefit of the Holders
of the Securities in respect of which such judgment has been recovered.
31
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Section 506. Application of Money Collected.
-------------------------------
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal (or premium,
if any), interest or Additional Amounts, upon presentation of the Securities and
the notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
First: To the payment of all amounts due the Trustee under Section
607;
Second: To the payment of the amounts then due and unpaid for
principal of (and premium, if any), interest and Additional Amounts on the
Securities in respect of which or for the benefit of which such money has
been collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for principal
(and premium, if any), interest and Additional Amounts, respectively; and
Third: To the payment of the remainder, if any, to the Company or any
other Person lawfully entitled thereto.
Section 507. Limitation on Suits.
--------------------
No Holder of any Security of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of such
series;
(2) the Holders of not less than 50% in principal amount of the
Outstanding Securities of such series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceedings; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities of such series.
It being understood and intended that no one or more Holders of Securities shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this
32
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Indenture to affect, disturb or prejudice the right of any other such Holders of
Securities of such series, or to obtain or to seek to obtain priority or
preference over any other such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all such Holders of Securities.
Section 508. Unconditional Right of Holders to Receive Principal, Premium and
----------------------------------------------------------------
Interest.
---------
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any, on) and (subject to
Section 307) interest on, and any Additional Amounts with respect to, such
Security on the respective Stated Maturities expressed in such Security (or, in
the case of redemption, on the Redemption Date) and to institute suit for the
enforcement of any such payment and such rights shall not be impaired without
the consent of such Holder.
Section 509. Restoration of Rights and Remedies.
-----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceedings has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
Section 510. Rights and Remedies Cumulative.
-------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
Section 511. Delay or Omission Not Waiver.
-----------------------------
No delay or omission of the Trustee or of any Holder to exercise any
right or remedy accruing upon any Event of Default shall impair any such right
or remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article or by law to the Trustee
or to the Holders may
33
<PAGE>
be exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.
Section 512. Control by Holders.
-------------------
The Holders of a majority in principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of such series, provided that:
--------------
(1) such direction shall not be in conflict with any rule of law or
with this Indenture or with such Securities;
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction; and
(3) subject to Section 601, the Trustee need not take any action which
might be prejudicial to the Holders of such series not consenting.
Section 513. Waiver of Past Defaults.
------------------------
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default:
(1) in the payment of the principal of (or premium, if any) or
interest on any Security of such series, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist with respect
to such series, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other default or impair any right consequent
thereon.
Section 514. Undertaking for Costs.
----------------------
All parties to this Indenture agree, and each Holder of any Security
by acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable
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costs, including reasonable attorneys' fees, against any party litigant in such
suit, having due regard to the merits and good faith of the claims or defenses
made by such party litigant; but the provisions of this Section shall not apply
to any suit instituted by the Company, to any suit instituted by the Trustee, to
any suit instituted by any Holder, or group of Holders, holding in the aggregate
more than 10% in principal amount of the Outstanding Securities of any series,
or to any suit instituted by any Holder for the enforcement of the payment of
the principal of (or premium, if any) or interest on any Security on or after
the respective Stated Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date).
Section 515. Waiver of Stay or Extension Laws.
---------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
The Trustee
Section 601. Certain Duties and Responsibilities.
------------------------------------
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
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(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct; except that:
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Holders of a majority in principal amount of the Outstanding
Securities of any series relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Indenture with respect to the Securities of such series; and
(4) no provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of
its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
Section 602. Notice of Defaults.
-------------------
Within 90 days after the occurrence of any default hereunder with
respect to the Securities of any series, the Trustee shall transmit by mail to
all Holders of Securities of such series, as their names and addresses appear in
the Security Register, notice of such default hereunder known to the Trustee,
unless such default shall have been cured or waived; provided, however, that,
except in the case of a default in the payment of the principal of (or premium,
if any) or interest on any Security, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors or Responsible Officers of the
Trustee in good faith determine that the withholding of such notice is in the
interest of the Holders of Securities of such series; and provided, further,
that in the case of any default of the character specified in Section 501(3)
with respect to the Securities of such series no such notice to Holders shall be
given until at least 60 days after the occurrence thereof. For the purpose of
this Section, the term "default" means any event which is, or after notice or
lapse of time or both would become, an Event of Default with respect to
Securities of such series.
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Section 603. Certain Rights of Trustee.
--------------------------
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officer's Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with
such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
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Section 604. Not Responsible for Recitals or Issuance of Securities.
-------------------------------------------------------
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee or any Authenticating Agent assume no
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Securities, except
that the Trustee represents that it is duly authorized to execute and deliver
this Indenture, authenticate the Securities and perform its obligations
hereunder and that the statements made by it in a Statement of Eligibility and
Qualification on Form T-1 supplied to the Company are true and accurate, subject
to the qualifications set forth therein. The Trustee or any Authenticating
Agent shall not be accountable for the use or application by the Company of
Securities or the proceeds thereof.
Section 605. May Hold Securities.
--------------------
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Section
613, may otherwise deal with the Company with the same rights it would have if
it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or
such other agent.
Section 606. Money Held in Trust.
--------------------
Except as otherwise provided herein, money held by the Trustee in
trust hereunder need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with the Company.
Section 607. Compensation and Reimbursement.
-------------------------------
The Company agrees:
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder;
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration
of the
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trust or trusts hereunder, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder, except to
the extent that any such loss, liability or expense was due to the
Trustee's negligence or bad faith.
Section 608. Intentionally Left Blank
------------------------
Section 609. Corporate Trustee Required; Eligibility.
----------------------------------------
(1) There shall at all times be a Trustee hereunder which shall:
(i) be a Corporation organized and doing business under the laws of
the United States of America, any State thereof or the District
of Columbia authorized under such laws to exercise corporate
trust powers;
(ii) be eligible under Section 310(a) of the Trust Indenture Act to
act as trustee under an indenture qualified under the Trust
Indenture Act; and
(iii) have a combined capital and surplus of at least $100,000,000
and subject to supervision or examination by federal or state
authority.
If such Corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of said supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
(2) The following Indenture shall be considered specifically described
herein for purposes of clause (i) of the proviso contained in Section 310(b)(1)
of the Trust Indenture Act: Indenture between AllianceAirport Authority Inc.
(the "Authority") and The First National Bank of Chicago, as trustee, dated as
of April 1, 1996 relating to the Authority's Special Facilities Revenue Bonds
(Federal Express Corporation Project), Series 1996.
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Section 610. Resignation and Removal; Appointment of Successor.
--------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
(b) The Trustee may resign at any time with respect to the Securities
of one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 611 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by the Company or by Act of the Holders of a majority
in principal amount of the Outstanding Securities of such series, delivered to
the Trustee, and to the Company in the case of an Act of the Holders.
(d) If at any time:
(1) the Trustee shall fail to comply with the obligations imposed upon
it under Section 310(b) of the Trust Indenture Act with respect to the
Securities after written request therefor by the Company or by any Holder
who has been a bona fide Holder of a Security for at least six months;
(2) the Trustee shall cease to be eligible under Section 609 and shall
fail to resign after written request therefor by the Company or by any such
Holder; or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company may remove the Trustee with respect to
all Securities or the Securities of such series, or (ii) subject to Section 514,
any Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of such Holder and all other similarly situated, petition any
court of competent jurisdiction for the removal of the Trustee with respect to
all Securities of such series and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Securities of one or more series, the Company shall promptly
appoint a successor Trustee or Trustees with respect to the Securities of that
or those Series (it
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being understood that any such successor Trustee may be appointed with respect
to the Securities of one or more or all of such series and that at any time
there shall be only one Trustee with respect to the Securities of any particular
series).
If, within one year after such resignation, removal or incapability,
or the occurrence of such vacancy, a successor Trustee with respect to the
Securities of any series shall be appointed by Act of the Holders of 75% in
principal amount of the Outstanding Securities of such series delivered to the
Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment in accordance with the
applicable requirements of Section 611, become the successor Trustee with
respect to the Securities of such series and supersede the successor Trustee
appointed by the Company.
If no successor Trustee with respect to the Securities of any series
shall have been so appointed by the Company or the Holders and accepted
appointment in the manner required by Section 611, any Holder who has been a
bona fide Holder of a Security of such series for at least six months may, on
behalf of such Holder and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee with respect
to the Securities of such series.
(f) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Securities of any series and each appointment
of a successor Trustee with respect to the Securities of any series by mailing
written notice of such event by first-class mail, postage prepaid, to all
Holders of Securities of such series as their names and addresses appear in the
Security Register. Each notice shall include the name of the successor Trustee
with respect to the Securities of such series and the address of its Corporate
Trust Office.
Section 611. Acceptance of Appointment by Successor.
---------------------------------------
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every successor Trustee appointed hereunder shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which,
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(1) shall contain such provisions as shall be necessary or desirable
to transfer and confirm to, and to vest in, each successor Trustee all the
rights, powers, trusts and duties of the retiring Trustee with respect to
the Securities of that or those series to which the appointment of such
successor Trustee relates,
(2) if the retiring Trustee is not retiring with respect to all
Securities, shall contain such provisions as shall be deemed necessary or
desirable to confirm that all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series as
to which the retiring Trustee is not retiring shall continue to be vested
in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as
shall be necessary to provide for or facilitate the administration of the
trusts hereunder by more than one Trustee.
It being understood that nothing herein or in such supplemental
indenture shall constitute such Trustees co-trustees of the same trust and that
each such Trustee shall be trustee of a trust or trusts hereunder separate and
apart from any trust or trusts hereunder administered by any other such Trustee.
Upon the execution and delivery of such supplemental indenture, the
resignation or removal of the retiring Trustee shall become effective to the
extent provided therein and each such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee with respect to the Securities of that or
those series to which the appointment of such successor Trustee relates; but, on
request of the Company or any successor Trustee, such retiring Trustee shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder with respect to the Securities of
that or those series to which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such a acceptance such successor Trustee shall be qualified and eligible
under this Article.
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Section 612. Merger, Conversion, Consolidation or Succession to Business.
------------------------------------------------------------
Any Corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any Corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
Corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
Corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
Section 613. Preferential Claims.
--------------------
Reference is made to Section 311 of the Trust Indenture Act. For
purposes of Section 311(b)(4) and (6) of such Act:
(1) "cash transaction" means any transaction in which full payment for
goods or securities sold is made within seven days after delivery of the goods
or securities in currency or in checks or other orders drawn upon banks or
bankers and payable upon demand; and
(2) "self-liquidating paper" means any draft, bill of exchange,
acceptance or obligation which is made, drawn, negotiated or incurred by the
Company for the purpose of financing the purchase, processing, manufacturing,
shipment, storage or sale of goods, wares or merchandise and which is secured by
documents evidencing title to, possession of, or a lien upon, the goods, wares
or merchandise or the receivables or proceeds arising from the sale of the
goods, wares or merchandise previously constituting the security, provided the
security is received by the Trustee simultaneously with the creation of the
creditor relationship with the Company arising from the making, drawing,
negotiating or incurring of the draft, bill of exchange, acceptance or
obligation.
Section 614. Appointment of Authenticating Agent.
------------------------------------
At any time when any of the Securities remain Outstanding the Trustee
may appoint an Authenticating Agent or Agents with respect to one or more series
of Securities which shall be authorized to act on behalf of the Trustee to
authenticate Securities of such series issued upon original issuance, exchange,
registration of transfer or partial redemption thereof or pursuant to Section
306, and Securities so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if authenticated
by the Trustee hereunder. Wherever reference is made in the Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be
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deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Company and shall
at all times be a Corporation organized and doing business under the laws of the
United States of America, any state thereof or the District of Columbia,
authorized under such laws to act as Authenticating Agent, having a combined
capital and surplus of not less than $50,000,000 and subject to supervision or
examination by federal or state authority. If such Authenticating Agent
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Authenticating Agent
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time an Authenticating Agent
shall cease to be eligible in accordance with the provisions of this Section,
such Authenticating Agent shall resign immediately in the manner and with the
effect specified in this Section.
Any Corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any Corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided that such Corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving 30 days'
written notice thereof to the Trustee and to the Company. The Trustee may at
any time terminate the agency of an Authenticating Agent by giving written
notice thereof to such Authenticating Agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
such Authenticating Agent shall cease to be eligible in accordance with the
provision of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders of
Securities of the series with respect to which such Authenticating Agent will
serve, as their names and addresses appear in the Security Register. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provision of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 607.
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If an appointment with respect to one or more series is made pursuant
to this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternate
certificate of authentication in the following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By _______________________________
As Authenticating Agent
By _______________________________
Authorized Officer
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
Section 701. Company to Furnish Trustee Names and Addresses of Holders.
----------------------------------------------------------
The Company will furnish or cause to be furnished to the Trustee with
respect to the Securities of each series:
(a) semi-annually, not later than each Interest Payment Date for such
series (or, in the case of any series not having semi-annual Interest
Payment Dates, semi-annually, not later than the dates determined pursuant
to Section 301 for such series) a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as of the
preceding Regular Record Date (or as of such other date determined pursuant
to Section 301 for such series) therefore, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
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provided, however, that so long as the Trustee is the Security Registrar no such
- -----------------
list shall be required to be furnished.
Section 702. Preservation of Information; Communications to Holders.
-------------------------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders of the Securities of each series
contained in the most recent list furnished to the Trustee as provided in
Section 701 and the names and addresses of such Holders received by the Trustee
in its capacity as Security Registrar. The Trustee may destroy any list of the
Holders of Securities of any series furnished to it as provided in Section 701
upon receipt of a new list of such Holders.
(b) If three or more Holders of Securities of any series (herein
referred to as "applicants") apply in writing to the Trustee, and furnish to the
Trustee reasonable proof that each such applicant has owned a Security of such
series for a period of at least six months preceding the date of such
application, and such application states that the applicants desire to
communicate with other Holders of Securities of such series with respect to
their rights under this Indenture or under the Securities of such series and is
accompanied by a copy of the form of proxy or other communication which such
applicants propose to transmit, then the Trustee shall, within five Business
Days after the receipt of such application, at its election, either:
(i) afford such applicants access to the information preserved at the
time by the Trustee in accordance with Section 702(a) with respect to the
Securities of such series, or
(ii) inform such applicants as to the approximate number of Holders
of Securities of such series whose names and addresses appear in the
information preserved at the time by the Trustee in accordance with Section
702(a), and as to the approximate cost of mailing to such Holders the form
of proxy or other communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Holder of Securities of such series whose name and
address appear in the information preserved at the time by the Trustee in
accordance with Section 702(a) a copy of the form or proxy or other
communication which is specified in such request, with reasonable promptness
after a tender to the Trustee of the material to be mailed and of payment, or
provision for the payment, of the reasonable expenses of mailing, unless within
five days after such tender the Trustee shall mail to such applicants and file
with the Commission, together with a copy of the material to be mailed, a
written statement to the effect that, in the opinion of the Trustee, such
mailing would be contrary to the best interest of the Holders or would be in
violation of applicable law. Such written statement shall specify the basis of
such opinion. If the Commission, after opportunity for a hearing upon the
objections specified in the written statement so filed, shall enter an order
refusing to sustain any of such objections or if, after the
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entry of an order sustaining one or more of such objections, the Commission
shall find, after notice and opportunity for hearing, that all the objections so
sustained have been met and shall enter an order so declaring, the Trustee shall
mail copies of such material to all such Holders with reasonable promptness
after the entry of such order and the renewal of such tender; otherwise the
Trustee shall be relieved of any obligation or duty to such applicants
respecting their application.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
in accordance with Section 702(b), regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under Section 702(b).
Section 703. Reports by Trustee.
-------------------
(a) Within 60 days after May 1 of each year commencing with the year
1997, the Trustee shall transmit by mail to all Holders, as their names and
addresses appear in the Security Register, such brief report dated as of such
May 1, if any, as may be required by Section 313(a) of the Trust Indenture Act.
(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when any Securities are listed on any stock exchange.
Section 704. Reports by Company.
-------------------
The Company shall:
(1) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports which the Company may
be required to file with the Commission pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934; or, if the Company is not
required to file information, documents or reports pursuant to either of
said Sections, then it shall file with the Trustee and the Commission, in
accordance with rules and regulations prescribed from time to time by the
Commission, such of the supplementary and periodic information, documents
and reports which may be required pursuant to Section 13 of the Securities
Exchange Act of 1934 in respect of a security listed and registered on a
national securities exchange as may be prescribed from time to time in such
rules and regulations;
(2) file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
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the Company with the conditions and covenants of this Indenture as may be
required from time to time by such rules and regulations; and
(3) transmit by mail to all Holders, as their names and addresses
appear in the Security Register, within 30 days after the filing thereof
with the Trustee, such summaries of any information, documents and reports
required to be filed by the Company pursuant to paragraphs (1) and (2) of
this Section as may be required by rules and regulations prescribed from
time to time by the Commission.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
Section 801. Company May Consolidate, Etc. on Certain Terms.
-----------------------------------------------
Nothing contained in this Indenture or in any of the Securities shall
prevent any consolidation or merger of the Company with or into any other
Person, or successive consolidations or mergers in which the Company or its
successor or successors shall be a party or parties, or shall prevent any
conveyance, transfer or lease of the property of the Company as an entirety or
substantially as an entirety, to any Person, unless:
(1) in case the Company shall consolidate with or merge into another
Corporation or convey, transfer or lease its properties and assets as, or
substantially as, an entirety to any Person, the Corporation formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance, transfer, or lease the properties and assets of the
Company, as, or substantially as, an entirety shall be a Corporation
organized and existing under the laws of the United States of America, any
state thereof or the District of Columbia and shall expressly assume, by an
indenture supplemental hereto executed and delivered to the Trustee, in
form satisfactory to the Trustee, the due and punctual payment of the
principal of (and premium, if any), interest on and any Additional Amounts
with respect to all the Securities and the performance of every covenant of
this Indenture on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction, no Event of
Default, or event which after notice or lapse of time, or both, would
become an Event of Default, shall have occurred and be continuing; and
(3) the Company shall have delivered to the Trustee an Officer's
Certificate or an Opinion of Counsel, stating that such consolidation,
merger, conveyance, transfer or lease and such supplemental indenture
comply with this Article and that all conditions precedent herein provided
for relating to such transaction have been complied with.
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Section 802. Successor Corporation Substituted.
----------------------------------
Upon any consolidation by the Company with or merger by the Company
into any other Corporation or any conveyance, transfer or lease of the
properties and assets of the Company as, or substantially as, an entirety to any
Person in accordance with Section 801, the successor Corporation formed by such
consolidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Corporation has been named as the Company
herein, and thereafter, except in the case of a lease to another Person, the
predecessor Corporation shall be relieved of all obligations and covenants under
this Indenture and the Securities.
ARTICLE NINE
Supplemental Indentures
Section 901. Supplemental Indentures Without Consent of Holders.
---------------------------------------------------
Without the consent of any Holders, the Company and the Trustee, at
any time and from time to time, may enter into one or more indentures
supplemental hereto, in form satisfactory to the Trustee, for any of the
following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities;
(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and, if such covenants are to
be for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the
Company;
(3) to add any additional Events of Default with respect to Securities
of any or all series;
(4) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only
when there is no Security Outstanding of any series created prior to the
execution of such supplemental indenture which is entitled to the benefit
of such provision;
(5) to secure the Securities of any or all series;
(6) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this
49
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Indenture, provided such action shall not adversely affect the
interests of the Holders of Securities of any series in any material
respect;
(7) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the issuance of
Securities in bearer form, registrable or not registrable as to principal,
and with or without interest coupons;
(8) to establish the form or terms of Securities of any series as
permitted by Sections 201 and 301;
(9) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, pursuant to the requirements
of Section 611(b);
(10) to add to, delete from or revise the conditions, limitations and
restrictions on the authorized amount, terms or purposes of issue,
authentication and delivery of Securities, as herein set forth;
(11) to supplement any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the defeasance and
discharge of any series of Securities pursuant to Article 13, provided that
--------
no such supplement shall materially adversely affect the interest of the
Holders of any Securities then Outstanding; or
(12) to amend or supplement any provision contained herein or in any
supplemental indenture, provided that no such amendment or supplement shall
--------
materially adversely affect the interest of the Holders of any Securities
then Outstanding.
Section 902. Supplemental Indentures with Consent of Holders.
------------------------------------------------
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders of Securities of such series
under this Indenture; provided, however, that no such supplemental indenture
-----------------
shall, without the consent of the Holder of each Outstanding Security affected
thereby,
(1) change the Stated Maturity of the principal of, or any installment
of interest on, any such Security, or reduce the principal amount thereof
or any
50
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interest thereon or any premium payable upon the redemption thereof,
or reduce the amount of the principal of an Original Issue Discount
Security that would be due and payable upon a declaration of acceleration
of the Maturity thereof pursuant to Section 502, or change any Place of
Payment where, or the currency in which, any such Security or any premium
or the interest thereon is payable, or impair the right to institute suit
for the enforcement of any such payment on or after the Stated Maturity
thereof (or, in the case of redemption, on or after the Redemption Date);
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of those Holders is required
for any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture; or
(3) modify any of the provisions of this Section or Section 513,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby.
A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely for
the benefit of one or more particular series of Securities, or which modifies
the rights of the Holders of Securities of such series with respect to such
covenant or the provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities or any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 903. Execution of Supplemental Indentures.
-------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
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Section 904. Effect of Supplemental Indentures.
----------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 905. Conformity with Trust Indenture Act.
------------------------------------
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
Section 906. Reference in Securities to Supplemental Indentures.
---------------------------------------------------
Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and shall
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
ARTICLE TEN
Covenants
Section 1001. Payment of Principal, any Premium, Interest and Additional
----------------------------------------------------------
Amounts.
--------
The Company covenants and agrees for the benefit of the Holders of
each series of Securities that it will duly and punctually pay the principal of
(and premium, if any) and interest on and any Additional Amounts with respect to
the Securities of that series in accordance with the terms of the Securities and
this Indenture.
Section 1002. Maintenance of Office or Agency.
--------------------------------
The Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of such series may be presented
or surrendered for registration or transfer or exchange and where notices and
demands to or upon the Company in respect of the Securities of such series and
this Indenture may be served. The Company will give prompt written notice to
the Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices
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and demands may be made or served at the Corporate Trust Office of Trustee, and
the Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities of one or more series may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission
-----------------
shall in any manner relieve the Company of its obligation to maintain an office
or agency in each Place of Payment for Securities of any series for such
purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
Unless otherwise specified with respect to any Securities pursuant to
Section 301, if and so long as the Securities of any series (i) are denominated
in a Foreign Currency or (ii) may be payable in a Foreign Currency, or so long
as it is required under any other provision of this Indenture, then the Company
will maintain with respect to each such series of Securities, or as so required,
at least one exchange rate agent.
Section 1003. Money for Securities Payments to be Held in Trust.
--------------------------------------------------
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of (and premium, if any) or interest on any of the Securities of such
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or interest
so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and will promptly notify the Trustee of its
action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will, on or before each due date of the principal of or
interest on any Securities of such series, deposit with a Paying Agent a sum
sufficient to pay the principal (or premium, if any) or interest so becoming
due, such sum to be held in trust for the benefit of the Persons entitled to
such principal, premium or interest, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its action or failure
so to act.
The Company will cause each Paying Agent for any series of Securities
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities of such series in trust for the
benefit
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of the Persons entitled thereto until such sums shall be paid to
such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities of such series) in the making of any
payment of principal (and premium, if any) or interest on the Securities of
such series; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or received
by the Trustee (or another trustee satisfying the requirements of Section 609)
in respect of Government Obligations deposited with the Trustee (or such other
trustee) pursuant to Section 1304, or then held by the Company, in trust for the
payment of the principal of (and premium, if any) or interest on any Security of
any series and remaining unclaimed for two years after such principal (and
premium, if any) or interest has become due and payable shall be paid to the
Company on Company Request, or (if then held by the Company) shall be discharged
from such trust. The Holder of such Security shall thereafter, as an unsecured
general creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease.
The Trustee or such Paying Agent, before being required to make any
such repayment, may publish, in the English language, in a newspaper customarily
published on each Business Day and of general circulation in the City of New
York, New York, or to be mailed to such Holder or both, notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the earlier of the date of such publication or such
mailing, any unclaimed balance of such money then remaining will be repaid to
the Company.
Section 1004. Corporate Existence.
--------------------
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchises; provided, however,
------------------
that the foregoing shall not obligate the Company to preserve any such right or
franchise if the Company
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<PAGE>
shall determine that the preservation thereof is no longer desirable in the
conduct of its business and that the loss thereof is not disadvantageous in any
material respect to any Holder.
Section 1005. Statement as to Default.
------------------------
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year, an Officer's Certificate, stating as to each signer thereof
that he or she is familiar with the affairs of the Company and whether or not to
such officer's knowledge the Company is in compliance (without regard to any
period of grace or requirement of notice) with all conditions and covenants of
this Indenture. The officer executing such certificate shall be the Company's
principal executive, finance or accounting officer and such certificate need not
comply with Section 314(e) of the Trust Indenture Act.
Section 1006. Additional Amounts
------------------
If any Securities of a series provide for the payment of Additional
Amounts, the Company agrees to pay to the Holder of any such Security Additional
Amounts as provided in or pursuant to this Indenture or such Securities.
Whenever in this Indenture there is mentioned, in any context, the payment of
the principal of or any premium or interest on, or in respect of, any Security
of any series or the net proceeds received on the sale or exchange of any
Security of any series, such mention shall be deemed to include mention of the
payment of Additional Amounts provided by the terms of such series established
hereby or pursuant hereto to the extent that, in such context, Additional
Amounts are, were or would be payable in respect thereof pursuant to such terms,
and express mention of the payment of Additional Amounts (if applicable) in any
provision hereof shall not be construed as excluding Additional Amounts in those
provisions hereof where such express mention is not made.
Except as otherwise provided in or pursuant to this Indenture or the
Securities of the applicable series, if the Securities of a series provide for
the payment of Additional Amounts, at least 10 days prior to the first Interest
Payment Date with respect to such series of Securities (or if the Securities of
such series shall not bear interest prior to Maturity, the first day on which a
payment of principal is made), and at least 10 days prior to each date of
payment of principal or interest if there has been any change with respect to
the matters set forth in the below-mentioned Officer's Certificate, the Company
shall furnish to the Trustee and the Paying Agent, if other than the Trustee, an
Officer's Certificate instructing the Trustee and such Paying Agent whether such
payment of principal of an premium, if any, or interest on the Securities of
such series shall be made to Holders of Securities of such series who are United
States aliens without withholding for or on account of any tax, assessment or
other governmental charge described in the Securities of such series. If any
such withholding shall be required, then such Officer's Certificate shall
specify by country the amount, if any, required to be withheld on such payments
to such Holders of Securities, and the Company agrees to pay to the Trustee or
such Paying Agent the Additional Amounts required by the terms of such
Securities.
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ARTICLE ELEVEN
Redemption of Securities
Section 1101. Applicability of Article.
-------------------------
Securities of any series which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms and (except as
otherwise specified pursuant to Section 301 for Securities of any series) in
accordance with this Article.
Section 1102. Election to Redeem; Notice to Trustee.
--------------------------------------
In case of any redemption of less than all the Securities of any
series, the Company shall, at least 60 days prior to the Redemption Date fixed
by the Company (unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee of such Redemption Date and of the principal amount of
Securities of such series to be redeemed and, if applicable, of the tenor of the
Securities to be redeemed. In the case of any redemption of Securities prior to
the expiration of any restriction on such redemption provided in the terms of
such Securities or elsewhere in this Indenture, the Company shall furnish the
Trustee with an Officer's Certificate evidencing compliance with such
restriction.
Section 1103. Selection by Trustee of Securities to be Redeemed.
--------------------------------------------------
If less than all the Securities of any series are to be redeemed
(unless all of the Securities of a specified tenor are to be redeemed), the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series subject to such redemption and not previously called for redemption,
by such method as the Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions (equal to the minimum
authorized denomination for Securities of that series and tenor or any integral
multiple thereof) of the principal amount of Securities of such series of a
denomination larger than the minimum authorized denomination for Securities of
that series. If less than all of the Securities of such series and of a
specified tenor are to be redeemed, the particular Securities to be redeemed
shall be selected not more than 45 days prior to the Redemption Date by the
Trustee, from the Outstanding Securities of such series and specified tenor not
previously called for redemption in accordance with the preceding sentence.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any
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<PAGE>
Securities redeemed or to be redeemed only in part, to the portion of the
principal amount of such Securities which has been or is to be redeemed.
Section 1104. Notice of Redemption.
---------------------
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed. Failure to give notice by
mailing in the manner herein provided to the Holder of any Securities designated
for redemption as a whole or in part, or any defect in the notice to any such
Holder, shall not affect the validity of the proceedings for the redemption of
any other Securities or portion thereof.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) if less than all the Outstanding Securities of any Series and
tenor are to be redeemed, the identification (and, in the case of partial
redemption, the principal amounts) of the particular Securities to be
redeemed;
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and that interest
thereon will cease to accrue on and after said date;
(5) the place or places where such Securities are to be surrendered
for payment of the Redemption Price;
(6) that the redemption is for a sinking fund, if such is the case;
(7) in case any Security is to be redeemed in part only, the notice
which relates to such Security shall state that on and after the Redemption
Date, upon surrender of such Security, the Holder of such Security will
receive, without charge, a new Security or Securities of authorized
denominations for the principal amount thereof remaining unredeemed; and
(8) the CUSIP Number or the Euroclear or the Cedel Bank reference
numbers of such Securities, if any (or any other numbers used by a
Depository to identify such Securities).
Notice of redemption of Securities to be redeemed shall be given by
the Company or, on Company Request, by the Trustee at the expense of the
Company.
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Section 1105. Deposit of Redemption Price.
----------------------------
On or before any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date.
Section 1106. Securities Payable on Redemption Date.
--------------------------------------
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price) such Securities
shall cease to bear interest. Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the
Company at the Redemption Price, together with accrued interest to the
Redemption Date; provided, however, that installments of interest whose Stated
-----------------
Maturity is on or prior to the Redemption Date shall be payable to the Holders
of such Securities, or one or more Predecessor Securities, registered as such at
the close of business on the relevant Regular or Special Record Dates according
to their terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Security.
Section 1107. Securities Redeemed in Part.
----------------------------
Any Security which is to be redeemed only in part shall be surrendered
at an office or agency of the Company at a Place of Payment therefor (with, if
the Company or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or the Holder's attorney duly authorized in
writing), and the Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge, a new Security or
Securities of the same series and of like tenor of any authorized denomination
as requested by such Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Security so
surrendered.
If a Global Security is so surrendered, the Company shall execute, and
the Trustee shall authenticate and deliver to the Depository, without service
charge, a new Global Security in a denomination equal to and in exchange for the
unredeemed portion of the principal of the Global Security so surrendered.
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ARTICLE TWELVE
Intentionally Left Blank
ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
Section 1301. Applicability of Article; Company's Option to Effect Defeasance
---------------------------------------------------------------
or Covenant Defeasance.
-----------------------
If pursuant to Section 301 provision is made for either or both of (a)
defeasance of the Securities of a series under Section 1302 or (b) covenant
defeasance of the Securities of a series under Section 1303 to apply to
Securities of any series, then the provisions of such Section or Sections, as
the case may be, together with the other provisions of this Article Thirteen,
shall be applicable to the Securities of such series, and the Company may at its
option, at any time, with respect to the Securities of such series, elect to
have either Section 1302 (if applicable) or Section 1303 (if applicable) be
applied to the Outstanding Securities of such series upon compliance with the
conditions set forth below in this Article Thirteen.
Section 1302. Defeasance and Discharge.
-------------------------
Upon the Company's exercise of the above option applicable to this
Section, the Company shall be deemed to have been discharged from its
obligations with respect to the Outstanding Securities of such series on the
date the conditions set forth below are satisfied (hereinafter, "defeasance").
For this purpose, such defeasance means that the Company shall be
deemed to have paid and discharged the entire indebtedness represented by the
Outstanding Securities of such series and to have satisfied all its other
obligations under such Securities and this Indenture insofar as such Securities
are concerned (and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder:
(A) the rights of Holders of Outstanding Securities of such series to
receive, solely from the trust fund described in Section 1304 and as more fully
set forth in such Section, payments in respect of the principal of (and premium,
if any) and interest, if any, on and Additional Amounts, if any, with respect
to, such Securities when such payments are due;
(B) the Company's obligations with respect to such Securities under
Sections 304, 305, 306, 607, 1002, 1003 and 1006 (but only to the extent that
any Additional Amounts payable exceed the amount deposited in respect of such
Additional Amounts pursuant to Section 1304(1) below);
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(C) the rights, powers, trusts, duties and immunities and other
provisions in respect of the Trustee hereunder; and
(D) this Article Thirteen.
Subject to compliance with this Article Thirteen, the Company may exercise its
option under this Section 1302 notwithstanding the prior exercise of its option
under Section 1303 with respect to the Securities of such series.
Section 1303. Covenant Defeasance.
--------------------
Upon the Company's exercise of the above option applicable to this
Section, the Company shall be released from its obligations under Sections 801,
1005, 501(3) (as to Sections 801 and 1005), 501(5), 501(6) and 501(7) (if
Section 501(7) is specified as applicable to the Securities of such series) with
respect to the Outstanding Securities of such series on and after the date the
conditions set forth below are satisfied (hereinafter, "covenant defeasance").
For this purpose, such covenant defeasance means that, with respect to
the Outstanding Securities of such series, the Company may omit to comply with
and shall have no liability in respect of any term, condition or limitation set
forth in any such Section, whether directly or indirectly by reason of any
reference elsewhere herein to any such Section or by reason of any reference in
any such Section to any other provision herein or in any other document, but the
remainder of this Indenture and such Securities shall be unaffected thereby.
Following a covenant defeasance, payment of the Securities of such series may
not be accelerated because of an Event of Default specified above in this
Section 1303.
Section 1304. Conditions to Defeasance or Covenant Defeasance.
------------------------------------------------
The following shall be the conditions to application of either Section
1302 or Section 1303 to the Outstanding Securities of such series.
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 609 who shall agree to comply with the provisions of this
Article Thirteen applicable to it) as trust funds in trust for the purpose
of making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (A) an
amount in Dollars or in such Foreign Currency in which such Securities are
then specified as payable at Stated Maturity, or (B) Government Obligations
which through the scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, on the due date of any
payment, money in an amount, or (C) a combination thereof, sufficient,
without reinvestment, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and
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<PAGE>
which shall be applied by the Trustee (or other qualifying trustee) to pay
and discharge, (i) the principal of (and premium, if any, on) and each
installment of principal of (and premium, if an) and interest on the
Outstanding Securities of such series on the Stated Maturity of such
principal or installment of principal or interest and (ii) any mandatory
sinking fund payments or analogous payments applicable to the Outstanding
Securities of such series on the day on which such payments are due and
payable in accordance with the terms of this Indenture and of such
Securities. Before such a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of any series of Securities
at a future date in accordance with any redemption provisions contained in
the Supplemental Indenture relating to such series, which shall be given
effect in applying the foregoing.
(2) No Event of Default or event with which notice of lapse of time or
both would become an Event of Default with respect to the Securities of
such series shall have occurred and be continuing on the date of such
deposit and, with respect to defeasance only, at any time during the period
ending on the 123rd day after the date of such deposit (it being understood
that this condition shall not be deemed satisfied until the expiration of
such period).
(3) Such defeasance or covenant defeasance shall not cause the Trustee
for the Securities of such series to have a conflicting interest for
purposes of the Trust Indenture Act with respect to any securities of the
Company.
(4) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or
any other agreement or instrument to which the Company is a party or by
which it is bound.
(5) Such defeasance or covenant defeasance shall not cause any
Securities of such series then listed on any registered national securities
exchange under the Securities Exchange Act of 1934, as amended, to be
deleted.
(6) In the case of an election under Section 1302, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (x) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (y) since the date of this Indenture there has
been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion shall confirm that, the
Holders of the Outstanding Securities of such series will not recognize
income, gain or loss for federal income tax purposes as a result of such
defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such defeasance had not occurred.
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<PAGE>
(7) In the case of an election under Section 1303, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the Outstanding Securities of such series will not recognize
income, gain or loss for federal income tax purposes as a result of such
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such covenant defeasance had not occurred.
(8) Such defeasance or covenant defeasance shall be effected in
compliance with any additional terms, conditions or limitations which may
be imposed on the Company in connection therewith pursuant to Section 301.
(9) The Company shall have delivered to the Trustee an Officer's
Certificate or an Opinion of Counsel, stating that all conditions precedent
provided for in the Indenture relating to either the defeasance under
Section 1302 or the covenant defeasance under Section 1303 (as the case may
be) have been complied with.
Section 1305. Deposited Money and Government Obligations to be Held in Trust;
---------------------------------------------------------------
Other Miscellaneous Provisions.
-------------------------------
Subject to the provisions of the last paragraph of Section 1003, all
money and Government Obligations (including the proceeds thereof) deposited with
the Trustee (or other qualifying trustee -- collectively, for purposes of this
Section 1305, the "Trustee") pursuant to Section 1304 in respect of the
Outstanding Securities of such series shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent (but not
including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities, of all sums due and to become due
thereon in respect of principal (and premium, if any) and interest and
Additional Amounts, if any, but such money need not be segregated from other
funds except to the extent required by law.
Unless otherwise specified in or pursuant to this Indenture or any
Security, if after a deposit referred in Section 1302 has been made, (a) Holder
of a Security in respect of which such deposit was made is entitled to, and
does, elect pursuant to Section 301 or the terms of such Security to receive
payment in a Currency other than that in which the deposit pursuant to 1302 has
been made in respect of such Security, or (b) a Conversion Event occurs in
respect of the Foreign Currency in which the deposit pursuant to Section 1302
has been made, the indebtedness represented by such Security shall be deemed to
have been, and will be, fully discharged and satisfied through the payment of
the principal of (and premium, if any), and interest, if any, on and Additional
Amounts, if any, with respect to, such Security as the same becomes due out of
the proceeds yielded by converting (from time to time as specified below in the
case of any such election) the amount or other property deposited in respect of
such Security into the Currency in which such Security becomes payable as a
result of such election or Conversion Event based on
62
<PAGE>
(x) in the case of payments made pursuant to clause (a) above, the applicable
market exchange rate for such Currency in effect on the second Business Day
prior to each payment date, or (y) with respect to a Conversion Event, the
applicable market exchange rate for such Foreign Currency in effect (as nearly
as feasible) at the time of the Conversion Event.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the Government Obligations
deposited pursuant to Section 1304 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Securities of such series.
Anything in this Article Thirteen to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or Government Obligations held by it as provided in Section
1304 which, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof which would then be required to be
deposited to effect an equivalent defeasance or covenant defeasance.
ARTICLE FOURTEEN
Sinking Funds
Section 1401. Applicability of Article.
-------------------------
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of a series, except as otherwise permitted or
required in or pursuant to this Indenture or any Security of such series issued
pursuant to this Indenture.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series is herein referred to as a "mandatory sinking
fund payment," and any payment in excess of such minimum amount provided for by
the terms of Securities of such series is herein referred to as an "optional
sinking fund payment." If provided for by the terms of Securities of any
series, the cash amount of any sinking fund payment may be subject to reduction
as provided in Section 1402. Each sinking fund payment shall be applied to the
redemption of Securities of any series as provided for by the terms of
Securities of such series and this Indenture.
Section 1402. Satisfaction of Sinking Fund Payments with Securities.
------------------------------------------------------
The Company may (1) deliver Outstanding Securities of a series (other
than any of such Securities previously called for redemption) and (2) apply as a
credit Securities of such series which have been redeemed either at the election
of the Company pursuant to the terms of such series of Securities, or through
the application of permitted optional sinking fund payments pursuant to the
terms of such Securities,
63
<PAGE>
in each case in satisfaction of all or any part of any sinking fund payment
required to be made pursuant to the terms of such Securities, as provided by the
terms of such Securities, provided that such have not been previously so
credited. Such Securities shall be received and credited for such purpose by the
Trustee at the Redemption Price specified in such Securities for redemption
through operation of the sinking fund and the amount of such required sinking
fund payment shall be reduced accordingly.
Section 1403. Redemption of Securities for Sinking Fund.
------------------------------------------
Not less than 75 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officer's
Certificate specifying the amount of the next ensuing mandatory sinking fund
payment for such series pursuant to the terms of such series, the portion
thereof, if any, which is to be satisfied by payment of cash and the portion
thereof, if any, which is to be satisfied by delivering and crediting Securities
of that series pursuant to Section 1402, and the optional amount, if any, to be
added in cash to the next ensuing mandatory sinking fund payment, hereof and
will also deliver to the Trustee any Securities to be so delivered. Not less
than 45 days prior to each such sinking fund payment date, the Trustee shall
select the Securities to be redeemed upon such sinking fund payment date in the
manner specified in Section 1103 and cause notice of the redemption thereof to
be given the name of and at the expense of the Company in the manner provided in
Section 1104. Such notice having been duly given, the redemption of such
Securities shall be made upon the terms and in the manner stated in Sections
1106 and 1107.
ARTICLE FIFTEEN
Securities in Foreign Currencies
Section 1501. Applicability of Article.
-------------------------
Whenever this Indenture provides for (i) any action by, or the
determination of any of the rights of, Holders of Securities of any series in
which not all of such Securities are denominated in the same Currency, or (ii)
any distribution to Holders of Securities, in the absence of any provision to
the contrary in this Indenture or the Securities, any amount in respect of any
Security denominated in a Currency other than Dollars shall be treated for any
such action or distribution as that amount of Dollars that could be obtained for
such amount on such reasonable basis of exchange and as of the record date with
respect to Securities of such series (if any) for such action, determination of
rights or distribution (or, if there shall be no applicable record date, such
other date reasonably proximate to the date of such action, determination of
rights or distribution) as the Company may specify in a written notice to the
Trustee or, in the absence of such written notice, as the Trustee may determine.
64
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed and attested, all as of the day and year first above written.
FEDERAL EXPRESS CORPORATION,
Issuer
Attest:
/s/ SCOTT E. HANSEN By /s/ BURNETTA B. WILLIAMS
Name: Scott E. Hansen Name: Burnetta B. Williams
Title: Assistant Secretary Title: Assistant Treasurer and Managing
Director - Corporate Finance
THE FIRST NATIONAL BANK OF
CHICAGO, as Trustee
Attest:
/s/ A. MOVITZ By /s/ JOHN R. PRENDIVILLE
Name: A. Movitz Name: John R. Prendiville
Title: Trust Officer Title: Vice President
65
<PAGE>
SCHEDULE I
FEDERAL EXPRESS CORPORATION
AND
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
__________________________________________________________________
Supplemental Indenture
No. __
Dated as of _____________, ______
__________________________________________________________________
___% Notes due __________________, ______
<PAGE>
SUPPLEMENTAL INDENTURE NO. ___, dated as of __________, _____ between
Federal Express Corporation, a Delaware Corporation (the "Company") and The
First National Bank of Chicago, a national banking association organized under
the laws of the United States of America (herein called the "Trustee") as
Trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company and the Trustee have executed and delivered an Indenture
dated as of July 1, 1996, as amended or supplemented (the "Indenture") to
provide for the issuance from time to time of the Company's Securities.
Sections 201 and 301 of the Indenture provide that the form and terms
of Securities of any series may be established pursuant to an indenture
supplemental to the Indenture.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and under the Indenture and
duly issued by the Company and to make this Supplemental Indenture No. ___ a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, this Indenture witnesseth:
For and in consideration of the premises and the purchase of the
Securities by the holders hereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of the holders of the Securities of the series
hereby established, as follows:
ARTICLE ONE
Relation to the Indenture;
Definitions and Other Provisions of
General Application
Section 1.01. Relation to the Indenture. This Supplemental Indenture
-------------------------
No. ___ constitutes an integral part of the Indenture.
Section 1.02. Definitions and Other Provisions of General
-------------------------------------------
Application. For all purposes of this Supplemental Indenture No. ___ unless
- ------------
otherwise specified herein:
(a) all terms defined in this Indenture which are used and not
otherwise defined herein shall have the meanings they are given in the
Indenture; and
(b) the provisions of general application stated in Section 101 of the
Indenture shall apply to this Supplemental Indenture No. __, except that the
words "herein," "hereof," "hereto" and "hereunder" and other words of similar
import refer
<PAGE>
to this Supplemental Indenture as a whole and not to the Indenture or any
particular Article, Section or other subdivision of the Indenture or this
Supplemental Indenture No. ___.
ARTICLE TWO
The Series of Notes
Section 2.01. Title.
------
There shall be a series of Securities designated the "___% Notes due
__________, __________" (the "Notes").
Section 2.02. Principal Amount.
-----------------
The aggregate principal amount of the Notes which may be authenticated
and delivered under this Supplemental Indenture shall not exceed $__________
(except for Notes which may be authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Notes pursuant to Sections
304, 305, 306, 906 or 1107 of the Indenture).
Section 2.03. Maturity.
---------
The date on which the principal of the Notes shall be payable shall be
__________.
Section 2.04. Interest.
---------
[The Notes shall bear interest at the rate of [ ]% per annum.
Interest shall accrue from __________, _____ or from the most recent Interest
Payment Date to which interest has been paid or provided for. Accrued interest
shall be payable on _________, _____ and on each _____ and _____ thereafter, to
the persons in whose names the Notes are registered at the close of business on
the preceding _____ or _____, as the case may be.]
[Insert other interest provisions if necessary]
Section 2.05. Place of Payment.
-----------------
[The Place of Payment for the Notes shall be at the Corporate Trust
office of the Trustee at ____________ or such other office of the Paying Agent
as the Paying Agent may reasonably request by notice to the Company and the
Trustee (if the Paying Agent is not the Trustee).]
2
<PAGE>
Section 2.06. Redemption.
-----------
[Insert redemption terms]
The provisions of Article Thirteen of the Indenture [shall/shall not]
apply to the Notes.
Section 2.08. Intentionally left blank.
Section 2.09. Form of Notes.
--------------
The Notes shall be in the form of Exhibit A attached hereto.
Section 2.10 Currency.
---------
[Insert currency terms.]
Section 2.11 Sinking Fund.
-------------
[Insert sinking fund terms.]
Section 2.13 Additional Amounts.
-------------------
The provisions of Section 1006 of the Indenture [shall/shall not]
apply to the Notes.
ARTICLE THREE
Miscellaneous Provisions
Section 3.01. Supplemental Indenture.
-----------------------
The Indenture, as supplemented and amended by this Supplemental
Indenture No. __, is in all respects hereby adopted, ratified and confirmed.
Section 3.02. Counterparts.
-------------
This Supplemental Indenture No. __ may be executed in any number of
counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture No. __ to be duly executed, as of the day and year first written
above.
FEDERAL EXPRESS CORPORATION
Attest:
_______________________________ By ___________________________
Name: Name:
Title: Title:
THE FIRST NATIONAL BANK OF
CHICAGO
Attest:
______________________________ By __________________________
Name: Name:
Title: Title:
4
<PAGE>
Exhibit A
to Indenture
------------
REGISTERED
No._____________________ PRINCIPAL AMOUNT:
$________________
CUSIP NO. ____________________
FEDERAL EXPRESS CORPORATION
_______ % Note due_____________ , _____
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (THE "DEPOSITORY") (55 WATER
STREET, NEW YORK, NEW YORK), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY, AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY, ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
UNLESS AND UNTIL THIS NOTE IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO THE DEPOSITORY OR
ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR DEPOSITORY.
FEDERAL EXPRESS CORPORATION, a Delaware Corporation, (the "Company"
which term includes any successor Person under the Indenture referred to on the
reverse hereof), for value received, hereby promises to pay
CEDE & CO.
C/O THE DEPOSITORY TRUST COMPANY
55 WATER STREET
NEW YORK, NEW YORK 10041
or registered assigns, the principal sum of
DOLLARS
on ________________ , _______ (the "Maturity Date") and to pay interest thereon
from _________________ , _____ or from the most recent "Interest Payment
Date" to which interest has been paid or duly provided for, semi-annually on
____________________________ and ______________ of each year,
commencing,________________,__________________, and on the Maturity Date, at the
rate of % per annum, until the principal hereof is paid or duly provided for.
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date
<PAGE>
will, as provided in the Indenture, be paid to the Person in whose name this
Note (or one or more Predecessor Notes) is registered at the close of business
on the "Regular Record Date" for such interest, which shall be the __________ or
______________(whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Any such interest not so punctually paid
or duly provided for shall forthwith cease to be payable to the registered
Holder on such Regular Record Date and may either be paid to the Person in whose
name this Note (or one or more Predecessor Notes) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee referred to on the reverse hereof, notice of which shall
be given to Holders of Notes of this series not less than 10 days prior to such
Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the Notes
of this series may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture.
The Company will at all times appoint and maintain a Paying Agent
(which may be the Trustee) authorized by the Company to pay the principal of and
interest on any Notes of this series on behalf of the Company and having an
office or agency in Chicago, Illinois and in such other cities, if any, as the
Company may designate in writing to the Trustee (the "Place of Payment") where
Notes of this series may be presented or surrendered for payment and where
notices, designations or requests in respect for payments with respect to Notes
of this series may be served. The Company has initially appointed The First
National Bank of Chicago as such Paying Agent.
Interest payments on this Note will be computed and paid on the basis
of a 360-day year of twelve 30-day months. Interest payable on this Note on any
Interest Payment Date and on the Maturity Date will include interest accrued
from and including the most recent Interest Payment Date to which interest has
been paid or duly provided for (or from and including __________ , ________, if
no interest has been paid on this Note) to but excluding such Interest Payment
Date or the Maturity Date, as the case may be.
If any Interest Payment Date or the Maturity Date falls on a day that
is not a Business Day (as defined below), principal or interest payable with
respect to such Interest Payment Date or Maturity Date, as the case may be, will
be paid on the next succeeding Business Day with the same force and effect as if
it were paid on the date such payment was due, and no interest shall accrue on
the amount so payable for the period from and after such Interest Payment Date
or the Maturity Date, as the case may be. "Business Day" means any day other
than Saturday, Sunday or other day on which banking institutions in New York,
Illinois or Tennessee are obligated or authorized by law to close.
The principal and interest payable on this Note will be made by wire
transfer of immediately available funds to the Holder hereof in such currency of
the United States of America as at the time of payment is legal tender for the
payment of public and private debts.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the Certificate of Authentication hereon has been executed by
the Trustee by manual signature, this Note shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose.
2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
FEDERAL EXPRESS CORPORATION
By:_______________________________
Name:
Title:
Attest:
_______________________________
Name:
Title:
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Notes of the series designated therein referred to in the
within-mentioned Indenture.
THE FIRST NATIONAL BANK
OF CHICAGO,
As Trustee
By:____________________________
Authorized Signatory
Dated:__________________________
3
<PAGE>
FEDERAL EXPRESS CORPORATION
______% Note due______________ , _________
This Note is one of a duly authorized issue of securities of the
Company (herein called the "Notes"), limited in aggregate principal amount to $
- ---------------- (except as otherwise provided in the Indenture), issued and to
be issued as one series of debt securities of the Company under an Indenture,
dated as of July __, 1996, as amended and supplemented from time to time (the
"Indenture"), between the Company and The First National Bank of Chicago, as
Trustee (the "Trustee," which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee and the Holders of
the Notes and of the terms upon which the Notes are, and are to be,
authenticated and delivered. In addition to the Notes, the Company is authorized
to issue an unlimited amount of debt securities in one or more series (herein
collectively with the Notes called the "Debt Securities") under the Indenture.
This Note is not redeemable at the option of the Company or at the
option of the Holder prior to the Maturity Date [and is not subject to any
sinking fund].
In case an Event of Default with respect to the Notes of this series
shall occur and be continuing, the principal of the Notes of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture contains provisions for defeasance at any time of (i)
the entire indebtedness of this Note or (ii) certain respective covenants and
Events of Default with respect to this Note, in each case upon compliance with
certain conditions set forth therein, which provisions apply to the Notes.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Debt Securities or each series to
be affected under the Indenture at any time by the Company and the Trustee with
the consent of a majority in principal amount of each series of Debt Securities
to be affected if less than all series are to be affected by such modification
or amendment. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Debt Securities of each series
at the time Outstanding, on behalf of the Holders of all Debt Securities of such
series, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any
Note or Notes issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Note.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, places and rate, and in the currency herein prescribed.
As provided in the Indenture and subject to certain limitations herein
and therein set forth, the transfer of this Note is registerable in the Security
Register, upon
4
<PAGE>
surrender of this Note for registration of transfer at the office or agency of
the Company in the Place of Payment, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar, duly executed by, the Holder hereof or its attorney duly
authorized in writing, and thereupon one or more new Notes of this series and of
like tenor, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
As provided in the Indenture and subject to certain limitations herein
and therein set forth, Notes of this series issued in definitive registered form
are exchangeable for the same aggregate principal amount of Notes of this series
and of like tenor and authorized denominations, as requested by the Holder
surrendering the same.
The Notes of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple of $1,000 in excess
thereof.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Note for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement of the
Corporation in the Indenture or any indenture supplemental thereto or in any
Note, or because of the creation of any indebtedness represented thereby, shall
be had against any incorporator, stockholder, officer or director, as such, of
the Corporation or of any successor Corporation, either directly or through the
Corporation or any successor Corporation, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment or by any legal
or equitable proceeding or otherwise, all such liability being expressly waived
and released by the acceptance hereof and as part of the consideration for the
issue hereof.
At the option of the Corporation and upon satisfaction of certain
conditions specified in the Indenture, either (a) the Corporation shall be
deemed to have paid and discharged the entire indebtedness on the Notes or (b)
the Corporation need not comply with certain covenants contained in the
Indenture, in each case upon the deposit by the Corporation with the Trustee in
trust for the Holders of the Notes of an amount of funds or obligations issued
or guaranteed by the United States of America sufficient to pay and discharge
upon the stated maturity thereof the entire indebtedness evidenced by the Notes,
all as provided in the Indenture.
This Note shall be governed by and construed in accordance with the
laws of the State of Tennessee.
All terms used in this Note which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
5
<PAGE>
ABBREVIATIONS
-------------
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as
tenants in common
UNIF GIFT MIN ACT ______________ Custodian ______________
(Cust) (Minor)
under Uniform Gifts to Minors Act
_________________________________
(State)
Additional abbreviations may also be used
though not in the above list.
__________________________________
6
<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assigns(s) and
transfer(s) unto
________________________________________________________________________________
________________________________________________________________________________
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
_____________________________
/____________________________/
________________________________________________________________________________
________________________________________________________________________________
(Please Print or Type Name and Address
Including Postal Zip Code of Assignee)
________________________________________________________________________________
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints
________________________________________________________________________________
______________________________________________________________________________to
transfer said Note on the books of the Company, with full power of substitution
in the premises.
Dated:_____________________________
Signature Guaranteed
_______________________________________
NOTICE: Signature must be guaranteed NOTICE: The signature to this
by a member firm of the New York Stock assignment must correspond with
Exchange or a commercial bank or trust the name as written upon the face
company. of the within Note in every
particular, without alteration or
enlargement or any change
whatever.
31335.doc.
7
<PAGE>
EXHIBIT 4.26
Confidential commercial and financial information has been omitted from the
exhibit and filed separately with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.
<PAGE>
Exhibit 4.26
EXECUTION COPY
*************************************************
FEDERAL EXPRESS CORPORATION
_____________________________
FACILITY AGREEMENT
Dated as of April 1, 1996
______________________________
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as Agent
*************************************************
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is attached
but is inserted for convenience of reference only.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Definitions............................. 1
Section 2. Commitments and Loans................... 5
2.01 Loans and Loan Certificates............. 5
2.02 Borrowings.............................. 5
2.03 Changes of Maximum Commitments.......... 6
2.04 Fees.................................... 6
2.05 Lending Offices......................... 7
2.06 Several Obligations..................... 7
2.07 Pro Rata Treatment...................... 7
2.08 Certain Notices......................... 8
2.09 Maximum Amounts......................... 8
Section 3. Conditions Precedent.................... 8
Section 4. Representations and Warranties.......... 9
4.01 Corporate Existence..................... 9
4.02 Authorization........................... 9
4.03 Enforceability.......................... 9
4.04 No Conflicts............................ 9
Section 5. The Agent............................... 9
5.01 Appointment, Powers and Immunities...... 9
5.02 Reliance by Agent....................... 10
5.03 Defaults, Etc........................... 11
5.04 Rights as a Bank........................ 11
5.05 Indemnification......................... 11
5.06 Non-Reliance on Agent and Other Banks... 12
5.07 Failure to Act.......................... 12
5.08 Resignation or Removal of Agent......... 12
Section 6. Funding Agreement and Indemnity......... 13
Section 7. Miscellaneous........................... 16
7.01 Waiver.................................. 16
7.02 Notices................................. 16
7.03 Expenses, Etc........................... 16
</TABLE>
<PAGE>
-2-
<TABLE>
<S> <C>
7.04 Amendments, Etc......................... 17
7.05 Successors and Assigns.................. 17
7.06 Assignments and Participations.......... 18
7.07 Captions................................ 19
7.08 Counterparts............................ 19
7.09 Governing Law........................... 19
7.10 Severability............................ 19
</TABLE>
Schedule 2.08 - Form of Notice of Borrowing
Exhibit A - Term Sheet
Exhibit B - Form of Trustee's Letter
<PAGE>
-3-
FACILITY AGREEMENT dated as of April 1, 1996 (as amended or
supplemented from time to time, this "Agreement"), among FEDERAL EXPRESS
CORPORATION, a corporation duly organized and validly existing under the laws of
the State of Delaware (the "Company"); each of the financial institutions that
is a signatory hereto identified under the caption "BANKS" on the signature
pages hereto or which, pursuant to Section 7.06(b) hereof, shall become a "Bank"
hereunder (individually, a "Bank" and, collectively, the "Banks"); and MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, as agent for the Banks (in such capacity,
together with its successors in such capacity, the "Agent").
The Company has requested the Banks to provide a facility under which
the Banks will make loans in an aggregate principal amount not exceeding
$[ * ], of which the aggregate principal amount outstanding at any one time
shall not exceed $[ * ] (as such amounts may be reduced from time to time
pursuant to Section 2.03 hereof), to the respective owner trustees designated by
the Company under leveraged lease transactions to finance a portion of the
purchase price by such owner trustees of one or more of the six Aircraft (as
hereinafter defined), each to be concurrently leased by such relevant owner
trustee to the Company. Each such Aircraft shall at the time the respective
loans are made hereunder be a new addition to the Company's fleet.
To induce the Banks to make such loans, the Company, the Banks and the
Agent propose to enter into this Agreement pursuant to which the Banks will make
a revolving credit facility available and to execute and deliver certain other
Operative Agreements in connection therewith.
Accordingly, the parties hereto agree as follows:
Section 1. Definitions. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in
Exhibit A hereto or, when used in respect of a particular Aircraft or any Loans
made to finance a portion of the purchase price thereof or the transactions
otherwise related thereto, in Schedule II to the Indenture entered into in
connection with the making of such Loans. In addition, as used herein, the
following terms shall have the following meanings (all terms defined in this
Section 1 or in other provisions of this Agreement in the singular to have the
same meanings when used in the plural and vice versa):
"Aggregate Maximum Exposure" shall mean the sum of the Maximum
Commitment of each Bank (as such amounts may be reduced from time to time
pursuant to Section 2.03 hereof). Initially such sum is $[ * ].
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
<PAGE>
-4-
"Aircraft" shall mean, individually, each of the six aircraft referred
to in the Term Sheet, in each case as more fully described in the Indenture and
the Indenture Supplement relating to such aircraft, and, collectively, all of
such aircraft.
"Applicable Lending Office" shall mean, for each Bank and for each Type
of Loan, the "Lending Office" of such Bank (or of an affiliate of such Bank)
designated for such Type of Loan on the signature pages hereof or such other
office of such Bank (or of an affiliate of such Bank) as such Bank may from time
to time specify to the Agent and the Company as the office by which its Loans of
such Type are to be made and maintained.
"Base Rate Loans" shall mean Loans that bear interest at rates based
upon the Base Rate.
"Business Day" shall mean any day (a) on which commercial banks are not
authorized or required to close in New York City and (b) on which dealings in
Dollar deposits are carried out in the London interbank market.
"Closing Date" shall mean April 18, 1996, or such later date occurring
on or before April 30, 1996 as the parties may agree on which this Agreement is
executed and delivered by the parties hereto.
"Commitment" shall mean, with respect to each Aircraft and for each
Bank, the obligation of such Bank in connection with the Company's entering into
a Leveraged Lease Transaction with respect to such Aircraft to make a Loan to
the relevant Owner Trustee to finance the purchase of such Aircraft in an amount
up to but not exceeding the amount set opposite the name of such Bank on the
signature pages hereof under the caption "Commitment for each Aircraft";
provided, however, that no Bank shall be obligated to make any Loan that would
result in the sum of the aggregate principal amount of Loans made by such Bank
then outstanding exceeding such Bank's Maximum Commitment. The sum of the
aggregate principal amount of all Loans for all of the Banks that may be
outstanding at any one time is the Aggregate Maximum Exposure. The aggregate
principal amount of the Commitments with respect to each Aircraft for all of the
Banks is $[ * ].
"Commitment Termination Date" shall mean the first to occur of (i) April
17, 1997, and (ii) the termination of the Commitments of all of the Banks with
respect to all of the Aircraft pursuant hereto.
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
<PAGE>
-5-
"Delivery Date" shall mean, for any Loan, the date on which an Aircraft
to be purchased with the proceeds of such Loan is delivered under the relevant
Participation Agreement.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"Floating Rate Loans" shall mean Loans that bear interest at rates based
upon LIBOR or the Treasury Rate.
"Indenture" shall mean each Trust Indenture, Mortgage and Security
Agreement between the respective Owner Trustee and the Indenture Trustee entered
into in connection with the making of any Loans, and any amendment or supplement
thereto from time to time entered into.
"Indenture Event of Default" shall mean an Indenture Event of Default as
defined in any Indenture.
"Indenture Trustee" shall mean State Street Bank and Trust Company, a
Massachusetts trust company, or such other bank or trust company designated as
such by the Company and satisfactory to the Agent, as Indenture Trustee under an
Indenture, and its successors and permitted assigns as trustee thereunder.
"Interest Period" shall have the meaning assigned to such term in the
Term Sheet.
"Leveraged Lease Transaction" with respect to an Aircraft, shall mean a
transaction in which, among other things, the Owner Trustee with respect to such
Aircraft purchases such Aircraft utilizing funds provided by the relevant Owner
Participant and the proceeds of secured Loans from the Banks pursuant to the
facility under this Agreement and the Owner Trustee immediately thereupon leases
such Aircraft to the Company pursuant to a triple net lease (the "Lease" with
respect to such Aircraft) for a basic rental at least sufficient to service such
Loans.
"Loans" shall mean the loans provided for by Section 2.01 hereof.
"Majority Banks" shall mean, subject to the last paragraph of Section
7.04 hereof, Banks having at least 51% of the aggregate amount of the
Commitments or, if the Commitments shall have terminated, Banks holding at least
51% of the aggregate unpaid principal amount of the Loans.
"Maximum Commitment" shall mean, for any Bank, the amount set opposite
the name of such Bank on the signature pages hereof under the caption "Maximum
Commitment" (in each case as the same may be reduced from time to time pursuant
to Section 2.03 hereof).
<PAGE>
-6-
"Morgan" shall mean Morgan Guaranty Trust Company of New York.
"Operative Agreements" shall mean, collectively, with respect to each
Aircraft, the Participation Agreement, the Indenture and the Lease with respect
to such Aircraft and all other agreements entered into pursuant to the Leveraged
Lease Transaction contemplated thereby and designated therein as an Operative
Agreement.
"Owner Trustee" with respect to an Aircraft shall mean First Security
Bank of Utah, National Association, or such other bank or trust company
designated by the Company and satisfactory to the Agent, as the trustee of a
grantor trust created by the initial equity investor (together with its
successors and permitted assigns, the "Owner Participant" with respect to such
Aircraft) with respect to such Aircraft, in its capacity as such trustee, and
its successors and permitted assigns as such trustee.
"Participation Agreement" shall mean, with respect to any Aircraft, the
Participation Agreement among the Company, the relevant Owner Participant, the
relevant Owner Trustee, the Banks, the Agent and the Indenture Trustee entered
into in connection with the purchase of such Aircraft, as amended or
supplemented from time to time.
"Permitted Investments" shall include each of the following (provided it
shall mature within ninety (90) days of the date of purchase thereof by the
Trustee or the Agent, as the case may be):
(i) direct obligations of the United States of America; or
(ii) obligations fully guaranteed by the United States of America; or
(iii) certificates of deposit issued by, or bankers' acceptances of, or time
deposits or a deposit account with, any bank, trust company or national
banking association incorporated or doing business under the laws of the
United States of America or one of its States, having a combined capital and
surplus of at least $500,000,000 and having a rating of "A" or better from
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Group
("S&P"); or
(iv) commercial paper rated A-1/P-1 by S&P or Moody's, respectively (or if
neither such organization shall rate such commercial paper at any time, a
rating by any nationally recognized statistical rating organization in the
United States of America equal to the highest rating assigned by such rating
organization).
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).
<PAGE>
-7-
"Term Sheet" shall mean the summary of terms and conditions entitled
"Federal Express Corporation, Interim Debt Financing For Aircraft Leveraged
Leases, Summary of Financial Terms and Conditions," attached hereto as Exhibit
A.
"Trustee" at any time shall mean the entity acting as Owner Trustee at
such time in its capacity as trustee for the Banks hereunder as evidenced by its
execution of a letter to the Agent in the form set forth as Exhibit B hereto.
"Type" shall mean a Floating Rate Loan or a Base Rate Loan.
<PAGE>
-8-
Section 2. Commitments and Loans.
2.01 Loans and Loan Certificates. Each Bank severally agrees, on the
terms and conditions of this Agreement and the Term Sheet (which are
incorporated herein by this reference and made a part hereof) in connection with
the Company's entering into one or more Leveraged Lease Transactions, to make
Loans to the respective Owner Trustees in Dollars on or before the Commitment
Termination Date in an amount with respect to each Aircraft up to but not
exceeding the amount of the Commitment of such Bank for such Aircraft; provided,
however, that the sum of the aggregate amount of such Loans made by such Bank
outstanding at any one time shall not exceed such Bank's Maximum Commitment.
The respective Owner Trustee (or the Company on its behalf) may elect to borrow
either Floating Rate Loans or Base Rate Loans, provided that all Loans in
respect of the same Aircraft shall at all times be of the same Type. For each
Aircraft each Bank will make only one Loan hereunder. Each Loan to be made by a
Bank hereunder shall be made on the Delivery Date of the Aircraft to be
purchased with the proceeds of such Loan. The relevant Owner Trustee (or the
Company on its behalf) may convert Floating Rate Loans made in respect of the
same Aircraft into Base Rate Loans and vice versa in accordance with the terms
of the related Indenture. To the maximum extent practicable the Company will
cause all Loans for all Aircraft outstanding at the same time to be of the same
Type and the then current Interest Periods therefor to end on the same day.
2.02 Borrowings. The Company shall give or cause the relevant Owner
Trustee to give the Banks and the Agent a Notice of Borrowing with respect to
each borrowing hereunder as provided in Section 2.08 hereof. Not later than
10:00 a.m. New York time on the date specified for each borrowing hereunder,
each Bank shall make the amount of the Loan to be made by it on such date
available (a) if the Trustee has executed and delivered to the Agent a letter in
the form of Exhibit B hereto, to the Trustee, at the account specified in such
letter, or (b) otherwise to the Agent, at account number [ * ] (Reference Fed Ex
Air, For Credit to: Loan Department) maintained by the Agent with Morgan (ABA #
[ * ] in New York, NY, in either case in immediately available funds. The amount
so received by the Trustee or the Agent shall, subject to the fulfillment to the
Agent's satisfaction of the terms and conditions of this Agreement (including
the Term Sheet) and of the relevant Participation Agreement, be made available
to the relevant Owner Trustee in the manner specified in the relevant
Participation Agreement.
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
<PAGE>
-9-
2.03 Changes of Maximum Commitments.
(a) The aggregate unused amount of the Maximum Commitments of all of
the Banks with respect to all of the Aircraft shall be automatically reduced to
zero upon (i) the Commitment Termination Date, (ii) the Delivery Date of the
sixth Aircraft (but after the making of any Loans hereunder in respect thereof
on such date), or (iii) the occurrence and continuance of any Indenture Event of
Default and, in the case of clause (iii) above, the giving by any Bank to the
Company of notice that such Bank is terminating its Commitments, but without
protest or other notice or other action of any kind on the part of the Banks or
the Agent or any of them, all of which are hereby waived.
(b) The Company shall have the right at any time or from time to time
to terminate or reduce the aggregate unused amount of the Maximum Commitments of
the Banks, provided that (i) the Company shall give notice of each such
termination or reduction as provided in Section 2.08 hereof and each such
termination or reduction shall be applied as provided in Section 2.07 hereof,
and (ii) each partial reduction shall be in an aggregate amount at least equal
to $[ * ] or in multiples of $[ * ] in excess thereof.
(c) The Maximum Commitments once terminated or reduced may not be
reinstated.
2.04 Fees.
(a) The Company shall pay, or cause the relevant Owner Trustee to pay,
to the Agent for the account of each Bank with respect to each Aircraft (other
than the sixth Aircraft) a commitment-related fee equal to $[ * ]. Such fees
with respect to each Aircraft shall be payable on the Delivery Date of such
Aircraft.
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
<PAGE>
-10-
(b) Promptly following the earliest date on which the Loans with
respect to any of the first three Aircraft are refinanced or prepaid in full
(the "Adjustment Date") the Company and the Agent will, if after consideration
of the Delivery Dates and refinancing or prepayment date for the first three
Aircraft and the then anticipated Delivery Dates for the remaining Aircraft they
mutually believe that absent any adjustment to the amount of the commitment-
related fees for each of the fourth and fifth Aircraft under subsection (a) of
this Section 2.04 the fees payable to the Banks under subsection (c) of this
Section 2.04 will be different than the amount for an Aircraft under such
subsection (a), adjust the fees under such subsection (a) for the fourth and
fifth Aircraft by such amount as they then mutually believe necessary in order
that, as so adjusted, the fees for each of the remaining Aircraft under such
subsections (a) and (c) will be equal to one another.
(c) On the earlier of the Delivery Date of the sixth Aircraft and the
Commitment Termination Date (the "Final Fee Date") the Company shall pay, or
cause to be paid, to the Agent for the account of each Bank a fee equal to the
amount, if any, by which (i) a hypothetical commitment fee for such Bank
calculated on the daily amount of such Bank's Maximum Commitment for the period
from and including the Closing Date to but not including the Final Fee Date at a
rate per annum equal to 1/10 of 1% exceeds (ii) the aggregate fees theretofore
paid to such Bank under subsection (a) (as the same may have been adjusted
pursuant to subsection (b) above) of this Section 2.04.
(d) For purposes of this Section 2.04, computations shall be made on the
basis of a year of 360 days and actual days elapsed.
(e) In addition, the Company shall pay, or cause the respective Owner
Trustee to pay, to the Agent for the Agent such additional fees as specified in
a letter agreement between the Company and the Agent dated April 5, 1996, as the
same may be supplemented and amended from time to time.
2.05 Lending Offices. The Loans of each Type made by each Bank shall
be made and maintained at such Bank's Applicable Lending Office for Loans of
such Type except as such Bank may otherwise designate from time to time.
2.06 Several Obligations. The failure of any Bank to make any Loan to
be made by it on the date specified therefor shall not relieve any other Bank of
its obligation to make its Loan on such date, but neither any Bank nor the Agent
shall be responsible for the failure of any other Bank to make a Loan to be made
by such other Bank, and no Bank shall have any obligation to the Agent or any
other Bank for the failure by such Bank to make any Loan required to be made by
such Bank.
2.07 Pro Rata Treatment. Except to the extent otherwise provided
herein, each borrowing of Loans from the Banks under Section 2.01 hereof shall
be made from the Banks, each payment of fees under Section 2.04 hereof in
respect of Commitments or Loans, as the case may be, shall be made for the
account of
<PAGE>
-11-
the Banks, and each termination or reduction of the amount of the
Maximum Commitments under Section 2.03 hereof shall be applied to the respective
Maximum Commitments of the Banks, in each case pro rata according to the amounts
of their respective Maximum Commitments or Loans at the time outstanding.
2.08 Certain Notices. Notices by the Company to the Banks and the
Agent of terminations or reductions of the Maximum Commitments and of borrowings
shall be irrevocable and shall be effective only if received by the Banks and
the Agent not later than 10:00 a.m. New York time on the date that is the number
of days or Business Days prior to the date of the relevant termination,
reduction or borrowing specified below:
Number of Days or
Notice Business Days Prior
------ -------------------
Termination or reduction
of Commitments 10 days
Borrowing of Floating 3 Business Days
Rate Loans
Borrowing of Base 1 Business Day
Rate Loans
Each such notice of termination or reduction shall specify the amount of unused
Maximum Commitments to be terminated or reduced. Each such notice of borrowing
(a "Notice of Borrowing") shall be substantially in the form of Schedule 2.08
hereto (or may be in the form, if any, specified by the relevant Participation
Agreement) and shall specify the Owner Trustee and the Aircraft with respect to
which the relevant Loans are to be made, whether such Loans shall be Floating
Rate Loans or Base Rate Loans, the Interest Period therefor (if Floating Rate
Loans), the aggregate amount (subject to Section 2.09 hereof) of the Loans to be
made and the date of borrowing (which shall be a Business Day and the Delivery
Date for such Aircraft).
<PAGE>
-12-
2.09 Maximum Amounts. Anything in this Agreement to the contrary
notwithstanding, in no event shall (a) the aggregate principal amount of the
Loans to be made hereunder with respect to any Aircraft exceed the least of
[ * ].
Section 3. Conditions Precedent. The obligation of any Bank to make
its Commitment with respect to an Aircraft available hereunder is subject (a) to
receipt by such Bank of due notice with respect to such borrowing pursuant to
Section 2.02 hereof, (b) to the payment by the Company of such fees and other
costs and expenses then or theretofore due as the Company shall have agreed to
pay hereunder or pursuant to the Term Sheet including, without limitation, any
fees and other costs and expenses payable pursuant to Section 2.04 or Section
7.03 hereof, and (c) to the fulfillment to the satisfaction of the Agent of the
other conditions specified in the Term Sheet and the relevant Participation
Agreement.
Section 4. Representations and Warranties. The Company represents and
warrants to the Agent and the Banks that:
4.01 Corporate Existence. The Company (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with its principal place of business and chief executive office in
Memphis, Tennessee, and (b) has full power, authority and legal right to conduct
its current business and operations as currently conducted and to own or hold
under lease its properties and to enter into and perform its obligations under
this Agreement.
4.02 Authorization. The execution, delivery and performance by the
Company of this Agreement have been duly authorized by all necessary corporate
action of the Company.
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
<PAGE>
-13-
4.03 Enforceability. This Agreement has been duly and validly executed
and delivered by the Company and constitutes the legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms except as such enforcement may be limited by applicable bankruptcy,
insolvency or other similar laws affecting creditor's rights generally.
4.04 No Conflicts. Neither the execution, delivery or performance by
the Company of this Agreement nor compliance with the terms and provisions
hereof conflicts or will conflict with or results or will result in a breach or
violation of any of the terms, conditions or provisions of, or will require any
consent or approval under, any law, governmental rule or regulation or the
charter documents, as amended, or bylaws, as amended, of the Company or any
order, writ, injunction or decree of any court or governmental authority against
the Company or by which it or any of its properties or other assets is bound or
any indenture, mortgage or contract or other agreement or instrument to which
the Company is a party or by which it or any of its properties or other assets
is bound, or constitutes or will constitute a default thereunder or results or
will result in the imposition of any Lien upon any of its Properties.
Section 5. The Agent.
5.01 Appointment, Powers and Immunities. Each Bank hereby irrevocably
appoints and authorizes the Agent to act as its agent hereunder and under the
other Operative Agreements with respect to each Aircraft with such powers as are
specifically delegated to the Agent by the terms of this Agreement and of the
other Operative Agreements, together with such other powers as are reasonably
incidental thereto. In addition, each Bank hereby agrees that, notwithstanding
any provision of this Agreement or any other Operative Agreement to the
contrary, the Agent, on behalf of such Bank, shall retain possession of any Loan
Certificate delivered to the Agent on behalf of such Bank pursuant to Article 2
of any Indenture unless and until such Bank shall direct the Agent in writing to
deliver such Loan Certificate to it or to such other Person as it may specify in
such direction, and that any references in this Agreement or in any other
Operative Agreement to the respective Owner Trustee's delivering any such Loan
Certificate to such Bank shall be satisfied by such Owner Trustee's delivering
such Loan Certificate to the Agent on behalf of such Bank. The Agent (which
term as used in this sentence and in Section 5.05 and the first sentence of
Section 5.06 hereof shall include reference to its affiliates and its own and
its affiliates' officers, directors, employees and agents): (a) shall have no
duties or responsibilities except those expressly set forth in this Agreement
and in the other Operative Agreements, and shall not by reason of this Agreement
or any other be a trustee for any Bank (except as expressly provided in Section
6 hereof); (b) shall not be responsible to the Banks for any recitals,
statements, representations or warranties contained in this Agreement or in any
other Operative Agreement, or in any certificate or other document referred to
or provided for in, or received by any of them under, this Agreement or any
other Operative Agreement, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement, any
<PAGE>
-14-
Loan Certificate or any other Operative Agreement or any other document referred
to or provided for herein or therein or for any failure by the Company or any
other Person to perform any of its obligations hereunder or thereunder; (c)
shall not be required to initiate or conduct any litigation or collection
proceedings hereunder or under any other Operative Agreement; and (d) shall not
be responsible for any action taken or omitted to be taken by it hereunder or
under any other Operative Agreement or under any other document or instrument
referred to or provided for herein or therein or in connection herewith or
therewith, except for its own gross negligence or willful misconduct. The Agent
may employ agents and attorneys-in-fact and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
in good faith. The Agent may deem and treat the payee of any Loan Certificate as
the holder thereof for all purposes hereof unless and until a notice of the
assignment or transfer thereof shall have been filed with the Agent, together
with the consent of the Company to such assignment or transfer (to the extent
provided in Section 7.06 hereof).
5.02 Reliance by Agent. The Agent shall be entitled to rely upon any
certification, notice or other communication (including, without limitation, any
thereof by telephone, telecopy, telex, telegram or cable) believed by it to be
genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the Agent. As to any
matters not expressly provided for by this Agreement or any other Operative
Agreement, the Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder or thereunder in accordance with instructions
given by the Majority Banks or, if provided herein, in accordance with the
instructions given by all of the Banks as is required in such circumstance, and
such instructions of such Banks and any action taken or failure to act pursuant
thereto shall be binding on all of the Banks.
5.03 Defaults, Etc. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Indenture Event of Default unless the Agent has
received notice from a Bank or the Company specifying such Indenture Event of
Default and stating that such notice is a "Notice of Indenture Event of
Default". In the event that the Agent receives such a notice of the occurrence
of any Indenture Event of Default, the Agent shall give prompt notice thereof to
the Banks. The Agent shall (subject always to the provisions of the applicable
Indenture and to Section 5.07 hereof) take such action with respect to such
Indenture Event of Default as shall be directed by the Majority Banks, provided
that, unless and until the Agent shall have received such directions, the Agent
may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Indenture Event of Default as it shall deem
advisable in the best interest of the Banks except to the extent that this
Agreement or the related Indenture expressly requires that such action be taken,
or not be taken, only with the consent or upon the authorization of the Majority
Banks or all of the Banks.
<PAGE>
-15-
5.04 Rights as a Bank. With respect to its Commitments and the Loans
made by it, Morgan (and any successor acting as Agent) in its capacity as a Bank
hereunder shall have the same rights and powers hereunder as any other Bank and
may exercise the same as though it were not acting as the Agent, and the term
"Bank" or "Banks" shall, unless the context otherwise indicates, include the
Agent in its individual capacity. Morgan (and any successor acting as Agent)
and its affiliates may (without having to account therefor to any Bank) accept
deposits from, lend money to, make investments in and generally engage in any
kind of banking, trust or other business with the Company (and any of its
subsidiaries or affiliates) as if it were not acting as the Agent, and Morgan
and its affiliates may accept fees and other consideration from the Company for
services in connection with this Agreement or otherwise without having to
account for the same to the Banks.
5.05 Indemnification. The Banks agree to indemnify the Agent (to the
extent not reimbursed under Section 7.03 hereof, but without limiting the
obligations of the Company under said Section 7.03) ratably in accordance with
their respective Commitments or Loans at the time outstanding, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever that may be
imposed on, incurred by or asserted against the Agent (including by any Bank)
arising out of or by reason of any investigation in or in any way relating to or
arising out of this Agreement or any other Operative Agreement or any other
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including, without limitation, the costs and
expenses that the Company is obligated to pay under Section 7.03 hereof, but
excluding, unless any Indenture Event of Default has occurred and is continuing,
normal administrative costs and expenses incident to the performance of its
agency duties hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided that no Bank shall be liable
for any of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the party to be indemnified.
5.06 Non-Reliance on Agent and Other Banks. Each Bank agrees that it
has, independently and without reliance on the Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement and that it will,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own analysis and decisions in taking or not taking action
under this Agreement and the related Operative Agreements. The Agent shall not
be required to keep itself informed as to the performance or observance by the
Company of this Agreement or any of the other Operative Agreements or any other
document referred to or provided for herein or therein or to inspect the
Properties or books of the Company. Except for notices, reports and other
documents and information expressly required to be furnished to the Banks by the
Agent hereunder, the Agent shall not have any duty or responsibility to provide
any Bank with any
<PAGE>
-16-
credit or other information concerning the affairs, financial condition or
business of the Company or any of its Subsidiaries (or any of their Affiliates)
that may come into the possession of the Agent or any of its affiliates.
5.07 Failure to Act. Except for action expressly required of the Agent
hereunder and under the other Operative Agreements, the Agent shall in all cases
be fully justified in failing or refusing to act hereunder and thereunder unless
it shall receive further assurances to its satisfaction from the Banks of their
indemnification obligations under Section 5.05 hereof against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.
5.08 Resignation or Removal of Agent. Subject to the appointment and
acceptance of a successor Agent as provided below, the Agent may resign at any
time by giving notice thereof to the Banks, the Company and the Indenture
Trustee, and the Agent may be removed at any time with or without cause by the
Majority Banks. Upon any such resignation or removal, the Majority Banks shall
have the right to appoint a successor Agent. If no successor Agent shall have
been so appointed by the Majority Banks and shall have accepted such appointment
within 30 days after the retiring Agent's giving of notice of resignation or the
Majority Banks' removal of the retiring Agent, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent, which successor Agent shall be a
bank that has an office in New York, New York. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations hereunder. After any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this Section 5
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Agent.
Section 6. Funding Agreement and Indemnity.
(a) If any Bank shall deliver any funds to the Trustee or the Agent
pursuant to Section 2.02 hereof, the Trustee or the Agent, as the case may be,
shall hold such funds in trust for the exclusive benefit of such Bank until the
Agent or such Bank authorizes the Trustee or the Agent, as the case may be, to
apply such funds in satisfaction of such Bank's obligation to make a Loan to the
Owner Trustee pursuant to the relevant Participation Agreement. If the Agent or
such Bank notifies the Trustee or the Agent, as the case may be, on or prior to
the scheduled Delivery Date for the relevant Aircraft that the Operative
Agreements will not be entered into and/or the conditions precedent set forth in
such Participation Agreement to the making of such Loan by such Bank are not
satisfied on such scheduled Delivery Date, the Trustee shall, on such scheduled
Delivery Date, cause such funds to be (a) held by the Trustee or the Agent, as
the case may be, in the account specified in clause (a) or (b), as the case may
be, of Section 2.02 hereof or paid into an account (either of such accounts,
which need not be segregated, being called herein the "Account") with the
Trustee or the Agent, as the case may be, the
<PAGE>
-17-
funds so held or paid to be held by the Trustee or the Agent, as the case may
be, in trust for such Bank solely as trustee hereunder and (b) invested by the
Trustee or the Agent, as the case may be, pursuant to subsection (c) of this
Section 6.
(b) The Company shall pay interest to such Bank on the amounts in
respect of such Bank in the Account for the period from and including such
scheduled Delivery Date to but excluding the earlier of (i) the date such
Aircraft is actually delivered under the Operative Agreements or (ii) the date
such funds are returned to such Bank under subsection (e) of this Section 6.
Such interest shall accrue on the amounts in the Account at a rate per annum
equal to (i) LIBOR for the initial Interest Period (as defined in the Indenture
with respect to such Aircraft or, if not executed, in the last draft thereof
provided to such Bank prior to such scheduled Delivery Date) [ * ]%
(computed on the basis of actual days elapsed and a year of 360 days), as
determined by the Agent two Business Days prior to such scheduled Delivery Date
or (ii) if a Base Rate Loan was specified in the Notice of Borrowing with
respect to such amounts, at the Base Rate as in effect from time to time
(computed on the basis of actual days elapsed and a year of 365 or 366 days) as
determined by the Agent. Such interest shall be due and payable to the Lender
on the earlier of the last day of such initial Interest Period referred to above
(or, if accruing at the Base Rate, within 10 Business Days of the date specified
in clause (i) of the preceding sentence) and the date specified in clause (ii)
of the preceding sentence.
(c) The Trustee or the Agent, as the case may be, will invest and
reinvest the amounts in the Account at the sole discretion, for the account, and
at the risk of the Company, in any Permitted Investment or other investments
agreed upon by the parties hereto; provided that, in the absence of
instructions, the Trustee or the Agent, as the case may be, shall invest the
amount of any funds so paid or the proceeds thereof in overnight Permitted
Investments selected by it pending receipt of directions from the Company. Upon
the Company's written instructions following payment in full by the Company of
all amounts payable under subsection (b) or (e) of this Section 6, as the case
may be, earnings on any such investments shall be paid by the Trustee or the
Agent, as the case may be, to the Company in the manner specified in such
instructions.
(d) The Company shall reimburse the Account on demand of the Trustee,
the Agent or such Bank for any loss incurred by the Account as a result of the
investment of funds by the Trustee or the Agent, as the case may be, in
accordance with the terms hereof. Further, the Company shall indemnify the
Agent and the Trustee and hold it harmless from and against any loss, cost or
expense such Bank, the Agent or the Trustee may incur as a result of any
investment or transfer of funds referred to herein.
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
<PAGE>
-18-
(e) If for any reason (i) the Operative Agreements in respect of the
Aircraft shall not be entered into on or prior to the Commitment Termination
Date, (ii) the actual delivery date of the Aircraft under the Operative
Agreements shall not occur (whether by reason of a failure to meet a condition
precedent thereto set forth in the Participation Agreement or otherwise) on or
prior to the earlier of the Commitment Termination Date and the last day of the
initial Interest Period for the Loans for such Aircraft as specified in the
Notice of Borrowing with respect thereto or as contemplated by subsection (b) of
this Section 6 (or, if a Base Rate Loan was so specified, within 10 Business
Days after the scheduled Delivery Date), or (iii) the full amount of the Loans
for the Aircraft shall not be applied to the financing thereof, then the Company
hereby irrevocably agrees that (a) each Bank may cancel or terminate any
financial arrangements it may have made to fund the Loans for the Aircraft (or
the unutilized portion thereof), and each Bank may direct that funds paid by it
to the Trustee or the Agent pursuant to Section 2.02 hereof (or the unutilized
portion thereof) be returned to it, and (b) to the extent not theretofore
reimbursed under the Operative Agreements, the Company shall reimburse each Bank
on demand for Break Funding Costs (as defined in the relevant Indenture or, if
not executed, in the latest draft thereof delivered to such Bank prior to the
scheduled Delivery Date) on the amount of the returned funds calculated as of
the date of return as if prepaid on such date, and the Agent for any and all
out-of-pocket costs and expenses (including legal fees and expenses) relating to
the negotiation, execution and delivery of the Operative Agreements.
(f) The duties of the Trustee or the Agent, as the case may be, under
this Section 6 are limited to those specifically set forth in this Section 6.
Neither the Trustee nor the Agent shall incur any liability hereunder except for
its gross negligence or willful misconduct or its simple negligence relating to
the holding or disposing of funds hereunder. The Trustee or the Agent, as the
case may be, shall hold the funds as escrow agent for the Banks and shall give
such funds the degree of care it gives other similar property held in such a
capacity. Neither the Trustee nor the Agent shall have any responsibility to
determine the authenticity or validity of any written notice, instruction,
request or other document delivered to it and shall be protected in acting or
refraining from acting upon any written notice, instruction or request furnished
to it hereunder and believed by it to be genuine and purporting to have been
signed by the proper party or parties. Without limiting the generality of the
foregoing, neither the Trustee nor the Agent shall have any responsibility for
any loss allocable to the Account from any investment made by the Trustee or the
Agent, as the case may be, in accordance with subsection (e) of this Section 6.
Upon making payment of the whole of the Account or any portion thereof in any
manner provided in this Agreement, the Trustee and the Agent shall have no
further liability under this Section 6 for such paid amount so delivered. The
Company hereby agrees to pay the Trustee's fee for the services to be rendered
hereunder and to promptly pay or reimburse the Trustee or the Agent upon request
for all reasonable expenses, including reasonable attorneys' fees, incurred or
made by either of them in connection with carrying out its duties hereunder.
The Company hereby agrees to indemnify the Trustee and the Agent
<PAGE>
-19-
for, and to hold the Trustee and the Agent harmless against, any loss, liability
or expense incurred without gross negligence or willful misconduct on the part
of the Trustee or the Agent arising out of or in connection with the Trustee's
or the Agent's carrying out its duties hereunder or without simple negligence on
the part of the Trustee or the Agent, as the case may be, relating to the
holding or disposing of funds hereunder. In the event that the Trustee or the
Agent is uncertain as to the application of any provision of this Section 6, or
such provision appears to be in conflict with any other applicable provisions
hereof, the Trustee or the Agent, as the case may be, may seek instructions from
the relevant Bank (or, in the case of the Trustee, the Agent) and shall not be
liable to the Company or any other Person to the extent that it acts in good
faith in accordance with the instructions of the relevant Bank (or, in the case
of the Trustee, the Agent). Neither the Trustee nor the Agent shall be obligated
to take any action under this Section 6 which may, in its reasonable judgment,
involve it in any liability unless it shall have been furnished with indemnity
reasonably satisfactory to it in amount, form and substance.
Section 7. Miscellaneous.
7.01 Waiver. No failure on the part of the Agent or any Bank to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under this Agreement preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.
7.02 Notices. Unless otherwise expressly specified or permitted by the
terms of this Agreement, all notices, requests, demands, authorizations,
directions, consents, waivers or documents provided or permitted by this
Agreement to be made, given, furnished or filed shall be in writing, mailed by
certified mail, postage prepaid, return receipt requested or delivered by hand
or by FedEx service or other delivery service of established reputation or by
confirmed telex or facsimile to the intended recipient at the "Address for
Notices" specified below its name on the signature pages hereof; or, as to any
party, at such other address as shall be designated by such party in a notice to
each other party. Any notice given pursuant to this Section 7.02 shall be
deemed given, and such requirement shall be deemed satisfied, when such notice
is received, if such notice is mailed by certified mail, postage prepaid or is
delivered by hand or FedEx service or other delivery service of established
reputation, or is sent by confirmed telex, telecopy or facsimile (if, in the
case of a facsimile, transmitted on a Business Day and during normal business
hours of the recipient, and otherwise on the next Business Day following
transmission), in the case of a mailed notice, upon receipt, in each case given
or addressed as aforesaid.
7.03 Expenses, Etc The Company agrees to pay or reimburse the Agent
for paying all reasonable out-of-pocket costs and expenses of the Agent
<PAGE>
-20-
(including, without limitation, the reasonable fees and expenses of Milbank,
Tweed, Hadley & McCloy, special New York counsel for the Banks), in connection
with (i) the negotiation, preparation, execution and delivery of this Agreement
and (ii) any modification, supplement or waiver of any of the terms of this
Agreement.
7.04 Amendments, Etc. Except as otherwise expressly provided in this
Agreement, any provision of this Agreement may be amended, modified or
supplemented only by an instrument in writing signed by the Company, the Agent
and the Majority Banks, or by the Company and the Agent acting with the consent
of the Majority Banks, and any provision of this Agreement may be waived by the
Majority Banks or by the Agent acting with the consent of the Majority Banks;
provided that: (a) no amendment, modification, supplement or waiver shall,
unless by an instrument signed by all of the Banks affected or by the Agent
acting with the consent of all of the Banks affected: (i) increase, or extend
the term of any of the Commitments or Maximum Commitments, or extend the time or
waive any requirement for the reduction or termination of any of the Commitments
or Maximum Commitments, (ii) reduce the margin over LIBOR or the Treasury Rate
in determining the interest rate for any Loan, (iii) modify the definition of
the term "Majority Banks", or modify in any other manner the number or
percentage of the Banks required to make any determinations or waive any rights
hereunder or to modify any provision hereof, (iv) waive any of the conditions
precedent set forth in Section 3 hereof or (v) reduce the rate specified in
Section 2.04(c)(i) utilized to compute the fee due on the Final Fee Date; and
(b) any modification or supplement of Section 5 or 6 hereof shall require the
consent of the Agent.
Anything in this Agreement to the contrary notwithstanding, if at a time
when the conditions precedent set forth in Section 3 hereof to the making of
Commitments hereunder are, in the opinion of the Majority Banks, satisfied, any
Bank shall fail to fulfill its obligations to make such Commitments then, for so
long as such failure shall continue, such Bank shall (unless the Majority Banks,
as the case may be, determined as if such Bank were not a "Bank" hereunder,
shall otherwise consent in writing) be deemed for all purposes relating to
amendments, modifications, waivers or consents under this Agreement or any of
the other Operative Agreements (including, without limitation, under this
Section 7.04) to have no Loans, shall not be treated as a "Bank" hereunder when
performing the computation of Majority Banks and shall have no rights under the
preceding paragraph of this Section 7.04; provided that any action taken by the
other Banks with respect to the matters referred to in clause (a) of the
preceding paragraph shall not be effective as against such Bank.
7.05 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
<PAGE>
-21-
7.06 Assignments and Participations.
(a) The Company may not assign any of its rights or obligations
hereunder without the prior consent of all of the Banks and the Agent.
(b) Subject to satisfaction of the conditions to assignment or transfer
provided in the Operative Agreements with respect to such Aircraft, each Bank
may assign any of its Loans and the Loan Certificates and its Commitments, but
only with the consent of the Company, which consent shall not be unreasonably
withheld, and, in the case of any assignment of a Commitment, the consent of the
Agent; provided that (i) prior to December 26, 1996, no such assignment shall be
made by any Bank other than to an affiliate of such Bank or to another Bank,
(ii) no such consent by the Company or the Agent shall be required in the case
of any assignment to another Bank, (iii) no such consent of the Company shall be
required at any time that any Indenture Event of Default shall have occurred and
be continuing (but the transferor or the transferee shall give notice of such
transfer to the Company), (iv) each such assignment by a Bank of its Loans and
the Loan Certificates or Commitments shall be made in such manner so that the
same portion of its Loans and the Loan Certificates and Commitments is assigned
to the respective assignee, and (v) each such assignment by a Bank of its Loans
and the Loan Certificates and/or its Commitments shall, unless otherwise
consented to by the Agent, be in an aggregate principal amount at least equal to
$[ * ]. Upon execution and delivery by the assignee to the Company and the
Agent of an instrument in writing pursuant to which such assignee agrees to
become a "Bank" hereunder (if not already a Bank) having the Commitment(s) and
Loans specified in such instrument, and upon consent thereto by the Company and
the Agent, to the extent required above, the assignee shall have, to the extent
of such assignment (unless otherwise provided in such assignment with the
consent of the Company and the Agent), the obligations, rights and benefits of a
Bank hereunder holding the Commitment(s) and Loans (or portions thereof)
assigned to it (in addition to the Commitment(s) and Loans theretofore held by
such assignee) and the assigning Bank shall, to the extent of such assignment,
be released from the Commitment(s) (or portion(s) thereof) so assigned.
(c) A Bank may sell or agree to sell to one or more other Persons a
participation in all or any part of any Loans and the Loan Certificates
evidencing the same held by it, or in its Commitments, provided that each
purchaser of a participation (a "Participant") shall not have any rights or
benefits under this Agreement or any Loan Certificate or any other Operative
Agreement (the Participant's rights against such Bank in respect of such
participation to be those set forth in the agreements executed by such Bank in
favor of the Participant).
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
<PAGE>
-22-
(d) In addition to the assignments and participations permitted under
the foregoing provisions of this Section 7.06, any Bank may assign and pledge
all or any portion of its Loans and its Loan Certificates evidencing the same to
any Federal Reserve Bank as collateral security pursuant to Regulation A and any
Operating Circular issued by such Federal Reserve Bank. No such assignment
shall release the assigning Bank from its obligations hereunder.
(e) Anything in this Section 7.06 to the contrary notwithstanding, no
Bank may assign or participate any interest in any Loan and Loan Certificates
evidencing the same held by it hereunder to the Company or any of its Affiliates
or Subsidiaries without the prior written consent of each other Bank.
7.07 Captions. The table of contents and captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
7.08 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
7.09 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the law of the State of New York.
7.10 Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
<PAGE>
-23-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
FEDERAL EXPRESS CORPORATION
By /s/ ROBERT D. HENNING
----------------------
Name: Robert D. Henning
Title: Asst. Treasurer/Managing Dir.
Structured Finance
Address for Notices:
2007 Corporate Avenue
Memphis, TN 38132
Attention: Vice President and
Treasurer
Telecopier: 901-395-4758
Telex: 534684
(Answerback: FEDEX INT MFS)
with a copy to:
1980 Nonconnah Drive
Memphis, TN 38132
Attention: Senior Vice President
and General Counsel
<PAGE>
-24-
Commitment for each MORGAN GUARANTY TRUST COMPANY
Aircraft: OF NEW YORK
$[ * ]*
Maximum Commitment: By /s/ STEPHEN B. KING
--------------------
Name: Stephen B. King
$[ * ] Title: Vice President
Lending Office for all Loans:
60 Wall Street, 22nd Floor
New York, NY 10260
Address for Notices:
60 Wall Street, 22nd Floor
New York, NY 10260
Attention: Stephen B. King,
Vice President
Telephone No.: (212) 648-7415
Telecopier No.: (212) 648-5336
(with a copy to:
J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, DE 19713
Attention: Andrew Lipsett
Telephone No.: (302) 634-8177
Telecopier No.: (302) 634-1091)
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
____________________
* In the event that the Owner Participant for any Leveraged Lease
Transaction may be an Affiliate of a Bank and as a result the Commitment
of such Bank for the related Aircraft must be reduced, the documentation
will be modified to provide for Morgan to cover such reduction (up to
$14,025,000 on only one such occasion) and for appropriate related
adjustments including, without limitation, as to allocating to Morgan an
appropriate portion of the fee otherwise payable to such Bank with
respect to such Aircraft under Section 2.04.
<PAGE>
-25-
Commitment for each BANK OF AMERICA NATIONAL TRUST
Aircraft: AND SAVINGS ASSOCIATION
$[ * ]
*Maximum Commitment: By /s/ TIMOTHY C. HINTZ
--------------------
Name: Timothy C. Hintz
$[ * ] Title: Managing Director
Lending Office for all Loans:
Bank of America National Trust
and Savings Association
GPO Account Admin. #5693
1850 Gateway Blvd.
Concord, CA 94520
Address for Notices:
Bank of America National Trust
and Savings Association
GPO Account Admin. #5693
1850 Gateway Blvd.
Concord, CA 94520
Attention: Ms. Marianne Runyan
Telex No.: 67652
(Answerback: BANKAMERSFO)
Telephone No.: (510) 675-7719
Telecopier No.: (510) 675-7531
_______________________
*This commitment supersedes the commitment of $43,400,000 contained
in Bank of America's letter to J.P. Morgan Securities, Inc. dated April 11,
1996, which commitment is no longer effective.
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
<PAGE>
-26-
Commitment for each THE CHASE MANHATTAN BANK
Aircraft: (NATIONAL ASSOCIATION)
$[ * ]
Maximum Commitment: By /s/ MATTHEW H. MASS
----------------------
Name: Matthew H. Massie
$[ * ] Title: Vice President
Lending Office for all Loans:
1 Chase Manhattan Plaza
New York, NY 10081
Address for Notices:
1 Chase Manhattan Plaza, 3rd Floor
New York, NY 10081
Attention: Matthew H. Massie
Telephone No.: (212) 552-3005
Telecopier No.: (212) 552-5879
(with a copy to:
2 Chase Manhattan Plaza, 5th floor
New York, NY 10081
Attention: Carlos Morales
Telephone No: 212-552-4517
Telecopy No: 213-552-4455)
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
<PAGE>
-27-
Commitment for each COMMERZBANK AG, ATLANTA AGENCY
Aircraft:
$[ * ]
Maximum Commitment: By /s/ ANDREAS K. BREMER
-----------------------
Name: Andreas K. Bremer
$[ * ] Title: Senior Vice President & Manager
By /s/ HARRY P. YERGEY
---------------------
Name: Harry P. Yergey
Title: Vice President
Lending Office for all Loans:
Promenade 2
Suite 3500
1230 Peachtree Street
Atlanta, GA 30309
Address for Notices:
Promenade 2
Suite 3500
1230 Peachtree Street
Atlanta, GA 30309
Attention:
Telephone No.: (404) 888-6500
Telecopier No.: (404) 888-6539
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
<PAGE>
Commitment for each NATIONSBANK, N.A. (SOUTH)
Aircraft:
$[ * ]
Maximum Commitment: By /s/ STEVE L. DALTON
---------------------
Name: Steve L. Dalton
$[ * ] Title: Vice President
Lending Office for all Loans:
One NationsBank Plaza, 5th Floor
Nashville, TN 37239-1697
Address for Notices:
One NationsBank Plaza, 5th Floor
Nashville, TN 37239-1697
Attention: Corporate Finance
Telephone No.: (615) 749-4228
Telecopier No.: (615) 749-4640
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
<PAGE>
-29-
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as Agent
By /s/ STEPHEN B. KING
---------------------
Name: Stephen B. King
Title: Vice President
Address for Notices to
Morgan as Agent:
60 Wall Street, 22nd Floor
New York, NY 10260
Attention: Stephen B. King,
Vice President
Telephone No.: (212) 648-7415
Telecopier No.: (212) 648-5336
(with a copy to:
J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, DE 19713
Telephone No.: (302) 634-8177
Telecopier No.: (302) 634-1091)
<PAGE>
Schedule 2.08
NOTICE OF BORROWING
_____________ __, 199_
Morgan Guaranty Trust Company
of New York
Attention:
Ladies and Gentlemen:
Reference is made to the Facility Agreement dated as of April 1, 1996 (the
"Facility Agreement") between Federal Express Corporation ("Federal"), Morgan
Guaranty Trust Company of New York, as Agent, and the Banks named therein.
Capitalized terms used herein, unless otherwise defined herein, are used herein
as used or defined in the Facility Agreement.
Pursuant to Sections 2.02 and 2.08 of the Facility Agreement, Federal hereby
gives you irrevocable notice of its request that the Banks make [Floating/Base]
Rate Loans to [First Security Bank of Utah, National Association], as Owner
Trustee, in the aggregate amount of $[___________] (the "Loan Amount") with
respect to the Aircraft bearing manufacturer's serial number [_______], on
_______ __, 199 , which date is a Business Day and the scheduled Delivery Date
for such Aircraft. [The initial Interest Period in respect of such Floating
Rate Loan shall be a [___-month/one-week] period, commencing on such Delivery
Date and ending __________ __, 199 .]* Federal hereby represents and
warrants to you and the Banks that the Loan Amount does not exceed the maximum
amount permitted with respect to such Aircraft pursuant to Section 2.09.
Please make the proceeds of the Loan available as provided in Section 2.02
of the Facility Agreement and Section __ of the Participation Agreement with
respect to the Aircraft.
Very truly yours,
FEDERAL EXPRESS CORPORATION
By_________________________
Name:
Title:
__________________________
* To be included in Notice of Borrowing for Floating Rate Loan only.
<PAGE>
Exhibit A to the
Facility Agreement
(Please see attached term sheet.)
<PAGE>
JPMORGAN
FEDERAL EXPRESS CORPORATION
INTERIM DEBT FINANCING FOR AIRCRAFT LEVERAGED LEASES
SUMMARY OF FINANCIAL TERMS AND CONDITIONS
Aircraft: Four new A300s and two used MD11s. The
airframes together with the associated
engines are referred to herein,
individually or collectively as the
context may require as the "Aircraft."
Lessor(s): To be determined.
Lessee: Federal Express Corporation ("FedEx")
pursuant to a lease or leases
from the Lessor(s) (the "Leases").
Arranger: J. P. Morgan Securities Inc.
Administrative Agent: Morgan Guaranty Trust Company of
New York.
Lenders: A syndicate of banks acceptable to FedEx
and the Administrative Agent. To the
extent that any of the Lenders or their
affiliates is also a Lessor of an
Aircraft, the other Lenders will provide
(on a pro rata basis or such other basis
as the Lenders may agree) that portion
of the debt financing which the affected
Lender is unable to provide.
Facility Description: A revolving credit facility (the
"Facility") to provide the debt portion
of U.S. leveraged lease financings
involving the Aircraft. The Facility
will be available on or before April 19,
1996 (the "Effective Date"). Loans drawn
under the Facility (the "Loans") may be
borrowed, repaid and reborrowed within
364 days of the Effective Date.
Facility Amount: $[ * ], with the amount available for
any individual Aircraft to be limited to
the lesser of (a) $[ * ] or (b) [ * ]%
of the Lessor's purchase price, which
purchase price will not
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
April 5, 1996 1
<PAGE>
exceed the fair market value determined
by an appraisal from a firm of
internationally recognized appraisers
mutually acceptable to FedEx and the
Administrative Agent (it being agreed
that BK Associates, Inc. is acceptable).
All appraisal costs shall be for the
account of FedEx.
Drawings under the Facility will reduce
the available Facility Amount, while
refinancings and principal repayments
will replenish availability under the
Facility.
Term and Amortization of Loans: The maximum term of the Loans shall be
24.5 years from the dates they are
incurred (the "Funding Dates"). The
Loans will amortize in accordance with
an amortization schedule provided by the
Lessor and acceptable to the
Administrative Agent and FedEx (the
average life of such Loans to be agreed
to by the parties, but in no event to
exceed 16 years). If rent is payable
semiannually, interest shall be rolled
up and capitalized at the end of each
Interest Period that ends on a date
other than a semiannual lease payment
date. Reoptimization of the Loans may be
effected by FedEx once, and by the
Lessor once following a change in tax
rate, following the closing date of the
leveraged lease so long as the average
life is not increased by more than six
months from the initial amortization
schedule, the principal amount of such
Loans is not increased, the amount of
principal to be paid on the last day of
the then current Interest Period is not
changed and the final maturity of such
Loans is not changed to a later date.
Interest Rate: The Interest rate on Loans under the
Facility shall be as follows:
(1) For the first twelve months
following their Funding Dates:
(a) LIBOR [ * ]% per annum,
or (b) the Base Rate.
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
April 5, 1996 2
<PAGE>
(2) For months thirteen through
eighteen following their Funding
Dates: (a) LIBOR [ * ]% per
annum, or (b) the Base Rate.
(3) Thereafter, the higher of (a)
LIBOR or (b) the Treasury Rate
plus, in either case, [ * ]% per
annum.
FedEx (or the Lessor) shall have the
option, exercisable at least three
business days prior to the commencement
of each Interest Period to select
interest rates based on LIBOR, if
applicable, for interest periods (the
"Interest Periods") of one week
(provided that such option may not be
selected more than three times per Loan)
or one, three or six months, provided
that no Interest Period shall commence
before and end after any principal
amortization date of such Loan under the
Facility. If FedEx or the Lessor has not
selected an interest rate based on LIBOR
(if applicable), the Base Rate option
will apply. There shall be only one
Interest Period per Loan at any one
time.
"LIBOR" means, for a given Interest
Period, an annual rate equal to the
London Interbank Offered Rate for the
corresponding deposits of U.S. Dollars
as displayed on Telerate Page 3750 or,
if unavailable on Telerate Page 3750,
the average of the rates quoted on
Reuters Page LIBO or, if neither service
displays any such quote, as quoted by
two reputable dealers selected by the
Administrative Agent, in either case two
business days' prior to the start of
each Interest Period. LIBOR will be
adjusted for Regulation D reserve
requirements.
"Treasury Rate" means, as of the first
day of any Interest Period, the weighted
average yield to maturity of, and
resulting from the bidding for, the most
recently auctioned United States
Treasury securities with maturities most
closely corresponding to (interpolating
between the maturities next succeeding
and next preceding)
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
April 5, 1996 3
<PAGE>
the remaining maturity of the affected
Loans (such yield to be rounded, if
necessary to the nearest 1/100 of 1%
with any figure of 1/200 of 1% or above
rounded upward) as displayed on the
applicable Telerate Page or, is such
service no longer displays any such
quote, as quoted by two reputable
dealers in United States Treasury
securities selected by the
Administrative Agent, in either case at
approximately 11:00 a.m. New York time
on such day.
"Base Rate" means, for any day, the
higher of (i) the Federal funds rate (as
published by the Federal Reserve Bank of
New York) plus [ * ]% per annum or (ii)
the Administrative Agent's prime rate,
as announced from time to time at its
head office. Each change in any interest
rate provided for herein based upon the
Base Rate resulting from a change in the
Base Rate shall take effect at the time
of such change in the Base Rate.
All calculations of interest based on
LIBOR and all other amounts (other than
interest at the Treasury Rate or the
prime rate) shall be made on the basis
or a year of 360 days and actual days
elapsed. Interest based on the Treasury
Rate shall be calculated on the basis of
a year of twelve 30-day months. Interest
based on the prime rate shall be
calculated on the basis of a year of
365/366 days and actual days elapsed.
Commitment Fee: FedEx shall pay the Lenders the
equivalent of on the available
(unused) Facility Amount from the
Effective Date to the date the Facility
is terminated.
Commitment Termination: FedEx shall have the right to terminate
or reduce on a pro rata basis the
Facility Amount (in an aggregate amount,
in each case, of at least $[ * ] or in
multiples of $[ * ] in excess thereof)
upon not less than three business days'
notice to the Administrative Agent
(which notice shall be irrevocable and
shall be effective only upon receipt by
the Administrative Agent). Amounts which
are terminated or reduced may not be
reinstated.
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
April 5, 1996 4
<PAGE>
Prepayment: The Loans shall be prepaid or paid (as
the case may be) in their entirety
(except in the case of an event which
applies to a specific Aircraft, in which
case only the relevant Loan will be
prepaid or paid), together with accrued
interest, Break Amount, fees, and all
other amounts payable under the relevant
Indenture, prior to stated maturity in
the following events:
(1) Upon an event of loss if the
affected Aircraft is not replaced
(provided that so long as FedEx is
not in default under the
transaction documents, such
prepayment may (at FedEx's option)
be postponed until the end of the
then current Interest Period in
respect of LIBOR-based Loans for
such Aircraft).
(2) If, at any time, the Lease
terminates with respect to an
Aircraft for any reason
whatsoever.
(3) At any time upon any sale of an
Aircraft.
(4) Upon acceleration subsequent to
an Event of Default.
(5) Upon the refinancing of the Loans
by FedEx.
Break Amount: Upon any payment, prepayment, conversion
or purchase of any principal of any Loan
on a day other than the last day of an
Interest Period with respect thereto, or
upon any failure to borrow, pay, prepay,
convert or purchase any principal of any
Loan on the scheduled date therefor
(whether by acceleration or otherwise),
FedEx or the Lessor shall pay to each
Lender such amount as shall be
determined by such Lender to be the
amount required to compensate such
Lender for any loss, cost or expense
which it may incur as a result of such
failure to borrow, payment, prepayment,
conversion or purchase or such failure
to pay, prepay, convert or purchase.
Security: All amounts payable on or in respect of
each Loan (including all indemnity
payments and all fees) must be at all
times secured by:
(1) a first lien of record on the
relevant Aircraft;
April 5, 1996 5
<PAGE>
(2) an assignment of the Leases; and
(3) additional customary security,
including, without limitation, an
assignment of airframe and engine
manufacturers' warranties,
insurance and requisition proceeds.
Section 1110: All Loans shall be structured so as
to ensure that the Lenders shall be
entitled to the benefits of Section
1110 of the Bankruptcy Code, and
the Lenders shall receive an
opinion of counsel to FedEx at each
Loan closing to the effect that
such Loans will be entitled to such
benefits.
Indenture Trustee: An institution to be determined,
satisfactory to the Administrative
Agent.
Conditions Precedent: Conditions precedent to each Loan
(or, in the case of clause (3)
below, the initial Loan only) shall
include, without limitation:
(1) the execution of documentation
satisfactory in form and
substance to all parties that
will reflect the terms and
conditions contained herein;
(2) the obtaining of all necessary
governmental approvals and
comments relating to the
transaction documentation;
(3) no material adverse change in
the principal business or
financial condition of FedEx
taken as a whole in any case
from that pertaining on
February 29, 1996.
(4) obtaining satisfactory legal
(including as to Section 1110
of the Bankruptcy Code) and
FAA opinions; and
(5) no Event of Default or event
that with notice and/or lapse
of time or both would become
an Event of Default.
Events of Default: Events of Default under the
Facility shall include, without
limitation:
(1) failure to pay principal of,
Break Amount or interest on
the Loans or any fee payable
to the Lenders, the
April 5, 1996 6
<PAGE>
Administrative Agent or the
Indenture Trustee within five
business days of the due date
therefor or failure to pay any
other amount payable to the
Lenders, the Administrative
Agent or the Indenture Trustee
within 30 days after demand
therefor;
(2) an Event of Default that
occurs under the Leases (a
"Lease Event of Default");
(3) breach of representation or
warranty that is material at
the time made and continues to
be material where such breach
remains unremedied for 30 days
after written notice;
(4) breach of covenant by FedEx or
the Lessor that remains
unremedied for 30 days after
written notice; provided that
in the event such breach is
curable and so long as (but
for no longer than 150 days
after such 30-day period)
FedEx shall have promptly
undertaken such cure, which
undertaking shall be
diligently and continuously
pursued using FedEx's best
efforts, such breach shall not
constitute an Event of
Default;
(5) failure to maintain the
Aircraft free of all liens
other than customarily
permitted liens;
(6) either FedEx or the Lessor
shall (i) file or consent to a
voluntary bankruptcy, (ii)
make an assignment for the
benefit of creditors or (iii)
consent to the appointment of
a custodian, receiver or
trustee; or
(7) involuntary bankruptcy filed
against FedEx or the Lessor
and not dismissed or stayed
within 60 days.
Quiet Enjoyment: The documentation will contain
provisions that so long as no Lease
Event of Default has occurred and is
continuing, no party shall take or cause
to be taken any action contrary to
FedEx's right to quiet enjoyment and the
continuing possession, use and operation
of the Aircraft.
April 5, 1996 7
<PAGE>
Indemnities: Subject to customary exceptions
acceptable to FedEx and the
Administrative Agent, FedEx will hold
the Lenders, the Administrative Agent
and the Indenture Trustee harmless
against any loss, liability, claim or
expense incurred as a result of the
purchase, ownership, use, lease or
operation of the Aircraft or the failure
to FedEx to perform any of its
obligations under any of the operative
documents or relating to any claims
associated with the issuance or sale of
the equity interest in connection with
the proposed leveraged lease financing.
Increased Costs, etc.: In accordance with customary practice,
FedEx shall pay to each Lender such
additional amounts as shall be necessary
to compensate such Lender for any costs
of making or maintaining its Commitment
or Loans including without limitation as
a result of any tax imposed by any
taxing authority of or in Tennessee, or
as result of any change after the date
of the Facility in any (including any
new) law, rule or regulation or
interpretation thereof that changes the
basis of taxation of any amounts payable
to such Lender or imposes or modifies
reserve or similar requirements or
imposes other conditions affecting its
Commitment or Loans, or attributable to
maintenance of capital following any
changes referred to above or
implementing any risk-based or other
capital guidelines or requirements
(whether or not compliance therewith is
required by law), in any case to the
extent related to the transactions
contemplated hereby and without
duplication of any amounts already
included in the interest rate on the
Loans.
Use, Maintenance, and Insurance
of Aircraft: In accordance with customary practice in
FedEx aircraft financings.
Reregistration and Subleasing: FedEx may sublease and/or reregister the
Aircraft at any time in accordance with
customary practice in FedEx aircraft
financings.
Debt-Equity Issues: To be negotiated in good faith by the
parties.
Transfers and Participants: On or after December 26, 1996, the
Lenders will have the right to transfer,
assign, participate or otherwise dispose
of all or any part of their Loans or
their commitments under the Facility
April 5, 1996 8
<PAGE>
subject, unless (i) an Event of Default
shall have occurred and be continuing or
(ii) the transfer is to another Lender,
or (iii) the transfer is by
participation, to FedEx's approval
(which shall not be unreasonably
withheld). Prior thereto, the Lenders
may transfer their Loans or Commitments
in whole or in part to an affiliate and
may discount any of their Loans with the
Federal Reserve.
Expenses: FedEx will pay all reasonable legal
expenses of Milbank, Tweed, Hadley and
McCloy, counsel to the Administrative
Agent, and other reasonable and
customary out-of-pocket expenses
incurred by the Administrative Agent and
related to this transaction and by the
Lenders related to any subsequent
amendments or waivers (including,
without limitation, the costs associated
with the filing of any Uniform
Commercial Code ("UCC") financing
statements, except for UCC financing
statements in Tennessee with respect to
a Lease, that the Administrative Agent
may deem reasonably advisable).
Documentations: Documentation will include but not be
limited to representations, covenants
and other provisions customary to
transactions of this type.
The transaction documents shall be in
form and substance satisfactory to FedEx
and the Administrative Agent and shall
be governed by New York law.
April 5, 1996 9
<PAGE>
Exhibit B to the
Facility Agreement
[Letterhead of Entity acting as Owner Trustee]
[date]
Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street, 22nd Floor
New York, NY 10260
Dear Sirs:
We have reviewed the provisions of Sections 2.02 and 6 of the Facility
Agreement dated as of April 1, 1996 among Federal Express Corporation, each of
the financial institutions signatory thereto as Banks, and Morgan Guaranty Trust
Company of New York as agent for the Banks and agree to act as, and perform the
duties of, the Trustee as provided therein with the same effect as if we were a
party to the Facility Agreement.
The account referred to in Section 2.02(a) of the Facility Agreement is
account number [ * ] maintained by us at The First National Bank of Chicago, ABA
No. [ * ], Attention: Margaret Kennelly, Reference: Federal Express.
[NAME OF SUCH ENTITY]
By______________________________
Name:
Title:
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
<PAGE>
Exhibit 10.21
EXECUTION COPY
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
ELEVENTH SUPPLEMENTAL LEASE AGREEMENT
by and between
MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY
and
FEDERAL EXPRESS CORPORATION
Dated as of July 1, 1994
AMENDING THE CONSOLIDATED AND RESTATED LEASE AGREEMENT DATED AS OF AUGUST 1,
1979 BETWEEN THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY AND FEDERAL EXPRESS
CORPORATION.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
1 Definitions...................................... 6
2 Granting Leasehold............................... 6
3 Term; Delivery and Acceptance of
Possession...................................... 10
4 Rental........................................... 10
5 Lease Agreement Still in Effect;
Provisions Thereof Applicable
to this Eleventh Supplemental
Lease Agreement................................. 11
6 Descriptive Headings............................. 11
7 Effectiveness of this Eleventh Supple-
mental Lease Agreement.......................... 11
8 Execution of Counterparts........................ 11
Notary........................................... 13
Leased Parcel Summary............................ 14
Rental Summary................................... 16
</TABLE>
2
<PAGE>
ELEVENTH SUPPLEMENTAL LEASE AGREEMENT
-------------------------------------
THIS ELEVENTH SUPPLEMENTAL LEASE AGREEMENT, made and entered into as of the
first day of July 1, 1994, by and between MEMPHIS-SHELBY COUNTY AIRPORT
AUTHORITY (herein sometimes referred to as "Authority"), a public and
governmental body politic and corporate of the State of Tennessee, and FEDERAL
EXPRESS CORPORATION (herein sometimes referred to as "Tenant"), a corporation
duly organized and existing under the laws of the State of Delaware and
qualified to do business in the State of Tennessee,
W I T N E S S E T H:
WHEREAS, Authority and Tenant on October 3, 1979 entered into a Consolidated
and Restated Lease Agreement dated as of August 1, 1979;
WHEREAS, Authority and Tenant on April 7, 1981 entered into a First
Supplemental Lease Agreement dated as of April 1, 1981 (the "First Supplemental
Lease Agreement") so as to provide for the lease by Tenant from Authority of
additional land, buildings and equipment to be included in the Project as
defined in the Lease Agreement all as set forth therein (such additional land,
buildings and equipment being defined therein and hereinafter referred to as the
"1981 Federal Express Project"), all as set forth therein; and
3
<PAGE>
WHEREAS, the Authority and Tenant on May 6, 1982 entered into a Second
Supplemental Lease Agreement dated as of January 1, 1982 (the "Second
Supplemental Lease Agreement") so as to provide for the lease by Tenant from
Authority of additional land to be included in the Project, all as set forth
therein; and
WHEREAS, Authority and Tenant on December 9, 1982, entered into a Third
Supplemental Lease Agreement dated as of November 1, 1982 (the "Third
Supplemental Lease Agreement") so as to release certain items consisting of
Buildings and Leased Equipment in the 1981 Federal Express Project; and
WHEREAS, Authority and Tenant on September 29, 1983 entered into a Fourth
Supplemental Lease Agreement dated as of July 1, 1983 (the "Fourth Supplemental
Lease Agreement") so as to provide for the lease by Tenant from Authority of
additional land to be included in the Project, all as set forth therein; and
WHEREAS, Authority and Tenant on April 23, 1984 entered into a Fifth
Supplemental Lease Agreement dated as of February 1, 1984 (the Fifth
Supplemental Lease Agreement") so as to provide for the lease by Tenant from
Authority of additional land to be included in this Project, all as set forth
therein; and
WHEREAS, Authority and Tenant on November 19, 1984 entered into a Sixth
Supplemental Lease Agreement dated as of April 1, 1984 (the "Sixth Supplemental
Lease Agreement") so as to provide for the lease by Tenant from Authority of
additional land to be included in this Project, all as set forth therein; and
4
<PAGE>
WHEREAS, Authority and Tenant on November 19, 1984 entered into a Seventh
Supplemental Lease Agreement dated as of June 1, 1984 (the "Seventh Supplemental
Lease Agreement") so as to provide for the lease by Tenant from Authority of
additional land to be included in this Project, all as set forth therein; and
WHEREAS, Authority and Tenant on November 4, 1988, entered into a Eighth
Supplemental Lease Agreement dated as of July 1, 1988, (the "Eighth Supplemental
Lease Agreement") so as to provide for the lease by Tenant from Authority of
additional land to be included in this Project, all as set forth therein; and
WHEREAS, Authority and Tenant on July 12, 1989, entered into a Ninth
Supplemental Lease Agreement dated as of June 1, 1989, (the "Ninth Supplemental
Lease Agreement") so as to provide for the lease by Tenant from Authority of
additional land to be included in this Project, all as set forth therein; and
WHEREAS, Authority and Tenant on October 1, 1991, entered into a Tenth
Supplemental Lease Agreement dated as of October 1, 1991, (the "Tenth
Supplemental Lease Agreement") so as to provide for the lease by Tenant from
Authority of additional land to be included in this Project, all as set forth
therein; and
WHEREAS, the said Consolidated and Restated Lease Agreement dated as of
October 3, 1979, together with the First through the Tenth Supplemental Lease
Agreements is herein referred to as the "Lease Agreement" and
5
<PAGE>
WHEREAS, Authority and Tenant have agreed to further supplement the Lease
Agreement so as to lease to Tenant certain additional land under this Eleventh
Supplemental Lease Agreement;
NOW THEREFORE, for and in consideration of the mutual promises, covenants
and agreements hereinafter contained to be kept and performed by the parties
hereto and upon the provisions and conditions hereinafter set forth, Authority
and Tenant do hereby covenant and agree, and each for itself does hereby
covenant and agree, as follows:
SECTION 1. DEFINITIONS. Except as otherwise provided herein, and unless the
context shall clearly require otherwise, all words and terms used in this
Eleventh Supplemental Lease Agreement which are defined in the Lease Agreement,
shall, for all purposes of this Eleventh Supplemental Lease Agreement, have the
respective meanings given to them in the Lease Agreement.
SECTION 2. GRANTING OF LEASEHOLD. In addition to the lease and demise to
Tenant of the Land in the Lease Agreement, the Authority hereby leases and
demises to Tenant, and Tenant hereby takes and hires from Authority, subject to
the provisions and conditions set forth in the Lease Agreement and this Eleventh
Supplemental Lease Agreement, the additional land designated as new Parcels 27
West A, 27 West B and Southwest Ramp which is located on the Memphis-Shelby
County Airport Authority property situated in Memphis, Shelby County, Tennessee,
and being more particularly described as follows:
6
<PAGE>
DESCRIPTION OF PART OF THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY PROPERTY
IN MEMPHIS, TENNESSEE: (SOUTHWEST RAMP)
Beginning at a point being located north 55 degrees 28 minutes 13 seconds
west, 640.42 feet from airport control point #23, said point being 132 feet
east of new taxiway 'S' and 132 feet north of new taxiway 'V' as measured
at right angles thereto; thence north 13 degrees 58 minutes 49 seconds west
with a line that is 132 feet east of and parallel to the centerline of new
taxiway 'S' 122.39 feet to a point; thence north 01 degrees 56 minutes 55
seconds east with a line that is 132 feet east of and parallel to the
centerline of taxiway 'S', 196.87 feet to a point, said point being 132
feet north of old taxiway 'V' as measured at right angles thereto; thence
south 60 degrees 43 minutes 53 seconds east with a line that is 132 feet
north of and parallel to the old centerline of taxiway 'V', 612.85 feet to
a point of curve; thence southeastwardly on a curve to the left having a
radius of 580.50 feet, delta angle of 24 degrees 57 minutes 59 seconds,
chord distance of 250.95 feet, chord bearing of south 73 degrees 12 minutes
53 seconds east and with a line that is 132 feet north of and parallel to
the centerline of old taxiway 'V' a curve distance of 252.95 feet to a
point, said point being 132 feet north of new taxiway 'V' as measured at
right angles thereto; thence north 85 degrees 41 minutes 52 seconds west
with a line that is 132 feet north of and parallel to the centerline of new
taxiway 'V', 754.12 feet to the point of beginning and containing 2.350
acres of land.
7
<PAGE>
DESCRIPTION
PARCEL 27 WEST-A
Being part of the west part of Parcel 27 of the Memphis-Shelby County
Airport (M.S.C.A.A.) property located south of the Tennessee Air National
Guard (T.A.N.G.) parcel, situated in Memphis, Shelby County, Tennessee, and
to be known for the purposes of this description as Parcel 27 West-A of
said M.S.C.A.A. property and more particularly described as follows:
Commencing at an iron pin in the west line of Tchulahoma Road (106 foot
R.O.W.) at the intersection of said west line with the eastwardly
projection of the centerline of Runway 27; thence run north 88 degrees
01'00" west along said projection and centerline 7393.18 feet to a point;
thence run north 01 degrees 59' 00" east and perpendicular to said
centerline 929.07 feet to a point 134.00 feet of the centerline of Runway
Sierra being the true point of beginning; thence north 00 degrees 18' 37"
west and parallel to the said centerline of Runway Sierra 1415.51 feet to a
point; thence south 87 degrees 55' 51" east a distance of 132.57 feet to a
point; thence south 00 degrees 17' 40" east a distance of 1257.40 feet to a
point; thence south 40 degrees 34' 21" west a distance of 201.84 feet to
the point of beginning containing 176,777 square feet or 4.058 acres more
or less.
8
<PAGE>
DESCRIPTION
PARCEL 27 WEST-B
Being part of the west part of Parcel 27 of the Memphis-Shelby County
Airport Authority (M.S.C.A.A.) property located south of the Tennessee Air
National Guard (T.A.N.G.) Parcel, situated in Memphis, Shelby County,
Tennessee, and to be known for the purposes of this description as Parcel
27 West-B of said M.S.C.A.A. property and more particularly described as
follows:
Commencing at an iron pin in the west line of Tchulahoma Road (106 foot
R.O.W.) at the intersection of said west line with the eastwardly
projection of the centerline of Runway 27; thence run north 88 degrees
01'00" west along said projection and centerline 7388.77 feet to a point;
thence run north 01 degrees 59' 00" east and perpendicular to said
centerline 819.15 feet to the true point of beginning and lying on the
southward projection of the west line of Parcel 27 West-A of said
M.S.C.A.A. property; thence north 00 degrees 18' 37" west along said
southward projection 110.00 feet to the southwest corner of said Parcel 27
West-A; thence north 40 degrees 34' 21" east along the southerly line of
said parcel 201.84 feet to the southeast corner of said parcel; thence
north 00 degrees 17' 40" west along the east line of said parcel 1257.40
feet to the south line of the above said T.A.N.G. parcel; thence south 87
degrees 55' 51" east along said south line 151.90 feet to the northwest
corner of the east part of Parcel 27; thence south 00 degrees 23' 07" east
along the west line of said east part of Parcel 27 and along the west line
of said east part of Parcel 27 and along the west line of part 5-B Parcel 9
(M.S.C.A.A. Property) a distance of 1279.32 feet to a point; thence south
26 degrees 24' 30" west a distance of 339.19 feet; thence north 63 degrees
06' 03" west a distance of 150.00 feet to the point of beginning containing
248,533 square feet or 5.706 acres more or less.
9
<PAGE>
SECTION 3. TERM; DELIVERY AND ACCEPTANCE OF POSSESSION. The terms of this
Eleventh Supplemental Lease Agreement shall commence on 12:01 A.M. on January 1,
1993, for the parcels described as 27 West A and 27 West B, it shall commence
for the parcel described as Southwest Ramp on December 1, 1993 and each of the
aforemention parcels shall expire at such time as the Lease Agreement shall
expire, to-wit: August 31, 2012 or upon such earlier termination, extension or
otherwise as provided therein. Authority shall deliver to Tenant sole and
exclusive possession of that portion of the Land, leased hereby as of the date
commencement of the term hereof, subject however, to Authority's right-of-entry
set forth in Section 21 of the Lease Agreement.
SECTION 4. RENTAL. In addition and supplemental to the rentals required to
be paid to the Authority pursuant to Section 5 of the Lease Agreement (including
all prior supplement lease agreements), during the term of this Eleventh
Supplemental Lease Agreement, Tenant shall pay to the Authority in advance on
the first business day of each month $4,291.77 in equal installments beginning
July 1, 1994, a total rental payment of $51,501.18 per year, which the parties
hereto agree is based upon an aggregate of 527,676 square feet of area at an
annual rental rate of ($0.0976) per square foot. Tenant also agrees to pay a
one-time rental fee of $68,093.48 which is rental payment for the time period
tenant used the 527,676 area before the July 1, 1994, starting date which is
more specifically described in Section 3.
10
<PAGE>
SECTION 5. LEASE AGREEMENT STILL IN EFFECT; PROVISIONS THEREFORE
APPLICABLE TO THIS SUPPLEMENTAL LEASE AGREEMENT. All of the terms, provisions,
conditions, covenants and agreements of the Lease Agreement, as supplemented
shall continue in full force and effect as supplemented hereby, and shall be
applicable to each of the provisions of this Eleventh Supplemental Lease
Agreement during the term hereof with the same force and effect as though the
provisions hereof were set forth in the Lease Agreement.
SECTION 6. DESCRIPTIVE HEADINGS. The descriptive headings of the sections
of this Eleventh Supplemental Lease Agreement are inserted for convenience of
reference only and do not constitute a part of this Eleventh Supplemental Lease
Agreement and shall not affect the meaning, construction, interpretation or
effect of this Eleventh Supplemental Lease Agreement.
SECTION 7. EFFECTIVENESS OF THIS SUPPLEMENTAL LEASE AGREEMENT. This
Eleventh Supplemental Lease Agreement shall become effective at 12:01 a.m. on
July 1, 1994.
SECTION 8. EXECUTION OF COUNTERPARTS. This Eleventh Supplemental Lease
Agreement may be simultaneously executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
instrument.
SECTION 9. SUMMARIES. For the convenience of both parties a leased parcel
summary and a rental summary are attached to this lease agreement.
11
<PAGE>
IN WITNESS WHEREOF, THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY AND FEDERAL
EXPRESS CORPORATION have caused this Eleventh Supplemental Lease Agreement to be
duly executed in their respective behalfs, as of the day and date first above
written.
MEMPHIS-SHELBY COUNTY AIRPORT
AUTHORITY
/s/ J. MCMICHAEL
----------------------------
Executive Vice President
WITNESS:
/s/ RICK
- -----------------------
APPROVED AS TO FORM AND LEGALITY:
/s/ R. GRATTAN BROWN, JR
- --------------------------
Airport Authority Attorney
FEDERAL EXPRESS CORPORATION
By /s/ GILBERT MOOK
-------------------------
Title Vice President
----------------------
WITNESS:
APPROVED
AS TO LEGAL FORM
By /s/ ANN HOFF /s/ SWM 10/21/94
----------------------- --------------------
Title Project Coord.
---------------------
12
<PAGE>
STATE OF TENNESSEE )
COUNTY OF SHELBY )
On this 11th day of November, 1994 before me appeared Jerry L. McMichael,
to me personally know, being by me duly sworn (or affirmed) did say that he is
the Executive Vice President of Memphis-Shelby County Airport Authority, and
that the seal affixed to the foregoing instrument is the corporate seal of said
Authority, and that said instrument was signed and sealed in behalf of said
Authority, by authority of its Board of commissioners and said Jerry L.
McMichael acknowledged said instrument to be the free act and deed of such
Authority.
MY COMMISSION EXPIRES
Sept. 17, 1997 /s/ CAROL D. WOLFE
- -------------------------------- -------------------------------
Notary Public
(seal)
STATE OF TENNESSEE )
COUNTY OF SHELBY )
On this 25th day of October, 1994, before me appeared Gilbert D. Mook, to
me personally known, who, being by me duly sworn (or affirmed) did say that he
is a Vice President of Federal Express Corporation, and that the seal affixed to
the foregoing instrument is the corporate seal of said corporation, and that
said instrument was signed and sealed in behalf of said corporation, by
authority of its Board of Commissioners and said Gilbert D. Mook acknowledged
said instrument to be the free act and deed of such corporation.
MY COMMISSION EXPIRES
Sept. 1, 1995 /s/ SANDRA Y. SWELL
- -------------------------------- -------------------------------
Notary Public
(seal)
13
<PAGE>
FEDERAL EXPRESS LEASED PARCELS SUMMARY
<TABLE>
<CAPTION>
PARCEL EFFECTIVE
LEASE ACRES SQUARE FEET AGREEMENT DATE
- ----- ----- ----------- --------- ---------
BASE-LEASE
----------
<S> <C> <C> <C> <C>
Revised 9 128.469 Consolidated & 08/01/79
Restated
10 1.612 70,200 Consolidated & 08/01/79
Restated
11 1.044 45,359 Consolidated & 08/01/79
Restated
</TABLE>
PREVIOUS SUPPLEMENTS
--------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
12 2.707 117,915 First 04/01/81
Supplemental
13 6.860 298,830 Second 01/01/82
Supplemental
14 14.586 635,377 Fourth 07/01/83
Supplemental
15 12.689 552,723 Fourth 07/01/83
Supplemental
Rev 16 18.281 (19.685) 796,312 Fifth 02/01/84
Supplemental
Rev 17 119.616 (124.992) 5,210,477 Sixth 04/01/84
Supplemental
18 2.717 118,353 Sixth 04/01/84
Supplemental
19 41.606 1,812,352 Seventh 06/01/84
Supplemental
25 0.435 18,933 Eighth 07/01/88
Supplemental
20 11.275 491,127 Ninth 06/01/89
Supplemental
27 11.192 487,512 Tenth 10/01/91
Supplemental
32 (removed) 22.972 1,000,681 Twelfth 07/01/93
Supplemental
</TABLE>
14
<PAGE>
THIS SUPPLEMENT
---------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
27 A 4.058 176,777 Eleventh 07/01/94
(West) Supplemental
27 B 5.706 248,533 Eleventh 07/01/94
(West) Supplemental
Southwest
Ramp 2.350 102,366 Eleventh 07/01/94
Supplemental
OPTIONS
-------
21 19.134 833,476 Option, Expires 5/31/94
22 6.521 284,068 Option, Expires 5/31/94
ASSIGNMENTS
-----------
23 5.923 258,008 Graber Assignment,
Expires 12/31/00
Invoice FEC
Next Increase 12/31/90
24 9.964 434,030 Southwide Assignment
Expires 5/14/13
Invoice FEC
Next Increase 5/15/93
26 9.532 415,213 BICO Assignment,
Expires 7/31/20,21
Invoice FEC
Next Increase 8/01/96
28 10.68 465,221 Equitable Life
Assignment
Expires 5/14/2013
Invoice FEC
Next Increase 5/15/93
</TABLE>
15
<PAGE>
RENTAL - FEDERAL EXPRESS
Effective July 1, 1994
<TABLE>
<CAPTION>
Annual
Category Number of Rent Rate Annual
of Space Square Feet Per Sq. Ft. Rental
- -------- ----------- ----------- ------------
<S> <C> <C> <C>
Bldg. T-376 1,240 1.221 1,514.04
Unimproved Ground 4,494,042 .098 440,416.11
Improved Apron 2,395,802 .122 292,287.84
Hangar Proper 108,139 .903 97,649.52
Hangar Office 42,000 1.465 61,530.00
International Park 8,721,224 .171 1,491,329.30
---------- ----- ------------
16,763,128 .1422 2,384,726.81
</TABLE>
BREAKDOWN OF SPACE
------------------
<TABLE>
<CAPTION>
Sq. Ft. Sq. Ft.
------- -------
<S> <C> <C> <C>
Bldg. T-376 Parcel 4 1,240 -----
- -----------
1,240
Unimproved Ground Parcel 1 130,900
- -----------------
Parcel 2 50,000
Parcel 3 192,400
Parcel 4 32,540
Parcel 6 89,700
Parcel 9 1,167,337
Parcel 19 1,812,362
Parcel 20 491,127
Parcel 27A 176,777
Parcel 27B 248,533
Southwest Ramp 102,366
---------
4,494,042
Improved Apron Parcel 1 850,250
- --------------
Parcel 2 226,900
Parcel 7 577,540
Parcel 9 253,600
Parcel 27 487,512
---------
2,395,802
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Hangar Proper Parcel 1 66,504
- -------------
Parcel 2 41,635
------
108,139
Hangar Office Parcel 1 33,600
- --------------------
Parcel 2 8,400 42,000
------
Sq. Ft. Sq. Ft.
------- -------
International Park Parcel 5 24,000
- --------------------
Parcel 8 247,254
Parcel 9 1,586,172
Parcel 10 70,200
Parcel 11 45,359
Parcel 12 117,915
Parcel 13 298,830
Parcel 14 556,334
Parcel 15 552,723
Parcel 16 796,312
Parcel 17 4,288,839
Parcel 18 118,353
Parcel 25 18,933
---------
8,721,224
----------
Total 15,762,447
</TABLE>
34636
17
<PAGE>
Exhibit 10.23
EXECUTION COPY
________________________________________________________________________
THIRTEENTH SUPPLEMENTAL LEASE AGREEMENT
by and between
MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY
and
FEDERAL EXPRESS CORPORATION
Dated as of June 1, 1995
AMENDING THE CONSOLIDATED AND RESTATED LEASE AGREEMENT DATED AS OF AUGUST 1,
1979 BETWEEN THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY AND FEDERAL EXPRESS
CORPORATION.
________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
1 Definitions................................................... 6
2 Granting Leasehold............................................ 6
3 Release of Certain Land....................................... 8
4 Term; Delivery and Acceptance of Possession.................. 8
5 Rental........................................................ 8
6 Lease Agreement Still in Effect; Provisions Thereof Applicable
to this Thirteenth Supplemental Lease Agreement............... 9
7 Descriptive Headings.......................................... 9
8 Effectiveness of this Thirteenth Supplemental Lease Agreement. 9
9 Execution of Counterparts..................................... 9
10 Notary........................................................ 11
11 Leased Parcel Summary......................................... 12
12 Rental Summary................................................ 14
</TABLE>
<PAGE>
THIRTEENTH SUPPLEMENTAL LEASE AGREEMENT
THIS THIRTEENTH SUPPLEMENTAL LEASE AGREEMENT, made and entered into as
of the first day of June 1, 1995, by and between MEMPHIS-SHELBY COUNTY AIRPORT
AUTHORITY (herein sometimes referred to as "Authority"), a public and
governmental body politic and corporate of the State of Tennessee, and FEDERAL
EXPRESS CORPORATION (herein sometimes referred to as "Tenant"), a corporation
duly organized and existing under the laws of the State of Delaware and
qualified to do business in the State of Tennessee,
W I T N E S S E T H:
WHEREAS, Authority and Tenant on October 3, 1979 entered into a
Consolidated and Restated Lease Agreement dated as of August 1, 1979;
WHEREAS, Authority and Tenant on April 7, 1981 entered into a First
Supplemental Lease Agreement dated as of April 1, 1981 (the "First Supplemental
Lease Agreement") so as to provide for the lease by Tenant from Authority of
additional land, buildings and equipment to be included in the Project as
defined in the Lease Agreement all as set forth therein (such additional land,
buildings and equipment being defined therein and hereinafter referred to as the
"1981 Federal Express Project"), all as set forth therein; and
WHEREAS, the Authority and Tenant on May 6, 1982 entered into a Second
Supplemental Lease Agreement dated as of January 1, 1982 (the "Second
Supplemental Lease Agreement") so as to provide for the lease by Tenant from
Authority of additional land to be included in the Project, all as set forth
therein; and
WHEREAS, Authority and Tenant on December 9, 1982, entered into a
Third
3
<PAGE>
Supplemental Lease Agreement dated as of November 1, 1982 (the "Third
Supplemental Lease Agreement") so as to release certain items consisting of
Buildings and Leased Equipment in the 1981 Federal Express Project; and
WHEREAS, Authority and Tenant on September 29, 1983 entered into a
Fourth Supplemental Lease Agreement dated as of July 1, 1983 (the "Fourth
Supplemental Lease Agreement") so as to provide for the lease by Tenant from
Authority of additional land to be included in the Project, all as set forth
therein; and
WHEREAS, Authority and Tenant on April 23, 1984 entered into a Fifth
Supplemental Lease Agreement dated as of February 1, 1984 (the Fifth
Supplemental Lease Agreement") so as to provide for the lease by Tenant from
Authority of additional land to be included in this Project, all as set forth
therein; and
WHEREAS, Authority and Tenant on November 19, 1984 entered into a
Sixth Supplemental Lease Agreement dated as of April 1, 1984 (the "Sixth
Supplemental Lease Agreement") so as to provide for the lease by Tenant from
Authority of additional land to be included in this Project, all as set forth
therein; and
WHEREAS, Authority and Tenant on November 19, 1984 entered into a
Seventh Supplemental Lease Agreement dated as of June 1, 1984 (the "Seventh
Supplemental Lease Agreement") so as to provide for the lease by Tenant from
Authority of additional land to be included in this Project, all as set forth
therein; and
WHEREAS, Authority and Tenant on November 4, 1988, entered into a
Eighth Supplemental Lease Agreement dated as of July 1, 1988, (the "Eighth
Supplemental Lease Agreement") so as to provide for the lease by Tenant from
Authority of
4
<PAGE>
additional land to be included in this Project, all as set forth therein; and
WHEREAS, Authority and Tenant on July 12, 1989, entered into a Ninth
Supplemental Lease Agreement dated as of June 1, 1989, (the "Ninth Supplemental
Lease Agreement") so as to provide for the lease by Tenant from Authority of
additional land to be included in this Project, all as set forth therein; and
WHEREAS, Authority and Tenant on October 1, 1991, entered into a Tenth
Supplemental Lease Agreement dated as of October 1, 1991, (the "Tenth
Supplemental Lease Agreement") so as to provide for the lease by Tenant from
Authority of additional land to be included in this Project, all as set forth
therein; and
WHEREAS, Authority and Tenant on July 1, 1994, entered into a
Eleventh Supplemental Lease Agreement dated July 1, 1994, (the Eleventh
Supplemental Lease Agreement") so as to provide for the lease by Tenant from
Authority of additional land to be included in this Project, all as set forth
therein; and
WHEREAS, Authority and Tenant on July 1, 1993, entered into a Twelfth
Supplemental Lease Agreement dated July 1, 1993, (the Twelfth Supplemental Lease
Agreement")so as to release a certain parcel of land from the 1981 Federal
Express Project as described on Exhibit 1 attached thereto; and
WHEREAS, the said Consolidated and Restated Lease Agreement dated as
of October 3, 1979, together with the First through the Twelfth Supplemental
Lease Agreements is herein referred to as the "Lease Agreement" and
WHEREAS, Authority and Tenant have agreed to further supplement the
Lease Agreement so as to lease to Tenant certain additional land under this
Thirteenth
5
<PAGE>
Supplemental Lease Agreement;
NOW THEREFORE, for and in consideration of the mutual promises,
covenants and agreements hereinafter contained to be kept and performed by the
parties hereto and upon the provisions and conditions hereinafter set forth,
Authority and Tenant do hereby covenant and agree, and each for itself does
hereby covenant and agree, as follows:
SECTION 1. DEFINITIONS. Except as otherwise provided herein, and
unless the context shall clearly require otherwise, all words and terms used in
this Thirteenth Supplemental Lease Agreement which are defined in the Lease
Agreement, shall, for all purposes of this Thirteenth Supplemental Lease
Agreement, have the respective meanings given to them in the Lease Agreement.
SECTION 2. GRANTING OF LEASEHOLD. In addition to the lease and
demise to Tenant of the Land in the Lease Agreement, the Authority hereby leases
and demises to Tenant, and Tenant hereby takes and hires from Authority, subject
to the provisions and conditions set forth in the Lease Agreement and this
Thirteenth Supplemental Lease Agreement, the additional land designated as new
Lease Parcels 33 and 36 which is located on the Memphis-Shelby County Airport
Authority property situated in Memphis, Shelby County, Tennessee, and being more
particularly described as follows:
6
<PAGE>
PARCEL 33
(FEEDER RAMP & GSE STORAGE AREA)
BEING A DESCRIPTION OF PART OF THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY
PROPERTY, LOCATED IN MEMPHIS, SHELBY COUNTY, TENNESSEE AND BEING MORE
PARTICULARLY DESCRIBED AS FOLLOWS:
Commencing at the intersection of the centerline of Taxiway C and Taxiway
Z, said point being N01 54'35"E a distance of 735.04 feet from the
intersection of the centerline of said Taxiway C with the centerline of
Runway 9/27 as measured along said Taxiway C; thence N01 54'35"E along the
centerline of said Taxiway C a distance of 122.72 feet to a point; thence
S88 05'25"E a distance of 129.50 feet to the point of beginning; thence N01
54'35"E along a line which is 129.50 feet east of and parallel to said
taxiway C a distance of 1429.08 feet to a point; thence S88 05'25"E a
distance of 233.58 feet to a point; thence S01 54'35"W a distance of 466.00
feet to a point; thence S88 05'25"E a distance of 240.39 feet to a point,
said point being 129.50 feet west of the centerline of Taxiway S; thence
S01 55'59"W and parallel to said Taxiway S a distance of 451.83 feet;
thence N88 05'25"W a distance of 339.81 feet to a point; thence S01 54'35"W
a distance of 518.46 feet to a point, said point being 129.50 feet north of
the centerline of said Taxiway Z; thence N85 00'41"W and parallel to said
Taxiway Z a distance of 134.17 feet to the point of beginning and
containing 391,942 square feet or 8.998 acres.
PARCEL 36
(FEDEX GSE STORAGE AREA)
BEING PART OF THE MEMPHIS-SHELBY AIRPORT AUTHORITY PROPERTY, LOCATED AT THE
MEMPHIS INTERNATIONAL AIRPORT IN MEMPHIS, SHELBY COUNTY, TENNESSEE AND
BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:
Beginning at a point on the west line of Tchulahoma Road (106.00 Foot
Right-of-Way), said point being the intersection of said west line with the
north line of the approach slope for Runway 29; thence following said west
line along a curve to the right having a radius of 1390.00 feet, an arc
length of 376.98 feet (Chord S07 20'19"E - 375.82 feet) to a point; thence
N85 43'11"W a distance of 322.06 feet to a point on the east line of a
service drive; thence following said east line along a curve to the left
having a radius of 380.00 feet, an arc length of 416.54 feet (Chord N38
26'02"W - 395.99 feet) to a point on the north line of said approach slope;
thence N85 45'32"E along said north line a distance of 520.74 feet to the
point of beginning and containing 132,837 square feet or 3.050 acres.
7
<PAGE>
SECTION 3. RELEASE OF CERTAIN LAND. The Tenant and the Authority have
agreed that it is desirable to release from the Lease Agreement that portion of
the Land identified as Hangar 8 in the following manner: delete 36,046.33
square feet from the Hangar Property at a rental rate of $.903 per square foot
and 14,000 square feet from the Hangar Office Space at a rental rate of $1.465
thereby creating a total annual reduction of $53,059.84.
SECTION 4. TERM; DELIVERY AND ACCEPTANCE OF POSSESSION. The terms of this
Thirteenth Supplemental Lease Agreement shall commence on 12:01 A.M. on June 1,
1995, for the parcels described as 33 and 36 and shall expire at such time as
the Lease Agreement shall expire, to-wit: August 31, 2012 or upon such earlier
termination, extension or otherwise as provided therein. Authority shall
deliver to Tenant sole and exclusive possession of that portion of the Land,
leased hereby as of the date commencement of the term hereof, subject however,
to Authority's right-of-entry set forth in Section 21 of the Lease Agreement.
Accordingly, the Authority and Tenant mutually agree that the portion of
land as described and set forth in Section 3 of this Thirteenth Supplemental
Agreement is released from the Lease Agreement and from and after the effective
date of this Thirteenth Supplemental Lease Agreement shall no longer be or be
deemed to be a part of the Land leased thereunder.
SECTION 5. RENTAL. In addition and supplemental to the rentals required to
be paid to the Authority pursuant to Section 5 of the Lease Agreement (including
all prior supplement lease agreements), during the term of this Thirteenth
Supplemental Lease Agreement, Tenant shall pay to the Authority in advance on
the first business day of each month $4,268.20 in equal installments beginning
June 1, 1995, a total rental payment of $51,218.43 per year, which the parties
hereto agree is based upon an aggregate of 524,779
8
<PAGE>
square feet of area at an annual rental rate of ($0.0976) per square foot.
SECTION 6. LEASE AGREEMENT STILL IN EFFECT; PROVISIONS THEREFORE
APPLICABLE TO THIS SUPPLEMENTAL LEASE AGREEMENT. All of the terms, provisions,
conditions, covenants and agreements of the Lease Agreement, as supplemented
shall continue in full force and effect as supplemented hereby, and shall be
applicable to each of the provisions of this Thirteenth Supplemental Lease
Agreement during the term hereof with the same force and effect as though the
provisions hereof were set forth in the Lease Agreement.
SECTION 7. DESCRIPTIVE HEADINGS. The descriptive headings of the sections
of this Thirteenth Supplemental Lease Agreement are inserted for convenience of
reference only and do not constitute a part of this Thirteenth Supplemental
Lease Agreement and shall not affect the meaning, construction, interpretation
or effect of this Thirteenth Supplemental Lease Agreement.
SECTION 8. EFFECTIVENESS OF THIS SUPPLEMENTAL LEASE AGREEMENT. This
Thirteenth Supplemental Lease Agreement shall become effective at 12:01 a.m. on
June 1, 1995.
SECTION 9. EXECUTION OF COUNTERPARTS. This Thirteenth Supplemental Lease
Agreement may be simultaneously executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
instrument.
SECTION 10. SUMMARIES. For the convenience of both parties a leased
parcel summary and a rental summary are attached to this lease agreement.
9
<PAGE>
IN WITNESS WHEREOF, THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY AND FEDERAL
EXPRESS CORPORATION have caused this Thirteenth Supplemental Lease Agreement to
be duly executed in their respective behalfs, as of the day and date first above
written.
WITNESS: MEMPHIS-SHELBY COUNTY AIRPORT
AUTHORITY
/s/ RICK BY: /s/ LARRY D. COX
- ------------------------------ ------------------------------------
Title: Director of Properties
TITLE: PRESIDENT
------------------------------------
Approved as to Form and Legality:
/s/ R. GRATTAN BROWN JR., ATTY
- ----------------------------------
Attorney for the Airport Authority
WITNESS: FEDERAL EXPRESS CORPORATION
/s/ ANN HOFF BY: /s/ D. M. HURTADO
- ----------------------------- ---------------------------------
Title: Proj. Coord.
- ----------------------------- TITLE: Managing Director, Real Estate
------------------------------
APPROVED
AS TO LEGAL FORM
/s/ PGA 8/24/95
----------------
10
<PAGE>
(STATE OF TENNESSEE )
COUNTY OF SHELBY )
On this 21st day of Sept., 1995 before me appeared LARRY D. COX, to me
personally known, who, being by me duly sworn (or affirmed), did say that he is
the President of the Memphis-Shelby County Airport Authority, the within named
Lessor, and that he as such President, being authorized so to do, executed the
foregoing instrument for the purposes therein contained, by signing the name of
the Authority by himself as such President.
MY COMMISSION EXPIRES
4/30/96 /s/ PAT STANFILL
- ----------------------------- ------------------------------------
Notary Public
(seal)
STATE OF TENNESSEE )
COUNTY OF SHELBY )
On this 7 day of September, 1995, before me appeared David M. Hurtado,
to me personally known, who, being by me duly sworn (or affirmed), did say that
he is a Managing Director, Real Estate of Federal Express Corporation, the
within named Lessee, and that he as such __________, being authorized so to do,
executed the foregoing instrument for the purposes therein contained, by signing
the name of the Corporation by himself as such Managing Director, Real Estate.
MY COMMISSION EXPIRES
Dec. 7, 1998 /s/ LEANNA M. JOHNSON
- ---------------------------- -----------------------------------
Notary Public
(seal)
11
<PAGE>
FEDERAL EXPRESS LEASED PARCELS SUMMARY
<TABLE>
<CAPTION>
PARCEL EFFECTIVE
LEASE ACRES SQUARE FEET AGREEMENT DATE
- ----- ----- ----------- --------- ----
BASE-LEASE
----------
<S> <C> <C> <C> <C>
Revised 9 128.469 Consolidated & 08/01/79
Restated
10 1.612 70,200 Consolidated & 08/01/79
Restated
11 1.044 45,359 Consolidated & 08/01/79
Restated
</TABLE>
PREVIOUS SUPPLEMENTS
--------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
12 2.707 117,915 First 04/01/81
Supplemental
13 6.860 298,830 Second 01/01/82
Supplemental
14 14.586 635,377 Fourth 07/01/83
Supplemental
15 12.689 552,723 Fourth 07/01/83
Supplemental
Rev 16 18.281 (19.685) 796,312 Fifth 02/01/84
Supplemental
Rev 17 119.616 (124.992) 5,210,477 Sixth 04/01/84
Supplemental
18 2.717 118,353 Sixth 04/01/84
Supplemental
19 41.606 1,812,352 Seventh 06/01/84
Supplemental
25 0.435 18,933 Eighth 07/01/88
Supplemental
20 11.275 491,127 Ninth 06/01/89
Supplemental
27 11.192 487,512 Tenth 10/01/91
Supplemental
32 (removed) 22.972 1,000,681 Twelfth 07/01/93
Supplemental
27 A(West) 4.058 176,777 Eleventh 07/01/94
Supplemental
27 B(West) 5.706 248,533 Eleventh 07/01/94
Supplemental
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
PARCEL EFFECTIVE
LEASE ACRES SQUARE FEET AGREEMENT DATE
- ----- ----- ----------- --------- ----
<S> <C> <C> <C> <C>
Southwest
Ramp 2.350 102,366 Eleventh 07/01/94
Supplemental
</TABLE>
THIS SUPPLEMENT
---------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
33 8.998 391,942 Thirteenth 06/01/95
Supplemental
36 3.050 132,837 Thirteenth 06/01/95
Supplemental
Hangar 8 (removed) 36,946,33 Thirteenth 06/01/95
Supplemental
</TABLE>
<TABLE>
<CAPTION>
OPTIONS
-------
<S> <C> <C> <C>
21 19.134 833,476 Option, Expires 5/31/99
22 3.521 153,394 Option, Expires 5/31/99
</TABLE>
ASSIGNMENTS
-----------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
23 5.923 258,008 Graber Assignment,
Expires 12/31/00
Invoice FEC
Next Increase 12/31/90
24 9.964 434,030 Southwide Assignment
Expires 5/14/13
Invoice FEC
Next Increase 5/15/93
26 9.532 415,213 BICO Assignment,
Expires 7/31/20,21
Invoice FEC
Next Increase 8/01/96
28 10.68 465,221 Equitable Life Assignment
Expires 5/14/2013
Invoice FEC
Next Increase 5/15/93
</TABLE>
13
<PAGE>
RENTAL - FEDERAL EXPRESS
Effective June 1, 1995
<TABLE>
<CAPTION>
Annual
Category Number of Rental Rate Annual
of Space Square Feet Per Sq. Ft. Rental
- -------- ------------- ----------- ------
<S> <C> <C> <C>
Bldg. T-376 1,240 $1.221 $ 1,514.04
Unimproved Ground 5,018,821 0.098 491,844.46
Improved Apron 2,395,802 0.122 292,287.84
Hangar Property 72,092.67 0.903 65,099.68
Hangar Office 28,000 1.465 41,020.00
International Park 8,721,224 0.171 1,491,329.30
------------- ------ -------------
16,237,179.67 $.1422 $2,383,095.32
</TABLE>
BREAKDOWN OF SPACE
------------------
<TABLE>
<CAPTION>
Sq. Ft. Sq. Ft.
------- -------
<S> <C> <C> <C>
Bldg. T-376 Parcel 4 1,240
1,240
Unimproved Ground Parcel 1 130,900
Parcel 2 50,000
Parcel 3 192,400
Parcel 4 32,540
Parcel 6 89,700
Parcel 9 1,167,337
Parcel 19 1,812,362
Parcel 20 491,127
Parcel 27A 176,777
Parcel 27B 248,533
Southwest Ramp 102,366
Parcel 33 391,942
Parcel 36 132,837
---------
5,018,821
Improved Apron Parcel 1 850,250
Parcel 2 226,900
Parcel 7 577,540
Parcel 9 253,600
Parcel 27 487,512
---------
2,395,802
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Sq. Ft. Sq. Ft.
------- -------
<S> <C> <C> <C>
Hangar Property Parcel 1 44,336
Parcel 2 27,756.67
---------
72,092.67
Hangar Office Parcel 1 22,400
Parcel 2 5,600
------
28,000
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
International Park Parcel 5 24,000
Parcel 8 247,254
Parcel 9 1,586,172
Parcel 10 70,200
Parcel 11 45,359
Parcel 12 117,915
Parcel 13 298,830
Parcel 14 556,334
Parcel 15 552,723
Parcel 16 796,312
Parcel 17 4,288,839
Parcel 18 118,353
Parcel 25 18,933
---------
8,721,224
---------
TOTAL 16,237,179.67
</TABLE>
34637
15
<PAGE>
EXHIBIT 10.24
EXECUTION COPY
________________________________________________________________________
FOURTEENTH SUPPLEMENTAL LEASE AGREEMENT
by and between
MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY
and
FEDERAL EXPRESS CORPORATION
Dated as of January 1, 1996
AMENDING THE CONSOLIDATED AND RESTATED LEASE AGREEMENT DATED AS OF AUGUST 1,
1979 BETWEEN THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY AND FEDERAL EXPRESS
CORPORATION.
________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- --------- ----
<S> <C> <C>
1 Definitions................................................... 6
2 Granting Leasehold............................................ 6
3 Term; Delivery and Acceptance of Possession.................. 7
4 Rental........................................................ 7
5 Lease Agreement Still in Effect; Provisions Thereof Applicable
to this Fourteenth Supplemental Lease Agreement............... 8
6 Descriptive Headings.......................................... 8
7 Effectiveness of this Fourteenth Supplemental Lease Agreement. 8
8 Execution of Counterparts..................................... 8
9 Notary........................................................ 10
10 Leased Parcel Summary......................................... 11
11 Rental Summary................................................ 13
</TABLE>
<PAGE>
FOURTEENTH SUPPLEMENTAL LEASE AGREEMENT
THIS FOURTEENTH SUPPLEMENTAL LEASE AGREEMENT, made and entered into as of
the first day of December, 1995, by and between MEMPHIS-SHELBY COUNTY AIRPORT
AUTHORITY (herein sometimes referred to as "Authority"), a public and
governmental body politic and corporate of the State of Tennessee, and FEDERAL
EXPRESS CORPORATION (herein sometimes referred to as "Tenant"), a corporation
duly organized and existing under the laws of the State of Delaware and
qualified to do business in the State of Tennessee,
W I T N E S S E T H:
WHEREAS, Authority and Tenant on October 3, 1979 entered into a
Consolidated and Restated Lease Agreement dated as of August 1, 1979;
WHEREAS, Authority and Tenant on April 7, 1981 entered into a First
Supplemental Lease Agreement dated as of April 1, 1981 (the "First Supplemental
Lease Agreement") so as to provide for the lease by Tenant from Authority of
additional land, buildings and equipment to be included in the Project as
defined in the Lease Agreement all as set forth therein (such additional land,
buildings and equipment being defined therein and hereinafter referred to as the
"1981 Federal Express Project"), all as set forth therein; and
WHEREAS, the Authority and Tenant on May 6, 1982 entered into a Second
Supplemental Lease Agreement dated as of January 1, 1982 (the "Second
Supplemental Lease Agreement") so as to provide for the lease by Tenant from
Authority of additional land to be included in the Project, all as set forth
therein; and
WHEREAS, Authority and Tenant on December 9, 1982, entered into a Third
3
<PAGE>
Supplemental Lease Agreement dated as of November 1, 1982 (the "Third
Supplemental Lease Agreement") so as to release certain items consisting of
Buildings and Leased Equipment in the 1981 Federal Express Project; and
WHEREAS, Authority and Tenant on September 29, 1983 entered into a Fourth
Supplemental Lease Agreement dated as of July 1, 1983 (the "Fourth Supplemental
Lease Agreement") so as to provide for the lease by Tenant from Authority of
additional land to be included in the Project, all as set forth therein; and
WHEREAS, Authority and Tenant on April 23, 1984 entered into a Fifth
Supplemental Lease Agreement dated as of February 1, 1984 (the Fifth
Supplemental Lease Agreement") so as to provide for the lease by Tenant from
Authority of additional land to be included in this Project, all as set forth
therein; and
WHEREAS, Authority and Tenant on November 19, 1984 entered into a Sixth
Supplemental Lease Agreement dated as of April 1, 1984 (the "Sixth Supplemental
Lease Agreement") so as to provide for the lease by Tenant from Authority of
additional land to be included in this Project, all as set forth therein; and
WHEREAS, Authority and Tenant on November 19, 1984 entered into a Seventh
Supplemental Lease Agreement dated as of June 1, 1984 (the "Seventh Supplemental
Lease Agreement") so as to provide for the lease by Tenant from Authority of
additional land to be included in this Project, all as set forth therein; and
WHEREAS, Authority and Tenant on November 4, 1988, entered into a Eighth
Supplemental Lease Agreement dated as of July 1, 1988, (the "Eighth Supplemental
Lease Agreement") so as to provide for the lease by Tenant from Authority of
4
<PAGE>
additional land to be included in this Project, all as set forth therein; and
WHEREAS, Authority and Tenant on July 12, 1989, entered into a Ninth
Supplemental Lease Agreement dated as of June 1, 1989, (the "Ninth Supplemental
Lease Agreement") so as to provide for the lease by Tenant from Authority of
additional land to be included in this Project, all as set forth therein; and
WHEREAS, Authority and Tenant on October 1, 1991, entered into a Tenth
Supplemental Lease Agreement dated as of October 1, 1991, (the "Tenth
Supplemental Lease Agreement") so as to provide for the lease by Tenant from
Authority of additional land to be included in this Project, all as set forth
therein; and
WHEREAS, Authority and Tenant on July 1, 1994, entered into a Eleventh
Supplemental Lease Agreement dated July 1, 1994, (the Eleventh Supplemental
Lease Agreement") so as to provide for the lease by Tenant from Authority of
additional land to be included in this Project, all as set forth therein; and
WHEREAS, Authority and Tenant on July 1, 1993, entered into a Twelfth
Supplemental Lease Agreement dated July 1, 1993, (the Twelfth Supplemental Lease
Agreement") so as to release a certain parcel of land from the 1981 Federal
Express Project as described on Exhibit 1 attached thereto; and
WHEREAS, Authority and Tenant on June 1, 1995, entered into a Thirteenth
Supplemental Lease Agreement dated June 1, 1995, (the Thirteenth Supplemental
Lease Agreement") so as to provide for the lease by Tenant from Authority of
additional land to be included in this Project and so as to release a certain
parcel of land from the 1981 Federal Express Project, all as set forth therein;
and
5
<PAGE>
WHEREAS, the said Consolidated and Restated Lease Agreement dated as of
October 3, 1979, together with the First through the Thirteenth Supplemental
Lease Agreements is herein referred to as the "Lease Agreement" and
WHEREAS, Authority and Tenant have agreed to further supplement the Lease
Agreement so as to lease to Tenant certain additional land under this Fourteenth
Supplemental Lease Agreement;
NOW THEREFORE, for and in consideration of the mutual promises, covenants
and agreements hereinafter contained to be kept and performed by the parties
hereto and upon the provisions and conditions hereinafter set forth, Authority
and Tenant do hereby covenant and agree, and each for itself does hereby
covenant and agree, as follows:
SECTION 1. DEFINITIONS. Except as otherwise provided herein, and
unless the context shall clearly require otherwise, all words and terms used in
this Fourteenth Supplemental Lease Agreement which are defined in the Lease
Agreement, shall, for all purposes of this Fourteenth Supplemental Lease
Agreement, have the respective meanings given to them in the Lease Agreement.
SECTION 2. GRANTING OF LEASEHOLD. In addition to the lease and demise to
Tenant of the Land in the Lease Agreement, the Authority hereby leases and
demises to Tenant, and Tenant hereby takes and hires from Authority, subject to
the provisions and conditions set forth in the Lease Agreement and this
Fourteenth Supplemental Lease Agreement, the additional land designated as new
Lease Parcel 34 which is located on the Memphis-Shelby County Airport Authority
property situated in Memphis, Shelby County, Tennessee, and being more
particularly described as follows:
6
<PAGE>
PARCEL 34
(PARCEL WEST OF HANGAR 11)
BEING A DESCRIPTION OF PART OF THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY
PROPERTY, LOCATED IN MEMPHIS, SHELBY COUNTY, TENNESSEE AND BEING MORE
PARTICULARLY DESCRIBED AS FOLLOWS:
Beginning at a point on the north line of Winchester Road, said point being
S85 43'52"E a distance of 40.00 feet from the intersection of said north
line of Winchester Road with the easterly face of the Hurricane Creek
vertical wall channel; thence N02 12'44"E along the western most east line
of the Northwest Airlink Maintenance Facility Lease Parcel a distance of
150.19 feet to a point; thence N04 08'27"E and continuing along said east
line a distance of 427.19 feet to a point on the south line of said Lease
Parcel; thence S85 46'02"E along said south line of said Lease Parcel a
distance of 365.00 feet to the southeast corner of said Lease Parcel;
thence N04 08'27"E along the east line of said Lease Parcel a distance of
550.00 feet to a point; thence S85 46'02"E along a line 191.00 feet south
of and parallel to Taxiway "A" a distance of 85.20 feet to the northwest
corner of the property shown on the Final Plan of the Aviation Facilities
P.D. as recorded in Plat Book 145, Page 37, at the Shelby County Register's
Office; thence S03 58'23"W along the west line of the said Aviation
Facilities property a distance of 386.06 feet to a point; thence S40
18'14"E a distance of 284.48 feet to a point; thence S04 40'50"W and
continuing along the west line of the said Aviation Facilities property a
distance of 534.87 feet to a point on the north line of said Winchester
Road; thence N85 43'52"W along the north line of said Winchester Road a
distance of 47.61 feet to a point; thence S49 16'08"W a distance of 5.66
feet to a point; thence N85 43'52"W and continuing along the north line of
said Winchester Road a distance of 588.82 feet to the point of beginning
and containing 433,461 square feet or 9.951 acres.
SECTION 3. TERM; DELIVERY AND ACCEPTANCE OF POSSESSION. The terms of this
Fourteenth Supplemental Lease Agreement shall commence on 12:01 A.M. on January
1, 1996, for the parcel described as 34 and shall expire at such time as the
Lease Agreement shall expire, to-wit: August 31, 2012 or upon such earlier
termination, extension or otherwise as provided therein. Authority shall
deliver to Tenant sole and exclusive possession of that portion of the Land,
leased hereby as of the date commencement of the term hereof, subject however,
to Authority's right-of-entry set forth in Section 21 of the Lease Agreement.
SECTION 4. RENTAL. In addition and supplemental to the rentals required to
be paid to the Authority pursuant to Section 5 of the Lease Agreement (including
all prior supplement lease agreements), during the term of this Fourteenth
7
<PAGE>
Supplemental Lease Agreement, Tenant shall pay to the Authority in advance on
the first business day of each month $3,525.48 in equal installments beginning
January 1, 1996, a total rental payment of $42,305.79 per year, which the
parties hereto agree is based upon an aggregate of 433,461 square feet of area
at an annual rental rate of ($0.0976) per square foot.
SECTION 5. LEASE AGREEMENT STILL IN EFFECT; PROVISIONS THEREFORE
APPLICABLE TO THIS SUPPLEMENTAL LEASE AGREEMENT. All of the terms, provisions,
conditions, covenants and agreements of the Lease Agreement, as supplemented
shall continue in full force and effect as supplemented hereby, and shall be
applicable to each of the provisions of this Fourteenth Supplemental Lease
Agreement during the term hereof with the same force and effect as though the
provisions hereof were set forth in the Lease Agreement.
SECTION 6. DESCRIPTIVE HEADINGS. The descriptive headings of the sections
of this Fourteenth Supplemental Lease Agreement are inserted for convenience of
reference only and do not constitute a part of this Fourteenth Supplemental
Lease Agreement and shall not affect the meaning, construction, interpretation
or effect of this Fourteenth Supplemental Lease Agreement.
SECTION 7. EFFECTIVENESS OF THIS SUPPLEMENTAL LEASE AGREEMENT. This
Fourteenth Supplemental Lease Agreement shall become effective at 12:01 a.m. on
January 1, 1996.
SECTION 8. EXECUTION OF COUNTERPARTS. This Fourteenth Supplemental Lease
Agreement may be simultaneously executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
instrument.
SECTION 9. SUMMARIES. For the convenience of both parties a leased
parcel summary and a rental summary are attached to this lease agreement.
8
<PAGE>
IN WITNESS WHEREOF, THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY AND FEDERAL
EXPRESS CORPORATION have caused this Fourteenth Supplemental Lease Agreement to
be duly executed in their respective behalfs, as of the day and date first above
written.
WITNESS: MEMPHIS-SHELBY COUNTY AIRPORT
AUTHORITY
/s/ J. MCMICHAEL BY: /s/ LARRY D. COX
- -------------------------------- --------------------------------
Title: Secretary TITLE: PRESIDENT
Approved as to Form and Legality:
/s/ R. GRATTAN BROWN, JR.
- ---------------------------------
Attorney for the Airport Authority
WITNESS: FEDERAL EXPRESS CORPORATION
/s/ Ann Hoff BY: /s/ D. M. Hurtado
- -------------------------------- -----------------------------------
Title: Proj. Coord. TITLE: Managing Director, Real Estate
APPROVED
AS TO LEGAL FORM
/s/ pga 02/1/96
----------------
LEGAL DEPT.
9
<PAGE>
(STATE OF TENNESSEE )
COUNTY OF SHELBY )
On this 15 day of February, 1996, before me appeared LARRY D. COX, to me
personally known, who, being by me duly sworn (or affirmed), did say that he is
the President of the Memphis-Shelby County Airport Authority, the within named
Lessor, and that he as such President, being authorized so to do, executed the
foregoing instrument for the purposes therein contained, by signing the name of
the Authority by himself as such President.
MY COMMISSION EXPIRES
April 30, 1996 /s/ PAT STANFILL
- ------------------------------------ ---------------------------------
Notary Public
(seal)
STATE OF TENNESSEE )
COUNTY OF SHELBY )
On this 5th day of February, 1996, before me appeared David M. Hurtado, to me
personally known, who, being by me duly sworn (or affirmed), did say that he is
a Managing Director of Federal Express Corporation, the within named Lessee, and
that he as such Mng. Director, being authorized so to do, executed the foregoing
instrument for the purposes therein contained, by signing the name of the
Corporation by himself as such Mng. Director.
MY COMMISSION EXPIRES
10-1-96 /s/ SANDRA C. WAITS
- ------------------------------- ------------------------------
Notary Public
(seal)
10
<PAGE>
FEDERAL EXPRESS LEASED PARCELS SUMMARY
<TABLE>
<CAPTION>
PARCEL EFFECTIVE
LEASE ACRES SQUARE FEET AGREEMENT DATE
- ------------ ------- ----------- -------------- ---------
BASE-LEASE
-----------
<S> <C> <C> <C> <C>
Revised 9 128.469 Consolidated & 08/01/79
Restated
10 1.612 70,200 Consolidated & 08/01/79
Restated
11 1.044 45,359 Consolidated & 08/01/79
Restated
PREVIOUS SUPPLEMENTS
12 2.707 117,915 First 04/01/81
Supplemental
13 6.860 298,830 Second 01/01/82
Supplemental
14 14.586 635,377 Fourth 07/01/83
Supplemental
15 12.689 552,723 Fourth 07/01/83
Supplemental
Rev 16 18.281 (19.685) 796,312 Fifth 02/01/84
Supplemental
Rev 17 119.616(124.992) 5,210,477 Sixth 04/01/84
Supplemental
18 2.717 118,353 Sixth 04/01/84
Supplemental
19 41.606 1,812,352 Seventh 06/01/84
Supplemental
25 0.435 18,933 Eighth 07/01/88
Supplemental
20 11.275 491,127 Ninth 06/01/89
Supplemental
27 11.192 487,512 Tenth 10/01/91
Supplemental
32 (removed) 22.972 1,000,681 Twelfth 07/01/93
Supplemental
27 A(West) 4.058 176,777 Eleventh 07/01/94
Supplemental
27 B(West) 5.706 248,533 Eleventh 07/01/94
Supplemental
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
PARCEL EFFECTIVE
LEASE ACRES SQUARE FEET AGREEMENT DATE
- -------------------- ----- ----------- ------------ ---------
<S> <C> <C> <C> <C>
Southwest
Ramp 2.350 102,366 Eleventh 07/01/94
Supplemental
33 8.998 391,942 Thirteenth 06/01/95
Supplemental
36 3.050 132,837 Thirteenth 06/01/95
Supplemental
Hangar 8 (removed) 36,946,33 Thirteenth 06/01/95
Supplemental
THIS SUPPLEMENT
---------------
34 9.951 433,461 Fourteenth 01/01/96
Supplemental
OPTIONS
-------
21 19.134 833,476 Option, Expires 5/31/99
22 3.521 153,394 Option, Expires 5/31/99
ASSIGNMENTS
-----------
23 5.923 258,008 Graber Assignment,
Expires 12/31/2000
Invoice FEC
Next Increase 1/1/2001
24 9.964 434,030 Southwide Assignment
Expires 5/14/2013
Invoice FEC
Next Increase 5/15/98
26 9.532 415,213 BICO Assignment,
Expires 7/31/2021
Invoice FEC
Next Increase 8/01/96
28 10.68 465,221 Equitable Life Assignment
Expires 5/14/2013
Invoice FEC
Next Increase 5/15/98
</TABLE>
12
<PAGE>
RENTAL - FEDERAL EXPRESS
Effective January 1, 1996
<TABLE>
<CAPTION>
Annual
Category Number of Rental Rate Annual
of Space Square Feet Per Sq. Ft. Rental
- -------------------- ------------- ----------- ------
<S> <C> <C> <C>
Bldg. T-376 1,240 1.221 $ 1,514.04
Unimproved Ground 5,452,282 0.098 534,323.64
Improved Apron 2,395,802 0.122 292,287.84
Hangar Property 72,092.67 0.903 65,099.68
Hangar Office 28,000 1.465 41,020.00
International Park 8,721,224 0.171 1,491,329.30
------------- ------ -------------
16,670,640.67 $.1422 $2,425,574.50
</TABLE>
BREAKDOWN OF SPACE
<TABLE>
<CAPTION>
Sq. Ft. Sq. Ft.
------- -------
<S> <C> <C>
Bldg. T-376 Parcel 4 1,240
- ---------------- ---------
1,240
Unimproved Ground Parcel 1 130,900
Parcel 2 50,000
Parcel 3 192,400
Parcel 4 32,540
Parcel 6 89,700
Parcel 9 1,167,337
Parcel 19 1,812,362
Parcel 20 491,127
Parcel 27A 176,777
Parcel 27B 248,533
Southwest Ramp 102,366
Parcel 33 391,942
Parcel 36 132,837
Parcel 34 433,461
---------
5,452,282
Improved Apron Parcel 1 850,250
Parcel 2 226,900
Parcel 7 577,540
Parcel 9 253,600
Parcel 27 487,512
---------
2,395,802
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Sq. Ft. Sq. Ft.
------- -------
<S> <C> <C> <C>
Hangar Property Parcel 1 44,336
Parcel 2 27,756.67
---------
72,092.67
Hangar Office Parcel 1 22,400
Parcel 2 5,600
---------
28,000
International Park Parcel 5 24,000
Parcel 8 247,254
Parcel 9 1,586,172
Parcel 10 70,200
Parcel 11 45,359
Parcel 12 117,915
Parcel 13 298,830
Parcel 14 556,334
Parcel 15 552,723
Parcel 16 796,312
Parcel 17 4,288,839
Parcel 18 18,353
Parcel 25 18,933
---------
8,721,224
---------
TOTAL: 16,670,640.67
</TABLE>
34638
14
<PAGE>
Exhibit 10.66
EXECUTION
COPY
TRUST INDENTURE
BETWEEN
ALLIANCEAIRPORT AUTHORITY, INC.
AND
THE FIRST NATIONAL BANK OF CHICAGO
Dated as of April 1, 1996
------------
ALLIANCEAIRPORT AUTHORITY, INC.
SPECIAL FACILITIES REVENUE BONDS, SERIES 1996
(FEDERAL EXPRESS CORPORATION PROJECT)
------------
<PAGE>
TRUST INDENTURE
TABLE OF CONTENTS
(This Table of Contents appears here for convenience only and shall not be
considered part of the Indenture.)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Parties 1
Recitals 1
Granting Clause 2
ARTICLE I. Acceptance of Trust; Instruments
of Further Assurance; Recording
(A) Acceptance of Trust 2
(B) Instruments of Further
Assurance 2
(C) Protection of Lien 2
(D) Continuation Statements 2
(E) Assignment of Special Facilities Rentals 3
ARTICLE II. The Bonds
(A) Designation, Initial Date, Denominations,
Numbers and Maturities of Bonds 3
(B) DTC Book-Entry 3
(C) Interest 4
(D) Redemption 4
(E) Characteristics of the Bonds 8
(F) Form of Bonds 10
(G) Damaged, Mutilated, Lost, Stolen or
Destroyed Bonds 10
(H) Effect of Exchange or Transfer 11
(I) Covenants Regarding Tax Exemption 11
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE III. Establishment of Construction Fund,
Debt Service Fund and Special
Rebate Fund
(A) Proceeds from Delivery of the Bonds 11
(B) Construction Fund 11
(C) Payments from Special Facilities
Construction Allowance Account 11
(D) Surplus Construction Funds 12
(E) Debt Service Fund 13
(F) Special Rebate Fund 14
(G) Net Proceeds Account 15
(H) Investments 15
(I) Security for Funds 16
ARTICLE IV. Accounts and Records
(A) Separate Records 16
(B) Report of Trustee 16
(C) Inspection 17
(D) Registration Books 17
ARTICLE V. Enforcement of Rights in Case of Default
(A) Trustee is Agent 17
(B) Restriction on Bondholder's
Action 17
(C) Events of Default 17
(D) Acceleration 18
(E) Action by Trustee 18
(F) Remedies Nonexclusive 18
(G) Trustee's Discretion 18
(H) Disposition of Money 18
(I) Intervention by Trustee 19
(J) Possession of Bonds
Unnecessary 19
(K) Bondholder's Directions 19
(L) Trustee's Notice of
Default 19
(M) Bonds Owned by Authority
or Company 19
(N) Trustee's Standard of
Conduct with Respect to
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Event of Default 20
(O) Bondholder Remedy - Ongoing
Disclosure Under Rule 15c2-12 20
ARTICLE VI. Concerning the Trustee
(A) Negligence or Misconduct 20
(B) Accountability for Funds 21
(C) Reliance on Communications 21
(D) Proof of Facts 21
(E) Limited Responsibilities 21
(F) Performance through Attorneys, Accountants,
Agents, Receivers or Employees 21
(G) Trustee as Bondholder 22
(H) Execution of Documents 22
(I) Fees 22
(J) Recitals 22
(K) Responsibility of Trustee Generally 22
(L) Additional Rights of Trustee 22
ARTICLE VII. Successor Trustee
(A) Resignation and Removal of Trustee 23
(B) Appointment of Successor 23
(C) Qualification of Successor 24
(D) Merger or Consolidation
of Trustee 24
ARTICLE VIII.Release of Indenture
(A) Satisfaction of Indebtedness
and Release of Indenture 24
(B) Payment, Advance Funding
and Defeasance 25
(C) Reinvestment 25
(D) Use of Moneys and Government
Obligations Set Aside 26
(E) No Amendment 26
(F) Additional Conditions to Defeasance
and Reinvestment 26
ARTICLE IX. Amendments
(A) Amendments without Bondholder Consent 26
(B) Consent of Majority of Bondholders 27
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(C) Consent of All Bondholders 27
(D) Effective Date of Amendment 27
(E) Opinion of Bond Counsel 28
ARTICLE X. Miscellaneous Provisions
(A) Proof of Execution 28
(B) Proof of Ownership 28
(C) Action Binding on Successor 28
(D) Nonpresentment and Unclaimed
Funds 28
(E) Destruction of Bonds 29
(F) No Third-Party
Beneficiaries 29
(G) Severability 29
(H) Governing Law 29
(I) Addresses 29
(J) Notice to Department of Commerce 29
(K) Counterparts 29
(L) Captions 29
(M) Company Direction 30
SIGNATURES
Exhibit A Form of Bond
</TABLE>
v
<PAGE>
TRUST INDENTURE
THE STATE OF TEXAS :
ALLIANCEAIRPORT AUTHORITY, INC. :
THIS TRUST INDENTURE (hereinafter called the "Indenture"), dated as of April
1, 1996, executed by and between ALLIANCEAIRPORT AUTHORITY, INC. (hereinafter
called the "Authority"), a nonstock, nonprofit industrial development
corporation, created to act on behalf of the CITY OF FORT WORTH, TEXAS, a home-
rule city and a political subdivision of the State of Texas (the "City"),
pursuant to the Constitution and laws of the State of Texas, including
particularly Article 5190.6, V.A.T.C.S., as amended (hereinafter called the
"Act"), and THE FIRST NATIONAL BANK OF CHICAGO, a national banking association
organized and existing under the laws of the United States of America, and
having its Designated Trust Office in Chicago, Illinois, as Trustee (hereinafter
called the "Trustee");
WITNESSETH THAT
WHEREAS, a Land and Special Facilities Lease Agreement dated as of April 1,
1996 (hereinafter called the "Facilities Agreement"), has been duly executed
between the Authority and FEDERAL EXPRESS CORPORATION, a corporation organized
and existing under the laws of the State of Delaware, and duly qualified to do
business under the laws of the state of texas (hereinafter called the
"Company");
WHEREAS, the capitalized terms of this Indenture shall have the same
meanings, and shall be defined, as set forth in the Facilities Agreement;
WHEREAS, the Board of Directors of the Authority duly adopted a "RESOLUTION
AUTHORIZING THE ISSUANCE OF ALLIANCEAIRPORT AUTHORITY, INC. SPECIAL FACILITIES
REVENUE BONDS, SERIES 1996 (FEDERAL EXPRESS CORPORATION PROJECT), THE EXECUTION
OF A LAND AND SPECIAL FACILITIES LEASE AGREEMENT, A TRUST INDENTURE AND AN
UNDERWRITING AGREEMENT, AND THE USE OF A PRELIMINARY OFFICIAL STATEMENT AND AN
OFFICIAL STATEMENT" (hereinafter called the "Bond Resolution");
WHEREAS, the Bond Resolution authorized the issuance of ALLIANCEAIRPORT
AUTHORITY, INC. SPECIAL FACILITIES REVENUE BONDS, SERIES 1996 (FEDERAL EXPRESS
CORPORATION PROJECT) IN THE AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED
$250,000,000 (the "Bonds");
WHEREAS, a certified copy of the Bond Resolution has been duly filed with
the Trustee;
<PAGE>
WHEREAS, pursuant to authority granted in the Bond Resolution, the Bonds
were sold to Goldman, Sachs & Co., on its behalf and as representative for
Morgan Keegan & Company, Inc., Morgan Stanley & Co. Inc., Pryor, McClendon,
Counts & Co., Inc., BA Securities, Inc., and J.P. Morgan Securities Inc.
(collectively, the "Underwriters"), in accordance with the terms and conditions
of an Underwriting Agreement by and between the Authority and the Underwriters
(the "Underwriting Agreement"), a Letter of Representations executed by the
Company pursuant to the terms and conditions of the Underwriting Agreement and
the Bond Resolution;
WHEREAS, the Bonds, and the interest thereon, are and shall be payable from
and secured by a first lien on and pledge of the payments to be made by the
Company pursuant to the Facilities Agreement, designated as the "Special
Facilities Rentals", which Special Facilities Rentals shall be in amounts
sufficient to pay and redeem, and provide for the payment of the principal of,
premium, if any, and interest on the Bonds, when due;
WHEREAS, to induce the Authority to issue the Bonds, and the Underwriters to
purchase the Bonds, the Company and the Trustee have entered into a Guaranty of
even date herewith (the "Guaranty") pursuant to which the Company
unconditionally guarantees the payment of the principal of, premium, if any, and
interest on the Bonds when due; and
WHEREAS, the Trustee has accepted the trusts created by this Indenture, and
in evidence thereof has joined in the execution hereof.
NOW, THEREFORE, THIS TRUST INDENTURE WITNESSETH:
That the Authority, in consideration of the premises and the acceptance by
the Trustee of the trusts hereby created, and of the purchase and acceptance of
the Bonds by the registered owners thereof, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, and for the purpose
of securing the payment of the principal of, premium, if any, and interest on
the Bonds at any time issued and outstanding, has granted, assigned,
transferred, pledged, set over, and confirmed, and by these presents does grant,
assign, transfer, pledge, set over, and confirm unto the Trustee, and to its
successor or successors in the said trust, and to its or their assigns, all and
singular, a first lien on and pledge of (i) the interest of the Authority in the
Construction Fund and the Debt Service Fund created herein, and (ii) all of its
right, title and interest in and to the Facilities Agreement relating to the
Bonds (other than the Authority's rights to fees, expenses and indemnification
pursuant to the terms of the Facilities Agreement), including specifically all
of its right, title and interest in and to the Special Facilities Rentals under
the Facilities Agreement (the "Trust Estate"), and subject to the terms,
conditions, stipulations, covenants, agreements, trusts, uses and purposes
hereinafter expressed. The Authority and the Trustee have agreed, and they
hereby
<PAGE>
agree and covenant with the respective registered owners from time to time of
the Bonds then Outstanding, as follows, to-wit:
ARTICLE I
ACCEPTANCE OF TRUST;
INSTRUMENTS OF FURTHER ASSURANCE;
RECORDING
(A) Acceptance of Trust. The Trustee hereby accepts the trusts, duties,
obligations, and requirements imposed on it by this Indenture, and agrees,
subject to the terms and provisions of Article VI hereof, to carry out and
perform, punctually and effectively, such trusts, duties, obligations, and
requirements, including the duties as paying agent and as bond registrar for
the Bonds, for the benefit of the Authority and the Bondholders.
(B) Instruments of Further Assurance. The Authority covenants that it will
do, execute, acknowledge, and deliver, or cause to be done, executed,
acknowledged, and delivered, such indenture or indentures supplemental hereto
and such further acts, instruments, and transfers as the Trustee may reasonably
require for the better assigning, pledging, and confirming unto the Trustee the
trusts, duties, obligations, and requirements imposed on it by this Indenture
and the revenues pledged hereunder.
(C) Protection of Lien. The Authority covenants that (1) upon the execution
and delivery of this Indenture and thereafter, from time to time, it shall cause
the Facilities Agreement and this Indenture, and each amendment and supplement
to each of such instruments (or a memorandum with respect to such instrument,
amendment, or supplement) to be maintained for inspection, filed, registered,
and recorded and to be maintained for inspection, refiled, reregistered, and
rerecorded in such manner and in such places as may be required by any present
or future law in order to publish notice of and fully to protect the lien of
this Indenture and to publish notice of and to protect the validity of the
Facilities Agreement and of the rights and security of the Bondholders and the
rights of the Trustee hereunder and thereunder and (2) it shall perform or cause
to be performed from time to time any other act as required by law, and it will
execute or cause to be executed any and all instruments of further assurance
(including financing statements with respect to any of such instruments) that
may be necessary for such publication and protection.
(D) Continuation Statements. The Trustee agrees that, at the expense of
the Company, it will execute and file all continuation statements at such times
and in such places as may be prescribed by the Texas Uniform Commercial Code and
any other instruments necessary to maintain, protect, or preserve the interests
of the Authority assigned to the Trustee under this Indenture.
<PAGE>
(E) Assignment of Special Facilities Rentals. The Trustee hereby
acknowledges that all of the rights, title and interests of the Authority in and
to the Special Facilities Rentals have been assigned to the Trustee, and the
Authority hereby acknowledges that in connection with the performance of its
duties, obligations, and requirements imposed on it by this Indenture, the
Trustee may exercise any rights or remedies available to the Trustee under the
terms of the Facilities Agreement or the Guaranty.
ARTICLE II
THE BONDS
(A) Designation, Initial Date, Denominations, Numbers, and Maturities of
Bonds. (1) Initially there shall be issued, sold and delivered hereunder fully
registered Bonds, known as "ALLIANCEAIRPORT AUTHORITY, INC. SPECIAL FACILITIES
REVENUE BONDS, SERIES 1996 (FEDERAL EXPRESS CORPORATION PROJECT)", in the
aggregate principal amount of $249,540,000, without interest coupons, dated
April 1, 1996, in the denomination of $5,000 or any integral multiple thereof,
numbered consecutively from R-1 upward, and said Bonds shall mature and be
payable on April 1, 2021.
(2) The Bonds shall be executed on behalf of the Authority with the manual
or facsimile signature of the President or Vice President and the Secretary of
the Board of Directors of the Authority and shall have impressed or imprinted
thereon the official seal of the Authority or a facsimile thereof. All
authorized facsimile signatures shall have the same force and effect as if
manually signed. In case any official whose signature or a facsimile of whose
signature shall appear on the Bonds shall cease to be such official before the
delivery of such Bonds, such signature or such facsimile shall nevertheless be
valid and sufficient for all purposes, the same as if such official had remained
in office until delivery. The Bonds may be signed on behalf of the Authority by
such persons who, at the time of the execution of such Bonds, are duly
authorized or hold the appropriate office of the Authority although on the date
of the authentication and delivery of the Bonds such persons were not so
authorized or did not hold such offices.
(3) The obligation to pay the principal of, premium, if any, and interest
on the Bonds is a special obligation of the Authority, and is payable solely
from the Special Facilities Rentals to be made by the Company pursuant to the
terms of the Facilities Agreement. No other public entity, including the State
of Texas, any other political subdivisions thereof, or any other public body, is
obligated, directly, indirectly, contingently, or in any other manner to pay
such principal, premium, if any, or interest from any source whatsoever. The
Bonds shall not be considered general obligations of the Board of Directors of
the Authority (either individually or collectively), the City, the State of
Texas, or any other political subdivision thereto.
<PAGE>
The registered owners of the Bonds shall never have the right to demand payment
of the Bonds out of any funds raised or to be raised by taxation, or from any
other funds except the sources described herein. No property shall be encumbered
by any lien or security interest for the benefit of the registered owners of the
Bonds.
(4) Upon the execution and delivery of this Indenture, the Authority shall
execute and deliver to the Trustee the Bonds and the Trustee shall deliver the
Bonds to the Underwriters as directed by the Authority. Prior to the delivery
of any of the Bonds to the Underwriters there shall be filed with the Trustee an
opinion of Bond Counsel to the effect that interest on the Bonds is excludable
from the gross income of the owners thereof for federal income tax purposes
(other than any owner who is a "substantial user" or "related person" of such
substantial user, within the meaning of the Code), other than any interest which
may be includable as a preference item or an adjustment item in computing any
minimum tax. Delivery of the Bonds shall be done in a manner consistent with
the provisions of Paragraph (B) below.
(B) DTC Book-Entry. The Bonds shall be initially issued in the name of Cede
& Co., as nominee of DTC, as registered owner of the Bonds, and held in the
custody of DTC. Two certificates will be issued and delivered to DTC for the
Bonds. One of the certificates will be issued in the principal amount of
$200,000,000; the other certificate will be issued in the principal amount equal
to the difference between $249,540,000 and $200,000,000. Beneficial owners of
Bonds will not receive physical delivery of Bond certificates except as provided
hereinafter. For so long as DTC shall continue to serve as securities
depository for the Bonds as provided herein, all transfers of beneficial
ownership interests will be made by book-entry only, and no investor or other
party purchasing, selling or otherwise transferring beneficial ownership of
Bonds is to receive, hold or deliver any Bond certificate, and Cede & Co. shall
be deemed the registered owner of the Bonds for all purposes under this
Indenture.
The Authority and the Trustee may treat DTC (or its nominee) as the sole and
exclusive owner of the Bonds registered in its name for the purpose of payment
of the principal of or interest or premium, if any, on the Bonds, giving any
notice permitted or required to be given to Bondholders hereunder, registering
the transfer of Bonds, obtaining any consent or other action to be taken by
Bondholders and for all other purposes whatsoever, and shall not be affected by
any notice to the contrary. The Authority and the Trustee shall not have any
responsibility or obligation to any Direct Participant, Indirect Participant,
any person claiming a beneficial ownership interest in the Bonds under or
through DTC or any Direct Participant, Indirect Participant, or any other person
which is not shown on the Registration Books of the Authority (kept by the
Trustee as Registrar) as being a Bondholder, with respect to: the accuracy of
any records maintained by DTC or any Direct Participant or Indirect Participant;
the payment by DTC or any Direct Participant or Indirect Participant of any
amount in respect of the principal of or interest or premium, if any, on the
Bonds; any notice which is permitted or required
<PAGE>
to be given to Bondholders thereunder or under the conditions to transfers or
exchanges adopted by the Authority or the Trustee; or any consent given or other
action taken by DTC as a Bondholder.
Replacement Bonds may be issued directly to beneficial owners of Bonds other
than DTC, or its nominee, but only in the event that (i) DTC determines, after
reasonable notice given to the Authority, the Company and the Trustee, not to
continue to act as securities depository for the Bonds; or (ii) the Authority
(at the request of the Company) has advised DTC of the Company's determination
(which determination is conclusive as to DTC and beneficial owners of the Bonds)
that DTC is incapable of discharging its duties as securities depository for the
Bonds; or (iii) the Company has determined (which determination is conclusive as
to DTC and the beneficial owners of the Bonds) that it is in the best interest
of the Company or the beneficial owners of the Bonds to discontinue such book-
entry only system of transfer. Upon occurrence of any of the events specified
in clauses (i) or (ii), the Company may attempt to locate another qualified
securities depository. If the Company is unable to locate another qualified
securities depository to replace DTC or determines not to seek such a
replacement, or upon the occurrence of the event specified in clause (iii)
above, the Company shall notify the Authority, the Trustee and the beneficial
owners of Bonds by mailing an appropriate notice to DTC, and the Trustee shall
cause to be authenticated and delivered replacement Bonds, in certificate form,
to the Direct Participants as shown on the records of DTC and provided to the
Trustee. Notwithstanding the foregoing, neither the Company nor the Authority
undertakes any obligation to make any investigation to determine the occurrence
of any events that would permit the Company to make any such determination.
Whenever, so long as the Bonds are outstanding, the beneficial ownership
thereof is determined by a book entry at DTC or another qualified securities
depository, the requirements in this Indenture of holding, delivering or
transferring Bonds shall be deemed modified to require the appropriate Person to
meet the requirements of DTC or another qualified securities depository as to
registering or transferring the book entry to produce the same effect.
As used herein, the term "Direct Participants" shall mean those securities
brokers and dealers, banks, trust companies, clearing corporations, and certain
other organizations which deposit securities with DTC; and the term "Indirect
Participants" shall mean those securities brokers and dealers, banks, and trust
companies that clear through or maintain a custodial relationship, either
directly or indirectly, with a Direct Participant.
If at any time, DTC ceases to hold the Bonds, all references herein to DTC
shall be of no further force or effect.
(C) Interest. The Bonds shall bear interest from their date, as described
in Paragraph (A) above, to their respective date or dates of maturity or
redemption
<PAGE>
prior to maturity at a fixed rate of 6.375% per annum. Interest on
the unpaid principal amount of the Bonds will be payable on October 1, 1996 and
on each April 1 and October 1 thereafter until maturity or redemption prior to
maturity.
(D) Redemption. The Bonds shall be subject to optional and mandatory
redemption in the manner described below.
(1) Optional Redemption. The Bonds are subject to optional redemption by
the Authority, at the direction of the Company, on and after April 1, 2006, at
any time and from time to time, in whole or in part, upon written notice of the
exercise of the option to redeem delivered to the Authority and the Trustee by
the Company, at the redemption price (expressed as a percentage of principal
amount) applicable to such redemption date as set forth in the table below plus
accrued interest to the date fixed for redemption:
<TABLE>
<CAPTION>
Redemption Period
(all dates inclusive) Redemption Price (%)
--------------------- --------------------
<S> <C>
April 1, 2006 to March 31, 2007 102
April 1, 2007 to March 31, 2008 101
April 1, 2008 and thereafter 100
</TABLE>
(2) Extraordinary Optional Redemption. The Bonds are subject to redemption
by the Authority, at the direction of the Company, at any time and from time to
time, in whole or in part as described below, at a redemption price equal to
100% of the principal amount thereof, without premium, plus accrued interest
thereon to the date fixed for redemption, upon the occurrence of any of the
following events:
(a) the Company shall have determined, as evidenced by a resolution
adopted by the Company's board of directors, that the continued operation of
the Special Facilities is impractical, uneconomical or undesirable for any
reason, including, without limitation, the imposition upon the Company with
respect to the Special Facilities or the operation thereof of unreasonable
burdens or excessive liabilities, which shall be deemed to include, without
limitation, the imposition or substantial increase of ad valorem property
taxes or taxes on the leasing or use of the Special Facilities or on amounts
payable with respect thereto; or
(b) all or substantially all of the Special Facilities shall have been
damaged, destroyed, condemned or taken by eminent domain; or
(c) the construction or operation of the Special Facilities shall have
been enjoined or prevented or shall have otherwise been prohibited by, or
shall conflict with, any order, decree, rule or regulation of any court or of
any
<PAGE>
federal, state or local regulatory body, administrative agency or other
governmental body.
To exercise any such option the Authority, at the direction of the Company,
shall give written notice to the Trustee, which notice shall specify a
redemption date, which date may not be more than 120 days nor less than 45 days
after said notice is given, and shall further specify that, as determined by the
Company, one or more of such events has occurred or one or more of such
conditions is continuing, and such determination shall be conclusive.
(3) Extraordinary Mandatory Redemption. The Bonds shall be redeemed by the
Authority in whole at a redemption price equal to 100% of the principal amount
thereof, without premium, plus accrued interest to the redemption date, within
90 days following receipt by the Trustee of written notice from a current or
former registered owner thereof or the Company of (a) the issuance of a
published or private ruling or a technical advice memorandum by the Internal
Revenue Service in which the Company has participated or has been given the
opportunity to participate, and which ruling or memorandum the Company, in its
discretion, does not contest or from which no further right of judicial review
or appeal exists, or (b) a final determination from which no further right of
appeal exists of any court of competent jurisdiction in the United States in a
proceeding in which the Company has participated or has been a party, or has
been given the opportunity to participate or be a party (either such event
being a "Determination of Taxability"), in either case, to the effect that, as
a result of a failure to observe any covenant or agreement in the Facilities
Agreement or the inaccuracy of any representation or warranty therein, the
interest payable on the Bonds is included in the gross income of the holders
thereof for federal income tax purposes, other than a person who is a
"substantial user" or a "related person" of such substantial user within the
meaning of the Code; provided, however, that no such Determination of
Taxability shall be considered to exist unless (i) the registered owner or
former registered owner of the Bond involved in such proceeding or action (a)
gives the Company and the Trustee prompt notice of the commencement thereof and
(b) (if the Company agrees to pay all expenses in connection therewith) offers
the Company the opportunity to control unconditionally the defense thereof and
(ii) either (a) the Company does not agree, within 30 days of receipt of such
offer, to pay such expenses and liabilities and to control such defense or (b)
the Company shall exhaust or choose not to exhaust all available proceedings
for the contest, review, appeal or rehearing of such decree, judgment or action
which the Company determines to be appropriate. No Determination of Taxability
described above will result from the inclusion of interest on any Bond in the
computation of minimum or indirect taxes. All of the Bonds shall be redeemed
upon a Determination of Taxability as described above, unless, if in the
opinion of Bond Counsel, or such other nationally recognized bond counsel as
may be mutually acceptable to the Authority and the Company, a copy of which
shall be delivered to the Trustee, redemption of a portion of the Bonds, the
amount of such portion being specified in said opinion, would have the result
that interest payable on the
<PAGE>
remaining Bonds Outstanding after such redemption would not be so included in
any such gross income, in which case only such portion shall be redeemed.
(4) [Intentionally Omitted].
-------------------------
(5) Redemption Notice. (a) At least thirty (30) days but not more than
sixty (60) days before the redemption date of any Bonds, whether such redemption
be in whole or in part, the Trustee on behalf of the Authority shall cause a
notice of any such redemption signed by the Trustee to be mailed, postage
prepaid, to all Bondholders owning Bonds to be redeemed in whole or in part.
Such notice shall also be sent by first-class mail, postage prepaid, by
facsimile transmission, or by overnight delivery service, at least thirty-five
(35) days prior to redemption to registered securities depositories and two or
more nationally recognized municipal bond services designated by the Authority
to the Trustee. Such notice shall be mailed a second (2nd) time to any
Bondholder owning Bonds that have been called for redemption if such Bondholder
has not presented such Bonds for payment of the redemption price within sixty
(60) days after the redemption date. Failure to mail any such notice to any
Bondholder or aforementioned depositories and municipal bond services, or any
defect in any notice so mailed shall not affect the validity of the proceedings
for the redemption of the Bonds of any other Bondholders. Each such notice
shall set forth: the CUSIP numbers and bond certificate numbers of the Bonds to
be redeemed, the interest rate of the Bonds to be redeemed, the date and the
date of issuance of the Bonds to be redeemed, the date fixed for redemption, the
redemption price to be paid, the maturity of the Bonds to be redeemed and, in
the case of Bonds to be redeemed in part only, the portion of the principal
amount thereof to be redeemed and, in the case that less than the entire
principal amount of any one bond certificate is redeemed, the portion of the
principal amount thereof to be redeemed, the address and phone number of the
Trustee, the date of the redemption notice, the date of publication of the
notice referred to in subparagraph (b) (iii) hereof, that on the redemption date
the Bonds called for redemption will be payable at the Designated Trust Office
of the Trustee, that from that date interest will cease to accrue and be payable
and that no representation is made as to the accuracy or correctness of the
CUSIP numbers printed therein or on the Bonds. If any Bond is to be redeemed in
part only, the notice of redemption shall state also that on or after the
redemption date, upon surrender of such Bond, a new Bond in principal amount
equal to the unredeemed portion of such Bond will be issued.
(b) The Trustee shall also take the following actions with respect to such
notice of redemption:
(i) At least two (2) Business Days before the date of publication required by
subparagraph (b) (iii) hereof, such notice shall be given by (A) registered or
certified mail, postage prepaid, (B) telephonically confirmed facsimile
transmission or (C) overnight delivery service to each of the following
securities depositories at the address and transmission numbers given, or such
other address or transmission
<PAGE>
number as may have been delivered in writing to the Trustee for such purpose not
later than the close of business on the day before such notice is given:
1. The Depository Trust Company
711 Stewart Avenue
Garden City, New York 11530
Facsimile transmission:
(516) 227-4039
(516) 227-4190
2. Philadelphia Depository Trust Company
Reorganization Division
1900 Market Street
Philadelphia, Pennsylvania 19103
Facsimile transmission:
(215) 496-5058
(ii) At least two (2) Business Days before the date of publication required
by subparagraph (b) (iii) hereof, such notice shall be given by (A) registered
or certified mail, postage prepaid, (B) facsimile transmission or (C) overnight
delivery service to at least two (2) of the following services selected by the
Trustee:
1. Financial Information, Inc's Daily Called Bond Service;
2. Kenny Information Service's Called Bond Service;
3. Moody's Municipal and Government Called Bond Record; or
4. Standard & Poor's Corporation Called Bond Record.
(iii) At least thirty (30) days prior to the redemption date, such notice
shall be published one (1) time in The Bond Buyer or, if such publication is no
longer in existence, in some other financial newspaper or journal which
regularly carries notices of redemption of other obligations similar to the
Bonds.
(c) Neither failure to receive any notice nor any defect in such notice so
given shall affect the sufficiency of the proceedings for the redemption of such
Bonds. Each check or other transfer of funds issued by the Trustee for the
purpose of redeeming Bonds shall bear, to the extent practicable, the CUSIP
number identifying the Bonds being redeemed with the proceeds of such check or
other transfer.
(d) Notice of redemption of Bonds shall be given by the Trustee, at the
expense of the Company.
(e) Failure by the Trustee to give notice pursuant to subparagraph (b) (i) or
(b) (ii) hereof to any one (1) or more of the securities depositories or
information services named therein shall not affect the sufficiency of the
proceedings for redemption. Failure of the Trustee to give notice to a
Bondholder or any defect in
<PAGE>
such notice shall not affect the validity of the proceedings for redemption of
any other Bonds.
(f) By the date fixed for any such redemption, due provision shall be made
with the Trustee for the payment of the principal amount of the Bonds which are
to be so redeemed, accrued interest thereon to the date fixed for redemption,
and any premium. If notice of redemption is given to the registered owners
described in subparagraph (a) above as provided herein and if sufficient funds
are on deposit with the Trustee to provide for the payment of the principal of,
premium, if any, and interest on the Bonds to be so redeemed, the Bonds which
are to be redeemed thereby automatically shall be deemed to have been redeemed
prior to their scheduled maturity, and they shall not bear interest after the
date fixed for redemption, and they shall not be regarded as being Outstanding
except for the right of the registered owner to receive the principal amount of
the Bonds which are to be so redeemed, accrued interest thereon to the date
fixed for redemption, and any required premium from the Trustee out of the funds
provided for such payment. If any Bond called for redemption shall not be paid
upon surrender thereof for redemption, as a result of the Trustee not having
received funds sufficient to pay the redemption price of the Bonds, such Bond
shall continue to bear interest until paid and, to the extent permitted by law,
interest on any overdue payment of principal of, premium, if any, or interest on
such Bond shall be paid at the rate borne by such Bond. If a portion of any
Bond shall be redeemed, a substitute Bond or Bonds having the same maturity
date, bearing interest at the same rate, in any denomination or denominations in
any integral multiple of $5,000, at the written request of the registered owner,
and in aggregate principal amount equal to the unredeemed portion thereof, will
be issued to the registered owner upon the surrender thereof for cancellation,
at the expense of the Company, all as provided below.
(6) Funds Available for Redemption. With respect to any optional redemption
of the Bonds, as described above, unless moneys sufficient to pay the principal
of and premium, if any, and interest on the Bonds to be redeemed shall have been
received by the Trustee prior to the giving of such notice of redemption, such
notice shall state that said redemption shall be conditional upon the receipt of
such moneys by the Trustee on or prior to the date fixed for such redemption.
If such moneys are not received, such notice shall be of no force and effect,
the Authority shall not redeem such Bonds and the Trustee shall give notice, in
the manner in which the notice of redemption was given, that such moneys were
not so received and that such Bonds shall not be so redeemed.
(7) Partial Redemption. If less than all of the Bonds are to be called for
redemption under any redemption provision set forth herein permitting such
partial redemption, the particular Bonds to be redeemed shall be selected by the
Trustee by lot or such other customary method chosen by the Trustee, in the
principal amounts (in integral multiples of $5,000) designated to the Trustee by
the Company on behalf of the Authority. The foregoing notwithstanding, during
any
<PAGE>
period in which ownership of the Bonds is determined only by a book-entry at
a securities depository for the Bonds, the particular Bonds to be so redeemed
shall be selected in accordance with the arrangements between the Authority and
the securities depository.
(E) Characteristics of the Bonds. (1) Registration and Transfer. The
Authority shall keep or cause the Trustee, acting as registrar, to keep and
maintain a register of the registered owners of the Bonds (the "Registration
Books"), and the Authority hereby appoints the Trustee as its registrar and
transfer agent to keep such books or records and make such transfers and
registrations under such reasonable regulations as the Authority and Trustee may
prescribe; and the Trustee shall make such transfers and registrations as herein
provided. The Trustee agrees to cause to be maintained in Texas a current copy
of the Registration Books. The Trustee shall obtain and record in the
Registration Books the address of the registered owner of each Bond to which
payments with respect to the Bonds shall be mailed, as herein provided; but it
shall be the duty of each registered owner to notify the Trustee in writing of
the address to which payments shall be mailed, and such interest payments shall
be mailed to such address which has been given to the Trustee by each such
registered owner. The Authority, the Company and the registered owners of not
less than 25% in aggregate principal amount of Bonds at any time Outstanding
shall have the right, upon reasonable notice and subject to reasonable
regulations established in writing by the Trustee, to inspect the Registration
Books during regular business hours of the Trustee, but otherwise the Trustee
shall keep the Registration Books confidential and, unless otherwise required by
law, shall not permit their inspection by any other entity. Registration of each
Bond may be transferred in the Registration Books only upon presentation and
surrender of such Bond to the Designated Trust Office of the Trustee for
transfer of registration and cancellation, together with proper written
instruments of assignment, in form and with a guarantee of signatures
satisfactory to the Trustee, evidencing the assignment of the Bond, or any
portion thereof in any integral multiple of $5,000, to the new registered
owner(s) thereof. Such assignment may be presumptively evidenced by the due
execution of the form of assignment to be printed or endorsed on each Bond which
shall be executed by the registered owner or its duly authorized attorney or
representative to evidence an assignment thereof. Upon the assignment and
transfer of any Bond or any portion thereof, a new substitute Bond or Bonds
shall be issued in conversion and exchange therefor in the manner herein
provided. Each Bond issued and delivered in conversion of and exchange for any
Bond or portion thereof shall be in any denomination or denominations of any
integral multiple of $5,000 (subject to the requirement hereinafter stated that
each substitute Bond shall have a single stated principal maturity date), shall
be in the form prescribed in the FORM OF BOND attached hereto as Exhibit A, and
shall have the characteristics, and may be assigned, transferred, and converted
as provided in this Indenture. Each Bond issued in exchange therefor shall have
a single stated principal maturity date corresponding to the maturity date of
the principal of the Bond for which the substitute Bond is being exchanged; and
each such Bond shall bear interest at the single rate
<PAGE>
applicable to and borne by the Bond for which it is being exchanged. Upon
surrender of any Bonds or any portion or portions thereof for transfer of
registration, an authorized representative of the Trustee shall record such
transfer in the Registration Books, and shall deliver a new fully registered
substitute Bond or Bonds, having the characteristics herein described, payable
to such new registered owner(s) (and to the previous registered owner in case
only a portion of a Bond is being assigned and transferred), all in conversion
of and exchange for said assigned Bond or Bonds or any portion or portions
thereof, in the same form and manner, and with the same effect, as provided in
subparagraph (4) below, for the conversion and exchange of Bonds by any
registered owner of a Bond. The Company shall pay the Trustee's standard or
customary fees and charges for making such transfer and delivery of a substitute
Bond or Bonds, but the Person requesting such transfer shall pay any taxes or
other governmental charges required to be paid with respect thereto. The Trustee
shall not be required to make transfers of registration of any Bond or any
portion thereof called for redemption prior to maturity, (a) within 45 days
prior to its redemption date or (b) during the 15 day period preceding the
mailing of notice of redemption of the Bonds of the same maturity.
(2) Ownership of Bonds. The Person in whose name any Bond shall be
registered in the Registration Books at any time shall be deemed and treated as
the absolute owner thereof for all purposes of this Indenture, whether or not
such Bond shall be overdue, and the Authority, the Company, and the Trustee
shall not be affected by any notice to the contrary; and payment of, or on
account of, the principal of, premium, if any, and interest on any such Bond
shall be made only to such registered owner. All such payments shall be valid
and effectual to satisfy and discharge the liability upon such Bond to the
extent of the sum or sums so paid.
(3) Payment of Bonds and Interest. The Authority hereby further appoints the
Trustee to act as the paying agent for paying the principal of, premium, if any,
and interest on the Bonds, as such payments are scheduled to occur or upon the
redemption of any of the Bonds, all as provided in this Indenture. The Trustee
shall keep proper records of all payments made by the Company on behalf of the
Authority into the Debt Service Fund created in Article III hereof, and all
payments made by the Trustee with respect to the Bonds, and of all conversions
and exchanges of Bonds, and all replacements of Bonds, as provided in this
Indenture. Payment of principal of, premium, if any, and interest on the Bonds
shall be paid by check or draft mailed to the registered owner thereof at his
address as it appears on the Registration Books at the close of business on the
Record Date. Upon written request of a registered owner of at least $1,000,000
in principal amount of Bonds, all payments of the principal of, premium, and
interest on the Bonds shall be paid by wire transfer in immediately available
funds to an account in the continental United States designated by such
registered owner; provided, that no such payment shall be made by wire transfer
unless the Trustee has on file such a written request executed by such
registered owner. If the date payment of principal, premium, if any, or
interest on the Bonds is due is not a Business Day,
<PAGE>
then such payment shall be made on the next succeeding Business Day and no
additional interest shall accrue as a result thereof. The foregoing
notwithstanding, for so long as the Bonds are held in the custody of DTC, the
payment of the principal of, premium, if any, and interest on the Bonds shall be
governed by the requirements of DTC.
(4) Conversion and Exchange or Replacement; Authentication. Each Bond issued
and delivered pursuant to this Indenture, to the extent of the unpaid or
unredeemed principal balance or principal amount thereof, upon surrender of such
Bond at the Designated Trust Office of the Trustee, together with a written
request therefor duly executed by the registered owner, or their duly authorized
attorneys or representatives, with guarantee of signatures satisfactory to the
Trustee, may, at the option of the registered owner, be converted into and
exchanged for fully registered bonds, without interest coupons, in the form
prescribed in the FORM OF BOND attached hereto as Exhibit A, in the denomination
of $5,000 or any integral multiple thereof, as requested in writing by such
registered owner, in an aggregate principal amount equal to the unpaid or
unredeemed principal balance or principal amount of any Bond or Bonds so
surrendered, and payable to the appropriate registered owner. If any Bond is
assigned and transferred or converted, each substitute Bond issued in exchange
for such Bond or any portion thereof shall have a single stated principal
maturity date corresponding to the maturity date of the principal of the Bond
for which the substitute Bond is being exchanged; and each such Bond shall bear
interest at the rate applicable to and borne by the Bond for which it is being
exchanged. If a portion of any Bond shall be redeemed prior to its scheduled
maturity, the Trustee shall issue to the registered owner a substitute Bond or
Bonds having the same maturity date, bearing interest at the same rate, in the
denomination or denominations of any multiple of $5,000 at the request of the
registered owner, and in an aggregate principal amount equal to the unredeemed
portion thereof, upon surrender thereof for cancellation. Each substitute Bond
shall bear a letter and/or number to distinguish it from each other Bond. It is
specifically provided that any Bond authenticated in conversion of and exchange
for or replacement of another Bond on or prior to the first scheduled Record
Date for the Bonds initially issued and delivered pursuant to this Indenture
shall bear interest from the date of the Bonds initially issued and delivered
pursuant to this Indenture, but each substitute Bond so authenticated after such
first scheduled Record Date shall bear interest from the interest payment date
next preceding the date on which such substitute Bond was so authenticated,
unless such Bond is authenticated after any Record Date but on or before the
next following interest payment date, in which case it shall bear interest from
such next following interest payment date; provided, however, that if at the
time of delivery of any substitute Bond the interest on the Bond for which it is
being exchanged is due but has not been paid, then such Bond shall bear interest
from the date to which such interest has been paid in full. Except as otherwise
provided in subparagraph (5) below, on each of the Bonds initially issued and
delivered hereunder and on each substitute Bond issued in conversion of and
exchange for or replacement of any Bond or Bonds issued hereunder there shall be
printed a Trustee's Authentication
<PAGE>
Certificate, in the form set forth in the FORM OF BOND attached hereto as
Exhibit A.
An authorized representative of the Trustee shall, before the delivery of any
such substitute Bond, date and manually sign said Authentication Certificate,
and no such substitute Bond shall be deemed to be issued or Outstanding unless
said Authentication Certificate is so executed. The Trustee promptly shall
cancel all Bonds surrendered for conversion and exchange or replacement. No
additional ordinances, orders, or resolutions need be passed or adopted by the
governing body of the Authority or any other body or person so as to accomplish
the foregoing conversion and exchange or replacement of any Bond or portion
thereof, and the Trustee shall provide for the preparation, execution, and
delivery of the substitute Bonds. Pursuant to Vernon's Ann. Tex. Civ. St. Art.
717k-6, and particularly Section 6 thereof, the duty of conversion and exchange
or replacement of Bonds as aforesaid is hereby imposed upon the Trustee, and,
upon the execution of said Authentication Certificate, the converted and
exchanged or replaced Bond shall be valid, incontestable, and enforceable in the
same manner and with the same effect as the Bonds which initially were issued
and delivered pursuant to this Indenture.
(5) Initial Bond(s) Registered. Notwithstanding any other provision hereof,
the Bond or Bonds initially delivered pursuant to the terms hereof shall be
approved by the Attorney General of the State of Texas and thereafter registered
with the Comptroller of Public Accounts of the State of Texas. If so registered
by the Comptroller of Public Accounts, said Bond or Bonds need not contain the
Trustee's Authentication Certificate referred to in subparagraph (4) above, and
if such Authentication Certificate does appear on said Bonds, it need not be
authenticated by the Trustee if the Comptroller's Registration Certificate has
been executed by the Comptroller of Public Accounts of the State or the designee
thereof.
(F) Form of Bonds. The form of the Bonds, including the form of Trustee's
Authentication Certificate, the form of Assignment and, if applicable, the form
of Registration Certificate of the Comptroller of Public Accounts of the State
of Texas to be attached to the Bonds initially issued and delivered pursuant to
this Indenture, shall be, respectively, substantially as set forth in the FORM
OF BOND attached hereto as Exhibit A.
(G) Damaged, Mutilated, Lost, Stolen, or Destroyed Bonds. (1) In the event
any Bond is damaged, mutilated, lost, stolen or destroyed, the Trustee shall
cause to be prepared, executed and delivered a new Bond of the same principal
amount, maturity and interest rate, as the damaged, mutilated, lost, stolen or
destroyed Bond, in replacement for such Bond in the manner hereinafter provided.
(2) Application for exchange and substitution of damaged, mutilated, lost,
stolen, or destroyed Bonds shall be made to the Trustee. In every case, the
applicant for a substitute Bond shall furnish to the Authority and to the
Trustee such security or indemnity as may be required by them to save each of
them
<PAGE>
harmless. In every case of loss, theft, or destruction of a Bond, the applicant
shall also furnish to the Authority and to the Trustee evidence to their
satisfaction of the loss, theft, or destruction of such Bond. In the case of
damage or mutilation of a Bond, the applicant shall surrender the Bond so
damaged or mutilated to the Trustee.
(3) Notwithstanding the foregoing provisions of this Paragraph (G), in the
event any such Bond shall have matured, and no default has occurred which is
then continuing in the payment of the principal of, premium, if any, or interest
on such Bond, the Authority may authorize the payment of the same (without
surrender thereof except in the case of a damaged or mutilated Bond) instead of
issuing a substitute Bond provided security or indemnity is furnished as above
provided in this Paragraph (G).
(4) Upon the issuance of any such substitute Bond, the Authority and the
Trustee shall charge the registered owner of such Bond with all expenses in
connection therewith. Every substitute Bond issued pursuant to the provisions of
this Section by virtue of the fact that any Bond is lost, stolen, or destroyed
shall constitute a contractual obligation of the Authority, whether or not the
lost, stolen, or destroyed Bond shall be found at any time, or be enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionally with any and all other Bonds duly issued under this Indenture.
(5) In accordance with Section 6 of Art. 717k-6 of Vernon's Ann. Tex. Civ.
St., this Indenture shall constitute sufficient authority for the issuance of
any such substitute Bond without necessity of further action by the Board of
Directors of the Authority or any other body or person, and the issuance of such
substitute Bonds by the Trustee is hereby authorized, notwithstanding any other
provisions of this Indenture.
(H) Effect of Exchange or Transfer. Each Bond delivered pursuant to any
provision of this Indenture in exchange or substitution for, or upon the
transfer of, another Bond shall carry all of the rights to interest accrued and
unpaid and to accrue which were carried by such other Bond, and notwithstanding
anything contained in this Indenture, such Bond shall be so dated or bear such
notation, that neither gain nor loss in interest shall result from any such
exchange, substitution, or transfer.
(I) Covenants Regarding Tax Exemption. The Authority covenants to refrain
from any action which would adversely affect, or to take such action reasonably
available to the Authority to assure, the treatment of the Bonds as obligations
described in section 103(a) of the Code, the interest on which is not includable
in the "gross income" of the holder (other than the income of a "substantial
user" of the Special Facilities or a "related person" to such substantial user,
within the meaning of the Code) for purposes of federal income taxation. It is
the understanding of the parties hereto that the covenants contained herein are
<PAGE>
intended to assure compliance with the provisions of the Code and any
regulations or rulings promulgated by the U.S. Department of the Treasury
pursuant thereto pertaining to obligations described in section 103(a) of the
Code. In the event that regulations or rulings are hereafter promulgated which
modify or expand provisions of the Code, as applicable to the Bonds, the parties
hereto will not be required to comply with any covenant contained herein to the
extent that such modification or expansion, in the opinion of Bond Counsel, will
not adversely affect the exemption from federal income taxation of interest on
the Bonds under section 103 of the Code. In the event that regulations or
rulings are hereafter promulgated which impose additional requirements which are
applicable to the Bonds, the parties hereto agree to comply with the additional
requirements to the extent necessary, in the opinion of Bond Counsel, to
preserve the exemption from federal income taxation of interest on the Bonds
under section 103 of the Code.
ARTICLE III
ESTABLISHMENT OF CONSTRUCTION FUND,
DEBT SERVICE FUND AND
SPECIAL REBATE FUND
(A) Proceeds from Delivery of the Bonds. The net proceeds from the sale of
the Bonds shall be deposited by the Trustee to the credit of the funds and
accounts created herein as follows:
(1) $397,704.38, representing accrued interest, to the Debt Service Fund;
(2) $29,571,555.18, representing capitalized interest, to the Capitalized
Interest Account of the Construction Fund; and
(3) the balance of the proceeds to the Special Facilities Construction
Allowance Account of the Construction Fund.
(B) Construction Fund. A separate and special trust fund called the
"Construction Fund" (consisting of three accounts, the "Capitalized Interest
Account", the "Special Facilities Construction Allowance Account", and the "Net
Proceeds Account", respectively) is hereby created and established by the
Authority with the Trustee. The Trustee shall transfer moneys on deposit in the
Capitalized Interest Account to pay interest coming due on the Bonds, as
provided in Paragraph (E) below. The Trustee shall draw on and use the Special
Facilities Construction Allowance Account and the Net Proceeds Account solely
for the purposes provided below.
(C) Payments from Special Facilities Construction Allowance Account. (1)
Concurrently with, or as soon as practicable after, the delivery of the Bonds,
the Trustee shall make an initial payment, if requested by the Company in the
manner
<PAGE>
described below for payments from the Special Facilities Construction Allowance
Account of the Construction Fund, to reimburse the Company or its designee for
any cost of acquisition, construction, equipment and furnishing of the Land and
the Special Facilities, paid, or provided to the Authority, by the Company on or
after January 4, 1994, and prior to such date of delivery. The Trustee shall
make such initial payment, if requested, and shall make any subsequent payments,
from the Special Facilities Construction Allowance Account of the Construction
Fund for any Cost of the Special Facilities, from time to time upon receipt by
the Trustee of a Disbursement Request signed by an Authorized Lessee
Representative.
(2) The Trustee and the Authority shall rely fully on any such Disbursement
Request delivered by the Company and shall not be required to make any
investigation in connection therewith; provided, however, that within a
reasonable time after the submission of any such Disbursement Request and after
payment of the amounts requested, the duly authorized representatives of the
Authority may inspect the invoices and statements which are the basis for
payment requested by the Company. If amounts paid by the Trustee with respect
to any portion of the Special Facilities exceed the cost thereof, the Company
shall promptly repay such overpayment into the Construction Fund.
(D) Surplus Construction Funds. (1) If, upon the completion of the Special
Facilities, as evidenced by the delivery to the Trustee and the Authority of the
certificate executed by an Authorized Company Representative described in
Section 305 of the Facilities Agreement, there shall be any surplus funds
remaining in the Special Facilities Construction Allowance Account of the
Construction Fund not required to provide for the payment of the Costs of the
Special Facilities, such funds shall, upon the written request of the Authorized
Company Representative, either be applied, in whole or in part, (a) to purchase
Bonds for cancellation at such times, prices and amounts as determined by the
Authorized Company Representative, which price, however, shall not exceed the
principal amount thereof plus accrued interest thereon; or (b) if the Bonds are
then subject to redemption, to redeem Bonds in such amounts and at such times as
directed by an Authorized Company Representative; provided that prior to any
such application under clause (a) above, the Authority and the Trustee shall
have been furnished with an unqualified opinion of Bond Counsel, to the effect
that the expenditure of monies from the Special Facilities Construction
Allowance Account of the Construction Fund for such purpose will not impair the
exclusion of interest on the Bonds from the gross income of the holders thereof
for federal income tax purposes. Any of such surplus funds not to be applied
for the purposes set forth in clauses (a) or (b) above shall be deposited in an
escrow account (outside the Debt Service Fund) and moneys on deposit in such
escrow account shall be applied to pay the principal of Bonds upon redemption
thereof on the earliest possible redemption date; provided that any moneys held
in such escrow account may not be invested to produce a yield greater than the
yield on the Bonds. The Trustee shall be entitled to rely upon a written
certificate executed by an Authorized Company Representative which sets forth
the yield on the Bonds. In lieu of treating the Construction Fund surpluses as
<PAGE>
set forth above, upon the written request of the Authorized Company
Representative such funds shall either be deposited or disbursed in any manner
designated in writing by the Authorized Company Representative if, in the
opinion of Bond Counsel, such deposit or disbursement will not impair the
exclusion of interest on any Bonds from the gross income of the holders thereof
for federal income tax purposes and is permissible under the Act.
(2) If the Trustee shall declare the principal of the Bonds and the interest
accrued thereon immediately due and payable as the result of an Event of Default
specified in this Indenture, or if the Bonds shall be redeemed as a whole in
accordance with their terms, or if the Facilities Agreement is terminated in
accordance with its terms prior to the completion of the Special Facilities, to
the extent the Company does not otherwise direct, any proceeds of the Bonds
remaining in the Special Facilities Construction Allowance Account of the
Construction Fund shall, subject to the provisions of subparagraph (5) of
Paragraph (F) and Article V(H) below, be immediately deposited into the Debt
Service Fund and used by the Trustee for the purpose of paying principal of,
premium, if any, and interest on the Bonds when due. In connection with release
of this Indenture under the terms hereof, any proceeds of the Bonds remaining in
the Special Facilities Construction Allowance Account of the Construction Fund
shall be either (a) immediately deposited by the Trustee into the Debt Service
Fund and shall be applied to reduce the amount of the next succeeding Special
Facilities Rentals by the Company if, in the opinion of Bond Counsel, such
application will not adversely affect the exclusion from gross income for
federal income tax purposes of the interest on the Bonds, or (b) upon the
written request of the Company, applied to the purchase, at a price not in
excess of the principal amount thereof, of Bonds in the open market, which Bonds
shall thereupon be cancelled. The Trustee shall have the right to take
appropriate action by judicial proceedings or otherwise to enforce this
Paragraph (D).
(E) Debt Service Fund. (1) A separate and special trust fund called the
"Debt Service Fund" is hereby created and established by the Authority with the
Trustee, and shall be maintained as provided in this Indenture, as long as any
Bond is Outstanding and unpaid.
(2) Pursuant to the Facilities Agreement, the Authority has directed the
payment by the Company to the Trustee of the Special Facilities Rentals, all as
described in the Facilities Agreement, which shall be deposited by the Trustee
to the credit of the Debt Service Fund. The Trustee shall deposit such Special
Facilities Rentals into the Debt Service Fund as follows, upon the receipt
thereof from the Company on the dates set forth below:
(i) On or before each date on which interest is due and payable on the
Bonds, an amount which, together with any other amounts then on deposit
therein and available for such purpose, will be sufficient to pay the
interest coming due on the Bonds on such date; and
<PAGE>
(ii) On or before each date on which principal of the Bonds is scheduled to
mature, an amount which, together with any other amounts then on deposit
therein and available for such purpose, will be sufficient to pay the
principal of the Bonds scheduled to mature on such date; and
(iii) On or before any date on which Bonds shall have been called for
redemption and subject to the conditions specified in this Indenture, an
amount which, together with any other amounts then on deposit and
available for such purposes, will be sufficient to pay the principal,
premium, if any, and accrued interest, specified therein; and
(iv) On any date on which the Bonds are declared to be immediately due and
payable pursuant to Article V of this Indenture, an amount which,
together with any other amounts then on deposit and available for such
purposes, will be sufficient to pay the principal of all Bonds then
Outstanding, any applicable premium thereon, the interest accrued
thereon and interest due on overdue principal or premium, if any, or (to
the extent permitted by law) interest.
In addition, upon the receipt of a Disbursement Request executed by an
Authorized Company Representative, the Trustee shall transfer from the
Capitalized Interest Account to the Debt Service Fund moneys sufficient from
time to time to make the payments described in clause (i) above.
(3) On or before the tenth Business Day prior to each date upon or before
which each payment is required by the Facilities Agreement to be paid to the
Trustee by the Company for deposit into the Debt Service Fund, the Trustee shall
give written notice to the Company, by first class mail, postage prepaid, by
Federal Express priority delivery, or by hand delivery, at such address as the
Company shall from time to time designate and file in writing with the Trustee,
of the amount, if any, of each such payment required to be made to the Trustee
by the Company and deposited by the Trustee into the Debt Service Fund on or
before such date. Such notice shall give a brief statement of the manner in
which the amount or amounts due were calculated, including a showing of all
credits on account of earnings from the time deposit or investment of the Debt
Service Fund. If such payment required to be paid by the Company under the
Facilities Agreement is not received by the Trustee on the date such payment is
required to be made in accordance with the terms of the Facilities Agreement,
then the Trustee promptly shall give telephone notice to the Company, confirmed
in writing in the manner provided above, of such failure to receive such payment
from the Company. The failure of the Trustee to give, or of the Company to
receive, any such notice shall not relieve the Company of its unconditional duty
and obligation to make to the Trustee all deposits or payments of such payments,
as required by the Facilities Agreement.
<PAGE>
(4) The moneys on deposit in the Debt Service Fund shall be used by the
Trustee to pay the principal of, premium, if any, and interest on the Bonds,
when due; and the Trustee shall make available to itself, in its capacity as
paying agent, out of the Debt Service Fund, the amounts required to pay or
redeem the principal of, premium, if any, and interest on the Bonds when due, as
well as such other amounts described in Article V(D) hereof.
(5) In any case where the date for any scheduled Special Facilities Rentals
to be deposited to the credit of the Debt Service Fund shall not be a Business
Day, then the date for payment of such Special Facilities Rentals shall be the
next succeeding day which is a Business Day, and no additional interest shall
accrue as a result.
(6) In addition to the foregoing, all funds received by the Trustee under the
Guaranty shall be deposited to the credit of the Debt Service Fund, for use as
herein provided.
(F) Special Rebate Fund. A separate and special trust fund to be designated
and known as the "Special Rebate Fund" is hereby established by the Authority
with the Trustee for the benefit of the United States of America and of the
Company, as their interests may appear pursuant to this Indenture and the
Facilities Agreement, and maintained as provided herein, as long as any of the
Bonds, or interest thereon, is Outstanding and unpaid.
(1) Payments into the Special Rebate Fund. The Trustee shall pay into the
Special Rebate Fund all payments received from the Company pursuant to Section
615 of the Facilities Agreement.
To the extent that, following any disbursements of amounts from the Special
Rebate Fund in accordance with subparagraph (2) following, the amount then on
deposit in the Special Rebate Fund exceeds the Tentative Rebate Amount
(hereinafter defined) determined as of the computation date immediately
preceding such disbursement (adjusted for the amount then disbursed), the
Trustee shall transfer such excess (i) to the Debt Service Fund, or (ii)
directly to the Company, as the Company shall direct.
(2) Disbursement of the Special Rebate Fund. The amounts in the Special
Rebate Fund shall be used solely for the payment to the United States of amounts
described under section 148(f) of the Code, and the Regulations thereunder, all
as may be applicable to the Bonds. Such payment shall be made by the Trustee in
accordance with written instructions from an Authorized Company Representative,
and the requirements of section 148(f)(3) of the Code, and the Regulations, the
first installment of such payment to be made by the Trustee within thirty days
after the fifth anniversary of the date of issuance of the Bonds, with each
subsequent installment of such payment to be made within thirty days following
each successive five year anniversary of the date of issuance of the Bonds, and
with the
<PAGE>
last installment of such payment to be made within thirty days after the final
retirement of the Bonds.
(3) Company Determination. The amounts to be paid, deposited or disbursed
hereunder shall be determined by the Company. Within thirty days following each
fifth anniversary date of the date of issuance of the Bonds, the Company shall
furnish to the Trustee and the Authority a copy of computations made in
accordance with the provisions of section 148(f) of the Code and the Regulations
promulgated thereunder, showing the amount (the "Tentative Rebate Amount" in
respect of such anniversary date) which would be payable to the United States
pursuant to section 148(f)(3) of the Code were the Bonds to have been finally
retired on such anniversary.
(4) Special Rebate Fund Records. The Trustee shall maintain a record of all
investments and disbursements from the funds, and of the periodic determinations
by the Company of the Tentative Rebate Amount, for a period beginning on the
fifth anniversary date of the issuance of the Bonds and ending on the date six
years after the final retirement of the Bonds. Such records shall state each
such anniversary date and summarize the manner in which the Tentative Rebate
Amount, if any, was determined. In addition, upon request, the Trustee will
provide to the Company all investment records and other information required by
the Company for the making of such determinations.
(5) Disposition of Construction Fund upon Acceleration and Redemption. If
the Trustee shall declare the principal of the Bonds and the interest accrued
thereon immediately due and payable as the result of an Event of Default
specified in this Indenture, or if the Bonds are mandatorily redeemed prior to
maturity as a whole in accordance with their terms, any amounts remaining in the
Construction Fund shall be transferred to the Special Rebate Fund to the extent
that the amount therein is less than the Tentative Rebate Amount computed by the
Company as of the date of such acceleration or redemption.
(6) Deemed Satisfaction of Rebate Requirements; Penalties in Lieu of Rebate.
Anything contained herein to the contrary notwithstanding, the requirements of
Article III(F)(1), (2), (3) and (5) hereof shall be deemed satisfied if the
Company delivers to the Trustee and the Authority a certificate, together with
an opinion of Bond Counsel stating that based on the representations in the
certificate, the requirements of section 148(f)(2) of the Code need not be met
with respect to the Bonds by reason of any of the exceptions afforded a tax-
exempt issue under section 148(f) of the Code.
(G) Net Proceeds Account. Any Net Proceeds generated as a result of damage
to or destruction of, or the condemnation of, all or any part of the Special
Facilities, all as provided in Sections 1101 and 1102 of the Facilities
Agreement, shall be deposited to the credit of the Net Proceeds Account. The
Trustee shall disburse any moneys on deposit in the Net Proceeds Account upon
the written direction of
<PAGE>
the Company, as approved in writing by the Authority, for the purposes described
in Sections 1101 and 1102 of the Facilities Agreement. Any moneys held by the
Trustee in the Net Proceeds Account shall be invested in accordance with the
provisions of Paragraph (H) below. The Company shall forthwith pay to the
Trustee the amount of any net losses with respect to principal in such
investments.
(H) Investments. (1) The Authority hereby directs the Trustee to invest or
reinvest such moneys in the manner provided below. Money in the Construction
Fund and the Debt Service Fund, respectively, held by the Trustee may be
invested or reinvested by the Trustee at the telephonic direction of the Company
(such oral direction subsequently confirmed in writing by the Company) in
Qualified Investments, defined below (provided that the Company shall not be
entitled to direct that any investment be made in violation of any applicable
law), in such a manner as will, in the opinion and within the discretion of the
Company, produce the maximum yield reasonably obtainable (subject to the
provisions of Article VIII of this Indenture). Money so invested or reinvested
shall be invested or reinvested in accordance with the laws of the State of
Texas.
(2) The securities purchased with the moneys in the Debt Service Fund or the
Construction Fund, respectively, shall be deemed a part of such respective Fund,
and, for the purpose of determining the amount of money therein, the securities
therein shall be valued at their cost or market value, whichever is lower. The
value of such securities shall be established annually during the last month of
each fiscal year of the Company. The income and profits, including realized
discount on securities purchased, received on all such securities (after
deduction for accrued interest and premium paid therefrom at the time of
purchase) shall be deposited in or credited to the Debt Service Fund or the
Construction Fund, respectively, and all losses thereon shall be charged against
the Debt Service Fund or the Construction Fund, respectively. Neither the
Authority nor the Trustee shall be liable or responsible for any loss resulting
from any such investment as herein authorized, such liability and responsibility
to be that of the Company. If at any time it shall become necessary that some
or all of the securities purchased with the moneys in the Debt Service Fund or
the Construction Fund be redeemed or sold to raise moneys necessary to comply
with the provisions of this Indenture, the Trustee may, after consultation with
an Authorized Company Representative, effect such redemption or sale, employing,
in the case of a sale, any commercially reasonable method of effecting the same,
including, without limitation, the sale thereof to the Company upon its written
request.
(3) As used in this Indenture, the term "Qualified Investments" shall mean
(i) obligations of the United States or its agencies and instrumentalities;
direct obligations of the State of Texas or its agencies and instrumentalities;
collateralized mortgage obligations directly issued by a federal agency or
instrumentality of the United States (the underlying security for which is
guaranteed by an agency or instrumentality of the United States); other
obligations, the principal and interest of which are unconditionally guaranteed
or insured by, or backed by the full faith and
<PAGE>
credit of Texas or the United States or their respective agencies and
instrumentalities; and obligations of states, agencies, counties, cities and
other political subdivisions of any state rated as to investment quality by a
nationally recognized investment rating firm not less than A or its equivalent
(collectively herein "Government Obligations"); (ii) certificates of deposit (1)
issued by a state or national bank or a savings and loan association domiciled
in Texas, and (2) guaranteed or insured by the Federal Deposit Insurance
Corporation or its successor, secured by Government Obligations or secured in
any other manner and amount provided by law for deposits of the Trustee; (iii)
fully collateralized repurchase agreements which (1) have a defined termination
date, (2) are secured by obligations of the United States or its agencies and
instrumentalities, (3) require the securities being purchased by the Trustee to
be pledged to the Trustee, held in the Trustee's name and deposited at the time
the investment is made with the Trustee or with a third party selected and
approved by the Trustee, and (4) are placed through a primary government
securities dealer, as defined by the Federal Reserve, or a financial institution
doing business in Texas, provided that, the term of any reverse security
repurchase agreement may not exceed 90 days after the date the reverse security
repurchase agreement is delivered and, provided further, that "repurchase
agreement" means a simultaneous agreement to buy, hold for a specified time and
sell back at a future date obligations of the United States or its agencies and
instrumentalities at a market value at the time the funds are disbursed of not
less than the principal amount of the funds disbursed; (iv) bankers' acceptances
which (1) have a stated maturity of 270 days or fewer from the date of issuance,
(2) will be liquidated in full at maturity, (3) are eligible for collateral for
borrowing from a Federal Reserve Bank, and (4) are accepted by a bank organized
and existing under the laws of the United States or any state, if the short-term
obligations of the bank, or of a bank holding company of which the bank is the
largest subsidiary, are rated not less than A-1 or P-1 or an equivalent rating
by at least one nationally recognized credit rating agency; (v) commercial paper
which (1) has a stated maturity of 270 days or fewer from the date of its
issuance and (2) is rated not less the A-1 or P-1 or an equivalent rating by at
least two nationally recognized credit rating agencies, or one nationally
recognized credit rating agency and is fully secured by an irrevocable letter of
credit issued by a bank organized and existing under the laws of the United
States or any state; and (vi) no-load money market mutual funds which (1) are
regulated by the Securities and Exchange Commission, (2) have a dollar-weighted
average stated maturity of 90 days or fewer, and (3) include in the investment
objectives of such mutual fund the maintenance of a stable net asset value of $1
of each share, provided however, that the Trustee is not authorized to invest in
the aggregate more than 80% of its monthly average fund balance, excluding bond
proceeds and reserves and other funds held for debt service, in money market
mutual funds or to invest an amount that would exceed 10% of the total assets of
any such mutual fund.
(4) The Trustee, when authorized by the Company, may trade with itself in
the purchase and sale of securities for such investment. Although the Authority
recognizes that it may obtain a broker confirmation or written statement
containing
<PAGE>
comparable information at no additional cost, the Authority hereby agrees that
confirmations of investments made by the Trustee pursuant to this Paragraph (H)
are not required to be issued by the Trustee for each month in which a monthly
statement is rendered. No such statement need be rendered pursuant to the
provisions hereof if no activity occurred in the fund or account during such
preceding month.
(I) Security for Funds. All Funds created by this Indenture shall be
secured in the manner required by Texas law for the security of public funds,
and such Funds shall be used only for the purposes and in the manner permitted
or required by this Indenture and the Facilities Agreement.
ARTICLE IV
ACCOUNTS AND RECORDS
(A) Separate Records. The Trustee shall keep proper books of records and
accounts, separate from all other records and accounts, in which complete and
correct entries shall be made of all transactions relating to the receipt of the
Special Facilities Rentals to be made by the Company to pay the principal of,
premium, if any, and the interest on the Bonds, the Construction Fund, the Debt
Service Fund and the Special Rebate Fund. The Trustee shall furnish to the
Authority and the Company no less often than monthly a copy of such records and
transactions as hereinabove described.
(B) Report of Trustee. Within 90 days after the close of each calendar
year, the Trustee shall furnish to the Authority, the Company, and the
Bondholders who may so request, a copy of a report by the Trustee covering such
calendar year, showing the following information:
(1) A detailed statement concerning the receipt and disposition of all
Special Facilities Rentals to be made by the Company under the terms
of the Facilities Agreement to pay the principal of, premium, if any,
and the interest on the Bonds;
(2) A detailed statement concerning the disposition of the amounts in the
Construction Fund (until the Construction Fund shall have been fully
disposed of); and
(3) An asset statement of the Debt Service Fund as of the end of said
calendar year.
(C) Inspection. The Authority, the Bondholders owning 25% or more of the
Outstanding principal amount of Bonds (as shown in the Registration Books) and
the Company shall have the right at all reasonable times pursuant to the
reasonable
<PAGE>
regulations established in writing by the Trustee to inspect all records,
accounts, and data of the Trustee relating to the Debt Service Fund, and to
obtain copies of the same at the expense of such inspecting party.
(D) Registration Books. So long as any of the Bonds shall remain
Outstanding, the Trustee shall maintain Registration Books for the registration
and transfer of Bonds upon the terms and subject to the conditions contained
herein.
ARTICLE V
ENFORCEMENT OF RIGHTS IN CASE OF DEFAULT
(A) Trustee is Agent. The Trustee is hereby irrevocably appointed the
special agent and representative of the Bondholders and vested with full power
to act on their behalf to effect and enforce the Facilities Agreement, the
Guaranty and this Indenture, for their benefit as provided herein; but anything
in this Indenture contained to the contrary notwithstanding, Bondholders of a
majority in principal amount of the Bonds then Outstanding, in case of any
existing Event of Default (hereinafter defined), shall have the right from time
to time to direct and control the Trustee in connection with the enforcement of
any of the provisions of the Facilities Agreement, the Guaranty and this
Indenture, and any other proceedings taken by virtue of any provisions of the
aforesaid instruments, including the right to have withdrawn and discontinued at
any stage thereof any proceedings taken hereunder by the Trustee, provided that
the Event of Default upon which such proceedings were based and all other Events
of Default hereunder shall have been remedied and made good. Anything contained
in this Indenture to the contrary notwithstanding, each Bondholder shall have a
right of action to enforce the payment of the principal of, premium, if any, and
interest on any Bond owned thereby on or after the same shall have become due at
the place, from the sources, and in the manner expressed in Article III hereof.
(B) Restriction on Bondholders' Action. Except as otherwise provided in
this Article V, all rights of action with respect to this Indenture shall be
exercised only by the Trustee and no Bondholder shall have any right to
institute any suit, action, or proceeding at law or equity for the appointment
of a receiver or for any other remedy hereunder or by reason hereof unless and
until, in addition to the fulfillment of all other conditions precedent
specified in this Indenture, the Trustee shall have received the written request
of Bondholders of not less than 25% in principal amount of the Bonds then
Outstanding to institute such suit, action, or proceeding and shall have been
offered reasonable indemnity and shall have refused, or for 30 days thereafter
neglected, to institute such suit, action, or proceeding; and it is hereby
declared that the making of such request and the furnishing of such indemnity
are in each case conditions precedent to the execution and enforcement by any
Bondholder of the powers and remedies given to the Trustee hereunder and to the
institution and maintenance by any Bondholder of any action or cause of
<PAGE>
action for the appointment of a receiver or for any other remedy hereunder; but
the Trustee may, in its discretion, or when thereunto duly requested in writing
by Bondholders of not less than 25% in principal amount of the Bonds then
Outstanding, and upon being furnished indemnity satisfactory to the Trustee
against expenses, charges, and liability, forthwith shall, take such appropriate
action by judicial proceedings or otherwise to enforce the covenants of the
Company or the Authority as the Trustee may deem expedient in the interest of
the Bondholders.
(C) Events of Default. Any one or more of the following events shall
constitute and hereinafter shall be called "Events of Default":
(1) Failure to pay when due, at maturity or upon redemption, the
principal of or, premium, if any, on any Bond;
(2) Failure to pay interest on any Bond on the Business Day immediately
following the date such payment of interest is scheduled to be due;
(3) The occurrence of an "Event of Default" as defined in Section 1401 of
the Facilities Agreement;
(4) A default in the performance or observance of any other of the
covenants, agreements or conditions on the part of the Authority in this
Indenture and the continuance thereof for a period of 60 days after written
notice thereof is given to the Authority and the Company by the Trustee,
provided, however, that no Event of Default shall be deemed to have occurred
if the Company or the Authority is diligently proceeding to cure or correct
such default; and
(5) The occurrence of a "Guaranty Event of Default" as defined in Section
2.4(a) of the Guaranty.
(D) Acceleration. Upon the occurrence and continuation of any Event of
Default as defined in this Indenture (except as described in Article V(C)(3)
hereof), the Trustee may, and upon the written request of the registered owners
of not less than 25% in aggregate principal amount of Bonds then Outstanding,
the Trustee shall, by notice in writing delivered to the Company with a copy of
such notice being sent to the Authority, declare the principal of all Bonds then
Outstanding and the interest accrued thereon immediately due and payable, and
such principal and interest thereon shall thereupon become and be immediately
due and payable.
If, after the principal of all Bonds then Outstanding shall have been so
declared to be due and payable, all arrears of interest upon such Bonds, and
interest on overdue installments of principal or premium, if any, and interest
(to the extent permitted by law) at the rate borne by the Bonds, and the
principal of and premium, if any, on all Bonds then Outstanding that shall have
become due and payable
<PAGE>
otherwise than by acceleration, and all other sums payable under this Indenture
other than the principal of and interest on the Bonds which by such declaration
of acceleration shall have become due and payable, shall have been paid by or on
behalf of the Authority, together with the reasonable fees and expenses of the
Trustee and of the registered owners of the Bonds, including reasonable
attorneys' fees and expenses paid or incurred, and all other defaults then
existing hereunder shall have been cured or waived in accordance with the
provisions hereof, then and in every such case, the Trustee shall annul such
declaration of maturity and its consequence, which annulment shall be binding
upon all registered owners of Bonds; provided, however, that if the registered
owners of not less than 25% in aggregate principal amount of the Bonds then
Outstanding shall have made the written request as described above directing the
Trustee to declare such acceleration of maturity, the Trustee shall not annul
such declaration and its consequences without the prior consent of the
registered owners of not less than a majority in aggregate principal amount of
the Bonds then Outstanding, and provided further that no such annulment shall
extend to or affect any subsequent default or impair any right or remedy
consequent thereon.
(E) Action by Trustee. Upon the happening of any Event of Default, the
Trustee may, in its discretion, or, upon the written request of Bondholders of
not less than 25% in principal amount of the Bonds then Outstanding, and upon
being indemnified to the satisfaction of the Trustee, shall take such
appropriate action by judicial proceedings or otherwise to cure the Event of
Default and to require the Company or the Authority to carry out its or their
covenants and obligations hereunder and with respect to the Facilities
Agreement, including, but without limitation, the use and filing of actions for
specific performance and mandamus proceedings in any court of competent
jurisdiction, against the Authority or the Company, and to obtain judgments
against the Company for, or seek the appointment of a receiver in equity to
collect, any Special Facilities Rentals due but unpaid into the Debt Service
Fund, or for any other amounts due hereunder or under the Facilities Agreement,
including all of the principal amount of the Bonds then outstanding if declared
due and payable as provided herein, premium, if any, and interest on such Bonds
and interest on overdue payments of principal, premium, and interest, as further
provided herein.
(F) Remedies Nonexclusive. No remedy herein conferred upon or reserved to
the Trustee is intended to be exclusive of any other available remedy or
remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or under the Bonds, or now and
hereafter existing at law or in equity or by statute. No delay or omission to
exercise any right or power accruing upon the happening of any Event of Default
continuing as aforesaid shall impair any such right or power or shall be
construed to be a waiver of any such Event of Default or acquiescence therein,
and every such right and power may be exercised from time to time and so often
as may be deemed expedient.
<PAGE>
(G) Trustee's Discretion. In the event the Trustee shall receive
conflicting or inconsistent requests and indemnity from two or more groups of
Bondholders, each representing less than a majority of the principal amount of
Bonds then Outstanding, the Trustee in its sole discretion may determine what
action, if any, shall be taken.
(H) Disposition of Money. All money collected by the Trustee pursuant to
the exercise of the remedies and powers in this Article V, together with all
other sums which then may be held by the Trustee under any provision of this
Indenture as security for the Bonds, shall be applied as follows:
FIRST: to the payment of the costs and expenses of the proceedings
whereunder such money was collected, including a reasonable compensation to
the Trustee, its agents, attorneys, and all other necessary or proper
expenses, liabilities, and advances incurred or made by the Trustee under
this Indenture relating to such collection.
SECOND: to the payment of matured interest on the Bonds and interest on
overdue interest (to the extent permitted by law).
THIRD: to the payment of principal of and premium, if any, on the Bonds
which have become due pursuant to their terms as permitted or required by
this Indenture as provided thereby.
FOURTH: to the payment of any amounts due the Authority under the
Facilities Agreement.
FIFTH: to the payment of the surplus, if any, to the Company, or as a
court of competent jurisdiction may otherwise direct.
If in making distribution pursuant to the order above stated, the amount
available for distribution in a particular classification is insufficient to pay
in full all of the items in such classification, the amount available for
distribution to items in such classification shall be prorated among such items
in the proportion that the amount of each item bears to the total of all such
items.
(I) Intervention by Trustee. In any judicial proceeding in which the
Authority is a party and which, in the opinion of the Trustee and its counsel,
has a substantial bearing on the interests of the Bondholders, the Trustee, if
permitted by the court having jurisdiction over such proceeding, may, in its
discretion, or, upon the written request of Bondholders of not less than 25% in
principal amount of the Bonds then Outstanding, and upon being indemnified to
the satisfaction of the Trustee, shall intervene on behalf of the Bondholders to
assert the rights of the Bondholders.
(J) Possession of Bonds Unnecessary. All rights of action or other rights
under this Indenture or otherwise may be enforced by the Trustee without the
possession
<PAGE>
of any of the Bonds, or the production thereof on the trial or other proceedings
relative thereto.
(K) Bondholder's Directions. It is expressly provided, however, that
Bondholders of a majority in principal amount of the Bonds then Outstanding, or
a committee representing, pursuant to a written appointment filed with the
Trustee, Bondholders of a majority in principal amount of the Bonds then
Outstanding, shall have the right, at any time, by an instrument or instruments,
in writing executed and delivered to the Trustee, to direct the method and place
of conducting all proceedings to be taken in connection with the enforcement of
the Trustee's rights and remedies under the Facilities Agreement or the
Guaranty, or the Bondholders' or the Trustee's rights and remedies under this
Indenture, and may exercise any right or perform any action hereunder with the
same effect as the Trustee under this Indenture, provided, that such direction
shall not be otherwise than in accordance with the provisions of law and of this
Indenture, and provided that the Trustee shall be indemnified to its
satisfaction.
(L) Trustee's Notice of Default. The Trustee shall not be required to take
notice nor be deemed to have notice of any Event of Default specified in this
Indenture, except for those Events of Default specified in subparagraphs (1) and
(2) of Paragraph (C) above, or the occurrence of an Act of Bankruptcy, unless
specifically notified in writing of such Event of Default by the Authority, the
Company, or Bondholders of not less than 25% in principal amount of the Bonds
then Outstanding. At such time as the Trustee has or is deemed to have notice
of any Event of Default specified in this Indenture, the Trustee shall notify
the registered owners of such Event of Default. With respect to an Event of
Default as described in Article V(C)(3), such notice shall contain language to
the effect that the remedy of acceleration is not available. Notice shall be
given in the same manner as is required with respect to giving notice of
redemption pursuant to Article II(C)(5).
(M) Bonds Owned by Authority or Company. In determining whether the
Bondholders of a requisite aggregate principal amount of Bonds then Outstanding
have concurred in any request, demand, authorization, direction, notice,
consent, or waiver under this Indenture, Bonds owned by or for the account of
the Company or the Authority, or any person controlled by, controlling, or under
common control of either of them, shall be disregarded and deemed not to be
outstanding for the purpose of any such determination, except to the extent that
the Company owns all of the Bonds then Outstanding; provided, however, that for
the purpose of determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent, or
waiver, only Bonds of which the Trustee has actual knowledge of such ownership
shall be so disregarded.
(N) Trustee's Standard of Conduct with Respect to Event of Default. (1)
Except during the continuance of an Event of Default,
<PAGE>
(a) the Trustee undertakes to perform such duties and only such duties as
are specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(b) in the absence of bad faith on its part, the Trustee may conclusively
rely, as to the truth of the statements and certificates or opinions
furnished to it and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they conform
to the requirements of this Indenture.
(2) Notwithstanding any other provisions of this Article V, the Trustee
shall, during the existence of an Event of Default known to the Trustee, and
upon receipt of indemnification reasonably satisfactory to the Trustee, exercise
such of the rights and powers vested in it by this Indenture and use the same
degree of skill and care in their exercise as a prudent person in a like
situation would ordinarily use and exercise under the circumstances; provided,
that nothing contained herein shall be construed to entitle the Trustee to
demand indemnification as a condition precedent to the exercise of its duties
under Article V(D) above.
(3) No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act,
or its own willful misconduct, except that:
(a) this subparagraph shall not be construed to limit the effect of
subparagraph (1) of this Paragraph (N);
(b) the Trustee shall not be liable for any error of judgment made in good
faith thereby, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of
the Bondholders in principal amount of the Bonds, relating to the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee, under
this Indenture with respect to the Bonds.
(O) Bondholder Remedy - Ongoing Disclosure Under Rule 15c2-12. In addition
to the foregoing, a Bondholder or a beneficial owner of a Bond demonstrating
ownership for the purpose of this Paragraph (O) in accordance with Section 616
of the Facilities Agreement may institute any suit, action or proceeding at law
or in equity for the enforcement of any covenant contained in such Section 616
or for any remedy for breach thereof, as specified in and subject to the
limitations of Section 616 of the Facilities Agreement, with respect to
compliance with the Rule.
<PAGE>
Neither the Authority, the City nor the Trustee has assumed or will assume any
responsibility with respect to any covenant contained in Section 616 of the
Facilities Agreement or said Rule.
ARTICLE VI
CONCERNING THE TRUSTEE
The Trustee accepts the trust imposed upon it by this Indenture, but only
upon and subject to the following express terms and conditions:
(A) Negligence or Misconduct. In no event shall the Trustee be liable
except for its negligence or willful misconduct in relation to its duties under
this Indenture. The Trustee shall not be responsible for any recitals herein,
in the Bonds, the Facilities Agreement, or for the sufficiency of the security
for the Bonds, or for monitoring compliance by the Company of its obligations
under the Facilities Agreement, or for reviewing and approving any required
insurance coverage as described in the Facilities Agreement. The Trustee shall
have no responsibility hereunder except to the extent of the duties placed upon
the Trustee to hold, administer, deposit, secure, invest, and use the
Construction Fund, the Debt Service Fund and the Special Rebate Fund as
required, to the extent funds for such purposes are received by the Trustee, and
to perform the other express covenants and agreements made by the Trustee under
the provisions of this Indenture.
(B) Accountability for Funds. The Trustee shall not be accountable for the
use of any of the proceeds of such Bonds except the portion thereof deposited
with the Trustee, and the Trustee shall not be liable for any loss from the
investment (made in accordance with the terms of this Indenture) of any funds it
holds pursuant to this Indenture.
(C) Reliance on Communications. The Trustee shall not be liable in acting
in accordance with the provisions of this Indenture upon any notice,
requisition, request, consent, certificate, order, affidavit, letter, telegram,
or other paper or document believed by it to be genuine and correct and to have
been signed or sent by the proper person or persons, and the Trustee shall not
be bound to recognize any person as a Bondholder or to take any action at his
request, unless the ownership of such Bond or Bonds is indicated in the
Registration Books. Any action taken by the Trustee pursuant to this Indenture
upon the request or authority or consent of any person who, at the time of
making such request, or giving such authority or consent, is the Bondholder of
any Bond secured hereby, shall be conclusive and binding upon all future
Bondholders of the same Bond or any Bond issued in substitution or replacement
therefor.
(D) Proof of Facts. Notwithstanding anything elsewhere in this Indenture
contained, the Trustee shall have the right, but shall not be required, to
demand
<PAGE>
before the disbursement of any cash or in respect of any action whatsoever
within the purview of this Indenture, any showings, certificates, opinions,
appraisals, or other information, or action or evidence thereof, in addition to
that required by the terms hereof which the Trustee believes to be necessary or
desirable.
(E) Limited Responsibilities. The responsibilities of the Trustee elsewhere
set forth herein shall be further limited as follows:
FIRST: The Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with a direction of
Bondholders pursuant to any provision of this Indenture relating to the time,
method, and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred upon the Trustee,
under this Indenture.
SECOND: No provision of this Indenture shall require the Trustee (1) to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any of
its rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it, nor (2) to take any action, whether or not
directed to take such action by any Bondholder, pursuant to this Indenture,
which in the judgment of the Trustee would conflict with any rule of law, or
with the terms of this Indenture, or would be unjustly prejudicial to the
Bondholders not taking part in such direction. When acting pursuant to the
direction of any Bondholder pursuant to this Indenture, the Trustee may take
other action deemed proper by the Trustee which is not inconsistent with such
direction; provided, however, that the terms of this subparagraph SECOND
shall not impose any additional duties or responsibilities upon the Trustee
and shall not be construed to limit the effect of subparagraph FIRST of this
Paragraph (E).
(F) Performance through Attorneys, Accountants, Agents, Receivers or
Employees.
(1) The Trustee may execute any of the trusts or powers hereof and perform
the duties required of it hereunder by or through attorneys, accountants,
agents, receivers or employees and shall be entitled to advice of counsel
concerning all matters of trust hereof and its duties hereunder, and may in all
cases pay such reasonable compensation as it shall deem proper to all such
persons as reasonably may be required and employed in connection with the trusts
hereof.
(2) The Trustee shall not be liable for the default or misconduct of any such
attorney, agent, accountant or employee selected by it with reasonable care.
<PAGE>
(3) The Trustee may act upon the opinion or advice of any attorney selected
by it with reasonable care, and the Trustee shall not be responsible for
anything done or not done in good faith in accordance with any such opinion or
advice.
(G) Trustee as Bondholder. The Trustee may become the Bondholder of any of
the Bonds secured by this Indenture with the same rights which it would have if
not the Trustee. Nothing herein contained shall be construed to prohibit the
Trustee, either as principal or agent, from engaging in or being interested in
any financial or other transaction with the Authority or the Company or from
acting as depository, trustee, or agent for any committee or body of Bondholders
of the Bonds or of other obligations of the Authority as freely as if it were
not the Trustee.
(H) Execution of Documents. The Trustee agrees to execute any documents
reasonably requested by the Company in connection with any action taken by the
Company under the Facilities Agreement.
(I) Fees. The fees and expenses of the Trustee incurred in connection with
its performance hereunder shall be payable by the Company, as set forth in
Section 615 of the Facilities Agreement.
(J) Recitals. The recitals, statements and representations in the documents
executed to facilitate the issuance of the Bonds except only the Trustee's
authentication of the Bonds and the Trustee's representations of trust powers
and the Trustee's acceptance of the trusts hereunder, shall not be taken as made
by the Trustee, and the Trustee does not assume any responsibility for the
correctness thereof. The foregoing notwithstanding, the Trustee does represent
and warrant that it is duly qualified under Texas law to administer the trusts
created hereunder.
(K) Responsibility of Trustee Generally. No provision of this Indenture
shall require the Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of its duties under the documents
executed to facilitate the issuance of the Bonds except at the direction of the
registered owners pursuant to any provision of this Indenture and upon receipt
of indemnification satisfactory to the Trustee; provided, that nothing contained
herein shall be construed to enable the Trustee to demand indemnification as a
condition precedent to the exercise of its duties under Article V(D) above.
(L) Additional Rights of Trustee.
(1) The Trustee may rely and shall be protected in acting or refraining from
acting upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties.
<PAGE>
(2) Any request or direction of the Company mentioned herein shall be
sufficiently evidenced by an instrument executed by an Authorized Company
Representative and any resolution of the Company may be sufficiently evidenced
by a certified copy executed by the Secretary or an Assistant Secretary of the
Board of Directors of the Company.
(3) The Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture at the request or direction of any of the
Bondholders pursuant to this Indenture, unless such Bondholders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction.
(4) The Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or attorney.
ARTICLE VII
SUCCESSOR TRUSTEE
(A) Resignation and Removal of Trustee.
(1) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Paragraph (B) below.
(2) The Trustee may resign at any time, with or without reason, by giving
written notice thereof to the Authority and the Company, and to each of the
Bondholders. If an instrument of acceptance by a successor Trustee shall not
have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee, at the expense of the Company, may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(3) The Trustee may be removed at any time by the registered owners of at
least a majority in principal amount of the Outstanding Bonds, by a written
request for removal delivered to the Authority and the Company.
<PAGE>
(4) If at any time:
(a) The Trustee shall cease to be eligible under Paragraph (B) below and
shall fail to resign after written request therefor by the Authority, or by
any Bondholder who has been a bona fide holder of a Bond for at least 6
months, or
(b) the Trustee shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or of its property shall
be appointed or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (x) the Authority may remove the Trustee, or (y) any
Bondholder who has been a bona fide holder of a Bond for at least 6 months
may, on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
(5) So long as there is no Event of Default under the Facilities Agreement or
this Indenture, the Trustee may be removed at any time, for any reason, by an
instrument in writing, executed by the Company, and delivered to the Trustee and
the Authority. The Company shall mail to all Bondholders notice of such removal
and, subject to the provisions of clause (1) of this Paragraph (A), such removal
shall be effective 60 days after such notice is mailed unless 25% in aggregate
principal amount of the Bondholders object in writing to such removal.
(6) If the Trustee shall resign, be removed or become incapable of acting, or
if a vacancy shall occur in the office of Trustee for any cause, the Authority
shall promptly appoint a successor Trustee. If no successor Trustee shall have
been so appointed by the Authority and accepted appointment in the manner
hereinafter provided, any Bondholder who has been a bona fide holder of a Bond
for at least 6 months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(7) The successor Trustee shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee (other than
pursuant to Paragraph (D) below) by mailing written notice of such event to the
holders of the Bonds and to the parties to the documents relating to the Bonds.
Each notice shall include the name of the successor Trustee and the address of
its principal corporate trust office.
(B) Appointment of Successor. In case the Trustee hereunder shall resign or
be removed, or be dissolved, or shall be in course of dissolution or
liquidation, or otherwise become incapable of acting hereunder, or in case the
Trustee shall be taken under the control of any public officer or officers, or
of a receiver appointed by a court, a successor shall be appointed by the
Authority by an instrument executed
<PAGE>
by authority of a resolution of its Board, signed by the President or Vice
President and by the Secretary of the Board of Directors of the Authority. The
foregoing notwithstanding, so long as the Company is not in default under the
terms of the Facilities Agreement, the Company may appoint any successor
Trustee, by delivering to the Authority an instrument executed on behalf of the
Company by an Authorized Company Representative. In the selection of any such
successor Trustee, the Company shall advise and consult with the Authority and
shall give due consideration to suggestions and input which may be offered by
the Authority prior to the Company making the final decision with respect to
such selection. Every such successor Trustee shall be a trust company or bank in
good standing, located in the United States of America, and having a capital and
surplus of not less than One Hundred Million Dollars ($100,000,000), if there be
such a trust company or bank willing, qualified, and able to accept the trust
upon reasonable or customary terms. In the event that no appointment of a
successor Trustee shall be made pursuant to the foregoing provisions of this
Article within 60 days after a vacancy in the office of Trustee shall have
occurred, any Bondholder or any retiring Trustee may apply to any court of
competent jurisdiction for the appointment of a successor Trustee, and such
court may thereupon, after such notice, if any, as it shall deem proper,
prescribe or appoint a successor Trustee. Within 30 days of the resignation or
removal of a Trustee and the appointment of a successor, such successor Trustee
shall cause a written notice of such occurrence to be (i) published one time in
each of two consecutive weeks in a financial newspaper or journal which is of
general circulation in the Borough of Manhattan in The City of New York, New
York, and is customarily published at least once a day for at least five days in
each calendar week; and (ii) mailed, postage prepaid, to each registered owner
of Bonds, at its address appearing in the Registration Books.
(C) Qualification of Successor. Every successor Trustee appointed hereunder
shall execute, acknowledge, and deliver to its predecessor, the Authority and
the Company, an instrument in writing accepting such appointment hereunder, and
thereupon such successor Trustee, without any further act, deed, or conveyance,
shall become fully vested with all the estates, rights, powers, trusts, duties,
and obligations hereunder and under the Guaranty of its predecessor; but such
predecessor shall nevertheless, on the written request of the Authority, execute
and deliver instruments, including, without limitation any statement of
assignment permitted to be filed by the Texas Uniform Commercial Code,
transferring to such successor Trustee all the estates, rights, powers, and
trusts of such predecessor hereunder; and every predecessor Trustee shall
deliver all securities and money held by it to its successor; provided, however,
that before any such delivery is required or made, all reasonable, customary,
and legally accrued fees, advances, and expenses of such predecessor Trustee
shall be paid in full. Should any deed, assignment, or instrument in writing
from the Authority be required by any successor Trustee for more fully and
certainly vesting in such Trustee the estates, rights, powers, and duties hereby
vested or intended to be vested in the predecessor Trustee, any and all such
deeds, assignments, and instruments in
<PAGE>
writing shall, on request, be executed, acknowledged, and delivered by the
Authority.
(D) Merger or Consolidation of Trustee. Any corporation or association into
which the Trustee, or any successor to it in the trusts created by this
Indenture, may be merged or converted or with which it or any successor to it
may be consolidated, or any corporation or association resulting from any
merger, conversion, or consolidation to which the Trustee or any successor to it
shall be a party, shall be the successor Trustee under this Indenture without
the execution or filing of any paper or any other act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
ARTICLE VIII
RELEASE OF INDENTURE
(A) Satisfaction of Indebtedness and Release of Indenture. If the Authority
shall pay or cause to be paid to the registered owner of any Bond secured hereby
the principal of, premium, if any, and interest due and payable, and thereafter
to become due and payable, upon such Bond, or any portion of such Bond in a
principal amount equal to the minimum denomination then authorized under this
Indenture or any integral multiple thereof, such Bond or portion thereof shall
cease to be entitled to any lien, benefit or security under this Indenture. If
the Authority shall pay or cause to be paid to the registered owners of all the
Bonds secured hereby the principal of, premium, if any, and interest due and
payable, and thereafter to become due and payable, thereon, and shall pay or
cause to be paid all other sums payable hereunder by the Authority, and all
accrued fees and expenses of the Trustee, then, and in that case, the right,
title and interest of the Trustee in and to the Trust Estate shall thereupon
cease, terminate and become void and this Indenture and the lien hereby created
shall be discharged and satisfied. In such event, the Trustee shall assign,
transfer and turn over to the Company the Trust Estate, including, without
limitation, any surplus funds then held by the Trustee hereunder. Upon the
discharge and satisfaction of this Indenture and the termination of the Trust
Estate, the Bonds shall no longer be subject to redemption pursuant to Article
II(C) hereof (other than any redemption as described in Article VIII(B)(i),
which shall survive any such discharge and termination).
(B) Payment, Advance Funding, and Defeasance. All or any portion of
Outstanding Bonds, or portions of Outstanding Bonds in principal amounts equal
to the minimum denomination, then authorized under this Indenture or any
integral multiple thereof, shall prior to the maturity or redemption date
thereof be deemed to have been paid within the meaning and with the effect
expressed in this Article VIII when:
<PAGE>
(i) in the event said Bonds or portions thereof have been selected for
redemption, the Trustee shall have given, or the Company shall have given to
the Trustee in form satisfactory to it, irrevocable instructions to give
notice of redemption of such Bonds or portions thereof in accordance with the
provisions of this Indenture;
(ii) there shall have been deposited with the Trustee either moneys in an
amount which shall be sufficient, or Government Obligations (a) which shall
not contain provisions permitting the redemption thereof at the option of the
issuer thereof, (b) which mature no later than the earlier of (1) the date
fixed for the redemption of the Bonds or (2) the maturity date of the Bonds,
and (c) the principal of and the interest on which, when due, and without any
regard to reinvestment thereof, will provide moneys which, together with the
moneys, if any, deposited with or held by the Trustee, shall be sufficient,
to pay when due, the principal of, premium, if any, and interest due and to
become due on said Bonds or portions thereof on and prior to the redemption
date or maturity date thereof, as the case may be; and
(iii) in the event said Bonds or portions thereof do not mature and are
not to be redeemed within the next succeeding sixty (60) days, the Company
shall have given the Trustee in form satisfactory to it irrevocable
instructions to give, as soon as practicable in the same manner as a notice
of redemption is given, a notice to the registered owners of said Bonds or
portions thereof that the deposit required by clause (ii) above has been made
with the Trustee and that said Bonds or portions thereof are deemed to have
been paid in accordance with this Article VIII and stating the maturity or
redemption date upon which moneys are to be available for the payment of the
principal of and premium, if any, and interest on said Bonds or portions
thereof.
As used in this Indenture, the term "Government Obligations" shall mean
noncallable, direct general obligations of, or obligations the full and timely
payment of the principal of and interest on which are unconditionally guaranteed
by, the United States of America; provided, that said term may include
noncallable, indirect obligations of the United States of America if, in the
opinion of Bond Counsel, such indirect obligations are eligible under State law
to discharge obligations such as the Bonds; and provided further, if, in the
opinion of Bond Counsel, such obligations hereinafter described are eligible
under State law to discharge obligations such as the Bonds, that said term may
include obligations described in clause (xii) of Article III (H)(3) hereof that
are noncallable obligations and that bear a rating in the highest rating
category by Standard & Poor's Ratings Group or Moody's Investors Service.
In addition, upon the defeasance of the Bonds, any rights to redeem the Bonds
not exercised prior to such defeasance shall be extinguished.
(C) Reinvestment. Neither the Government Obligations nor moneys deposited
with the Trustee pursuant to this Article VIII nor principal or interest
payments on
<PAGE>
any such Government Obligations shall be withdrawn or used for any
purpose other than, and shall be held in trust for, the payment of the principal
of, premium, if any, and interest on said Bonds or portions thereof; provided,
that, any cash received from such principal or interest payments on such
Government Obligations deposited with the Trustee, if not then needed for such
purpose, may, to the extent practicable, be invested in Government Obligations
of the type and tenor described in clause (ii) of Paragraph (B) of this Article
VIII and interest earned from such reinvestments shall be paid over to the
Company, as received by the Trustee, free and clear of any trust, lien or
pledge. The foregoing notwithstanding, the agreement pursuant to which such
cash and/or Government Obligations are held by the Trustee may provide for the
ability to sell or otherwise dispose of all or part of the Government
Obligations and the reinvestment of the proceeds thereof, together with all or
any part of any cash held thereunder, in Government Obligations.
(D) Use of Moneys and Government Obligations Set Aside. Notwithstanding any
provision of any other Article of this Indenture which may be contrary to the
provisions of this Article VIII, all money or Government Obligations set aside
and held in trust pursuant to the provisions of this Article VIII for the
payment of Bonds, the premium, if any, and interest thereon, shall be applied to
and used solely for the payment of the particular Bonds, the premium, if any,
and interest thereon with respect to which such money or Government Obligations
have been so set aside in trust.
(E) No Amendment. Notwithstanding anything elsewhere contained in this
Indenture, if money or Government Obligations have been deposited or set aside
with the Trustee pursuant to this Article VIII for the payment of Bonds and such
Bonds shall not have in fact been actually paid in full, no amendment to the
provisions of this Article VIII shall be made without the consent of each
Bondholder affected thereby.
(F) Additional Conditions to Defeasance and Reinvestment. Prior to any
defeasance being deemed to have occurred hereunder, or prior to any reinvestment
of Government Obligations, as described in Paragraphs (B) and (C) above, the
Trustee shall receive the following:
(1) an opinion by an independent certified public accountant that after
such reinvestment the principal amount of substituted securities, together
with the interest thereon and any other available cash held by the Trustee,
will be sufficient to pay the principal of, and interest on, the Bonds which
have not previously been paid, and
(2) an unqualified opinion of Bond Counsel to the effect that (i) such
investment will not cause the Bonds to be "arbitrage bonds" within the
meaning of section 148 of the Code, and the Regulations in effect on the date
of such investment, or otherwise make the interest on the Bonds subject to
Federal income taxation, and (ii) such reinvestment is not inconsistent with
the
<PAGE>
laws of the State of Texas and with all relevant documents relating to the
issuance of the Bonds.
ARTICLE IX
AMENDMENTS
(A) Amendments without Bondholder Consent. With the consent of the Trustee
(unless such consent specifically is not required by the Facilities Agreement),
the parties to the Guaranty or the Facilities Agreement may, and the parties to
this Indenture, with the consent of the Company, may, without the consent of, or
notice to, any of the registered owners of the Bonds, enter into any amendments
to the Guaranty or the Facilities Agreement or enter into any indentures
supplemental to this Indenture for any one or more of the following purposes:
(1) to cure any ambiguity, formal defect, omission or inconsistent
provision herein or therein;
(2) to grant to the Trustee for the benefit of the registered owners of
the Bonds any additional revenues, properties or collateral, or any
additional rights, remedies, powers or authority that may lawfully be granted
to the registered owners of the Bonds or the Trustee;
(3) to add to the covenants and agreements of the parties hereto or
thereto other covenants and agreements of, or conditions or restrictions
upon, such parties or to eliminate any right or power conferred upon the
Company;
(4) to evidence any succession otherwise permitted hereunder or thereunder
to any parties hereto or thereto and the assumption by such successor of the
covenants and agreements of its predecessor hereunder or thereunder;
(5) to modify the Facilities Agreement to amend the definition of "Special
Facilities" therein, or to modify this Indenture to amend the definition of
"Qualified Investments" as set forth in Article III herein, which
modification does not, in the opinion of the Trustee, materially and
adversely affect the interest of the registered owners of the Bonds;
(6) to modify, amend or supplement this Indenture or any indenture
supplemental hereto in such manner as to permit the qualification hereof and
thereof under the Trust Indenture Act of 1939 or any similar federal statute
hereafter in effect or to permit the qualification of the Bonds for sale
under the securities laws of the United States of America or any of the
states of the United States of America, and to add to this Indenture or any
indenture
<PAGE>
supplemental thereto such other terms, conditions and provisions as
may be permitted by said Trust Indenture Act of 1939 or similar federal
statute;
(7) to modify or amend such provisions herein or therein in a manner in
which, in the opinion of Bond Counsel, is necessary in order to assure the
exclusion from gross income of interest on the Bonds pursuant to section
103(a) of the Code; or
(8) to make any other change herein or therein which does not, in the
opinion of the Trustee, materially and adversely affect the interest of the
registered owners of the Bonds, except that any such change to the Guaranty
will not be effective unless, in the opinion of counsel delivered to the
Trustee, such change will not materially and adversely affect the interest of
the registered owners of the Bonds.
(B) Consent of Majority of Bondholders. With the consent of the Company,
the parties to this Indenture may, or with the consent of the Trustee, the
parties to the Facilities Agreement may, at any time, enter into indentures
supplemental to this Indenture or amendments to this Indenture or the Facilities
Agreement amending, modifying, adding to or eliminating any of the provisions
hereof or thereof but, if such supplement or amendment is not of the character
described in Paragraph (A) above, only with the consent of the registered owners
of not less than a majority of the aggregate principal amount of the Outstanding
Bonds.
(C) Consent of All Bondholders. Notwithstanding the foregoing, no
supplement or amendment to this Indenture or amendment to the Guaranty or the
Facilities Agreement shall, without the consent of the registered owner of each
Outstanding Bond so affected, (i) extend the maturity date of any Bond, or
reduce the rate or extend the time of payment of interest thereon, or reduce the
principal amount thereof, or reduce any premium payable upon the redemption
thereof, or extend or reduce the amount of any mandatory redemption requirement,
or change the method of calculation of interest on the Bonds, (ii) deprive such
registered owner of the lien hereof on the revenues pledged hereunder and on the
Trust Estate, (iii) decrease the amounts payable by the Company under Section
502 of the Facilities Agreement or under the terms of the Guaranty, (iv) reduce
the aggregate principal amount of Bonds the registered owners of which are
required to approve any such supplement to this Indenture or amendment to this
Indenture or the Facilities Agreement or the Guaranty, (v) increase the
percentage of the aggregate principal amount of Bonds the registered owners of
which are required to direct the Trustee to accelerate the maturity of the
Bonds, or (vi) provide a privilege or priority of any Bond over any other Bond.
In addition to the foregoing, this Indenture shall not be amended in
contravention of the provisions of Article VIII(E) hereof.
(D) Effective Date of Amendment. The Trustee shall establish a record date
for purposes of approval of any such amendment or supplement described in
<PAGE>
Paragraphs (B) and (C) of this Article, and shall cause notice of such record
date and such proposed amendment to be given in the same manner as notices of
redemption are given by the Trustee. Such notice shall briefly set forth the
nature of the proposed amendment and shall state that copies thereof are on file
at the Designated Trust Office for inspection by all registered owners. If,
within 60 days (or such longer period as shall be prescribed by the Company)
following the mailing of such notice, the registered owners of the requisite
aggregate principal amount of the Bonds Outstanding at the time of the record
date established for such purpose shall have consented to and approved such
amendment, no registered owner of any Bond shall have any right to object to any
of the terms and provisions contained therein, or the operation thereof, or in
any manner to question the propriety of the execution thereof, or to enjoin or
restrain the parties to such amendment from adopting the same or from taking any
action pursuant to the provisions thereof. Upon receipt of the consent of the
registered owners of the requisite aggregate principal amount of the Bonds
Outstanding, the relevant parties may execute such amendment.
The consent of a registered owner shall be evidenced by an instrument
executed by such registered owner, delivered to the Trustee, which instrument
shall refer to the proposed amendment described in said notice and shall
specifically consent to and approve such amendment. Any consent given by a
registered owner as of such record date shall be irrevocable for a period of six
months from the date such consent is given, and shall be conclusive and binding
upon all future registered owners of the same Bond during such period. Such
consent may be revoked at any time after six months from the date such consent
was given by such registered owner, or by a successor in title, by filing notice
thereof with the Authority, the Company and the Trustee, but such revocation
shall not be effective if the registered owners of the requisite aggregate
principal amount of the Bonds Outstanding have, prior to the attempted
revocation, consented to and approved such amendment.
(E) Opinion of Bond Counsel. Prior to executing any amendment to this
Indenture, the Trustee shall receive an opinion of Bond Counsel substantially to
the effect that such amendment (i) does not violate the laws of the State of
Texas and (ii) will not materially adversely affect the treatment of the
interest on the Bonds as excludable from the gross income of the Bondholders
under applicable provisions of the Code.
ARTICLE X
MISCELLANEOUS PROVISIONS
(A) Proof of Execution. Any request, direction, consent, or other
instrument required by this Indenture to be signed or executed by Bondholders
may be in any number of concurrent writings of similar tenor and may be signed
or executed by
<PAGE>
such Bondholders in person or by an agent appointed in writing. Proof of the
execution of any such instrument, or of the writing appointing such agent, if
made in the following manner, shall be sufficient for any purpose of this
Indenture and shall be conclusive in favor of the Trustee with regard to any
action taken by it under such instrument. The fact, date, and due authorization
of the execution by any person of any such instrument may be proved by the
certificate of any officer in any jurisdiction, who, by the laws thereof, has
power to take acknowledgments within such jurisdiction, to the effect that the
person signing such instrument acknowledged before him the execution thereof, or
by an affidavit of a witness to such execution.
(B) Proof of Ownership. The fact of ownership of the Bonds by any
Bondholder, the amount and numbers of such Bonds, and the date of his holding
same shall be conclusively proved by the appropriate entries in the Registration
Books.
(C) Action Binding on Successor. Unless otherwise provided in this
Indenture, any request or consent of any Bondholder shall bind every future
Bondholder of the same Bond, or any Bond issued in substitution or replacement
therefor, in respect of anything done by the Trustee in pursuance of such
request or consent. In the event of the dissolution of the Authority, all of the
covenants, stipulations, promises, and agreements in this Indenture contained
by, on behalf of, or for the benefit of the Authority, shall bind or inure to
the benefit of the successor or successors of the Authority from time to time
and any officer, board, or commission to whom or to which any power or duty
affecting such covenants, stipulations, promises, and agreements shall be
transferred by or in accordance with law.
(D) Nonpresentment and Unclaimed Funds. If any Bond shall not be presented
for payment when the principal thereof becomes due, either at maturity or at the
date fixed for redemption thereof or otherwise, all liability of the Authority
and the Company to the owners thereof and to the Trustee for the payment of such
Bond shall forthwith cease, determine, and be completely discharged whenever
funds sufficient to pay for the principal of, premium, if any, and interest on
such Bond shall be paid, or caused to be paid to the Trustee by the Company as
provided in this Indenture, and such funds shall be segregated by the Trustee
and held in trust for the benefit of the registered owner of such Bond, who
shall thereafter be restricted exclusively to such funds for the satisfaction of
any claim of whatever nature relating to such Bond. Any money deposited with the
Trustee in trust for the payment of the principal of, premium, if any, or
interest on any Bond remaining unclaimed for three years after such principal
of, premium, if any, or interest on such Bond has become due and payable shall,
subject to any unclaimed property laws of the State of Texas, and upon receipt
of indemnification reasonably satisfactory to the Trustee, be paid to the
Company; provided, however, that before the Trustee shall be required to make
any such repayment, the Trustee may at the expense of the Company cause to be
published at least once, in a financial
<PAGE>
newspaper or journal which is of general circulation in the Borough of Manhattan
in The City of New York, New York, and is customarily published at least once a
day for at least five days in each calendar week, a notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such publication, any unclaimed balance of
such money then remaining will be repaid to the Company. After the payment of
such unclaimed moneys to the Company, the owner of such Bond shall thereafter
look (to the extent of any amount so repaid to the Company) only to the Company
for the payment thereof, and all liability of the Trustee with respect to such
money shall thereupon cease, and the Company shall not be liable for any
interest thereon and shall not be regarded as a trustee of such moneys.
(E) Destruction of Bonds. Upon the surrender to the Trustee of any Bonds
acquired or redeemed or paid at maturity by the Authority, the same shall
forthwith be cancelled and destroyed by the Trustee in accordance with its
customary procedures, and the Trustee shall, from time to time, deliver its
certificate of such destruction to the Authority and the Company.
(F) No Third-Party Beneficiaries. Except as herein otherwise expressly
provided, nothing in this Indenture express or implied is intended or shall be
construed to confer upon any person, firm, or corporation other than the
Company, the Authority, the Trustee, and the Bondholders, any right, remedy, or
claim, legal or equitable, under or by reason of this Indenture or any covenant,
condition, or stipulation contained herein.
(G) Severability. In case any one or more of the provisions of this
Indenture or of the Bonds shall be held to be invalid or ineffective as to any
person or circumstance, the remainder thereof and the application of such
provision to persons or circumstances other than those as to which it is held
invalid shall not be affected thereby.
(H) Governing Law. The validity, interpretation, and performance of this
Indenture shall be governed by the laws of the State of Texas.
(I) Addresses. All notices, certificates, requests, or other communications
hereunder shall be sufficiently given and shall be deemed given, unless
otherwise required by this Indenture, when delivered by United States mail,
first-class, postage prepaid, or Federal Express overnight priority delivery, or
such other method as may be agreed upon by the parties to such notice, addressed
as follows: if to the Authority, 1000 Throckmorton, Fort Worth, Texas 76102,
Attention: City Manager; if to the City, 1000 Throckmorton, Fort Worth, Texas
76102, Attention: City Attorney; if to the Company, Federal Express
Corporation, 2007 Corporate Avenue, Memphis, Tennessee 38132, Attention: Vice
President and Treasurer, with a copy of such notice to be sent in the same
manner to Federal Express Corporation, 1980 Nonconnah Blvd., Memphis, Tennessee
38132, Attention: Legal Department, Managing Director, Contracts and Business
Transactions, and to
<PAGE>
Federal Express Corporation, 2003 Corporate Avenue, Memphis, Tennessee 38132,
Attention: Vice President, Properties; and if to the Trustee, One First National
Plaza, Suite 0126, Chicago, Illinois 60670-0126, Attention: Corporate Trust
Services Division. A duplicate copy of each notice, certificate, request, or
other communication given hereunder to the Authority, the City, the Company, or
the Trustee shall also be given to the others. The Company, the City, the
Authority, and the Trustee may, by notice given hereunder, designate any further
or different addresses to which subsequent notices, certificates, requests or
other communications shall be sent.
(J) Notice to Department of Commerce. If (i) the Company fails to timely
make or pay any Special Facilities Rental under the Facilities Agreement, (ii)
an Event of Default has occurred, or (iii) upon receiving notice that the
interest on the Bonds is, or may be, subject to federal income taxation, the
Trustee promptly shall inform the Department of such an occurrence, by sending
written notice to the following address:
Texas Department of Commerce
Attention: Executive Director
P. O. Box 12728
Austin, Texas 78711
or the latest address specified by the Department.
(K) Counterparts. This Indenture may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and
the same instrument.
(L) Captions. In this Indenture, unless the context otherwise requires:
(1) The terms "hereby", "hereof", "hereto", "hereunder", and any similar
terms, as used in this Indenture, refer to this Indenture, and the term
"hereafter" shall mean after, and the "heretofore" shall mean before the date
of this Indenture.
(2) Words of the masculine gender shall mean and include correlative words
of the feminine and neuter genders and words importing the singular number
shall mean and include the plural number and vice versa.
(3) Any headings preceding the texts of the several Articles and
Paragraphs of this Indenture, and any table of contents appended hereto,
shall be solely for convenience of reference and shall not constitute a part
of this Indenture, nor shall they affect its meaning, construction or effect.
<PAGE>
(4) All references herein to particular Articles or Paragraphs are
references to the Articles or Paragraphs of this Indenture, and reference
herein to any exhibit means an exhibit attached to this Indenture.
(5) Reference to any documents means that document as amended or
supplemented from time to time in accordance with its terms and, where
applicable, the Facilities Agreement, and reference to any party to a
documents means that party and its permitted successors and assigns.
(M) Company Direction. Whenever, so long as there is no Event of Default
which has occurred and is continuing under the Facilities Agreement, after a
reasonable request by the Company, the Authority shall fail, refuse or neglect
to give any direction to the Trustee or to require the Trustee to take any other
action that the Authority is required to have the Trustee take pursuant to the
provisions of the Facilities Agreement or this Indenture, the Company instead of
the Authority may give any such direction to the Trustee or require the Trustee
to take any such action. Upon receipt by the Trustee of a written notice signed
by an Authorized Company Representative stating that the Company has made
reasonable request of the Authority, and that the Authority has failed, refused
or neglected to give any direction to the Trustee or to require the Trustee to
take any such action, the Trustee is hereby irrevocably empowered and directed
to accept such direction from the Company as sufficient for all purposes of this
Indenture. Except with respect to the Authority's rights to fees, expenses and
indemnification pursuant to Section 901 of the Facilities Agreement, the Company
shall have the direct right to cause the Trustee to comply with any of the
Trustee's obligations under this Indenture to the same extent that the Authority
is empowered so to do, and the Trustee shall incur no liability for action taken
by it in good faith in accordance with the Company's directions pursuant to this
Paragraph.
[THE REMAINDER OF THIS PAGE HAS BEEN
LEFT BLANK INTENTIONALLY]
<PAGE>
IN WITNESS WHEREOF, the Authority, acting through its Board of Directors, has
caused this Indenture to be executed in its name, and for and on its behalf, by
the President or Vice President of the Authority and attested by the Secretary
of the Authority, and its corporate seal to be hereunto affixed; and the
Trustee, to evidence its acceptance of the trusts hereby created and vested in
it, has caused this Indenture to be executed in its name, and for and on its
behalf by an Assistant Vice President, all as of the date first above written.
ALLIANCEAIRPORT AUTHORITY, INC.,
ISSUER
By /s/ James Lane
--------------------------------
President
ATTEST:
/s/ Jewel Woods
----------------------------
Secretary
(SEAL)
THE FIRST NATIONAL BANK OF
OF CHICAGO, TRUSTEE
By /s/ Leland Hansen
---------------------------------
Title: Assistant Vice President
<PAGE>
EXHIBIT A
FORM OF BOND
NO. R-_____________ PRINCIPAL
AMOUNT
$_______
UNITED STATES OF AMERICA
STATE OF TEXAS
ALLIANCEAIRPORT AUTHORITY, INC.
SPECIAL FACILITIES REVENUE BOND, SERIES 1996
(FEDERAL EXPRESS CORPORATION PROJECT)
INTEREST RATE DATED DATE MATURITY DATE CUSIP NO.
- ------------- ---------- ------------- ---------
_______% APRIL 1, 1996 ______________ __________
ON THE MATURITY DATE specified above, ALLIANCEAIRPORT AUTHORITY, INC. (the
"Authority"), being a nonstock, nonprofit industrial development corporation
organized and existing under the laws of the State of Texas, including
particularly the Development Corporation Act of 1979, Article 5190.6,
V.A.T.C.S., as amended (the "Act"), and acting on behalf of the City of Fort
Worth, Texas (the "City") hereby promises to pay to
(hereinafter called the "registered owner") the principal amount of
DOLLARS
and to pay interest on the unpaid principal amount hereof from the Dated Date
set forth above, on October 1, 1996 and semiannually thereafter on each April 1
and October 1 to the Maturity Date specified above, or the date fixed for
redemption prior to maturity, and on such Maturity Date, at the Interest Rate
per annum specified above; except that if the date of the authentication of this
Bond is later than the first Record Date (hereinafter defined), such principal
amount shall bear interest from the interest payment date next preceding the
date of authentication, unless such date of authentication is after any Record
Date but on or before the next following interest payment date, in which case
such unpaid principal amount shall bear interest from such next following
interest payment date. Interest on this Bond shall be calculated on the basis
of a year of 360 days and twelve 30-day months.
THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON this Bond are payable in
lawful money of the United States of America, without exchange or collection
charges. Payment of principal of, premium, if any, interest on this Bond shall
be made by The First National Bank of Chicago (the "Trustee") in its capacity
<PAGE>
as the paying agent for this Bond to the registered owner hereof appearing on
the Registration Books, as hereinafter described, on the fifteenth day of the
month next preceding each such interest payment date (the "Record Date"), by
check or draft mailed, to such registered owner, at its address as it appears on
the Registration Books kept by the Trustee, in its capacity as registrar for
this Bond, as hereinafter described, at the close of business on the Record
Date; provided, however, upon the written request of any registered owner of at
least $1,000,000 in principal amount of Bonds, given in accordance with the
terms of the hereinafter defined Indenture, all payments of principal, premium,
if any, and interest on the Bonds shall be paid by wire transfer in immediately
available funds to an account in the continental United States designated by the
registered owner. It shall be the duty of each registered owner to notify the
Trustee in writing of the address to which payment shall be mailed. For so long
as the registered owner of a Bond is determined in accordance with the book-
entry-only system of The Depository Trust Company ("DTC"), payments of
principal, premium, if any, and interest on the Bond shall be made in accordance
with the arrangements between DTC and the Authority, all in accordance with the
terms of the Indenture. If the registered owner of a Bond is determined to be
any other securities depository, payments of principal, premium, if any, and
interest on the Bonds shall be made in accordance with the arrangements between
such securities depository and the Authority, all in accordance with the terms
of the Indenture.
THIS BOND is one of a Series of bonds dated as of the Dated Date (the
"Bonds"), authorized and issued in an aggregate principal amount of $___,000,000
FOR THE PURPOSE OF PROVIDING A PORTION OF THE COST OF THE ACQUISITION,
CONSTRUCTION, EQUIPPING AND FURNISHING OF AN EXPRESS CARGO PACKAGE SORTING AND
DISTRIBUTION FACILITY AT ALLIANCE AIRPORT (THE "SPECIAL FACILITIES") WITHIN THE
BOUNDARIES OF THE CITY FOR USE BY FEDERAL EXPRESS CORPORATION, A DELAWARE
CORPORATION (THE "COMPANY").
THE OBLIGATION to pay the principal of, premium, if any, and interest on
this Bond from the sources described below is solely and exclusively a special
obligation of the Authority. No other public entity, including the State of
Texas, or any other political subdivision of the State of Texas, or any other
public body, is obligated, directly, indirectly, contingently, or in any other
manner, to pay such principal, premium, or interest from any source whatsoever
and that neither the full faith and credit nor the taxing power of the State of
Texas, the City, or any other political subdivision of the State of Texas, is
pledged to the payment of the principal or the interest on the Bonds. The
registered owner hereof shall never have the right to demand payment of this
Bond or the interest hereon out of any funds raised or to be raised by taxation,
or from any other funds, and no representation is made herein with respect to
the anticipated sufficiency of such sources. No property is encumbered by any
lien or security interest for the benefit of the registered owner of this Bond.
<PAGE>
THE BONDS are subject to optional redemption by the Authority, at the
direction of the Company, on and after April 1, 2006, at any time and from time
to time, in whole or in part, upon written notice of the exercise of the option
to redeem delivered to the Authority and the Trustee by the Company, at the
redemption price (expressed as a percentage of principal amount) applicable to
such redemption date as set forth in the table below plus accrued interest to
the date fixed for redemption:
<TABLE>
<CAPTION>
Redemption Period
(all dates inclusive) Redemption
- ------------------------------------ ------------
Price (%)
------------
<S> <C>
April 1, 2006 to March 31, 2007 102
April 1, 2007 to March 31, 2008 101
April 1, 2008 and thereafter 100
</TABLE>
THE BONDS are subject to redemption by the Authority, at the direction of the
Company, at any time and from time to time, in whole or in part as described
below, at a redemption price equal to 100% of the principal amount thereof,
without premium, plus accrued interest thereon to the date fixed for redemption,
upon the occurrence of any of the following events:
(a) the Company shall have determined, as evidenced by a resolution
adopted by the Company's Board of Directors, that the continued operation of
the Special Facilities is impractical, uneconomical or undesirable for any
reason, including, without limitation, the imposition upon the Company with
respect to the Special Facilities or the operation thereof of unreasonable
burdens or excessive liabilities, which shall be deemed to include, without
limitation, the imposition or substantial increase of ad valorem property
taxes or taxes on the leasing or use of the Special Facilities or on amounts
payable with respect thereto;
(b) all or substantially all of the Special Facilities shall have been
damaged, destroyed, condemned or taken by eminent domain; or
(c) the construction or operation of the Special Facilities shall have
been enjoined or prevented or shall have otherwise been prohibited by, or
shall conflict with, any order, decree, rule or regulation of any court or of
any Federal, state or local regulatory body, administrative agency or other
governmental body.
To exercise any such option the Authority, at the direction of the Company,
shall give written notice to the Trustee, which notice shall specify a
redemption date, which date may not be more than 120 days nor less than 45 days
after said notice is given, and shall further specify that, as determined by the
Company, one
<PAGE>
or more of such events has occurred or one or more of such conditions is
continuing, and such determination shall be conclusive.
THE BONDS shall be redeemed by the Authority in whole at a redemption price
equal to 100% of the principal amount thereof, without premium, plus accrued
interest to the redemption date, within 90 days following receipt by the Trustee
of written notice from a current or former registered owner thereof or the
Company of (a) the issuance of a published or private ruling or a technical
advice memorandum by the Internal Revenue Service in which the Company has
participated or has been given the opportunity to participate, and which ruling
or memorandum the Company, in its discretion, does not contest or from which no
further right of judicial review or appeal exists, or (b) a determination from
which no further right of appeal exists of any court of competent jurisdiction
in the United States in a proceeding in which the Company has participated or
has been a party, or has been given the opportunity to participate or be a party
(either such event being a "Determination of Taxability"), in either case, to
the effect that, as a result of a failure to observe any covenant or agreement
in the Facilities Agreement (hereinafter defined) or the inaccuracy of any
representation or warranty therein, the interest payable on the Bonds is
included in the gross income, of the holders thereof for federal income tax
purposes, other than a person who is a "substantial user" or a "related person"
of such substantial user within the meaning of the Internal Revenue Code of
1986, as amended (the "Code"); provided, however, that no such Determination of
Taxability shall be considered to exist unless (i) the registered owner or
former registered owner of the Bond involved in such proceeding or action (a)
gives the Company and the Trustee prompt notice of the commencement thereof and
(b) (if the Company agrees to pay all expenses in connection therewith) offers
the Company the opportunity to control unconditionally the defense thereof and
(ii) either (a) the Company does not agree within 30 days of receipt of such
offer to pay such expenses and liabilities and to control such defense or (b)
the Company shall exhaust or choose not to exhaust all available proceedings for
the contest, review, appeal or rehearing of such decree, judgment or action
which the Company determines to be appropriate. No Determination of Taxability
described above will result from the inclusion of interest on any Bond in the
computation of minimum or indirect taxes. All of the Bonds shall be redeemed
upon a Determination of Taxability as described above, unless, if in the opinion
of Bond Counsel, or such other nationally recognized bond counsel as may be
mutually acceptable to the Authority and the Company, redemption of a portion of
the Bonds would have the result that interest payable on the remaining Bonds
outstanding after the redemption would not be so included in any such gross
income, only such portion shall be redeemed.
PRIOR TO THE DATE FIXED FOR ANY REDEMPTION of Bonds prior to their scheduled
maturity, the Trustee shall cause a notice of such redemption to be given in the
manner described in the Indenture.
<PAGE>
WITH RESPECT TO any optional redemption of the Bonds, as described above,
unless moneys sufficient to pay the principal of, premium, if any, and interest
on the Bonds to be redeemed shall have been received by the Trustee prior to the
giving of such notice of redemption, such notice shall state that said
redemption shall be conditional upon the receipt of such moneys by the Trustee
on or prior to the date fixed for such redemption. If such moneys are not
received, such notice shall be of no force and effect, the Authority shall not
redeem such Bonds and the Trustee shall give notice, in the manner in which the
notice of redemption was given, that such moneys were not so received and that
the Bonds were not so redeemed.
IF LESS THAN ALL the Bonds are to be called for redemption under any
redemption provision set forth herein permitting such partial redemption, the
particular Bonds to be redeemed shall be selected by the Trustee by lot or such
other customary method chosen by the Trustee, in the principal amounts (in
integral multiples of $5,000) designated to the Trustee by the Company on behalf
of the Authority or otherwise required by the Indenture.
IF THE DATE FOR THE PAYMENT of the principal of, premium, if any, or interest
on this Bond shall be a Sunday, a Saturday, a legal holiday, or a day on which
banking institutions in the City of New York, New York, the City of Memphis,
Tennessee, or the city where the Designated Trust Office of the Trustee is
located are authorized by law or executive order to close, then the date for
such payment shall be the next succeeding day which is not such a day; payment
on such date shall have the same force and effect as if made on the scheduled
date of payment; and no interest shall accrue and be payable in respect of such
payment from the scheduled date of payment to such date.
THIS BOND OR ANY PORTION OR PORTIONS HEREOF IN ANY INTEGRAL MULTIPLE OF
$5,000 may be assigned and shall be transferred only in the Registration Books
upon the terms and conditions set forth in the Indenture. Among other
requirements for such assignment and transfer, this Bond must be presented and
surrendered to the Trustee at its Designated Trust Office, together with proper
instruments of assignment, in form and with guarantee of signatures satisfactory
to the Trustee, evidencing assignment of this Bond or any portion or portions
hereof in any integral multiple of $5,000 to the assignee or assignees in whose
name or names this Bond or any such portion or portions hereof is or are to be
transferred and registered. The form of Assignment printed or endorsed on this
Bond shall be executed by the registered owner, or its duly authorized attorney
or representative, and may be deemed to conclusively evidence the assignment
hereof. A new Bond or Bonds payable to such assignee or assignees, or to the
previous registered owner in the case of the assignment and transfer of only a
portion of this Bond, may be delivered by the Trustee in conversion of and
exchange for this Bond, all in the form and manner as provided in the next
paragraph hereof for the conversion and exchange of other Bonds. The registered
owner of this Bond shall be deemed and treated by the Authority, the Company,
<PAGE>
and the Trustee as the absolute owner hereof for all purposes, including payment
and discharge of liability upon this Bond to the extent of such payment, and the
Authority, the Company and the Trustee shall not be affected by any notice to
the contrary.
ALL BONDS OF THIS SERIES are issuable solely as fully registered bonds,
without interest coupons, in the denomination of any integral multiple of
$5,000. As provided in the Indenture, this Bond, or any unredeemed portion
hereof, may, at the request of the registered owner or the assignee or assignees
hereof, be converted into and exchanged for a like aggregate principal amount of
fully registered bonds, without interest coupons, payable to the appropriate
registered owner, assignee, or assignees, as the case may be, having the same
maturity date, and bearing interest at the same rate, in any denomination or
denominations in any integral multiple of $5,000 as requested in writing by the
appropriate registered owner, assignee, or assignees, as the case may be, upon
surrender of this Bond to the Trustee for cancellation, all in accordance with
the form and procedures set forth in the Indenture. The Company shall pay the
Trustee's standard or customary fees and charges for transferring, converting,
and exchanging any Bond or portion thereof, but the one requesting such
transfer, conversion, or exchange shall pay any taxes or governmental charges
required to be paid with respect thereto as a condition precedent to the
exercise of such privilege of transfer, conversion or exchange. The Trustee
shall not be required to make any such transfer, conversion, or exchange with
respect to any Bond or any portion thereof called for redemption prior to
maturity, within 45 days prior to its redemption date.
WHENEVER the beneficial ownership of this Bond is determined by a book entry
at a securities depository for the Bonds, the foregoing requirements of holding,
delivering or transferring this Bond shall be modified to require the
appropriate person or entity to meet the requirements of the securities
depository as to registering or transferring the book entry to produce the same
effect.
IN THE EVENT any Trustee for the Bonds is removed, resigns, or otherwise
ceases to act as such, the Indenture provides procedures for the appointment of
a successor therefor, and for written notice thereof to be mailed to the
registered owners of the Bonds.
IT IS HEREBY certified and covenanted that this Bond has been duly and
validly authorized, issued, and delivered; that all acts, conditions, and things
required or proper to be performed, exist, and be done precedent to or in the
authorization, issuance, and delivery of this Bond have been performed, existed,
and have been done in accordance with law; that this Bond is a special revenue
obligation of the Authority, with the principal of, premium, if any, and
interest on this Bond being payable solely from (except to the extent payable
from amounts attributable to proceeds of the Bonds), and secured by a first lien
on and pledge of, the Trust Estate, as defined in the Indenture, including
specifically the payments (the "Special Facilities Rentals") to be made by the
Company pursuant to the Land and Special
<PAGE>
Facilities Lease Agreement between the Authority and the Company, dated as of
April 1, 1996 (the "Facilities Agreement") and held under the Indenture. The
Company has agreed and is unconditionally obligated to make Special Facilities
Rentals to the Trustee for deposit into the Debt Service Fund created pursuant
to the Indenture in amounts sufficient to pay and redeem, or provide for the
payment and redemption of, the principal of, premium, if any, and interest on
this Bond, and the Series of which it is a part.
THE BONDS are secured by a Trust Indenture, dated as of April 1, 1996 (the
"Indenture"), whereunder the Trustee, or its successor, is custodian of the Debt
Service Fund and is obligated to enforce the rights of the owners of the Bonds
and to perform other duties in the manner and under the conditions stated in the
Indenture and in the Resolution. In case an "Event of Default", as defined in
the Indenture, shall occur, the principal of the Bonds then outstanding may be
declared to be due and payable immediately upon the conditions and in the manner
provided in the Indenture. The registered owner of this Bond shall have no right
to enforce the provisions of the Indenture, or to institute an action, suit, or
proceeding at law or in equity to enforce the covenants therein, or to
institute, appear in, or defend any action, suit, or proceeding with respect
thereto, except as provided in the Indenture. Anything in the Indenture to the
contrary notwithstanding, the registered owner of this Bond shall have a right
of action to enforce the payment of the principal of, premium, if any, and
interest on this Bond on or after the same shall have become due at the place,
from the sources, and in the manner expressed in the Indenture. In addition,
the registered owners shall be entitled to the benefits of a Guaranty from the
Company to the Trustee, dated as of April 1, 1996 (the "Guaranty"). Reference
is hereby made to the Indenture for the provisions with respect to the nature
and extent of the security for the Bonds; the rights, duties, and obligations of
the Authority, the Trustee, the Company, and the registered owners of the Bonds;
the terms upon which such Bonds are issued and secured; and the modification of
any of the foregoing.
BY BECOMING the registered owner of this Bond, the registered owner thereby
acknowledges all of the terms and provisions of the Indenture, agrees to be
bound by such terms and provisions, acknowledges that the Facilities Agreement,
the Guaranty and the Indenture are available for inspection at the Designated
Trust Office in Chicago, Illinois of the Trustee, and agrees that the terms and
provisions of this Bond, the Facilities Agreement and the Indenture constitute a
contract between each registered owner hereof and the Authority.
THE AUTHORITY has reserved the right to amend the Indenture and the
Facilities Agreement, and the Guaranty may be amended by the parties thereto,
with the approval in some, but not all circumstances, of the registered owners
of at least a majority in aggregate principal amount of the outstanding Bonds
secured by the Indenture, all as provided in and subject to the provisions of
the Indenture.
<PAGE>
IN WITNESS WHEREOF, this Bond has been signed with the (manual) (facsimile)
signature of the President or Vice President of the Board of Directors of the
Authority, and countersigned with the (manual) (facsimile) signature of the
Secretary of the Board of Directors of the Authority, and the official seal of
the Authority has been duly impressed, or placed in facsimile, on this Bond.
____________________________ ______________________________
Secretary, President,
Board of Directors Board of Directors
(Authority's Seal)
<PAGE>
FORM OF TRUSTEE'S AUTHENTICATION CERTIFICATE
--------------------------------------------
TRUSTEE'S AUTHENTICATION CERTIFICATE
It is hereby certified that this Bond has been issued under the provisions of
the Indenture described in the text of this Bond; and that this Bond has been
issued in conversion of and exchange for or replacement of a Bond, Bonds, or a
portion of a Bond or Bonds of an issue authorized by the Indenture described in
the text of this Bond; and that the Indenture authorizing this Bond and other
proceedings relating thereto were approved by the Attorney General of the State
of Texas.
Dated The First National Bank of Chicago,
as Trustee
_________________
By ____________________________
Authorized Representative
FORM OF COMPTROLLER'S REGISTRATION CERTIFICATE
----------------------------------------------
TO BE ATTACHED TO INITIAL BONDS
-------------------------------
COMPTROLLER'S REGISTRATION CERTIFICATE: REGISTER NO.________
I hereby certify that there is on file and of record in my office a
certificate to the effect that this Bond has been examined, certified as to
validity, and approved by the Attorney General of the State of Texas, and
further that this Bond has been registered by the Comptroller of Public Accounts
of the State of Texas.
Witness my signature and seal this ___________________.
________________________________
Comptroller of Public Accounts
of the State of Texas
(Comptroller's Seal)
<PAGE>
FORM OF ASSIGNMENT
------------------
ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers unto:
________________________________________________________________________
(Please insert Social Security or Taxpayer
Identification Number of Transferee)
________________________________________________________________________
(Please print or typewrite name and address,
including zip code of Transferee)
________________________________ the within Bond and all rights thereunder, and
hereby irrevocably constitutes and appoints __________________________________,
attorney, to register the transfer of the within Bond on the books kept for
registration thereof, with full power of substitution in the premises.
Dated:
Signature Guaranteed:
<TABLE>
<CAPTION>
<S> <C>
________________________________________________ ______________________________________________________
NOTICE: Signature(s) must be guaranteed by an NOTICE: The signature above must correspond
"eligible guarantor institution" meeting the require- with the name of the registered owner as it appears
ments of the Trustee, which requirements include upon the front of this Bond in every particular, with-
membership or participation in STAMP or such other out alteration or any change.
"signature guaranty program" as may be determined
by the Trustee in addition to or in substitution for
STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.
</TABLE>
THE FOLLOWING LEGEND SHALL BE PLACED ON THE BONDS AS THE AGGREGATE PRINCIPAL
AMOUNT OF THE BONDS EXCEEDS $200 MILLION:
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent
for registration of transfer, exchange, or payment, and any certificate issued
is registered in the name of Cede & Co. or in such other name as is requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
<PAGE>
Exhibit 10.67
EXECUTION
COPY
______________________________________________________________
GUARANTY
FROM
FEDERAL EXPRESS CORPORATION,
as Guarantor
TO
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
Dated as of April 1, 1996
AllianceAirport Authority, Inc.
Special Facilities Revenue Bonds, Series 1996
(Federal Express Corporation Project)
______________________________________________________________
<PAGE>
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF GUARANTOR
<TABLE>
<S> <C> <C>
Section 1.1 Guarantor Representations and Warranties.. 1
ARTICLE II
COVENANTS AND AGREEMENTS
Section 2.1 Obligations Guaranteed.................. 2
Section 2.2 Obligations Unconditional............... 2
Section 2.3 No Waiver or Set-Off.................... 4
Section 2.4 Guaranty Event of Default............... 4
Section 2.5 Waiver of Notice; Expenses.............. 4
Section 2.6 Dissolution or Merger of the Guarantor.. 4
Section 2.7 Benefit and Enforcement................. 5
ARTICLE III
NOTICES
Section 3.1 Notices................................. 5
ARTICLE IV
MISCELLANEOUS
Section 4.1 Effective Date; Termination............. 5
Section 4.2 Remedies Not Exclusive.................. 5
Section 4.3 Amendments.............................. 5
Section 4.4 Entire Agreement; Counterparts.......... 5
Section 4.5 Severability............................ 5
Section 4.6 Reinstatement........................... 5
Section 4.7 Governing Law........................... 6
</TABLE>
<PAGE>
GUARANTY
THIS GUARANTY made and entered into as of April 1, 1996 from FEDERAL
EXPRESS CORPORATION, a corporation duly organized and existing under the laws of
the State of Delaware and having its principal office at 2005 Corporate Avenue,
Memphis, Tennessee 38132 (the "Guarantor"), to THE FIRST NATIONAL BANK OF
CHICAGO, a banking association duly organized and existing under the laws of the
United States of America, and having its principal corporate trust office in
Chicago, Illinois, as trustee (the "Trustee"), under the Indenture referred to
below.
WITNESSETH:
WHEREAS, the AllianceAirport Authority, Inc., a nonprofit industrial
development corporation created and existing under the laws of the State of
Texas (the "Authority") intends to issue its Special Facilities Revenue Bonds,
Series 1996 (Federal Express Corporation Project), in the aggregate principal
amount of $249,540,000 (the "Bonds") under and pursuant to a Trust Indenture
(the "Indenture"), dated as of April 1, 1996, between the Authority and the
Trustee;
WHEREAS, the proceeds derived from the issuance and sale of the Bonds are
to be used to finance all or part of the cost of acquiring, constructing,
equipping and furnishing certain facilities described in the hereinafter defined
Facilities Agreement to be located at an airport commonly known as "Alliance
Airport", which facilities are to be leased by the Authority to the Guarantor
under a Land and Special Facilities Lease Agreement of even date herewith (the
"Facilities Agreement") by and between the Authority and the Guarantor;
WHEREAS, the Guarantor desires that the Authority issue the Bonds and apply
the proceeds as aforesaid and is willing to enter into this Guaranty in order to
induce the Authority to issue the Bonds, to enhance the marketability of the
Bonds and thereby achieve interest cost and other savings thereto, and in order
to provide an inducement to the purchase of the Bonds by all who shall at any
time become the registered owners of the Bonds (collectively, the
"Bondholders"); and
WHEREAS, all terms used in this Guaranty which are defined in the
Facilities Agreement have the same meanings in this Guaranty which are assigned
to such terms in the Facilities Agreement.
NOW, THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guarantor does hereby represent, warrant, covenant and agree with the Trustee
for the benefit of the Bondholders as follows:
1
<PAGE>
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF GUARANTOR
Section 1.1 Guarantor Representations and Warranties. The Guarantor does
hereby represent and warrant that it is a corporation duly incorporated and in
good standing under the laws of the State of Delaware, has the power to enter
into and perform this Guaranty and to own its corporate property and assets, has
duly authorized the execution and delivery of this Guaranty by proper corporate
action and neither this Guaranty, the authorization, execution, delivery and
performance hereof will violate in any material respect any provision of law,
any order of any court or agency of government or any agreement, indenture or
other instrument to which the Guarantor is a party or by which it or its
property is bound, or in any material aspect be in conflict with or result in a
breach of or constitute a default under any indenture, agreement or other
instrument or any provision of its restated certificate of incorporation,
bylaws, or any other requirement of law applicable to the Guarantor. This
Guaranty constitutes the legal, valid and binding obligation of the Guarantor
enforceable against the Guarantor in accordance with its terms, except as the
enforceability hereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general equitable principles.
ARTICLE II
COVENANTS AND AGREEMENTS
Section 2.1 Obligations Guaranteed.
(a) The Guarantor hereby unconditionally guarantees to the Trustee for the
benefit of the Bondholders the full and prompt payment of the principal of,
premium, if any, and interest on the Bonds and, to the extent permitted by law,
interest on overdue interest or premium, when and as the same shall become due
and payable as provided in the Indenture, whether at the stated maturity
thereof, by acceleration, call for redemption or otherwise. All payments by the
Guarantor hereunder shall be paid in lawful money of the United States of
America. Each and every default in payment of the principal of, premium, if
any, or interest on any Bond, or interest on overdue interest or premium, shall
give rise to a separate cause of action hereunder and separate suits may be
brought hereunder as each cause of action arises.
(b) The Guarantor further agrees that this Guaranty constitutes an
absolute, unconditional, present and continuing guaranty of payment and not of
collection, and waives any right to require that any resort be had by the
Trustee or the Bondholders to pursue (1) the Trustee's or any Bondholder's
rights against any
2
<PAGE>
other party, (2) any other right or remedy available to the Trustee or any
Bondholder by contract, applicable law or otherwise or (3) any security (other
than moneys on deposit in the Funds or Accounts held by the Trustee under the
Indenture) held by or for the benefit of the Bondholders for payment of the
principal of, premium, if any, or interest on the Bonds, or interest on overdue
interest or premium on the Bonds.
Section 2.2 Obligations Unconditional. The obligations of the Guarantor
under this Guaranty shall be absolute, unconditional and immediately
enforceable, subject to the provisions of Section 2.4 herein, when each payment
of principal, premium, if any, and interest is due and shall remain in full
force and effect on the Guarantor and any successors thereof until the entire
principal of, premium, if any, and interest on the Bonds and, to the extent
permitted by law, interest on overdue interest and premium, shall have been paid
in full or duly provided for in accordance with the Indenture and, to the extent
permitted by law, such obligations shall not be affected, modified, released or
impaired by any state of facts or the happening from time to time of any event,
including, without limitation, any of the following, whether or not with notice
to, or the consent of, the Guarantor:
(a) the waiver, compromise, settlement, release or termination of any
or all of the obligations, covenants or agreements of the Authority
contained in the Indenture, or of the payment, performance or observance
thereof, or the impossibility of performance or unenforceability of any of
such obligations, covenants or agreements;
(b) the failure to give notice to the Guarantor of the occurrence of
an Event of Default under the terms and provisions of this Guaranty, the
Indenture or the Facilities Agreement;
(c) the transfer, assignment or mortgaging of all or any part of the
interest of the Authority or the Guarantor in the Special Facilities or any
failure of title with respect to the Authority's or the Guarantor's
interest in the Special Facilities or the invalidity, unenforceability or
termination of the Facilities Agreement;
(d) the assignment of any of the obligations, covenants and agreements
contained in this Guaranty;
(e) the waiver, compromise, settlement, release or termination of the
Authority's obligations, covenants or agreements contained in the
Facilities Agreement, or of the payment, performance or observance thereof,
or the impossibility of performance or unenforceability of any of such
obligations, covenants or agreements;
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(f) the waiver, compromise, settlement, release or termination of any
of the obligations, covenants or agreements of the Guarantor under the
Facilities Agreement, or of the payment, performance or observance thereof;
(g) the extension of the time for payment of any principal of and
premium, if any, or interest on any Bond, owing or payable on such Bond or
of the time for performance of any obligations, covenants or agreements
under or arising out of the Facilities Agreement or the Indenture or the
extension or the renewal of either thereof;
(h) the modification or amendment (whether material or otherwise) of
any obligation, covenant or agreement set forth in the Facilities Agreement
or the Indenture;
(i) the taking or the omission to take any of the actions referred to
in the Facilities Agreement, the Indenture, the Bonds or this Guaranty;
(j) any failure, omission or delay on the part of the Authority or the
Trustee to enforce, assert or exercise any right, power or remedy conferred
on the Trustee, the Authority or any other person in this Guaranty, the
Facilities Agreement or the Indenture, or any other act or acts on the part
of the Trustee, the Authority or any of the Bondholders;
(k) the voluntary or involuntary liquidation, dissolution, sale or
other disposition of all or substantially all the assets, marshalling of
assets and liabilities, receivership, insolvency, bankruptcy, assignment
for the benefit of creditors, reorganization, arrangement, composition with
creditors or readjustment of, or other similar proceedings affecting the
Guarantor or the Authority or any or all of the assets of either of them,
or any allegation or contest of the validity of this Guaranty, the
Indenture or the Facilities Agreement, or the disaffirmance of this
Guaranty, the Indenture or the Facilities Agreement in any such proceeding;
it being specifically understood, consented and agreed to that this
Guaranty shall remain and continue in full force and effect and shall be
enforceable against the Guarantor to the same extent and with the same
force and effect as if such proceedings had not been instituted, and it is
the intent and purpose of this Guaranty that the Guarantor shall and does
hereby waive all rights and benefits which might accrue to the Guarantor by
reason of any such proceedings;
(l) to the extent permitted by law, any event or action that would, in
the absence of this clause, result in the release or discharge by operation
of law of the Guarantor from the performance or observance of any
obligation, covenant or agreement contained in this Guaranty;
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(m) the default or failure of the Guarantor fully to perform any of
its obligations set forth in this Guaranty;
(n) the damage to, or condemnation, destruction, redelivery,
repossession or surrender of, all or a portion of the Special Facilities or
the abandonment, non-completion or curtailment of the Special Facilities,
or the release, substitution or replacement of any property comprising all
or a portion of the Special Facilities;
(o) the release, substitution or replacement of any security pledged
under the Indenture;
(p) any determination of the illegality, irregularity, invalidity or
unenforceability of, or any defect in, the Bonds, the Facilities Agreement
or the Indenture or any of the provisions thereof;
(q) any present or future law or order of any government (de jure or
de facto) or of any agency thereof, purporting to reduce, amend or
otherwise affect the Bonds or to vary any terms of payment thereof;
(r) any claim of immunity on behalf of the Authority or any other
obligor on the Bonds or with respect to any property of the Authority or
any other obligor on the Bonds; or
(s) any other circumstances which might otherwise constitute a legal
or equitable discharge or defense of a surety or a guarantor.
Section 2.3 No Waiver or Set-Off.
(a) Nothing in this Guaranty shall be construed as a waiver by the
Guarantor of any rights or claims it may have against the Authority or the
Trustee under this Guaranty or otherwise, but any recovery upon such rights and
claims shall be had from the Authority or the Trustee separately.
(b) No act of commission or omission of any kind or at any time on the part
of the Authority or the Trustee, or their successors and assigns, in respect of
any matter whatsoever shall in any way impair the rights of the Trustee to
enforce any right, power or benefit under this Guaranty, and no set-off,
counterclaim, reduction, or diminution of any obligation, or any defense of any
kind or nature (other than performance by the Guarantor of its obligations
hereunder), which the Guarantor has or may have against the Authority or the
Trustee or any assignee or successor thereof shall be available hereunder to the
Guarantor.
5
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Section 2.4 Guaranty Event of Default.
(a) A "Guaranty Event of Default" shall exist if the Guarantor defaults in
any guarantee referred to in Section 2.1(a) hereof and such default continues
for one Business Day from the date such payment was due. At such time as the
Trustee has notice of a Guaranty Event of Default hereunder, the Trustee shall
notify the registered owners of such Guaranty Event of Default in the same
manner as is provided in the Indenture.
(b) Upon an event of default in payment of principal of or premium, if any,
on any Bond when and as the same shall become due, whether at the stated
maturity thereof, by acceleration, call for redemption or otherwise, or in the
event of a default in the payment of any interest on any Bond when and as the
same shall become due, the Trustee shall have the right to proceed first and
directly against the Guarantor under this Guaranty without resorting to any
security (other than moneys on deposit in the Funds or Accounts held by the
Trustee under the Indenture) held by the Authority or the Trustee under the
Indenture.
(c) All moneys received by the Trustee pursuant to any right given or
action taken under the provisions of this Guaranty shall, after payment of
accrued fees and expenses of the Trustee and the cost and expenses of the
proceedings resulting in the collection of such moneys and of the expenses,
liabilities and advances incurred or made by the Trustee, be deposited in the
Debt Service Fund (as established in the Indenture) for the benefit of the
Bondholders and such moneys shall be applied in accordance with the terms of the
Indenture.
(d) The Trustee shall be under no obligation to institute any suit or to
take any remedial action under this Guaranty, or to enter any appearance or in
any way defend in any suit in which it may be made defendant, or to take any
steps in the enforcement of any rights and powers under this Guaranty, until it
shall be indemnified to its satisfaction by the Bondholders against any and all
liability (including, without limitation, reasonable compensation for services,
costs and expenses, outlays, and counsel fees and expenses and other
disbursements) not due to its negligence or willful misconduct for any action so
taken.
Section 2.5 Waiver of Notice; Expenses. The Guarantor hereby expressly
waives notice from the Trustee and the Bondholders of their acceptance and
reliance on this Guaranty. The Guarantor agrees to pay all reasonable costs,
expenses and fees, including all reasonable attorneys' fees and expenses which
are incurred by the Trustee in enforcing this Guaranty or protecting the rights
of the Trustee or the Bondholders following a Guaranty Event of Default on the
part of the Guarantor, whether the same shall be enforced by suit or otherwise.
Section 2.6 Dissolution or Merger of the Guarantor. Except as hereinafter
provided, the Guarantor agrees that during the term of this Guaranty it will not
6
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dissolve or otherwise dispose of all or substantially all of its assets and will
not consolidate with or merge into another Person unless the surviving or
transferee Person, as applicable, is, and after such transaction shall be, a
solvent Person qualified to do business in the State and, concurrently with such
transaction, irrevocably and unconditionally assumes in writing, by means of an
instrument which is delivered to the Authority and the Trustee, all of the
obligations of the Guarantor herein.
Section 2.7 Benefit and Enforcement. This Guaranty shall not be deemed to
create any right, or to be in whole or in part for the benefit of any person
other than the Trustee, the Guarantor, the Bondholders, and their permitted
successors and assigns. This Guaranty is entered into by the Guarantor for the
benefit of the registered owners from time to time of the Bonds under the
Indenture and may be enforced by or on behalf of the registered owners of the
Bonds only by the Trustee by such actions, suits and proceedings, at law or in
equity, as it may be advised shall be necessary or expedient to preserve and
protect its interest and the interests of the Bondholders hereunder. However,
the Trustee shall proceed to enforce this Guaranty on behalf of the Bondholders
upon written request of the registered owners of not less than 25% in aggregate
principal amount of the Bonds then outstanding and upon being indemnified for
its expenses and any liability to be incurred by the Trustee other than
liability arising from its willful misconduct or negligence in connection with
any action so taken.
ARTICLE III
NOTICES
Section 3.1 Notices. The provisions of Article X(I) of the Indenture shall
govern the giving of any notice hereunder.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Effective Date; Termination. The obligations of the Guarantor
hereunder shall arise absolutely and unconditionally upon the Closing Date.
This Guaranty shall terminate on such date as the Indenture is discharged and
satisfied in accordance with Article VIII of the Indenture.
Section 4.2 Remedies Not Exclusive. No remedy herein conferred upon or
reserved to the Trustee is intended to be exclusive of any other available
remedy or remedies, but each and every such remedy shall be cumulative and shall
be in addition to every other remedy given under this Guaranty or now or
hereafter
7
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existing at law or in equity. No delay or omission to exercise any right or
power accruing upon any Guaranty Event of Default shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right and power
may be exercised from time to time and as often as may be deemed expedient. In
order to entitle the Trustee to exercise any remedy reserved to it in this
Guaranty, it shall not be necessary to give any notice. In the event any
provision contained in this Guaranty should be breached, and thereafter duly
waived, such waiver shall be limited to the particular breach so waived and
shall not be deemed to waive any other breach hereunder. No waiver, amendment,
release or modification of this Guaranty shall be established by conduct, custom
or course of dealing, but solely by an instrument in writing duly executed by
the parties to this Guaranty.
Section 4.3 Amendments. This Guaranty may be amended by the Guarantor and
the Trustee only in accordance with the provisions of Article IX of the
Indenture.
Section 4.4 Entire Agreement; Counterparts. This Guaranty constitutes the
entire agreement, and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof
and may be executed simultaneously in several counterparts, each of which shall
be deemed an original, and all of which together shall constitute one and the
same instrument.
Section 4.5 Severability. The invalidity or unenforceability of any one
or more phrases, sentences, clauses or sections contained in this Guaranty shall
not affect the validity or enforceability of the remaining portions of this
Guaranty, or any part thereof.
Section 4.6. Reinstatement. This Guaranty shall continue to be effective,
or be reinstated, as the case may be, in respect of any of the obligations
guaranteed hereunder if at any time payment or any part thereof, of such
obligations is rescinded or must otherwise be restored or returned by any
Bondholder or the Trustee on behalf of any Bondholder upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Authority or the
Guarantor, or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Authority or the
Guarantor or any substantial part of its property, or otherwise, all as though
such payments had not been made.
Section 4.7 Governing Law. THIS GUARANTY SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
TENNESSEE.
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LEFT BLANK INTENTIONALLY]
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed
in its name and behalf by its duly authorized officer as of the date first above
written.
FEDERAL EXPRESS CORPORATION,
as Guarantor
By: /s/ CHARLES M. BUCHAS, JR.
----------------------------
Name: Charles M. Buchas, Jr.
----------------------
Title: Vice President and Treasurer
----------------------------
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By: /s/ LELAND HANSEN
------------------
Name: Leland Hansen
-------------
Title: Assistant Vice President
------------------------
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Exhibit 10.68
EXECUTION
COPY
LAND AND SPECIAL FACILITIES
LEASE AGREEMENT
By and Between
FEDERAL EXPRESS CORPORATION
and
ALLIANCEAIRPORT AUTHORITY, INC.
Dated as of April 1, 1996
<PAGE>
<TABLE>
<S> <C>
PARTIES ...................................................................... 1
ARTICLE I DEFINITIONS......................................................... 1
Section 101. Definitions...................................................... 1
ARTICLE II USE OF FACILITIES: REPRESENTATIONS AND WARRANTIES.................. 7
Section 201. Uses and Ownership of Facilities............................ 7
Section 202. Representations and Warranties by the Authority............. 8
Section 203. Representations and Warranties by the Lessee................ 8
ARTICLE III COMMENCEMENT AND COMPLETION OF
FACILITIES; ISSUANCE OF BONDS............................. 10
Section 301. Plans and Specifications, Approvals, Construction,
Construction Contracts; Utilities......................... 10
Section 302. Agreement to Issue Bonds; Application of Proceeds;
the Lessee Required to Pay Costs of Construction
if Bond Proceeds Insufficient............................. 12
Section 303. As-Built Drawings........................................... 12
Section 304. Cost of Construction and Preliminary Completion Certificates 12
Section 305. Establishment of the Completion Date, Other Completion
Certificates.............................................. 12
Section 306. The Lessee to Pursue Remedies Against Contractors,
Subcontractors and Suppliers and Their Sureties........... 13
Section 307. Construction of Additional Facilities....................... 13
Section 308. Ownership of Improvements................................... 14
Section 309. Form of Construction Contracts.............................. 14
ARTICLE IV TERM........................................................ 14
Section 401. Term........................................................ 14
Section 402. Rights at Expiration........................................ 14
Section 403. Expiration.................................................. 15
ARTICLE V RENTALS AND FEES............................................ 15
Section 501. Ground Rent................................................. 15
Section 502. Special Facilities Rental................................... 15
Section 503. Facilities Rental after Bonds are No Longer Outstanding..... 15
Section 504. Field Use Charges........................................... 16
Section 505. Time and Place of Payments.................................. 16
Section 506. Delinquent Rentals.......................................... 16
Section 507. Assignment of Rights........................................ 16
</TABLE>
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<TABLE>
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Section 508. Obligations of the Lessee Hereunder Unconditional........... 17
Section 509. Prepayment of Rentals....................................... 17
Section 510. Payments to Authority....................................... 17
ARTICLE VI OBLIGATIONS OF THE LESSEE................................... 17
Section 601. Net Lease................................................... 17
Section 602. Maintenance and Operation................................... 17
Section 603. Utilities................................................... 17
Section 604. Signs....................................................... 18
Section 605. Hazardous Materials......................................... 17
Section 606. Nondiscrimination........................................... 19
Section 607. Affirmative Action.......................................... 20
Section 608. Right to Use Airport........................................ 20
Section 609. [Intentionally Omitted]..................................... 20
Section 610. Mechanic's Liens............................................ 20
Section 611. The Lessee to Maintain its Corporate Existence; Conditions
Under Which Exceptions Permitted.......................... 21
Section 612. Equipment................................................... 21
Section 613. Security Plan............................................... 21
Section 614. Tax Exemption............................................... 21
Section 615. The Lessee's Covenant Concerning the Bonds.................. 22
Section 616. The Lessee's Obligations Concerning SEC Rule 15c2-12........ 23
ARTICLE VII OBLIGATIONS OF THE AUTHORITY................................ 24
Section 701. Operation as a Public Airport............................... 24
Section 702. Ingress and Egress.......................................... 24
Section 703. Quiet Enjoyment of Leased Premises.......................... 24
Section 704. Maintenance and Operations.................................. 24
Section 705. No Federal Funds to be Spent on Leased Premises............. 24
Section 706. Expansion of Airport Boundaries to Include Contiguous Land.. 24
ARTICLE VIII RESERVATIONS................................................ 24
Section 801. Improvement, Relocation or Removal of Special Facilities.... 24
Section 802. Inspection of Leased Premises............................... 24
Section 803. Subordination to U.S. Government............................ 25
Section 804. War or National Emergency................................... 25
Section 805. No Liability of the Authority............................... 25
Section 806. No Warranty of Condition or Suitability..................... 25
Section 807. Responsibility for Contracts for Special Facilities and
Payment of Special Facilities Rentals....................... 25
Section 808. [Intentionally Omitted]..................................... 25
Section 809. Consideration of Amendment.................................. 25
</TABLE>
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<TABLE>
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ARTICLE IX INDEMNITY AND INSURANCE..................................... 26
Section 901. Indemnification of Indemnified Parties...................... 26
Section 902. Indemnification of the Trustee.............................. 27
Section 903. Public Liability Insurance.................................. 27
Section 904. Fire and Extended Coverage Insurance........................ 27
Section 905. Application of Insurance Proceeds........................... 28
Section 906. Performance Bonds........................................... 28
Section 907. Right of the City or Trustee to Pay Insurance Premiums...... 28
ARTICLE X PREPAYMENT OF SPECIAL FACILITIES RENTALS.................... 28
Section 1001. In Connection with Optional Redemption of Bonds............. 28
Section 1002. In Connection with Defeasance of the Bonds.................. 28
Section 1003. In Connection with the Termination of this Agreement in the
Event of Damage or Destruction or Condemnation............ 29
Section 1004. In Connection with a Partial Redemption..................... 29
Section 1005. In Connection with a Determination of Taxability............ 29
ARTICLE XI DAMAGE AND CONDEMNATION..................................... 29
Section 1101. Damage and Destruction...................................... 29
Section 1102. Condemnation................................................ 31
Section 1103. Destruction or Condemnation of Excluded Personal Property
or Lessee Improvements.................................... 32
Section 1104. Taking or Condemnation by the City.......................... 32
Section 1105. Destruction or Condemnation of Leased Premises Other
Than Special Facilities or Former Lessee Improvements....... 32
ARTICLE XII ADDITIONAL BONDS............................................ 33
Section 1201. Additional Bonds............................................ 33
Section 1202. Approval of State Agencies.................................. 33
ARTICLE XIII TERMINATION OF AGREEMENT BY THE LESSEE...................... 33
Section 1301. Termination by the Lessee................................... 33
ARTICLE XIV EVENTS OF DEFAULT........................................... 34
Section 1401. Events of Default........................................... 34
Section 1402. Remedies of the Trustee for Certain Events of Default....... 34
Section 1403. Remedies of the Authority on Default........................ 35
Section 1404. The Lessee to Remain Liable for Payments; Reletting......... 35
</TABLE>
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<TABLE>
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Section 1405. Disposition of Excluded Personal Property................... 35
Section 1406. No Remedy Exclusive......................................... 36
Section 1407. No Additional Waiver Implied By One Waiver; Consents
to Waiver................................................. 36
Section 1408. Suspension.................................................. 36
Section 1409. Delay not a Waiver.......................................... 36
ARTICLE XV DEFAULT BY THE AUTHORITY.................................... 36
Section 1501. Default by the Authority; Remedies of the Lessee............ 36
ARTICLE XVI RIGHTS UPON TERMINATION..................................... 37
Section 1601. Fixed Improvements.......................................... 37
Section 1602. Excluded Personal Property.................................. 37
ARTICLE XVII ASSIGNMENT AND SUBLETTING................................... 37
Section 1701. Successors and Assignments.................................. 37
Section 1702. Subletting.................................................. 37
Section 1703. Transfer of Leased Premises by the Authority; Performance
of Rights, Duties and Obligations of the Authority under
this Agreement............................................ 37
Section 1704. Opinion of Bond Counsel Required............................ 38
ARTICLE XVIII GENERAL PROVISIONS.......................................... 38
Section 1801. Non-Interference with Operation of Airport.................. 38
Section 1802. Attorney's Fees............................................. 38
Section 1803. Taxes....................................................... 38
Section 1804. License Fees and Permits.................................... 38
Section 1805. Amendments to this Agreement................................ 39
Section 1806. Force Majeure............................................... 39
Section 1807. References to Bonds, the Authority, the Trustee and
the Indenture Ineffective when Bonds are no Longer
Outstanding............................................... 39
Section 1808. Modifications Hereof and of Indenture....................... 39
Section 1809. Paragraph Headings.......................................... 39
Section 1810. Interpretations............................................. 39
Section 1811. Notices..................................................... 39
Section 1812. Party's Consent............................................. 40
Section 1813. Nondisturbance by Authority and Trustee..................... 40
Section 1814. Counterparts................................................ 40
Execution Page ...............................................................41
Exhibit A Property Description........................................ A-1
</TABLE>
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<TABLE>
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Exhibit B Special Facilities.......................................... B-1
Exhibit C Insurance Form.............................................. C-1
</TABLE>
<PAGE>
LAND AND SPECIAL FACILITIES LEASE AGREEMENT
THIS LAND AND SPECIAL FACILITIES LEASE AGREEMENT (hereinafter called this
"Agreement") made and entered into as of April 1, 1996, by and between the
AllianceAirport Authority, Inc. (the "Authority"), a nonstock, nonprofit
industrial development corporation, created to act on behalf of the City of Fort
Worth, a home-rule city and a political subdivision of the State of Texas (the
"City"), pursuant to the Constitution and laws of the State of Texas, including
particularly Article 5190.6, V.A.T.C.S., as amended (hereinafter called the
"Development Corporation Act"), and Federal Express Corporation, a Delaware
corporation with its principal office at Memphis, Tennessee and authorized to do
business in the State of Texas (hereinafter called the "Lessee").
WITNESSETH:
WHEREAS, the City owns and operates the Alliance Airport (hereinafter called
"Airport"); and
WHEREAS, the Lessee is primarily engaged in the business of distribution of
express cargo and parcels; and
WHEREAS, at the request of the Lessee, the Authority has acquired or will
acquire simultaneously herewith and develop certain real estate described in
EXHIBIT A hereto, and will acquire and construct thereon certain facilities
described in EXHIBIT B hereto; and
WHEREAS, in furtherance of the public purposes set forth in the Development
Corporation Act, the Authority proposes to finance the costs of the project to
be leased to the Lessee through the issuance of Special Facilities Revenue Bonds
of the Authority issued under the Indenture herein defined; and
WHEREAS, the Lessee desires to lease such real estate and improvements upon
the terms and conditions hereinafter stated;
NOW, THEREFORE, in consideration of the mutual covenants and considerations
herein contained, the Authority lets and demises to the Lessee and the Lessee
rents from the Authority the Leased Premises and all herein described rights
incident thereto, and the Lessee and the Authority further agree and covenant as
follows:
<PAGE>
ARTICLE I
---------
DEFINITIONS
-----------
Section 101. Definitions. In addition to terms defined elsewhere in this
Agreement, the following terms, for the purposes of this Agreement, shall
have the meanings set forth below:
"Act of Bankruptcy" means the commencement of a bankruptcy or similar
proceeding by or against the Lessee, including, but not limited to, the
following: the making of a general assignment for the benefit of creditors, the
commencing of a voluntary case under the Federal Bankruptcy Code or the filing
of a petition thereunder, petitioning or applying to any tribunal for the
appointment of a receiver, or any trustee for the Lessee or a substantial part
of the assets of the Lessee, commencing any proceeding under any bankruptcy,
reorganization, dissolution or liquidation law or statute of any jurisdiction,
whether now or hereafter in effect, or the appointment of a receiver or any
trustee for the Lessee or any substantial part of any of the properties of the
Lessee.
"Airport" means the public transportation facility owned by and located
within the City and known as Alliance Airport.
"Architect" means Taylor Gardner Montgomery Architects, Inc.
"Authority" means the AllianceAirport Authority, Inc., a nonstock,
nonprofit industrial development corporation duly organized and operating under
the laws of the State, including the Development Corporation Act, or any
successor thereto or assign thereof.
"Authorized Lessee Representative" means such officer or employee of the
Lessee authorized by the Lessee to act on its behalf under this Agreement or the
Indenture as certified to the Authority, the City and the Trustee in writing by
the Lessee.
"Board" or "Board of Directors" means the lawfully qualified board of
directors of the Authority.
"Bond Counsel" means McCall, Parkhurst & Horton L.L.P. and Kelly, Hart &
Hallman, a Professional Corporation, or such nationally recognized bond counsel
as may hereafter be selected by the Authority.
"Bond Year" means each one year period beginning on the Closing Date, or
any yearly anniversary thereof, and ending one year thereafter, until the Bonds
are retired in full.
<PAGE>
"Bonds" means the AllianceAirport Authority, Inc. Special Facilities
Revenue Bonds, Series 1996 (Federal Express Corporation Project) to be issued
in the aggregate principal amount not to exceed $250,000,000.
"Business Day" means any day which is not a Sunday, a Saturday, a legal
holiday or a day on which banking institutions in the City of New York, New
York, the City of Memphis, Tennessee, or the city in which the Designated Trust
Office of the Trustee is located are authorized by law or executive order to
close.
"City" means the City of Fort Worth, Texas, a home-rule city organized and
existing under the laws of the State.
"Claims" means all claims, lawsuits, causes of action and other legal
actions and proceedings brought against any Indemnified Party so long as the
claim, lawsuit, cause of action or other legal action or proceeding, directly or
indirectly, arises out of, results from, relates to or is based upon, in whole
or in part: (a) the issuance, offering, sale, delivery or payment of the Bonds
(except when arising out of, resulting from, relating to or based upon the
information under the captions "The Authority", "The Airport", "The City" and
"Tax Matters" contained in the preliminary official statement and the official
statement relating to the Bonds), or (b) the design, construction, installation,
operation, use, occupancy, maintenance or ownership of the Special Facilities or
any part thereof.
"Closing Date" means the date of issuance and delivery of the Bonds to the
initial purchasers thereof in exchange for the purchase price therefor.
"Code" means the Internal Revenue Code of 1986, together with any
amendments thereto or successor federal income tax laws.
"Commission" means the Securities and Exchange Commission of the United
States of America.
"Completion Date" means the date of completion of the acquisition and
construction of the Special Facilities certified in accordance with Section 305
hereof.
"Construction Fund" means the construction fund established with the
Trustee pursuant to Article III of the Indenture.
"Costs" means all costs incident to the purchase of the Land and the
provision of the Special Facilities and the financing thereof now or hereafter
permitted by the Development Corporation Act, including, without limitation, the
cost of acquisition, construction, reconstruction, improvement, and
<PAGE>
expansion, including the cost of the acquisition of any land, rights-of-way,
property rights, easements, and interests, the cost of machinery and equipment,
financing charges, inventory, raw materials and other supplies, research and
development costs, interest prior to and during construction and for one year
after completion of construction (whether or not capitalized), cost of estimates
and of engineering and legal services, plans, specifications, surveys, estimates
of cost and of revenue, other expenses necessary or incident to determining the
feasibility and practicability of acquiring, constructing, reconstructing,
improving, and expanding the Special Facilities, administrative expense and such
other expense as may be necessary or incident to the acquisition, construction,
reconstruction, improvement and expansion thereof, the placing of the same in
operation, and the financing or refinancing of the Special Facilities, including
the refunding of any outstanding obligations, mortgages, or advances issued,
made or given by any Person for any of the aforementioned costs.
"Debt Service Fund" means the debt service fund established with the
Trustee pursuant to Article III of the Indenture.
"Department" means the Texas Department of Commerce, together with any
successor under the Development Corporation Act.
"Designated Trust Office" means the corporate trust office of the Trustee
located in Chicago, Illinois, or such future location as shall be designated in
writing by the Trustee to the Authority and the Lessee.
"Disbursement Request" means a certificate signed by an Authorized Lessee
Representative, which certificate shall state: (i) the requisition number,
amount to be paid and the name and address of the Person to whom payment is to
be made or to whom a reimbursable advance, if any, by the Company has been made;
(ii) that there has been expended, or is being expended concurrently with the
delivery of such certificate (or in the case of interest which the Trustee is
directed to transfer from the Capitalized Interest Account of the Construction
Fund to the Debt Service Fund, will be expended within the year following the
date the Special Facilities is completed and placed in service) an amount on
account of Costs of the Special Facilities at least equal to the amount set
forth in such certificate; (iii) that no other certificate in respect of such
expenditure is being or previously has been delivered to the Trustee; (iv) that
no Event of Default (as defined herein) has occurred and is continuing; (v) to
the extent such disbursement (a "reimbursement allocation") is to reimburse an
expenditure (an "original expenditure") that was paid (X) from a source other
than the proceeds of the Bonds and (Y) prior to the issue date of the Bonds,
that such original expenditure is for a proper Cost of the Special Facilities
and was incurred not more than 60 days prior to the Inducement Date and that the
reimbursement allocation is being made not later than 18 months after the later
of (A) the
<PAGE>
date on which such original expenditure was paid or (B) the date on which the
property is placed in service or abandoned (but the date of such reimbursement
allocation may not be more than three years after the date the original
expenditure was paid); (vi) that at least 95% of all amounts previously
disbursed from the Construction Fund to pay Costs of the Special Facilities (not
including costs of issuance and any underwriters' discount) plus the amount
requested by such certificate to be disbursed from the Construction Fund have
been or will be used to provide "airport facilities" or other exempt facilities
within the meaning of the Code and the Regulations in effect thereunder and
applicable to the Bonds; and (vii) if applicable, that the sum of (A) all
amounts previously disbursed from the Construction Fund to pay costs of issuance
plus (B) the amount requested by such certificate to be disbursed from the
Construction Fund, when added to other amounts already expended for the payment
of such costs (including underwriters' discount), to pay costs of issuance does
not exceed 2% of the issue price of the Bonds.
"DTC" means The Depository Trust Company, New York, New York.
"Environment, Health and Safety Requirements" means all of the terms and
conditions of all permits, licenses, and other authorizations which are required
under, and all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables which are
contained in, all federal, state and local laws (including rules, regulations,
codes, judgments, orders, decrees, stipulations, injunctions, and demand letters
issued, entered, promulgated or approved thereunder) relating to public health
and safety, worker health and safety, or pollution or protection of the
environment, including Laws (specifically those defined in Section 605 hereof as
Environmental Laws) relating to emissions, discharges, releases, or threatened
releases of Hazardous Materials into ambient air, surface water, ground water,
or lands or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials.
"Equipment" means tangible personal property that is not annexed to the
Land as a fixture, and that was financed from moneys disbursed from the
Construction Fund, or that was financed with moneys other than from moneys
disbursed from the Construction Fund and donated in writing to and as part of
the Airport, as the same shall be substituted or replaced from time to time in
accordance with Subsection 612(a) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Personal Property" means tangible personal property that was
financed from moneys other than moneys disbursed from the
<PAGE>
Construction Fund, that is not annexed to the Land as a fixture, that is not or
has not been donated in writing to and as a part of the Airport, and that is not
Equipment.
"FAA" means the Federal Aviation Administration, or any successor thereto
or assign thereof.
"Facilities" means, collectively, the Leased Premises, the Lessee
Improvements and the Excluded Personal Property.
"Force Majeure" means Acts of God, strikes, lockouts or other industrial
disturbances, acts of the public enemy, orders of any kind of the government of
the United States of America, or of any state thereof, or any civil or military
authority, insurrections, riots, epidemics, landslides, lightning, earthquakes,
fires, hurricanes, tornadoes, blue northers, storms, floods, washouts, droughts,
arrests, restraining of government and people, civil disturbances, explosions,
nuclear accidents, wars, partial or entire failure of utilities, shortages of
labor, material, supplies or transportation, or any other cause not reasonably
within the control of the party claiming inability to perform due to such cause.
"Guaranty" means the Guaranty dated as of April 1, 1996 between the
Lessee, as guarantor, and the Trustee.
"Hazardous Materials" shall have the meaning ascribed to said term in
Section 605 hereof.
"Indemnified Parties" means the Authority, the City, and the Department,
and the members, officers, directors, employees and agents (excluding Bond
Counsel, counsel to the Authority, and the Manager) of each of such Persons,
either individually or collectively.
"Indenture" means the Trust Indenture dated as of April 1, 1996 between the
Authority and The First National Bank of Chicago, as amended and supplemented,
providing for the issuance of the Bonds.
"Inducement Date" means January 4, 1994.
"Interest Payment Date" means October 1, 1996 and each April 1 and October
1 thereafter until maturity or redemption of the Bonds.
"Land" means the Primary Land (as described in Exhibit A hereto) and any
additional land which is hereafter leased to the Lessee by the Authority
pursuant to this Agreement by an amendment hereto or supplement hereof, or by
the City at the Airport, as the case may be.
<PAGE>
"Laws" means and shall include, but not be limited to, the Comprehensive
Environmental Response, Compensation and Liability Act, the Solid Waste Disposal
Act, the Occupational Safety and Health Act, the Federal Water Pollution Control
Act, the Clean Air Act, the Safe Drinking Water Act, the Toxic Substances
Control Act, the Refuse Act, the Hazardous Materials Transportation Act, the
Emergency Planning and Community Right-to-Know Act, the Federal Insecticide,
Fungicide and Rodenticide Act, the Endangered Species Act, the National
Environmental Policy Act, the Texas Clean Air Act, the Texas Solid Waste
Disposal Act, the Texas Underground and Aboveground Storage Tanks Act, the Texas
Water Code, and the Texas Hazardous Substances Spill Prevention Act.
"Leased Premises" means: (i) the Land; (ii) the Special Facilities; (iii)
any Lessee Improvements that have been conveyed to the Authority pursuant to the
provisions of Section 308 hereof; and (iv) any land acquired at the request of
the Lessee, or any other buildings, structures, additions, improvements,
fixtures and facilities constructed on the Land, at the request of the Lessee,
from time to time, other than Lessee Improvements.
"Lessee" means Federal Express Corporation, a corporation duly organized
and validly existing under the laws of the State of Delaware and qualified to do
business in the State, or any successor thereto or assignee thereof permitted by
this Agreement.
"Lessee Improvements" means any additional buildings, structures,
additions, improvements, fixtures or facilities constructed on the Land as
provided in Subsection 307(a) hereof, except to the extent the same have been
conveyed to the Authority or its assignee pursuant to Section 308 hereof.
"Letter of Representations" means the letter of representations executed by
the Lessee pursuant to the terms of the Underwriting Agreement.
"Liability" means any liability (whether known or unknown, whether absolute
or contingent, whether liquidated or unliquidated, and whether due or to become
due), including, without limitation, responsibility under Environment, Health
and Safety Requirements for cleanup, containment, restoration, removal,
remediation, investigation or monitoring relating thereto (collectively,
"Remedial Work"), liability for costs of Remedial Work, liability for costs of
government oversight and other expenses incidental to Remedial Work, liability
for natural resources damage, liability for illness, personal injury or the
increased risk of or fear of illness or personal injury, and liability for
economic losses or other property damage.
<PAGE>
"Losses" means losses, costs, damages, expenses and liabilities of whatever
nature (including reasonable attorneys' fees, litigation and court costs and
expenses, amounts paid in settlement, amounts paid to discharge judgments)
directly or indirectly resulting from, arising out of or relating to one or more
Claims.
"Management Agreement" means the Management Agreement, as amended, between
the City and the Manager, governing the management, operation and maintenance of
the Airport.
"Manager" means (i) Alliance Air Services, Inc., a Texas corporation, or
any successor thereto or assignee thereof and (ii) any Person succeeding the
entity named in clause (i) as manager of the Airport.
"MSRB" means the Municipal Securities Rulemaking Board.
"M/WBE Ordinance" means the ordinance passed by the City with respect to
the City's disadvantaged business enterprise contracting and subcontracting
goals as established from time to time by the City, currently Ordinance No.
121932.
"Net Proceeds" means the term by that name as defined in Sections 1101 and
1102 of this Agreement.
"NRMSIR" means, as of any date, all nationally recognized municipal
securities information repositories then recognized by the Commission for
purposes of the Rule. As of the date of this Agreement, the NRMSIRs are:
Bloomberg Municipal Repository
P.O. Box 840
Princeton, NJ 08542-0840
Phone: (609) 279-3224
Fax: (609) 279-5962
Thomson Municipal Services Group
c/o The Bond Buyer
395 Hudson Street - 3rd Floor
New York, NY 10014
Attn: Municipal Disclosure
Phone: (212) 807-3891
Fax: (212) 989-2078
Internet: Disclosure @ Muller.com
Disclosure, Inc.
5161 River Road
Bethesda, MD 20816
<PAGE>
Attn: Document Acquisitions/Municipal Securities
Phone: (301) 951-1300
Fax: (301) 718-2329
Kenny Information Systems, Inc.
65 Broadway - 16th Floor
New York, NY 10006
Attn: Kenny Repository Service
Phone: (212) 770-4500
Fax: (212) 797-7994
Moody's NRMSIR
Public Finance Information Center
99 Church Street
New York, NY 10007
Phone: (800) 339-6306
Fax: (212) 553-1460
R.R. Donnelly Financial
Municipal Securities Disclosure Archive
559 Main Street
Hudson, MA 01749
Phone: (800) 580-3670
Fax: (508) 562-1969
"Outstanding" means, with respect to the Bonds, as of the time in question,
all Bonds registered or authenticated, as applicable, and delivered under the
Indenture, except: (i) Bonds cancelled by the Trustee or delivered to the
Trustee for cancellation; (ii) Bonds in exchange for or in lieu of which other
Bonds have been authenticated and delivered pursuant to the Indenture; (iii)
Bonds deemed to have been paid within the meaning of Article VIII of the
Indenture; and (iv) Bonds for which payment or prepayment of money in the
necessary amount has been deposited with the Trustee in trust for the registered
owners of such Bonds pursuant to the Indenture, provided that, if such Bonds are
to be redeemed, notice of such redemption has been duly given pursuant to the
Indenture.
"Paying Agent" means the Trustee or any other paying agent for a series of
Bonds named in the Indenture.
"Person" means any association, individual, corporation, governmental
entity, partnership, joint venture, business association, estate or any other
organization or entity.
<PAGE>
"Plans and Specifications" means the final plans and specifications for the
Special Facilities and any Lessee Improvements prepared by the Architect and
approved by the Authority and the Lessee.
"Record Date" means the fifteenth day of the month next preceding an
Interest Payment Date.
"Registrar" means the registrar and transfer agent for the Bonds named in
the Indenture.
"Regulations" means the Treasury Regulations promulgated pursuant to the
Code .
"Rule" means Rule 15c2-12 adopted by the Commission under the Exchange Act,
as the same may be amended from time to time.
"SID" means the public or private repository designated by the State as the
state information depository and recognized as such by the Commission for
purposes of the Rule. As of the date of this Agreement, the SID is the
Municipal Advisory Council of Texas, Austin, Texas.
"Special Facilities" means the Primary Land, buildings, structures,
fixtures, improvements, equipment and facilities located on, affixed to, or used
in connection with the Land, and financed with moneys disbursed from the
Construction Fund and the Equipment, whether now owned or hereafter acquired.
"Special Facilities Rentals" means the amounts paid or payable by the
Lessee pursuant to Section 502 hereof.
"Special Rebate Fund" means the special rebate fund established with the
Trustee pursuant to Article III of the Indenture.
"State" means the State of Texas.
"Supplemental Agreement" means an amendment to or supplement of this
Agreement entered into in accordance with Section 1805 hereof.
"Tax Representation Certificate" means the certificate executed by an
Authorized Lessee Representative addressing matters relating to the tax-exempt
status of the interest on the Bonds.
"Trust Estate" means the term by that name as defined in the Indenture.
<PAGE>
"Trustee" means The First National Bank of Chicago, or any successor
thereto or assignee thereof permitted by the Indenture.
"Underwriting Agreement" means the Underwriting Agreement, dated
1996, by and between the Authority and the underwriters named therein.
ARTICLE II
----------
USE OF FACILITIES; REPRESENTATIONS AND WARRANTIES
-------------------------------------------------
Section 201. Uses and Ownership of Facilities. (a) Ownership. The
Authority shall, at all times throughout the term of this Agreement, unless
transferred with the consent of the Lessee as provided in Section 1703
hereof, own, hold, use, and enjoy legal, fee title to the Leased Premises as a
part of the Airport on behalf of and for the benefit of the City, as the owner
of the Airport, subject to the provisions of this Agreement. The Authority
reserves the right to transfer, convey and assign legal, fee title to the Leased
Premises, subject to the terms of this Agreement, but shall not transfer the
Leased Premises to any party, without the consent of the Lessee.
(b) Lessee's Permitted Uses. The Lessee shall use the Facilities as a part
of the Airport and as airport facilities within the meaning of Section 142(a)(1)
of the Code (or the successor provisions of any federal income tax laws) or as
functionally related and subordinate facilities to the Airport, and for the
purposes of collecting, storing, sorting, distributing, and shipping air cargo,
including parcels, and for other purposes reasonably related thereto.
(c) Management Agreement. The City has entered into the Management
Agreement with the Manager, pursuant to which the manager is obligated to
perform, on behalf of the City, administrative responsibilities necessary to
monitor the performance or nonperformance of the obligations of any Airport
tenant to maintain and repair its leased premises and improvements and, further,
to perform, on behalf of the City, the administrative responsibilities of
monitoring or overseeing the performance of all City obligations pursuant to
existing and future agreements with all Airport tenants, all in accordance with
and subject to the terms of the Management Agreement. By entering into this
Agreement, the Lessee acknowledges that certain duties to be performed by the
City in connection with the operation and maintenance of the Airport may be
performed by the Manager, and that the Lessee agrees to deal directly with the
Manager with respect to such matters. The foregoing notwithstanding, the
Authority shall remain responsible for the performance of its obligations under
this
<PAGE>
Agreement; provided, however, the Authority shall have no responsibilities
with respect to the condition, maintenance or repair of the Leased Premises.
Section 202. Representations and Warranties by the Authority. The
Authority makes the following representations and warranties as the basis for
the undertakings on its part herein contained:
(a) The Authority is duly organized as a nonstock, nonprofit industrial
development corporation, existing and in good standing under the laws of the
State, including specifically the Development Corporation Act, and has the power
under the Development Corporation Act to enter into the transactions
contemplated by this Agreement, the Underwriting Agreement and the Indenture and
to carry out its obligations hereunder and thereunder. By written resolution as
required by the Development Corporation Act, the City has duly approved the
execution and delivery of the Indenture, the Underwriting Agreement and this
Agreement by the Authority.
(b) The Authority has taken all action and has complied with all provisions
of law with respect to the execution, delivery and performance of this
Agreement, the Underwriting Agreement and the Indenture and the due
authorization of the consummation of the transactions contemplated hereby and
thereby, and this Agreement, the Underwriting Agreement and the Indenture have
been duly executed and delivered by, and constitute the valid and legally
binding agreements of, the Authority, enforceable against the Authority in
accordance with their respective terms.
(c) Neither the execution and delivery of this Agreement, the Underwriting
Agreement and the Indenture, the consummation of the transactions contemplated
hereby and thereby, nor the fulfillment of or compliance with the terms and
conditions of this Agreement, the Underwriting Agreement and the Indenture,
violate any law or regulation, or any Articles of Incorporation or Bylaws, or
any judicial order, judgment, decree, or injunction, conflict with or results in
a breach of any of the terms, conditions or provisions of any restriction,
ordinance or any agreement or instrument to which the Authority is now a party
or by which it is bound, or constitute a default under any of the foregoing, or
result in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the property or assets of the Authority under the
terms of any instrument or agreement.
(d) There is no litigation now pending or, to the Authority's knowledge,
threatened challenging the powers of the Authority or its Board of Directors or
in any way affecting this Agreement, the Underwriting Agreement, the Indenture
or the Bonds.
<PAGE>
(e) The Authority has determined, in the public interest, that it will
finance the Cost of the Special Facilities, and deposit the proceeds from the
sale of the Bonds into the Construction Fund for use by the Lessee for such
purposes and in the manner provided in the Development Corporation Act and this
Agreement.
Section 203. Representations and Warranties by the Lessee. The Lessee
makes the following representations and warranties as the basis for the
undertakings on its part herein contained:
(a) The Lessee is a corporation duly organized under the laws of the State
of Delaware and duly qualified to do business in the State, is in good standing
in the State of Delaware and the State, has power to execute and enter into this
Agreement, the Guaranty and the Letter of Representations and by proper
corporate action has been duly authorized to execute and deliver this Agreement,
the Guaranty and the Letter of Representations.
(b) The Lessee will execute the Tax Representation Certificate, dated the
Closing Date, setting forth certain covenants, representations and warranties,
which Tax Representation Certificate is incorporated herein and included as a
part of this Agreement by reference. The Lessee represents that the
representations set forth in the Tax Representation Certificate will be accurate
as of such date and covenants to comply with the covenants set forth in the Tax
Representation Certificate.
(c) The Lessee represents and certifies that to the best of its knowledge
the Leased Premises was not a site used for the storage or disposal of hazardous
waste.
(d) The Lessee hereby makes an irrevocable election not to claim
depreciation or an investment tax credit with respect to the Special Facilities
in accordance with Section 142(b)(1)(B)(i) of the Code, such that the Bonds
shall qualify under Section 142(a)(1) of the Code. The tax identification
number of the Lessee is 71-0427007.
(e) This Agreement, the Guaranty and the Letter of Representations have
been duly executed and delivered by duly authorized officers of the Lessee, and
constitute valid and binding obligations of the Lessee, enforceable against the
Lessee in accordance with their respective terms.
(f) No approvals or consents, other than those that have been or will in
normal course be obtained, are necessary in order for the Lessee to execute and
deliver this Agreement, the Guaranty, the Letter of Representations or the Tax
Representation Certificate.
<PAGE>
(g) There is no litigation now pending or, to the Lessee's knowledge,
threatened, challenging the corporate existence of the Lessee and, except for
matters described under "Legal Proceedings" in the Lessee's Annual Report on
Form 10-K for the Lessee's fiscal year ended May 31, 1995, as updated by the
Lessee's Form 10-Q for the quarter ending November 30, 1995, there is no
pending, or to the Lessee's knowledge, threatened action or proceeding before
any court or administrative agency that individually (or in the aggregate in the
case of any group of related lawsuits) is expected to have a material adverse
effect on the financial condition of the Lessee or the ability of the Lessee to
perform its obligations under this Agreement or the Guaranty.
(h) Neither the execution and delivery of this Agreement, the Guaranty, the
Letter of Representations or the Tax Representation Certificate, the
consummation of the transactions contemplated hereby or thereby, nor the
fulfillment of or compliance with the terms and conditions of this Agreement,
the Guaranty, the Letter of Representations or the Tax Representation
Certificate, will conflict with or result in a material breach of the Restated
Certificate of Incorporation or By-laws of the Lessee or any of the terms,
conditions or provisions of any indenture, agreement or other instrument to
which the Lessee is now a party or by which it is bound, or constitute a
material default under any of the foregoing, or result in the creation or
imposition of any material lien, charge or encumbrance of any nature whatsoever
upon any of the property or assets of the Lessee under the terms of any
instrument or agreement.
(i) The Lessee has duly and validly obtained all material certificates,
licenses and permits from all public authorities, both federal and state,
required to enable the Lessee to carry on its business as it is now conducted
and to enter into this Agreement.
(j) To the best of its knowledge, no event has occurred and no condition
currently exists, which constitutes or may, with the passage of time or the
giving of notice, or both, constitute an Event of Default with respect to or on
the part of the Lessee under this Agreement or the Guaranty or that could
materially adversely affect the ability of the Lessee to perform its obligations
hereunder or thereunder.
<PAGE>
(k) During the term of this Agreement, the Lessee shall operate the Special
Facilities in accordance with all applicable laws; provided, however, that the
Lessee shall not be required to comply or cause compliance with such applicable
laws so long as the Lessee shall, at the Lessee's expense, contest the same or
the validity thereof in good faith, by appropriate proceedings; and provided,
further, such non-compliance will not have a material adverse effect on the
Special Facilities or the Lessee or the performance of its obligations
hereunder. Such contest may be made by the Lessee in the name of the Authority
or the Lessee, or both, as the Lessee shall determine, and the Authority agrees
that it will, at the Lessee's expense, cooperate with the Lessee in any such
contest to such extent as the Lessee may reasonably request; provided, however,
the Lessee may not contest in the name of the Authority any law, ordinance,
rule, regulation, order or requirement of the Authority, and the Authority has
no obligation to cooperate in any such contest against the Authority. The
Authority shall not be subject to any liability for the payment of any costs or
expenses in connection with any such proceedings brought by the Lessee.
(l) The Lessee has no present intention of disposing of or abandoning the
Special Facilities, using or moving any portion of the Special Facilities out of
the State, or of directing the Special Facilities to a use other than the uses
represented to the Department and the Authority.
(m) The Lessee has no reason to believe, based upon the best information in
the possession thereof, that the development of the Special Facilities in the
City will not result in contributing to the economic growth or stability of the
City by (1) increasing or stabilizing employment opportunities in the City, (2)
significantly increasing or stabilizing the property tax base of the City and
the State, and (3) promoting commerce within the City and the State.
ARTICLE III
-----------
COMMENCEMENT AND COMPLETION OF FACILITIES;
------------------------------------------
ISSUANCE OF BONDS
-----------------
Section 301. Plans and Specifications, Approvals, Construction,
Construction Contracts, Utilities.
(a) Location Improvement Permit. An airport location improvement permit
was obtained from the City subsequent to the Inducement Date and prior to the
Closing Date with respect to the Land and Special Facilities. The Lessee
covenants and agrees that, prior to the preparation of detailed plans and
specifications for any of the Facilities (other than those Facilities described
in the previous sentence), it shall first obtain an airport location
<PAGE>
improvement permit from the City by submitting to the City for approval plans
showing the general site plan, design and character of improvements and their
locations relative to the Leased Premises, including location of drainage,
utilities and roadways.
(b) Approval of Plans and Specifications. In connection with construction
of any of the Facilities, the Lessee shall cause preliminary plans and
specifications, together with the estimated cost of such portion, to be prepared
by the Architect, which shall be submitted to the Authority for its approval.
The Authority shall approve or suggest reasonable revisions to such preliminary
plans and specifications within seven (7) days from the date of receipt thereof,
and shall submit the same to the Lessee. If the Authority fails to respond
within that seven (7) day period, the preliminary plans and specifications shall
be deemed approved. If within said seven (7) day period the Authority notifies
the Lessee of items of which it disapproves, the Lessee shall thereafter cause
such Architect to prepare revised preliminary plans and specifications that take
into consideration any revisions suggested by the Authority, and accepted by the
Lessee, at which time the revised preliminary plans and specifications shall be
submitted to the Authority for approval in the manner provided herein. After the
Authority has approved such preliminary plans and specifications, the Lessee
shall cause the Architect to prepare final plans and specifications. The final
plans and specifications shall be submitted by the Lessee to the Authority for
review and approval of any changes not previously approved in the preliminary
plans and specifications, in the same manner as the preliminary plans and
specifications were reviewed and approved. If the Authority fails to respond to
the Lessee in writing within seven (7) days after submission of any of the plans
and specifications contemplated by this Subsection (b), then such plans and
specifications shall be deemed approved for purposes of this Subsection (b).
Upon approval such final plans and specifications shall become the Plans and
Specifications.
(c) Provisions Concerning Design. The Plans and Specifications (i) for any
of the Facilities shall meet the City's design standards for the type of
development proposed at the Airport, which the Authority agrees to cause to be
available to the Lessee and (ii) with respect to the Special Facilities to be
constructed and acquired with proceeds of the Bonds, shall qualify as Costs of a
"Project" under the Development Corporation Act. The Lessee covenants and
agrees that all construction or installation of any building, roadway,
structure, addition, or improvement on the Land will be in accordance with such
Plans and Specifications.
(d) Provisions Concerning Design Changes. The Lessee may initiate whatever
design changes to the Plans and Specifications it deems necessary or desirable;
provided, however, that any such changes (i) shall be subject to approval by the
Authority prior to implementation for consistency with the
<PAGE>
Plans and Specifications and the mutually contemplated use of the Facilities as
set forth in Subsection 201(b) of this Agreement and (ii) shall qualify as a
"Project" under the Development Corporation Act. Review of such design changes
shall be conducted in the same time and manner as review of the Plans and
Specifications as set forth in Subsection (b) hereof and shall otherwise comply
with Subsection (c) hereof.
(e) Compliance with Laws. Contracts relating to the designing, equipping
and constructing of the Facilities shall include those provisions agreed to by
the Lessee and the Authority for the purposes intended and shall comply in all
respects with State and federal law and the provisions of this Agreement. The
Facilities shall be constructed and equipped in compliance with all State,
federal and local laws, ordinances and regulations applicable thereto.
(f) Permits. The Lessee, with the cooperation of the Authority, shall
obtain or cause to be obtained all other necessary approvals and permits from
any and all governmental agencies prior to constructing and equipping any of the
Facilities.
(g) Occupancy Permits. Upon completion of the construction and equipping
of any of the Facilities, the Lessee shall furnish to the Authority copies of
all required occupancy permits and authorizations from appropriate authorities,
if any are required, authorizing the occupancy and use thereof for the purposes
described herein.
(h) Additions and Changes. The Lessee may, at its sole cost and expense,
make such additions or changes to the Facilities as it shall desire, provided
that the Lessee:
(1) obtains all requisite governmental permits, licenses and
approvals, including an airport location improvement permit issued by
the City in the manner provided in Subsection 301(a) hereof; and
(2) prosecutes the work in a workmanlike and diligent manner in
compliance with the Plans and Specifications therefor, all laws and
regulations and the other provisions of this Agreement.
(i) Layout. The Lessee may change the location of a structure on the Land
from the location approved in Subsection (a) hereof, subject to submission to
the Authority for its review and approval of any such change in the same manner
as the preliminary plans and specifications are required to be reviewed and
approved hereunder. The provisions of this Subsection (i) shall not constitute
an approval for purposes of Subsection (a) hereof.
<PAGE>
(j) Use of Construction Fund Moneys. Moneys held in the Construction Fund
or, at the Lessee's option, moneys provided by the Lessee, shall be used to
construct:
(1) all necessary utility lines required for the Lessee to connect
utility services for the Special Facilities to the line of existing
service;
(2) the connecting roadways to the existing roadway system up to
the property line; and
(3) all necessary utility lines required for the Lessee to connect
the utility services for any portion of the Leased Premises (other
than the Special Facilities) or for any Lessee Improvement.
The Authority agrees to use its best efforts to cause the City to grant to
the Lessee all necessary roadway or utility easements required for the Lessee to
meet its obligations under this Subsection (j).
Section 302. Agreement to Issue Bonds; Application of Proceeds; the Lessee
Required to Pay Costs of Construction if Bond Proceeds Insufficient.
(a) Pursuant to the terms of the Indenture, the Authority shall issue the
Bonds upon the execution and delivery of this Agreement to provide funds for
paying the Costs of the Land and of the Special Facilities.
(b) The Bonds shall be issued under and in accordance with the Indenture,
the form of which shall have been approved by the Lessee prior to the adoption
thereof.
(c) The proceeds of the Bonds shall be deposited directly by the Authority
with the Trustee in the Funds and Accounts specified in the Indenture. Proceeds
of the Bonds deposited in the Construction Fund shall be disbursed by the
Trustee for the payment of Costs.
(d) In the event that funds held in the Construction Fund available for
payment of the Costs of the Land and of the Special Facilities are insufficient,
the Lessee shall: (i) provide funds to complete the construction of the
Special Facilities; (ii) appropriately reduce the scope of the Special
Facilities so that funds in the Construction Fund will be sufficient (if such
reduction in scope, in the opinion of Bond Counsel, will not adversely affect
the exclusion from gross income of the interest on the Bonds for federal income
tax purposes); or (iii) cause the Authority to issue additional bonds
("Additional Bonds") pursuant to Article XII hereof to the extent necessary to
<PAGE>
provide sufficient funds for such purposes, provided that, in the opinion of
Bond Counsel, the issuance of such Additional Bonds will not adversely affect
the exclusion from gross income of the interest on the Bonds for federal income
tax purposes.
(e) The Authority does not make any warranty, either express or implied,
that the Special Facilities can or will be constructed for the estimated cost
therefor, or that the moneys paid into the Construction Fund and available for
payment of the Costs shall be sufficient for that purpose. The Lessee agrees
that if, after exhaustion of such funds, the Lessee pays any portion of the
Costs for any reason whatsoever, it shall not be entitled to any reimbursement
therefor from the Authority (except reimbursement from the proceeds of
Additional Bonds, if any) nor shall the Lessee be entitled to any set-off or
diminution of the rentals or other amounts payable under this Agreement.
(f) The Lessee is authorized as tenant to design, construct and equip the
Special Facilities pursuant to and in conformity with the Plans and
Specifications.
Section 303. As-Built Drawings. Within sixty (60) days following
completion of the construction of any of the Special Facilities, any Lessee
Improvement or any other improvements on the Land, the Lessee shall present to
the Authority a complete set of reproducible (mylar) "record" drawings
including, but not limited to, specifications and shop drawings. This
information, with the exception of shop drawings, shall be submitted by the
Lessee on a computer diskette using Autocadd Version 11 or any more recent
version as of that date (or any successor technology). Similar record drawings
shall be provided by the Lessee as additional facilities are constructed or if
any material alterations are made in any of the facilities included in the
Leased Premises.
Section 304. Cost of Construction and Preliminary Completion Certificates.
Within sixty (60) days of the date upon which the Special Facilities have been
substantially completed and available for their intended use, the Lessee shall
present to the Authority for examination and approval by the Authority a sworn
statement setting forth all amounts incurred to such date of substantial
completion by the Lessee with respect to such Special Facilities and the
economic lives of the buildings, structures, additions, improvements, fixtures,
facilities and equipment that comprise such Special Facilities.
Section 305. Establishment of the Completion Date, Other Completion
Certificates. (a) The Completion Date of the Special Facilities shall be
evidenced to the Authority, the City and the Trustee by a certificate signed by
the Lessee to the effect: (i) that the design, construction and
<PAGE>
equipping of the Special Facilities has been completed and (ii) that the Lessee
has made a reasonable investigation of such sources of information it deems
necessary and is of the opinion that the Special Facilities have been fully paid
for and that no claim or claims exist against the Authority, the City or the
Lessee or against the properties of either out of which a lien based on
furnishing labor or material for the Special Facilities might ripen. Such
certificate shall be delivered within one hundred twenty (120) days of the first
day on which the conditions set forth in both (i) and (ii) above have been
satisfied.
(b) Within one hundred twenty (120) days of the date on which the Special
Facilities have been finally completed and all amounts due and owing with
respect thereto have been paid, the Lessee shall certify to the Authority and
the City the final amounts paid by the Lessee with respect thereto.
Section 306. The Lessee to Pursue Remedies Against Contractors,
Subcontractors and Suppliers and Their Sureties.
(a) In the event of default or breach by any contractor, subcontractor,
manufacturer or supplier under any contract made in connection with the design,
construction and equipping of the Leased Premises, the Lessee may, in its
discretion, either separately or in conjunction with the Authority, pursue the
remedies of the Authority and/or the Lessee against the contractor,
subcontractor, manufacturer or supplier so in default and against any surety for
the performance of that contractor, subcontractor, manufacturer or supplier, or
against a contractor, subcontractor, manufacturer or supplier for breach of
warranty.
(b) In the event that the Lessee shall, after thirty (30) days written
notice from the Authority, fail to pursue its remedies under such contracts, the
Authority may pursue such remedies and, subject to any reimbursement received by
the Authority under Subsection (d) hereof, the Lessee shall permit the Authority
to be reimbursed from the Construction Fund for one hundred percent (100%) of
its reasonable costs with respect thereto to the extent that moneys are
available in the Construction Fund.
(c) The Lessee agrees to advise the Authority of any default by a
contractor, subcontractor, manufacturer or supplier in connection with the
construction of all or a portion of the Leased Premises which is material to the
operations of the Leased Premises and of any legal actions or proceedings the
Lessee intends to commence in connection with any such breach or default.
(d) The Authority agrees, if requested by the Lessee, to cooperate with and
assist the Lessee in any such proceeding and to join in any such proceeding, or
allow such proceeding to be brought in its name if necessary.
<PAGE>
Any amount recovered by way of damages, refunds, adjustment or otherwise in
connection with the foregoing shall be disbursed in the following order:
(i) for reimbursement of costs to the Lessee if the Lessee pursues the
recovery on its own and for reimbursement of costs proportionately to the
Lessee and the Authority (measured by the costs incurred by each party in
pursuit of such recovery) if the Authority joins in the pursuit or pursues
recovery in lieu of the Lessee;
(ii) for the repair, restoration or completion of the Leased
Premises or the relevant portion thereof; and
(iii) the balance to the Lessee.
Section 307. Construction of Additional Facilities.
--------------------------------------
(a) The Lessee has the right at its own expense to construct additional
buildings or facilities on the Land or to improve, expand or better the Special
Facilities all in compliance with the provisions of this Agreement. In such
event, the use thereof shall be enjoyed by the Lessee during the term hereof
without additional rental therefor. Such buildings, facilities, improvements,
additions and betterments shall be Lessee Improvements and shall be the property
of the Lessee during the term of this Agreement, except as provided in Sections
201 and 308 hereof. Notwithstanding the provisions of paragraph (ii) of
Subsection 602(a) hereof, the Lessee shall have within its sole discretion and
subject to Sections 301 and 303 hereof, the right to remove, replace or renovate
any Lessee Improvement, provided, however, that during the final year of the
term hereof the Lessee shall not remove any Lessee Improvement or otherwise
alter such Lessee Improvement so as to materially decrease the value thereof
without first obtaining the written consent of the Authority. The foregoing
notwithstanding, any such buildings, facilities, improvements, additions and
betterments shall be constructed in a manner consistent with the development
standards imposed by the City in connection with the development of the Airport.
(b) The Lessee shall have the right to locate on the Leased Premises or
install in the Special Facilities or the Lessee Improvements any Excluded
Personal Property, which Excluded Personal Property shall not become part of the
Special Facilities or the Leased Premises.
Section 308. Ownership of Improvements. All Excluded Personal Property
and Lessee Improvements shall be the property of the Lessee during the term of
this Agreement. Notwithstanding the foregoing, the Lessee shall have the right
at all times during the term of this Agreement to convey to the
<PAGE>
Authority, and the Authority shall take, title to all or a portion of the Lessee
Improvements and any additional land contiguous to the Land acquired by the
Lessee to accommodate such Lessee Improvements, subject to the Authority's
approval upon performance by the Authority of appropriate due diligence and
investigation. No such conveyance shall be effective unless, in the opinion of
Bond Counsel, such conveyance will not adversely affect the exclusion from gross
income for federal income tax purposes of the interest on the Bonds. Upon such
conveyance, the buildings, structures, improvements, fixtures and facilities so
conveyed shall cease to be Lessee Improvements and from such point forward shall
constitute a portion of the Leased Premises. Upon the termination of this
Agreement: (i) the Excluded Personal Property shall remain the property of the
Lessee, and (ii) the Lessee Improvements then remaining shall become the
property of the Authority.
Section 309. Form of Construction Contracts. All contracts for
construction of buildings or facilities on the Land shall be in a form mutually
agreed to in writing by the Authority and Lessee and shall contain provisions
requiring the contractor to provide payment and performance bonds and insurance
which are acceptable to the Authority and Lessee, and Lessee agrees, in
connection with all such contracts, to comply with the MBE/WBE Ordinance.
ARTICLE IV
----------
TERM
----
Section 401. Term. (a) The term of this Agreement shall commence on the
date of the execution hereof and shall terminate on April 1, 2021, or such
earlier date determined pursuant to the provisions of Subsection (b) hereof.
Notwithstanding the stated commencement date of this Agreement, the lease for
the Special Facilities shall commence on the weighted average date that the
Special Facilities have been placed in service (within the meaning of Section
147(b)(3) of the Code); provided, however, that neither the termination date of
this Agreement nor the commencement date of the lease for the Special Facilities
shall adversely impact upon, or affect in any way, the payment obligations of
the Lessee under Section 502 hereof.
(b) Not more than ninety (90) days after the Special Facilities are placed
in service (within the meaning of Section 147(b)(3) of the Code), the Lessee
shall deliver to the Authority and the City an opinion of Bond Counsel to the
effect that: (i) a termination date for this Agreement of April 1, 2021 will not
adversely affect the exclusion from gross income of the interest on the Bonds;
or (ii) a termination date earlier than April 1, 2021 will be required in order
to maintain the exclusion from gross income of the interest on the
<PAGE>
Bonds (which opinion shall state the latest permissible termination date, which
date shall be deemed to be the date of termination of this Agreement).
Section 402. Rights at Expiration.
---------------------
(a) In the event the Lessee shall continue to occupy the Leased Premises
beyond the Agreement term without the Authority's written renewal thereof, such
holding over shall not constitute a renewal or extension of this Agreement, but
shall create a tenancy from month to month which may be terminated at any time
by the Authority or the Lessee by giving thirty (30) days written notice to the
other party.
(b) The Lessee further agrees that upon the expiration of the term of this
Agreement or sooner cancellation thereof, the Leased Premises will be delivered
to the Authority in good condition, reasonable wear and tear, matters covered by
insurance and damages from condemnation excepted.
(c) The Lessee further agrees that upon the expiration of the term of this
Agreement or sooner cancellation thereof, the Lessee shall execute such
instruments as are necessary to convey title to the Lessee Improvements to the
Authority, and such Lessee Improvements and the Leased Premises shall be
delivered to the Authority free and clear of all liens not consented to by the
Authority.
Section 403. Expiration. This Agreement shall expire and terminate at the
end of the term specified in Section 401 hereof, and the Lessee shall have no
further right or interest in the Leased Premises except as provided in Section
1405.
ARTICLE V
---------
RENTALS AND FEES
----------------
Section 501. Ground Rent. (a) The Lessee shall pay ground rentals for the
Land in the amount of one dollar ($1.00) per calendar year.
(b) If at any time during the term hereof the Land is substituted with
other land due to a condemnation, such substituted land shall become a part of
the Land.
Section 502. Special Facilities Rentals. So long as any Bond is
Outstanding, the Lessee shall pay to the Authority, by depositing with the
Trustee, a rental (the "Special Facilities Rentals") payable without demand,
either: (i) in same day funds pursuant to an automated clearinghouse transfer,
one (1) Business Day prior to the date on which principal of, or
<PAGE>
premium, if any, and interest is due on the Bonds, or (ii) in same day funds
prior to 10:00 a.m., Chicago, Illinois time, on the date on which principal of,
or premium, if any, and interest is due on the Bonds, in either case in an
amount equal to such principal of, interest or premium payments due on the Bonds
whether at maturity, upon redemption, by acceleration or otherwise; provided
that in the case of each payment the amount thereof shall be reduced by an
amount equal to any amount then held by the Trustee in the Debt Service Fund
which is available for such payment.
The Lessee hereby acknowledges that the Special Facilities Rentals are the
sole source of moneys to be used by the Authority to make payments of the
principal of, interest or premium, if any, due on the Bonds.
Section 503. Facilities Rental after Bonds are No Longer Outstanding. (a)
In the event that there shall cease to be any Bonds Outstanding prior to April
1, 2021 or such other date that the term of this Agreement is scheduled to
expire pursuant to Section 401, the Lessee shall continue to occupy the Leased
Premises under the terms of this Agreement until the scheduled termination date;
and the amounts paid to prepay or redeem or otherwise retire the Bonds shall be
considered a prepayment of all Special Facilities Rentals and other rentals,
other than ground rentals under Section 501(a), that would have been due for the
remainder of the term of this Agreement. The Lessee shall continue to pay the
ground rentals as they become due under Section 501(a). In the event the Lessee
shall occupy the Leased Premises beyond the Agreement term in accordance with
Section 402 hereof, and the Bonds are no longer Outstanding during such
occupancy, the Lessee shall pay to the Authority a rental without demand, in an
amount equal to (i) the fair market rental value of all buildings, fixtures or
other improvements then located upon the Land which were constructed using funds
made available to the Lessee by the Authority in accordance with the terms of
this Agreement, the Equipment and any Lessee Improvements determined in the
manner hereinafter described (the "Fair Market Rental Value") plus (ii) one
dollar ($1.00), which shall be the agreed rental for all buildings and
improvements included in the Leased Premises but which are not covered by clause
(i) above.
(b) The Lessee and the Authority shall attempt to agree in writing on the
Fair Market Rental Value, but if they do not do so within 30 days after the date
of expiration of the Agreement term and there are no longer any Bonds
Outstanding ("Appraisal Date"), the Lessee and the Authority shall appoint an
Independent Appraiser (as hereinafter defined) within 10 days after the end of
such 30-day period. If any party fails to appoint an Independent Appraiser as
provided above, the Independent Appraiser timely appointed by the other party
shall make his determination of the Fair Market Rental Value.
<PAGE>
(c) If only one Independent Appraiser is timely appointed as provided
above, that Independent Appraiser shall determine the Fair Market Value Rental
within 60 days after the Appraisal Date.
(d) If two Independent Appraisers are timely appointed as provided above,
and if they fail to agree on the Fair Market Rental Value within 60 days after
the Appraisal Date:
(1) if the difference between the appraisals is three percent (3%) or
less of the amount of the higher appraisal, the Fair Market Rental
Value shall be the average of the two appraisals; or
(2) if the difference between the appraisals is greater than three
percent (3%) of the amount of the higher appraisal, the two
Independent Appraisers shall appoint a third Independent
Appraiser, who shall make his determination of Fair Market Rental
Value within 120 days after the Appraisal Date, and the Fair
Market Rental Value shall be (i) the appraisal that is neither the
highest nor the lowest of the three appraisals, or (ii) if two of
the Appraisals are the same, the amount of such identical
appraisals.
(e) The Fair Market Rental Value determined in accordance with the
provisions of this provision shall be deemed to be the Fair Market Rental Value
as of the date of the Appraisal Date, and the Lessee shall pay all past due
rental and continue to pay the Fair Market Rental in advance for the duration of
the occupancy occurring under Section 402.
(f) The Independent Appraisers shall give written notice to the Lessee and
the Authority concurrently upon the determination of the Fair Market Rental
Value.
(g) Each party shall bear the costs and expenses of the Independent
Appraiser appointed by that party. In the event a third Independent Appraiser
is appointed, the costs and expenses of such appraiser shall be borne equally by
the Lessee and the Authority.
(h) For purposes of this Section 503, the term "Independent Appraiser"
shall mean a person or firm with at least 10 years experience in appraising the
rental value of properties similar to the Leased Premises, who is a member of
the American Institute of Real Estate appraisers (MAI), which individual or firm
shall not be a member, director, officer or employee of the Lessee or the
Authority and, in the case of a firm, shall not have a partner, member,
director, officer or employee who is a member, director, officer or employee of
the Lessee or the Authority.
<PAGE>
Section 504. Field Use Charges. The Lessee is not granted hereunder the
right to use any aircraft parking apron or taxiway not on the Land for the use
of itself or its tenants, but nothing herein shall abrogate any rights the
Lessee may have for such use pursuant to other agreements with the City or the
Manager, acting on behalf of the City. Any use of aircraft operational areas
outside of the Land by the Lessee or the Lessee's tenants or agents shall be by
separate agreement and payment of appropriate fees. Nothing in this Section,
however, shall prohibit the Lessee or its tenants from the joint use with others
at the Airport of interior and exterior roadways serving the Land in accordance
with Airport rules, regulations and/or restrictions, including, without
limitation, the Management Agreement.
Section 505. Time and Place of Payments.
---------------------------
(a) Any ground rentals due under Section 501 hereof shall be payable in
advance on or before the first Business Day of each calendar year, and any
rentals due under Section 503 hereof shall be payable in equal monthly
installments in advance on or before the first Business Day of each calendar
month of the term at the office of the City Manager of the City at the address
set forth in Section 1811 hereof.
(b) The Special Facilities Rentals payable pursuant to Section 502 hereof
shall be payable to the Authority at the Designated Trust Office of the Trustee
for deposit in the Debt Service Fund.
Section 506. Delinquent Rentals. In the event rentals due pursuant to
Section 503 hereof shall not be paid by the Lessee on the due date thereof, the
Lessee shall pay as additional rental, an interest charge at an interest rate of
15% per annum, from time to time, on the amount due for each full calendar month
of delinquency computed as simple interest. No interest shall be charged upon
that portion of any such rental which, in good faith, is not paid because it is
in dispute. No interest shall be charged until payment is thirty (30) days
overdue, but such interest when assessed thereafter, shall be computed from the
due date.
Section 507. Assignment of Rights. As security for the payment of the
Bonds, the Authority agrees and, pursuant to the terms of the Indenture, does
assign its right, title and interest in and to the Special Facilities Rentals to
the Trustee as part of the Trust Estate. The Lessee hereby assents to the
assignment of such rights hereunder. The Trustee shall not be responsible for
those rights and obligations of the Authority not assigned by the Authority to
the Trustee as part of the Trust Estate.
Section 508. Obligations of the Lessee Hereunder Unconditional. The
obligation of the Lessee to make the payments required under Section 502
<PAGE>
hereof and to pay the premiums or charges necessary to maintain or cause to be
maintained the insurance required by Article IX shall be absolute and
unconditional and shall not be subject to any defense (other than payment) or
any right of set-off, counterclaim, abatement or otherwise. The Lessee shall
not suspend, postpone, discontinue or permit the suspension, postponement or
discontinuance of any such payments referred to in Section 502. Each payment
referred to in Section 502 made by the Lessee pursuant to this Agreement shall
be final and the Lessee shall not seek to recover all or any part of such
payment from the Trustee or any holder of the Bonds for any reason whatsoever.
Nothing contained in this Section 508 shall be construed to relieve the
Authority or the Trustee from the performance of any of the agreements on their
part contained herein or in the Indenture or to constitute a waiver by the
Lessee of its rights to enforce the performance thereof or to recover from the
Authority damages for the Authority's failure to perform its covenants
hereunder.
Section 509. Prepayment of Rentals. Any prepayment of ground rentals due
pursuant to Section 501 or rentals due pursuant to Section 503 hereof shall be
applied to the next ensuing payments in order of their due dates.
Section 510. Payments to Authority. The Lessee hereby agrees to pay or
cause to be paid directly to the Authority annually while any of the Bonds is
outstanding, upon receiving a bill or statement therefor, which shall be
submitted by the Authority promptly after the close of its fiscal year, an
amount sufficient to pay and reimburse the Authority for any of its actual costs
reasonably and necessarily incurred in connection with the Bonds, this Agreement
or the Leased Premises during the previous fiscal year.
ARTICLE VI
----------
OBLIGATIONS OF THE LESSEE
-------------------------
Section 601. Net Lease. It shall be the sole responsibility of the Lessee
to maintain, repair and operate the entirety of the Facilities at the Lessee's
sole cost and expense. Neither the Authority nor the Manager shall bear any
responsibility to maintain, repair and operate all or any part of the
Facilities.
Section 602. Maintenance and Operation.
(a) The Lessee shall at its own expense: (i) keep the Facilities in as
reasonably safe, neat and attractive condition, as its operation shall permit
and in good repair; (ii) keep the Leased Premises in good operating condition,
making from time to time all necessary repairs thereto (including external and
<PAGE>
structural repairs) and renewals and replacements thereof, ordinary wear and
tear, matters covered by insurance and damages from condemnation excepted
(subject to the rights of the Lessee set forth in Subsection 307(a) hereof with
respect to any Lessee Improvement); and (iii) shall repaint the Facilities as
necessary.
(b) The Lessee shall be responsible for and perform all maintenance of the
Facilities, including, but not limited to, maintenance of all equipment and
facilities for the storage and control of Hazardous Substances, including, but
not by way of limitation, any detention ponds constructed or developed on the
Leased Premises.
(c) The Lessee shall consider in good faith any recommendation of the City
or the Manager, acting on behalf of the City, as to necessary maintenance to or
repairs of the Leased Premises.
(d) No waste shall be committed to the Leased Premises.
Section 603. Utilities. The Lessee shall assume and pay for any costs or
charges for utilities services furnished to the Lessee during the term hereof.
The Lessee shall have the right to connect to any and all storm and sanitary
sewers and water and utility outlets at its own cost and expense; and the Lessee
shall pay for any and all service charges incurred therefor.
Section 604. Signs. The Lessee shall not erect, maintain, or display upon
the outside of any of the Facilities any billboards or advertising signs;
provided, however, that the Lessee may maintain on the outside of said buildings
its own name and services on signs, the size, location and design of which shall
be subject to prior written approval by the Manager.
Section 605. Hazardous Materials.
(a) For purposes of this Agreement, the following terms shall have the
following meanings: (1) "Hazardous Materials" shall mean (i) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, transformers, or other
equipment that contain dielectric fluid containing polychlorinated biphenyls,
and radon gas; (ii) any chemicals or substances now or hereafter defined as or
included in the definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "extremely hazardous wastes", "restricted hazardous
wastes", "toxic substances", "toxic pollutants", "contaminants" or "pollutants",
or words of similar import, under any applicable Environmental Law; and (iii)
any other chemical, material, or substance, exposure to which is now or
hereafter prohibited, limited, or regulated by any applicable Environmental Law
or governmental authority; (2) "Environmental Law" means any applicable federal,
state, or
<PAGE>
local statute, law, rule, regulation, ordinance, code, policy, or rule
of common law now or hereafter in effect and in each case as amended and any
judicial or administrative order, consent decree or judgment, relating to the
environment, health, safety, or Hazardous Materials, including without
limitation the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C. (S) 9601 et. seq.; the Hazardous Materials
Transportation Act, as amended, 49 U.S.C. (S) 1801 et seq.; the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. (S) 6901 et seq.; the
Federal Water Pollution Control Act, as amended, 33 U.S.C. (S) 1251 et seq.; the
Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq.; the Clean Air Act, 42
U.S.C. (S) 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. (S) 3808 et
seq.; the Texas Solid Waste Disposal Act, Tex. Health & Safety Code Ann. Ch. 361
(Vernon 1990); the Texas Clean Air Act, Tex. Health & Safety Code Ann. Ch. 382
(Vernon 1990); the Texas Water Code, Tex. Water Code Ann. (Vernon 1988 and Supp.
1990); and the Texas Hazardous Substances Spill Prevention and Control Act, Tex.
Water Code Ann. (Vernon 1988 and Supp. 1990); and (3) "Release" or "Released"
means disposed, discharged, injected, spilled, leaked, leached, migrated,
dumped, emitted, escaped, emptied, seeped, or placed, in, on, or under any land,
water, or air, or otherwise entered into the environment, and as otherwise more
broadly defined in applicable Environmental Law.
(b) The Lessee covenants and agrees with the Authority, which covenants and
agreements shall be effective as of the Closing Date and shall continue during
the term of this Agreement, as follows: (1) the construction and installation of
all improvements and the use and operation of the Facilities shall at all times
be in full compliance with applicable Environmental Law; (2) the Lessee is the
owner of, and has in its possession, all environmental permits, licenses, and
approvals that are necessary or required by applicable Environmental Law to
conduct its business and operations as then being conducted, and the Lessee is
in full compliance with such environmental permits, licenses, and approvals; (3)
neither the Lessee nor any person claiming by, through, or under the Lessee
shall bring onto, use, store, generate, treat, process, dispose of, recycle,
incinerate or transport any Hazardous Materials in, on, or under the Facilities
except in compliance with applicable Environmental Law; (4) the Lessee shall
regularly inspect the Facilities to monitor and assure that the Facilities are
at all times in full compliance with applicable Environmental Law; (5) the
Lessee shall protect the Facilities against intentional or negligent acts or
omissions of third parties which might result, directly or indirectly, in the
Release of Hazardous Materials on the Facilities in violation of applicable
Environmental Law; and (6) if any Hazardous Materials are released in, on, or
under the Facilities during the term of this Agreement:
(i) the Lessee shall immediately notify applicable governmental
agencies having competent jurisdiction of the
<PAGE>
occurrence of the Release of Hazardous Materials in accordance with the
requirements of applicable Environmental Law;
(ii) the Lessee shall immediately notify the Manager, acting on behalf
of the City, and the City of the occurrence of the Release of the Hazardous
Materials and shall immediately furnish or make available to the Manager
such information, documents, and other communications as the Manager or the
City shall reasonably request;
(iii) the Lessee shall promptly and timely commence or cause to be
commenced appropriate actions required by applicable Environmental Law to
clean up the Hazardous Materials that have been Released on the Facilities
(collectively referred to as "Response Action") and shall conduct and
perform all appropriate Response Action in accordance with applicable
Environmental Law; and
(iv) the Lessee shall contract for or perform all Response Action in
the Lessee's own name or cause the violator to do so in the violator's
name.
(c) As between the Authority, the City (as the owner of the Airport) and
the Lessee, the Lessee hereby covenants and agrees that it shall be responsible
for, and waives, releases, and forever discharges the Authority and the City
from, and agrees to indemnify, defend, and hold the Authority and the City
harmless from and against, all expenses, costs (including reasonable attorneys'
fees and court costs), losses, damages, penalties, fines, and other expenditures
of any nature arising from or in connection with any claims, demands, liens,
investigations, notices of violation, governmental directives, causes of action,
or any other administrative or legal proceedings of any nature which result
from, relate to, or arise out of (1) the breach of any covenant or agreement of
the Lessee in this Section 605; (2) the presence or alleged presence of
Hazardous Materials in, on, or under the Facilities; or (3) the violation of any
applicable Environmental Law with respect to the Facilities. This release and
indemnity specifically includes (a) all costs of "removal" and/or "remedial
action" and all other costs of "response" as those terms are defined and used in
applicable Environmental Law, and (b) all other costs and expenses of any nature
incurred by, assessed against, imposed upon, or charged to the Authority and the
City relating to compliance with or enforcement of applicable Environmental Law.
If the Authority and the City incur costs or expenses described in this
indemnity, the Lessee shall reimburse the Authority and the City for those
reasonable costs or expenses within ten (10) days of the date of receipt by the
Lessee of notice from the Authority and the City, including copies of invoices
or other verification, that the costs or expenses have been incurred.
<PAGE>
The foregoing release and indemnity shall survive the expiration or termination
of this Agreement.
(d) If (i) there exists any uncorrected violation by the Lessee of an
Environmental Law or any condition, caused directly or indirectly by the Lessee,
which requires a cleanup, removal or other remedial action by the Lessee under
any Environmental Law, and such cleanup, removal or other remedial action is not
initiated within the time period required by Environmental Law or (ii) that if
the City reasonably determines that (A) such uncorrected violation or condition
poses an imminent threat to the safety or well being of any other users of the
Airport, the citizens of the City or other persons or (B) the Land is likely to
be further damaged or contaminated or other land on or in the vicinity of the
Airport is likely to be damaged or contaminated by virtue of the continued
failure to correct such violation or condition; and such cleanup, removal or
other remedial action is not initiated within ninety (90) days from the date of
written notice from the City (or the Manager acting on behalf of the City) to
the Lessee, and diligently pursued to completion, the same shall, at the
election of the Authority, constitute an Event of Default as described in
Section 1401(e)(ii) hereof; and provided, further, that the Authority will not
consider any failure to initiate such cleanup, removal or other remedial action
within the aforesaid ninety (90) day period an Event of Default if such cleanup,
removal or other remedial action is of such a nature that it cannot readily be
initiated within the ninety (90) days and so long as the Lessee commences in
good faith to cure such uncorrected violation or condition and diligently
pursues the cure continuously thereafter.
Section 606. Nondiscrimination. (a) The Lessee, for itself, its personal
representatives, successors in interest, and assigns, as part of the
consideration hereof, does hereby covenant and agree that it will comply with
pertinent statutes, Executive Orders and such rules that are promulgated to
assure that (1) no person on the grounds of race, color, creed, sex, age or
national origin shall be excluded from participation in, denied the benefits of,
or otherwise be subjected to discrimination in the use of the Facilities; (2) in
the construction of any improvements on, over, or under such land and the
furnishing of services thereof no person on the grounds of race, color, creed,
sex, age or national origin shall be excluded from participation in, denied the
benefits of, or otherwise be subjected to discrimination; (3) the Lessee shall
use the Facilities in compliance with all other requirements imposed by or
pursuant to Title 49, Code of Federal Regulations, Department of Transportation,
Subtitle A, Office of the Secretary, Part 21, Nondiscrimination in federally-
assisted programs of the Department of Transportation, Effectuation of title VI
of the Civil Rights Act of 1964, and as said Regulations may be amended, to the
extent that said requirements are applicable, as a matter of law, to the Lessee.
<PAGE>
(b) With respect to the Facilities, the Lessee agrees to furnish services
on a fair, equal and not unjustly discriminatory basis to all users thereof, and
to charge fair, reasonable and not unjustly discriminatory prices for each unit
or service; provided, that the Lessee may be allowed to make reasonable and
nondiscriminatory discounts, rebates, or other similar types of price reductions
to volume purchasers.
(c) The Lessee assures that it will comply with pertinent statutes,
Executive Orders and such rules as are promulgated to assure, that no person
shall, on the grounds of race, creed, color, national origin, sex, age, or
handicap be excluded from participating in any activity conducted with or
benefiting from federal assistance. This Subsection (c) obligates the Lessee or
its transferee for the period during which federal assistance is extended to the
airport program, except where federal assistance is to provide, or is in the
form of personal property or real property or interest therein or structures or
improvements thereon. In these cases, this Subsection (c) obligates the Lessee
or any transferee for the longer of the following periods: (a) the period during
which the property is used by the Authority, the City, the Lessee or any
transferee for a purpose for which federal assistance is extended, or for
another purpose involving the provision of similar services or benefits; or (b)
the period during which the Authority, the City, the Lessee or any transferee
retains ownership or possession of the Leased Premises.
Section 607. Affirmative Action. With respect to the Facilities, the
Lessee assures that it will undertake an affirmative action program as required
by 14 CFR Part 152, Subpart E, to insure that no person shall, on the grounds of
race, creed, color, national origin or sex, be excluded from participating in
any employment activities covered in 14 CFR Part 152, Subpart E; that no person
shall be excluded on these grounds from participating in or receiving the
services or benefits of any program or activity covered by that Subpart; and
that it will require that its covered suborganizations provide assurance to the
Lessee that they similarly will undertake affirmative action programs, and that
they will require assurances from their suborganizations, as required by 14 CFR
Part 152, Subpart E, to the same effect, to the extent that said requirements
are applicable, as a matter of law, to the Lessee. Furthermore, with respect to
the Facilities, the Lessee assures that it shall use its best efforts to comply
with the City's disadvantaged business enterprise contracting and subcontracting
goals, as established in the M/WBE Ordinance.
Section 608. Right to Use Airport. The granting of this Agreement and its
acceptance by the Lessee is conditioned upon the right to use the Airport in
common with others authorized to do so, provided, however, that the Lessee shall
observe and comply with any and all requirements of the constituted public
authorities and with all federal, State or local statutes, ordinances, regimens
and standards applicable to the Lessee for its use of
<PAGE>
the Facilities, including but not limited to, rules and regulations promulgated
from time to time by the City for the administration of the Airport.
Section 609. [Intentionally Omitted].
------------------------
Section 610. Mechanic's Liens.
-----------------
(a) The Lessee herein agrees that if any mechanic's lien is filed upon any
portion of the Facilities, the Lessee shall protect and save harmless the
Authority and the City against any loss, liability or expense whatsoever by
reason thereof and shall proceed with or defend, at its own expense, such action
or proceedings as may be necessary to remove such lien from the records to the
extent that the Leased Premises or any portion thereof is affected. Upon
receipt of notice thereof by the Authority or the City, the Authority or the
City shall promptly give the Lessee written notice of the existence of any such
mechanic's lien on the Facilities, but the failure of the Authority or the City
to give such notice shall not affect the responsibilities of the Lessee as set
forth in this Section 610.
(b) The Lessee may, however, in good faith and with due diligence, contest
any mechanic's lien or other lien filed or established against all or any
portion of the Facilities, and in such event may permit such lien or charge to
remain undischarged and unsatisfied during the period of such contest and appeal
therefrom, if (i) the Lessee shall effectively prevent or stay the execution,
foreclosure or enforcement of such lien or charge, or (ii) such contest or
appeal shall prevent or stay the execution or enforcement or foreclosure of such
lien or charge. If such lien or charge is so stayed and such stay thereafter
expires or the Authority or the City gives the Lessee written notice of the fact
that by nonpayment of any such items the Leased Premises or any portion thereof
will be subject to loss or forfeiture, then the Lessee shall forthwith pay and
cause to be satisfied and discharged such lien or charge or secure such payment
by posting a bond, in form satisfactory to the Authority and the City. The
Authority and the City shall cooperate fully with the Lessee in any such
contest.
(c) If the Lessee shall fail to contest, discharge or pay any such lien as
required by Subsections (a) and (b) hereof, the Authority or the City may, after
having given the Lessee at least sixty (60) days' written notice of such
failure, contest, discharge or pay any such lien which the Authority or the City
may reasonably determine to be necessary in order to protect its interest in the
Leased Premises. In such event, the Lessee agrees to reimburse the Authority
and the City for any and all reasonable expenses and costs incurred by the City
in respect thereto.
Section 611. The Lessee to Maintain its Corporate Existence; Conditions
Under Which Exceptions Permitted. Except as hereinafter
<PAGE>
provided, the Lessee agrees that during the term of this Agreement it will not
dissolve or otherwise dispose of all or substantially all of its assets and will
not consolidate with or merge into another Person unless the surviving or
transferee Person, as applicable, is, and after such transfer shall be, a
solvent Person qualified to do business in the State and, concurrently with such
transaction, irrevocably and unconditionally assumes in writing, by means of an
instrument which is delivered to the Authority, the City and the Trustee, all of
the obligations of the Lessee herein.
Section 612. Equipment.
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(a) The Lessee shall acquire (either from its own funds or from moneys in
the Construction Fund) the necessary equipment, fixtures, permanent inventory
and other tangible personal property for use at the Special Facilities in order
to operate the Special Facilities as contemplated by this Agreement. The Lessee
shall continue to maintain in good working order and repair and keep fully
insured each piece of Equipment, including, but not limited to, the furnishing
of all parts, mechanisms and devices required to keep the Equipment in good
mechanical and working order and repair, unless the same becomes irreparable,
worn out, obsolete or is no longer needed by the Lessee to conduct its
operations at the Special Facilities. The Lessee shall replace or substitute
any Equipment necessary to maintain the operating utility or productive capacity
of the Special Facilities (unless the same is not needed by the Lessee in the
conduct of its operations) with replacement equipment of equal functional value
and utility to the item replaced and such replacement equipment shall become a
part of the Equipment when installed by the Lessee.
(b) The Lessee shall undertake diligent efforts to properly identify the
Equipment by appropriate tags or other means of identification. The Lessee
shall, (i) on or before the date the Special Facilities have been substantially
completed and available for their intended use, (ii) on each date of the
purchase or sale of the Equipment, and (iii) at the expiration of the term or
earlier termination of this Agreement, certify to the Authority a true and
correct current itemized list of the Equipment indicating with particularity (A)
whether the Equipment was acquired with moneys in the Construction Fund or from
the funds of the Lessee and (B) any changes from the previous certification.
Section 613. Security Plan. The Lessee shall have entrances and gates to
the Air Operations Area (as defined in applicable regulations of the FAA), and
an "Airport Security Plan" as required by the City in accordance with FAA
regulations, Title 14 CFR Part 139.
Section 614. Tax Exemption. (a) The Authority (to the extent that such
matters are within its control) and the Lessee covenant to refrain from
<PAGE>
any action which would adversely affect, and to take such action (including the
provision and enforcement by the Lessee in any document of sublease or
assignment of the Lessee's leasehold interest in the Special Facilities of
appropriate covenants of the sublessee or assignee thereunder) as is necessary
to assure, the treatment of the Bonds as obligations described in section 103(a)
of the Code, the interest on which is not includable in the "gross income" of
the owner thereof for purposes of federal income taxation (other than the gross
income of a "substantial user" of the Special Facilities or a "related person"
to such a "substantial user", within the meaning of the Code). In particular,
but not by way of limitation thereof, the Authority (to the extent that such
matters are within its control) and the Lessee covenant as follows:
(i) to take such action which may be reasonably available to the
Authority or the Lessee to assure that the bonds are "exempt facility
bonds", as defined in section 142(a) of the Code, at least 95 percent of
the proceeds of which are used to provide airport facilities (within the
meaning of section 142(a) of the Code);
(ii) to ensure that at all times during the term of the Bonds that the
property provided with the proceeds thereof be treated as governmentally
owned within the meaning of section 142(b) of the Code;
(iii) to refrain from taking any action that would result in the Bonds
being "federally guaranteed" within the meaning of section 149(b) of the
Code;
(iv) to refrain from using any portion of the proceeds of the Bonds,
directly or indirectly, to acquire or to replace funds which were used,
directly or indirectly, to acquire investment property (as defined in
section 148(b)(2) of the Code) which produces a materially higher yield
over the term of the Bonds, other than investment property acquired with --
(1) proceeds of the Bonds invested for a reasonable temporary
period (not to exceed three years) or, until such proceeds are needed
for the purpose for which the Bonds are issued, and
(2) proceeds of amounts invested in a bona fide debt service fund,
within the meaning of section 1.148-1(b) of the Regulations
(v) to otherwise restrict the investment of the proceeds of the Bonds
or amounts treated as proceeds of the Bonds, as may be
<PAGE>
necessary, to satisfy the requirements of section 148 of the Code (relating
to arbitrage);
(vi) to use no more than two percent of the proceeds of the Bonds for
the payment of costs of issuance (including underwriters' discount) of the
Bonds;
(vii) to use no portion of the proceeds of the Bonds to provide any
airplane, sky-box or other private luxury box, facility primarily used for
gambling or store the principal business of which is the sale of alcoholic
beverages for consumption off-premises;
(viii) to comply with the limitations imposed by section 147(c) of
the Code (relating to the limitation of the use of proceeds to acquire
land) and section 147(d) of the Code (relating to restrictions on the use
of bonds proceeds to acquire existing buildings, structures or other
property).
It is the understanding of the Authority and the Lessee that the covenants
contained herein are intended to assure compliance with the provisions of the
Code, and any regulations or rulings promulgated by the U.S. Department of the
Treasury pursuant thereto, pertaining to obligations described in section 103(a)
of the Code. In the event that regulations or rulings applicable to the Bonds
are hereafter promulgated which modify or expand such provisions of the Code,
the Authority and the Lessee will not be required to comply with any covenant
contained herein to the extent that, in the opinion of Bond Counsel, such
failure to comply will not adversely affect the excludability pursuant to
section 103(a) of the Code of interest on the Bonds from the gross income of the
owners thereof for federal income tax purposes. In the event that regulations
or rulings are hereafter promulgated which impose additional requirements,
pertaining to obligations described in section 103(a) of the Code, which are
applicable to the Bonds, the Authority and the Lessee agree to comply with the
additional requirements to the extent necessary, in the opinion of Bond Counsel,
to preserve the excludability pursuant to section 103(a) of the Code of interest
on the Bonds from the gross income of the owners thereof for federal income tax
purposes.
(b) The Lessee shall maintain or cause the Trustee to maintain for at least
six years following final payment of interest and principal on the Bonds
accurate investment records for the purpose of determining the amount of
arbitrage rebate that shall be owed with respect to the Bonds to the United
States in order to comply with the requirements of Section 148 of the Code with
respect to the Bonds. The Lessee shall compute and cause to be paid, in the
manner and time provided in the Tax Representation Certificate, the arbitrage
rebate that is required to be paid to the United States pursuant to Section 148
of the Code in order to preserve the tax
<PAGE>
status of the interest on the Bonds. In any event, if the amount of cash held in
the Special Rebate Fund immediately prior to the date on which any payment must
be made by the Trustee pursuant to Article III(F)(2) of the Indenture shall be
insufficient to permit the Trustee to make such payment to the United States,
the Lessee forthwith shall pay the amount of such insufficiency to the Trustee
in immediately available funds. The obligations of the Lessee under this Section
are direct obligations of the Lessee, acting under the authorization of, and on
behalf of, the Authority, and neither the City nor the Authority shall have any
further obligation or duty with respect to the Special Rebate Fund.
Section 615. The Lessee's Covenant Concerning the Bonds.
-------------------------------------------
(a) Trustee's Fees and Expenses. The Lessee shall pay the ordinary fees
and expenses of the Trustee for serving as the Trustee under the Indenture and
the Guaranty and shall also pay to the Trustee all extraordinary fees and
expenses incurred by the Trustee in enforcing the provisions of this Agreement,
the Indenture or the Guaranty or otherwise serving in the capacity as the
Trustee under the Indenture and the Guaranty.
(b) Investment of Funds Under the Indenture. Any moneys held in the Funds
or Accounts established under the Indenture shall be invested or reinvested by
the Trustee in Qualified Investments in accordance with the provisions of the
Indenture.
(c) Advances by the Authority and Trustee. In the event the Lessee shall
fail to comply with any covenant or agreement set forth in this Agreement, the
Authority, the City or the Trustee may (but shall be under no obligation to)
comply with said covenants and agreements. All amounts advanced by the
Authority, the City or the Trustee to comply with such agreements and covenants
shall be paid by the Lessee to the one making the advancements, together with
interest thereon at the Trustee's prime rate of interest.
Section 616. The Lessee's Obligations Concerning SEC Rule 15c2-12.
-------------------------------------------------------
(a) Pursuant to Rule 15c2-12(b)(5) under the Exchange Act, the Lessee
hereby agrees and undertakes, for the benefit of the holders and beneficial
owners of the Bonds, to
(1) file, within ninety (90) days after the end of the Lessee's 1996
fiscal year and each fiscal year thereafter, with the Commission
annual financial information concerning the Lessee for the prior
fiscal year including (i) the Lessee's audited financial
statements, prepared in accordance with generally accepted
accounting principles in effect from time
<PAGE>
to time, (ii) the Lessee's periodic reports filed with the
Commission under the Exchange Act, and (iii) summary financial
information and operating data of the type disclosed in Appendix A
to the official statement prepared in connection with the sale of
the Bonds;
(2) send, within ninety (90) days after the end of the Lessee's 1996
fiscal year and each fiscal year thereafter, notice to each NRMSIR
and the SID that the Lessee's annual financial information filed
with the Commission in accordance with the Exchange Act
constitutes the Lessee's annual financial information for the
prior fiscal year for purposes of this Section 616; and
(3) provide timely notice to each NRMSIR, the MSRB and the SID of (i)
the occurrence of any of the events enumerated in Rule 15c2-
12(b)(5)(i)(C), as amended from time to time, with respect to the
Bonds if material, and (ii) any failure of the Lessee to provide
required annual financial information.
(b) No holder or beneficial owner of a Bond may institute any suit, action
or proceeding at law or in equity for the enforcement of any covenant herein or
for any remedy for breach thereof, unless such holder or beneficial owner shall
have given the Lessee evidence of ownership and written notice of and request to
cure such breach, and the Lessee shall have failed to comply within reasonable
time. No remedy shall be sought or granted other than specific performance of
the covenant at issue. Failure to comply with any covenant contained in this
Section 616 shall not be an Event of Default under this Agreement.
(c) This Section 616 may only be amended in accordance with the Rule and
interpretations thereunder. If this Section 616 is amended, the annual
financial information containing the amended summary financial information or
operating data will explain, in narrative form, the reasons for the amendment
and the impact of the change in the type of summary financial information or
operating data being provided.
(d) The obligation of the Lessee under this Section 616 shall be
automatically terminated upon the legal defeasance, prior redemption or payment
in full of all of the Bonds or at the time nationally recognized counsel
determines that the Lessee is no longer an "obligated person" under the Rule.
If such termination occurs prior to the maturity of the Bonds, the Lessee shall
give notice in a timely manner to each NRMSIR, the MSRB and the SID.
<PAGE>
(e) This Section 616 shall inure solely to the benefit of the holders and
the beneficial owners of the Bonds and shall create no rights in any other
person or entity.
ARTICLE VII
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OBLIGATIONS OF THE AUTHORITY
----------------------------
Section 701. Operation as a Public Airport. The Authority covenants and
agrees that at all times it will use its best efforts to cause the City to
operate and maintain the Airport as a public airport consistent with and
pursuant to the sponsor's assurances given by the City to the United States
Government under the Federal Airport and Airways Act.
Section 702. Ingress and Egress. The Lessee shall have the right of
ingress to and egress from the Facilities for the Lessee, its officers,
employees, agents, servants, customers, vendors, suppliers, patrons, and
invitees over the roadway provided by the City serving the Facilities. The
City's roadway shall be used jointly with other tenants on the Airport, and the
Lessee shall not interfere with the rights and privileges of other persons or
firms using said roadway and shall be subject to such weight and use
restrictions promulgated in the City's rules and regulations.
Section 703. Quiet Enjoyment of Leased Premises. By keeping and
performing the covenants and agreement herein contained to be performed by it,
the Lessee shall at all times throughout the term of this Agreement, have the
right, subject to the provisions of this Agreement, to peaceably and quietly
possess and enjoy the Leased Premises without suit, trouble or hindrance. The
Authority shall defend the Lessee's right to such peaceable and quiet possession
at the Authority's expense.
Section 704. Maintenance and Operations. The Authority will be
responsible, either itself or acting through the Manager, for snow removal from
the runways, taxiways and public use areas of the Airport, but not from the
Leased Premises. The Lessee acknowledges that the City, or the Manager acting
on behalf of the City, bears the responsibility for snow removal at the Airport.
Section 705. No Federal Funds to be Spent on Leased Premises. The parties
hereto acknowledge and agree that the City has not spent federal funds on,
developing, expanding or maintaining the Leased Premises. In the resolution
adopted by the City approving the issuance of the Bonds by the Authority, as
required by the Development Corporation Act, the City will agree not to spend
federal funds during the term of this Agreement on developing, expanding or
maintaining the Leased Premises.
<PAGE>
Section 706. Expansion of Airport Boundaries to Include Contiguous Land.
In the event the Lessee exercises its right under Section 308 hereof to convey
additional land contiguous to the Land acquired by the Lessee to accommodate
Lessee Improvements, the Authority agrees to request the City to consider in
good faith any request by the Lessee that the City seek approval from FAA of an
expansion of the Airport boundaries to include such additional land. The
foregoing notwithstanding, no assurances can be made that any such request will
receive approval from the FAA.
ARTICLE VIII
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RESERVATIONS
------------
Section 801. Improvement, Relocation or Removal of Special Facilities.
Subject to Section 1104 hereof, the Lessee hereby acknowledges that the City, at
its sole discretion, reserves the right to further develop or improve the
Aircraft Operating Area (as defined in FAA regulations) and other portions of
the Airport, including the right to remove or relocate any structure on the
Airport, as it sees fit, and to take any action it considers necessary to
protect the aerial approaches of the Airport against obstructions, together with
the right to prevent the Lessee from erecting or permitting to be erected, any
buildings or other structure on the Airport which, in the reasonable opinion of
the City, would limit the usefulness of the Airport, constitute a hazard to
aircraft or violate FAA standards or regulations.
Section 802. Inspection of Leased Premises. The Authority, acting through
the duly authorized agent of the City (currently the Manager), shall have at any
reasonable time the right to enter the Leased Premises for the purpose of
periodic inspection for fire protection, maintenance and to investigate
compliance with the terms of this Agreement; provided, however, that except in
the case of emergency, such right shall be exercised upon twenty-four (24) hours
prior notice to the Lessee and with an opportunity for the Lessee to have an
employee or agent present. The Authority, acting through the City and its
designated agents, will comply with the Lessee's security procedures and will
conduct such inspections in a manner that does not unduly interfere with or
disrupt the Lessee's normal business operations.
Section 803. Subordination to U.S. Government. This Agreement shall be
subordinate to the provisions of any existing or future agreement(s) between the
City and the United States Government, relative to the operation and maintenance
of the Airport, the terms and execution of which have been or may be required as
a condition precedent to the expenditure or reimbursement to the City of Federal
funds for the development of the Airport; the foregoing notwithstanding, no such
subordination shall adversely
<PAGE>
impact the obligations of the Lessee under Section 502 or the assignment of
rental payments by the Authority under Section 507.
Section 804. War or National Emergency. During the time of war or national
emergency, the parties recognize that the City shall have the right to lease the
Airport or any part thereof to the United States Government for military use,
and if any such lease is executed, the provisions of this Agreement insofar as
they are inconsistent with the lease to the United States Government shall be
suspended, and in that event, a just and proportionate part of the ground rent
due under Section 501 hereof shall be abated.
Section 805. No Liability of the Authority. The Bonds shall be special and
limited obligations of the Authority, payable solely and only out of the Trust
Estate. No holder of any Bond shall have the right to compel any exercise of
the taxing power of the State or any political subdivision thereof, including
the City, to pay principal of, premium, if any, or interest on the Bonds, and
the Bonds shall not constitute an indebtedness of the State or any political
subdivision thereof, including the City, or a loan of credit thereof within the
meaning of any constitutional or statutory provision or limitation or
indebtedness.
Section 806. No Warranty of Condition or Suitability. The Authority makes
no warranty, either express or implied, as to the condition of the Leased
Premises or that it shall be suitable for the Lessee's purposes or needs. The
Authority shall not be responsible for any latent defect or change of condition
in the Leased Premises and the Lessee shall not, under any circumstances,
withhold any rentals or other amounts payable to the Authority hereunder on
account of any defect in the Leased Premises, nor for any change in the
condition thereof nor for any damage accruing thereto. By its entry onto the
Leased Premises, the Lessee accepts the Leased Premises as being free and clear
from all defects and in good, safe, clean and orderly condition and repair, and
agrees to maintain the same.
Section 807. Responsibility for Contracts for Special Facilities and
Payment of Special Facilities Rentals. The Authority shall not be responsible
to the Lessee for the performance of the contractor or contractors for the
construction, modification, expansion and installation of the Special
Facilities. The Authority shall not be required to pay or provide any monies
for the construction, modification, expansion or installation of the Special
Facilities, except to the extent of the moneys in the Construction Fund.
Failure of the contractor or contractors to complete the construction,
modification, expansion and installation of the Special Facilities shall in no
way affect the payment obligations of the Lessee under Section 502 of this
Agreement.
Section 808. [Intentionally Omitted].
------------------------
<PAGE>
Section 809. Consideration of Amendment. In the event that the FAA, or its
successors, requires modifications or changes in this Agreement as a condition
precedent to the granting of funds for the improvement of the Airport, the
Lessee agrees to consider in good faith to such amendments, modifications,
revisions, supplements or deletions of any of the terms, conditions or
requirements of this Agreement as may be reasonably required to obtain such
funds; provided, however, that in no event will the Lessee be required, pursuant
to this Section, to agree to an increase in the rent provided for hereunder or
to a change in the use (provided it is an authorized use hereunder) to which the
Lessee has put the Facilities.
ARTICLE IX
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INDEMNITY AND INSURANCE
-----------------------
Section 901. Indemnification of Indemnified Parties.
-----------------------------------------
(a) Agreement to Indemnify. The Lessee releases the Indemnified Parties
from, and the Indemnified Parties shall not be liable for, and the Lessee agrees
and shall protect, indemnify, defend, and hold the Indemnified Parties harmless
from any and all Claims or Losses (including, but not limited to, attorneys'
fees, litigation and court costs, amounts paid in settlement, and amounts paid
to discharge judgments) directly or indirectly resulting from, arising out of,
in connection with, or related to (i) the issuance, offering, sale, or delivery
of the Bonds, the Underwriting Agreement, the Indenture, the Guaranty, and this
Agreement and the obligations imposed on the Authority or the City hereby and
thereby; or the design, construction, installation, operation, use, occupancy,
maintenance, or ownership of the Special Facilities; (ii) any written statements
or representations made or given by the Lessee or any of its agents, officers or
employees, to the Indemnified Parties, or to any underwriters or purchasers of
any of the Bonds, with respect to the Lessee, the Special Facilities, or the
Bonds, including, but not limited to, statements or representations of facts,
financial information, or corporate affairs; (iii) damage to property or any
injury to or death of any person that may be occasioned by any cause whatsoever
pertaining to the Facilities; (iv) the presence or release of any Hazardous
Materials or any environmental condition at the Facilities; and (v) any breach,
violation or nonperformance of any covenant of the Lessee hereunder, including,
without limitation, any loss or damage incurred by the Authority or the City as
a result of violation by the Lessee of the provisions of Sections 614 or 615.
THIS INDEMNIFICATION REMAINS IN FULL FORCE AND EFFECT EVEN IF ANY CLAIM DIRECTLY
OR INDIRECTLY RESULTS FROM, ARISES OUT OF, OR RELATES TO OR IS ASSERTED TO HAVE
RESULTED FROM, ARISEN
<PAGE>
OUT OF, OR RELATED TO THE SOLE NEGLIGENCE OR CONCURRENT NEGLIGENCE OF AN
INDEMNIFIED PARTY. The foregoing notwithstanding, such indemnification shall (i)
not extend to any Claim or Loss resulting from the willful misconduct, bad faith
or fraud of an Indemnified Party and (ii) continue and remain in effect
notwithstanding any disclaimers of warranty contained in the Special Warranty
Deed conveying the Land to the Authority.
(b) Defense. The Lessee shall have the right to assume the investigation
and defense of all Claims, including the employment of counsel and the payment
of all expenses. Each Indemnified Party shall have the right to employ separate
counsel in any such action and participate in the investigation and defense
thereof, but the fees and expenses of such counsel shall be paid by such
Indemnified Party unless (i) the employment of such counsel has been
specifically authorized by the Lessee, in writing, or (ii) the Lessee has failed
to assume the defense and to employ counsel and the ability of the Indemnified
Parties to be adequately defended is thereby jeopardized, or (iii) the named
parties to any such action include both an Indemnified Party and the Lessee, and
the Indemnified Party shall have received a written legal opinion of counsel to
the effect that in such counsel's opinion, one or more of the legal defenses
available to such Indemnified Party are in conflict with those available to the
Lessee (in which case, if such Indemnified Party notifies the Lessee in writing
that it elects to employ separate counsel at the Lessee's expense, the Lessee
shall not have the right to assume the defense of the action on behalf of such
Indemnified Party; provided however, that the Lessee shall not, in connection
with any one action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegation or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys for the Indemnified Parties, which firm shall be
designated in writing by the Indemnified Parties); provided further, anything to
the contrary notwithstanding, nothing herein shall be construed as prohibiting
the Department from utilizing the Attorney General of the State as its counsel,
or the City and the Authority from utilizing the City Attorney of the City as
its counsel, and having the expenses and overhead associated therewith paid by
the Lessee.
(c) Cooperation with Lessee. Each Indemnified Party shall use reasonable
efforts to cooperate with the Lessee in the defense of any Claim. The Lessee
shall not be liable for any settlement of any such action without its consent,
unless the interests of the Indemnified Parties are in conflict with the
interests of the Lessee, but, if any such action is settled with the consent of
the Lessee, the Lessee shall indemnify and hold harmless the Indemnified Parties
against any Loss by reason of such settlement as provided in this Section.
<PAGE>
(d) Survival of Term. The provisions of this Section 901 shall survive the
term of this Agreement for all Claims arising out of actions or occurrences
during the term of this Agreement.
Section 902. Indemnification of the Trustee. The Lessee agrees to
indemnify the Trustee, its directors, officers and employees, for and to hold it
harmless against, any loss, liability or expense incurred without negligence,
whether by act or omission to act, or willful misconduct on its part, arising
out of or in connection with the performance of its duties under the trust
imposed by the Indenture, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of
any of its powers or duties under the Indenture, provided, however, that:
(1) the Trustee shall reimburse the Lessee for payments made by the Lessee
pursuant to such indemnity, to the extent of any proceeds, net of all
expenses of collection, actually received by it from any insurance
proceeds with respect to any such indemnified loss, liability or
expense, and the Trustee shall assign rights to such proceeds, to the
extent of such required reimbursement, to the Lessee;
(2) as a condition to such indemnity, the Trustee shall promptly notify
the Lessee in writing of any claim brought or, to the knowledge of the
Trustee, threatened against the Trustee in respect of which indemnity
may be sought against the Lessee;
(3) the Lessee shall have the right to assume the investigation and
defense of any claims against the Trustee in respect of which
indemnity may be sought against the Lessee, including the employment
of counsel and the payment of all expenses, provided that the Trustee
shall have the right to employ separate counsel in any such action and
participate in the investigation and defense thereof, but the fees and
expenses of such counsel shall be paid by the Trustee unless (a) the
employment of such counsel has been specifically authorized by the
Lessee, in writing, or (b) the Lessee has failed to assume the defense
and to employ counsel, or (c) the Trustee determines in good faith
that its rights cannot be adequately represented by counsel employed
by the Lessee as a result of a conflict between the interests of the
Lessee and the interests of the Trustee;
(4) the Trustee, as a condition of such indemnity, shall use reasonable
efforts to cooperate with the Lessee in the defense
<PAGE>
of any claim in respect of which indemnity may be sought against the
Lessee; and
(5) the Lessee shall not be liable for any settlement of any such action
without its consent, but, if any such action is settled with the
consent of the Lessee or there be final judgment for the plaintiff in
any such action, the Lessee shall indemnify and hold harmless the
Trustee by reason of such settlement or judgment as provided herein.
Section 903. Public Liability Insurance. The Lessee shall, at its
expense, procure, maintain and keep in force, at all times during the term of
this Agreement from financially sound and reputable companies reasonably
acceptable to the Authority, commercial general liability insurance, insuring
the Lessee, the Authority, the Trustee and the City against liability for bodily
injury and property damage with respect to the risks set forth in Exhibit C
attached hereto. Without limiting its liability, the Lessee agrees to carry and
keep in force insurance with single limit liability for bodily injury or death
and property damage in a sum not less than $20,000,000 with said policy
designating the Authority, the City and the Trustee as additional insureds to
the extent the Lessee is required to indemnify the Authority and the City
pursuant to Section 901 hereof. In no event shall the Lessee knowingly handle
any materials which would void or reduce the insurance coverage of the
Facilities required of the Lessee herein. The Lessee shall furnish the
Authority, the City and the Trustee with a certificate of insurance as evidence
of such coverage. Said insurance shall not be cancelled or materially modified
except upon ten (10) days' advance written notice to the Authority, the City and
the Trustee.
Section 904. Fire and Extended Coverage Insurance. The Lessee shall, at
its expense, procure and keep in force at all times during the term of this
Agreement with financially sound and reputable companies reasonably acceptable
to the Authority, replacement cost insurance on the Leased Premises against loss
and damage by fire, aircraft and extended coverage perils. Such policy shall be
in an amount of not less than eighty percent (80%) of the replacement cost of
the Leased Premises. In no event shall the Lessee knowingly handle any
materials which would void or reduce the insurance coverage of the Facilities
required of the Lessee herein. Said policy shall designate the Authority, the
City and the Trustee as additional insureds. The Lessee shall furnish the
Authority and the Trustee with a certificate of insurance as evidence of such
coverage. Said policy shall not be cancelled or materially modified except upon
ten (10) days' advance written notice to the Authority, the City and the
Trustee. In connection with any transfer of the Leased Premises by the
Authority under the provisions of Section 1703, the Authority may provide that
it shall no longer be an insured under the terms of this Section.
<PAGE>
Section 905. Application of Insurance Proceeds. The proceeds of the
insurance required to be maintained in accordance with the provisions of Section
904 hereof shall be paid and disbursed in accordance with the provisions of
Article XI hereof.
Section 906. Performance Bonds. At any time that the Lessee undertakes any
construction pursuant to Article III hereof, the Lessee shall, at its own cost
and expense, cause to be made, executed, and delivered to the Authority separate
performance bonds, as follows:
(a) Prior to the date of commencement of such construction, a contract
surety bond in a sum equal to the full amount of the construction contract
awarded. Said bond shall be drawn in a form and from a financially sound and
reputable company reasonably acceptable to the City, acting on behalf of the
Authority; shall guarantee the faithful performance of necessary construction
and completion of improvements in accordance with the Plans and Specifications
therefor; and shall guarantee the Authority against any losses and liability,
damages, expenses, claims and judgments caused by or resulting from any failure
of the Lessee to perform completely, the work described therein.
(b) Prior to the date of commencement of such construction, a payment bond
with the Lessee's contractor or contractors as principal, in a sum equal to the
full amount of the construction contract awarded. Said bond shall guarantee
payment of all wages for labor and services engaged and of all bills for
materials, supplies and equipment used in the performance of said construction
contract.
Section 907. Right of the City or Trustee to Pay Insurance Premiums. In
the event that the Lessee shall fail to maintain full insurance coverage
required by this Agreement, the City, acting on behalf of the Authority, or the
Trustee may (but shall be under no obligation to) take out the required policies
of insurance, pay the required premiums or otherwise comply with the covenants
set forth in Sections 903 and 904 hereof. All amounts advanced by the City,
acting on behalf of the Authority, or the Trustee in payment of the required
premiums for such insurance or otherwise to comply with the covenants set forth
in such Sections shall be paid by the Lessee to the one making the advances,
together with interest thereon at the Trustee's prime rate of interest.
ARTICLE X
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PREPAYMENT OF SPECIAL FACILITIES RENTALS
----------------------------------------
<PAGE>
Section 1001. In Connection With Optional Redemption of Bonds. The Lessee
shall have the option to prepay the Special Facilities Rentals due pursuant to
Section 502 hereof with respect to the Bonds for the purpose of providing for
the redemption of the Bonds then Outstanding in accordance with the Indenture.
In order to exercise such right, the Lessee shall: (i) give conditional written
notice of the exercise of such right to the Authority, the City and the Trustee
not more than one hundred twenty (120) days nor less than forty-five (45) days
prior to the date the Lessee has selected for the redemption of the Bonds; and
(ii) irrevocably deposit with the Trustee in the Debt Service Fund on or prior
to such redemption date sufficient moneys, which, together with investment
earnings thereon to such redemption date and other moneys in the Debt Service
Fund available therefore, shall be sufficient to provide for the payment of the
principal, redemption premium, if any, and interest on the Bonds to be redeemed
on such redemption date.
Section 1002. In Connection with Defeasance of the Bonds. The Lessee
shall have the option to prepay the Special Facilities Rentals due pursuant to
Section 502 hereof with respect to the Bonds for the purpose of providing for
the defeasance of the Bonds in accordance with the Indenture. In order to
exercise such right, the Lessee shall: (i) give written notice of the exercise
of such right to the Authority, the City and the Trustee; and (ii) irrevocably
deposit with the Trustee in the Debt Service Fund on or prior to the date of
such defeasance sufficient moneys, which, together with investment earnings
thereon and other moneys in the Debt Service Fund available therefor, shall be
sufficient to provide for the payment of principal of, redemption premium, if
any, and interest on the Bonds to the date the Lessee has selected for the
redemption thereof or the date of maturity, as the case may be, in accordance
with the Indenture.
Section 1003. In Connection with the Termination of this Agreement in the
Event of Damage or Destruction or Condemnation. The Lessee shall have and is
hereby granted the option, in accordance with paragraph (ii) of Subsection 1101
(a) and paragraph (iii) of Subsection 1102(a) hereof, to prepay the Special
Facilities Rentals due pursuant to Section 502 and to terminate this Agreement
in the event of a destruction or damage to or condemnation of the Special
Facilities for the purpose of redeeming the Bonds then Outstanding in accordance
with the Indenture. In order to exercise such right, the Lessee shall: (i) give
written notice of the exercise of such right to the Authority, the City and the
Trustee not more than one hundred twenty (120) days nor less than forty-five
(45) days prior to the date the Lessee has selected for the redemption of the
Bonds; and (ii) irrevocably deposit with the Trustee in the Debt Service Fund on
or prior to such redemption date sufficient moneys which, together with interest
thereon to such redemption date and other moneys in the Debt Service Fund
available therefor, shall be sufficient to provide for the payment of the
<PAGE>
principal of and interest on all the Bonds then Outstanding in accordance with
the provisions of the Indenture.
Section 1004. In Connection with a Partial Redemption. The Lessee shall
have the option, in accordance with paragraph (iii) of Subsection 1102(a) hereof
to prepay the Special Facilities Rentals due pursuant to Section 502 hereof for
the purpose of providing for the redemption of the Bonds then Outstanding in
accordance with the Indenture. In order to exercise such right, the Lessee
shall: (i) give written notice of the exercise of such right to the Authority,
the City and the Trustee not more than one hundred twenty (120) days nor less
than forty-five (45) days prior to the date the Lessee has scheduled for the
redemption of the Bonds; and (ii) irrevocably deposit with the Trustee in the
Debt Service Fund on or prior to such redemption date sufficient moneys, which,
together with investment earnings thereon to such redemption date and other
moneys in the Debt Service Fund available therefor, shall be sufficient to
provide for the payment of the principal of and interest on the Bonds to such
redemption date.
Section 1005. In Connection With a Determination of Taxability. The
Lessee shall be obligated to prepay the Special Facilities Rentals due pursuant
to Section 502 hereof with respect to the Bonds in the event of a Determination
of Taxability. Such redemption shall occur at a date to be selected by the
Lessee not more than one hundred twenty (120) days after the occurrence of the
Determination of Taxability. The Lessee shall irrevocably deposit with the
Trustee in the Debt Service Fund on or prior to such redemption date sufficient
moneys, which, together with investment earnings thereon to such redemption date
and other moneys in the Debt Service Fund available therefor, shall be
sufficient to provide for the payment of the principal of and interest on the
Bonds to such redemption date.
ARTICLE XI
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DAMAGE AND CONDEMNATION
-----------------------
Section 1101. Damage and Destruction.
-----------------------
(a) If prior to full payment of the Bonds (or provision for payment thereof
having been made in accordance with the provisions of the Indenture) the Special
Facilities are destroyed (in whole or in part) or are damaged by fire or other
casualty, the Lessee shall promptly give written notice thereof to the
Authority, the City and the Trustee. All Net Proceeds in an amount less than
one million dollars ($1,000,000) per casualty shall be paid to the Lessee to be
applied to repair, rebuild or restore the property damaged. Any remaining
balance after payment for such repair, rebuilding or restoration shall be
retained by the Lessee. Net Proceeds of insurance in excess of one
<PAGE>
million dollars ($1,000,000) per casualty resulting from such claims for losses
shall be paid to and held by the Trustee in the Net Proceeds Account of the
Construction Fund created under the Indenture, whereupon the Lessee shall elect
to proceed in accordance with paragraphs (i) or (ii) hereof:
(i) The Lessee will proceed promptly to repair, rebuild or restore the
property damaged or destroyed to substantially the same condition as it
existed prior to the event causing such damage or destruction, with such
changes, alterations and modifications (including the substitution and
addition of other property) as may be desired by the Lessee and as will not
impair productive capacity or the character of the Special Facilities, and
the Trustee will apply so much as may be necessary of the Net Proceeds to
payment of the costs of such repair, rebuilding or restoration, either on
completion thereof or as the work progresses, as directed by the Lessee.
In the event said Net Proceeds are not sufficient to pay in full the costs
of such repair, rebuilding or restoration, the Lessee will, nonetheless,
complete the work thereof and will pay that portion of the costs thereof in
excess of the amount of said Net Proceeds, or will advance to the Authority
the moneys necessary to complete said work, in which case the Authority
will proceed so to complete said work. Any balance of such Net Proceeds
remaining after payment of all the costs of such repair, rebuilding or
restoration shall be paid to the Lessee.
(ii) The Lessee shall: (A) cause the Special Facilities to be returned
to the Authority either in the condition the Special Facilities then exist
or in the same condition in which the Special Facilities existed prior to
the execution of this Agreement, whichever shall be acceptable to the
Authority; (B) transfer all amounts in the Net Proceeds Account in the
Construction Fund not used pursuant to clause (A) to the Debt Service Fund
and prepay all of the Special Facilities Rentals due pursuant to Section
502 hereof pursuant to the provisions of Section 1003 hereof and the
corresponding provisions of the Indenture and cause the Authority and the
Trustee to provide for the redemption of all Bonds then Outstanding under
the Indenture in whole in accordance with the provisions thereof; (C) if
any Bonds have previously been redeemed or provision for their payment has
been made pursuant to the Indenture, reimburse itself for such prepayment
in an amount equal to the amount that would have been necessary (on the
date of receipt of such Net Proceeds), to redeem or provide for the payment
of such Bonds to the next practicable redemption date, but not less than
the actual amount paid by the Lessee; and (D) apportion the remaining Net
Proceeds between the Authority and the Lessee, with the Authority receiving
the same proportion of the remaining Net Proceeds as the then expired
portion of the term of this Agreement bears to the full term and the Lessee
shall be entitled to the remainder
<PAGE>
of the Net Proceeds; provided, that if the Lessee proceeds under this
paragraph (ii) hereof, it shall provide for the completion of the
requirements of clauses (A) and (B) hereof, whether or not the Net Proceeds
are sufficient for such purposes. The Lessee may elect to proceed pursuant
to this paragraph (ii) only if the Special Facilities have been damaged or
destroyed by fire or other casualty (x) to such extent that, in the opinion
of the Lessee expressed within a period of six consecutive months following
such damage or destruction, it is not practicable or desirable to rebuild,
repair or restore the Special Facilities, or (y) to such extent that, in
the opinion of the Lessee, the Lessee is or will be thereby prevented from
carrying on its normal operations at the Special Facilities for a period of
six consecutive months.
Any moneys held by the Trustee in the Net Proceeds Account shall, at the
written direction of the Lessee, be invested or reinvested by the Trustee in
Qualified Investments in accordance with the Indenture. The Lessee shall
forthwith pay to the Trustee the amount of any net losses with respect to
principal on such investments.
(b) If the Bonds have been fully paid (or provision for the payment thereof
has been made in accordance with the Indenture) and the Special Facilities are
destroyed (in whole or in part) or are damaged by fire or other casualty, all
Net Proceeds will be paid to the Trustee or a mutually acceptable third party,
with any disbursements to be approved by the Lessee and the Authority, and the
Lessee shall elect to proceed in accordance with paragraphs (i) or (ii) hereof:
(i) The Lessee will proceed promptly to repair, rebuild or restore the
property damaged or destroyed to substantially the same condition as it
existed prior to the event causing such damage or destruction, with such
changes, alterations and modifications (including the substitution and
addition of other property) as may be desired by the Lessee and as will not
impair productive capacity or the character of the Special Facilities, and
the Lessee will apply so much as may be necessary of the Net Proceeds to
payment of the costs of such repair, rebuilding or restoration, either on
completion thereof or as the work progresses as directed by the Lessee. In
the event the Net Proceeds are not sufficient to pay in full the costs of
such repair, rebuilding or restoration, the Lessee will, nonetheless,
complete the work thereof and will pay that portion of the costs thereof in
excess of the amount of the Net Proceeds, or will advance to the Authority
the moneys necessary to complete said work, in which case the Authority
will proceed so to complete said work. Any balance of the Net Proceeds
remaining after payment of all the costs of such repair, rebuilding or
restoration shall be paid to the Lessee.
<PAGE>
(ii) The Lessee will (A) cause the Special Facilities to be returned
to the Authority either in the condition the Special Facilities then exist
or in the same condition in which the Special Facilities existed prior to
the execution of this Agreement, whichever shall be acceptable to the
Authority, (B) if any Bonds have previously been redeemed or provision for
their payment has been made pursuant to the Indenture, reimburse itself for
such prepayment in an amount equal to the amount that would have been
necessary (on the date of receipt of such Net Proceeds) to redeem or
provide for the payment of such Bonds to the next practicable redemption
date, but not less than the actual amount paid by the Lessee and (C)
apportion the remaining Net Proceeds between the Authority and the Lessee,
with the Authority receiving the same proportion of such remaining Net
Proceeds as the then expired portion of the term of this Agreement bears to
the full term, and the Lessee shall be entitled to the remainder of the Net
Proceeds.
(c) The Lessee shall not, by reason of the payment of the costs (whether by
direct payment thereof or advances to the Authority or the Trustee) of replacing
or repairing of any property damaged or destroyed in excess of the Net Proceeds
be entitled to any reimbursement from the Authority, the City, the Trustee, or
the holders or owners of the Bonds, or any abatement or diminution of the rents
payable under Article V hereof.
(d) Within this Section 1101, "Net Proceeds" means the gross proceeds from
the insurance with respect to which that term is used remaining after payment of
all expenses (including attorneys expenses and any extraordinary fees and
expenses of the Trustee), incurred in the collection of such gross proceeds.
Section 1102. Condemnation.
-------------
(a) In the event that title to, or the temporary use of, the Special
Facilities or the leasehold estate of the Lessee in the Special Facilities
created by this Agreement or any part of either thereof shall be taken under the
exercise of the power of eminent domain by any governmental body or by any
person, firm or corporation acting under governmental authority, in each case
other than the City, while any Bonds are Outstanding, the Lessee shall be
obligated to continue to pay the Special Facilities Rental and other amounts due
to the Trustee. Any Net Proceeds derived for the temporary use or condemnation
of the Special Facilities shall be paid to the Lessee. The Authority, the
Lessee and the Trustee will cause any other Net Proceeds received by them or any
of them from any award made in such eminent domain proceedings with respect to
the Special Facilities, to be paid to and
<PAGE>
held by the Trustee in the Net proceeds Account, to be applied in one or more of
the following ways, as shall be directed in writing by the Lessee:
(i) The restoration of the Special Facilities to substantially the
same condition as existed prior to the exercise of the said power of
eminent domain.
(ii) The acquisition, by construction or otherwise, by the Lessee of
other improvements suitable for the Lessee's operations (which improvements
shall be deemed a part of the Special Facilities and available for use and
occupancy by the Lessee without the payment of any rent other than the
Special Facilities Rental to the same extent as if such other improvements
were specifically described herein and demised hereby).
(iii) Redemption of any of the Bonds together with accrued interest
thereon to the date of redemption; provided, that no part of any such
condemnation award may be applied for such redemption, unless all of the
Bonds are to be redeemed or, in the event that less than all of the Bonds
are, to be redeemed, the Lessee shall certify to the Authority, the City
and the Trustee that (A) the property forming a part of the Special
Facilities that was taken by such condemnation proceedings is not essential
to the Lessee's use or occupancy of the Special Facilities, or (B) the
Special Facilities have been restored to a condition substantially
equivalent to its condition prior to the taking by such condemnation
proceedings, or (C) improvements have been acquired which are suitable for
the Lessee's operations at the Special Facilities as contemplated by the
foregoing paragraph (ii) of this Subsection 1102(a). The Lessee may elect
to proceed pursuant to this paragraph (iii) only if the Special Facilities
have been condemned (x) to such extent that, in the opinion of the Lessee
expressed within a period of six consecutive months following such
condemnation it is not practicable or desirable to rebuild, repair or
restore the Special Facilities, or (y) to such extent that, in the opinion
of the Lessee, the Lessee is or will be thereby prevented from carrying on
its normal operations at the Special Facilities for a period of six
consecutive months.
(b) The Lessee shall direct the Authority, the City and the Trustee in
writing as to which of the ways specified in this Section the Lessee elects to
have the condemnation award applied. Any balance of the Net Proceeds of the
award in such eminent domain proceedings in an amount necessary to redeem the
then Outstanding Bonds shall be paid into the Debt Service Fund. If the Bonds
have been fully paid (or provision for payment thereof has been made in
accordance with the provisions of the Indenture), all Net Proceeds will be
apportioned between the Authority and the Lessee, with the Authority
<PAGE>
receiving the same portion of such proceeds as the then expired portion of the
Agreement term bears to the term of the Agreement, and the Lessee receiving the
balance, provided, however, that if any Bonds have been previously redeemed or
provision for their payment has been made pursuant to the Indenture, prior to
any such apportionment the Lessee shall receive Net Proceeds in an amount
(determined on the date of the receipt of such Net Proceeds) that would have
been necessary to redeem such Bonds to the next practicable redemption date, but
not less than the actual amount paid by the Lessee.
(c) Any moneys held by the Trustee under the provisions of the
preceding paragraph shall, at the written request of the Lessee, be invested or
reinvested by the Trustee in Qualified Investments in accordance with the
provisions of the Indenture. The Lessee shall forthwith pay to the Trustee the
amount of any net losses with respect to principal on such investments.
(d) Within this Section 1102, "Net Proceeds" means the gross proceeds
derived from the condemnation award with respect to which that term is used
after payment of all expenses (including attorney's expenses and any
extraordinary expenses of the Trustee) incurred in connection with the
collection of such gross proceeds.
(e) The Authority shall cooperate fully with the Lessee in the handling and
conduct of any prospective or pending condemnation proceedings with respect to
the Special Facilities or any part thereof and will, to the extent it may
lawfully do so, permit the Lessee to litigate in any such proceedings in the
name and behalf of the Authority. In no event will the Authority voluntarily
settle, or consent to the settlement of, any prospective or pending condemnation
proceeding with respect to the Special Facilities or any part thereof without
the written consent of the Lessee.
Section 1103. Destruction or Condemnation of Excluded Personal Property or
Lessee Improvements. The Lessee shall also be entitled to the net proceeds of
any insurance or condemnation award or portion thereof made for damages to or
takings of the Excluded Personal Property or any portion thereof, the Lessee
Improvements or any portion thereof, as well as any portion of the Leased
Premises that at one time was Lessee Improvements.
Section 1104. Taking or Condemnation by the City. In the event the City
requires the Facilities for expansion, improvement, development of the Airport
or in the event the City exercises its right of condemnation or eminent domain
with respect to all or substantially all of the Facilities for the purposes set
forth in Section 801 hereof, the Authority reserves the right, on six (6) months
notice, to relocate or replace the Facilities in substantially similar form at
another comparable location on the Airport. The City shall
<PAGE>
identify to the Authority and the Lessee the comparable location by appending to
this Agreement revised Exhibits A and B. The new location shall constitute
thereafter the Land and the facilities or improvements located thereon shall
constitute the Facilities for purposes of this Agreement. The relocation of the
Facilities shall be at no cost to the Lessee and the new Facilities must be
ready for occupancy by the Lessee prior to the date of required relocation.
If the Authority complies with the provisions of this Section, such
remedies shall be in lieu of any remedies the Lessee may have pursuant to law or
equity with respect to the actions taken by the City in condemning or relocating
the Facilities.
Section 1105. Destruction or Condemnation of Leased Premises Other Than
Special Facilities or Former Lessee Improvements. The Lessee shall direct the
Authority to apply the net proceeds of any insurance or condemnation award
(other than condemnation by the City) or any portion thereof made for damages or
takings of Leased Premises (other than Special Facilities or former Lessee
Improvements) to restore such Leased Premises to substantially the same
condition as existed prior to such damage or condemnation or acquire, by
construction or otherwise, other improvements of similar character suitable for
the Lessee's operations. To the extent that such net proceeds are insufficient
to effect the foregoing, the Lessee shall: (i) pay all costs in excess of the
net proceeds required for such redemption; (ii) develop Plans and Specifications
which can accomplish such restoration with the net proceeds available therefor;
or (iii) terminate this Agreement with respect to those Leased Premises
condemned or destroyed, in which case, such net proceeds shall be retained by
the Authority. Any excess net proceeds shall be retained by the Authority.
ARTICLE XII
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ADDITIONAL BONDS
----------------
Section 1201. Additional Bonds. If the Lessee is not in default
hereunder, the Authority will issue pursuant to an indenture between the
Authority and the trustee thereunder the amount of Additional Bonds specified by
the Lessee to provide funds to pay or to reimburse the Lessee for costs incurred
by the Lessee for any one or more of the following: (a) the costs of completing
the Special Facilities, (b) the costs of the issuance and sale of the Additional
Bonds and other costs reasonably related to the financing as shall be agreed
upon by the Lessee and the City, (c) the costs of acquiring land, buildings, and
equipment, one or more, to expand the Special Facilities for the purpose of
distributing cargo and parcels and for other
<PAGE>
purposes reasonably incidental thereto, and (d) the refunding of Outstanding
Bonds (including Additional Bonds, if any); provided that:
(i) the terms of such Additional Bonds, the purchase price to be
paid therefor, and the manner in which the proceeds therefrom are to be
disbursed, shall have been approved in writing by the Lessee;
(ii) the Authority and the Lessee shall have entered into a
Supplemental Agreement to provide for additional rent in an amount at least
sufficient to pay principal of, interest, and premium, if any, on the
Additional Bonds when due;
(iii) the Authority shall have otherwise complied with the
provisions of said indenture with respect to the issuance of such
Additional Bonds; and
(iv) there shall be delivered to the Trustee an opinion of Bond
Counsel to the effect that the issuance of such Additional Bonds shall not
adversely affect the exemption from gross income for federal income tax
purposes of interest on the Bonds.
Section 1202. Approval of State Agencies. Should Additional Bonds be
issued by the Authority pursuant to the terms of the Development Corporation
Act, no such Additional Bonds shall be issued without the prior approval of the
Department. To the extent required by State law, no Additional Bonds shall be
issued without the prior approval of the Attorney General of Texas.
ARTICLE XIII
------------
TERMINATION OF AGREEMENT BY THE LESSEE
--------------------------------------
Section 1301. Termination by the Lessee. So long as no Bonds remain
Outstanding under the Indenture, the Lessee may terminate this Agreement and
terminate its obligations hereunder at any time that the Lessee is not in
default in the payment of ground rentals and other amounts payable to the
Authority hereunder by giving the Authority sixty (60) days advance written
notice to be served as hereinafter provided, and by surrender of the Leased
Premises, upon or after the happening of any one of the following events:
(a) The issuance by any court of competent jurisdiction of an injunction in
any way preventing or restricting the use of the Airport, so as to substantially
affect the Lessee's use of the system at the Airport, and the remaining in force
of such injunction for a period of at least ninety (90) days;
<PAGE>
provided, however, that such injunction is not due solely to the Lessee's
violation of this Agreement.
(b) Failure by the Authority to observe and perform any covenant, condition
or agreement on its part to be observed or performed, for a period of sixty (60)
days after written notice to the Authority, specifying such failure and
requesting that it be remedied, given to the Authority by the Lessee, unless the
Lessee shall agree in writing to an extension of such time prior to its
expiration. If a failure under this Subsection is such that it cannot be
corrected within the applicable period, the Lessee shall not terminate this
Agreement if corrective action is instituted by the Authority within the
applicable period and diligently pursued until the failure is corrected.
(c) The assumption by the United States Government or any authorized agency
thereof of the operation, control, or use of the Airport or the Facilities, or
any substantial part or parts thereof, in a manner which substantially restricts
the Lessee for a period of at least ninety (90) days from full use of the
Facilities.
The provisions of this Section 1301 shall be subject to the provisions of
Section 1806 hereof.
ARTICLE XIV
-----------
EVENTS OF DEFAULT
-----------------
Section 1401. Events of Default. The following shall constitute Events of
Default:
(a) the failure of the Lessee to pay any installment of rent then due (with
interest) under Section 501 or Section 503 hereof within thirty (30) days after
receipt by the Lessee of written notice to pay such rent;
(b) the failure of the Lessee to pay any installment of Special Facilities
Rentals pursuant to Section 502 hereof, which results in the occurrence of an
"Event of Default" as described in Article V(C)(1) or Article V(C)(2) of the
Indenture;
(c) the occurrence of an Act of Bankruptcy, provided that with respect to
the filing of an involuntary petition in bankruptcy or other commencement of a
bankruptcy or similar proceeding against the Lessee, such petition or proceeding
shall remain undismissed for ninety (90) days;
(d) (i) failure by the Lessee to observe and perform any covenant,
condition or agreement on its part to be observed or performed pursuant to
<PAGE>
Sections 201 or 611 hereof, or (ii) any violation of an FAA or United States
Department of Transportation regulation that (A) deprives the City of the use of
or the power to operate all or a portion of the Airport or (B) prevents the City
from obtaining an airport development grant in aid from the United States
Government, where such occurrence set forth in (i) or (ii) shall continue for a
period of sixty (60) days after written notice to the Lessee specifying such
failure and requesting that it be remedied, given to the Lessee by the Authority
or the City, unless the City shall agree in writing to an extension of such time
prior to its expiration. If a failure under this Subsection is such that it
cannot be corrected within the applicable period, it shall not constitute an
Event of Default if corrective action is instituted by the Lessee within the
applicable period and diligently pursued until the failure is corrected; or
(e) (i) failure by the Lessee to observe and perform any covenant,
condition or agreement on its part to be observed or performed, other than as
referred to in Subsections (a) through (d) above, for a period of sixty (60)
days after written notice to the Lessee, specifying such failure and requesting
that it be remedied, given to the Lessee by the Authority, unless the Authority
shall agree in writing to an extension of such time prior to its expiration;
provided, however, if a failure under this clause (i) is such that it cannot be
corrected within the applicable period, it shall not constitute an Event of
Default if corrective action is instituted by the Lessee within the applicable
period and diligently pursued until the failure is corrected; or (ii) election
of the Authority to declare an Event of Default as provided in Subsection 605(d)
hereof.
The provisions of Subsections (d) and (e) shall be subject to the
provisions of Section 1806 hereof.
Section 1402. Remedies of the Trustee for Certain Events of Default. Upon
the occurrence of any Event of Default described in Subsections 1401(b) or (c),
the Trustee, as assignee pursuant to Section 507 hereof, may in its discretion
and shall upon the direction of the Owners of at least twenty-five percent (25
%) of the principal amount of Bonds Outstanding, join in or separately initiate
whatever action at law or in equity as may appear necessary or desirable to
collect the Special Facilities Rentals due and owing and any other amounts then
due to the Trustee under this Agreement including, without limitation, the use
and filing of actions for specific performance and mandamus proceedings in any
court of competent jurisdiction, against the Company, and to obtain judgments
against the Company for, or to seek the appointment of a receiver in equity to
collect, the Special Facilities Rentals due and owing and any other amounts then
due to the Trustee under this Agreement. No waiver by the Authority of an Event
of Default described in Subsections 1401 (b) or (c) shall adversely affect the
Trustee's rights under this Section 1402.
<PAGE>
Section 1403. Remedies of the Authority on Default.
-------------------------------------
(a) If any Event of Default shall have occurred, the Authority may, in its
own name and for its own account, without impairing the ability of the Authority
to pursue any other remedy provided for in this Agreement or now or hereafter
existing at law or in equity or by statute, institute such action against the
Lessee as may appear necessary or desirable to collect such rentals and any
other amounts then due under this Agreement, or to enforce performance and
observance of such covenant, condition or obligation of the Lessee hereunder, or
to recover damages for the Lessee's non-payment, non-performance or non-
observance of the same.
(b) Upon the occurrence of any Event of Default described in Subsections
1401 (a), (c) or (d), the Authority may (i) by giving the Lessee written notice
upon the occurrence of any Event of Default described in Subsections 1401(a) and
(d) and without giving the Lessee notice upon the occurrence of an Event of
Default described in Subsection 1401(c), declare this Agreement to be
terminated, except for the Lessee's continuing obligation pursuant to Subsection
1404(a) hereof to make payments due hereunder, (ii) exclude the Lessee from
possession of the Leased Premises and reenter the same; and (iii) take whatever
action at law or in equity as may appear necessary or desirable to collect the
rentals and any other amounts then due, to enforce performance and observance of
any covenant, condition or obligation of the Lessee hereunder, or to recover
damages for the Lessee's non-payment, non-performance or non-observance of the
same; provided that the Authority shall be required to mitigate its damages to
the extent required by law and Subsection 1404(b) hereof.
(c) The Lessee shall pay all of the Authority's reasonable fees and
expenses, including reasonable attorneys' fees, in enforcing any covenant to be
observed by the Lessee or pursuing any remedy upon an Event of Default. Such
amounts shall for all purposes of this Agreement be considered additional rent
due under Section 501 hereof.
Section 1404. The Lessee To Remain Liable for Payments; Reletting.
----------------------------------------------------
(a) Notwithstanding the exercise by the Authority of its remedies pursuant
to Section 1403 hereof or the exercise by the Trustee of its remedies pursuant
to Section 1402 hereof or the Indenture, the Lessee shall continue to be liable
for the payment of all rentals payable under Article V hereof and other amounts
payable under this Agreement and the Lessee shall make such payments at the same
times and in the same manner as provided in this Agreement, except as provided
in Subsection 1404(b) hereof.
<PAGE>
(b) Whether or not any Bonds are Outstanding, the Authority shall use
reasonable efforts to relet the Leased Premises for the maximum rental it may
reasonably obtain, provided, however, that the Authority shall have no
obligation to relet the Leased Premises to any person who will not use the
Leased Premises for aviation related purposes requiring airfield access. Any
such rentals received prior to the stated termination date of this Agreement
shall be applied first to the payment of expenses incurred by the Authority in
connection with such reletting, second, to the Trustee, to the extent Bonds are
then Outstanding, for the payment of principal, premium, if any, and interest on
the Bonds, third to the Lessee in an amount equal to the sum of the principal
amount of the Bonds Outstanding on the date of such termination and the
principal amount and any premium paid on Bonds no longer Outstanding, and fourth
to the Authority. All such rentals paid to the Authority after the stated
termination date of this Agreement shall be retained by the Authority.
Section 1405. Disposition of Excluded Personal Property. If there shall
remain any Excluded Personal Property upon the Authority's reentry of the Leased
Premises, the Authority may, but without any obligation to do so, remove such
property and hold it for the Lessee and the Lessee shall reimburse the Authority
for any expense incurred by the Authority in connection with such removal and
storage of such property. The Authority shall have the right to sell or rent
such Excluded Personal Property; provided that it shall give to the Lessee not
less than thirty (30) days' prior written notice that it intends to conduct such
a sale or rental. The proceeds of such sale or letting shall be applied first,
to the cost of such sale, second, to the payment of the charges for storage,
third, to the payment of any other amounts which may then be due from the Lessee
to the Authority under this Agreement, except Sections 502 hereof, fourth, so
long as any Bonds are Outstanding, to the payment, redemption, purchase in the
open market or defeasance of such Bonds, and the balance, if any, shall be paid
to the Lessee.
Section 1406. No Remedy Exclusive. No remedy herein conferred upon the
Authority is intended to be exclusive of any other available remedy or remedies,
and each such remedy shall be cumulative and shall be in addition to every other
remedy given under this Agreement or now or hereafter existing at law or in
equity or by statute. No delay or omission to exercise any right or power
accruing upon any default granted under this Agreement shall impair any right or
power or shall be construed to be a waiver thereof, and any such right or power
may be exercised from time to time and as often as may be deemed expedient, and
the exercise of any one right or remedy shall not impair the right of the
Authority to any or all other remedies under this Agreement.
<PAGE>
Section 1407. No Additional Waiver Implied By One Waiver; Consents to
Waiver. The waiver of either party of any breach by the other party of any
covenant, condition or obligation under this Agreement shall not operate as a
waiver of any subsequent breach of the same or a waiver of any breach of any
other covenant, condition or obligation under this Agreement, nor shall any
forbearance by the non-defaulting party not breaching to seek a remedy for any
breach by the other party be a waiver by such non-defaulting party not breaching
any of its rights and remedies with respect to such breach or any subsequent
breach of the same or with respect to any other breach.
Section 1408. Suspension. During the time of war or national emergency,
the Lessee acknowledges that the City shall have the right to lease the landing
area or any part thereof to the United States Government for military use. If
any such lease is executed, any provisions of this instrument which are
inconsistent with the provisions of the lease to the Government shall be
suspended; provided that the term of this Agreement shall be extended by the
amount of the period of suspension; provided that such shall not affect the
Lessee's obligations to pay Special Facilities Rentals pursuant to Section 502
and provided that the City obtains an opinion of Bond Counsel that such
extension does not affect the exemption from gross income of interest on the
Bonds for federal income tax purposes.
Section 1409. Delay not a Waiver. No delay or omission by the Authority
of the exercise of any right or power accruing upon any Event of Default shall
impair any such right or power or shall be construed to be a waiver of any such
Event of Default or any acquiescence therein, and every power or remedy given by
this Agreement to the City may be exercised from time to time and as often as
may be deemed expedient. The Authority may waive any Event of Default which in
its opinion has been remedied before the entry of final judgment or decree in
any suit, action or proceeding instituted by it under the provisions of this
Agreement or before the completion of the enforcement of any other remedies
under this Agreement. No such waiver shall extend to or affect any other
existing or subsequent Event of Default or impair any rights or remedies
consequent thereon.
ARTICLE XV
----------
DEFAULT BY THE AUTHORITY
------------------------
Section 1501. Default by the Authority; Remedies of the Lessee. The
Authority shall in no event be in default in the performance of any of its
obligations hereunder unless and until the Authority shall have failed to
perform such obligation within thirty (30) days, or such additional time as is
reasonably required in the opinion of the Lessee and the Trustee, to conduct
<PAGE>
any such default, after notice by the Lessee to the Authority and, so long as
any of the Bonds are outstanding, to the Trustee, properly specifying wherein
the Authority has failed to perform any such obligation; but, so long as any of
the Bonds are Outstanding, neither the occurrence nor existence of any default
by the Authority shall relieve the Lessee of any of its obligations hereunder,
including, without limitation, its obligation to pay Special Facilities Rentals
under Section 502 hereunder, to provide indemnification under Section 901
hereof, or to provide insurance under Sections 902 and 903 hereof; provided,
however, the Lessee may institute such action against the Authority as the
Lessee may deem necessary to compel performance or recover its damages for non-
performance. The Lessee shall have the right, to the extent permitted by law, to
perform the obligations of the Authority hereunder if the Authority does not so
perform and any costs associated therewith and not reimbursed by the Authority,
shall be abated against the ground rental payable under this Agreement. The
Lessee shall have the right in addition to instituting any such action, to
terminate this Agreement upon sixty (60) days' notice to the Authority and the
Trustee, and upon payment to the Trustee of that amount which, together with any
monies available for that purpose under the provisions of the Indenture, will be
sufficient to pay or redeem, or provide for such payment or redemption of, the
Bonds then Outstanding on the first practicable retirement or redemption date
thereof, including principal, premium, if any, and interest to the redemption
date, this Agreement shall forthwith cease and determine and the parties hereto
shall be released and discharged of and from all further obligations hereunder,
without prejudice, subject, however, to any claim which may have occurred prior
thereto in favor of either party against the other and to the provisions that by
the terms of this Agreement specifically survive the term hereof.
ARTICLE XVI
-----------
RIGHTS UPON TERMINATION
-----------------------
Section 1601. Fixed Improvements. It is the intent of this Agreement that
the Leased Premises shall be and remain on the Airport during the entire term of
this Agreement and thereafter.
Section 1602. Excluded Personal Property. Upon termination of this
Agreement, the Lessee shall remove all Excluded Personal Property from the
Leased Premises within thirty (30) days (or such longer period as shall be
reasonably necessary) after the effective date of the termination and make all
necessary or appropriate repairs to the Leased Premises resulting from such
removal so as to restore the Leased Premises to proper operating condition,
ordinary wear and tear and damage by casualty or condemnation excepted. If the
Lessee fails to remove all or any portion of the Excluded Personal Property, the
Authority may thereafter elect to remove the Excluded Personal
<PAGE>
Property (or any part thereof) at the Lessee's expense or elect to deem such
Excluded Personal Property or any part thereof as abandoned by the Lessee to the
Authority.
ARTICLE XVII
------------
ASSIGNMENT AND SUBLETTING
-------------------------
Section 1701. Successors and Assignments. Except as provided in Section
611 hereof, but subject to the provisions of Section 1703 hereof, the Lessee
shall not assign this Agreement or any part thereof in any manner whatsoever or
assign any of the privileges recited herein without the prior written consent of
the Authority. Such consent shall not be unreasonably withheld, having in mind
the particular requirements of the Authority in maintaining its public service
air transportation facilities. No such consent shall be granted unless the
Leased Premises shall be continued to be used for aviation related purposes
requiring airfield access. In the event of such assignment, the Lessee shall
remain liable to the Authority for the remainder of the term of the Agreement to
pay to the Authority or the Trustee the rentals provided for in Sections 501,
502 and 503 hereof and to otherwise comply with the provisions of the Agreement
for the term of this Agreement and the Lessee's assignee shall agree to comply
with the applicable provisions of this Agreement. Said assignee shall not
further assign its interest in this Agreement except with the prior written
approval of the Authority and the Lessee; and any assignment by the Lessee shall
contain a clause to this effect. Any assignment in violation of this Section
1701 shall be void.
Section 1702. Subletting. Except as otherwise provided herein, but
subject to the provisions of Section 1703 hereof, the Lessee shall not sublease
or permit any part of the Leased Premises to be occupied by others without the
prior written consent of the Authority. No such consent shall be granted unless
the Leased Premises shall be continued to be used for aviation related purposes
requiring airfield access. Such consent shall not be unreasonably withheld,
having in mind the particular requirements of the City in maintaining its public
service air transportation facilities. In the event of such sublease, the
Lessee shall remain liable to the Authority and the Trustee for the remainder of
the term of this Agreement to pay to the Authority and the Trustee the rentals
provided for in Sections 501, 502 and 503 hereof and to otherwise comply with
the provisions of this Agreement for the term of this Agreement and the
sublessee shall agree to comply with the applicable provisions of this
Agreement. Said sublessee shall not further sublease its interest in this
Agreement except with the prior written approval of the Authority and the
Lessee; and any sublease shall contain a clause to this effect. Any subletting
in violation of this Section 1702 shall be void.
<PAGE>
Section 1703. Transfer of Leased Premises by the Authority; Performance of
Rights, Duties and Obligations of the Authority under this Agreement. (a) Upon
the receipt of the prior written consent of the Lessee in its sole discretion,
the Authority may, prior to the time no Bonds are Outstanding under the terms of
the Indenture, transfer, convey or otherwise dispose of the Leased Premises,
and together therewith its rights as lessor hereunder, to any Person; provided,
that any transfer, conveyance or other disposition of the Leased Premises to any
Person, other than the City, under the terms of this Section 1703 will not be
effective unless, in the opinion of Bond Counsel delivered to the Trustee, such
transfer, conveyance or other disposition will not adversely affect the
exclusion from gross income for federal income tax purposes of the interest on
any Bonds; and provided, further, that any such transfer, conveyance or other
disposition shall be subject to the provisions of Section 507.
(b) Upon the receipt of the prior written consent of the Lessee, the
Authority may designate as its agent any Person to perform its duties,
responsibilities and obligations described in this Agreement, other than those
duties, responsibilities and obligations with respect to the issuance of the
Bonds and any Additional Bonds (the "Bond Duties"), as herein set forth. Upon
the receipt of such consent from the Lessee, for all purposes under this
Agreement, any reference to the Authority in respect to the performance of such
duties, responsibilities and obligations, other than the Bond Duties, shall be
deemed to mean the Person so designated to the Lessee by the Authority. The
Authority agrees to provide to the Lessee and the Trustee appropriate names,
addresses and telephone numbers of any such Person so designated.
(c) Anything to the contrary herein notwithstanding, upon the later of (1)
the termination of this Agreement in accordance with the terms and conditions
herein set forth or (2) the date the Bonds are no longer Outstanding as a result
of the final payment of Special Facilities Payments in support of the debt
service on the Bonds, the Authority (i) shall no longer act as lessor under the
terms of this Agreement, and (ii) shall convey the Special Facilities then owned
thereby to the City.
Section 1704. Opinion of Bond Counsel Required. No assignment of this
Agreement or sublease of the Leased Premises by the Company will be effective
unless, in the opinion of Bond Counsel delivered to the Trustee, such assignment
or sublease will not adversely affect the exclusion from gross income for
federal income tax purposes of the interest on any Bonds.
ARTICLE XVIII
-------------
GENERAL PROVISIONS
------------------
<PAGE>
Section 1801. Non-Interference with Operation of Airport. The Lessee, by
accepting this Agreement, expressly agrees for itself and its successors and
assigns that it will not make use of the Leased Premises in any manner which
might interfere with the landing and taking off of aircraft at the Airport or
otherwise constitute a hazard. In the event the aforesaid covenant is breached,
the City shall have the right to enter upon the Leased Premises and cause the
abatement of such interference at the expense of the Lessee.
The City shall maintain and keep in repair the Airport landing areas,
including taxiways and aircraft parking apron located outside the Leased
Premises and shall have the right to direct and control all activities of the
Lessee in this regard.
Section 1802. Attorney's Fees. In any action brought by any party to this
Agreement or the Trustee for the enforcement of the provisions hereof, the
prevailing party shall be entitled to recover interest and its reasonable
attorney's fees.
Section 1803. Taxes. The Lessee shall timely pay any lawfully imposed
property taxes, assessments charged against the property, or sales and use taxes
which may be assessed a charge against personal property included in or located
on the Land or other permitted portions of the Airport, including without
limitation the Excluded Personal Property. Furthermore, the Lessee shall not
claim that it is entitled to an exemption from sales and use taxes under Section
151.341 of the Texas Tax Code (which supplies an exemption for items sold to or
used by corporations formed under the Development Corporation Act) in connection
with the financing of the Special Facilities under the Development Corporation
Act.
Section 1804. License Fees and Permits. The Lessee shall obtain and pay
for all licenses, permits, fees or other authorization or charges as required
under federal, State or local laws and regulations insofar as they are necessary
to comply with the requirements of this Agreement and the privileges extended
hereunder.
Section 1805. Amendments to this Agreement. If at any time that Bonds are
then Outstanding (including if provisions have been made for the payment thereof
in accordance with the provisions of the Indenture), and the Lessee and the
Authority wish to amend, modify, change, alter or terminate this Agreement by
execution of a Supplemental Agreement, and pursuant to Article IX of the
Indenture, the consent of the Trustee to such Supplemental Agreement is
necessary, such alteration, amendment, change, modification or termination shall
become effective only upon the prior written consent of the Trustee obtained in
accordance with the provisions of the Indenture. The
<PAGE>
Lessee and the Authority specifically reserve the right to execute a
Supplemental Agreement, without the consent of the Trustee, (i) to provide for
additional rental payments to secure future obligations undertaken by the
Authority on behalf of the Lessee (other than additional Special Facilities
Rentals securing Bonds or Additional Bonds), provided that such additional
payments shall be payable on a parity basis or subordinate to the Special
Facilities Rental, or (ii) to exclude certain Land from the Leased Premises,
provided that, giving effect to such exclusion, the operating utility or
productive capacity of the remaining Leased Premises is not materially less than
the operating utility or productive capacity of the Leased Premises prior to
such exclusion.
Section 1806. Force Majeure. Neither the Authority nor the Lessee shall
be deemed to be in breach of this Agreement and no default shall arise hereunder
by reason of failure to perform any of its obligations hereunder, if, while, and
to the extent that such failure is due to the occurrence of a Force Majeure.
This provision shall not apply to failures by the Lessee to pay rents, fees, or
other charges, or to make any other money payments required by this Agreement.
This provision shall not prevent the Authority from exercising its rights upon
the occurrence of an Event of Default described in Subsections 1401(a)-(c)
hereof.
Section 1807. References to Bonds, the Authority, the Trustee and the
Indenture Ineffective when Bonds are no Longer Outstanding. From and after such
time as there are no longer any Bonds Outstanding, and all fees and charges of
the Trustee and any paying agents for the Bonds have been paid or provided for,
to their respective satisfaction, all references in this Agreement to the Bonds,
the Authority, the Trustee and the Indenture shall be ineffective and neither
the Trustee nor the Owners of any of the Bonds shall thereafter have any rights
hereunder, saving and excepting those that shall have theretofore vested.
Section 1808. Modifications Hereof and of Indenture. So long as an Event
of Default shall not have occurred and be continuing hereunder, the Authority
has covenanted in the Indenture that it will not, without the written consent of
the Lessee, agree with the Trustee to effectively amend, supplement, change,
modify or alter the Indenture in any manner. The Lessee shall provide the
Trustee with an executed copy of any instrument altering, amending, modifying,
or rescinding this Agreement.
Section 1809. Paragraph Headings. The paragraph headings contained herein
are for convenience in reference and are not intended to define or limit the
scope of any provision of this Agreement.
Section 1810. Interpretations. This Agreement shall be interpreted in
accordance with the laws of the State.
<PAGE>
Section 1811. Notices. Whenever any notice or payment (other than a
payment required by Section 502) is required by this Agreement to be made, given
or transmitted to the parties hereto, such notice or payment (other than a
payment required by Section 502) shall be enclosed in an envelope with
sufficient postage attached to insure delivery and deposited in the United
States Mail or Federal Express Priority Overnight delivery, addressed as
follows: if to the Authority, 1000 Throckmorton, Fort Worth, Texas 76102,
Attention: City Manager; if to the City, 1000 Throckmorton, Fort Worth, Texas
76102, Attention: City Attorney; if to the Lessee, Federal Express Corporation,
2007 Corporate Avenue, Memphis, Tennessee 38132, Attention: Vice President and
Treasurer, with a copy of such notice to be sent in the same manner to Federal
Express Corporation, 1980 Nonconnah Blvd., Memphis, Tennessee 38132, Attention:
Legal Department, Managing Attorney, Real Estate Development and Operations
Group, and to Federal Express Corporation, 2003 Corporate Avenue, Memphis,
Tennessee 38132, Attention: Vice President, Properties; and if to the Trustee,
One First National Plaza, Suite 0126, Chicago, Illinois 60670-0126, Attention:
Corporate Trust Services Division. A duplicate copy of each notice,
certificate, request, or other communication given hereunder to the Authority,
the City, the Lessee, or the Trustee shall also be given to the others. The
Lessee, the City, the Authority, and the Trustee may, by notice given hereunder,
designate any further or different addresses to which subsequent notices,
certificates, requests or other communications shall be sent.
Section 1812. Party's Consent. Whenever any provision of this Agreement
requires the approval, consent or exercise of discretion of any party to this
Agreement, such action shall not be unreasonably withheld, conditioned, delayed
or exercised.
Section 1813. Nondisturbance by Authority and Trustee. So long as no
Event of Default shall have occurred and be continuing hereunder, the Lessee's
peaceful and quiet possession or right to such peaceful and quiet possession of
the Leased Premises and its rights and privileges under this Agreement or any
renewal or extension thereof shall not be diminished, disturbed or interfered
with by the Authority or the Trustee.
Section 1814. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
<PAGE>
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LEFT BLANK INTENTIONALLY]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above mentioned at Fort Worth, Texas.
ALLIANCE AIRPORT AUTHORITY, INC.
By:/s/ JAMES LANE
--------------
President, Board of Directors
(SEAL) By:/s/ JEWEL WOODS
---------------
Secretary, Board of Directors
FEDERAL EXPRESS CORPORATION
By:/s/ CHARLES M. BUCHAS, JR.
-----------------------------
Name: Charles M. Buchas, Jr.
------------------------
Title: Vice President and Treasurer
--------------------------------
Date of Execution: April 10, 1996
--------------
<PAGE>
EXHIBIT A
BEING a tract of land situated in the G. Overton Survey, Abstract
No. 972, the E. B. Peters Survey, Abstract No. 1626, the A.
McDonald Survey Abstract No. 786, and the J. Evans Survey,
Abstract No. 396, in Denton County, Texas; and being all of
that certain 158.00 acre tract of land described in deed to
Federal Express Corporation, filed by clerks file no. 94-
R0034691, Map Records of Denton County, Texas together with a
part of that certain tract of land described in Deed to
Alliance Airport Ltd., recorded in Volume 2451, Page 412, Real
Records of Denton County Texas; said tract being more
particularly described by metes and bounds as follows:
COMMENCING at a 1 inch steel rod on the West line of said Alliance
Airport tract, being the Southwest corner of Lot 1, Block 1,
American Airlines AFW Maintenance Base, recorded in Cabinet H,
Page 309, Plat Records of Denton County, Texas and Cabinet A,
Slide 593, Plat Records of Tarrant County, Texas; said rod
also being the most Westerly Northwest corner of Taxiway H, as
described in deed to the City of Fort Worth, recorded in
Volume 2931, Page 213, Real Records of Denton County, Texas;
THENCE South 09 degrees 53 minutes 13 seconds East, with the West
line of said Alliance Airport tract, and the West end of
Taxiway H, a distance of 299.79 feet to a "+" cut in concrete,
being the Northwest corner of said Federal Express tract and
the POINT OF BEGINNING of this tract herein described.
THENCE North 80 degrees 06 minutes 47 seconds East, with a South line
of Taxiway H, a distance of 2557.33 feet to a railroad spike
in concrete at a fence post, the Northeast corner of said
Federal Express tract;
THENCE South 09 degrees 53 minutes 13 seconds East with the East line
of said Federal Express tract, a distance of 1390.00 feet to a
5/8 inch Carter & Burgess capped steel rod.
<PAGE>
THENCE North 80 degrees 06 minutes 47 seconds East, a distance of
385.29 feet to a 5/8 inch Carter & Burgess capped steel rod.
THENCE South 09 degrees 53 minutes 13 seconds East, a distance of
1132.00 feet to a 5/8 inch Carter & Burgess capped steel rod.
THENCE South 80 degrees 06 minutes 47 minutes West, a distance of
269.78 feet to a 5/8 inch Carter & Burgess capped steel rod,
at the beginning of a curve to the right whose radius is
168.00 and whose chord bears North 77 degrees 50 minutes 23
seconds West, 124.62 feet.
THENCE in a westerly direction with said curve through a central-
angle of 44 degrees 05 minutes 40 seconds, a distance of
127.75 feet to a 5/8 inch Carter & Burgess capped steel rod on
the East line of said Federal Express tract.
THENCE South 09 degrees 53 minutes 10 seconds East, with said East
line a distance of 84.26 feet to a 5/8 inch Carter & Burgess
capped steel rod lying in a curve to the left whose radius is
234.00 feet and whose chord bears South 85 degrees 05 minutes
50 seconds East, 119.47 feet;
THENCE In an Easterly direction with said curve through a central
angle of 29 degrees 34 minutes 47 seconds, a distance of
120.61 feet to a 5/8 inch capped Carter & Burgess steel rod.
THENCE South 80 degrees 08 minutes 47 seconds West, passing at a
distance of 115.51 feet, a 5/8 inch Carter & Burgess capped
steel rod being the Southeast corner of said Federal Express
tract, continuing with its South line in all a distance of
2772.84 feet to a 5/8 inch Carter & Burgess capped steel rod
for the Southwest corner of said Federal Express tract, on the
West line of the before mentioned Alliance Airport tract;
THENCE North 09 degrees 53 minutes 13 seconds West with the West line
of said Alliance Airport tract, and the West line of said
Federal Express tract, a distance of
<PAGE>
2590.00 feet to the POINT OF BEGINNING and embracing 7,318,066
Square Feet, or 168.00 Acres of Land.
NORTH APPROACH
BEING a tract of land situated in the G. Overton Survey, Abstract
No. 972, the E.B. Peters survey, Abstract No. 1636, the A.
McDonald Survey Abstract No. 786, and the J. Evans Survey,
Abstract No. 396, in Denton County, Texas; and being all of
that certain 158.00 acre tract of land described in deed to
Federal Express Corporation, filed by clerks File No. 94-
R0034691, Map Records of Denton County, Texas together with a
part of that certain tract of land described in Deed to
Alliance Airport Ltd., recorded in Volume 2451, page 412, Real
Records of Denton County, Texas; said tract being more
particularly described by metes and bounds as follows;
COMMENCING at a 1 inch steel rod on the West line of said Alliance
Airport tract, being the Southwest corner of Lot 1, Block 1,
American Airlines AFW Maintenance Base, recorded in Cabinet H,
Page 309, Plat Records of Denton County, Texas and Cabinet A,
Slide 593, Plat Records of Tarrant County, Texas; said rod
also being the most Westerly Northwest corner of Taxiway H, as
described in deed to the City of Fort Worth, recorded in
Volume 2931, Page 213, Real Records of Denton County, Texas;
THENCE South 09 degrees 53 minutes 13 seconds East, with the West
line of said Alliance Airport tract, and the West end of
Taxiway H, a distance of 299.79 feet to a "+" cut in concrete,
being the Northwest corner of said Federal Express tract;
THENCE North 80 degrees 06 minutes 47 seconds East with a
South line of Taxiway H, a distance of 1696.12 feet to the
POINT OF BEGINNING of this tract herein described being in a
curve to the left whose radius is 135.00 feet and whose chord
bears North 67 degrees 29 minutes 23 seconds West;
THENCE along said curve to the left through a central angle of 64
degrees 47 minutes 40 seconds, an arc distance or 152.67 feet
to a point for corner;
<PAGE>
THENCE North 09 degrees 53 minutes 13 seconds West, a distance of
35.00 feet to a point for corner;
THENCE North 80 degrees 06 minutes 47 seconds East, a distance of
440.00 feet to a point for corner;
THENCE South 09 degrees 53 minutes 13 seconds East, a distance of
35.00 feet to the beginning of a curve to the left whose
radius is 135.00 feet and whose chord bears South 47 degrees
42 minutes 57 seconds West 144.66 feet;
THENCE along said curve to the left through a central angle of 64
degrees 47 minutes 40 seconds, an arc length of 152.67 feet to
a point for corner from which a railroad spike in concrete to
a fence post bears North 80 degrees 06 minutes 47 seconds East
765.50 feet;
THENCE South 80 degrees 06 minutes 47 seconds West along the North
line of said Federal Express tract; a distance of 195.71 feet
to a POINT OF BEGINNING and embracing 35,916 Square Feet or
0.82 Acre of Land.
WEST APPROACH
BEING a tract of land situated in the G. Overton Survey, Abstract
No. 972, the E. B. Peters Survey, Abstract No. 1636, the A.
McDonald Survey Abstract No. 786, and the J. Evans Survey,
Abstract No. 396, in Denton County, Texas; and being all of
that certain 158.00 acre tract of land described in deed to
Federal Express Corporation, filed by clerks File No. 94-
R0034691, Map Records of Denton County, Texas together with a
part of that certain tract of land described in Deed to
Alliance Airport Ltd., recorded in Volume 2451, page 412, Real
Records of Denton County, Texas; said tract being more
particularly described by metes and bounds as follows:
COMMENCING at a 1 inch steel rod on the West line of said Alliance tract,
being the Southwest corner of Lot 1, Block 1, American
Airlines AFW Maintenance Base, recorded in Cabinet H, Page
309, Plat Records of Denton County, Texas and Cabinet A, Slide
593; Plat
<PAGE>
in Cabint H, Page 309, Plat Records of Tarrant County, Texas;
said rod also being the most Westerly Northwest corner of
Taxiway H, as described in deed to the City of Fort Worth,
recorded in Volume 2931, Page 213, Real Records of Denton
County, Texas;
THENCE South 09 degrees 53 minutes 13 seconds East, with the West
line of said Alliance Airport tract, and the West end of
Taxiway H, a distance of 299.79 feet to a "+" cut in concrete,
being the Northwest corner of said Federal Express tract;
THENCE continuing South 09 degrees 53 minutes 13 seconds East
along the West line of said Federal Express tract a distance
of 1765.34 feet to the POINT OF BEGINNING on this tract herein
described;
THENCE South 09 degrees 53 minutes 13 seconds East continuing along
said West line, a distance of 170.00 feet to a point for
corner from which a 5/8 inch Carter & Burgess capped steel rod
being the Southwest corner of said Federal Express tract bears
South 09 degrees 53 minutes 13 seconds East, 654.66 feet;
THENCE South 80 degrees 06 minutes 47 seconds West, a distance of
77.01 feet to the beginning of a curve to the left whose
radius is 100.00 feet and whose chord bears South 35 degrees
06 minutes 47 seconds West 141.42 feet;
THENCE along said curve to the left through a central angle of 90
degrees 00 minutes 00 seconds, an arc length of 157.08 feet to
a point for corner;
THENCE South 80 degrees 06 minutes 47 seconds West, a distance of
35.48 feet to a point for corner;
THENCE North 09 degrees 53 minutes 13 seconds West, a distance of
370.00 feet to a point for corner;
THENCE North 80 degrees 06 minutes 47 seconds East, a distance of
35.48 feet to the beginning of a curve to the left whose
radius is 100.00 feet and whose chord
<PAGE>
bears South 54 degrees 53 minutes 13 seconds East 141.42 feet;
THENCE along said curve to the left through a central angle of 90
degrees 00 minutes 00 seconds, an arc length of 157.08 feet to
a point for corner;
THENCE North 80 degrees 06 minutes 47 seconds East, a distance of
77.01 feet to a point for corner;
THENCE South 09 degrees 53 minutes 13 seconds East along the East
line of said Federal Express tract, a distance of 170.00 feet
to the POINT OF BEGINNING and embracing 47,514 Square Feet or
1.09 Acres of Land.
<PAGE>
EXHIBIT B
SPECIAL FACILITIES DESCRIPTION
The Special Facilities to be acquired and constructed with the proceeds of the
Bonds will consist of land (described in Exhibit A as the Primary Land),
buildings, improvements, fixtures and equipment for the handling and sorting of
packages at the Airport; including, but not limited to, aircraft parking apron,
taxiway connectors, vehicular parking spaces with security gates and fencing,
fuel dispensing and storage facilities, offices, maintenance shops and storage
areas. The Special Facilities will serve as a regional sorting facility for
distribution of packages to other facilities within the Lessee's distribution
system.
<PAGE>
EXHIBIT C
INSURANCE REQUIREMENTS
________________________________________________________________________
DESCRIPTIVE SCHEDULE
________________________________________________________________________
Kind of Insurance Limits of Liability
of Not Less Than
________________________________________________________________________
Aircraft Liability:
Single Limit (PL, PD & PASS) $20,000,000
________________________________________________________________________
Public Liability:
Single Limit (Bodily Injury,
Death, Property Damage)
- Premises/Operations
- Contractual Liability
- Independent Contractors
- Products/Completed Operations
- Personal Injury $20,000,000
- ---------------------------------------------------
Hangarkeepers Liability: $20,000,000
- ---------------------------------------------------
Automobile $20,000,000
- ---------------------------------------------------
<PAGE>
EXHIBIT 10.69
ASSIGNMENT AND ASSUMPTION OF FACILITIES AGREEMENT AND
AGREEMENT FOR DONATION AND ASSIGNMENT OF PURCHASED ITEMS
--------------------------------------------------------
THIS ASSIGNMENT AND ASSUMPTION OF FACILITIES AGREEMENT AND AGREEMENT FOR
DONATION AND ASSIGNMENT OF PURCHASED ITEMS (this "Assignment") is made and
entered into as of the ___ day of April, 1996, by and between AllianceAirport
Authority, Inc., a nonstock, nonprofit industrial development corporation
organized and existing under the laws of the State of Texas, having a mailing
address at 1000 Throckmorton, Fort Worth, Texas 76102 ("Assignor"), and the City
of Fort Worth, Texas, a municipal corporation, having a mailing address at 1000
Throckmorton, Fort Worth, Texas 76102 ("Assignee");
RECITALS:
---------
A. Assignee is a political subdivision of the State of Texas.
B. Assignor is an industrial development corporation created by Assignee.
C. Assignor has this day conveyed to Assignee a certain tract of land and
appurtenances situated in Denton County, Texas, more particularly described on
the attached Exhibit "A" which is incorporated into this Assignment, together
with all improvements thereon (the "Property").
D. The Property is subject to a Land and Special Facilities Lease
Agreement (the "Facilities Agreement") dated April 1, 1996, between Assignor, as
lessor, and Federal Express Corporation, a Delaware corporation, as lessee (the
"Lessee"). Capitalized terms not otherwise defined herein shall have the
meanings assigned such terms in the Facilities Agreement.
E. In conjunction with the conveyance of the Property, Assignor has agreed
to assign all of its right, title and interest in and to the Facilities
Agreement to Assignee, except as otherwise provided herein, and Assignee has
agreed to assume and perform all of Assignor's liabilities and obligations
arising under the Facilities Agreement, except as otherwise provided herein, on
and after the date of this Assignment, all in accordance with the terms and
conditions set forth below.
F. In connection with construction of improvements on and placement of
tangible personal property on the Property, it is anticipated that certain items
of tangible personal property, material, consumables, equipment, fixtures, and
services (collectively, the "Purchased Items") acquired pursuant to various
construction contracts and other agreements with third parties (the "Project
Contracts") will or may, with Assignor's consent, become the property of
Assignor, subject to and in accordance with the provisions of the Facilities
Agreement.
G. Upon its acceptance thereof, Assignor will donate, assign, and transfer
to Assignee all right, title, and interest in any such Purchased Items subject
to Assignee's acceptance and approval thereof after appropriate due diligence by
Assignee.
<PAGE>
H. Assignor will acquire the Purchased Items under the Project Contracts
upon Assignor's approval thereof and after appropriate due diligence by Assignor
for the sole purpose of donating such Purchased Items to Assignee, and Assignor
does not intend to make any intervening use of any Purchased Items.
I. To the extent it may lawfully do so, Assignor will issue an exemption
certificate pursuant to Section 151.155 of the Texas Tax Code.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, Assignor and Assignee agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein shall have
the meanings assigned such terms in the Facilities Agreement.
2. Assignment. Assignor assigns, transfers and conveys to Assignee all of
Assignor's right, title and interest as lessor in and to the Facilities
Agreement and all of the rights, benefits and privileges of Assignor as lessor
thereunder, including without limitation all of Assignor's right, title and
interest in and to all rentals thereunder; provided, however, that Assignor
retains its rights (i) to receive any payments due the Authority under Section
510 of the Facilities Agreement, (ii) to indemnity under Section 605(c) and
Article IX of the Facilities Agreement and (iii) to perform its covenants (A)
with respect to the Bonds, including those under Section 614 of the Facilities
Agreement and (B) under Article XII of the Facilities Agreement.
3. Assumption. Assignee assumes all liabilities and obligations of
Assignor under the Facilities Agreement which arise on or after the date hereof
and agrees to perform all obligations of Assignor under the Facilities Agreement
which are to be performed or which become due on or after the date hereof;
provided, however, that Assignee does not assume and Assignor shall remain
responsible for, the performance of its covenants (i) with respect to the Bonds,
including those under Section 614 of the Facilities Agreement and (ii) under
Article XII of the Facilities Agreement. Notwithstanding any provisions of this
Assignment to the contrary, Assignee shall not be or become a party to any
Project Contracts.
4. Additional Covenant of Assignee. In consideration of Lessee granting
its consent to this Assignment, Assignee covenants and agrees that in the event
Lessee exercises its right under Section 308 of the Facilities Agreement to
convey additional land continguous to the Land acquired by the Lessee to
accommodate Lessee Improvements, Assignee shall consider in good faith any
request by Lessee that Assignee seek approval from the FAA of an expansion of
the Airport boundaries to include such additional land. The foregoing
notwithstanding, Assignee makes no assurances that any such request will receive
approval from the FAA.
5. Ad Valorem Taxation. The Land and Special Facilities are owned by
Assignor and, as of the date of this Assignment, correspondence has been
received by the parties hereto from the Tarrant Appraisal District and the
Denton County Central Appraisal District stating that the Land and portions of
the Special Facilities may be found to be exempt from ad valorem taxes. Copies
of such correspondence have been provided to the Lessee. Assignor, Assignee and
Lessee recognize that the proposed use of the Land and Special Facilities is
reasonably necessary
2
<PAGE>
to carry out the public purpose of Assignee as defined by Chapter 22 of the
Texas Transportation Code (the "Airports Act") and that as such anticipate that
the leasehold interest of the Lessee in the Land and Special Facilities may be
exempt from ad valorem taxation. Neither Assignor nor Assignee, however, makes
any warranty as to whether the leasehold interest of the Lessee in the Land and
Special Facilities is or will be exempt from ad valorem taxation, it being the
duty and responsibility of the Lessee to establish such exemption of its
leasehold interest.
6. Representations and Warranties.
-------------------------------
(a) Assignor represents and warrants to Assignee (i) that it has full
power and authority to assign the Facilities Agreement to Assignee, (ii) that
the Facilities Agreement is in full force and effect and has not been modified
or amended in any manner whatsoever, and (c) that all right, title and interests
of Assignor in and to the Facilities Agreement are free and clear of any and all
claims, liens and encumbrances whatsoever other than the lien and pledge thereof
under the Indenture to secure the Bonds, and that Assignor warrants and will
forever defend the same against the claims of all persons claiming the same or
any part thereof.
(b) In consideration of Lessee granting its consent to this Assignment,
Assignee represents and warrants to Lessee that:
(i) It is duly organized as a home-rule city pursuant to the laws of the
State, and has the power under the laws of the State, including
specifically the Airports Act, to enter into the transactions
contemplated by this Assignment and to carry out its obligations
hereunder. By proper action, Assignee has duly authorized the
execution and delivery of this Assignment.
(ii) This Assignment constitutes the valid and binding obligation of
Assignee, enforceable against Assignee in accordance with its terms,
except as the enforceability thereof may be subject to applicable
bankruptcy or other laws affecting the rights of creditors generally
or by the application of general principles of equity.
(iii) All approvals or consents of which Assignee has knowledge and which
are necessary for Assignee to approve, execute and deliver this
Assignment have been obtained.
(iv) Neither the execution and delivery of this Assignment, the
consummation of the transactions contemplated hereby, nor the
fulfillment of or compliance with the terms and conditions of this
Assignment conflicts with or results in a breach of any of the terms,
conditions or provisions of any restriction, ordinance or any
agreement or instrument to which Assignee is now a party or by which
it is bound, or constitutes a default under any of the foregoing, or
results in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of the property or
assets of Assignee under the terms of any instrument or agreement to
which Assignee is party.
3
<PAGE>
(v) There is no litigation now pending or to Assignee's knowledge,
threatened challenging the powers of Assignee or its councilmembers or
in any way affecting this Assignment.
(vi) Subject to the provisions of Section 803 of the Facilities Agreement,
it will use its best efforts to operate and maintain the Airport as a
public airport consistent with and pursuant to the sponsor's
assurances given by the City to the United States Government under the
Federal Airport and Airways Act.
(vii) To the extent it may do so and at Lessee's expense, it will grant
Lessee all necessary roadway or utility easements required by Lessee
to construct utility lines and connecting roadways necessary to
connect utility services for the Leased Premises.
7. Donation and Assignment of Purchased Items. Assignor by means of this
instrument grants and conveys to Assignee all right, title, and interest that
Assignor may have in the Purchased Items described in Exhibit "B" hereto.
8. Agreement to Deliver Purchased Items. Upon Assignor's acceptance of
Purchased Items, Assignor will immediately notify Assignee, and upon Assignee's
acceptance of such Purchased Items, Assignor will deliver all such Purchased
Items to Assignee. Assignor will not make any intervening use of any such
Purchased Items. All costs or expenses of any such delivery shall be paid by
Assignor but solely from funds on deposit in the Construction Fund or monies
provided by Lessee.
9. No Assumption of Liabilities by Assignor or Assignee with Respect to
Purchased Items. Neither Assignor nor Assignee assumes any liability, under the
Project Contracts or otherwise, to pay for the acquisition of any of the
Purchased Items at any time other than from funds on deposit in the Construction
Fund, and nothing in this Agreement shall operate to impose any such liability
on Assignor or Assignee. Correspondingly, any liability of Lessee under the
Project Contracts shall not be affected by this Agreement. Neither Assignor nor
Assignee shall be liable for any taxes related to the Purchased Items by virtue
of any use of such property or otherwise, and Lessee shall be liable for such
taxes, if any, as may be levied from time to time.
10. Further Assurances. Assignor covenants with Assignee and Assignee
covenants with Assignor that each will execute or procure any additional
documents necessary to establish the rights of the other under this Assignment.
11. Binding Effect. This Assignment is binding upon and shall inure to
the benefit of Assignor, Assignee and their respective successors and assigns.
12. Multiple Counterparts. This Assignment may be executed in a number of
identical counterparts, each of which is deemed an original, and all of which
constitute collectively one agreement between the parties.
4
<PAGE>
13. Governing Law. This Assignment shall be construed and enforced in
accordance with the laws of the United States of America and the State of Texas.
14. Entire Agreement. This Assignment contains the entire agreement of
the parties and supersedes all prior agreements and understandings, oral or
written, with respect to the subject matter hereof. This Assignment may be
changed only by an agreement in writing signed by all of the parties to this
Assignment.
15. Conflict. In the event of any conflict between the terms of this
Assignment and the terms of any other agreement or understanding between the
parties relating to the Purchased Items, the terms of this Assignment shall
control.
16. Headings. The headings contained in this Assignment are for reference
purposes only and shall not affect the meaning or interpretation of this
Assignment.
IN WITNESS WHEREOF, the parties have executed this Assignment as of the
date set forth above.
ASSIGNOR: ALLIANCEAIRPORT AUTHORITY, INC.
By: /s/ JIM LANE
--------------------------------------------------
President
By: /s/ JEWEL WOODS
----------------------------------------------
(SEAL) Secretary
ASSIGNEE: THE CITY OF FORT WORTH, TEXAS
By: /s/ BOB TERRELL
-----------------------------------------------
City Manager
By: /s/ ALICE CHURCH
----------------------------------------------
City Secretary
APPROVED AS TO FORM:
(SEAL) By: /s/ WADE ADKINS
---------------------------------------------
City Attorney
5
<PAGE>
The undersigned lessee under the Facilities Agreement
consents to and acknowledges the provisions of the
above Assignment and Assumption of Facilities Agreement
and Agreement for Donation and Assignment of Purchased Items
by and between Assignor and Assignee:
FEDERAL EXPRESS CORPORATION
By: /s/ CHARLES M. BUCHAS, JR.
-----------------------------------
Name: Charles M. Buchas, Jr.
Title: Vice President and Treasurer
THE STATE OF TEXAS )
)
COUNTY OF TARRANT )
This instrument was acknowledged before me on the 2nd day of April, 1996,
by Jim Lane and Jewel Woods, President and Secretary, respectively, of
AllianceAirport Authority, Inc., a nonstock, nonprofit industrial development
corporation organized and existing under the laws of the State of Texas, on
behalf of said Corporation.
/s/ LOIS O. THREATT
------------------------------------------
Notary Public in and for the State of Texas
My Commission Expires: 10-6-97
---------------------
THE STATE OF TEXAS )
)
COUNTY OF TARRANT )
This instrument was acknowledged before me on the 2nd day of April, 1996,
by Bob Terrell, Alice Church, and Wade Adkins, City Manager, City Secretary, and
City Attorney, respectively, of the City of Fort Worth, Texas, a municipal
corporation, on behalf of said City.
/s/ LOIS O. THREATT
------------------------------------------
Notary Public in and for the State of Texas
My Commission Expires: 10-6-97
---------------------
6
<PAGE>
THE STATE OF TENNESSEE )
COUNTY OF SHELBY )
This instrument was acknowledged before me on the 1st day of April, 1996,
by Charles M. Buchas, Jr., Vice President and Treasurer of Federal Express
Corporation, a Delaware corporation, on behalf of said corporation.
/s/ KIMBLE HALE SCOTT
--------------------------------------------
Notary Public in and for the State of
Tennessee
My Commission Expires: June 8, 1999
-----------------------
7
<PAGE>
Exhibit 10.80
RESTRICTED STOCK AGREEMENT
PURSUANT TO FEDERAL EXPRESS CORPORATION
1995 RESTRICTED STOCK PLAN
THIS RESTRICTED STOCK AGREEMENT is made this ______ day of
__________________, by and between __________________________ (the
"Participant") and Federal Express Corporation, a Delaware corporation (the
"Company"), pursuant to the Company's 1995 Restricted Stock Plan (the "Plan").
WHEREAS, the Compensation Committee (the "Committee") of the Board of
Directors of the Company at its meeting on __________________ authorized and
directed the Company to make an award of stock to the Participant under the Plan
for the purposes expressed in the Plan;
NOW THEREFORE, in consideration of the foregoing and the mutual undertakings
herein contained, the parties agree as follows:
1. Grant of Stock. In accordance with the terms of the Plan and subject to
the further terms, conditions and restrictions contained in this Agreement, the
Company hereby grants to the Participant __________ shares (the "Shares") of the
Company's common stock, $.10 par value (the "Common Stock"). As long as the
Shares are subject to the Restrictions set forth in Section 4 of this Agreement,
such shares shall be deemed to be, and are referred to in this Agreement as, the
"Restricted Shares." The Shares granted shall be treasury stock.
2. Certificates for Shares. Certificates evidencing Restricted Shares
shall be deposited with the Company to be held in escrow until such Shares are
released to the Participant or forfeited in accordance with this Agreement. The
Participant shall, simultaneously with the delivery of this Agreement, deliver
to the Company a stock power, in blank, executed by the Participant.
If any Restricted Shares are forfeited, the Company shall direct the
transfer agent of the Common Stock to make the appropriate entries in its
records showing the cancellation of the certificate or certificates for such
Restricted Shares and to return the Shares represented thereby to the Company's
treasury.
3. Adjustments in Restricted Shares. In the event of any change in the
outstanding Common Stock by reason of a stock dividend or distribution,
recapitalization, merger, consolidation, split-up, combination, exchange of
shares or the like, the Committee shall make equitable adjustments in the
Restricted Shares corresponding to adjustments made by the Committee in the
number and class of shares of Common Stock which may be issued under the Plan.
Any new, additional or different securities to which the Participant shall be
entitled in respect of Restricted Shares by reason of such adjustment shall be
deemed to be Restricted Shares and shall be subject to the same terms,
conditions, and restrictions as the Restricted Shares so adjusted.
<PAGE>
4. Restrictions. During applicable periods of restriction determined in
accordance with Section 6 of this Agreement, Restricted Shares and all rights
with respect to such Shares, may not be sold, assigned, transferred, exchanged,
pledged, hypothecated or otherwise encumbered or disposed of and shall be
subject to the risk of forfeiture contained in Section 5 of this Agreement (such
limitations on transferability and risk of forfeiture being herein referred to
as "Restrictions"), but the Participant shall have all other rights of a
stockholder, including, but not limited to, the right to vote and receive
dividends on Restricted Shares.
5. Forfeiture of Restricted Shares. In the event that the Participant
terminates employment with the Company and its subsidiaries for any reason other
than his or her death, retirement or permanent disability, such event shall
constitute an "Event of Forfeiture" and all Shares which at that time are
Restricted Shares shall thereupon be forfeited by the Participant to the Company
without payment of any consideration by the Company, and neither the Participant
nor any successor, heir, assign or personal representative of the Participant
shall have any right, title or interest in or to such Restricted Shares or the
certificates evidencing them.
6. Lapse of Restrictions. (a) Except as provided in subsection (b) below,
the Restrictions on the Restricted Shares granted under this Agreement shall
lapse ratably on each of the _________ through ___________ anniversaries of the
date of this Agreement in accordance with the following schedule:
Number of Shares on
Date Which Restrictions Lapse
----- -------------------------
(b) In the event that a Participant's employment with the Company and its
subsidiaries terminates as a result of his or her death, retirement or permanent
disability, the Restrictions shall lapse on the Restricted Shares (if not
already lapsed pursuant to subsection (a) above) on the later of (i) the date of
such event, or (ii) the first anniversary of the date of this Agreement.
Upon lapse of the Restrictions in accordance with this Section, the Company
shall, as soon as practicable thereafter, deliver to the Participant an
unrestricted certificate for the Shares with respect to which such Restrictions
have lapsed.
7. Tax Equalization Bonus. The Company shall, provided the Participant has
furnished the Company evidence of having timely made the election under Section
83(b) of the Internal Revenue Code with respect to the grant of the Shares, pay
for the benefit of the Participant a bonus equal to the gross amount of Federal
income taxes, Medicare tax and loss of itemized deduction for such Federal
income taxes for which the Participant has incurred a liability solely
<PAGE>
as a result of the grant of the Shares, the making of such election and the
payment of such bonus. All of such payment shall be made in the form of Federal
income tax withholding payments on or before December 31, ______ and the amount
thereof shall be determined assuming that the Participant's marginal Federal
income tax rate is ______%. No such bonus shall be paid unless the Participant
makes such election and furnishes the Company proof of such election in such
form and manner as the Company shall prescribe.
8. Withholding Requirements. Whenever payments hereunder are to be made in
cash, or Restrictions lapse with respect to Restricted Shares, the Company shall
have the right to withhold from sums due to the Participant (or to require the
Participant to remit to the Company) an amount sufficient to satisfy any
Federal, state or local withholding tax requirements prior to making such
payments or delivering any certificate evidencing such Shares.
9. Change in Control. Notwithstanding any other provision of this
Agreement or the Plan, upon the occurrence of a Change in Control, as defined
below, the stock certificates evidencing any Restricted Shares shall be
cancelled and the Company shall make a cash payment to Participant in an amount
equal to the highest price per share received by holders of the Company's Common
Stock in connection with the Change in Control multiplied by the then number of
Restricted Shares, with any non-cash consideration valued in good faith by the
Committee.
For purposes of the Plan, a "Change in Control" of the Company shall be
deemed to have occurred if:
(a) any person, as such term is used in Sections 13(d)(3) and 14(d)(2) of
the Securities Exchange Act of 1934, as amended, becomes a beneficial
owner (within the meaning of Rule 13d-3 under such Act) of 20% or more
of the Company's outstanding Common Stock;
(b) there occurs within any period of two consecutive years any change in
the directors of the Company such that the members of the Company's
Board of Directors prior to such change do not constitute a majority
of the directors after giving effect to all changes during such two-
year period unless the election, or the nomination for election by the
Company's stockholders, of each new director was approved by a vote of
at least two-thirds of the directors then still in office who were
directors at the beginning of the period; or
(c) the Company is merged, consolidated or reorganized into or with, or
sells all or substantially all of its assets to, another corporation
or other entity, and immediately after such transaction less than 80%
of the voting power of the then-outstanding securities of such
corporation or other entity immediately after such transaction is held
in the aggregate by holders of
<PAGE>
the Company's Common Stock immediately before such transaction.
In addition, if the Company enters into an agreement or series of
agreements or the Board of Directors of the Company adopts a resolution which
results in the occurrence of any of the foregoing events, and Participant's
employment is terminated after the entering into of such agreement or series of
agreements or the adoption of such resolution, then, upon the occurrence of any
of the events described above, a Change in Control shall be deemed to have
retroactively occurred on the date of entering into of the earliest of such
agreements or the adoption of such resolution and Participant shall be entitled
to the payment as of such date with respect to any forfeited Restricted Shares.
10. Effect of Employment. Nothing contained in this Agreement shall
confer upon the Participant the right to continue in the employment of the
Company or affect any right which the Company may have to terminate the
employment of the Participant.
11. Amendment. This Agreement may not be amended except with the consent
of the Committee and by a written instrument duly executed by the Participant
and the Company.
12. Binding Effect. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their heirs, personal representatives,
successors and assigns. Participant acknowledges receipt of a copy of the Plan,
which is annexed hereto, represents that he or she is familiar with the terms
and provisions thereof and accepts the award of Shares hereunder subject to all
of the terms and conditions thereof and of this Agreement. Participant hereby
agrees to accept as binding, conclusive and final all decisions and
interpretations of the Committee upon any questions arising under the Plan or
this Agreement.
IN WITNESS WHEREOF, the Company and the Participant have each executed and
delivered this Agreement as of the date first above written.
ATTEST: FEDERAL EXPRESS CORPORATION
_______________________________ By:_________________________________
Assistant Secretary Chairman, President and
Chief Executive Officer
PARTICIPANT:
_________________________________
<PAGE>
EXHIBIT 11
FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
Net income applicable to common and common equivalent shares and the weighted
average number of shares used in the calculation of earnings per share for the
years ended May 31 were as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED MAY 31
--------------------------------
1996 1995 1994
--------- ---------- ---------
<S> <C> <C> <C>
Net income applicable to common and
common equivalent shares.................. $307,777 $297,588 $204,370
======== ======== ========
Average shares of common stock
outstanding............................... 56,564 55,988 55,333
Common Equivalent Shares:
Assumed exercise of outstanding
dilutive options........................ 2,625 2,438 2,867
Less shares repurchased from proceeds of
assumed exercise of options............. (2,051) (1,932) (2,188)
-------- -------- --------
Average common and common equivalent
shares.................................... 57,138 56,494 56,012
======== ======== ========
Earnings per share.......................... $ 5.39 $ 5.27 $ 3.65
-------- -------- --------
</TABLE>
- - The computation of the number of shares repurchased from the proceeds of the
assumed exercise of outstanding dilutive options is based upon the average
market price of the Company's common stock during the periods. Common
equivalent shares are excluded in periods in which their assumed exercise
would have an anti-dilutive effect.
- - Fully diluted earnings per share are substantially the same as earnings per
share for the years ended May 31, 1996, 1995, and 1994.
<PAGE>
Exhibit 12
FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
<TABLE>
<CAPTION>
Year Ended May 31,
--------------------------------------------------------
1992 1993 1994 1995 1996
--------- -------- -------- -------- ----------
(In thousands, except ratios)
<S> <C> <C> <C> <C> <C>
Earnings:
Income (loss) before
income taxes............................. $(146,828) $203,576 $378,462 $522,084 $ 539,959
Add back:
Interest expense, net of
capitalized interest................... 176,321 168,762 152,170 130,923 105,449
Amortization of debt
issuance costs......................... 2,570 4,906 2,860 2,493 1,628
Portion of rent expense
representative of interest
factor................................. 299,012 262,724 285,261 329,370 386,254
--------- -------- -------- -------- ----------
Earnings as adjusted....................... $ 331,075 $639,968 $818,753 $984,870 $1,033,290
========= ======== ======== ======== ==========
Fixed Charges:
Interest expense, net of
capitalized interest..................... $ 176,321 $168,762 $152,170 $130,923 $ 105,449
Capitalized interest....................... 26,603 31,256 29,738 27,381 39,254
Amortization of debt
issuance costs........................... 2,570 4,906 2,860 2,493 1,628
Portion of rent expense
representative of interest
factor................................... 299,012 262,724 285,261 329,370 386,254
--------- -------- -------- -------- ----------
$ 504,506 $467,648 $470,029 $490,167 $ 532,585
========= ======== ======== ======== ==========
Ratio of Earnings to Fixed
Charges (A) 1.4 1.7 2.0 1.9
========= ======== ======== ======== ==========
</TABLE>
(A) Earnings were inadequate to cover fixed charges by $173.4 million for the
year ended May 31, 1992.
<PAGE>
A Message from the
Chief Financial Officer
Most investors seek answers to at least three questions before electing to
invest in a particular enterprise: Does the company operate in a growth
industry? Does it enjoy leadership leverage within its industry? Do its people
demonstrate both the vision and vigor not only to defend, but to extend, their
company's leadership advantage? a As you've seen in this and recent years'
annual reports, FedEx operates and clearly excels within a rapidly growing,
forward-moving industry. FedEx revenues have grown by nearly $1 billion
annually, and our net income has nearly tripled since fiscal 1993. Looking
ahead, the global express transportation market is expected to exhibit
consistently exceptional growth over the next two decades. a With 16 million
pounds of daily cargo capacity and an unmatched portfolio of exclusive air cargo
route authorities, the FedEx integrated global distribution network affords us
tremendous economies of scale and competitive leverage as we grow. a On the
third question, the company's ability to extend its competitive advantage, FedEx
entered fiscal 1996 from a position of strength, as the express distribution
industry leader. Rather than rest on that advantage, we elected to strategically
invest $2.0 billion in overall network enhancements and information
technologies. These investments will help us continue to expand our network to
handle increasing customer demand as well as extend it to reach new markets. a
In fiscal 1997, we will remain committed to making similar investments to
improve our financial performance, continue our strong revenue growth and
solidify our leadership position.
Alan B. Graf, Jr.
Executive Vice President and Chief Financial Officer
<TABLE>
<CAPTION>
Financial Section
<S> <C>
Management's Discussion and Analysis of
Results of Operations and Financial Condition 18
Consolidated Statements of Income 23
Consolidated Balance Sheets 24
Consolidated Statements of Cash Flows 26
Consolidated Statements of Changes in
Common Stockholders' Investment 27
Notes to Consolidated Financial Statements 28
Report of Independent Public Accountants 39
Selected Consolidated Financial Data 40
</TABLE>
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
Results of Operations
In 1996, the Company achieved record net income and earnings per share for the
third consecutive year. Consolidated net income for 1996 was $308 million
($5.39 per share) compared with $298 million ($5.27 per share) and $204 million
($3.65 per share) for 1995 and 1994, respectively.
Over the past three years, the Company's consolidated financial results
improved considerably. The majority of the Company's earnings growth during
this period was attributable to the development of its international express
delivery services and a growing demand for those services. In 1996, however,
weakness in the global airfreight market and costs associated with implementing
the Company's intra-Asian network resulted in much lower international
operating income than in 1995. The Company's U.S. domestic operations over the
same period have been subject to an express delivery market characterized by
intense competition and generally declining prices. Consequently, from 1992 to
1995, U.S. domestic operating profits declined. In 1996, despite the impact of
unusually severe winter weather in the eastern United States, management
actions to control prices and expenses contributed to a significant year-over-
year improvement in U.S. domestic operating profits.
Revenues
The following table shows a comparison of revenues for the years ended May 31:
<TABLE>
<CAPTION>
In millions Percent Change
1996/ 1995/
1996 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C>
U.S. domestic express $ 7,284 $6,700 $6,142 + 9 + 9
FedEx International Priority/R/ (IP) 1,997 1,680 1,339 +19 +25
FedEx International Express Freight/R/ (IXF)
and FedEx International
Airport-to-AirportSM (ATA) 554 580 505 - 5 +15
FedEx/R/ Air Charter 92 115 113 -20 + 1
Logistics services 94 106 248 -11 -57
Other* 253 211 132 +20 +59
------- ------ ------
$10,274 $9,392 $8,479 + 9 +11
======= ====== ======
</TABLE>
*Includes the sale of engine noise reduction kits.
The following table shows a comparison of selected express and airfreight
(IXF/ATA) statistics for the years ended May 31:
<TABLE>
<CAPTION>
In thousands, except dollar amounts Percent Change
1996/ 1995/
1996 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C>
U.S. domestic express:
Average daily packages 2,246 2,084 1,792 + 8 +16
Revenue per package $12.67 $12.61 $13.33 -- - 5
IP:
Average daily packages 192 164 133 +17 +23
Revenue per package $40.58 $40.28 $39.21 + 1 + 3
IXF/ATA:
Average daily pounds 2,144 2,153 1,844 -- +17
Revenue per pound $ 1.01 $ 1.06 $ 1.06 - 5 --
</TABLE>
<PAGE>
Federal Express Corporation and Subsidiaries
In 1996, revenue per package (yield) associated with the Company's U.S.
domestic express service improved on a year-over-year basis for the first time
in five years. This improvement was partially attributable to an ongoing
program of systematic review and revision of customer pricing and discounts.
The goal of this program is to ensure a balance between revenues generated and
the cost of providing express services. This program particularly impacted
FedEx 2DaySM volumes and yields. In 1995, FedEx 2Day yields declined 4%, while
average daily volumes increased 22%. In 1996, however, FedEx 2Day yields
increased 5%, but average daily volumes increased only 1%. Additionally, the
Company raised the list price for FedEx Standard Overnight/R/ service in June
1995 and April 1996.
Also impacting U.S. domestic revenue per package in 1996 was the expiration
of the air cargo transportation excise tax on December 31, 1995. The expiration
of this tax added approximately $50 million and 1% to U.S. domestic revenues
and yields, respectively. This benefit will continue until such time as
Congress reenacts the excise tax.
Over the past three years, the Company's IP service benefited from its
EXPRESSfreighter/R/ network which provides customers with reduced transit
times, later drop-off opportunities and daily service on a global basis that is
generally unmatched by competitors. Year-over-year increases in average daily
volumes and revenues equaled or exceeded 16% during this three-year period.
Yields remained relatively constant.
In 1995 and 1996, the Company's airfreight revenues were a significant
factor in determining overall profitability. The Company uses its ATA
airfreight service (a lower-priced, space-available service) to fill space on
its international flights not utilized by express services such as IP or IXF.
In 1995, the demand for global airfreight services generally exceeded available
market capacity. Consequently, airfreight shippers paid higher prices for
airfreight services than in prior years. This additional revenue contributed to
1995's improvement in earnings. In contrast to 1995, the available market
capacity in 1996 was greater relative to demand, which resulted in lower non-
express airfreight pounds, prices and revenues for the Company.
The decrease in logistics services revenue in 1995 and 1996 was due to the
sale, effective May 1994, of the Company's German logistics subsidiary and the
1995 sale of two dedicated warehousing and contract distribution companies in
the United Kingdom. See additional discussion in Other Income and Expense and
Income Taxes below. The increases in other revenue in 1995 and 1996 were
primarily attributable to increased sales of engine noise reduction kits.
Operating Expenses
Volume growth and expansion of the Company's operations resulted in a trend of
increasing operating expenses. Presented below are year-over-year percentage
changes in operating expenses:
<TABLE>
<CAPTION>
Percent Change
1996/ 1995/
1995 1994
<S> <C> <C>
Salaries and employee benefits + 4 + 8
Rentals and landing fees +17 +16
Depreciation and amortization +10 + 9
Fuel +15 + 6
Maintenance and repairs +14 +17
Other +16 +16
Total operating expenses +10 +11
</TABLE>
Increases in salaries and employee benefits were primarily due to higher
employment levels associated with volume growth. In 1996, decreased provisions
under the Company's performance-based incentive compensation plans offset a
large portion of the increase in salaries and wages expense.
The increases in rentals and landing fees were primarily due to the leasing
of additional aircraft. As of May 31, 1996, the Company had 74 wide-bodied
aircraft under operating lease compared with 58 as of May 31, 1995, and 37 as
of May 31, 1994. Management expects year-over-year increases in lease expense
to continue as the Company enters into additional aircraft rental agreements
during 1997 and thereafter.
<PAGE>
Management's Discussion and Analysis
The increase in fuel expense in 1996 was due to increases in the average
price per gallon of jet fuel (7%) and gallons consumed (9%). The rise in
average price per gallon of jet fuel was due to higher jet fuel prices and a
4.3 cents per gallon excise tax on aviation fuel, used domestically, which
became effective October 1, 1995. The increase in fuel expense in 1995 was due
to an increase in gallons consumed (10%), partially offset by a decline in
average jet fuel price per gallon (5%).
The increase in maintenance and repairs expense for 1996 was due to a number
of factors. The Company's aircraft fleet has increased, resulting in a
corresponding increase in maintenance expense. The Company also incurred
significant spare parts expense outfitting the newly-opened Subic Bay facility
and earlier than expected DC10 engine maintenance expense. In 1995, regulatory
directives on B727 and MD11 aircraft engines resulted in higher maintenance and
repairs expense, and the Company's MD11 aircraft entered their initial cycle of
engine maintenance.
Maintenance and repairs expense, as it relates to aircraft, typically
follows a predictable pattern over the life of the aircraft. Unforeseen
maintenance events will occasionally disrupt this pattern, resulting in
periodic fluctuations in maintenance and repairs expense. Given the Company's
increasing fleet size and variety of aircraft types, management believes that
maintenance and repairs expense will continue a long-term trend of year-over-
year increases for the foreseeable future.
Increases in other operating expenses for 1996 and 1995 were primarily due
to expenses related to volume growth, including the transportation of packages
by third parties and temporary manpower. The cost of sales of engine noise
reduction kits increased in 1996 and 1995. A significant portion of the 1996
increase in other operating expenses was also due to consulting fees related to
ongoing projects designed to optimize the value of goods and services purchased
and the use of internal resources. Advertising also contributed to the increase
in other operating expenses in 1995.
Operating Income
The Company's operating income increased 6% and 11% in 1996 and 1995,
respectively.
U.S. domestic operating income rose 16% in 1996 and declined 17% in 1995.
During 1996, revenue per package increased 0.5% and cost per package increased
only 0.3%, while average daily volume rose 8%. These factors contributed to a
substantial improvement in operating profits. In 1996, severe winter storms in
the eastern United States closed numerous airports and businesses and,
consequently, lowered U.S. domestic operating income by approximately $30
million. U.S. domestic results declined in 1995 because of lower margins
attributable to a 5% decrease in U.S. domestic express yields, while the
average U.S. domestic cost per package declined only 3%. Sales of engine noise
reduction kits contributed an incremental $15 million and $36 million to U.S.
domestic operating income in 1996 and 1995, respectively. U.S. domestic
operating margins were 7.3%, 6.8% and 9.0% in 1996, 1995 and 1994,
respectively.
International operating income declined $44 million in 1996 compared with a
$155 million increase in 1995. In addition to the factors impacting express and
airfreight revenue discussed above, the costs of establishing the Company's
intra-Asian network and declines in charter revenue contributed to the decrease
in international operating income. International operating margins were 2.9%,
4.9% and 1.3% in 1996, 1995 and 1994, respectively.
For additional information on the Company's U.S. domestic and international
operations, see Note 10 of Notes to Consolidated Financial Statements.
Other Income and Expense and Income Taxes
Decreases in net interest expense of 17% and 19% for 1996 and 1995,
respectively, were due to lower debt levels and a higher level of capitalized
interest. Interest is capitalized during the modification of certain Airbus
A310 aircraft from passenger to freighter configuration. During 1996, 17 A310
aircraft were modified, or were undergoing modification, compared with four
during 1995.
Other, net for 1996 and 1995 included distributions of $7.8 million and $9.7
million, respectively, from the bankruptcy estate of a firm engaged by the
Company in 1990 to remit payments of employee payroll taxes to the appropriate
authorities. In total, the Company has received $17.9 million. All major issues
pertaining to the bankruptcy have been resolved, and any additional amounts the
Company may receive are expected to be insignificant. Other, net for 1996 also
included gains on sales of B727 aircraft and, for 1995, a pre-tax gain of $35.7
million from the sale of warehousing and distribution companies in the United
Kingdom.
<PAGE>
Federal Express Corporation and Subsidiaries
The Company's effective tax rate was 43.0% in 1996 and 1995 and 46.0% for
1994. In each year, the effective tax rate was greater than the statutory U.S.
federal tax rate primarily because of state income taxes and the impact of
foreign operations. The 43.0% effective tax rate in 1996 was lower than the
46.0% effective rate in 1994 primarily due to reductions in state and local
taxes and taxes on earnings from foreign operations. The 43.0% rate in 1995 was
largely attributable to a change in the structure of the Company's foreign
entity in Mexico. This change permitted the one-time deduction in 1995 of
certain items for U.S. federal income tax purposes that were not deductible in
prior years. For 1997, management expects the effective tax rate to remain at a
level similar to the 1996 rate. The actual rate, however, is dependent on a
number of factors, including the amount and source of operating income.
Outlook
Management is committed to achieving long-term earnings growth by positioning
the Company's resources to address customers' expectations and to capitalize on
emerging markets for express distribution services. Very often this involves a
significant front-end investment in assets, technology and personnel that might
have a negative impact on near-term profitability.
As discussed above, a key factor in the improvement in the Company's U.S.
domestic operations was the customer pricing and discount review program.
Management will continue this program in 1997. Additionally, the Company has
introduced a new U.S. domestic service for certain customers in select markets
with prices based on the distance between a package's origin and destination.
Management believes that year-over-year changes in U.S. domestic yields will
remain flat or fall slightly during 1997. Actual results, however, may vary
depending primarily on the impact of competitive pricing changes, changing
customer demand patterns, and the timing of the reenactment of the air cargo
transportation excise tax.
To reduce costs, management will continue investing in technologies that
streamline package pick-up, sorting, tracking and delivery. Improving package
movement through more efficient integration of the Company's air and ground
transportation systems is a continuing Company effort and, assuming effective
implementation, is expected to reduce transportation cost per package. The
Company has also implemented programs designed to optimize the value of goods
and services purchased. These programs have already resulted in modest savings
in 1996 with additional savings anticipated in 1997 and beyond. The results of
these programs may differ from management's expectations depending upon the
Company's success and timing in implementing the program recommendations and
the timing of technological changes.
Management's long-term plan for the Company's international operations calls
for continued expansion of its international network to the emerging centers of
economic growth. Management believes that the overall success of its
international operations is strongly tied to connecting these growth areas,
most notably China, the Pacific Basin and Latin America, to its global
transportation network. Providing direct service to new areas typically entails
a significant capital investment followed by a start-up period characterized by
operating costs higher than in established service areas. Furthermore, during
the start-up period, until express volumes grow into available capacity, more
reliance is placed on lower-yielding ATA and IXF to fill available space. This
reliance on airfreight exposes the Company to cyclical downturns in the
international airfreight market.
Management expects strong IP average daily volume growth to continue in
1997. With respect to airfreight, management believes that excess market
capacity and unfavorable economic conditions encountered in 1996 will continue
to hamper profitability in 1997. Actual results for IP or airfreight, however,
will depend on international economic conditions, actions by the Company's
competitors and regulatory conditions for international aviation rights.
Financial Condition
Liquidity
Cash and cash equivalents totaled $93 million at May 31, 1996, a decrease of
$264 million during 1996 compared with a decrease of $35 million in 1995 and an
increase of $237 million in 1994. Cash provided from operations during 1996 was
$947 million compared with $1.0 billion and $767 million in 1995 and 1994,
respectively. The Company currently has available a $1 billion revolving bank
credit facility that is generally used to finance temporary operating cash
requirements and to provide support for the issuance of commercial paper.
Management believes that cash flow from operations, its commercial paper
program and the revolving bank credit facility will adequately meet its working
capital needs for the foreseeable future.
<PAGE>
Management's Discussion and Analysis
Capital Resources
The Company's operations are capital intensive, characterized by significant
investments in aircraft, vehicles, computer and telecommunication equipment,
package handling facilities and sort equipment. The amount and timing of
capital additions are dependent on various factors including volume growth, new
or enhanced services, geographical expansion of services, competition and
availability of satisfactory financing.
Capital expenditures for 1996 totaled $1.4 billion and included seven Airbus
A310 aircraft, two MD11 aircraft, five B727-200 aircraft, 35 Cessna 208
aircraft, deposits on future Airbus A300 aircraft, vehicles and ground support
equipment, customer automation and computer equipment, and package handling
facilities and sort equipment. In comparison, prior year expenditures totaled
$1.1 billion and included four A310s, 15 Cessna 208s, deposits on future A300s,
vehicle and ground support equipment, and customer automation and computer
equipment. One MD11 and one A310 acquired in 1996 along with two A310s acquired
in 1995 were subsequently sold and leased back during 1996. For information on
the Company's purchase commitments, see Note 12 of Notes to Consolidated
Financial Statements.
Additional investing activities in 1996 included the purchase of an all-
cargo route authority between the U.S. and China.
The Company has historically financed its capital investments through the
use of lease, debt and equity financing in addition to the use of internally
generated cash from operations. Generally, management's practice in recent
years with respect to funding new aircraft acquisitions has been to finance
such aircraft through long-term lease transactions that qualify as off balance
sheet operating leases under applicable accounting rules. Management has
determined that these operating leases have provided economic benefits
favorable to ownership with respect to market values, liquidity and after-tax
cash flows. In the future, alternative approaches to financing the Company's
aircraft acquisitions, such as capitalized leases or other forms of secured
financing, may be pursued when management determines that such financing best
meets the Company's needs. The Company has been successful in obtaining
investment capital, both domestic and international, for long-term leases on
terms acceptable to it although the marketplace for such capital can become
restricted depending on a variety of economic factors beyond the control of the
Company. See Note 3 of Notes to Consolidated Financial Statements for
additional information concerning the Company's debt and credit facilities.
In August and October 1995, approximately $123 and $195 million,
respectively, of pass through certificates were issued under a shelf
registration filed with the Securities and Exchange Commission to refinance the
debt portion of leveraged leases related to five Airbus A300 aircraft. The pass
through certificates are not direct obligations of, or guaranteed by, the
Company, but amounts payable by the Company under the five leveraged leases are
sufficient to pay the principal of and interest on the certificates.
The Company's capital resources include backstop financing for nine Airbus
A300 aircraft and the public and private debt markets for leveraged lease
financing. Management believes that the capital resources available to the
Company provide flexibility to access the most efficient markets for financing
its capital acquisitions, including aircraft, and are adequate for the
Company's future capital needs.
Deferred Tax Assets
At May 31, 1996, the Company had a net cumulative deferred tax asset of $29
million consisting of $443 million of deferred tax assets and $414 million of
deferred tax liabilities. The reversals of deferred tax liabilities in future
periods will offset similar amounts of deferred tax assets. Based upon
historical levels of taxable income, the Company believes that it is more
likely than not that sufficient levels of future taxable income will be
generated to realize the remaining deferred tax asset.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Income Federal Express Corporation and Subsidiaries
Years ended May 31
In thousands, except Earnings Per Share 1996 1995 1994
<S> <C> <C> <C>
Revenues $10,273,619 $9,392,073 $8,479,456
----------- ---------- ----------
Operating Expenses:
Salaries and employee benefits (Notes 8 and 9) 4,619,990 4,425,202 4,104,800
Rentals and landing fees (Note 4) 959,055 818,599 703,028
Depreciation and amortization 719,609 652,287 599,357
Fuel 578,614 502,417 472,786
Maintenance and repairs 617,657 544,170 464,557
Other 2,154,870 1,858,254 1,604,296
----------- ---------- ----------
9,649,795 8,800,929 7,948,824
----------- ---------- ----------
Operating Income 623,824 591,144 530,632
----------- ---------- ----------
Other Income (Expense):
Interest, net (Note 1) (95,599) (114,687) (142,392)
Other, net (Note 14) 11,734 45,627 (9,778)
----------- ---------- ----------
(83,865) (69,060) (152,170)
----------- ---------- ----------
Income before Income Taxes 539,959 522,084 378,462
Provision for Income Taxes (Note 7) 232,182 224,496 174,092
----------- ---------- ----------
Net Income $ 307,777 $ 297,588 $ 204,370
=========== ========== ==========
Earnings Per Share (Note 6) $5.39 $5.27 $3.65
=========== ========== ==========
Average Shares Outstanding (Note 6) 57,138 56,494 56,012
=========== ========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<PAGE>
Consolidated Balance Sheets
May 31
<TABLE>
<CAPTION>
In thousands 1996 1995
Assets
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 93,419 $ 357,548
Receivables, less allowance for doubtful accounts of
$30,809 and $31,173 1,271,599 1,130,254
Spare parts, supplies and fuel 222,110 193,251
Deferred income taxes (Note 7) 92,606 115,801
Prepaid expenses and other 48,527 72,228
---------- ----------
Total current assets 1,728,261 1,869,082
---------- ----------
Property and Equipment, at Cost (Notes 1, 3, 4 and 12):
Flight equipment 3,372,647 3,006,693
Package handling and ground support equipment 2,148,509 1,841,108
Computer and electronic equipment 1,439,883 1,224,050
Other 1,717,478 1,625,860
---------- ----------
8,678,517 7,697,711
Less accumulated depreciation and amortization 4,561,916 3,982,467
---------- ----------
Net property and equipment 4,116,601 3,715,244
---------- ----------
Other Assets:
Goodwill (Note 1) 380,748 397,272
Equipment deposits and other assets (Note 12) 473,361 451,774
---------- ----------
Total other assets 854,109 849,046
---------- ----------
$6,698,971 $6,433,372
========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these balance sheets.
<PAGE>
Federal Express Corporation and Subsidiaries
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Liabilities and Stockholders' Investment
Current Liabilities:
Current portion of long-term debt (Note 3) $ 8,009 $ 255,448
Accounts payable 705,532 618,621
Accrued expenses (Note 2) 904,856 904,466
---------- ----------
Total current liabilities 1,618,397 1,778,535
---------- ----------
Long-Term Debt, Less Current Portion (Note 3) 1,325,277 1,324,711
---------- ----------
Deferred Income Taxes (Note 7) 64,034 55,956
---------- ----------
Other Liabilities (Note 1) 1,115,124 1,028,601
---------- ----------
Commitments and Contingencies (Notes 4, 12 and 13)
Common Stockholders' Investment (Note 6):
Common Stock, $.10 par value; 200,000 shares
authorized;
56,885 and 56,174 shares issued 5,689 5,617
Additional paid-in capital 815,137 775,255
Retained earnings 1,766,578 1,466,427
---------- ----------
2,587,404 2,247,299
Less treasury stock and deferred compensation 11,265 1,730
---------- ----------
Total common stockholders' investment 2,576,139 2,245,569
---------- ----------
$6,698,971 $6,433,372
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Consolidated Statements of CashFlows Federal Express Corporation and Subsidiaries
Years ended May 31
In thousands 1996 1995 1994
Operating Activities
Net income $ 307,777 $ 297,588 $ 204,370
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 719,609 652,287 599,357
Provision for uncollectible accounts 38,963 36,334 45,763
Provision for deferred income taxes and other 26,489 25,976 3,810
Gain from disposals of property and equipment (5,397) (39,997) (11,897)
Changes in assets and liabilities, net of effects
from dispositions of businesses:
Increase in receivables (191,334) (167,319) (173,902)
Increase in other current assets (41,992) (24,101) (7,826)
Increase in accounts payable, accrued
expenses and other liabilities 100,515 258,373 110,508
Other, net (8,050) (8,424) (2,905)
--------- ---------- ----------
Cash provided by operating activities 946,580 1,030,717 767,278
--------- ---------- ----------
Investing Activities
Purchases of property and equipment, including deposits
on aircraft of $68,202, $113,073 and $112,138 (1,412,242) (1,060,761) (1,087,708)
Proceeds from dispositions of property and equipment:
Sale-leaseback transactions 176,500 -- 581,400
Reimbursements of A300 deposits 143,859 138,203 38,794
Other dispositions 26,504 59,523 46,148
Other, net 77,208 87,925 27,843
--------- ---------- ----------
Cash used in investing activities (988,171) (775,110) (393,523)
--------- ---------- ----------
Financing Activities
Proceeds from debt issuances 17,298 45,460 10,777
Principal payments on debt (264,004) (349,523) (198,243)
Proceeds from stock issuances 36,566 13,081 53,759
Other, net (12,398) -- (2,581)
--------- ---------- ----------
Cash used in financing activities (222,538) (290,982) (136,288)
--------- ---------- ----------
Cash and Cash Equivalents
Increase (decrease) during the year (264,129) (35,375) 237,467
Balance at beginning of year 357,548 392,923 155,456
--------- ---------- ----------
Balance at end of year $ 93,419 $ 357,548 $ 392,923
========= ========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Changes in Common Stockholders' Investment Federal Express Corporation and Subsidiaries
In thousands, except shares Additional
Common Paid-in Retained Treasury Deferred
Stock Capital Earnings Stock Compensation
<S> <C> <C> <C> <C> <C>
Balance at May 31, 1993 $5,474 $699,385 $ 969,515 $ (36) $ (2,957)
Purchase of treasury stock -- -- -- (185) --
Forfeiture of restricted stock -- -- -- (1,224) --
Issuance of common and treasury
stock under employee incentive
plans (1,153,248 shares) 115 59,844 -- 670 (8)
Amortization of deferred compensation -- -- -- -- 1,467
Foreign currency translation adjustment -- -- (11,725) -- --
Net income -- -- 204,370 -- --
------- -------- --------- ------- --------
Balance at May 31, 1994 5,589 759,229 1,162,160 (775) (1,498)
Forfeiture of restricted stock -- -- -- (231) --
Issuance of common stock
under employee incentive
plans (288,724 shares) 28 16,026 -- -- --
Amortization of deferred compensation -- -- -- -- 774
Foreign currency translation adjustment -- -- 6,679 -- --
Net income -- -- 297,588 -- --
------- -------- --------- ------- --------
Balance at May 31, 1995 5,617 775,255 1,466,427 (1,006) (724)
Purchase of treasury stock -- -- -- (12,398) --
Forfeiture of restricted stock -- -- -- (1,068) 1,130
Issuance of common and treasury
stock under employee incentive
plans (886,195 shares) 72 39,882 -- 14,472 (13,898)
Amortization of deferred compensation -- -- -- -- 2,227
Foreign currency translation adjustment -- -- (7,626) -- --
Net income -- -- 307,777 -- --
------- -------- --------- ------- --------
Balance at May 31, 1996 $5,689 $815,137 $1,766,578 $ -- $(11,265)
======= ======== ========== ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
<PAGE>
Notes to Consolidated Financial Statements
Note 1: Summary of Significant Accounting Policies
Principles of consolidation. The consolidated financial statements include the
accounts of Federal Express Corporation and its wholly-owned subsidiaries (the
"Company"). All significant intercompany accounts and transactions have been
eliminated.
Property and equipment. Expenditures for major additions, improvements, flight
equipment modifications, and certain overhaul costs are capitalized.
Maintenance and repairs are charged to expense as incurred, except for B747
airframe and engine overhaul maintenance which is accrued and charged to
expense on the basis of hours flown. The cost and accumulated depreciation of
property and equipment disposed of are removed from the related accounts, and
any gain or loss is reflected in the results of operations.
For financial reporting purposes, depreciation and amortization of property
and equipment is provided on a straight-line basis over the asset's service
life or related lease term as follows:
Flight equipment 7 to 20 years
Package handling and ground support equipment 5 to 30 years
Computer and electronic equipment 3 to 10 years
Other 2 to 30 years
Aircraft airframes and engines are assigned residual values ranging from 10%
to 20% of asset cost. All other property and equipment have no assigned
residual values. Vehicles, which are included in package handling and ground
support equipment, are depreciated on a straight-line basis over 5 to 10 years.
For income tax purposes, depreciation is generally computed using
accelerated methods.
Deferred gains. Gains on the sale and leaseback of aircraft and other property
and equipment are deferred and amortized over the life of the lease as a
reduction of rent expense. Included in other liabilities at May 31, 1996 and
1995, were deferred gains of $337,118,000 and $293,000,000, respectively.
Deferred lease obligations. While certain of the Company's aircraft and
facility leases contain fluctuating or escalating payments, the related rent
expense is recorded on a straight-line basis over the lease term. Included in
other liabilities at May 31, 1996 and 1995, were $260,977,000 and $216,683,000,
respectively, representing the cumulative difference between rent expense and
rent payments.
Self-insurance reserves. The Company is self-insured up to certain levels for
workers' compensation, employee health care and vehicle liabilities. Reserves
are based on the actuarially estimated cost of claims. Included in other
liabilities at May 31, 1996 and 1995, were $278,000,000 and $294,000,000,
respectively, representing self-insurance reserves for the Company's workers'
compensation and vehicle liabilities.
Capitalized interest. Interest on funds used to finance the acquisition and
modification of aircraft and construction of certain facilities up to the date
the asset is placed in service is capitalized and included in the cost of the
asset. Capitalized interest was $39,254,000, $27,381,000 and $29,738,000 for
1996, 1995 and 1994, respectively.
Advertising. Advertising costs are generally expensed as incurred and are
included in other operating expenses. Advertising expenses were $138,408,000,
$147,288,000 and $122,002,000 in 1996, 1995 and 1994, respectively.
Cash equivalents. Cash equivalents are cash in excess of current operating
requirements invested in short-term, interest-bearing instruments with
maturities of three months or less at the date of purchase and are stated at
cost, which approximates market value. Interest income was $9,850,000 in 1996,
$16,236,000 in 1995 and $9,778,000 in 1994.
<PAGE>
Federal Express Corporation and Subsidiaries
Spare parts, supplies and fuel. Spare parts, supplies and fuel are stated
principally at standard cost (approximates actual cost on a first-in, first-out
basis) which is not in excess of current replacement cost.
Goodwill. Goodwill is the excess of the purchase price over the fair value of
net assets of businesses acquired. It is amortized on a straight-line basis
over periods ranging up to 40 years. Accumulated amortization was $114,606,000
and $100,527,000 at May 31, 1996 and 1995, respectively.
Foreign currency translation. Translation gains and losses of the Company's
foreign operations that use local currencies as the functional currency are
accumulated and reported as a separate component of common stockholders'
investment. Transaction gains and losses that arise from exchange rate
fluctuations on transactions denominated in a currency other than the local
functional currency are included in the results of operations.
Income taxes. Deferred income taxes are provided for the tax effect of
temporary differences between the tax basis of assets and liabilities and their
reported amounts in the financial statements. The Company uses the liability
method to account for income taxes, which requires deferred taxes to be
recorded at the statutory rate expected to be in effect when the taxes are
paid.
The Company has not provided for U.S. federal income taxes on its foreign
subsidiaries' earnings deemed to be permanently reinvested. Quantification of
the deferred tax liability, if any, associated with permanently reinvested
earnings is not practicable.
Revenue recognition. Revenue is generally recognized upon delivery of
shipments. For shipments in transit, revenue is recorded based on the
percentage of service completed.
Earnings per share. Earnings per share is computed based on the weighted
average number of common and common equivalent shares outstanding during the
period. Common equivalent shares are the shares of common stock that would be
issued upon the exercise of all dilutive outstanding stock options, less the
assumed repurchase of treasury shares. Earnings per share assuming full
dilution is substantially the same as earnings per share as stated and,
accordingly, is not shown separately.
Recent pronouncements. During 1997, the Company will adopt the provisions of
two Statements of Financial Accounting Standards ("SFAS") recently issued by
the Financial Accounting Standards Board. SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
requires that long-lived assets and certain identifiable intangibles be
reviewed periodically for impairment. The Company does not expect the adoption
of SFAS 121 to have a material effect on its financial statements.
SFAS 123, "Accounting for Stock-Based Compensation," defines a fair-value
based method of measuring and recording compensation costs for employee stock
compensation programs. This new standard, however, permits companies to follow
the intrinsic-value based method presently required by Accounting Principles
Board Opinion No. 25, as long as they also provide pro forma footnote
disclosure of the effect that the fair-value based method would have had on net
income and earnings per share had that method been adopted. Management intends
to adopt the pro forma disclosure alternative beginning in 1997.
Reclassifications. Certain amounts for 1995 and 1994 have been reclassified to
conform to the 1996 presentation.
Use of estimates. The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
<PAGE>
Notes to Consolidated Financial Statements
Note 2: Accrued Expenses
<TABLE>
<CAPTION>
<S> <C> <C>
May 31
In thousands 1996 1995
<S> <C> <C>
Compensated absences $ 211,499 $ 192,785
Insurance 194,209 176,806
Taxes other than income taxes 153,905 137,037
Employee benefits 111,912 127,870
Salaries 78,384 100,024
Aircraft overhaul 59,343 53,540
Other 95,604 116,404
---------- ---------
$ 904,856 $ 904,466
========== =========
</TABLE>
Note 3: Long-Term Debt
<TABLE>
<CAPTION>
May 31
In thousands 1996 1995
<S> <C> <C>
Unsecured notes payable, interest rates of 6.25% to 10.57%, due through 2013 $ 934,181 $1,187,413
---------- ---------
Unsecured sinking fund debentures, interest rate of 9.63%, due through 2020 98,392 98,323
---------- ---------
Capital lease obligations and tax exempt bonds, due through 2017,
interest rates of 6.75% to 8.30% 255,100 255,100
Less bond reserves 11,096 11,096
---------- ---------
244,004 244,004
---------- ---------
Other debt, interest rates of 9.68% to 9.98% 56,709 50,419
---------- ---------
1,333,286 1,580,159
Less current portion 8,009 255,448
---------- ---------
$1,325,277 $1,324,711
========== ==========
</TABLE>
The Company has a revolving credit agreement with domestic and foreign banks
that provides for a commitment of $1,000,000,000 through May 31, 2000, all of
which was available at May 31, 1996. Interest rates on borrowings under this
agreement are generally determined by maturities selected and prevailing market
conditions. The agreement contains certain covenants and restrictions, none of
which are expected to significantly affect operations or the ability to pay
dividends. As of May 31, 1996, approximately $957,000,000 was available for the
payment of dividends. Commercial paper borrowings are backed by unused
commitments under the revolving credit agreement and reduce the amount
available under the agreement.
Tax exempt bonds were issued by the Memphis-Shelby County Airport Authority
("MSCAA") and the City of Indianapolis. A lease agreement with the MSCAA and a
loan agreement with the City of Indianapolis covering the facilities and
equipment financed with the bond proceeds obligate the Company to pay rentals
and loan payments, respectively, equal to principal and interest due on the
bonds.
Scheduled annual principal maturities of long-term debt for the five years
subsequent to May 31, 1996, are as follows: $8,000,000 in 1997; $126,700,000 in
1998; $265,500,000 in 1999; $14,900,000 in 2000; and $11,300,000 in 2001.
The Company's long-term debt, exclusive of capital leases, had carrying
values of $1,130,000,000 and $1,390,000,000 at May 31, 1996 and 1995,
respectively, compared with fair values of approximately $1,245,000,000 and
$1,470,000,000 at those dates. The estimated fair values were determined based
on quoted market prices or on the current rates offered for debt with similar
terms and maturities.
<PAGE>
Federal Express Corporation and Subsidiaries
Note 4: Lease Commitments
The Company utilizes certain aircraft, land, facilities and equipment under
capital and operating leases which expire at various dates through 2024. In
addition, supplemental aircraft are leased under agreements which generally
provide for cancellation upon 30 days' notice.
Property and equipment recorded under capital leases at May 31 was as
follows:
<TABLE>
<CAPTION>
In thousands 1996 1995
<S> <C> <C>
Package handling and ground support equipment $346,479 $378,438
Facilities 133,435 133,435
Computer and electronic equipment and other 7,143 7,175
-------- --------
487,057 519,048
Less accumulated amortization 329,678 347,738
-------- --------
$157,379 $171,310
======== ========
</TABLE>
Rent expense under operating leases for the years ended May 31 was as
follows:
<TABLE>
<CAPTION>
In thousands 1996 1995 1994
<S> <C> <C> <C>
Minimum rentals $820,896 $707,182 $621,174
Contingent rentals 61,164 43,005 21,540
-------- -------- --------
$882,060 $750,187 $642,714
======== ======== ========
</TABLE>
Contingent rentals are based on mileage under supplemental aircraft leases.
A summary of future minimum lease payments under capital leases and non-
cancelable operating leases (principally aircraft and facilities) with an
initial or remaining term in excess of one year at May 31, 1996, follows:
<TABLE>
<CAPTION>
In thousands Capital Leases Operating Leases
<S> <C> <C>
1997 $ 15,561 $ 724,161
1998 15,561 732,675
1999 15,561 715,247
2000 15,561 671,798
2001 15,561 638,510
Thereafter 356,085 7,634,161
-------- -----------
$433,890 $11,116,552
======== ===========
</TABLE>
At May 31, 1996, the present value of future minimum lease payments for
capital lease obligations was $199,004,000.
Note 5: Preferred Stock
The Certificate of Incorporation authorizes the Board of Directors, at its
discretion, to issue up to 4,000,000 shares of Series Preferred Stock. The
stock is issuable in series which may vary as to certain rights and preferences
and has no par value. As of May 31, 1996, none of these shares had been issued.
<PAGE>
Notes to Consolidated Financial Statements
Note 6: Common Stockholders' Investment
Under the provisions of the Company's stock incentive plans, options may be
granted to certain key employees (and, under the 1993 plan, to directors who
are not employees of the Company) to purchase common stock of the Company at a
price not less than its fair market value at the date of grant. The following
summarizes information for the past three years with respect to those plans:
<TABLE>
<CAPTION>
Number of Shares Option Price
Under Option Per Share
<S> <C> <C>
Outstanding at May 31, 1993 3,147,043 $30.56-$70.19
Granted 982,750 54.31-70.81
Exercised (1,142,249) 30.56-70.19
Canceled (111,758) 34.31-62.94
----------
Outstanding at May 31, 1994 2,875,786 $30.56-$70.81
Granted 671,800 56.13-75.88
Exercised (288,724) 30.56-62.94
Canceled (89,997) 30.56-75.88
----------
Outstanding at May 31, 1995 3,168,865 $30.56-$75.88
Granted 909,000 59.13-82.31
Exercised (710,945) 30.56-75.88
Canceled (167,640) 34.50-82.31
----------
Outstanding at May 31, 1996 3,199,280 $30.56-$82.31
==========
Exercisable at May 31, 1996 1,226,400 $30.56-$75.88
==========
</TABLE>
At May 31, 1996, 942,731 shares were available for future grants under the
above-mentioned stock incentive plans.
Under the terms of the Company's restricted stock plans, shares of the
Company's common stock may be awarded to key employees. Restrictions on the
shares expire over a period of one to ten years from the date of award. The
value of shares awarded under these plans is recorded as a reduction of common
stockholders' investment and is being amortized to compensation expense as
restrictions on such shares expire. Shares awarded under the plans totaled
175,250 in 1996 and 11,000 in 1994. No shares were awarded in 1995. During
1996, 1995 and 1994, 14,500, 3,750 and 18,438 shares, respectively, were
forfeited. At May 31, 1996, 128,938 shares were available for future awards.
At May 31, 1996, there were 4,270,949 shares of common stock reserved for
issuance under the above-mentioned plans.
In 1988, the Board of Directors authorized the purchase of up to
approximately 5,300,000 shares of the Company's common stock on the open
market. As of May 31, 1996, a total of 2,911,305 shares at an average cost of
$43.85 per share had been purchased and reissued under the above-mentioned
plans.
<PAGE>
Federal Express Corporation and Subsidiaries
Note 7: Income Taxes
The components of the provision for income taxes for the years ended May 31
were as follows:
<TABLE>
<CAPTION>
In thousands 1996 1995 1994
Current provision:
<S> <C> <C> <C>
Federal $142,512 $137,041 $131,724
Foreign 37,759 29,787 16,387
State 18,007 23,405 26,862
-------- -------- --------
198,278 190,233 174,973
======== ======== ========
Deferred provision (credit):
Federal 27,962 24,058 2,263
Foreign 2,351 9,072 2,524
State 3,591 1,133 (5,668)
-------- -------- --------
33,904 34,263 (881)
-------- -------- --------
$232,182 $224,496 $174,092
======== ======== ========
</TABLE>
The Company's operations included the following income (loss) with respect
to entities in foreign locations for the years ended May 31:
<TABLE>
<CAPTION>
In thousands 1996 1995 1994
<S> <C> <C> <C>
Entities with pre-tax income $ 153,000 $ 149,000 $ 127,000
Entities with pre-tax losses (228,000) (173,000) (210,000)
--------- --------- ---------
$ (75,000) $ (24,000) $ (83,000)
========= ========= =========
</TABLE>
Income (losses) from entities which are structured as foreign subsidiaries
are not included in the U.S. consolidated income tax return. Approximately
$60,000,000, $29,000,000 and $14,000,000 of net foreign subsidiary income were
not taxable for federal income tax purposes in 1996, 1995 and 1994,
respectively. Income taxes have been provided for foreign operations based upon
the various tax laws and rates of the countries in which the Company's
operations are conducted. There is no direct relationship between the Company's
overall foreign income tax provision and foreign pre-tax book income due to the
different methods of taxation used by countries throughout the world.
A reconciliation of the statutory federal income tax rate to the Company's
effective income tax rate for the years ended May 31 follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Statutory U.S. income tax rate 35.0% 35.0% 35.0%
Increase resulting from:
Goodwill amortization 0.9 1.0 1.3
Foreign operations 1.7 0.9 3.5
State income taxes, net of federal benefit 2.6 3.1 3.6
Other, net 2.8 3.0 2.6
---- ---- ----
43.0% 43.0% 46.0%
==== ==== ====
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
The significant components of deferred tax assets and liabilities as of May
31 were as follows:
<TABLE>
<CAPTION>
In thousands 1996 1995
Deferred Deferred Deferred Deferred
Tax Assets Tax Liabilities Tax Assets Tax Liabilities
<S> <C> <C> <C> <C>
Depreciation $ -- $324,221 $ -- $303,088
Deferred gains on sales of assets 81,370 -- 67,912 --
Employee benefits 45,137 -- 69,563 --
Self-insurance reserves 165,020 -- 165,197 --
Other 151,355 90,089 137,063 76,802
-------- -------- -------- --------
$442,882 $414,310 $439,735 $379,890
======== ======== ======== ========
</TABLE>
Note 8: Pension and Profit Sharing Plans
The Company sponsors pension plans covering substantially all employees. The
largest plan covers U.S. domestic employees age 21 and over, with at least one
year of service, and provides benefits based on final average earnings and
years of service. Plan funding is actuarially determined, subject to certain
tax law limitations.
International defined benefit plans provide benefits primarily based on
final earnings and years of service and are funded in accordance with local
laws and income tax regulations.
The following table sets forth the funded status of the plans as of May 31:
<TABLE>
<CAPTION>
In thousands 1996 1995
<S> <C> <C>
Plan assets at fair value $2,725,896 $2,093,422
Actuarial present value of the
projected benefit obligation
for service rendered to date 2,571,086 1,972,009
---------- ----------
Plan assets in excess of
projected benefit obligation 154,810 121,413
Unrecognized net gains from
past experience different
from that assumed and effects
of changes in assumptions (74,425) (123,929)
Prior service cost not yet
recognized in net periodic cost (7,398) (6,449)
Unrecognized transition amount 3,239 3,679
---------- ----------
Pension asset (liability) $ 76,226 $ (5,286)
========== ==========
Accumulated benefit obligation $1,626,877 $1,203,126
========== ==========
Vested benefit obligation $1,538,267 $1,140,545
========== ==========
</TABLE>
<PAGE>
Federal Express Corporation and Subsidiaries
Net periodic pension cost for the years ended May 31 included the following
components:
<TABLE>
<CAPTION>
In thousands 1996 1995 1994
<S> <C> <C> <C>
Service cost -- benefits earned during the period $ 184,305 $ 182,617 $176,861
Interest cost on projected benefit obligation 165,635 143,408 127,959
Actual return on plan assets (463,819) (192,939) (82,019)
Net amortization and deferral 256,968 19,333 (64,727)
--------- --------- --------
$ 143,089 $ 152,419 $158,074
========= ========= ========
</TABLE>
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 8.0% and 5.5%, respectively, in 1996, 8.6%
and 6.0%, respectively, in 1995 and 8.1% and 6.0%, respectively, in 1994. The
expected long-term rate of return on assets was 9.5% in 1996, 1995 and 1994.
Plan assets consist primarily of marketable equity securities and fixed income
instruments.
The Company also has a profit sharing plan, which covers substantially all
U.S. domestic employees age 21 and over, with at least one year of service with
the Company as of the contribution date, as defined in the plan. The plan
provides for discretionary contributions by the Company which are determined
annually by the Board of Directors. Profit sharing expense was $54,000,000 in
1996, $52,200,000 in 1995 and $36,800,000 in 1994.
Note 9: Postretirement Benefit Plans
The Company offers medical and dental coverage to all eligible U.S. domestic
retirees and their eligible dependents. Vision coverage is provided for
retirees only. Substantially all of the Company's U.S. domestic employees
become eligible for these benefits at age 55 and older, if they have permanent,
continuous service with the Company of at least 10 years after attainment of
age 45 if hired prior to January 1, 1988, or at least 20 years after attainment
of age 35, if hired on or after January 1, 1988. Life insurance benefits are
provided to retirees of the former Tiger International, Inc. who retired prior
to acquisition.
The following table sets forth accrued postretirement benefit cost as of May
31:
Accumulated postretirement benefit obligation:
<TABLE>
<CAPTION>
In thousands 1996 1995
<S> <C> <C>
Retirees $ 39,539 $ 35,816
Fully eligible active employees 31,472 24,400
Other active employees, not fully eligible 80,001 60,769
--------- --------
151,012 120,985
Unrecognized net gain 15,402 25,421
--------- --------
$166,414 $146,406
========= ========
</TABLE>
Net postretirement benefit cost for the years ended May 31
was as follows:
<TABLE>
<CAPTION>
In thousands 1996 1995 1994
<S> <C> <C> <C>
Service cost $12,085 $ 12,870 $ 12,392
Interest cost 11,275 10,617 10,174
Amortization of accumulated gains (780) -- --
------- -------- --------
$22,580 $ 23,487 $ 22,566
======= ======== ========
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
Future medical benefit costs were estimated to increase at an annual rate of
10.5% during 1997, decreasing to an annual growth rate of 5.5% in 2007 and
thereafter. Future dental benefit costs were estimated to increase at an annual
rate of 8.5% during 1997, decreasing to an annual growth rate of 5.5% in 2009
and thereafter. The Company's cost is capped at 150% of 1993 employer cost and,
therefore, will not be subject to medical and dental trends after the capped
cost is attained, projected to be in 1999. Primarily because of the cap on the
Company's cost, a 1% increase in these annual trend rates would not have a
significant impact on the accumulated postretirement benefit obligation at May
31, 1996, or 1996 benefit expense. The weighted average discount rates used in
estimating the accumulated postretirement obligation were 7.4% and 8.6% at May
31, 1996 and 1995, respectively. The Company pays claims as incurred.
Note 10: Business Segment Information
The Company is in a single line of business -- the worldwide transportation and
distribution of documents, packages and freight. For reporting purposes,
operations are classified into two geographic areas, U.S. domestic and
international. Shipments which either originate in or are destined to locations
outside the U.S. are categorized as international.
A summary of selected financial information for U.S. domestic and
international operations for the years ended May 31 follows:
<TABLE>
<CAPTION>
In thousands U.S. Total
Domestic International Worldwide
<S> <C> <C> <C>
Revenues:
1996 $7,466,311 $2,807,308 $10,273,619
1995 6,839,418 2,552,655 9,392,073
1994 6,199,940 2,279,516 8,479,456
Operating Income (Loss):
1996 $ 542,168 $ 81,656 $ 623,824
1995 465,527 125,617 591,144
1994 559,629 (28,997) 530,632
Identifiable Assets:
1996 $5,449,353 $1,249,618 $ 6,698,971
1995 5,321,811 1,111,561 6,433,372
1994 4,883,644 1,108,854 5,992,498
</TABLE>
Identifiable assets used jointly in U.S. domestic and international
operations (principally aircraft) have been allocated based on estimated usage.
International revenues related to services originating in the U.S. totaled
$1,316,100,000, $1,201,100,000 and $1,020,000,000 for the years ended May 31,
1996, 1995 and 1994, respectively.
Note 11: Supplemental Cash Flow Information
Cash paid for interest expense and income taxes for the years ended May 31 was
as follows:
<TABLE>
<CAPTION>
In thousands 1996 1995 1994
<S> <C> <C> <C>
Interest (net of capitalized interest) $108,052 $138,833 $158,149
Income taxes 204,487 185,964 167,209
</TABLE>
In March 1995, the Company issued three series of loan certificates totaling
$50,300,000 in exchange for a leased B747 aircraft.
<PAGE>
Federal Express Corporation and Subsidiaries
Note 12: Commitments and Contingencies
The Company's annual purchase commitments under various contracts as of May 31,
1996, were as follows:
<TABLE>
<CAPTION>
In thousands Aircraft-
Aircraft Related(1) Other(2) Total
<S> <C> <C> <C> <C>
1997 $482,800 $185,000 $194,400 $862,200
1998 478,600 64,200 37,800 580,600
1999 240,800 18,500 15,600 274,900
2000 124,200 9,900 -- 134,100
</TABLE>
(1)Primarily aircraft modifications, rotables, spare parts and engines.
(2)Facilities, vehicles, computer and other equipment.
At May 31, 1996, the Company was committed to purchase nine Airbus A300, 12
Airbus A310 and ten MD11 aircraft to be delivered through 2000. Deposits and
progress payments of $199,880,000 had been made toward these purchases. In
April 1996, the Company canceled its options to purchase up to 36 additional
Airbus A300s for delivery beginning in 1999. The Company may be required to
purchase seven additional MD11 aircraft for delivery beginning no later than
2000 under a put option agreement.
The Company has entered into contracts which are designed to limit its
exposure to fluctuations in jet fuel prices. Under these contracts, the Company
makes (or receives) payments based on the difference between a specified lower
(or upper) limit and the market price of jet fuel, as determined by an index of
spot market prices representing various geographic regions. The difference is
recorded as an increase or decrease in fuel expense. At May 31, 1996, the
Company had contracts with various financial institutions covering a total
notional volume of 365,300,000 gallons (approximately 54% of the Company's
annual jet fuel consumption), with some contracts extending through May 1997.
At May 31, 1995, the Company had similar contracts covering a total notional
volume of 97,400,000 gallons (approximately 16% of the Company's annual jet
fuel consumption), with some contracts extending through August 1996. During
1996, the Company received $1,977,000 under jet fuel contracts. Based on
current market prices, the fair value of outstanding contracts at May 31, 1996
and 1995, was approximately $1,370,000 and $141,000, respectively.
Note 13: Legal Proceedings
On May 14, 1996, a class-action suit was filed by customers of the Company in
the United States District Court for the District of Minnesota. The complaint
generally alleges that the Company breached its contract with the plaintiffs in
transporting packages shipped by them by continuing to collect a 6.25% federal
excise tax on the transportation of property shipped by air after the tax
expired on December 31, 1995. The plaintiffs assert that the benefit to the
Company is believed to be in excess of $30,000,000. The plaintiffs seek
certification as a class action, damages, an injunction to enjoin the Company
from continuing to collect the excise tax referred to above, and an award of
attorneys' fees and costs. Other customers of the Company filed two separate
lawsuits, one in California state court during April 1996 and one in Minnesota
state court during June 1996, containing substantially similar allegations and
requests for relief.
During June 1996, the Company reached an agreement with the plaintiffs in
all three lawsuits to consolidate the three lawsuits in the United States
District Court for the District of Minnesota. The plaintiffs are in the process
of filing the necessary motions to accomplish this consolidation.
The Company intends to vigorously defend itself in these cases.No amount has
been reserved for these contingencies.
The Company is subject to other legal proceedings and claims which arise in
the ordinary course of its business. In the opinion of management, the
aggregate liability, if any, with respect to these other actions will not
materially adversely affect the financial position or results of operations of
the Company.
<PAGE>
Notes to Consolidated Financial Statements
Note 14: Unusual Events
The Company received $7,800,000 and $9,700,000 in 1996 and 1995, respectively,
from the bankruptcy estate of a firm engaged by the Company in 1990 to remit
payments of employee withholding taxes. These amounts are a partial recovery of
a $32,000,000 loss incurred by the Company in 1991 that resulted from the
firm's failure to remit certain tax payments to appropriate authorities. The
Company has received a total of $17,900,000 from the bankruptcy estate of the
firm. All major issues pertaining to the bankruptcy have been resolved, and any
additional amounts the Company may receive are expected to be insignificant.
In 1995, the Company sold two dedicated warehousing and contract
distribution companies in the United Kingdom. A gain of $35,700,000 was
recorded from the sale.
Note 15: Summary of Quarterly Operating Results (Unaudited)
<TABLE>
<CAPTION>
In thousands, except earnings per share First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
1996
Revenues $2,453,394 $2,547,012 $2,535,470 $2,737,743
Operating income 149,230 170,905 77,943 225,746
Income before income taxes 129,886 154,952 52,637 202,484
Net income 75,334 89,871 27,156 115,416
Earnings per share $ 1.33 $ 1.57 $ .47 $ 2.01
Average shares outstanding 56,688 57,260 57,258 57,346
1995
Revenues $2,231,127 $2,358,765 $2,332,594 $2,469,587
Operating income 142,985 176,376 97,672 174,111
Income before income taxes 107,267 151,120 110,714 152,983
Net income 61,142 86,139 63,107 87,200
Earnings per share $ 1.08 $ 1.53 $ 1.12 $ 1.54
Average shares outstanding 56,614 56,385 56,374 56,601
</TABLE>
<PAGE>
Report of Independent Public Accountants
Federal Express Corporation and Subsidiaries
To the Stockholders of Federal Express Corporation:
We have audited the accompanying consolidated balance sheets of Federal Express
Corporation (a Delaware corporation) and subsidiaries as of May 31, 1996 and
1995, and the related consolidated statements of income, common stockholders'
investment and cash flows for each of the three years in the period ended May
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Federal Express Corporation
and subsidiaries as of May 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
May 31, 1996, in conformity with generally accepted accounting principles.
Memphis, Tennessee
July 1, 1996
<PAGE>
Selected Consolidated Financial Data
<TABLE>
<CAPTION>
Years ended May 31
In thousands, except per
share amounts and Other
Operating Data 1996 1995 1994
<S> <C> <C> <C>
Operating Results
Revenues $10,273,619 $9,392,073 $8,479,456
Operating income 623,824 591,144 530,632
Income (loss) before
income taxes 539,959 522,084 378,462
Income (loss) from
continuing operations 307,777 297,588 204,370
Net income (loss) $ 307,777 $ 297,588 $ 204,370
Per Share Data
Earnings (loss) per share:
Continuing operations $ 5.39 $ 5.27 $ 3.65
Discontinued operations -- -- --
Cumulative effect of
changes in accounting
principles -- -- --
Net earnings (loss)
per share $ 5.39 $ 5.27 $ 3.65
Average shares outstanding 57,138 56,494 56,012
Cash dividends -- -- --
Financial Position
Property and equipment,
net $ 4,116,601 $3,715,244 $3,449,093
Total assets 6,698,971 6,433,372 5,992,498
Long-term debt 1,325,277 1,324,711 1,632,202
Common stockholders'
investment 2,576,139 2,245,569 1,924,705
Other Operating Data
Express package:
Average daily package
volume 2,437,662 2,247,594 1,925,105
Average pounds per
package 6.4 6.3 6.0
Average revenue per
pound* $ 2.31 $ 2.31 $ 2.51
Average revenue per
package* $ 14.87 $ 14.62 $ 15.12
Airfreight:
Average daily pounds 2,144,225 2,153,041 1,844,270
Average revenue per
pound $ 1.01 $ 1.06 $ 1.06
Operating weekdays 256 255 257
Aircraft fleet:
Airbus A300-600 16 9 2
Airbus A310-200 25 15 --
Boeing 747-100 -- -- --
Boeing 747-200 4 5 6
McDonnell Douglas MD11 18 13 13
McDonnell Douglas
DC10-10 13 13 11
McDonnell Douglas
DC10-30 22 22 19
McDonnell Douglas DC8 -- -- --
Boeing 727-100 68 68 69
Boeing 727-200 95 90 90
Cessna 208A 10 10 10
Cessna 208B 254 219 206
Fokker F27 32 32 32
Vehicle fleet 36,900 35,900 30,900
Average number of
employees (based on a
standard full-time
workweek) 99,999 94,201 88,502
</TABLE>
* Beginning in 1995, certain service fee revenues were classified as package-
related revenue. Data for prior periods has been restated where applicable
to conform to this presentation.
<PAGE>
Federal Express Corporation and Subsidiaries
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C>
$7,808,043 $7,550,060 $7,688,296 $7,015,069 $5,166,967 $3,882,817 $3,178,308
377,173 22,967 252,126 387,355 414,787 379,452 364,743
203,576 (146,828) 40,942 218,423 298,332 302,328 311,885
109,809 (113,782) 5,898 115,764 166,451 187,716 166,952
$ 53,866 $ (113,782) $ 5,898 $ 115,764 $ 184,551 $ 187,716 $ (65,571)
$ 2.01 $ (2.11) $ .11 $ 2.18 $ 3.18 $ 3.56 $ 3.21
-- -- -- -- -- -- (4.48)
(1.03) -- -- -- .35 -- --
$ .98 $ (2.11) $ .11 $ 2.18 $ 3.53 $ 3.56 $ (1.27)
54,719 53,961 53,350 53,161 52,272 52,670 51,905
-- -- -- -- -- -- --
$3,476,268 $3,411,297 $3,624,026 $3,566,321 $3,431,814 $2,231,875 $1,861,432
5,793,064 5,463,186 5,672,461 5,675,073 5,293,422 3,008,549 2,499,511
1,882,279 1,797,844 1,826,781 2,148,142 2,138,940 838,730 744,914
1,671,381 1,579,722 1,668,620 1,649,187 1,493,524 1,330,679 1,078,920
1,710,561 1,472,642 1,310,890 1,234,174 1,059,882 877,543 704,392
5.8 5.7 5.6 5.4 5.4 5.3 5.1
$ 2.62 $ 2.90 $ 3.08 $ 3.13 $ 3.04 $ 3.10 $ 3.33
$ 15.30 $ 16.38 $ 17.33 $ 16.76 $ 16.28 $ 16.32 $ 16.97
2,050,033 2,258,303 2,650,204 3,148,290 4,019,353 -- --
$ 1.09 $ 1.22 $ 1.20 $ 1.13 $ 1.06 -- --
255 254 255 255 255 257 254
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- 4 8 9 9 -- --
8 9 10 10 12 -- --
8 4 1 -- -- -- --
11 11 11 10 8 8 8
19 17 16 16 16 13 11
-- -- -- 6 6 -- --
80 85 92 89 80 47 39
87 66 57 41 26 21 21
10 10 10 37 38 38 39
206 206 183 147 109 71 27
32 32 26 19 7 5 --
28,100 30,400 32,800 31,000 28,900 21,000 18,700
84,104 84,162 81,711 75,102 58,136 48,556 41,047
</TABLE>
Board of Directors
Robert H. Allen(2)
Private Investor and
Managing Partner
Challenge Investment Partners
Investment firm
Howard H. Baker, Jr.(1)
Partner
Baker, Donelson,
Bearman & Caldwell
Law firm
Anthony J.A. Bryan(1)
Senior Managing Director
The Whatley Group L.L.C.
Private investment and
consulting firm
Robert L. Cox(1)
Partner
Waring Cox
Law firm
Ralph D. DeNunzio(2)
President
Harbor Point Associates, Inc.
Private investment and
consulting firm
Judith L. Estrin
President and
Chief Executive Officer
Precept Software, Inc.
Computer software company
Philip Greer(1*)
Senior Managing Principal
Weiss, Peck & Greer, L.L.C.
Diversified investment man-
agement and securities firm
J.R. Hyde, III (2)
Chairman and
Chief Executive Officer
AutoZone, Inc.
Auto parts retail chain
Charles T. Manatt(2)
Senior Partner
Manatt, Phelps & Phillips
Law firm
George J. Mitchell(1)
Special Counsel
Verner, Liipfert, Bernhard,
McPherson and Hand
Law firm
Jackson W. Smart, Jr.(2*)
Chairman and
Chief Executive Officer
MSP Communications, Inc.
Radio broadcasting company
Frederick W. Smith
Chairman, President and
Chief Executive Officer
Federal Express Corporation
Dr. Joshua I. Smith(1)
Chairman, President and
Chief Executive Officer
The MAXIMA Corporation
Information and
data processing firm
Peter S. Willmott(1)
Chairman and
Chief Executive Officer
Willmott Services, Inc.
Retail and consulting firm
(1) Audit Committee
(2) Compensation Committee
(*) Committee Chairman
<PAGE>
Senior Officers Federal Express Corporation and Subsidiaries
Frederick W. Smith
Chairman, President and
Chief Executive Officer
Alan B. Graf, Jr.
Executive Vice President and
Chief Financial Officer
Kenneth R. Masterson
Executive Vice President,
General Counsel and Secretary
Theodore L. Weise
Executive Vice President
Worldwide Operations
David J. Bronczek
Senior Vice President
Europe, Middle East
and Africa
Michael L. Ducker
Senior Vice President
Asia and Pacific
Leonard B. Feiler
Senior Vice President
Central Support Services
T. Michael Glenn
Senior Vice President
Marketing, Customer Service
and Corporate Communications
Dennis H. Jones
Senior Vice President and
Chief Information Officer
Joseph C. McCarty,III
Senior Vice President
Latin America and Caribbean
Gilbert D. Mook
Senior Vice President
Air Operations
James A. Perkins
Senior Vice President and
Chief Personnel Officer
David F. Rebholz
Senior Vice President
Global Sales and Trade Services
Tracy G. Schmidt
Senior Vice President
Air Ground Terminals and
Transportation
Mary Alice Taylor
Senior Vice President
United States and Canada
Laurie A. Tucker
Senior Vice President
Logistics, Electronic
Commerce and Catalog
James S. Hudson
Vice President, Controller and
Chief Accounting Officer
<PAGE>
Corporate Information
STOCK LISTING: The Company's common stock is listed on The New YorkStock
Exchange under the ticker symbol FDX.
STOCKHOLDERS: At July 15, 1996, there were 9,649 stockholders of record.
MARKET INFORMATION: Following are high and low closing prices, by quarter,
for Federal Express Corporation common stock in fiscal 1996 and 1995. No cash
dividends have been declared.
<TABLE>
<CAPTION>
Closing prices of common stock First Quarter Second Quarter Third Quarter Fourth Quarter
FY1996
<S> <C> <C> <C> <C>
High $75-3/8 $86 82-5/8 82-1/2
Low 58-5/8 79-5/8 66-7/8 68-7/8
FY1995
High $80-3/4 70-3/4 65-3/4 69-5/8
Low 64 56-1/2 53-7/8 59-7/8
</TABLE>
Corporate headquarters: 2005 Corporate Avenue,Memphis, Tennessee 38132,
(901) 369-3600.
Annual meeting: The annual meeting of stockholders will be held at the
Crowne Plaza Memphis, 250 NorthMain Street, Memphis,Tennessee, on Tuesday,
October 1, 1996, at 10:00 a.m., CDT.
Inquiries: For financial information, contact Thomas L. Holland, Managing
Director, Investor Relations and Corporate Contributions, Federal Express
Corporation, Box 727, Dept. 1854, Memphis,Tennessee 38194, (901) 395-3478. For
general information, contact Gregory M. Rossiter, Managing Director, Public
Relations, Federal Express Corporation, Box 727, Dept. 1850, Memphis, Tennessee
38194, (901) 395-3460.
Form 10-K: A copy of the Company's Annual Report on Form 10-K (excluding
exhibits), filed with the Securities and Exchange Commission (SEC) is available
free of charge.You will be mailed a copy upon request to Rebecca M. Halvorson,
Manager, Investor Relations Department,Federal Express Corporation,Box 727,
Dept. 1854, Memphis,Tennessee 38194, (901) 395-3478. Company documents filed
electronically with the SEC can also be found on the Internet at the SEC's Web
site (http://www.sec.gov).
Auditors: Arthur Andersen LLP, Memphis,Tennessee.
Registrar and transfer agent: First Chicago Trust Company of New York,
Shareholder Services, P.O.Box 2500, Jersey City, New Jersey 07303-2500, (800)
446-2617 / Michael R. Phalen (312) 407-4885.
Equal Employment Opportunity: Federal Express Corporation is firmly
committed to afford Equal Employment Opportunity to all individuals regardless
of age, sex, race, color, religion, national origin, citizenship, disability,
or status as a Vietnam era or special disabled veteran. We are strongly bound
to this commitment because adherence to Equal Employment Opportunity principles
is the only acceptable way of life. We adhere to those principles not just
because they're the law, but because it's the right thing to do.
Service Marks: Federal Express,/R/ FedEx,/R/ the FedEx logo, The World On
Time,/R/ 1-800-Go-FedEx,/R/ FedEx AsiaOne,/R/ FedEx International Priority,/R/
FedEx ShipSite,/R/ FedEx World Service Centers,/R/ FedEx First Overnight,/R/
FedEx International Express Freight,/R/ FedEx/R/ Air Charter, FedEx Standard
Overnight/R/ and FedEx EXPRESSFREIGHTER/R/ ARE REGISTERED SERVICE MARKS OF
FEDERAL EXPRESS CORPORATION REG. U.S. PAT. &TM. OFF. AND IN CERTAIN OTHER
COUNTRIES. FEDEX INTERNETSHIP,SM FEDEX INTERNATIONAL FIRST,SM FEDEX SAMEDAYSM
AND FEDEX INTERNATIONAL AIRPORT-TO-AIRPORTSM ARE SERVICE MARKS AND FEDEX SHIPTM
IS A TRADEMARK OF FEDERAL EXPRESS CORPORATION.
Portions of this Annual Report were printed on recycled paper.
<PAGE>
Exhibit 21
FEDERAL EXPRESS CORPORATION
<TABLE>
<CAPTION>
JURISDICTION OF
ORGANIZATION OR
REGISTRATION STATUS
----------------- ------
<S> <C> <C> <C>
I. Federal Express Aviation Services, Incorporated Delaware Active
A. Federal Express Aviation Services International, Ltd. Delaware Active
II. Federal Express Canada Ltd. Canada Active
III. Federal Express International, Inc. Delaware Active
A. Dencom Investments Limited Northern Ireland Inactive
1. Dencom Freight Holdings Limited Northern Ireland Inactive
a. Federal Express (N.I.) Limited Northern Ireland Inactive
b. Fedex (Ireland) Limited Ireland Inactive
c. F.E.D.S. (Ireland) Limited Ireland Inactive
B. Federal Express (Australia) PTY Ltd. Australia Active
C. Federal Express Europe, Inc. Delaware Active
1. Federal Express Europe, Inc. & Co., V.O.F/S.N.C. Belgium Active
2. Federal Express European Services, Inc. Delaware Active
3. PIK Holdings Limited United Kingdom Active
D. Federal Express Europlex, Inc. Delaware Liquidation
E. Federal Express Holdings, S.A. Delaware Active
1. Federal Express (Antigua) Limited Antigua Active
2. Federal Express (Antilles Francaises) S.A.R.L. French West Indies Active
3. Federal Express (Barbados) Limited Barbados Active
4. Federal Express (Bermuda) Limited Bermuda Active
5. Federal Express Cayman Limited Cayman Islands Active
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JURISDICTION OF
ORGANIZATION OR
REGISTRATION STATUS
----------------- --------
<S> <C> <C>
6. Federal Express (Dominicana) S.A. Dominican Republic Active
a. Inversiones Geminis, S.A. Dominican Republic Active
b. Inversiones Piscis, S.A. Dominican Republic Active
c. Inversiones Sagitario, S.A. Dominican Republic Active
7. Federal Express Entregas Rapidas, Ltd. Brazil Inactive
8. Federal Express (Grenada) Limited Grenada Active
9. Federal Express (Haiti) S.A. Haiti Inactive
10. Federal Express Holdings y Compania (Mexico)
S.N.C. de C.V. Mexico Active
11. Federal Express (Jamaica) Limited Jamaica Active
12. Federal Express (St. Kitts) Limited St. Kitts Active
13. Federal Express (St. Lucia) Limited St. Lucia Active
14. Federal Express (St. Maarten) N.V. Netherland Antilles Active
a. Federal Express (Aruba) N.V. Netherland Antilles Active
15. Federal Express (Turks & Caicos) Limited Turks & Caicos Islands Active
16. Federal Express Virgin Islands, Inc. U.S. Virgin Islands Active
17. FedEx (Bahamas) Limited Bahamas Active
F. Federal Express (Hong Kong) Limited Hong Kong Liquidation
G. Federal Express International (France) SNC France Active
H. Federal Express International Y Compania Mexico Active
S.N.C. de C.V.
I. Federal Express Italy Inc. Delaware Inactive
1. Federal Express Italia SpA Italy Liquidation
J. Federal Express (Japan) K.K. Japan Active
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JURISDICTION OF
ORGANIZATION OR
REGISTRATION STATUS
---------------- -----------
<S> <C> <C>
K. Federal Express Limited United Kingdom Liquidation
1. Federal Express Finance P.L.C. United Kingdom Inactive
2. Federal Express International Limited United Kingdom Inactive
3. Federal Express Parcel Services Limited United Kingdom Inactive
4. Federal Express (U.K.) Limited United Kingdom Active
a. Federal Express (U.K.) Pension Trustees Ltd. United Kingdom Active
5. Winchmore Developments Ltd. United Kingdom Inactive
a. Concorde Advertising Limited United Kingdom Inactive
L. Federal Express Luxembourg, Inc. Delaware Active
M. Federal Express Pacific, Inc. Delaware Active
1. Federal Express Services (M) Sdn. Bhd. Malaysia Active
2. The Flying Tiger Line, Limited Hong Kong Inactive
3. Udara Express Courier Services Sdn. Bhd. Malaysia Active
N. Federal Express (Singapore) PTE, LTD. Singapore Active
O. Federal Express (Thailand) Limited Thailand Inactive
P. Fedex (N. I.) Limited Northern Ireland Inactive
IV. Federal Express Leasing Corporation Delaware Active
V. Federal Express Logistics, Inc. Delaware Inactive
VI. Federal Express Redevelopment Corporation Missouri Inactive
VII. FEDEX Aeronautics Corporation Delaware Active
VIII. Fedex Customs Brokerage Corporation Delaware Inactive
IX. Fedex Foreign Sales Corporation U. S. Virgin Islands Active
X. Fedex International Transmission Corporation Delaware Active
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JURISDICTION OF
ORGANIZATION OR
REGISTRATION STATUS
------------------ --------
<S> <C> <C>
XI. Fedex Partners, Inc. Delaware Active
XII. Flying Tigers Limited New Zealand Inactive
XIII. The Flying Tiger Line (NZ) Limited New Zealand Inactive
XIV. Tiger International Insurance Ltd. Cayman Islands Active
XV. Tiger Trading Company Delaware Inactive
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in Federal Express Corporation's previously filed Form S-8
Registration Statement Nos. 2-74000, 2-95720, 33-20138, 33-38041, 33-55055 and
333-03443 and Form S-3 Registration Statement No. 333-07691 of our report dated
July 1, 1996, included (or incorporated by reference) in Federal Express
Corporation's Form 10-K for the year ended May 31, 1996.
/s/ ARTHUR ANDERSEN LLP
--------------------------
ARTHUR ANDERSEN LLP
Memphis, Tennessee
August 2, 1996
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the
"Corporation"), a Delaware corporation, does hereby constitute and appoint
Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them,
with full power of substitution and resubstitution, his true and lawful
attorneys-in-fact and agents, with full power and authority to execute in the
name and on behalf of the undersigned as such Director, the Corporation's Annual
Report on Form 10-K with respect to the Corporation's fiscal year ended May 31,
1996, and any and all amendments thereto; and hereby ratifies and confirms all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes may lawfully do or cause to be done by virtue of these
presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 12 day of June, 1996.
/s/ ROBERT H. ALLEN
------------------------------------------
Robert H. Allen
STATE OF TEXAS
COUNTY OF HARRIS
I, Earlene L. Barbeau, a Notary Public in and for said County, in the
aforesaid State, do hereby certify that Robert H. Allen, personally known to me
to be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered the said instrument as his free and voluntary act, for the uses and
purposes therein set forth.
/s/ EARLENE L. BARBEAU
-------------------------------------------
Notary Public
My Commission Expires:
March 8, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the
"Corporation"), a Delaware corporation, does hereby constitute and appoint
Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them,
with full power of substitution and resubstitution, his true and lawful
attorneys-in-fact and agents, with full power and authority to execute in the
name and on behalf of the undersigned as such Director, the Corporation's Annual
Report on Form 10-K with respect to the Corporation's fiscal year ended May 31,
1996, and any and all amendments thereto; and hereby ratifies and confirms all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes may lawfully do or cause to be done by virtue of these
presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 1 day of July, 1996.
/s/ HOWARD H. BAKER, JR.
-----------------------------------------
Howard H. Baker, Jr.
STATE OF TENNESSEE
COUNTY OF SCOTT
I, Betty B. Lowe, a Notary Public in and for said County, in the aforesaid
State, do hereby certify that Howard H. Baker, Jr., personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered the
said instrument as his free and voluntary act, for the uses and purposes therein
set forth.
/s/ BETTY B. LOWE
------------------------------------------
Notary Public
My Commission Expires:
August 27, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the
"Corporation"), a Delaware corporation, does hereby constitute and appoint
Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them,
with full power of substitution and resubstitution, his true and lawful
attorneys-in-fact and agents, with full power and authority to execute in the
name and on behalf of the undersigned as such Director, the Corporation's Annual
Report on Form 10-K with respect to the Corporation's fiscal year ended May 31,
1996, and any and all amendments thereto; and hereby ratifies and confirms all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes may lawfully do or cause to be done by virtue of these
presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 4th day of June, 1996.
/s/ ROBERT L. COX
------------------------------------------
Robert L. Cox
STATE OF TENNESSEE
COUNTY OF SHELBY
I, Lillian W. Powers, a Notary Public in and for said County, in the
aforesaid state, do hereby certify that Robert L. Cox, personally known to me to
be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered the said instrument as his free and voluntary act, for the uses and
purposes therein set forth.
/s/ LILLIAN W. POWERS
------------------------------------------
Notary Public
My Commission Expires:
4-29-97
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the
"Corporation"), a Delaware corporation, does hereby constitute and appoint
Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them,
with full power of substitution and resubstitution, his true and lawful
attorneys-in-fact and agents, with full power and authority to execute in the
name and on behalf of the undersigned as such Director, the Corporation's Annual
Report on Form 10-K with respect to the Corporation's fiscal year ended May 31,
1996, and any and all amendments thereto; and hereby ratifies and confirms all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes may lawfully do or cause to be done by virtue of these
presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 11 day of June, 1996.
/s/ RALPH D. DENUNZIO
---------------------------------------
Ralph D. Denunzio
STATE OF NEW YORK
COUNTY OF NEW YORK
I, Pauline Kalahele, a Notary Public in and for said County, in the
aforesaid State, do hereby certify that Ralph D. Denunzio, personally known to
me to be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered the said instrument as his free and voluntary act, for the uses and
purposes therein set forth.
/s/ PAULINE E.KALAHELE
-----------------------------------------
Notary Public
My Commission Expires:
Feb. 28, 1998
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the
"Corporation"), a Delaware corporation, does hereby constitute and appoint
Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them,
with full power of substitution and resubstitution, her true and lawful
attorneys-in-fact and agents, with full power and authority to execute in the
name and on behalf of the undersigned as such Director, the Corporation's Annual
Report on Form 10-K with respect to the Corporation's fiscal year ended May 31,
1996, and any and all amendments thereto; and hereby ratifies and confirms all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes may lawfully do or cause to be done by virtue of these
presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 2 day of July, 1996.
/s/ JUDITH L. ESTRIN
-------------------------------------------
Judith L. Estrin
STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO
I, Katherine Poulter, a Notary Public in and for said County, in the
aforesaid State, do hereby certify that Judith L. Estrin, personally known to me
to be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that she signed and
delivered the said instrument as her free and voluntary act, for the uses and
purposes therein set forth.
/s/ KATHERINE POULTER
------------------------------------------
Notary Public
My Commission Expires:
Feb. 24, 1998
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the
"Corporation"), a Delaware corporation, does hereby constitute and appoint
Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them,
with full power of substitution and resubstitution, his true and lawful
attorneys-in-fact and agents, with full power and authority to execute in the
name and on behalf of the undersigned as such Director, the Corporation's Annual
Report on Form 10-K with respect to the Corporation's fiscal year ended May 31,
1996, and any and all amendments thereto; and hereby ratifies and confirms all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes may lawfully do or cause to be done by virtue of these
presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of June,
1996.
/s/ PHILIP GREER
-----------------------------------------------
Philip Greer
STATE OF NEW YORK
COUNTY OF NEW YORK
I, Nancy Martinek, a Notary Public in and for said County, in the aforesaid
State, do hereby certify that Philip Greer, personally known to me to be the
same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered the
said instrument as his free and voluntary act, for the uses and purposes therein
set forth.
/s/ NANCY MARTINEK
-----------------------------------------------
Notary Public
My Commission Expires:
9/30/97
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the
"Corporation"), a Delaware Corporation, does hereby constitute and appoint
Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them,
with full power of substitution and resubstitution, his true and lawful
attorneys-in-fact and agents, with full power and authority to execute in the
name and on behalf of the undersigned as such Director, the Corporation's Annual
Report on Form 10-K with respect to the Corporation's fiscal year ended May 31,
1996, and any and all amendments thereto; and hereby ratifies and confirms all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes may lawfully do or cause to be done by virtue of these
presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 21 day of June, 1996.
/s/ J.R. HYDE, III
-------------------------------------------
J. R. Hyde, III
STATE OF TENNESSEE
COUNTY OF SHELBY
I, Nancy C. Phillips, a Notary Public in and for said County, in the
aforesaid State, do hereby certify that J. R. Hyde, III, personally known to me
to be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered the said instrument as his free and voluntary act, for the uses and
purposes therein set forth.
/s/ NANCY C.PHILLIPS
-------------------------------------------
Notary Public
My Commission Expires:
Jan. 12, 2000
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the
"Corporation"), a Delaware Corporation, does hereby constitute and appoint
Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them,
with full power of substitution and resubstitution, his true and lawful
attorneys-in-fact and agents, with full power and authority to execute in the
name and on behalf of the undersigned as such Director, the Corporation's Annual
Report on Form 10-K with respect to the Corporation's fiscal year ended May 31,
1996, and any and all amendments thereto; and hereby ratifies and confirms all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes may lawfully do or cause to be done by virtue of these
presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 8 day of July, 1996.
/s/ CHARLES T. MANATT
------------------------------------------
Charles T. Manatt
DISTRICT OF COLUMBIA
I, Bernida D. Evans, a Notary Public in and for said County, in the
aforesaid State, do hereby certify that Charles T. Manatt, personally known to
me to be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered the said instrument as his free and voluntary act, for the uses and
purposes therein set forth.
/s/ BERNIDA D.EVANS
-------------------------------------------
Notary Public
My Commission Expires:
11/30/99
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the
"Corporation"), a Delaware corporation, does hereby constitute and appoint
Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them,
with full power of substitution and resubstitution, his true and lawful
attorneys-in-fact and agents, with full power and authority to execute in the
name and on behalf of the undersigned as such director, the Corporation's Annual
Report on Form 10-K with respect to the Corporation's fiscal year ended May 31,
1996, and any and all amendments thereto; and hereby ratifies and confirms all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes may lawfully do or cause to be done by virtue of these
presents.
IN WITNESS WHEREOF, I have hereunto set my hand this ________ day of
____________, 1996.
_____________________________________
GEORGE J. MITCHELL
STATE OF ___________
CITY OF ____________
I,________________________________, a Notary Public in and for said County,
in the aforesaid State, do hereby certify that George J. Mitchell, personally
known to me to be the same person whose name is subscribed to the foregoing
instrument, appeared before me this day in person, and acknowledged that he
signed and delivered the said instrument as his free and voluntary act, for the
uses and purposes therein set forth.
_____________________________________
Notary Public
My Commission Expires:
______________________
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the
"Corporation"), a Delaware corporation, does hereby constitute and appoint
Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them,
with full power of substitution and resubstitution, his true and lawful
attorneys-in-fact and agents, with full power and authority to execute in the
name and on behalf of the undersigned as such Director, the Corporation's Annual
Report on Form 10-K with respect to the Corporation's fiscal year ended May 31,
1996, and any and all amendments thereto; and hereby ratifies and confirms all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes may lawfully do or cause to be done by virtue of these
presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of
August, 1996.
/s/ George J. Mitchell
-------------------------------------------
GEORGE J. MITCHELL
DISTRICT OF COLUMBIA
I, Ione M. Hartl, a Notary Public in and for said County, in the aforesaid
State, do hereby certify that George J. Mitchell, personally known to me to
be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered the said instrument as his free and voluntary act, for the uses and
purposes therein set forth.
/s/ Ione M. Hartl
-------------------------------------------
Notary Public
My Commission Expires:
8/14/00
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the
"Corporation"), a Delaware corporation, does hereby constitute and appoint
Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them,
with full power of substitution and resubstitution, his true and lawful
attorneys-in-fact and agents, with full power and authority to execute in the
name and on behalf of the undersigned as such Director, the Corporation's Annual
Report on Form 10-K with respect to the Corporation's fiscal year ended May 31,
1996, and any and all amendments thereto; and hereby ratifies and confirms all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes may lawfully do or cause to be done by virtue of these
presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 27th day of June,
1996.
/s/ JOSHUA I. SMITH
-------------------------------------------
Joshua I. Smith
STATE OF MARYLAND
COUNTY OF PRINCE GEORGES
I, Bertha A. Davies, a Notary Public in and for said County, in the
aforesaid State, do hereby certify that Joshua I. Smith, personally known to me
to be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered the said instrument as his free and voluntary act, for the uses and
purposes therein set forth.
/s/ BERTHA A. DAVIES
-------------------------------------------
Notary Public
My Commission Expires:
5-1-00
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the
"Corporation"), a Delaware corporation, does hereby constitute and appoint
Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them,
with full power of substitution and resubstitution, his true and lawful
attorneys-in-fact and agents, with full power and authority to execute in the
name and on behalf of the undersigned as such Director, the Corporation's Annual
Report on Form 10-K with respect to the Corporation's fiscal year ended May 31,
1996, and any and all amendments thereto; and hereby ratifies and confirms all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes may lawfully do or cause to be done by virtue of these
presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 17th day of June,
1996.
/s/ PETER S. WILLMOTT
--------------------------------------------
Peter S. Willmott
STATE OF ILLINOIS
COUNTY OF COOK
I, Joan L. Noble, a Notary Public in and for said County, in the aforesaid
State, do hereby certify that Peter S. Willmott, personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered the
said instrument as his free and voluntary act, for the uses and purposes therein
set forth.
/s/ JOAN L. NOBLE
------------------------------------------
Notary Public
My Commission Expires:
03/05/99
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned, the principal financial officer of FEDERAL EXPRESS
CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute
and appoint Frederick W. Smith and James S. Hudson, and each of them, with full
power of substitution and resubstitution, his true and lawful attorneys-in-fact
and agents, with full power and authority to execute in the name and on behalf
of the undersigned as such officer, the Corporation's Annual Report on Form 10-K
with respect to the Corporation's fiscal year ended May 31, 1996, and any and
all amendments thereto; and hereby ratifies and confirms all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes may lawfully do or cause to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 6 day of June, 1996.
/s/ ALAN B. GRAF, JR.
-------------------------------------------
Alan B. Graf, Jr.
STATE OF TENNESSEE
COUNTY OF SHELBY
I, Edna M. Kennon, a Notary Public in and for said County, in the aforesaid
State, do hereby certify that Alan B. Graf, Jr., personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered the
said instrument as his free and voluntary act, for the uses and purposes therein
set forth.
/s/ EDNA M. KENNON
-------------------------------------------
Notary Public
My Commission Expires:
9-14-99
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned, the principal executive officer and a director of
FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does
hereby constitute and appoint Alan B. Graf, Jr. and James S. Hudson, and each of
them, with full power of substitution and resubstitution, his true and lawful
attorneys-in-fact and agents, with full power and authority to execute in the
name and on behalf of the undersigned as such officer and Director, the
Corporation's Annual Report on Form 10-K with respect to the Corporation's
fiscal year ended May 31, 1996, and any and all amendments thereto; and hereby
ratifies and confirms all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes may lawfully do or cause to be
done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 12 day of June, 1996.
/s/ FREDERICK W. SMITH
-----------------------------------------
Frederick W. Smith
STATE OF TENNESSEE
COUNTY OF SHELBY
I, June Y. Fitzgerald, a Notary Public in and for said County, in the
aforesaid State, do hereby certify that Frederick W. Smith, personally known to
me to be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered the said instrument as his free and voluntary act, for the uses and
purposes therein set forth.
/s/ JUNE Y. FITZGERALD
------------------------------------------
Notary Public
My Commission Expires:
Jan. 26, 1999
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned, the principal accounting officer of FEDERAL EXPRESS
CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute
and appoint Frederick W. Smith and Alan B. Graf, Jr., and each of them, with
full power of substitution and resubstitution, his true and lawful attorneys-in-
fact and agents, with full power and authority to execute in the name and on
behalf of the undersigned as such officer, the Corporation's Annual Report on
Form 10-K with respect to the Corporation's fiscal year ended May 31, 1996, and
any and all amendments thereto; and hereby ratifies and confirms all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes may lawfully do or cause to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 28 day of June, 1996.
/S/ JAMES S. HUDSON
------------------------------------------
James S. Hudson
STATE OF TENNESSEE
COUNTY OF SHELBY
I, Joyce J. Jones, a Notary Public in and for said County, in the aforesaid
State, do hereby certify that James S. Hudson, personally known to me to be the
same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered the
said instrument as his free and voluntary act, for the uses and purposes therein
set forth.
/s/ JOYCE J. JONES
-------------------------------------------
Notary Public
My Commission Expires:
August 12, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED BALANCE SHEETS ON PAGES ___
OF THE COMPANY'S FORM 10-K FOR THE YEAR ENDED MAY 31, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 93,419
<SECURITIES> 0
<RECEIVABLES> 1,302,408
<ALLOWANCES> 30,809
<INVENTORY> 222,110
<CURRENT-ASSETS> 1,728,261
<PP&E> 8,678,517
<DEPRECIATION> 4,561,916
<TOTAL-ASSETS> 6,698,971
<CURRENT-LIABILITIES> 1,618,397
<BONDS> 1,325,277
0
0
<COMMON> 5,689
<OTHER-SE> 2,570,450
<TOTAL-LIABILITY-AND-EQUITY> 6,698,971
<SALES> 0
<TOTAL-REVENUES> 10,273,619
<CGS> 0
<TOTAL-COSTS> 9,649,795
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 95,599
<INCOME-PRETAX> 539,959
<INCOME-TAX> 232,182
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 307,777
<EPS-PRIMARY> 5.39
<EPS-DILUTED> 5.39
</TABLE>
