As filed with the Securities and Exchange Commission on April 3, 1998
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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FEDERAL EXPRESS CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 71-0427007
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2005 Corporate Avenue
Memphis, Tennessee 38132
(901) 369-3600
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
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Karen M. Clayborne, Esq.
Senior Vice President and General Counsel
Federal Express Corporation
1980 Nonconnah Boulevard
Memphis, Tennessee 38132
(901) 395-3392
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
Sarah Beshar, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
(212) 450-4000
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this registration statement as determined in
light of market conditions and other factors.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act"), other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [X]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [X]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Aggregate Aggregate Amount of
Title of Each Class of Amount To Be Price Per Offering Registration
Securities Being Registered Registered(1) Unit Price(1) Fee
- ------------------------------ ------------- --------- --------- ------------
Equipment Trust Certificates..
Pass Through Certificates.....
Debt Securities............... $991,967,000 100% $991,967,000 $292,630
- ----------
(1) Estimated solely for purposes of determining the registration fee.
Pursuant to Rule 429 under the Securities Act, the Prospectuses filed as
part of this Registration Statement relate to the securities registered hereby
and to the remaining unsold $8,033,000 amount of Equipment Trust Certificates,
Pass Through Certificates and Debt Securities previously registered by Federal
Express Corporation under its Registration Statement on Form S-3, File No.
333-07691.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains three forms of prospectus: each, as
supplemented, to be used in connection with offerings of (1) equipment trust
certificates; (2) pass through certificates; or (3) debt securities,
respectively. No prospectus will be used to consummate sales of securities
unless accompanied by a prospectus supplement applicable to the securities
offered thereby.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOT MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITAITON OR SALE WOULD BE UNLAWFUL PRIOR
TO THE REGISTRATION STATEMENT OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED APRIL 3, 1998
PROSPECTUS
[COMPANY LOGO]
EQUIPMENT TRUST CERTIFICATES
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Up to $1,000,000,000 aggregate principal amount of Equipment Trust
Certificates (the "Certificates") may be offered for sale from time to time
pursuant to this Prospectus and one or more Prospectus Supplements. The
Certificates may be offered in one or more Series in amounts, at prices and
on terms to be determined at the time of sale. The Certificates of each
Series will be issued as nonrecourse obligations by an Owner Trustee,
acting not in its individual capacity but solely as the Owner Trustee of a
separate Owner Trust, and authenticated by the Indenture Trustee, acting
not in its individual capacity but solely as the Indenture Trustee under an
Indenture among the Owner Trustee, the Indenture Trustee and Federal
Express Corporation (the "Corporation"), to finance or refinance a portion
of the payment by such Owner Trustee of the purchase price for a specified
aircraft (an "Aircraft"), which has been or will be leased to the
Corporation in connection with a leveraged lease transaction. The
Prospectus Supplement relating to each offering will describe certain terms
of the Certificates offered thereby, the Indentures and Leases and the
leveraged lease transactions and Aircraft relating to such Certificates.
For each Aircraft, the related Owner Trustee will issue Certificates
of the related Series, each of which may have a different principal amount,
maturity date and interest rate, which will be set forth on the cover of
the related Prospectus Supplement. The Certificates of each Series will be
secured by a security interest in the related Aircraft and by the Lease
relating thereto, including the right to receive rent payable by the
Corporation under such Lease. Although the Certificates will not be
obligations of, nor guaranteed by, the Corporation, the amounts payable by
the Corporation under such Lease will be sufficient to pay in full when due
all principal of and interest on the Certificates related to such Aircraft.
Interest will be payable on the Certificates of each Series on the
dates and at the rates per annum set forth for such Certificates in the
applicable Prospectus Supplement. Principal will be payable on the
Certificates of each Series in scheduled amounts and on specified dates as
set forth in the applicable Prospectus Supplement. The Certificates will
be issued in registered form only and, unless otherwise specified in the
applicable Prospectus Supplement, in accordance with a book-entry system.
The Certificates may be sold to or through underwriters or directly to
other purchasers or through agents. The Prospectus Supplement relating to each
offering will set forth the names of any underwriters, dealers or agents
involved in the sale of the Certificates in connection with which this
Prospectus is being delivered, the amounts, if any, to be purchased by
underwriters and the compensation, if any, of such underwriters or agents.
Prior to their issuance there will have been no market for the
Certificates of any Series and there can be no assurance that one will
develop. Unless otherwise indicated in the applicable Prospectus
Supplement, the Corporation does not intend to apply for the listing of any
Series of Certificates on a national securities exchange.
This Prospectus may not be used to consummate sales of any Certificates
unless accompanied by the Prospectus Supplement applicable to the Certificates
being sold.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------------
The date of this Prospectus is April __, 1998.
AVAILABLE INFORMATION
Federal Express Corporation (the "Corporation") is subject to the
informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith files reports and
other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy and information statements and other
information filed by the Corporation with the Commission can be inspected,
and copies may be obtained at prescribed rates, at the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549,
as well as at the following Regional Offices of the Commission: Chicago
Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and New York Regional Office, 7 World Trade Center, New York,
New York 10048. Such material can also be accessed electronically by means
of the Commission's home page on the Internet at http://www.sec.gov. and
inspected and copied at the offices of the New York Stock Exchange, Inc.,
20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a registration statement on Form
S-3 (together with all amendments and exhibits, herein referred to as the
"Registration Statement") filed by the Corporation under the Securities Act
of 1933, as amended (the "Securities Act"). This Prospectus does not
contain all of the information included in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. Reference is made to such Registration
Statement and to the exhibits relating thereto for further information with
respect to the Corporation and the securities offered hereby.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission in accordance with the
provisions of the Exchange Act are incorporated herein by reference and made a
part hereof:
1. The Corporation's Annual Report on Form 10-K for the fiscal year
ended May 31, 1997 filed August 8, 1997.
2. The Corporation's Quarterly Reports on Form 10-Q for the fiscal
quarters ended August 31, 1997 and November 30, 1997, respectively, filed
October 14, 1997 and January 13, 1998, respectively.
3. The Corporation's Current Reports on Form 8-K dated May 22, June 11,
June 30, July 7, August 8, September 30 and October 6, 1997, and February
26, 1998, respectively, filed June 2, June 19, July 7, July 9, August 14,
October 8 and October 8, 1997, and March 6, 1998, respectively.
All documents filed by the Corporation pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and before the
termination of the offering made by this Prospectus shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein, or contained in this Prospectus, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Corporation will furnish without charge to each person, including
any beneficial owner, to whom this Prospectus is delivered, upon written or
oral request of such person, a copy of any or all documents incorporated by
reference in this Prospectus, without exhibits to such documents (unless
such exhibits are specifically incorporated by reference into such
documents). Requests for such copies should be directed to: Elizabeth R.
Allen, Investor Relations, FDX Corporation, by mail at Box 727, Memphis,
Tennessee 38194-1854 or by telephone at (901) 395-3478.
FEDERAL EXPRESS CORPORATION
The Corporation is a wholly-owned subsidiary of FDX Corporation. The
Corporation 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. Corporate headquarters are located at 2005 Corporate Avenue,
Memphis, Tennessee 38132, telephone (901) 369-3600.
RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
Nine Months Ended
Year Ended May 31, February 28,
----------------------------------- ---------------
1993 1994 1995 1996 1997 1997 1998
Ratio of Earnings to ---- ---- ---- ---- ---- ---- ----
Fixed Charges(a)..... 1.4x 1.7x 2.0x 1.9x 2.0x 1.9x 2.0x
- -------------------
(a) Earnings included in the calculation of the ratio of earnings to fixed
charges represent income before income taxes plus fixed charges (other than
capitalized interest). Fixed charges include interest expense, capitalized
interest, amortization of debt issuance costs and a portion of rent expense
representative of interest.
USE OF PROCEEDS
The proceeds from the sale of the equipment trust certificates (the
"Certificates") of each series (a "Series") offered pursuant to this
Prospectus and a related Prospectus Supplement will be used to finance or
refinance the debt portion and, in certain cases, to refinance some of the
equity portion of a separate leveraged lease transaction entered into by
the Corporation, as lessee, with respect to an aircraft (an "Aircraft")
specified in such Prospectus Supplement. For each Aircraft, unless
otherwise specified in the applicable Prospectus Supplement, the debt
portion financed or refinanced will not exceed 80% of the purchase price
for such Aircraft.
The discounts and commissions relating to the offering of the
Certificates of each Series will be paid by the Owner Participant (as
defined below). The other expenses relating to the issuance and offering
of such Certificates (other than certain expenses to be paid directly by
the Corporation) will be paid by the Owner Participant as such other
expenses become due or, if previously paid by the Corporation, will be
reimbursed to the Corporation by the Owner Participant.
OUTLINE OF LEVERAGED LEASE TRANSACTIONS
Each Prospectus Supplement will specify the type and model of Aircraft
relating to the Certificates offered thereby, the engines with which such
Aircraft is equipped and when such Aircraft was delivered new by the
manufacturer to the Corporation, the Owner Trustee or any prior owner, as
the case may be. Each Aircraft has been or will be sold to State Street
Bank and Trust Company of Connecticut, National Association, or another
bank or trust company, not in its individual capacity but solely as owner
trustee (the "Owner Trustee") of a trust (an "Owner Trust" created pursuant
to a "Trust Agreement") for the benefit of the owner participant named in
the related Trust Agreement (the "Owner Participant"). Simultaneously with
such sale, the Owner Trustee has leased or will lease the Aircraft to the
Corporation pursuant to a lease (a "Lease") between the Owner Trustee, as
lessor, and the Corporation, as lessee. Each of the leveraged lease
transactions was or will be effected pursuant to a separate participation
agreement (a "Participation Agreement") among the Owner Participant, the
Owner Trustee, the Indenture Trustee (as defined below), the Corporation
and, in the case of a refinancing, each holder of a loan certificate issued
under the Indenture as originally executed.
For each Aircraft, the related Certificates will be issued as a separate
Series by the Owner Trustee, as nonrecourse obligations, and authenticated by
First Security Bank, National Association, or another bank or trust company,
as indenture trustee (the "Indenture Trustee") pursuant to a separate trust
indenture and security agreement between the Owner Trustee, the Indenture
Trustee and the Corporation (an "Indenture"). Each Owner Participant will have
provided or will provide, from sources other than the related Certificates,
unless otherwise specified in the applicable Prospectus Supplement, at least 20%
of the purchase price for the related Aircraft.
DESCRIPTION OF THE CERTIFICATES
The discussion that follows is a summary and does not purport to be
complete. The summary includes descriptions of the material terms of the
Indenture and the Certificates, the forms of which have been filed as
exhibits to the Registration Statement of which this Prospectus is a part.
For the Certificates offered pursuant to this Prospectus and any Prospectus
Supplement, this summary will be qualified in its entirety by the detailed
information appearing in such Prospectus Supplement, as well as by the form
of the Certificates of each Series offered thereby and the related
Indenture, Lease and Participation Agreement which will be filed as
exhibits to a post-effective amendment to this Registration Statement, a
Current Report on Form 8-K, a Quarterly Report on Form 10-Q or an Annual
Report on Form 10-K, as applicable, to be filed with the Commission in
connection with the issuance of such Certificates. This summary makes use
of terms defined in and is qualified in its entirety by reference to the
form of Indenture referred to above.
Each Prospectus Supplement will include a glossary of certain terms
used in connection with the Certificates offered thereby. Except as
otherwise indicated below or as described in the applicable Prospectus
Supplement, the following summary will apply to the Certificates, the
Indenture, the Lease and the Participation Agreement relating to each
Aircraft. Additional provisions with respect to the Indentures, the
Certificates, the Leases and the Participation Agreements relating to any
particular offering of Certificates will be described in the applicable
Prospectus Supplement. To the extent that any provision in any Prospectus
Supplement is inconsistent with any provision of this summary, the
provision of such Prospectus Supplement will control.
General
The Certificates of each Series will be issued as nonrecourse
obligations by the Owner Trustee, acting for a separate Owner Trust for the
benefit of an Owner Participant, and will be authenticated under the
related Indenture by the Indenture Trustee for the benefit of the
registered holders of the Certificates of such Series (the "Holders"). All
of the Certificates issued under the same Indenture will relate to a
specific Aircraft which will be leased by the Owner Trustee to the
Corporation pursuant to a separate Lease between the Owner Trustee and the
Corporation. The Aircraft subject to each Lease and the Certificates
issued under the related Indenture, will be specified in the applicable
Prospectus Supplement. The Corporation will be obligated to make rental
payments under each Lease that will be sufficient to pay the principal of
and interest on the related Certificates when and as due and payable. The
Corporation's obligations to pay rent and to cause other payments to be
made under each Lease will be general obligations of the Corporation. The
Certificates will not, however, be obligations of, or guaranteed by, the
Corporation.
The Certificates will not be obligations of the Owner Trustee, in its
individual capacity, or the Owner Participant; and neither the Owner
Trustee, in its individual capacity, nor the Owner Participant will be
liable for payment of any principal of, or premium, if any, or interest on
the Certificates.
Book-Entry Procedures
Unless otherwise specified in the applicable Prospectus Supplement,
the Certificates will be subject to the provisions described below. The
Certificates will be fully registered and issued in the form of one or more
temporary or permanent global security or securities without coupons, in
minimum denominations of $1,000 or any integral multiple of $1,000. Each
global certificate will be deposited with, or on behalf of, The Depository
Trust Company ("DTC"), and registered in its name or in the name of Cede &
Co. ("Cede"), its nominee. No Certificateholder will be entitled to
receive a Certificate in certificated form, except as set forth below.
DTC has advised the Corporation that DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
New York Uniform Commercial Code and a "clearing agency" registered
pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its participants ("DTC Participants") and to facilitate the
clearance and settlement of securities transactions between DTC
Participants through electronic book-entries, thereby eliminating the need
for physical movement of certificates. DTC Participants include securities
brokers and dealers, banks, trust companies and clearing corporations.
Access to DTC's book-entry system is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a participant, either directly or indirectly.
Certificateholders that are not DTC Participants but desire to
purchase, sell or otherwise transfer ownership of, or other interests, in
Certificates may do so only through DTC Participants. In addition,
Certificateholders will receive all distributions of principal and interest
from the Indenture Trustee through the DTC Participants. Under the rules,
regulations and procedures creating and affecting DTC and its operation,
DTC is required to make book-entry transfers of Certificates among DTC
Participants on whose behalf it acts and to receive and transmit
distributions of principal of, and interest on, the Certificates. Under
the book-entry system, Certificateholders may experience some delay in
receipt of payments, since such payments will be forwarded by the Indenture
Trustee to Cede, as nominee for DTC, and DTC in turn will forward the
payments to the appropriate DTC Participants.
Distributions by DTC Participants to Certificateholders will be the
responsibility of such DTC Participants and will be made in accordance with
customary industry practices. Accordingly, although Certificateholders
will not have possession of the Certificates, the rules of DTC provide a
mechanism by which participants will receive payments and will be able to
transfer their interests. Although the DTC Participants are expected to
convey the rights represented by their interests in any global security to
the related Certificateholders, because DTC can only act on behalf of DTC
Participants, the ability of Certificateholders to pledge Certificates to
persons or entities that are not DTC Participants or to otherwise act with
respect to such Certificates, may be limited due to the lack of physical
certificates for such Certificates.
None of the Corporation, the Indenture Trustee or any other agent of
the Corporation or the Indenture Trustee will have any responsibility or
liability for any aspect of the records relating to, or payments made on
account of, beneficial ownership interests in the Certificates or for
supervising or reviewing any records relating to such beneficial ownership
interests. Since the only "Certificateholder" will be Cede, as nominee of
DTC, Certificateholders will not be recognized by the Indenture Trustee as
Certificateholders, as such term is used in the Indenture, and
Certificateholders will be permitted to exercise the rights of
Certificateholders only indirectly through DTC and DTC Participants. DTC
has advised the Corporation that it will take any action permitted to be
taken by a Certificateholder under the Indenture and any Prospectus
Supplement only at the direction of one or more DTC Participants to whose
accounts with DTC the related Certificates are credited. Additionally, DTC
has advised the Corporation that it will take such actions with respect to
any percentage of the beneficial interest of Certificateholders only at the
direction of and on behalf of DTC Participants whose holders include
undivided interests that satisfy any such percentage. DTC may take
conflicting actions with respect to other undivided interests to the extent
that such actions are taken on behalf of DTC Participants whose holders
include such undivided interests.
Same-Day Settlement and Payment. All payments made by the Corporation to
the Indenture Trustee under each Lease will be in immediately available funds
and will be passed through to DTC in immediately available funds.
The Certificates will trade in DTC's Same-Day Funds Settlement System until
maturity, and secondary market trading activity in the Certificates will be
required by DTC to settle in immediately available funds. No assurance can be
given as to the effect, if any, of settlement in immediately available funds on
trading activity in the Certificates.
Certificated Form. The Certificates will be issued in fully registered,
certificated form to Certificateholders, or their nominees, rather than to DTC
or its nominee, only if DTC advises the Indenture Trustee in writing that it is
no longer willing or able to discharge properly its responsibilities as
depository with respect to the Certificates and the Corporation is unable to
locate a qualified successor or if the Corporation, at its option, elects to
terminate the book-entry system through DTC. In such event, the Indenture
Trustee will notify all Certificateholders through DTC Participants of the
availability of such certificated Certificates. Upon surrender by DTC of the
definitive global certificate representing the series of Certificates and
receipt of instructions for reregistration, the Indenture Trustee will reissue
the Certificates in certificated form to Certificateholders or their nominees.
Principal and Interest Payments
Interest will be payable on the Certificates of each Series on the dates
and at the rates per annum set forth for such Certificates in the applicable
Prospectus Supplement. Interest will be calculated on the basis of a 360-day
year consisting of twelve 30-day months. Principal will be payable on the
Certificates of each Series in scheduled amounts and on specified dates as set
forth in the applicable Prospectus Supplement. Unless otherwise set forth in the
applicable Prospectus Supplement, the record date for each interest and
principal payment date will be the fifteenth day prior to such payment date.
If the Certificates are issued in certificated form as discussed above,
principal of, premium, if any, and interest on the Certificates of each Series
will be payable at the corporate trust office of the Indenture Trustee in Salt
Lake City, Utah or at such other office or agency, including the office or
agency of a paying agent that may be appointed by the Indenture Trustee (a
"Paying Agent"), maintained for the payment of the Certificates of a Series. All
amounts payable by the Indenture Trustee under the terms of the Indenture may,
however, at the option of the Indenture Trustee or Paying Agent, be paid by
check mailed to the person entitled thereto at the address shown in the register
maintained by the Indenture Trustee or other registrar, if any. (Indenture,
Sections 2.04, 3.02 and 3.04) Such Certificates may be surrendered for
registration of transfer or exchange for Certificates of the same Series,
maturity and interest rate at facilities established for such purpose by the
Indenture Trustee in Salt Lake City, Utah. No service charge will be levied on
any Holder for any transfer or exchange of Certificates, but payment may be
required from such Holder of any tax or other governmental charges that may be
imposed in connection therewith. (Indenture, Sections 2.04, 2.06 and 3.02)
Prepayment
The applicable Prospectus Supplement will describe the circumstances,
whether voluntary or involuntary, under which the related Certificates may or
must be prepaid prior to the stated maturity date thereof, in whole or in part,
the premium, if any, applicable upon certain prepayments and other terms
applying to the prepayment of such Certificates.
Security
The Certificates of each Series will be secured by:
(i) an assignment by the Owner Trustee to the Indenture Trustee of the
Owner Trustee's rights (except for certain limited rights described below)
under the related Lease, including the right to receive rent and other
payments thereunder;
(ii) a security interest in the related Aircraft, subject to the rights
of the Corporation under such Lease and to certain other liens and
encumbrances; and
(iii) an assignment to the Indenture Trustee of the Owner Trustee's
rights relating to such Aircraft and the related engines under any
agreements for the purchase thereof between the Corporation and the
respective manufacturers of such Aircraft and of such engines. See
"Registration of the Aircraft" below.
The assignment by the Owner Trustee to the Indenture Trustee of its rights
under each Lease will exclude rights of the Owner Trustee and the Owner
Participant relating to:
(i) indemnification by the Corporation for certain matters;
(ii) proceeds of public liability insurance payable to the Owner Trustee
in its individual capacity and to the Owner Participant under insurance
maintained by the Corporation under such Lease; and
(iii) proceeds of any insurance policies separately maintained by the
Owner Trustee in its individual capacity or by the Owner Participant.
The right of the Indenture Trustee, however, to exercise any of the rights
of the Owner Trustee under the related Lease, except the right to receive
payments of rent due thereunder, will be subject to certain limitations as
described in the applicable Prospectus Supplement. (Indenture, Granting Clause
and Section 8.01)
There will be no cross-collateralization provisions in the Indentures and
consequently the Certificates issued in respect of one Aircraft will not be
secured by any other Aircraft or the Leases related thereto. There will be no
cross-default provisions in the Indentures and consequently events resulting in
an Indenture Event of Default under any particular Indenture may not result in
an Indenture Event of Default occurring under any other Indenture.
The proceeds from the sale of the Certificates of any Series will, if such
proceeds are received by the Indenture Trustee on a day that is prior to the
delivery date for the related Aircraft or, in the case of a refinancing, the
refunding date for the related original loan certificate, be deposited with and
held by the Indenture Trustee in the investments described in the following
sentence, as security for such Certificates pending the delivery of the Aircraft
or the consummation of the refunding. Funds, if any, held from time to time by
the Indenture Trustee with respect to any Aircraft as a result of (i) the
occurrence of an Indenture Event of Default, which may cause the Indenture
Trustee to hold funds otherwise distributable to the Owner Trustee, (ii) an
Event of Loss with respect to such Aircraft or (iii) otherwise, will be invested
in obligations either of, or fully guaranteed by, the United States of America;
certificates of deposit, bankers' acceptances or time deposits made with or by
certain banks, trust companies or national banking associations; or commercial
paper issued by a U.S. corporation whose commercial paper is rated at least
A-1/P-1 by Standard & Poor's Corporation and Moody's Investors Service, Inc.,
respectively, or if neither such organization rates such commercial paper, the
highest rating by another nationally recognized rating organization. Any income
realized as a result of such investments, net of the Indenture Trustee's
reasonable fees and expenses incurred in making such investment, will be held
and applied by the Indenture Trustee in the same manner as the principal amount
of such investment is to be applied and any losses, after taking into account
such earnings and such reasonable fees and expenses, will be charged against the
principal amount invested, in which case the Corporation will be responsible for
any losses. (Indenture, Section 5.08)
Registration of the Aircraft
The Corporation will be required, except under certain circumstances, to
register and keep each Aircraft registered under Title 49 of the United States
Code (the "Transportation Code"), in the name of the Owner Trustee, and to
record and maintain the recordation of the Indenture and the Lease relating to
each such Aircraft under the Transportation Code. Such recordation will give the
Indenture Trustee a security interest in each such Aircraft perfected under the
Transportation Code, which perfected security interest will, with certain
limited exceptions, be recognized in those jurisdictions that have ratified the
Convention on the International Recognition of Rights in Aircraft (the
"Convention").
The Corporation will be able, in certain circumstances, to re-register any
Aircraft in certain countries other than the United States. Unless otherwise
specified in the applicable Prospectus Supplement, prior to any such change in
the jurisdiction of registry, the Indenture Trustee and the related Owner
Participant must receive certain assurances, including that such other country
would provide substantially equivalent protection for the rights of owner
participants, lessors and lenders in similar transactions as is provided under
United States law, except that, for the purpose of such determination, rights
and remedies similar to those available under Section 1110 of the United States
Bankruptcy Code (the "Bankruptcy Code") will not be required in the absence of
restrictions of rights and remedies of lessors and secured parties that are
similar to those imposed by Sections 362, 363 and 1129 of the Bankruptcy Code.
While such assurances are intended to provide that the Corporation's or the
Owner Trustee's title to the Aircraft and the Indenture Trustee's Lien thereon
will be recognized in such jurisdiction and that the Indenture Trustee may
exercise the rights granted to it in the Indentures, there is no guarantee that,
even if such jurisdiction is a party to the Convention, as a practical matter,
the Indenture Trustee would be able to realize upon its security interest in the
case of an Indenture Event of Default.
Each Aircraft may also be operated by the Corporation or placed under
sublease or interchange arrangements with carriers domiciled outside of the
United States. The ability of the Indenture Trustee in the case of an Indenture
Event of Default, to realize upon its security interest in the Aircraft could be
adversely affected as a legal or practical matter if the Aircraft were located
outside the United States.
Payments and Limitations of Liability
All payments of principal of, premium, if any, and interest on the
Certificates of each Series will be made only from the assets subject to the
Lien of the applicable Indenture or the income and proceeds received by the
Indenture Trustee therefrom, including rent payable by the Corporation under the
related Lease. See "The Leases -- Terms and Rentals" below. The Corporation's
obligations to pay rent and to cause other payments to be made under each Lease
will be general obligations of the Corporation. The Certificates will not be
direct obligations of, and will not be guaranteed by, the Corporation.
Neither the Owner Trustee nor the Indenture Trustee (in their individual
capacities) will be liable to any Holder or, in the case of the Owner Trustee,
in its individual capacity, to the Corporation or the Indenture Trustee for any
amounts payable or for any liability under the Certificates or the Indentures,
except as provided in the Indentures and the Participation Agreements and except
for the gross negligence or willful misconduct of the Owner Trustee. (Indenture,
Section 2.05)
Merger, Consolidation and Transfer of Assets
With respect to each Series of Certificates, the Corporation will be
prohibited from consolidating with or merging into any other corporation under
circumstances in which the Corporation is not the surviving corporation, or from
transferring all or substantially all of its assets as an entirety to any other
corporation, unless, among other things:
(i) the successor or transferee corporation is a U.S. Citizen, an "air
carrier" within the meaning of and operating under the Transportation Code
and a corporation organized and existing under the laws of the United
States or a political subdivision thereof, and such corporation expressly
assumes all the obligations of the Corporation contained in the related
Indenture, the Participation Agreement, the Lease, the Purchase Agreement
and the Purchase Agreement Assignment;
(ii) immediately after giving effect to such consolidation, merger or
transfer, the successor or transferee is in compliance with all of the
terms and conditions of such documents; and
(iii) such consolidation, merger or transfer does not give rise to a
Lease Event of Default.
The Indentures contain no debt covenants or provisions that would afford
the Holders protection in the event of a highly leveraged transaction involving
the Corporation.
Events of Default, Notice and Waiver
The Indenture Events of Default under each Indenture for the Certificates
to be offered pursuant to this Prospectus and any Prospectus Supplement will be
set forth in such Prospectus Supplement. There will be no cross-default
provisions in the Indentures and consequently events resulting in an Indenture
Event of Default under any particular Indenture may not result in an Indenture
Event of Default occurring under any other Indenture.
Each Indenture will provide that the Indenture Trustee must, within 90 days
after the occurrence of any event actually known to a responsible officer of the
Indenture Trustee that is an Indenture Default thereunder, give notice thereof
to the Holders of outstanding Certificates issued thereunder. Under no
circumstances, however, may the Indenture Trustee give such notice until the
expiration of a period of 60 days from the occurrence of such Indenture Default.
The Indenture Trustee will be protected in withholding such notice, except in
the case of a default in the payment of the principal of, premium, if any, or
interest on any Certificate issued thereunder, if it in good faith determines
that the withholding of such notice is in the interests of the Holders of such
Certificates. (Indenture, Section 7.12)
The Holders of not less than 50% in aggregate principal amount of the
outstanding Certificates issued under an Indenture to which an Indenture Default
relates may on behalf of all Holders waive certain past Indenture Defaults
thereunder and their consequences. Consent from each Holder of an outstanding
Certificate issued under an Indenture, however, is required with respect to a
waiver of an Indenture Default in the payment of the principal of, premium, if
any, or interest on any Certificate then outstanding under such Indenture or in
respect of any covenant or provision of such Indenture or any other related
Operative Agreement that, pursuant to the provisions of such Indenture, cannot
be modified or amended without the consent of each Holder affected thereby.
(Indenture, Section 7.11)
Under each Indenture the Owner Trustee or the related Owner Participant
will have the right under certain circumstances, as specified in the applicable
Prospectus Supplement, to cure an Indenture Event of Default that results from
the occurrence of a Lease Event of Default under the related Lease. If the Owner
Trustee or the related Owner Participant exercises such cure right, the
Indenture Event of Default will be deemed to be cured.
Remedies
Each Indenture will provide that if an Indenture Event of Default has
occurred and is continuing thereunder, the Indenture Trustee may exercise
certain rights or remedies available to it under applicable law, including, if a
Lease Event of Default under the related Lease has occurred, one or more of the
remedies with respect to the Aircraft pledged under such Indenture afforded to
the Owner Trustee by the related Lease for Lease Events of Default thereunder.
The exercise by the Indenture Trustee of such rights or remedies in connection
with a Lease Event of Default will be subject, however, to the right, if any, of
the Owner Trustee or the related Owner Participant, as the case may be, to cure
certain defaults or to prepay the Certificates. The applicable Prospectus
Supplement will describe any limitation on the exercise of remedies by the
Indenture Trustee. Such remedies may be exercised by the Indenture Trustee to
the exclusion of the Owner Trustee and the Owner Participant. Any Aircraft sold
in the exercise of such remedies will be free and clear of any rights of those
parties, including the rights of the Corporation under the applicable Lease,
provided that no exercise of any remedies by the Indenture Trustee may affect
the rights of the Corporation under a Lease unless a Lease Event of Default
under such Lease has occurred and is continuing. (Indenture, Section 7.02(a))
It is impossible to predict the resale value for any Aircraft to be sold
upon the exercise of the Indenture Trustee's remedies under the related
Indenture. The market for aircraft, whether new or used, is and will be affected
by many factors including, among other things, the supply of similarly equipped
aircraft of the same make and model, the demand for such aircraft by air
carriers and the cost and availability of financing to potential purchasers of
such aircraft. Each of these factors, in turn, will be affected by various
circumstances including, among other things, current and anticipated demand for
passenger and cargo air services, the relative capacity of air carriers to
provide such services, the current and projected profitability of providing such
services, the economic condition of the domestic and international airline
industries and global economic and financial developments generally.
The marketability of a particular aircraft will be affected by factors such
as the reputation and actual performance record of the air carrier operating the
aircraft with respect to maintenance, the compliance of the aircraft with
federal noise and other environmental standards and the degree of technical and
other support available from the manufacturer of the aircraft. Since the market
for aircraft will fluctuate over time to reflect changes in these circumstances,
and because of the unique factors that would affect market value in a forced
disposition of an aircraft, there can be no assurance that the net proceeds
realized from the sale or other disposition of any Aircraft in the exercise of
such remedies will be sufficient to satisfy in full amounts due and payable on
the related Certificates.
If an Indenture Event of Default occurs under an Indenture as a result of
certain specified events of bankruptcy, insolvency or reorganization of the
Owner Trustee, the related Owner Participant or the Corporation, then the unpaid
principal of all outstanding Certificates issued under such Indenture, together
with interest accrued but unpaid thereon and all other amounts due thereunder
and under such Indenture, immediately and without further act, will become due
and payable. If any other Indenture Event of Default occurs and is continuing
under an Indenture, the Indenture Trustee, acting on its own or at the direction
of the Holders of not less than 25% in aggregate principal amount of the
outstanding Certificates of each Series issued under such Indenture, may declare
the principal of all such Certificates immediately due and payable, together
with interest accrued but unpaid thereon and all other amounts due thereunder
and under such Indenture, by written notice or notices to the Owner Trustee and
the Corporation.
The Holders of not less than 50% in aggregate principal amount of the
outstanding Certificates of such Series may rescind any such declaration by the
Indenture Trustee or by such Holders at any time prior to the sale or
disposition of the property subject to the Lien of the Indenture provided there
has been paid to or deposited with the Indenture Trustee an amount sufficient to
pay:
(a) all overdue installments of interest on all such Certificates
(together, to the extent permitted by law, with interest on such overdue
installments of interest);
(b) the principal on any Certificates that has become due otherwise than by
such declaration;
(c) all amounts paid or advanced by the Indenture Trustee under such
Indenture; and
(d) certain other expenses
or all Indenture Events of Default under such Indenture (other than the
non-payment of principal that has become due solely because of such declaration)
have been cured or waived. (Indenture, Sections 7.02(b) and (c))
In the event of the bankruptcy of the Owner Participant, it is possible
that, notwithstanding the fact that the applicable Aircraft will be owned by the
Owner Trustee in trust, such Aircraft and the related Lease and Certificates
might become part of such bankruptcy proceeding. In such event, payments under
such Lease or Certificates might be interrupted and the ability of the Indenture
Trustee to exercise its remedies under such Indenture might be restricted,
although the Indenture Trustee would retain its status as a secured creditor in
respect of such Lease and Aircraft.
The right of any Holder of a Certificate to institute an action for any
remedy under the Indenture pursuant to which such Certificate was issued
(including the right to enforce payment of the principal of, premium, if any,
and interest on such Certificates when due) will be subject to certain
conditions precedent, including a written request to the Indenture Trustee by
the Holders of not less than 25% in aggregate principal amount of outstanding
Certificates issued pursuant to such Indenture to take action, and an offer to
the Indenture Trustee of reasonable indemnification against costs, expenses and
liabilities incurred by it in doing so. (Indenture, Sections 7.08 and 7.09)
The Holders of not less than 50% in aggregate principal amount of
outstanding Certificates of each Series may direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee or
of exercising any trust or power conferred on the Indenture Trustee but, in such
event, the Indenture Trustee is entitled to be indemnified by the Holders of
such Series before proceeding to act and the Indenture Trustee may not be held
liable for any such action taken in good faith. (Indenture, Section 7.10 and
Article XI)
Section 1110 of the Bankruptcy Code provides that the right of lessors,
conditional vendors and holders of security interests with respect to aircraft
capable of carrying ten or more individuals or 6,000 pounds or more of cargo
used by air carriers operating under certificates issued by the Secretary of
Transportation under Chapter 447 of the Transportation Code to take possession
of such aircraft in compliance with the provisions of the lease, conditional
sale contract or security agreement, as the case may be, is not affected by:
(a) the automatic stay provision of the Bankruptcy Code, which provision
enjoins the taking of any action against a debtor by a creditor;
(b) the provision of the Bankruptcy Code allowing the trustee in
reorganization or the debtor-in-possession to use, sell or lease property of the
debtor;
(c) the confirmation of a plan by the bankruptcy court; and
(d) any power of the bankruptcy court to enjoin a repossession.
Section 1110 provides, however, that the right of a lessor, conditional
vendor or holder of a security interest to take possession of an aircraft in the
event of a default may not be exercised for 60 days following the date of
commencement of the reorganization proceedings (unless specifically permitted by
the bankruptcy court) and may not be exercised at all if, within such 60-day
period, the trustee in reorganization or the debtor-in-possession agrees to
perform the debtor's obligations that become due on or after such date and cures
all existing monetary defaults. The Prospectus Supplement for each offering will
discuss the availability of the benefits of Section 1110 of the Bankruptcy Code
with respect to the related Aircraft.
If an Indenture Event of Default occurs and is continuing, any amounts held
or received by the Indenture Trustee may be applied to reimburse the Indenture
Trustee for any tax, expense, charge or other loss incurred by it and to pay any
other amounts due the Indenture Trustee prior to any payments to Holders of the
Certificates with respect to which such Indenture Event of Default relates.
(Indenture, Sections 5.03 and 9.11)
Modification of Agreements
The provisions of the Indenture, the Lease, the Participation Agreement and
the Trust Agreement with respect to any Series may be amended or modified,
except to the extent indicated below, with the consent of the Holders of more
than 50% in aggregate principal amount of outstanding Certificates of such
Series. (Indenture, Section 13.02)
The following changes may be made to the Indenture pursuant to which a
Certificate was issued or the related Lease or Participation Agreement only with
the consent of all Holders of the outstanding Certificates affected thereby:
(a) reductions in the principal amount of, or premium, if any, or interest
payment payable on such Certificate or changes in the date on which any such
principal, premium, if any, or interest payment is due and payable or which
otherwise affect the terms of payment of such Certificate;
(b) reductions in, and modifications or amendments to, any indemnities
payable by the related Owner Participant in favor of such Holder;
(c) reductions in the amount of any rent payable by the Corporation below
the amount required to pay all principal of, premium, if any, and interest on
all such Certificates as and when due and payable;
(d) creations of any security interest with respect to the property subject
to the Lien of such Indenture ranking prior to or on a parity with the security
interest created by such Indenture or deprivation to the Holder of any such
Certificate of the benefit of the Lien of such Indenture upon the property
subject thereto; or
(e) reductions in the percentage of the aggregate principal amount of such
Certificates necessary to modify or amend any provision of such Indenture or to
waive compliance therewith. (Indenture, Article XIII)
Certain provisions of the Indentures, the Leases, the Participation
Agreements and the Trust Agreements may be modified by the Owner Trustee, the
Lessee and the Indenture Trustee without the consent of the Holders of the
outstanding Certificates related thereto. (Indenture, Section 13.01)
The Indenture Trustee
Unless otherwise indicated in the applicable Prospectus Supplement,
First Security Bank, National Association will be the Indenture Trustee
under each Indenture. First Security Bank, National Association acts as
trustee under other indentures with respect to other indebtedness of the
Corporation, and the Corporation from time to time borrows from, and
and maintains deposit accounts with, First Security Bank, National
Association and its affiliates.
In accordance with the Trust Indenture Act of 1939, as amended, each
Indenture will be deemed to provide that in the case of any Indenture Event of
Default thereunder, the Indenture Trustee shall exercise such of the rights and
powers vested in it by such Indenture and use the same degree of care and skill
in its exercise, as a prudent person would exercise or use under the
circumstances in the conduct of its own affairs. Generally, the Indenture
Trustee will not be liable for any error of judgment made in good faith, unless
the Indenture Trustee was negligent in ascertaining the pertinent facts, or for
any action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of not less than 50% in aggregate principal amount
of the outstanding Certificates issued under such Indenture. Subject to such
provisions, the Indenture Trustee will be under no obligation to exercise any of
its rights or powers under such Indenture at the request of any Holders of
Certificates issued thereunder unless they shall have offered to the Indenture
Trustee reasonable security or indemnity. Each Indenture will provide that the
Indenture Trustee and the Owner Trustee may acquire and hold Certificates issued
thereunder and, subject to certain conditions, the Indenture Trustee may
otherwise deal with the Owner Trustee with the same rights it would have if it
were not the Indenture Trustee. (Indenture, Sections 9.02, 9.03 and 9.05)
The Indenture Trustee may resign as trustee under any Indenture at any
time. If the Indenture Trustee ceases to be eligible to continue as Indenture
Trustee under an Indenture or becomes incapable of acting as Indenture Trustee
or becomes insolvent, the Owner Trustee may remove the Indenture Trustee. Any
Holder of a related Certificate who has been a Holder for at least six months
may, on behalf of such Holder and all others similarly situated, petition any
court of competent jurisdiction for the removal of the Indenture Trustee and the
appointment of a successor trustee. In addition, the Indenture Trustee under any
Indenture may be removed without cause by the Holders of more than 50% in
aggregate unpaid principal amount of the related outstanding Certificates or by
the Owner Trustee, with the consent of the Corporation and such Holders.
(Indenture, Section 12.02)
In the case of the resignation or removal of the Indenture Trustee under an
Indenture, the Holders of more than 50% in aggregate unpaid principal amount of
the related outstanding Certificates, or the Owner Trustee, with the consent of
the Corporation and such Holders, may appoint a successor Indenture Trustee. The
resignation or removal of the Indenture Trustee under any Indenture and the
appointment of the successor trustee under such Indenture does not become
effective until acceptance of the appointment by the successor trustee.
(Indenture, Section 12.02) Pursuant to such resignation and successor trustee
provisions, it is possible that a different trustee could be appointed to act as
the successor trustee under each Indenture. All references in this Prospectus to
the Indenture Trustee are to the trustee acting in such capacity under each of
the Indentures and should be read to take into account the possibility that each
of the Indentures could have a different successor trustee in the event of such
a resignation or removal.
The Leases
Terms and Rentals. Each Aircraft will be leased separately by the related
Owner Trustee to the Corporation for a term commencing on the date of the
delivery of the related Aircraft to the Owner Trustee and expiring on a date not
earlier than the latest maturity date of the Certificates issued with respect to
such Aircraft, unless previously terminated or extended, as permitted by the
related Lease. The scheduled rental payments by the Corporation under each Lease
will be payable on the dates specified in the applicable Prospectus Supplement.
The respective payments will be assigned under the related Indenture by the
Owner Trustee to the Indenture Trustee to provide the funds necessary to make
payments of principal and interest due from such Owner Trustee on the
Certificates issued under such Indenture. Although in certain cases the
scheduled rental payments under the Leases may be adjusted, under no
circumstances will such payments that the Corporation will be unconditionally
obligated to make or cause to be made under any Lease be less than the scheduled
payments of principal of and interest on the Certificates issued under the
Indenture relating to such Lease. See "Payments and Limitations of Liability"
above. Scheduled payments of principal of and interest on the Certificates will
be made on the dates specified in the applicable Prospectus Supplement.
Net Lease. The Corporation's obligations under each Lease in respect of the
related Aircraft will be those of a lessee under a "net lease." Accordingly, the
Corporation will be obligated to pay all costs of operating the Aircraft and, at
its expense, to maintain, service, repair and overhaul the Aircraft so as to
keep the Aircraft in good condition, ordinary wear and tear excepted, and to
enable the airworthiness certification thereof to be maintained in good standing
at all times under the Transportation Code or, under certain circumstances,
under the applicable requirements of the aeronautical authority of another
country of registry. If, however, the Aircraft loses its airworthiness
certification and such loss is curable and the Corporation, using its reasonable
best efforts, undertakes such cure promptly, diligently and continuously, then
the Corporation will not be in default with respect to such obligation.
Generally, the Corporation will be obligated to replace or cause to be
replaced all parts that may from time to time be incorporated or installed in or
attached to any Aircraft (including in or on any engine) and that may become
worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use. The Corporation will have the right to make
other alterations, modifications and additions to an Aircraft so long as such
alterations, modifications or additions do not materially decrease the value or
utility of such Aircraft or impair its condition or airworthiness below its
value, utility, condition and airworthiness immediately prior to such
alteration, modification or addition, assuming that such Aircraft was then in
the condition and airworthiness required by the related Lease. Also, in certain
circumstances, the Corporation will be permitted to remove parts (without
replacement) from an Aircraft or any engine (and therefore from the Lien of the
applicable Indenture) if the Corporation deems such parts to be obsolete or no
longer suitable or appropriate for use thereon so long as such removals do not
decrease the utility, condition or airworthiness of such Aircraft or any such
engine, although the value of such Aircraft or any such engine may be reduced by
such removal. The applicable Prospectus Supplement will contain a description of
certain limitations, if any, applicable to the provisions described above.
Insurance. Unless otherwise indicated in the applicable Prospectus
Supplement, the Corporation will be obligated to carry insurance with insurers
of recognized responsibility with respect to each Aircraft, at its own cost and
expense, in such amounts, against such risks, with such deductibles or
retentions (i) in the case of hull insurance, as the Corporation customarily
maintains with respect to other aircraft in the Corporation's fleet of the same
type and model and operating on the same routes as the respective Aircraft and
(ii) in the case of liability insurance, as is usually carried by similar
corporations engaged in the same or similar business and similarly situated as
the Corporation, owning or operating aircraft similar to the Aircraft. The
Corporation will be permitted to maintain coverage below certain stipulated
values and may be permitted to self-insure (including by way of deductibles and
retentions) in certain circumstances, subject to certain limits. Therefore,
there is no assurance that any insurance will be carried in the future or, if it
is carried, as to the amount of such insurance.
The Corporation and any permitted sublessee of an Aircraft will be named as
insured parties under all insurance policies required by the related Lease. The
Indenture Trustee, Owner Trustee and related Owner Participant will be named
additional insureds, which will afford each of them the rights but not the
obligations of an additional insured. Unless otherwise specified in the
applicable Prospectus Supplement, liability insurance proceeds will be
distributed to the respective parties as their interests may appear and hull
insurance proceeds in excess of certain specified amounts will be distributed to
the Indenture Trustee. The applicable Prospectus Supplement will contain a
description of certain limitations, if any, applicable to the provisions
described in this paragraph.
Lease Events of Default; Remedies. The applicable Prospectus Supplement
will describe the Lease Events of Default under the related Leases, the remedies
that the Owner Trustee may exercise with respect to the related Aircraft, and
other provisions relating to the occurrence of a Lease Event of Default and the
exercise of remedies.
The Participation Agreements
The Corporation will be required to indemnify each Owner Participant, the
Owner Trustee, the Indenture Trustee and certain parties affiliated with the
foregoing (but not including Holders) for certain liabilities, losses, fees and
expenses and for certain other matters arising out of the transactions described
herein or relating to the applicable Aircraft or the use thereof. In addition,
under certain circumstances the Corporation will be required to indemnify such
persons against certain taxes, levies, duties, withholdings and for certain
other matters relating to such transactions or the applicable Aircraft.
Subject to certain restrictions and unless otherwise provided in the
related Prospectus Supplement, each Owner Participant may convey all of its
interest in the related Owner Trust. Davis Polk & Wardwell has advised the
Corporation based on law in effect on the date hereof that an Owner
Participant's conveyance of its right, title and interest in the related Owner
Trust will not constitute a taxable event to the Holders of the related
Certificates. However, if so provided in the applicable Prospectus Supplement,
in certain limited instances the Corporation may assume an Owner Trust's
obligations under the related Certificates on a full recourse basis. In this
event, Holders will recognize gain or loss on the related Certificates for
federal income tax purposes.
ERISA CONSIDERATIONS
Unless otherwise indicated in the applicable Prospectus Supplement,
Certificates may not be purchased by, or with the assets of, any employee
benefit plan subject to Title I of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or individual retirement account or plan
subject to Section 4975 of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code"). Certain governmental plans and non-electing
church plans, however, are not subject to Title I of ERISA or Section 4975
of the Internal Revenue Code, and, therefore, may purchase the
Certificates.
PLAN OF DISTRIBUTION
The Certificates may be sold to or through underwriters, directly to other
purchasers or through agents.
The distribution of the Certificates may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Certificates, underwriters or agents may
receive compensation from the Corporation or from purchasers of Certificates for
whom they may act as agents in the form of discounts, concessions or
commissions. Underwriters may sell Certificates to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters or commissions from the purchasers for whom
they may act as agents. Underwriters, dealers and agents that participate in the
distribution of Certificates may be deemed to be underwriters, and any discounts
or commissions received by them from the Corporation and any profit on the
resale of Certificates by them may be deemed to be underwriting discounts and
commissions, under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from the Corporation will be
described, in the applicable Prospectus Supplement.
Offers to purchase Certificates may be solicited directly and the sale
thereof may be made directly to institutional investors or others, who may be
deemed to be underwriters within the meaning of the Securities Act with respect
to any resale thereof. The terms of any such sales will be described in the
Prospectus Supplement relating thereto.
Under agreements which may be entered into by the Corporation, underwriters
and agents who participate in the distribution of Certificates may be entitled
to indemnification by the Corporation against certain liabilities, including
liabilities under the Securities Act.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporation does not intend to apply for the listing of any Series of
Certificates on a national securities exchange. If the Certificates of any
Series are sold to or through underwriters, the underwriters may make a market
in such Certificates, as permitted by applicable laws and regulations. No
underwriter would be obligated, however, to make a market in such Certificates,
and any such market-making could be discontinued at any time at the sole
discretion of the underwriters. Accordingly, no assurance can be given as to the
liquidity of, or trading markets for, the Certificates of any Series.
Certain of the underwriters or agents and their associates may be customers
of, engage in transactions with, and perform services for, the Corporation in
the ordinary course of business.
LEGAL MATTERS
Unless otherwise indicated in the applicable Prospectus Supplement, the
legality of the Certificates offered hereby will be passed upon for the
Corporation by Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York
10017, and by counsel for any agents, dealers or underwriters ("Underwriters'
Counsel"). Unless otherwise indicated in the applicable Prospectus Supplement,
both Davis Polk & Wardwell and Underwriters' Counsel may rely on the opinion of
counsel for the Owner Trustee, individually and as Owner Trustee, as to matters
relating to the authorization, execution and delivery of each Indenture and of
the related Series of Certificates by the Owner Trustee, and of Karen M.
Clayborne, Senior Vice President and General Counsel of the Corporation, as to
the Corporation's authorization, execution and delivery of the Indentures. At
February 28, 1998, Ms. Clayborne owned 2,000 shares of FDX Corporation's common
stock and had been granted options to purchase 32,500 shares of FDX
Corporation's common stock. Of the options granted, 6,800 were vested at such
date.
EXPERTS
The consolidated financial statements and schedules of the Corporation
included or incorporated by reference in the Corporation's Annual Report on Form
10-K for the year ended May 31, 1997 and incorporated by reference herein, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said reports.
With respect to the unaudited interim financial information for the
quarters ended August 31, 1997 and November 30, 1997, included in the
Corporation's Quarterly Reports on Form 10-Q for such periods, which are
incorporated by reference in this Prospectus, Arthur Andersen LLP has applied
limited procedures in accordance with professional standards for a review of
such information. However, their separate reports thereon state that they did
not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their reports on that
information should be restricted in light of the limited nature of the review
procedures applied. In addition, the accountants are not subject to the
liability provisions of Section 11 of the Securities Act for their reports on
the unaudited interim financial information because those reports are not
"reports" or a "part" of the Registration Statement, of which this Prospectus is
a part, prepared or certified by the accountants within the meaning of Sections
7 and 11 of the Securities Act.
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No dealer, salesperson or other individual has been authorized to give any
information or to make any representations not contained in this Prospectus in
connection with the offering covered by this Prospectus. If given or made, such
information or representation must not be relied upon as having been authorized
by the Corporation or the Underwriters. This Prospectus does not constitute an
offer to sell, or the solicitation of an offer to buy, the Certificates in any
jurisdiction where, or to any person to whom, it is unlawful to make such offer
or solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create an implication that there has
not been any change in the facts set forth in this Prospectus or in the affairs
of the Corporation since the date hereof.
$1,000,000,000
[COMPANY LOGO]
$1,000,000,000
Equipment Trust Certificates
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PROSPECTUS
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April __, 1998
TABLE OF CONTENTS
Page
Available Information...............................2
Incorporation of Certain Documents by
Reference......................................2
Federal Express Corporation.........................3
Ratio of Earnings to Fixed Charges..................3
Use of Proceeds.....................................3
Outline of Leveraged Lease Transactions.............4
Description of the Certificates.....................4
ERISA Considerations...............................14
Plan of Distribution...............................14
Legal Matters......................................15
Experts............................................15
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to the registration statement or qualification under the securities laws of any
such state.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED APRIL 3, 1998
PROSPECTUS
[COMPANY LOGO]
PASS THROUGH TRUSTS
PASS THROUGH CERTIFICATES
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Up to $1,000,000,000 aggregate amount of Pass Through Certificates
(the "Pass Through Certificates") may be offered for sale from time to time
pursuant to this Prospectus and one or more Prospectus Supplements. The
Pass Through Certificates may be offered in one or more Series in amounts,
at prices and on terms to be determined at the time of sale. For each
Series of Pass Through Certificates offered pursuant to this Prospectus and
a Prospectus Supplement, a separate Pass Through Trust will be formed
pursuant to the Pass Through Trust Agreement dated as of May 1, 1997 (the
"Pass Through Agreement") between Federal Express Corporation (the
"Corporation") and First Security Bank, National Association, and the
supplements thereto relating to such Pass Through Trust (a "Series
Supplement") between the Corporation and the trustee named in such Series
Supplements, not in its individual capacity but solely as the Pass Through
Trustee with respect to such Pass Through Trust. Each Pass Through
Certificate in a Series will evidence a fractional undivided interest in
the related Pass Through Trust and, except as may be contained in any
intercreditor agreement, will have no rights, benefits or interest in
respect of any other Pass Through Trust or the Trust Property (as defined
below) held in any other such Pass Through Trust.
The Trust Property of each Pass Through Trust will consist of (a) equipment
purchase certificates issued with recourse to the Corporation (the "Owned
Aircraft Certificates") or (b) equipment trust certificates issued as
nonrecourse obligations by certain Owner Trustees, each acting not in its
individual capacity but solely as the Owner Trustee of a separate Owner Trust,
in connection with separate leveraged lease transactions (the "Leased Aircraft
Certificates" and, together with the Owned Aircraft Certificates, the "Equipment
Certificates"). The Owned Aircraft Certificates will be issued to finance or
refinance all or a portion of the purchase price of each of one or more aircraft
that have been or will be purchased and owned by the Corporation (the "Owned
Aircraft"). The Leased Aircraft Certificates will be issued to finance or
refinance a portion of the payment by each such Owner Trustee of the purchase
price for a specified aircraft which has been or will be leased to the
Corporation (the "Leased Aircraft" and, together with the Owned Aircraft, the
"Aircraft"). The Prospectus Supplement relating to each offering will describe
certain terms of the Pass Through Certificates offered thereby, the respective
Pass Through Trusts, the Equipment Certificates to be purchased by such Pass
Through Trusts, the leveraged lease transactions, if any, relating thereto and
the Aircraft relating to such Equipment Certificates.
For each Aircraft, the related Owner Trustee or the Corporation, as the
case may be, may issue one or more Equipment Certificates, each of which may
have a different interest rate, final maturity date and ranking in respect of
priority of payment. For each Series of Pass Through Certificates, the Pass
Through Trustee will purchase one or more Equipment Certificates issued with
respect to each of one or more Aircraft such that all of the Equipment
Certificates held in the related Pass Through Trust will have identical ranking
and identical interest rates, in each case equal to the rate applicable to the
Pass Through Certificates issued by such Pass Through Trust, and such that the
latest maturity date for such Equipment Certificates will occur on or before the
final distribution date for such Pass Through Certificates.
(Continued on following page)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is April __, 1998.
(continued from previous page)
The Owned Aircraft Certificates issued with respect to each Owned Aircraft
will be secured by a security interest in such Owned Aircraft and will be direct
obligations of the Corporation. The Leased Aircraft Certificates issued with
respect to each Leased Aircraft, except during the Pre-Funding Period, if any,
will be secured by a security interest in such Leased Aircraft and by the Lease
relating thereto, including the right to receive rent payable by the Corporation
under such Lease. Although none of the Leased Aircraft Certificates held in the
respective Pass Through Trusts will be obligations of, or guaranteed by, the
Corporation, the amounts payable by the Corporation under the Lease of each
Leased Aircraft will be sufficient to pay in full when due all principal of and
interest on the Leased Aircraft Certificates relating to such Leased Aircraft,
except as described under "Description of the Equipment Certificates -- General"
relating to any Pre-Funding Period with respect to such Leased Aircraft.
Unless otherwise specified in the applicable Prospectus Supplement, during
any Pre-Funding Period, the related Leased Aircraft Certificates will be secured
by a collateral account funded by the net proceeds of the sale of such Leased
Aircraft Certificates to the Pass Through Trustee and, if specified in the
applicable Prospectus Supplement, by other security (which may include a letter
of credit). Funds in such collateral account, together with any such other
security will be available to pay any principal due and interest accrued on such
Leased Aircraft Certificates during such Pre-Funding Period, as well as to fund
any mandatory prepayment of such Leased Aircraft Certificates during such
Pre-Funding Period.
Interest paid on the Equipment Certificates held in each Pass Through Trust
will be passed through to the registered holders of the Pass Through
Certificates for such Pass Through Trust (for each Pass Through Trust, the
"Certificateholders") on the dates and at the rate per annum set forth in the
Prospectus Supplement relating to such Pass Through Certificates until the final
distribution date for such Pass Through Trust. Principal paid on the Equipment
Certificates held in each Pass Through Trust will be passed through to the
Certificateholders in scheduled amounts on the dates set forth in the Prospectus
Supplement relating to such Pass Through Certificates until the final
distribution date for such Pass Through Trust.
The Pass Through Certificates will be issued in registered form only and,
unless otherwise specified in the applicable Prospectus Supplement, will be
issued in accordance with a book-entry system.
The Pass Through Certificates represent interests in the related Pass
Through Trust only and all payments and distributions will be made only from the
property of such Pass Through Trust. The Pass Through Certificates do not
represent an interest in, or obligation of, the Corporation.
The Pass Through Certificates may be sold to or through underwriters or
directly to other purchasers or through agents. The Prospectus Supplement
relating to each offering will set forth the names of any underwriters, dealers
or agents involved in the sale of the Pass Through Certificates in connection
with which this Prospectus is being delivered, the amounts, if any, to be
purchased by underwriters and the compensation, if any, of such underwriters or
agents.
Prior to their issuance, there will have been no market for the Pass
Through Certificates of any Series and there can be no assurance that one will
develop. Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporation does not intend to apply for the listing of any Series of Pass
Through Certificates on a national securities exchange. See "Plan of
Distribution."
This Prospectus may not be used to consummate sales of any Pass Through
Certificates unless accompanied by the Prospectus Supplement applicable to the
Pass Through Certificates being sold.
AVAILABLE INFORMATION
Federal Express Corporation (the "Corporation") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy and information statements and other information filed by the
Corporation with the Commission can be inspected, and copies may be obtained at
prescribed rates, at the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as at the following Regional
Offices of the Commission: Chicago Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and New York Regional Office, 7 World
Trade Center, New York, New York 10048. Such material can also be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov. and inspected and copied at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a registration statement on Form S-3
(together with all amendments and exhibits, herein referred to as the
"Registration Statement") filed by the Corporation under the Securities Act of
1933, as amended (the "Securities Act"). This Prospectus does not contain all of
the information included in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
Reference is made to such Registration Statement and to the exhibits relating
thereto for further information with respect to the Corporation and the
securities offered hereby.
REPORTS TO PASS THROUGH CERTIFICATEHOLDERS
The Pass Through Trustee under each Pass Through Trust will provide the
Certificateholders of each Pass Through Trust with certain periodic statements
concerning the distributions made from such Pass Through Trust. See "Description
of the Pass Through Certificates -- Statements to Certificateholders."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission in accordance with the
provisions of the Exchange Act are incorporated herein by reference and made a
part hereof:
1. The Corporation's Annual Report on Form 10-K for the fiscal year
ended May 31, 1997 filed August 8, 1997.
2. The Corporation's Quarterly Reports on Form 10-Q for the fiscal
quarters ended August 31, 1997 and November 30, 1997, respectively, filed
October 14, 1997 and January 13, 1998, respectively.
3. The Corporation's Current Reports on Form 8-K dated May 22, June 11,
June 30, July 7, August 8, September 30 and October 6, 1997, and February
26, 1998, respectively, filed June 2, June 19, July 7, July 9, August 14,
October 8 and October 8, 1997, and March 6, 1998, respectively.
All documents filed by the Corporation pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and before the
termination of the offering made by this Prospectus shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein, or contained in this Prospectus, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Corporation will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any or all documents incorporated by reference
in this Prospectus, without exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Requests for such
copies should be directed to: Elizabeth R. Allen, Investor Relations, FDX
Corporation, by mail at Box 727, Memphis, Tennessee 38194-1854 or by telephone
at (901) 395-3478.
FEDERAL EXPRESS CORPORATION
The Corporation is a wholly-owned subsidiary of FDX Corporation. The
Corporation 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. Corporate headquarters are located at 2005 Corporate Avenue,
Memphis, Tennessee 38132, telephone (901) 369-3600.
RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
Nine Months
Ended
Year Ended May 31, February 28,
-------------------------------- ------------
1993 1994 1995 1996 1997 1997 1998
Ratio of Earnings to ---- ---- ---- ---- ---- ---- ----
Fixed Charges(a) ........... 1.4x 1.7x 2.0x 1.9x 2.0x 1.9x 2.0x
- -------------------
(a) Earnings included in the calculation of the ratio of earnings to fixed
charges represent income before income taxes plus fixed charges (other than
capitalized interest). Fixed charges include interest expense, capitalized
interest, amortization of debt issuance costs and a portion of rent expense
representative of interest.
OUTLINE OF PASS THROUGH TRUST STRUCTURE
For each Series of Pass Through Certificates (as such terms are defined
below) offered pursuant to this Prospectus and a related Prospectus Supplement,
a separate pass through trust (a "Pass Through Trust") will be formed pursuant
to a supplemental agreement (a "Series Supplement") between the Corporation and
the trustee named in such Series Supplement, not in its individual capacity but
solely as pass through trustee (the "Pass Through Trustee"), in accordance with
the Pass Through Trust Agreement, dated as of May 1, 1997 (the "Pass Through
Agreement") between the Corporation and the Pass Through Trustee, for the
benefit of the registered holders (the "Certificateholders") of the series (a
"Series") of certificates (the "Pass Through Certificates") evidencing
fractional undivided interests in such Pass Through Trust. The property held in
each Pass Through Trust (the "Trust Property") will consist of (a) equipment
purchase certificates issued in connection with the purchase by the Corporation
of one or more aircraft (the "Owned Aircraft Certificates") or (b) equipment
trust certificates issued in connection with one or more leveraged lease
transactions (the "Leased Aircraft Certificates" and, together with the Owned
Aircraft Certificates, the "Equipment Certificates"), as specified in the
applicable Prospectus Supplement.
As more fully described below under "Use of Proceeds," in connection with
each purchase or leveraged lease transaction, one or more Equipment Certificates
may be issued, each of which may have different interest rates and final
maturity dates and rankings in respect of priority of payment. Concurrently with
the execution and delivery of each Series Supplement, the Pass Through Trustee,
on behalf of the related Pass Through Trust, will enter into one or more
participation agreements (each, a "Participation Agreement") pursuant to which
it will, among other things, purchase one or more Owned Aircraft Certificates or
Leased Aircraft Certificates, such that the Equipment Certificates that
constitute the property of such Pass Through Trust will have identical interest
rates, in each case equal to the rate applicable to the Pass Through
Certificates issued by such Pass Through Trust, and identical priority of
payment relative to each of the other Equipment Certificates held by such Pass
Through Trust. The latest maturity date for such Equipment Certificates will
occur on or before the final distribution date applicable to such Pass Through
Certificates.
For each Pass Through Trust, the aggregate amount of the related Series of
Pass Through Certificates will equal the aggregate principal amount of the
Equipment Certificates constituting the Trust Property of such Pass Through
Trust. The Pass Through Trustee will distribute the amount of payments of
principal, premium, if any, and interest, received by it as holder of the
Equipment Certificates to the Certificateholders of the Pass Through Trust in
which such Equipment Certificates are held. See "Description of the Pass Through
Certificates" and "Description of the Equipment Certificates."
USE OF PROCEEDS
Each Series of Pass Through Certificates offered pursuant to this
Prospectus and a related Prospectus Supplement will be issued to facilitate (a)
the financing of the aggregate principal amount of debt to be issued, or the
refinancing of the aggregate principal amount of the debt previously issued, by
the Corporation with respect to each of the aircraft that have been or will be
purchased and owned by the Corporation (the "Owned Aircraft"), as specified in
the applicable Prospectus Supplement, or (b) the financing or refinancing of the
debt portion and, in certain cases, refinancing some of the equity portion of
one or more separate leveraged lease transactions entered into or to be entered
into by the Corporation, as lessee, with respect to each of the aircraft that
have been or will be leased by the Corporation (the "Leased Aircraft" and,
together with the Owned Aircraft, the "Aircraft"), as specified in the
applicable Prospectus Supplement. Each Prospectus Supplement will specify the
type and model of each Aircraft relating to the Pass Through Certificates
offered thereby, the engines with which such Aircraft is equipped and whether
such Aircraft was or will be delivered new by the manufacturer to the
Corporation or the Owner Trustee, as the case may be, or whether such Aircraft
is already in use in the Corporation's fleet.
The proceeds from the sale of such Pass Through Certificates will be
used by the Pass Through Trustee on behalf of the related Pass Through
Trust (a) to purchase Owned Aircraft Certificates or (b) to purchase Leased
Aircraft Certificates. The Owned Aircraft Certificates will be issued with
recourse to the Corporation to finance or refinance all or a portion of the
purchase price (as specified in the applicable Prospectus Supplement) for
one or more Owned Aircraft which have been or will be purchased and owned
by the Corporation. The Leased Aircraft Certificates will be issued as
nonrecourse obligations by State Street Bank and Trust Company of
Connecticut, National Association, or another bank or trust company, not in
its individual capacity but solely as the owner trustee (the "Owner
Trustee") of separate owner trusts (each, an "Owner Trust" created pursuant
to a separate "Trust Agreement") for the benefit of the owner participant
named therein (each, an "Owner Participant"), in connection with one or
more leveraged lease transactions, in each case to finance or refinance not
more than, unless otherwise specified in such Prospectus Supplement, 80% of
the purchase price paid or to be paid by the Owner Trustee for a Leased
Aircraft which has been or will be leased by the related Owner Trustee to
the Corporation.
To the extent that any proceeds from the sale of the Pass Through
Certificates for any Pass Through Trust have not been applied by the Pass
Through Trustee by the date specified in the applicable Prospectus Supplement to
the purchase of the Equipment Certificates that were contemplated to be held in
such Pass Through Trust, such proceeds will be distributed on the date specified
in such Prospectus Supplement to the related Certificateholders together with
interest accrued thereon, but without premium. See "Description of the Pass
Through Certificates -- Special Payment Upon Unavailability of Trust Property."
Unless otherwise specified in the applicable Prospectus Supplement, if, for
any Leased Aircraft, under the circumstances discussed below in "Description of
Equipment Certificates -- Delayed Lease Commencement" the proceeds from the sale
of the related Leased Aircraft Certificates to the applicable Pass Through
Trusts are not applied by the Owner Trustee to pay the purchase price for such
Leased Aircraft on the date of the purchase of such Leased Aircraft Certificates
by such Pass Through Trusts, such proceeds, after deducting certain expenses of
the Pass Through Certificate offering, will be deposited by the Owner Trustee
into a Collateral Account (as defined below). Such Collateral Account, together
with the other security, if any, pledged under the related Indenture (see
"Description of the Equipment Certificates -- Security" below), will secure such
Leased Aircraft Certificates during the related Pre-Funding Period (as defined
below) and will be available to make scheduled payments of principal, if any,
and interest accrued on such Leased Aircraft Certificates during the Pre-Funding
Period. If the Lease related to such Leased Aircraft does not commence by the
Cut-off Date specified in the applicable Prospectus Supplement or an event of
loss occurs with respect to such Leased Aircraft during the Pre-Funding Period,
funds in such Collateral Account, together with such other security will be
available to prepay such Leased Aircraft Certificates as described in such
Prospectus Supplement or will be applied to finance the aggregate principal
amount of the debt to be issued by the Corporation in connection with the
acquisition of such Aircraft by the Corporation so that such Aircraft becomes an
Owned Aircraft. See "Description of the Equipment Certificates -- Delayed Lease
Commencement" and "--Mandatory Prepayment During the Pre-Funding Period."
For each Leased Aircraft, the related Leased Aircraft Certificates have
been or will be issued by the Owner Trustee and authenticated by the trustee
named in such trust indenture and security agreement, as indenture trustee (the
"Indenture Trustee") under a separate trust indenture and security agreement
(each, a "Leased Aircraft Indenture") between the Owner Trustee and the
Indenture Trustee. Each Owner Participant will have provided or will provide,
from sources other than the related Leased Aircraft Certificates, at least,
unless otherwise specified in the applicable Prospectus Supplement, 20% of the
purchase price for the related Leased Aircraft. No Owner Participant, however,
will be personally liable for any amount payable under the related Leased
Aircraft Indenture or the Leased Aircraft Certificates issued thereunder. For
each Owned Aircraft, the related Owned Aircraft Certificates have been or will
be issued under a separate trust indenture and security agreement (each, an
"Owned Aircraft Indenture," and together with any Leased Aircraft Indentures,
the "Indentures") between the Indenture Trustee and the Corporation. The Owned
Aircraft Certificates will be direct obligations of the Corporation.
DIAGRAM OF PAYMENTS
The following diagram illustrates certain aspects of the payment flows in
the Pass Through Trust structure (1) for a possible transaction for Leased
Aircraft among the Corporation, the Owner Trustee, the related Owner
Participant, the Indenture Trustee, the Pass Through Trustee and the
Certificateholders, assuming each Leased Aircraft is leased by the Corporation
upon issuance of the Pass Through Certificates, and (2) for a possible
transaction for Owned Aircraft among the Corporation, the Indenture Trustee, the
Pass Through Trustee and the Certificateholders. For each Aircraft included in a
particular Pass Through Certificate offering, one or more Equipment Certificates
will be issued, each of which may have a different interest rates and final
maturity dates and rankings in respect of priority of payment and will be held
in a separate Pass Through Trust. Each Pass Through Trust may hold Equipment
Certificates relating to more than one Aircraft. The number of Aircraft included
in each offering and the interest rates, final maturity dates and rankings in
respect of priority of payment, of the Equipment Certificates held by each Pass
Through Trust will be described in the applicable Prospectus Supplement.
In a Leased Aircraft transaction, the Corporation will lease each Leased
Aircraft from the Owner Trustee under a separate Lease. The Corporation will
make scheduled rental payments for each Leased Aircraft under the related Lease.
As a result of the assignment under the related Leased Aircraft Indenture of
certain rights of the Owner Trustee under such Lease, the Corporation will make
these payments directly to the Indenture Trustee. From these rental payments the
Indenture Trustee will pay to the Pass Through Trustee for each Pass Through
Trust the interest or interest and principal due from the Owner Trustee on the
Leased Aircraft Certificates issued under the related Leased Aircraft Indenture
and held in such Pass Through Trust. After such payments have been made, the
Indenture Trustee will pay the remaining balance to the Owner Trustee for the
benefit of the related Owner Participant. The Pass Through Trustee for each Pass
Through Trust will distribute to the related Certificateholders payments
received on the Leased Aircraft Certificates held in such Pass Through Trust.
See "Description of the Pass Through Certificates -- Payments and Distributions"
and "Description of the Equipment Certificates -- Delayed Lease Commencement"
for a discussion of payments during any Pre-Funding Period.
In an Owned Aircraft transaction, the Corporation will make scheduled
payments on the Owned Aircraft Certificates relating to each Owned Aircraft to
the Indenture Trustee. From these payments the Indenture Trustee will pay to the
Pass Through Trustee for each Pass Through Trust the interest or interest and
principal due on the Owned Aircraft Certificates issued under the related Owned
Aircraft Indenture and held in such Pass Through Trust. The Pass Through Trustee
for each Pass Through Trust will distribute to the related Certificateholders
payments received on the Owned Aircraft Certificates held in such Pass Through
Trust.
[GRAPHIC - A diagram is included here which contains boxes
representing the parties identified in the first paragraph of "Diagram
of Payments" which are connected by arrows demonstrating the cash
flows described in each of the second and third paragraphs.]
DESCRIPTION OF THE PASS THROUGH CERTIFICATES
In connection with each offering of Pass Through Certificates, one or more
separate Pass Through Trusts will be formed, and one or more corresponding
Series of Pass Through Certificates will be issued, pursuant to the Pass Through
Agreement and one or more separate Series Supplements to be entered into between
the Corporation and the Pass Through Trustee. The following summary relates to
the Pass Through Agreement and each of the Series Supplements, the Pass Through
Trusts to be formed thereby and the Pass Through Certificates to be issued by
each Pass Through Trust, except as otherwise described in the applicable
Prospectus Supplement.
The discussion that follows is a summary and does not purport to be
complete. The summary includes descriptions of the material terms of the Pass
Through Agreement the form of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The Series Supplement
relating to each Series of Pass Through Certificates and the forms of the
related Indentures, Participation Agreements, Leases if the Pass Through
Certificates relate to Leased Aircraft, Intercreditor Agreement, if any,
Liquidity Facility, if any, Trust Agreements and Collateral Agreements, if any,
will be filed as exhibits to a post-effective amendment to this Registration
Statement, a Current Report on Form 8-K, a Quarterly Report on Form 10-Q or an
Annual Report on Form 10-K, as applicable, to be filed with the Commission in
connection with the issuance of each such Series of Pass Through Certificates.
This summary makes use of terms defined in and is qualified in its entirety by
reference to the Pass Through Agreement.
Each Prospectus Supplement will include a glossary of certain defined terms
used in connection with the Pass Through Certificates offered thereby and the
related Equipment Certificates. To the extent that any provision in any
Prospectus Supplement is inconsistent with any provision of this summary, the
provision of such Prospectus Supplement will control.
General
The Pass Through Certificates will be issued in fully registered form only
and, unless otherwise specified in the applicable Series Supplement, be
registered in the name of Cede & Co. ("Cede") as the nominee of The Depository
Trust Company ("DTC"). If the Pass Through Certificates are so registered, no
Certificateholder will be entitled to receive a certificated Pass Through
Certificate representing such person's interest in the related Pass Through
Trust unless such certificates are issued as described below. Unless
certificated Pass Through Certificates are issued, all references to actions by
Certificateholders shall refer to actions taken by DTC upon instructions from
DTC Participants (as defined below), and all references herein to distributions,
notices, reports and statements to Certificateholders shall refer, as the case
may be, to distributions, notices, reports and statements to DTC or Cede, as the
registered holder of the Pass Through Certificates, or to DTC Participants for
distribution to Certificateholders in accordance with DTC procedures. See
"Description of the Pass Through Certificates -- Book-Entry Procedures." (Pass
Through Agreement, Section 2.12)
Each Pass Through Certificate will represent a fractional undivided
interest in the separate Pass Through Trust formed by the Pass Through Agreement
and the related Series Supplement pursuant to which such Pass Through
Certificate is issued. The property of each Pass Through Trust will include the
Equipment Certificates held in such Pass Through Trust, all monies at any time
paid thereon, all monies due and to become due thereunder and funds from time to
time deposited with the Pass Through Trustee in accounts relating to such Pass
Through Trust, and, if specified in the applicable Prospectus Supplement, rights
under any intercreditor agreement relating to cross-subordination arrangements
and monies receivable under any liquidity facility. Each Pass Through
Certificate will represent a pro rata share of the outstanding principal amount
of the Equipment Certificates and other property held in the related Pass
Through Trust and will be issued, unless otherwise specified in the applicable
Prospectus Supplement, in minimum denominations of $1,000 or any integral
multiple of $1,000. (Pass Through Agreement, Article II)
The applicable Prospectus Supplement will describe the specific Series of
Pass Through Certificates offered thereby, including:
(1) the specific designation and title of such Pass Through
Certificates;
(2) the Pass Through Trustee for such series of Pass Through
Certificates;
(3) the Regular Distribution Dates (as herein defined) and Special
Distribution Dates (as herein defined) applicable to such Pass Through
Certificates and the applicable Cut-Off Date (as herein defined), if any;
(4) the specific form of such Pass Through Certificates;
(5) a description of:
(a) the Equipment Certificates to be purchased by such Pass Through
Trust, including the period or periods within which, the price
or prices at which, and the terms and conditions upon which such
Certificates may or must be repaid in whole or in part, by the
Corporation or, with respect to Leased Aircraft Certificates,
the related Owner Trustee;
(b) the payment priority of such Equipment Certificates in relation
to any other Equipment Certificates issued with respect to the
related Aircraft;
(c) any additional security or liquidity enhancements therefor;
(d) any intercreditor issues between or among the holders of
Equipment Certificates having different priorities issued by the
same Owner Trustee; and
(e) other specific terms of the Equipment Certificates during any
Pre-Funding Period;
(6) a description of the related Aircraft, including whether the
Aircraft is a Leased Aircraft or an Owned Aircraft;
(7) a description of the related Participation Agreement and Indenture,
including a description of the events of default under the related
Indentures, the remedies exercisable upon the occurrence of such events of
default and any limitations on the exercise of such remedies with respect
to such Equipment Certificates;
(8) if such Pass Through Certificates relate to Leased Aircraft, a
description of the related Lease, Trust Agreement and Collateral Agreement,
if any, including (a) the names of the related Owner Trustee, (b) a
description of the events of default under the related Lease, the remedies
exercisable upon the occurrence of such events of default and any
limitations on the exercise of such remedies with respect to such Leased
Aircraft Certificates, and (c) the rights, if any, of the related Owner
Trustee or Owner Participant to cure failures of the Corporation to pay
rent under the related Lease;
(9) the extent, if any, to which the provisions of the operative
documents applicable to such Equipment Certificates may be amended by the
parties thereto without the consent of the Holders, or upon the consent of
the Holders of a specified percentage of aggregate principal amount of,
such Equipment Certificates;
(10) a description of any cross-default or cross-collateralization
provisions in the related Indenture;
(11) a description of any subordination provisions among the holders of
Pass Through Certificates, including any cross-subordination provisions
among the holders of Pass Through Certificates in separate Pass Through
Trusts;
(12) any additional security or liquidity facilities for the Pass
Through Certificates; and
(13) any other special terms pertaining to such Pass Through
Certificates. (Pass Through Agreement, Article II)
The Equipment Certificates issued under an Indenture may be held in more
than one Pass Through Trust and one Pass Through Trust may hold Equipment
Certificates issued under more than one Indenture. Unless otherwise provided in
the applicable Prospectus Supplement, only Equipment Certificates having the
same priority of payment (the Equipment Certificates of any such priority, a
"Class") may be held in the same Pass Through Trust.
Interest will be passed through to Certificateholders of each Pass Through
Trust at the rate per annum payable on the Equipment Certificates held in such
Pass Through Trust, as set forth for such Pass Through Trust on the cover page
of the applicable Prospectus Supplement.
The Pass Through Certificates represent interests in the related Pass
Through Trust only and all payments and distributions shall be made only from
the Trust Property of such Pass Through Trust. The Pass Through Certificates do
not represent an interest in or obligation of the Corporation, the Pass Through
Trustee, any related Owner Participant, the Owner Trustee in its individual
capacity or any affiliate of any of the foregoing. Each Certificateholder by its
acceptance of a Pass Through Certificate agrees to look solely to the income and
proceeds from the Trust Property of the related Pass Through Trust as provided
in the Pass Through Agreement and the applicable Series Supplement. (Pass
Through Agreement, Section 3.06)
The Pass Through Agreement does not, and the Indentures will not, contain
any debt covenants or provisions that would afford Certificateholders protection
in the event of a highly leveraged transaction involving the Corporation.
However, the Certificateholders of each Series will have the benefit of a lien
on the specific Aircraft securing the related Equipment Certificates held in the
related Pass Through Trust. See "Description of the Equipment
Certificates--Security" below for a discussion of security for Leased Aircraft
Certificates during any Pre-Funding Period.
Book-Entry Procedures
Unless otherwise specified in the applicable Prospectus Supplement, the
Pass Through Certificates will be subject to the provisions described below.
Upon issuance, each Series of Pass Through Certificates will be represented by
one or more fully registered global certificates. Each global certificate will
be deposited with, or on behalf of, DTC, and registered in its name or in the
name of Cede, its nominee. No Certificateholder will be entitled to receive a
certificated Pass Through Certificate, except as set forth below.
DTC has advised the Corporation that DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered pursuant to Section
17A of the Securities Exchange Act of 1934, as amended. DTC was created to hold
securities for its participants ("DTC Participants") and to facilitate the
clearance and settlement of securities transactions between DTC Participants
through electronic book-entries, thereby eliminating the need for physical
movement of certificates. DTC Participants include securities brokers and
dealers, banks, trust companies and clearing corporations. Access to DTC's
book-entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly.
Certificateholders that are not DTC Participants but desire to purchase,
sell or otherwise transfer ownership of, or other interests, in Pass Through
Certificates may do so only through DTC Participants. In addition,
Certificateholders will receive all distributions of principal and interest from
the Pass Through Trustee through the DTC Participants. Under the rules,
regulations and procedures creating and affecting DTC and its operation, DTC is
required to make book-entry transfers of Pass Through Certificates among DTC
Participants on whose behalf it acts and to receive and transmit distributions
of principal of, and interest on, the Pass Through Certificates. Under the
book-entry system, Certificateholders may experience some delay in receipt of
payments, since such payments will be forwarded by the Pass Through Trustee to
Cede, as nominee for DTC, and DTC in turn will forward the payments to the
appropriate DTC Participants.
Distributions by DTC Participants to Certificateholders will be the
responsibility of such DTC Participants and will be made in accordance with
customary industry practices. Accordingly, although Certificateholders will not
have possession of the Pass Through Certificates, the rules of DTC provide a
mechanism by which participants will receive payments and will be able to
transfer their interests. Although the DTC Participants are expected to convey
the rights represented by their interests in any global security to the related
Certificateholders, because DTC can only act on behalf of DTC Participants, the
ability of Certificateholders to pledge Pass Through Certificates to persons or
entities that are not DTC Participants or to otherwise act with respect to such
Pass Through Certificates, may be limited due to the lack of physical
certificates for such Pass Through Certificates.
None of the Corporation, the Pass Through Trustee or any other agent of the
Corporation or the Pass Through Trustee will have any responsibility or
liability for any aspect of the records relating to, or payments made on account
of, beneficial ownership interests in the Pass Through Certificates or for
supervising or reviewing any records relating to such beneficial ownership
interests. Since the only "Certificateholder" will be Cede, as nominee of DTC,
Certificateholders will not be recognized by the Pass Through Trustee as
Certificateholders, as such term is used in the Pass Through Agreement, and
Certificateholders will be permitted to exercise the rights of
Certificateholders only indirectly through DTC and DTC Participants. DTC has
advised the Corporation that it will take any action permitted to be taken by a
Certificateholder under the Pass Through Agreement and any Prospectus Supplement
only at the direction of one or more DTC Participants to whose accounts with DTC
the related Pass Through Certificates are credited. Additionally, DTC has
advised the Corporation that it will take such actions with respect to any
percentage of the beneficial interest of Certificateholders held in each Pass
Through Trust only at the direction of and on behalf of DTC Participants whose
holders include undivided interests that satisfy any such percentage. DTC may
take conflicting actions with respect to other undivided interests to the extent
that such actions are taken on behalf of DTC Participants whose holders include
such undivided interests.
Same-Day Settlement and Payment. All payments made by the Corporation to
the Indenture Trustee under each Lease will be in immediately available funds
and will be passed through to DTC in immediately available funds.
The Pass Through Certificates will trade in DTC's Same-Day Funds Settlement
System until maturity, and secondary market trading activity in the Pass Through
Certificates will be required by DTC to settle in immediately available funds.
No assurance can be given as to the effect, if any, of settlement in immediately
available funds on trading activity in the Pass Through Certificates.
Certificated Form. The Pass Through Certificates will be issued in fully
registered, certificated form to Certificateholders, or their nominees, rather
than to DTC or its nominee, only if DTC advises the Pass Through Trustee in
writing that it is no longer willing or able to discharge properly its
responsibilities as depository with respect to the Pass Through Certificates and
the Corporation is unable to locate a qualified successor or if the Corporation,
at its option, elects to terminate the book-entry system through DTC. In such
event, the Pass Through Trustee will notify all Certificateholders through DTC
Participants of the availability of such certificated Pass Through Certificates.
Upon surrender by DTC of the definitive global certificate representing the
series of Pass Through Certificates and receipt of instructions for
reregistration, the Pass Through Trustee will reissue the Pass Through
Certificates in certificated form to Certificateholders or their nominees. (Pass
Through Agreement, Section 2.12)
Certificates in certificated form will be freely transferable and
exchangeable at the office of the Pass Through Trustee upon compliance with the
requirements set forth in the Pass Through Agreement and the applicable Series
Supplements. No service charge will be imposed for any registration of transfer
or exchange, but payment of a sum sufficient to cover any tax or other
governmental charge may be required.
Payments and Distributions
The Corporation will make scheduled payments of principal of, and interest
on the unpaid amount of, the Owned Aircraft Certificates to the Indenture
Trustee under the related Owned Aircraft Indenture, and the Indenture Trustee
will distribute such principal and interest payments to the Pass Through Trustee
for each of the Pass Through Trusts that hold such Owned Aircraft Certificates.
Upon commencement of the Lease for any Leased Aircraft, the Corporation will
make scheduled rental payments for each Leased Aircraft under the related Lease.
After any Pre-Funding Period for a Leased Aircraft, these scheduled rental
payments will be assigned under the applicable Leased Aircraft Indenture by the
related Owner Trustee to the Indenture Trustee to provide the funds necessary to
make the corresponding payments of principal and interest due from the Owner
Trustee on the Leased Aircraft Certificates issued under such Leased Aircraft
Indenture.
Until the Corporation has entered into a Lease in connection with a Leased
Aircraft, the Corporation will not be obligated to make any scheduled rental
payments and during any Pre-Funding Period for such Leased Aircraft the related
Leased Aircraft Certificates will not be secured by such Leased Aircraft or the
related Lease, including any rental payments under such Lease. Unless otherwise
specified in the applicable Prospectus Supplement, during the Pre-Funding
Period, if any, for such Leased Aircraft, however, the related Collateral
Account, together with any other security pledged under the related Indenture or
otherwise provided to the Indenture Trustee will be available to provide funds
necessary to make the corresponding scheduled payments of principal, if any, and
interest accrued on the related Leased Aircraft Certificates during such
Pre-Funding Period, and to pay the portion, if any, of principal and interest
due on the first payment date after the Pre-Funding Period to the extent
exceeding the amount of rent payable by the Corporation on such payment date.
See "Description of the Equipment Certificates -- Delayed Lease Commencement."
Following any Pre-Funding Period, after the Indenture Trustee has made such
principal and interest payments to the Pass Through Trustee for each of the Pass
Through Trusts on the Leased Aircraft Certificates held in such Pass Through
Trust, the Indenture Trustee will, except under certain circumstances, pay the
remaining balance, if any, to the Owner Trustee for the benefit of the related
Owner Participant. The Pass Through Trustee for each such Pass Through Trust
will distribute to the Certificateholders of such Pass Through Trust payments
received on the Equipment Certificates held in such Pass Through Trust as
described below. During any Pre-Funding Period for a Leased Aircraft, the
Indenture Trustee will not make any payments to the Owner Trustee for the
benefit of the related Owner Participant.
Payments of principal of, and interest on the unpaid amount of, the
Equipment Certificates held in each Pass Through Trust will be scheduled to be
received by the Pass Through Trustee on the dates specified in the applicable
Prospectus Supplement (such scheduled payments of principal of, and interest on,
the Equipment Certificates are referred to herein as "Scheduled Payments," and
the dates specified for distributions of Scheduled Payments to the Pass Through
Trustee in the applicable Prospectus Supplement are referred to herein as
"Regular Distribution Dates"). Subject to the effect of any cross-subordination
provisions set forth in the applicable Prospectus Supplement, for each Pass
Through Trust, the Pass Through Trustee will distribute on each Regular
Distribution Date to the related Certificateholders any Scheduled Payment
received by the Pass Through Trustee on such Regular Distribution Date. (Pass
Through Agreement, Section 5.02)
If a Scheduled Payment is not received by the Pass Through Trustee on or
before a Regular Distribution Date but is received within seven Business Days
thereafter, it will be distributed on the date received to the
Certificateholders. Each such distribution of a Scheduled Payment will be made
by the Pass Through Trustee to the Certificateholders of record of such Pass
Through Trust on the fifteenth day prior to such Regular Distribution Date,
subject to certain exceptions. Subject to the effect of any cross-subordination
provisions set forth in the applicable Prospectus Supplement, each such
Certificateholder will be entitled to receive a pro rata share of any such
distribution. (Pass Through Agreement, Article I; Sections 5.01 and 5.02) If a
Scheduled Payment is received more than seven Business Days after the applicable
Regular Distribution Date, it will be treated as a Special Payment and will be
distributed as described below.
Subject to the effect of any cross-subordination provisions set forth in
the applicable Prospectus Supplement, after any prepayment of principal, any
redemption or any default in respect of some or all of the Equipment
Certificates held in any Pass Through Trust, any Certificateholder of such Pass
Through Trust should refer to the Pool Balance and the Pool Factor (as such
terms are defined below) for such Pass Through Trust reported periodically by
the Pass Through Trustee, in order to calculate such Certificateholder's pro
rata share of such Pass Through Trust. See "Pool Factors" and "Statements to
Certificateholders" below.
For any Pass Through Trust, any payments of principal, premium, if any, or
interest, other than Scheduled Payments, received by the Pass Through Trustee on
any of the Equipment Certificates held in such Pass Through Trust, including
payments received (i) for the prepayment of such Equipment Certificates in
connection with certain events specified in the applicable Prospectus Supplement
(including payments upon unavailability of Trust Property and prepayments during
any Pre-Funding Period), (ii) upon the prepayment by the related Owner Trustee
of such Equipment Certificates following a default in respect of such Equipment
Certificates, and (iii) on account of the sale of such Equipment Certificates by
the Pass Through Trustee (such payments are referred to herein as "Special
Payments"), will be distributed on the dates determined as set forth in the
applicable Prospectus Supplement (each, a "Special Distribution Date" and,
together with the Regular Distribution Dates, the "Distribution Dates") except
that unless otherwise specified in the applicable Prospectus Supplement payments
received by the Pass Through Trustee following default in respect of the
Equipment Certificates on a Regular Distribution Date as a result of a drawing
under any liquidity facility specified in the applicable Prospectus Supplement,
provided for the benefit of the Certificateholders, will be distributed on such
Regular Distribution Date. See "Description of the Equipment Certificates --
Mandatory Prepayment During the Pre-Funding Period" for a discussion of the
funding of such prepayments during any Pre-Funding Period.
Prior to any Special Payment for any Pass Through Trust, the Pass Through
Trustee will notify the Certificateholders of record of such Pass Through Trust
of such Special Payment and the anticipated Special Distribution Date therefor
in accordance with the Pass Through Agreement. Each distribution of a Special
Payment, other than the final distribution, for any Pass Through Trust will be
made by the Pass Through Trustee to the Certificateholders of record of such
Pass Through Trust on the fifteenth day prior to such Special Distribution Date,
unless otherwise specified in the applicable Prospectus Supplement. Subject to
the effect of any cross-subordination provisions set forth in the applicable
Prospectus Supplement, each such Certificateholder will be entitled to receive a
pro rata share of any such distribution. (Pass Through Agreement, Section 5.02)
See "Description of the Equipment Certificates -- Prepayment" and "Description
of the Pass Through Certificates -- Events of Default and Certain Rights Upon an
Event of Default."
The Pass Through Agreement requires that the Pass Through Trustee establish
and maintain, for each Pass Through Trust and for the benefit of the related
Certificateholders, one or more non-interest bearing accounts (a "Certificate
Account") for the deposit of Scheduled Payments on the Equipment Certificates
held in such Pass Through Trust and one or more accounts which will, except in
connection with Permitted Investments as defined below, be non-interest bearing
(a "Special Payments Account") for the deposit of Special Payments on such
Equipment Certificates. The Pass Through Trustee is required to deposit any
Scheduled Payments relating to a Pass Through Trust received by it in the
related Certificate Account and to deposit any Special Payments so received by
it in the related Special Payments Account pending distribution thereof. (Pass
Through Agreement, Section 5.01) Special Payments that are not promptly
distributed by the Pass Through Trustee will, to the extent practicable, be
invested by the Pass Through Trustee in Permitted Investments pending the
distribution of such funds on a Special Distribution Date, and the income and
earnings on such investment will be distributed with such Special Payment.
"Permitted Investments" are (a) direct obligations of the United States of
America or obligations fully guaranteed by the United States of America; (b)
commercial paper rated A-1/P-1 by Standard & Poor's Ratings Group and Moody's
Investors Service, Inc., respectively or, if such ratings are unavailable, rated
by any nationally recognized rating organization in the United States equal to
the highest rating assigned by such rating organization; (c) overnight federal
funds transactions with members of the Federal Reserve System arranged by
federal funds brokers; and (d) overnight repurchase agreements with respect to
the securities described in clause (a) above entered into with an office of a
bank or trust company which is located in the United States of America of any
bank or trust company which is organized under the laws of the United States or
any state thereof and has capital, surplus and undivided profits aggregating at
least $500 million. (Pass Through Agreement, Article I and Section 5.04)
If at any time, the Pass Through Certificates of any Pass Through Trust are
issued in the form of certificated Pass Through Certificates and not to Cede, as
nominee for DTC, distributions by the Pass Through Trustee from a Certificate
Account or a Special Payments Account of any Pass Through Trust on any
Distribution Date will be paid to each Certificateholder of record of such Pass
Through Trust on the applicable record date at its address appearing on the
register maintained for such Pass Through Trust. (Pass Through Agreement,
Section 5.02) The final distribution for each Pass Through Trust, however, will
be made only upon presentation and surrender of the Pass Through Certificates
for such Pass Through Trust at the office or agency of the Pass Through Trustee
specified in the notice given by the Pass Through Trustee of such final
distribution. The Pass Through Trustee will mail such notice of the final
distribution to the Certificateholders of such Pass Through Trust, specifying
the date set for such final distribution and the amount of such distribution.
(Pass Through Agreement, Section 12.01) See "Termination of Pass Through Trusts"
below.
If any Distribution Date is not a Business Day, distributions scheduled to
be made on such Distribution Date may be made on the next succeeding Business
Day without additional interest. (Pass Through Agreement, Section 13.15)
Pool Factors
Except as provided below, the Pool Factor (as defined below) for any Pass
Through Trust will decline in proportion to the scheduled repayments of
principal on the Equipment Certificates held in such Pass Through Trust as
described in the applicable Prospectus Supplement. Where any Equipment
Certificates held in a Pass Through Trust have been prepaid, a scheduled
repayment of principal thereon has not been made or certain actions have been
taken following a default thereon, as discussed in the applicable Prospectus
Supplement or below in "Events of Default and Certain Rights Upon an Event of
Default," the Pool Factor and the Pool Balance (as defined below) of such Pass
Through Trust will be recomputed after giving effect thereto and notice thereof
will be mailed to the Certificateholders of such Pass Through Trust. Each Pass
Through Trust will have a separate Pool Factor.
Unless otherwise described in the applicable Prospectus Supplement, the
"Pool Balance" for each Pass Through Trust indicates, as of any date, the
aggregate unpaid principal amount of the Equipment Certificates held in such
Pass Through Trust on such date plus any amounts in respect of principal on such
Equipment Certificates held by the Pass Through Trustee and not yet distributed
plus any amounts transferred to the Corporation and deposited in a deposit trust
account in connection with a delayed purchase of the Equipment Certificates. The
Pool Balance for each Pass Through Trust as of any Distribution Date will be
computed after giving effect to the payment of principal, if any, on the
Equipment Certificates held in such Pass Through Trust and the distribution
thereof being made on that date. (Pass Through Agreement, Article I)
Unless otherwise described in the applicable Prospectus Supplement, the
"Pool Factor" for each Pass Through Trust as of any Distribution Date is the
quotient (rounded to the seventh decimal place) computed by dividing (i) the
Pool Balance, by (ii) the aggregate original principal amount of the Equipment
Certificates held in such Pass Through Trust. The Pool Factor for each Pass
Through Trust as of any Distribution Date shall be computed after giving effect
to the payment of principal, if any, on the Equipment Certificates held in such
Pass Through Trust and the distribution thereof being made on that date. The
Pool Factor for each Pass Through Trust will initially be 1.0000000; thereafter,
the Pool Factor for each Pass Through Trust will decline as described above to
reflect reductions in the Pool Balance of such Pass Through Trust. For any Pass
Through Trust, the amount of any Certificateholder's pro rata share of the Pool
Balance of such Pass Through Trust can be determined by multiplying the original
denomination of such Certificateholder's Pass Through Certificate by the Pool
Factor for such Pass Through Trust as of the applicable Distribution Date. (Pass
Through Agreement, Article I)
Statements to Certificateholders
On each Distribution Date, the Pass Through Trustee will include with each
distribution of a Scheduled Payment or Special Payment to Certificateholders of
record of the related Pass Through Trust a statement, giving effect to such
distribution being made on such Distribution Date, setting forth the following
information (per $1,000 in aggregate amount of Pass Through Certificates for
such Pass Through Trust, as to (i) and (ii) below):
(i) the amount of such distribution allocable to principal and allocable
to premium, if any;
(ii) the amount of such distribution allocable to interest; and
(iii) the Pool Balance and the Pool Factor for such Pass Through Trust.
(Pass Through Agreement, Section 5.03)
So long as the Pass Through Certificates of any related Pass Through Trust
are registered in the name of Cede, as nominee for DTC, on the record date prior
to each Distribution Date, the Pass Through Trustee will request from DTC a
securities position listing setting forth the names of all DTC Participants
reflected on DTC's books as holding interests in the Pass Through Certificates
of such related Pass Through Trust on such record date. On each Distribution
Date, the Pass Through Trustee will mail to each such DTC Participant the
statement described above, and will make available additional copies as
requested by such DTC Participant, to be available for forwarding to
Certificateholders.
In addition, after the end of each calendar year, the Pass Through Trustee
will prepare and deliver to each Certificateholder of each Pass Through Trust at
any time during the preceding calendar year a report containing the sum of the
amounts determined pursuant to clauses (i) and (ii) above with respect to each
such Pass Through Trust for such calendar year or, in the event such person was
a Certificateholder during a portion of such calendar year, for the applicable
portion of such calendar year. Such report and such other items will be prepared
on the basis of information supplied to the Pass Through Trustee by the DTC
Participants, and shall be delivered by the Pass Through Trustee to such DTC
Participants to be available for forwarding by such DTC Participants to
Certificateholders in the manner described above. (Pass Through Agreement,
Section 5.03)
At such time, if any, as the Pass Through Certificates of a related Pass
Through Trust are issued in certificated form, the related Pass Through Trustee
will prepare and deliver the information described above to each
Certificateholder of record of such Trust as the name and period of record
ownership of such Certificateholder appears on the records on the registrar for
such Pass Through Trust.
Voting of Equipment Certificates
Subject to the effect of any cross-subordination provisions and any
intercreditor provisions described in the applicable Prospectus Supplement, the
Pass Through Trustee, as holder of the Equipment Certificates held in each Pass
Through Trust, has the right to vote and give consents and waivers in respect of
such Equipment Certificates under the related Indentures. The Pass Through
Agreement sets forth the circumstances in which the Pass Through Trustee shall
direct any action or cast any vote as the holder of the Equipment Certificates
held in the applicable Pass Through Trust at its own discretion and the
circumstances in which the Pass Through Trustee shall seek instructions from the
Certificateholders of such Pass Through Trust. Prior to an Event of Default (as
defined below) with respect to any Pass Through Trust, the principal amount of
the Equipment Certificates held in such Pass Through Trust directing any action
or being voted for or against any proposal will be in proportion to the
principal amount of Pass Through Certificates held by the Certificateholders of
such Pass Through Trust taking the corresponding position. (Pass Through
Agreement, Section 7.01). If specified in the applicable Prospectus Supplement,
the right of the Pass Through Trustee to vote and give consents and waivers with
respect to the Equipment Certificates held in the related Pass Through Trust
may, in the circumstances set forth in an intercreditor agreement to be executed
by such Pass Through Trustee, be exercisable by another person specified in such
Prospectus Supplement.
Events of Default and Certain Rights Upon an Event of Default
The Pass Through Agreement defines an event of default for any Pass Through
Trust (an "Event of Default") as the occurrence and continuance of an event of
default under one or more of the related Indentures (an "Indenture Event of
Default"). The Indenture Events of Default under the Indentures will be
described in the applicable Prospectus Supplement and, for the Leased Aircraft,
will include events of default under the related Leases ("Lease Events of
Default"). With respect to any Equipment Certificates which are supported by a
liquidity facility, the Events of Default or Indenture Events of Default may
include events of default under such liquidity facility.
Since the Equipment Certificates outstanding under an Indenture may be held
in more than one Pass Through Trust, a continuing Indenture Event of Default
under such Indenture would result in an Event of Default with respect to each
such Pass Through Trust. All of the Equipment Certificates issued under the same
Indenture, however, will relate to a specific Aircraft and there will be no
cross-collateralization or cross-default provisions in the Indentures, unless
otherwise specified in the applicable Prospectus Supplement. Consequently,
unless otherwise specified in the applicable Prospectus Supplement, events
resulting in an Indenture Event of Default under any particular Indenture will
not necessarily result in an Indenture Event of Default occurring under any
other Indenture. If an Indenture Event of Default occurs in fewer than all of
the Indentures related to a Pass Through Trust, the Equipment Certificates
issued pursuant to the related Indentures with respect to which an Indenture
Event of Default has not occurred will continue to be held in such Pass Through
Trust and payments of principal of, premium, if any, and interest on such
Equipment Certificates will continue to be distributed to the Certificateholders
of such Pass Through Trust as originally scheduled. If the applicable Prospectus
Supplement contains the terms of any cross-subordination provisions among
Certificateholders of separate Pass Through Trusts, payments made pursuant to a
related Indenture under which no Indenture Event of Default has occurred will be
distributed first to holders of Pass Through Certificates issued under the Pass
Through Trust which holds the most senior Equipment Certificates issued under
all related Indentures.
The Equipment Certificates in any Pass Through Trust, and therefore the
related Pass Through Certificates, will not have the benefit of any debt
covenants or provisions in the Indentures relating to such Equipment
Certificates or Pass Through Certificates that would afford the holders thereof
protection in the event of a highly leveraged transaction involving the
Corporation.
Under each Leased Aircraft Indenture the related Owner Trustee and the
Owner Participant will have the right under certain circumstances to cure an
Indenture Event of Default that results from the occurrence of a Lease Event of
Default under the related Lease. If the Owner Trustee or the Owner Participant
chooses to exercise such cure right, the Indenture Event of Default and
consequently the Event of Default under any Pass Through Trust holding the
related Leased Aircraft Certificates will be deemed to be cured. The applicable
Prospectus Supplement will contain a more detailed discussion of certain
provisions described in this paragraph.
The Pass Through Agreement provides that if an Indenture Event of Default
under an Indenture relating to Equipment Certificates held in a Pass Through
Trust shall have occurred and be continuing, the Pass Through Trustee may vote
all of the Equipment Certificates issued under such Indenture that are held in
such Pass Through Trust, and upon the direction of the Certificateholders
evidencing fractional undivided interests aggregating not less than a majority
in interest of such Pass Through Trust, shall vote a corresponding majority of
such Equipment Certificates, in each case in favor of directing the Indenture
Trustee to declare the unpaid principal amount of all Equipment Certificates
issued under such Indenture and any accrued and unpaid interest thereon to be
due and payable. The Pass Through Agreement also provides, subject to any
intercreditor agreement, that if an Indenture Event of Default under an
Indenture relating to Equipment Certificates held in a Pass Through Trust shall
have occurred and be continuing, the Pass Through Trustee may, and upon the
direction of the Certificateholders evidencing fractional undivided interests
aggregating not less than a majority in interest of such Pass Through Trust
shall, vote all of the Equipment Certificates issued under such Indenture that
are held in such Pass Through Trust in favor of directing the Indenture Trustee
as to the time, method and place of conducting any proceeding for any remedy
available to such Indenture Trustee or of exercising any trust or power
conferred on such Indenture Trustee under such Indenture. (Pass Through
Agreement, Sections 7.01 and 7.09)
The ability of the Certificateholders of any one Pass Through Trust to
cause the Indenture Trustee for any Equipment Certificates held in such Pass
Through Trust to accelerate the payment on such Equipment Certificates under the
related Indenture or to direct the exercise of remedies by such Indenture
Trustee under the related Indenture will depend, in part, upon the proportion of
the aggregate principal amount of the Equipment Certificates outstanding under
such Indenture and held in such Pass Through Trust to the aggregate principal
amount of all Equipment Certificates outstanding under such Indenture. In
addition, if cross-subordination provisions are applicable to the Pass Through
Certificates, the ability of the Certificateholders of any one Pass Through
Trust holding Equipment Certificates issued under related Indentures to cause
the Indenture Trustee to accelerate such Equipment Certificates or to direct the
exercise of remedies by the Indenture Trustee under the related Indenture will
depend, in part, on the Class of Equipment Certificates held in such Pass
Through Trust.
Each Pass Through Trust will hold Equipment Certificates with different
terms from those of the Equipment Certificates held in any other Pass Through
Trust and, therefore, the Certificateholders of a Pass Through Trust may have
divergent or conflicting interests from those of the Certificateholders of the
other Pass Through Trusts holding Equipment Certificates relating to the same
Indenture. In addition, so long as the same institution or an affiliate of such
institution acts as Pass Through Trustee of one or more Pass Through Trusts
holding Equipment Certificates issued under such Indenture, in the absence of
instructions from the Certificateholders of any such Pass Through Trust, the
Pass Through Trustee for such Pass Through Trust could for the same reason be
faced with a potential conflict of interest upon an Indenture Event of Default.
In such event, the initial Pass Through Trustee has indicated that it would
resign as Pass Through Trustee of one or all of such Pass Through Trusts, and a
successor pass through trustee would be appointed in accordance with the terms
of the Pass Through Agreement and the applicable Series Supplement. See "The
Pass Through Trustee; the Indenture Trustee" below for a discussion of
resignation procedures.
As an additional remedy, if an Indenture Event of Default under an
Indenture has occurred and is continuing, the Pass Through Agreement provides
that the Pass Through Trustee of a Pass Through Trust holding Equipment
Certificates issued under such Indenture may, and upon the direction of the
Certificateholders evidencing fractional undivided interests aggregating not
less than a majority in interest of such Pass Through Trust will, sell all or
part of such Equipment Certificates for cash to any person at a price or prices
that it may reasonably deem advisable. Any proceeds received by the Pass Through
Trustee upon any such sale will be deposited in the Special Payments Account for
such Pass Through Trust and will be distributed to the Certificateholders of
such Pass Through Trust on a Special Distribution Date. (Pass Through Agreement,
Sections 7.01 and 7.02)
The market for Equipment Certificates in default may be very limited and
there can be no assurance that they could be sold for a reasonable price.
Furthermore, so long as the same institution or an affiliate of such institution
acts as Pass Through Trustee of one or more Pass Through Trusts holding
Equipment Certificates issued under such Indenture, it may be faced with a
conflict in deciding from which Pass Through Trust to sell Equipment
Certificates to available buyers. If the Pass Through Trustee sells any such
Equipment Certificates with respect to which an Indenture Event of Default
exists for less than the outstanding principal amount thereof, the
Certificateholders of such Pass Through Trust will receive a smaller amount of
principal distributions than anticipated and will not have any claim for the
shortfall against the Pass Through Trustee, or the Corporation or, in the case
of Leased Aircraft Certificates, the Owner Trustee or any related Owner
Participant, as the case may be. Furthermore, neither the Pass Through Trustee
nor the Certificateholders of such Pass Through Trust could take any action with
respect to any remaining Equipment Certificates held in such Pass Through Trust
so long as no Indenture Event of Default existed with respect thereto.
For any Pass Through Trust, any amount distributed to the Pass Through
Trustee by the Indenture Trustee under any Indenture on account of the Equipment
Certificates held in such Pass Through Trust following an Indenture Event of
Default under such Indenture will be deposited in the Special Payments Account
for such Pass Through Trust and will be distributed to the Certificateholders of
such Pass Through Trust on a Special Distribution Date. In addition, if,
following an Indenture Event of Default under any Leased Aircraft Indenture, the
related Owner Trustee or Owner Participant, as the case may be, exercises its
option, if any, to prepay or purchase the outstanding Leased Aircraft
Certificates issued under such Indenture as described in the related Prospectus
Supplement, the price paid by such Owner Trustee or the Owner Participant to the
Pass Through Trustee for such Leased Aircraft Certificates held in such Pass
Through Trust will be deposited in the related Special Payments Account and will
be distributed to the Certificateholders of such Pass Through Trust on a Special
Distribution Date. (Pass Through Agreement, Sections 5.01 and 5.02)
Any funds representing payments received with respect to any Equipment
Certificates held in a Pass Through Trust in default, or the proceeds from the
sale by the Pass Through Trustee of any such Equipment Certificates, held by the
Pass Through Trustee in the Special Payments Account for such Pass Through Trust
will, to the extent practicable, be invested by the Pass Through Trustee in
Permitted Investments pending the distribution of such funds on a Special
Distribution Date. (Pass Through Agreement, Article I and Section 5.04)
The Pass Through Agreement provides that the Pass Through Trustee will,
within 90 days after the occurrence of a default (as defined below) under any
Pass Through Trust, notify the Certificateholders of such Pass Through Trust by
mail of all uncured or unwaived defaults with respect to such Pass Through Trust
known to it. Under no circumstances, however, may the Pass Through Trustee give
such notice until the expiration of a period of 60 days from the occurrence of
such default. The Pass Through Trustee will be protected in withholding such
notice if it in good faith determines that the withholding of such notice is in
the interests of such Certificateholders, except in the case of default in the
payment of principal of, premium, if any, or interest on any of the Equipment
Certificates held in such Pass Through Trust. The term "default" means the
occurrence of any Event of Default with respect to a Pass Through Trust as
described above, except that in determining whether any such Event of Default
has occurred any grace period or notice in connection therewith shall be
disregarded. (Pass Through Agreement, Section 7.11)
The Pass Through Agreement provides that for each Pass Through Trust,
subject to the duty of the Pass Through Trustee during a default to act with the
required standard of care, the Pass Through Trustee is entitled to be
indemnified by the Certificateholders of such Pass Through Trust before
proceeding to exercise any right or power under such Pass Through Trust or any
intercreditor agreement at the request of such Certificateholders. (Pass Through
Agreement, Section 8.03)
Subject to any intercreditor agreement, in certain cases, the
Certificateholders of a Pass Through Trust evidencing fractional undivided
interests aggregating not less than a majority in interest of such Pass Through
Trust (x) may on behalf of all the Certificateholders of such Pass Through Trust
or (y) if the Pass Through Trustee is the controlling party under an
intercreditor agreement, may direct the Pass Through Trustee to instruct the
applicable Indenture Trustee to, waive any past default or Event of Default with
respect to such Pass Through Trust and thereby annul any direction given by such
Certificateholders to the Pass Through Trustee or the Indenture Trustee with
respect thereto, except (i) a default in payment of the principal of, premium,
if any, or interest on any of the Equipment Certificates held in such Pass
Through Trust and (ii) a default in respect of any covenant or provision of the
Pass Through Agreement or the related Series Supplement that cannot be modified
or amended without the consent of each Certificateholder of such Pass Through
Trust affected thereby. Any such waiver, however, will be effective to waive any
such past default or Event of Default if, but only if, the correlative Indenture
Event of Default has been waived under the related Indenture by the requisite
holders of the Equipment Certificates outstanding thereunder. (Pass Through
Agreement, Section 7.10)
Each Indenture will provide that, with certain exceptions, the holders of a
majority in aggregate unpaid principal amount of the Equipment Certificates
issued thereunder may on behalf of all such holders waive any past default or
Indenture Event of Default thereunder. If, as described above, the
Certificateholders of a Pass Through Trust elect to waive a past default or
Event of Default with respect to such Pass Through Trust, the principal amount
of the Equipment Certificates issued under the related Indenture and held in
such Pass Through Trust will be counted in favor of the waiver of the
corresponding past default or Indenture Event of Default under the related
Indenture when the Indenture Trustee determines whether such past default or
Indenture Event of Default has been waived by the requisite majority in
aggregate unpaid principal amount of Equipment Certificates under such
Indenture. If, for example, the Equipment Certificates issued under an Indenture
held in a Pass Through Trust constitute only 45% in aggregate unpaid principal
amount of the Equipment Certificates issued and unpaid under such Indenture,
even if all the Certificateholders of such Pass Through Trust were to instruct
the Pass Through Trustee not to waive a past default or Event of Default with
respect to such Pass Through Trust and, consequently, to vote such Equipment
Certificates against the waiver of the corresponding past default or Indenture
Event of Default under such Indenture, the Equipment Certificates so voted by
the Pass Through Trustee on behalf of such Pass Through Trust would not alone be
sufficient under the terms of such Indenture to compel the Indenture Trustee to
refrain from giving such waiver. Moreover, there would be no assurance that the
Certificateholders of any other Pass Through Trust holding Equipment
Certificates issued under such Indenture would at such time vote such Equipment
Certificates against such waiver. Therefore, if the Certificateholders of a Pass
Through Trust or Trusts waive a past default or Event of Default such that the
principal amount of the Equipment Certificates held either individually in such
Pass Through Trust or in the aggregate in such Pass Through Trusts constitutes
the required majority in aggregate unpaid principal amount under the applicable
Indenture, such past default or Indenture Event of Default under such Indenture
will be waived whether or not the Certificateholders of any other Pass Through
Trust holding Equipment Certificates issued under such Indenture waive such past
default or Event of Default with respect to such other Pass Through Trust.
Modifications of the Pass Through Agreement
The Pass Through Agreement contains provisions permitting the Corporation
and the Pass Through Trustee to enter into an agreement supplemental to any Pass
Through Trust, without the consent of the Certificateholders of such Pass
Through Trust, to:
(i) provide for the formation of any Pass Through Trust and the issuance
of the related Pass Through Certificates;
(ii) evidence the succession of another corporation to the Corporation
and the assumption by such corporation of the Corporation's obligations
under the Pass Through Agreement and the applicable Series Supplement;
(iii) add to the covenants of the Corporation for the protection of the
related Certificateholders;
(iv) surrender any right or power conferred upon the Corporation in the
Pass Through Agreement or any Series Supplement;
(v) cure any ambiguity or correct or supplement any defective or
inconsistent provision of such Pass Through Agreement or the applicable
Series Supplement, any intercreditor agreement or any Liquidity Facility or
make any other provisions in regard to matters or questions arising
thereunder that will not adversely affect the interests of the related
Certificateholders;
(vi) correct or amplify the description of property that constitutes
Trust Property or the conveyance of such property to the Pass Through
Trustee;
(vii) evidence and provide for a successor Pass Through Trustee for some
or all of the Pass Through Trusts;
(viii) modify, eliminate or add to the provisions of the Pass Through
Agreement or any Series Supplement to the extent necessary to continue to
qualify such Pass Through Agreement or such Series Supplement under the
Trust Indenture Act of 1939, as amended, or any similar federal statute
enacted thereafter;
(ix) make any other amendments or modifications which shall only apply
to any Pass Through Trust established thereafter; and
(x) add, eliminate or change any provision under the Pass Through
Agreement that will not adversely affect the interests of the
Certificateholders,
provided that in each case such modification does not cause the Pass Through
Trust to become taxable as an "association" within the meaning of Treasury
Regulation Section 301.7701-4. (Pass Through Agreement, Section 11.01)
The Pass Through Agreement also provides that the Corporation and the Pass
Through Trustee, with the consent of the Certificateholders evidencing
fractional undivided interests aggregating not less than a majority in interest
of the affected Pass Through Trust, may execute supplemental agreements adding
any provisions to or changing or eliminating any of the provisions of the Pass
Through Agreement, to the extent relating to such Pass Through Trust, and the
applicable Series Supplement, any intercreditor agreement or any Liquidity
Facility or modifying the rights of such Certificateholders. No such
supplemental agreement may, however, without the consent of each
Certificateholder so affected:
(a) reduce the amount of, or delay the timing of, any receipt by the
Pass Through Trustee of payments on the Equipment Certificates held in such
Pass Through Trust, or distributions in respect of any Pass Through
Certificate of such Pass Through Trust, or make distributions payable in a
currency other than that provided for in such Pass Through Certificates, or
impair the right of any such Certificateholder to institute suit for the
enforcement of any payment when due;
(b) reduce, modify or amend any indemnities in favor of any
Certificateholder (unless consented to by each such holder adversely
affected thereby);
(c) create or permit the creation of any lien on the Trust Property or
deprive any holder of any such Equipment Certificate of the benefit of the
related Pass Through Trust with respect to the Trust Property whether by
disposition or otherwise, except as provided in the Pass Through Agreement
or the applicable Series Supplement;
(d) reduce the percentage of the aggregate fractional undivided
interests of the Pass Through Trust that is required to approve any
supplemental agreement or any waiver provided for in the Pass Through
Agreement or such Series Supplement; or
(e) cause the Pass Through Trust to become taxable as an "association"
within the meaning of Treasury Regulation Section 301.7701-4. (Pass Through
Agreement, Section 11.02)
Modification, Consents and Waivers under the Indenture and Related Agreements
If the Pass Through Trustee, as the holder of any Equipment Certificates
held in a Pass Through Trust, receives a request for its consent to any
amendment, modification or waiver under the Indenture, or other document
relating to such Equipment Certificates (including any Lease with respect to
Leased Aircraft Certificates), the Pass Through Trustee will mail a notice of
such proposed amendment, modification or waiver to each Certificateholder of
such Pass Through Trust as of the date of such notice. The Pass Through Trustee
will request instructions from such Certificateholders as to whether or not to
consent to such amendment, modification or waiver. The Pass Through Trustee will
vote or consent with respect to such Equipment Certificates in the same
proportion as the Pass Through Certificates of such Pass Through Trust are
actually voted by such Certificateholders by a certain date. If an Event of
Default relating to such Indenture has occurred and is continuing under such
Pass Through Trust, the Pass Through Trustee may, in the absence of instructions
from Certificateholders holding a majority in interest of such Pass Through
Trust and subject to any intercreditor agreement, in its own discretion consent
to such amendment, modification or waiver, and may so notify the Indenture
Trustee. (Pass Through Agreement, Section 11.08)
Cross-Subordination Issues
The Equipment Certificates issued under an Indenture may be held in more
than one Pass Through Trust and one Pass Through Trust may hold Equipment
Certificates issued under more than one related Indenture. Unless otherwise
provided in the applicable Prospectus Supplement, only Equipment Certificates of
the same Class may be held in the same Pass Through Trust. In addition, the Pass
Through Trustee may enter into an intercreditor agreement which provides that
payments made on account of a subordinate Class of Equipment Certificates issued
under a related Indenture may, under circumstances described in the applicable
Prospectus Supplement, be subordinated to the prior payment of all amounts owing
to Certificateholders of a Pass Through Trust which holds senior Equipment
Certificates issued under all related Indentures. The applicable Prospectus
Supplement related to an issuance of Pass Through Certificates will describe any
such intercreditor agreement and the cross-subordination provisions and any
related terms, including the percentage of Certificateholders under any Pass
Through Trust which are permitted to (i) grant waivers of defaults under any
related Indenture, (ii) consent to the amendment or modification of any related
Indentures or (iii) direct the exercise of remedial actions under any related
Indentures.
Termination of Pass Through Trusts
The obligations of the Corporation and the Pass Through Trustee with
respect to a Pass Through Trust will terminate upon the distribution to the
Certificateholders of such Pass Through Trust of all amounts required to be
distributed to them pursuant to the Pass Through Agreement and the applicable
Series Supplement and the disposition of all property held in such Pass Through
Trust. The Pass Through Trustee will notify each Certificateholder of record of
such Pass Through Trust by mail of, among other things, the termination of such
Pass Through Trust, the amount of the proposed final payment and the proposed
date for the distribution of such final payment for such Pass Through Trust. The
final distribution for each Certificateholder of such Pass Through Trust will be
made only upon surrender of such Certificateholder's Pass Through Certificates
at the office or agency of the Pass Through Trustee specified in such
termination notice. (Pass Through Agreement, Section 12.01)
Delayed Purchase
If, on the date of issuance of any Pass Through Certificates, all of the
proceeds from the sale of such Pass Through Certificates are not used to
purchase the Equipment Certificates contemplated to be held in the related Pass
Through Trust, such Equipment Certificates may be purchased by the Pass Through
Trustee at any time on or prior to the date specified in the applicable
Prospectus Supplement. In such event, the Pass Through Trustee will transfer the
proceeds from the sale of such Pass Through Certificates not used to purchase
Equipment Certificates on such date of issuance to the Corporation which will
deposit such amount into a deposit trust account pending the purchase of the
Equipment Certificates not so purchased. Such proceeds will be invested until
applied to such purchase. (Pass Through Agreement, Article I and Section 2.02)
Subject to a Special Payment upon unavailability of the Trust Property as
described below, in return for its interest in the funds transferred to the
deposit trust account, if the Equipment Certificates that were not so purchased
become available for purchase on or prior to the date specified in the
applicable Prospectus Supplement, then the Corporation will cause an amount
equal to the purchase price of such Equipment Certificates to be transferred
from the deposit trust account to the Pass Through Trustee on the date for such
delayed purchase. On the initial Regular Distribution Date, the Corporation will
pay to the Pass Through Trustee an amount equal to the interest that would have
accrued on any Equipment Certificates purchased after the date of the issuance
of such Pass Through Certificates from the date of the issuance of such Pass
Through Certificates to, but excluding, the date of the purchase of such
Equipment Certificates by the Pass Through Trustee. (Pass Through Agreement,
Section 2.02)
Special Payment Upon Unavailability of Trust Property
For any Pass Through Trust, to the extent that any of the proceeds from the
sale of the related Pass Through Certificates are not applied on or prior to the
date specified in the applicable Prospectus Supplement to purchase the Equipment
Certificates that were contemplated to be held in such Pass Through Trust, the
Corporation will cause an amount equal to such unapplied proceeds to be paid
from the deposit trust account to the Pass Through Trustee. The Pass Through
Trustee will distribute such proceeds to the Certificateholders of such Pass
Through Trust on a pro rata basis upon not less than 20 days' prior notice to
them as a Special Payment on the date specified in the applicable Prospectus
Supplement, together with interest thereon at a rate equal to the rate
applicable to such Pass Through Certificates, but without premium. The
Corporation will also pay to the Pass Through Trustee on such date an amount
equal to such interest. The Corporation will be responsible for any losses in
the deposit trust account. (Pass Through Agreement, Section 2.02)
Liquidity Facility
The applicable Prospectus Supplement may provide that one or more payments
of interest on the Pass Through Certificates of one or more Series will be
supported by a liquidity facility issued by an institution identified in such
Prospectus Supplement (the "Liquidity Facility"). The provider of such liquidity
facility will have a claim senior to the Certificateholders' as specified in the
Prospectus Supplement.
The Pass Through Trustee; the Indenture Trustee
The Pass Through Trustee for each of the Pass Through Trusts will be named
in the Prospectus Supplement. The Pass Through Trustee and any of its affiliates
may hold Pass Through Certificates in their own names. (Pass Through Agreement,
Section 8.05)
Unless otherwise specified in the related Prospectus Supplement,
First Security Bank, National Association will be the Indenture Trustee
under the Indentures under which the Equipment Certificates have been or
will be issued. First Security Bank, National Association acts as trustee
under other indentures with respect to other indebtedness by the Corporation,
and the Corporation from time to time borrows from, and maintains deposit
accounts with, First Security Bank, National Association and its affiliates.
The Pass Through Trustee may resign as trustee under any or all of the Pass
Through Trusts at any time. If the Pass Through Trustee ceases to be eligible to
continue as Pass Through Trustee with respect to a Pass Through Trust or becomes
incapable of acting as Pass Through Trustee or becomes insolvent, the
Corporation may remove such Pass Through Trustee, or any Certificateholder of
such Pass Through Trust holding Pass Through Certificates for at least six
months may, on behalf of such Certificateholder and all others similarly
situated, petition any court of competent jurisdiction for the removal of such
Pass Through Trustee and the appointment of a successor trustee. In addition,
the Pass Through Trustee of any Pass Through Trust may be removed without cause
by the Certificateholders holding more than 50% in aggregate amount of the
related Pass Through Certificates. (Pass Through Agreement, Section 10.01)
In the case of the resignation or removal of the Pass Through Trustee, the
Corporation or the Certificateholders holding more than 50% in aggregate amount
of the related Pass Through Certificates may appoint a successor Pass Through
Trustee. The resignation or removal of the Pass Through Trustee for any Pass
Through Trust and the appointment of the successor trustee for such Pass Through
Trust does not become effective until acceptance of the appointment by the
successor trustee. (Pass Through Agreement, Article X) Pursuant to such
resignation and successor trustee provisions, it is possible that a different
trustee could be appointed to act as the successor trustee with respect to each
Pass Through Trust. All references in this Prospectus to the Pass Through
Trustee are to the trustee acting in such capacity under each of the Pass
Through Trusts and should be read to take into account the possibility that each
of the Pass Through Trusts could have a different successor trustee in the event
of such a resignation or removal.
The Pass Through Agreement provides that the Corporation will pay the Pass
Through Trustee's fees and expenses and that the Pass Through Trustee will have
a priority claim on the related Trust Property to the extent such fees and
expenses are not paid. The Pass Through Agreement further provides that the Pass
Through Trustee in its individual capacity will be entitled to indemnification
by the Corporation for, and will be held harmless against, any loss, liability
or expenses (other than income or similar taxes) incurred by the Pass Through
Trustee in its individual capacity in connection with the administration of any
Pass Through Trust, except to the extent incurred through its own willful
misconduct, bad faith or negligence or by reason of a breach of any of its
representations or warranties set forth in the Pass Through Agreement or the
applicable Series Supplement or any related documents. In certain circumstances,
the Pass Through Trustee will be entitled to be reimbursed from the applicable
Pass Through Trust for any tax (other than income or similar taxes) incurred in
its trust capacity in connection with the administration of any Pass Through
Trust. (Pass Through Agreement, Articles VIII and IX).
DESCRIPTION OF THE EQUIPMENT CERTIFICATES
The discussion that follows is a summary that does not purport to be
complete and is qualified in its entirety by the detailed information appearing
in the applicable Prospectus Supplement. The following summary includes
descriptions of the material terms of the Equipment Certificates and the
Indentures. Except as otherwise indicated below or as described in the
applicable Prospectus Supplement, the following summary will apply to the
Equipment Certificates, the Indenture and the Participation Agreement relating
to each Aircraft, the Lease for Leased Aircraft and the Collateral Agreement, if
any, relating thereto. Where no distinction is made between the Leased Aircraft
Certificates and the Owned Aircraft Certificates or between their respective
Indentures, the summary applies to any Equipment Certificate and any Indenture.
Additional provisions with respect to the Equipment Certificates, the
Indentures, the Participation Agreements, the Leases, if any, and the Collateral
Agreements, if any, relating to any particular offering of Pass Through
Certificates will be described in the applicable Prospectus Supplement. To the
extent that any provision in any Prospectus Supplement is inconsistent with any
provision of this summary, the provision of such Prospectus Supplement will
control.
General
For each Owned Aircraft, the related Owned Aircraft Certificates will be
issued as direct obligations by the Corporation and will be authenticated under
an Owned Aircraft Indenture by the Indenture Trustee. All of the Owned Aircraft
Certificates issued under the same Owned Aircraft Indenture will relate to a
specific Owned Aircraft and will not be secured by any other Aircraft. The Owned
Aircraft relating to each Owned Aircraft Indenture and the related Owned
Aircraft Certificates will be specified in the applicable Prospectus Supplement.
The Corporation will be directly obligated under each Owned Aircraft Indenture
to make payments of principal of, premium, if any, and interest on the related
Owned Aircraft Certificates.
For each Leased Aircraft, the related Leased Aircraft Certificates will be
issued as nonrecourse obligations by the Owner Trustee, in each case acting for
a separate Owner Trust for the benefit of an Owner Participant, and will be
authenticated under a Leased Aircraft Indenture by the Indenture Trustee. All of
the Leased Aircraft Certificates issued under the same Leased Aircraft Indenture
will relate to and, after any related Pre-Funding Period, as discussed below
under "Delayed Lease Commencement," will be secured by a specific Leased
Aircraft and will not be secured by any other Aircraft. In each case, the Owner
Trustee will lease the related Leased Aircraft to the Corporation pursuant to a
separate Lease between such Owner Trustee and the Corporation. See "Delayed
Lease Commencement" below for a discussion of the circumstances under which the
Lease for an Aircraft may commence after the date of issuance of the related
Leased Aircraft Certificates.
The Leased Aircraft subject to each Lease and the Leased Aircraft
Certificates issued under the related Leased Aircraft Indenture will be
specified in the applicable Prospectus Supplement. Upon the commencement of the
Lease for any Leased Aircraft, the Corporation will be obligated to make rental
payments under such Lease that will be sufficient to pay the principal of and
accrued interest on the related Leased Aircraft Certificates when and as due and
payable except that, with respect to a Delayed Lease Aircraft (as defined
below), on the first scheduled payment date after the related Pre-Funding
Period, any difference between the rental payment due on such date by the
Corporation and the scheduled payment of principal, if any, and interest then
due on such Leased Aircraft Certificates will be payable from the related
Collateral Account and any other security pledged under the related Indenture or
otherwise available to the Indenture Trustee. See "Delayed Lease Commencement"
below. The Leased Aircraft Certificates will not, however, be obligations of, or
guaranteed by, the Corporation. The Corporation's obligations to pay rent and to
cause other payments to be made under each Lease will be general obligations of
the Corporation.
In certain circumstances described in the applicable Prospectus Supplement,
the Corporation will have the right to purchase an Owner Trustee's right, title
and interest in and to the related Aircraft and to assume the related Leased
Aircraft Certificates on a full recourse basis, which would reflect a financing
contemplated by an Owned Aircraft Indenture.
For any Owned Aircraft, if specified in the applicable Prospectus
Supplement, the Corporation may arrange for an Owner Trustee, acting for an
Owner Trust for the benefit of an Owner Participant, to purchase such Owned
Aircraft from the Corporation and lease such Aircraft back to the Corporation
under a "net lease," subsequent to the sale of the related Owned Aircraft
Certificates to the Pass Through Trustee for each applicable Pass Through Trust
and the offering and sale of the related Pass Through Certificates pursuant to
such Prospectus Supplement. In such event, such Owner Trustee will assume, on a
nonrecourse basis, the obligations of the Corporation to make payments of
principal and interest on the related Equipment Certificates. However, the
related Equipment Certificates will no longer be direct obligations of, and will
not be guaranteed by, the Corporation, although the Corporation will be
obligated under the related Lease to make rental payments that will be
sufficient to pay the principal of and accrued interest on the related Equipment
Certificates when and as due and payable, and such Equipment Certificates will
continue to be secured by a security interest in the related Aircraft, in
addition to being secured by an assignment by such Owner Trustee to the
Indenture Trustee of such Owner Trustee's rights under such Lease and the
agreements relating to the purchase of such Aircraft. See "Security," "Payments
and Limitation of Liability" and "Federal Income Tax Consequences" below. The
terms and conditions under which any such sale and leaseback transaction may be
consummated will be described in the applicable Prospectus Supplement.
Until the Corporation has entered into a Lease in connection with a Leased
Aircraft, the Corporation will not be obligated to make any scheduled rental
payments and during any Pre-Funding Period for such Leased Aircraft the related
Leased Aircraft Certificates will not be secured by such Leased Aircraft or the
related Lease, including any rental payments under such Lease. Unless otherwise
specified in the applicable Prospectus Supplement, during any Pre-Funding Period
for such Leased Aircraft, however, the related Collateral Account, together with
any other security pledged under the related Indenture or otherwise available to
the Indenture Trustee will be available to provide funds necessary to make the
corresponding scheduled payments of principal, if any, and interest accrued on
the related Leased Aircraft Certificates during such Pre-Funding Period,
including the portion, if any, of principal and interest due on the first
payment date after the Pre-Funding Period to the extent exceeding the amount of
rent payable by the Corporation pursuant to the related Lease. See "Delayed
Lease Commencement" below.
Principal and Interest Payments
Interest received by the Pass Through Trustee on the Equipment Certificates
constituting Trust Property of each Pass Through Trust will be passed through to
the Certificateholders of such Pass Through Trust on a pro rata basis on the
dates and at the rate per annum set forth in the applicable Prospectus
Supplement. Interest on the Equipment Certificates will be calculated on the
basis of a 360-day year consisting of twelve 30-day months.
Each Pass Through Trust will hold Equipment Certificates on which principal
is payable in scheduled amounts and on specified dates as set forth in the
applicable Prospectus Supplement. Principal received by the Pass Through Trustee
on such Equipment Certificates will be passed through to the Certificateholders
of such Pass Through Trust as set forth in the Prospectus Supplement.
Prepayment
The applicable Prospectus Supplement will describe the circumstances,
whether voluntary or involuntary, under which the related Equipment Certificates
may or must be prepaid prior to the stated maturity date thereof, in whole or in
part, the premium, if any, applicable upon certain prepayments and other terms
applying to the prepayment of such Equipment Certificates. See "Mandatory
Prepayment During the Pre-Funding Period" below for a discussion of certain
events which would require prepayment of Leased Aircraft Certificates related to
a Leased Aircraft during any related Pre-Funding Period.
Security
Except during any related Pre-Funding Period, the Leased Aircraft
Certificates issued under each Leased Aircraft Indenture will be secured by:
(i) an assignment by the related Owner Trustee to the Indenture Trustee
of such Owner Trustee's rights (except for certain limited rights described
below) under the applicable Lease, including the right to receive rent and
other payments thereunder;
(ii) a security interest granted to the Indenture Trustee in the related
Leased Aircraft, subject to the rights of the Corporation under such Lease
and to certain other liens and encumbrances; and
(iii) an assignment to such Indenture Trustee of such Owner Trustee's
rights relating to such Leased Aircraft and the related engines under the
agreements for the purchase thereof between the Corporation and the
respective manufacturers of such Leased Aircraft and of such engines. See
"Registration of the Aircraft" below.
The assignment by such Owner Trustee to the Indenture Trustee of its rights
under each Lease will exclude rights of such Owner Trustee and the related Owner
Participant relating to:
(i) indemnification by the Corporation for certain matters;
(ii) proceeds of public liability insurance payable to such Owner
Trustee in its individual capacity and to such Owner Participant under
insurance maintained by the Corporation under such Lease; and
(iii) proceeds of any insurance policies separately maintained by such
Owner Trustee in its individual capacity or by such Owner Participant.
The right of the Indenture Trustee, however, to exercise any of the rights
of the Owner Trustee under the related Lease, except the right to receive
payments of rent due thereunder, will be subject to certain limitations as
described in the applicable Prospectus Supplement.
The Owned Aircraft Certificates issued under each Owned Aircraft Indenture
will be secured by (i) a security interest granted to the Indenture Trustee in
all of the Corporation's right, title and interest in and to the related Owned
Aircraft and (ii) an assignment to such Indenture Trustee of certain of the
Corporation's rights relating to such Owned Aircraft and the related engines
under the agreements for the purchase thereof between the Corporation and the
respective manufacturers of such Owned Aircraft and of such engines. See
"Registration of the Aircraft" below.
Unless otherwise specified in the applicable Prospectus Supplement, there
will be no cross-collateralization provisions in the Indentures and
consequently, unless so specified, the Equipment Certificates issued in respect
of one of the Aircraft will not be secured by any other Aircraft or, in the case
of Leased Aircraft Certificates, the Leases related thereto. Unless otherwise
specified in the applicable Prospectus Supplement, there will be no
cross-default provisions in the Indentures and consequently, unless so
specified, events resulting in an Indenture Event of Default under any
particular Indenture may not result in an Indenture Event of Default occurring
under any other Indenture.
Section 1110 of the United States Bankruptcy Code (the "Bankruptcy Code")
provides that the right of lessors, conditional vendors and holders of security
interests with respect to aircraft capable of carrying ten (10) or more
individuals or 6,000 pounds or more of cargo used by air carriers operating
under certificates issued by the Secretary of Transportation under Chapter 447
of the Transportation Code to take possession of such aircraft in compliance
with the provisions of the lease, conditional sale contract or security
agreement, as the case may be, is not affected by:
(a) the automatic stay provision of the Bankruptcy Code, which provision
enjoins the taking of any action against a debtor by a creditor;
(b) the provision of the Bankruptcy Code allowing the trustee in
reorganization or the debtor-in-possession to use, sell or lease property
of the debtor;
(c) the confirmation of a plan by the bankruptcy court; and
(d) any power of the bankruptcy court to enjoin a repossession.
Section 1110 provides, however, that the right of a lessor, conditional
vendor or holder of a security interest to take possession of an aircraft in the
event of a default may not be exercised for 60 days following the date of
commencement of the reorganization proceedings (unless specifically permitted by
the bankruptcy court) and may not be exercised at all if, within such 60-day
period, the trustee in reorganization or the debtor-in-possession agrees to
perform the debtor's obligations that become due on or after such date and cures
all existing monetary defaults. The Prospectus Supplement for each offering will
discuss the availability of the benefits of Section 1110 of the Bankruptcy Code
with respect to the related Aircraft.
If the applicable Prospectus Supplement provides that a Pre-Funding Period
will apply to a Leased Aircraft, then during such Pre-Funding Period the related
Leased Aircraft Certificates will not be secured by such Leased Aircraft or a
related Lease. During such Pre-Funding Period, however, such Leased Aircraft
Certificates will be secured by the related Collateral Account and, if the
Prospectus Supplement so provides, certain additional security which may
include, unless otherwise specified in the applicable Prospectus Supplement, a
letter of credit or other facility issued by a bank (within the meaning of
Section 3(a)(2) of the Securities Act) whose obligations at the time of the
relevant Pass Through Certificate offering carry a credit rating at least as
high as the Corporation's ("Additional Collateral"). See "Delayed Lease
Commencement" below.
Registration of the Aircraft
The Corporation will be required, except under certain circumstances, to
register and keep each Aircraft registered under Title 49 of the United States
Code (the "Transportation Code"), in the name of the Corporation, in the case of
an Owned Aircraft, or in the name of the Owner Trustee, after commencement of a
Lease in the case of a Leased Aircraft, and to record and maintain the
recordation of the Indenture and the Lease, if any, relating to each such
Aircraft under the Transportation Code. Such recordation of the Indenture and
the Lease, if any, relating to each Aircraft will give the Indenture Trustee a
security interest in each such Aircraft perfected under the Transportation Code,
which perfected security interest will, with certain limited exceptions, be
recognized in those jurisdictions that have ratified to the Convention on the
International Recognition of Rights in Aircraft (the "Convention").
The Corporation will be able, in certain circumstances, to re-register any
Aircraft in certain countries other than the United States. Unless otherwise
specified in the applicable Prospectus Supplement, prior to any such change in
the jurisdiction of registry, the Indenture Trustee and, for Leased Aircraft,
the related Owner Participant must receive certain assurances, including that
such other country would provide substantially equivalent protection for the
rights of owner participants, lessors and lenders in similar transactions as is
provided under United States law, except that, for the purpose of such
determination, rights and remedies similar to those available under Section 1110
of the Bankruptcy Code will not be required in the absence of restrictions of
rights and remedies of lessors and secured parties that are similar to those
imposed by Sections 362, 363 and 1129 of the Bankruptcy Code. While such
assurances are intended to provide that the Corporation's (in the case of an
Owned Aircraft) or the Owner Trustee's (in the case of a Leased Aircraft) title
to the Aircraft and the Indenture Trustee's lien thereon will be recognized in
such jurisdiction and that the Indenture Trustee may exercise the rights granted
to it in the Indentures, there is no guarantee that, even if such jurisdiction
is a party to the Convention, as a practical matter, the Indenture Trustee would
be able to realize upon its security interest in the case of an Indenture Event
of Default.
Also, each Aircraft may be operated by the Corporation, or placed under
lease, sublease or interchange arrangements with carriers domiciled outside of
the United States. The ability of the Indenture Trustee in the case of an
Indenture Event of Default, to realize upon its security interest in the
Aircraft could be adversely affected as a legal or practical matter if the
Aircraft were located outside the United States.
Merger, Consolidation and Transfer of Assets
With respect to each Aircraft, the Corporation will be prohibited from
consolidating with or merging into any other corporation under circumstances in
which the Corporation is not the surviving corporation, or from transferring all
or substantially all of its assets as an entirety to any other corporation,
unless, among other things:
(i) the successor or transferee corporation is a U.S. Citizen, an "air
carrier" within the meaning of and operating under the Transportation Code
and a corporation organized and existing under the laws of the United
States or a political subdivision thereof, and such corporation expressly
assumes all the obligations of the Corporation contained in the related
Indenture, the Participation Agreement, the Lease, the Purchase Agreement
and the Purchase Agreement Assignment;
(ii) immediately after giving effect to such consolidation, merger or
transfer, the successor or transferee is in compliance with all of the
terms and conditions of such documents; and
(iii) such consolidation, merger or transfer does not (or would not, if
prior to commencement of the related Lease) give rise to a Lease Event
Default under the related Lease or, in the case of an Owned Aircraft, an
Indenture Event of Default under the related Owned Aircraft Indenture.
Delayed Lease Commencement
If the applicable Prospectus Supplement provides that a Pre-Funding Period
will apply to a Leased Aircraft, then until commencement of a Lease with respect
to such Leased Aircraft and the Indenture Trustee's release of funds from the
related Collateral Account, which is expected to occur at the same time as the
commencement of such Lease, such Leased Aircraft is referred to as a "Delayed
Lease Aircraft" and the period prior to the Indenture Trustee's release of such
funds is referred to as the "Pre-Funding Period."
Unless otherwise specified in the applicable Prospectus Supplement, in the
case of Leased Aircraft Certificates relating to a Delayed Lease Aircraft, the
proceeds from sale of such Leased Aircraft Certificates to the applicable Pass
Through Trusts, after deducting certain expenses of the offering of the related
Pass Through Certificates, will be deposited by the Owner Trustee, on the date
of such sale, in a collateral account (a "Collateral Account") established
pursuant to the Indenture or a collateral agreement between the Owner Trustee
and the Indenture Trustee (a "Collateral Agreement"). Such Collateral Account
will secure payment of the related Leased Aircraft Certificates. In addition, if
the Prospectus Supplement so provides, the Corporation will be required to
provide to the Indenture Trustee Additional Collateral for such Leased Aircraft
Certificates during the related Pre-Funding Period. See "Security" above.
Funds in the Collateral Account will be invested pursuant to the related
Collateral Agreement or Indenture in U.S. government obligations or such other
obligations as further described in the applicable Prospectus Supplement.
Earnings on such investments will be retained in the Collateral Account pending
distribution as contemplated below.
Unless otherwise specified in an applicable Prospectus Supplement, the
Leased Aircraft Certificates relating to a Delayed Lease Aircraft will be issued
in an amount such that the net proceeds thereof, together with expected earnings
on the investments in the Collateral Account, will be sufficient (i) to make
scheduled payments of principal, if any, and interest accrued on such Leased
Aircraft Certificates during the related scheduled Pre-Funding Period specified
in such Prospectus Supplement and (ii) to finance a portion of the purchase
price of such Delayed Lease Aircraft, as specified in such Prospectus
Supplement.
Subject to any mandatory prepayment contemplated below, under the
Collateral Agreement relating to a Delayed Lease Aircraft, on each date during
the scheduled Pre-Funding Period for the scheduled payments of principal, if
any, and interest on the related Leased Aircraft Certificates, the Indenture
Trustee shall withdraw from the Collateral Account the amount necessary to make
the scheduled payment then due. If the Indenture Trustee shall not have released
the funds in the Collateral Account on the date scheduled for the commencement
of the Lease relating to such Delayed Lease Aircraft, then on each scheduled
payment date during the Pre-Funding Period that occurs after such scheduled
commencement date, the Indenture Trustee shall withdraw from the Collateral
Account the excess of the amount therein over the amount specified to be
retained in such Collateral Account to be applied to the purchase price of the
Delayed Lease Aircraft. If the amount withdrawn is less than the scheduled
payment then due, the Indenture Trustee shall draw the deficiency from any
available Additional Collateral and will apply such amount to satisfy the
corresponding payment obligation. On the first scheduled payment date after any
Pre-Funding Period with respect to a Delayed Lease Aircraft, the Indenture
Trustee will withdraw from the Collateral Account or otherwise realize from any
Additional Collateral the difference between the scheduled payment then due and
the rental payment due on such payment date from the Corporation.
Mandatory Prepayment During the Pre-Funding Period
To the extent that the Lease related to a Delayed Lease Aircraft has not
commenced on or prior to the cut-off date specified in the applicable Prospectus
Supplement as the last date of the related permitted Pre-Funding Period either
(i) the Collateral Account and, to the extent necessary, any Additional
Collateral will be drawn upon and the related Leased Aircraft Certificates will
be prepaid at a prepayment price equal to the aggregate principal amount of such
Leased Aircraft Certificates, together with accrued but unpaid interest thereon
to the date designated for such prepayment specified in such Prospectus
Supplement or (ii) the Corporation will assume the Leased Aircraft Certificates
on a full recourse basis.
With respect to any Delayed Lease Aircraft, the applicable Prospectus
Supplement also will set forth (i) any mandatory prepayment of the related
Leased Aircraft Certificates, and the prepayment price therefor, upon the
occurrence of any event of loss with respect to such Delayed Lease Aircraft
during such Pre-Funding Period and (ii) any option the Corporation may have to
convert the leveraged lease financing for a Delayed Lease Aircraft into the type
of financing available for Owned Aircraft.
Owned Aircraft Indenture Covenants
Maintenance. The Corporation will be obligated to pay all costs of
operating the Owned Aircraft and, at its expense, to maintain, inspect, service,
repair and overhaul the Owned Aircraft so as to keep the Owned Aircraft in good
condition, ordinary wear and tear excepted, and to enable the airworthiness
certification thereof to be maintained in good standing at all times under the
Transportation Code or, under certain circumstances, under the applicable
requirements of the aeronautical authority of another country of registry. If,
however, the Owned Aircraft loses its airworthiness certification and such loss
is curable, and the Corporation, using its reasonable best efforts, undertakes
such cure promptly, diligently and continuously, then the Corporation will not
be in default with respect to such obligation.
Generally, the Corporation will be obligated to replace or cause to be
replaced all parts that may from time to time be incorporated or installed in or
attached to any Owned Aircraft (including in or on any engine) and that may
become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use. The Corporation will have
the right to make other alterations, modifications and additions to an
Owned Aircraft so long as such alterations, modifications or additions do
not materially decrease the value or utility of such Owned Aircraft or
impair its condition or airworthiness below its value, utility, condition
and airworthiness immediately prior to such alteration, modification or
addition, assuming that such Owned Aircraft was then in the condition and
airworthiness required by the related Indenture. Also, in certain
circumstances, the Corporation will be permitted to remove parts (without
replacement) from an Owned Aircraft or any engine (and therefore from the
Lien of the applicable Indenture) if the Corporation deems such parts to be
obsolete or no longer suitable or appropriate for use thereon so long as
such removals do not decrease the utility, condition or airworthiness of
such Owned Aircraft or any such engine, although the value of such Owned
Aircraft or any such engine may be reduced by such removal. The applicable
Prospectus Supplement will contain a description of certain limitations, if
any, applicable to provisions described in this paragraph.
Insurance. Unless otherwise indicated in the applicable Prospectus
Supplement, the Corporation will be obligated to carry insurance with insurers
of recognized responsibility with respect to each Owned Aircraft, at its own
cost and expense, in such amounts, against such risks, with such deductibles or
retentions (i) in the case of hull insurance, as the Corporation customarily
maintains with respect to other aircraft in the Corporation's fleet of the same
type and model and operating on the same routes as the respective Owned Aircraft
and (ii) in the case of liability insurance, as is usually carried by similar
corporations engaged in the same or similar business and similarly situated as
the Corporation, owning or operating aircraft similar to the Aircraft. The
Corporation will be permitted to maintain coverage below certain stipulated
values and may be permitted to self-insure (including by way of deductibles and
retentions) in certain circumstances, subject to certain limits. Therefore,
there is no assurance that any insurance will be carried in the future, or, if
it is carried, as to the amount of such insurance.
The Corporation and any permitted lessee of an Owned Aircraft will be named
as insured parties under all insurance policies required by the related
Indenture. The Indenture Trustee will be named as an additional insured, which
will afford such Indenture Trustee the rights but not the obligations of an
additional insured. Unless otherwise specified in the applicable Prospectus
Supplement, liability insurance proceeds will be distributed to the respective
parties as their interests may appear and hull insurance proceeds will be
distributed to the Indenture Trustee if the amount of such proceeds exceeds
certain specified amounts. The applicable Prospectus Supplement will contain a
description of certain limitations, if any, applicable to provisions described
in this paragraph.
Ranking of Equipment Certificates
Some of the Equipment Certificates related to one or more Aircraft, as
described in the applicable Prospectus Supplement, may be subordinated and
junior in right of payment to other Equipment Certificates related to the same
Aircraft. The terms of such subordination, if any, will be described in the
applicable Prospectus Supplement.
Payments and Limitations of Liability
All payments of principal of, premium, if any, and interest on any Leased
Aircraft Certificates will be made only from the assets subject to the Lien of
the related Leased Aircraft Indenture or the income and proceeds received by the
Indenture Trustee therefrom or from certain payments received by the Indenture
Trustee to be applied pursuant to such Leased Aircraft Indenture, including,
during any Pre-Funding Period relating to a Leased Aircraft, the Collateral
Account and any Additional Collateral provided in connection with such
Pre-Funding Period and, on and after the commencement of the related Lease and,
in the case of a Delayed Lease Aircraft, after the related Pre-Funding Period,
rent payable by the Corporation under the related Lease. The Leased Aircraft
Certificates will not be direct obligations of, or guaranteed by the
Corporation. The Corporation's obligations to pay rent and to cause other
payments to be made under each Lease will be general obligations of the
Corporation.
Neither the Owner Trustee or the Indenture Trustee (in their individual
capacities) will be liable to any Certificateholder or, in the case of the Owner
Trustee, in its individual capacity, to the Corporation or the Indenture Trustee
for any amounts payable or for any liability under the Equipment Certificates or
the Indentures, except as provided in the Indentures and the Participation
Agreements and except for the gross negligence or willful misconduct of the
Owner Trustee.
The Corporation's obligations under each Owned Aircraft Indenture and under
the related Owned Aircraft Certificates will be general obligations of the
Corporation.
Indenture Events of Default and Remedies
For any Pass Through Trust, the applicable Prospectus Supplement will
describe the Indenture Events of Default under the Indentures related to the
Equipment Certificates to be held by such Pass Through Trust, the remedies that
the Indenture Trustee may exercise with respect to the related Aircraft, either
at its own initiative or upon instruction from holders of the related Equipment
Certificates, and other provisions relating to the occurrence of an Indenture
Event of Default and the exercise of remedies. Unless otherwise specified in the
applicable Prospectus Supplement, there will be no cross-default provisions in
the Indentures and, unless so specified, events resulting in an Indenture Event
of Default under any particular Indenture will not necessarily result in an
Indenture Event of Default under any other Indenture.
The Leases
Upon the commencement of any Lease, the following terms will be applicable:
Terms and Rentals. Each Leased Aircraft will be leased separately by the
related Owner Trustee to the Corporation for a term commencing on the date of
the delivery of the related Leased Aircraft to such Owner Trustee and expiring
on a date not earlier than the latest maturity date of the Leased Aircraft
Certificates issued with respect to such Leased Aircraft, unless previously
terminated or extended, as permitted by the related Lease. The scheduled rental
payments by the Corporation under each Lease will be payable on the dates
specified in the applicable Prospectus Supplement. The respective payments will
be assigned under the related Leased Aircraft Indenture by the Owner Trustee to
the Indenture Trustee to provide the funds necessary to make payments of
principal and interest due from such Owner Trustee on the Leased Aircraft
Certificates issued under such Leased Aircraft Indenture. Although in certain
cases the scheduled rental payments under the Leases may be adjusted, under no
circumstances will such payments that the Corporation will be unconditionally
obligated to make or cause to be made under any Lease be less than the scheduled
payments of principal and interest on the Leased Aircraft Certificates issued
under the Leased Aircraft Indenture relating to such Lease. See "Payments and
Limitations of Liability" above.
For any Delayed Lease Aircraft, upon the commencement of the Lease for such
Aircraft and after the related Pre-Funding Period, the Corporation will be
obligated to make scheduled rental payments under the related Lease that will be
sufficient to pay in full when due all principal of and interest on, to the
extent accrued from and after the related Pre-Funding Period, the related Leased
Aircraft Certificates, except that on the first scheduled payment date after the
related Pre-Funding Period, the difference between the rental payment due on
such date by the Corporation and the scheduled payment of principal, if any, and
interest then due on such Leased Aircraft Certificates will be payable from the
related Collateral Account and any related Additional Collateral. See "Payments
and Limitations of Liability" above. Scheduled payments of principal and
interest on the Leased Aircraft Certificates will be made on the dates specified
in the applicable Prospectus Supplement.
Net Lease. The Corporation's obligations under each Lease in respect of the
related Leased Aircraft will be those of a lessee under a "net lease."
Accordingly, the Corporation will be obligated to pay all costs of operating the
Leased Aircraft and, at its expense, to maintain, service, repair and overhaul
the Leased Aircraft so as to keep the Leased Aircraft in good condition,
ordinary wear and tear excepted, and to enable the airworthiness certification
thereof to be maintained in good standing at all times under the Transportation
Code or, under certain circumstances, under the applicable requirements of the
aeronautical authority of another country of registry. If, however, the Leased
Aircraft loses its airworthiness certification and such loss is curable, and the
Corporation, using its reasonable best efforts, undertakes such cure promptly,
diligently and continuously, then the Corporation will not be in default with
respect to such obligation.
Generally, the Corporation will be obligated to replace or cause to be
replaced all parts that may from time to time be incorporated or installed in or
attached to any Leased Aircraft (including in or on any engine) and that may
become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use. The Corporation will have the
right to make other alterations, modifications and additions to a Leased
Aircraft so long as such alterations, modifications or additions do not
materially decrease the value or utility of such Leased Aircraft or impair its
condition or airworthiness below its value, utility, condition and airworthiness
immediately prior to such alteration, modification or addition, assuming that
such Leased Aircraft was then in the condition and airworthiness required by the
related Lease. Also, in certain circumstances, the Corporation will be permitted
to remove parts (without replacement) from a Leased Aircraft or any engine (and
therefore from the Lien of the applicable Indenture) if the Corporation deems
such parts to be obsolete or no longer suitable or appropriate for use on such
Leased Aircraft so long as such removals do not decrease the utility, condition
or airworthiness of such Leased Aircraft or any such engine, although the value
of such Leased Aircraft or any such engine may be reduced by such removal. The
applicable Prospectus Supplement will contain a description of certain
limitations, if any, applicable to provisions described above.
Insurance. Unless otherwise indicated in the applicable Prospectus
Supplement, the Corporation will be obligated to carry insurance with insurers
of recognized responsibility with respect to each Leased Aircraft, at its own
cost and expense, in such amounts, against such risks, with such deductibles or
retentions (i) in the case of hull insurance, as the Corporation customarily
maintains with respect to other aircraft in the Corporation's fleet of the same
type and model and operating on the same routes as the respective Leased
Aircraft and (ii) in the case of liability insurance, as is usually carried by
similar corporations engaged in the same or similar business and similarly
situated as the Corporation, owning or operating aircraft similar to the
Aircraft. The Corporation will be permitted to maintain coverage below certain
stipulated values and may be permitted to self-insure (including by way of
deductibles and retentions) in certain circumstances, subject to certain limits.
Therefore, there is no assurance that any insurance will be carried in the
future, or, if it is carried, as to the amount of such insurance.
The Corporation and any permitted sublessee of a Leased Aircraft will be
named as insured parties under all insurance policies required by the related
Lease. The Indenture Trustee, Owner Trustee and related Owner Participant will
be named additional insureds, which will afford each of them the rights but not
the obligations of an additional insured. Unless otherwise specified in the
applicable Prospectus Supplement, liability insurance proceeds will be
distributed to the respective parties as their interests may appear and hull
insurance proceeds will be distributed to the Indenture Trustee if the amount of
such proceeds exceeds certain specified amounts. The applicable Prospectus
Supplement will contain a description of certain limitations, if any, applicable
to provisions described in this paragraph.
Lease Events of Default; Remedies. The applicable Prospectus Supplement
will describe the Lease Events of Default under the related Leases, the remedies
that the Owner Trustee may exercise with respect to the related Leased Aircraft,
and other provisions relating to the occurrence of a Lease Event of Default and
the exercise of remedies.
The Participation Agreements
The Corporation will be required to indemnify each Indenture Trustee and,
in the case of Leased Aircraft Certificates, each Owner Participant and each
Owner Trustee, and certain parties affiliated with the foregoing (but not
including holders of the Equipment Certificates or the Certificateholders), for
certain liabilities, losses, fees and expenses and for certain other matters
arising out of the transactions described herein or relating to the applicable
Aircraft or the use thereof. In addition, under certain circumstances the
Corporation will be required to indemnify such persons against certain taxes,
levies, duties, withholdings and for certain other matters relating to such
transactions or the applicable Aircraft. Subject to certain restrictions, each
Owner Participant may convey all of its right, title and interest relating to
any Leased Aircraft. Moreover, if so provided in the applicable Prospectus
Supplement, in certain limited instances the Corporation may assume an Owner
Trust's obligations under the related Leased Aircraft Certificates on a full
recourse basis.
Liquidity Facility
The applicable Prospectus Supplement may provide that one or more payments
of interest on the related Equipment Certificates of one or more Series or
distributions made by the Pass Through Trustee of the related Pass Through Trust
will be supported by a liquidity facility issued by an institution identified in
the applicable Prospectus Supplement. Unless otherwise provided in the
applicable Prospectus Supplement, the provider of the liquidity facility will
have a senior claim upon the assets securing the Equipment Certificates.
Intercreditor Issues
Equipment Certificates may be issued in different Classes, which means that
the Equipment Certificates may have different payment priorities even though
issued by the same Owner Trustee and relate to the same Aircraft. In such event,
the applicable Prospectus Supplement will describe the priority of distributions
among such Equipment Certificates (and any liquidity facilities therefor), the
ability of any Class to exercise and enforce any or all remedies with respect to
the related Aircraft (and, if the Equipment Certificates are Leased Aircraft
Certificates, the Lease related thereto) and certain other intercreditor terms
and provisions.
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Davis Polk & Wardwell, tax counsel to the Corporation,
the following discussion accurately describes the principal United States
federal income tax consequences of ownership and disposition of the Pass Through
Certificates to the initial purchasers thereof at the "issue price" who hold
such Pass Through Certificates as a capital asset, and should be read in
conjunction with any additional discussion of federal income tax consequences
included in the applicable Prospectus Supplement. This opinion is based on laws,
regulations, rulings and decisions in effect as of the date hereof. Changes to
existing law, which could have retroactive effect, may alter the consequences
described below. This opinion does not purport to address federal income tax
consequences applicable to particular categories of investors, some of which
(for example, insurance companies, financial institutions, dealers in securities
and foreign investors) may be subject to special rules. Persons considering
purchasing interests in Pass Through Certificates should consult their own tax
advisors with regard to the application of the United States federal income tax
laws to their particular situations as well as any tax consequences arising
under the laws of any state, local or foreign jurisdiction. The Pass Through
Trusts are not indemnified for any federal income taxes that may be imposed upon
them, and the imposition of any such taxes on a Pass Through Trust could result
in a reduction in the amounts available for distribution to the
Certificateholders of such Pass Through Trust.
General
The Pass Through Trusts will not themselves be subject to federal income
taxation. Each Certificateholder will be required to report on its federal
income tax return its pro rata share of the entire income from each of the
Equipment Certificates and any other property held in the related Pass Through
Trust, in accordance with such Certificateholder's method of accounting.
A purchaser of an interest in a Pass Through Certificate should be treated
as purchasing an interest in each Equipment Certificate and any other property
in the related Pass Through Trust at a price determined by allocating the
purchase price paid for the Pass Through Certificate among such Equipment
Certificates and other property in proportion to their fair market values at the
time of purchase of the Pass Through Certificate. Unless otherwise indicated in
a Prospectus Supplement, the Corporation anticipates that when all the Equipment
Certificates have been acquired by the related Pass Through Trust the purchase
price paid for a Pass Through Certificate of such Pass Through Trust by an
original purchaser of such Pass Through Certificate should be allocated among
the Equipment Certificates held in such Pass Through Trust in proportion to
their respective principal amounts.
If an Equipment Certificate held by a Pass Through Trust is prepaid for an
amount that differs from a Certificateholder's aggregate adjusted basis in the
Equipment Certificate, the Certificateholder will be considered to have sold his
pro rata share of that Equipment Certificate, and will recognize any gain or
loss equal to the difference between the Certificateholder's adjusted basis and
the amount realized from such prepayment (except to the extent attributable to
accrued interest, which would be taxable as interest income if not previously
included in income). Any such gain or loss will be long-term capital gain or
loss if the Equipment Certificate is considered to have been held for more than
one year. Net capital gains of individuals are, under certain circumstances,
taxed at lower rates than items of ordinary income. With respect to the
Equipment Certificates, an Owner Participant's conveyance of its interest in an
Owner Trust will not constitute a taxable event to the holders of interests in
the related Equipment Certificates. However, if (a) the Corporation were to
assume an Owner Trust's obligations under the related Equipment Certificates
upon a purchase of the related Aircraft by the Corporation, or (b) an Owner
Trust assumes the Corporation's obligations under the Owned Aircraft
Certificates, such assumption would be treated for federal income tax purposes
as a taxable exchange of the respective Equipment Certificates resulting in the
recognition of taxable gain or loss under the rules discussed above. For this
purpose the amount realized, as determined under current Treasury regulations on
original issue discount, will be equal to the fair market value of the
Certificateholder's pro rata share of the respective Equipment Certificates at
such time.
Sales or Exchanges of Pass Through Certificates
A Certificateholder that sells or exchanges a Pass Through Certificate will
be considered to have sold his pro rata portion of the property held by the Pass
Through Trust, and will recognize gain or loss on the basis discussed in the
preceding paragraph.
Effect of Subordination of Subordinated Certificateholders
If any Pass Through Trust with respect to a Series is subordinated with
respect to other Pass Through Trusts of the same Series (such Pass Through
Trusts being the "Subordinated Trusts" and the related Pass Through Certificates
being the "Subordinated Certificates") receives less than the full amount of the
receipts of principal or interest paid with respect to the Equipment
Certificates held by it (any shortfall in such receipts being the "Shortfall
Amounts") because of the subordination of the Equipment Certificates held by
such Pass Through Trust under the Intercreditor Agreement, the corresponding
owners of beneficial interests in the Subordinated Certificates (the
"Subordinated Certificateholders") would probably be treated for federal income
tax purposes as if they had (1) received as distributions their full share of
such receipts, (2) paid over to the relevant preferred class of
Certificateholders an amount equal to their share of such Shortfall Amount, and
(3) retained the right to reimbursement of such amounts to the extent of future
amounts payable to such Subordinated Certificateholders with respect to such
Shortfall Amount.
Under this analysis, (1) Subordinated Certificateholders incurring a
Shortfall Amount would be required to include as current income any interest or
other income of the corresponding Subordinated Trust that was a component of the
Shortfall Amount, even though such amount was in fact paid to the relevant
preferred class of Certificateholders, (2) a loss would only be allowed to such
Subordinated Certificateholders when their right to receive reimbursement of
such Shortfall Amount became worthless (i.e., when it becomes clear that funds
will not be available from any source to reimburse such loss), and (3)
reimbursement of such Shortfall Amount prior to such a claim of worthlessness
would not be taxable income to Subordinated Certificateholders because such
amount was previously included in income. These results should not significantly
affect the inclusion of income for Subordinated Certificateholders on the
accrual method of accounting, but could accelerate inclusion of income to
Subordinated Certificateholders on the cash method of accounting by, in effect,
placing them on the accrual method.
Backup Withholding
Payments made on the Pass Through Certificates, and proceeds from the sale
or exchange of the Pass Through Certificates to or through certain brokers, may
be subject to a "backup" withholding tax of 31% unless the Certificateholder
complies with certain reporting procedures or is an exempt recipient under the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"). Any
such withheld amounts will be allowed as a credit against the
Certificateholder's federal income tax and may entitle such Certificateholder to
a refund, provided that the required information is furnished to the Internal
Revenue Service.
CERTAIN UTAH TAXES
The summary set forth below is based upon applicable tax statutes,
regulations and rules promulgated thereunder, government agency rulings and
court decisions published to date, each of which is subject to change.
The Pass Through Trustee is a national banking association with its
principal corporate trust office in Salt Lake City, Utah. Ray, Quinney &
Nebeker, counsel to the Pass Through Trustee, has advised the Corporation that,
in its opinion, under currently applicable Utah laws and assuming that the Pass
Through Trustee will not hold any legal or equitable title to, or lease, any
real or tangible personal property located in Utah: (i) the Pass Through Trusts
will not be subject to any tax (including, without limitation, net or gross
income, tangible or intangible property, net worth, capital, franchise or doing
business tax), governmental fee or similar charge imposed by Utah or any
political subdivision thereof as a result of the transactions contemplated by
the Pass Through Agreement; and (ii) Certificateholders who are not residents
of, or otherwise subject to tax in or by, Utah will not be subject to any tax
(including, without limitation, net or gross income, tangible or intangible
property, net worth, capital, franchise or doing business tax), governmental fee
or similar charge imposed by Utah or any political subdivision thereof as a
result of purchasing, holding (including receiving payments with respect to) or
selling a Pass Through Certificate.
Neither the Pass Through Trusts nor the Certificateholders will be
indemnified for any state or local taxes imposed on them, and the imposition of
any such taxes on a Pass Through Trust could result in a reduction in the
amounts available for distribution to the Certificateholders of such Pass
Through Trust. In general, should a Certificateholder or any Pass Through Trust
be subject to any state or local tax which would not be imposed if such Pass
Through Trust were administered in a different jurisdiction in the United Sates
or if the Pass Through Trustee were located in a different jurisdiction in the
United States, the Pass Through Trustee will either relocate the administration
of such Pass Through Trust to such other jurisdiction or resign and, in the
event of the Pass Through Trustee's resignation, a new Pass Through Trustee in
such other jurisdiction will be appointed.
ERISA CONSIDERATIONS
Unless otherwise indicated in the applicable Prospectus Supplement, Pass
Through Certificates may not be purchased by, or with the assets of, any
employee benefit plan subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or individual retirement account or
plan subject to Section 4975 of the Internal Revenue Code. Certain governmental
plans and non-electing church plans, however, are not subject to Title I of
ERISA or Section 4975 of the Internal Revenue Code and, therefore, may purchase
the Pass Through Certificates.
PLAN OF DISTRIBUTION
The Pass Through Certificates may be sold to or through underwriters,
directly to other purchasers or through agents.
The distribution of the Pass Through Certificates may be effected from time
to time in one or more transactions at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices.
In connection with the sale of Pass Through Certificates, underwriters or
agents may receive compensation from the Corporation or from purchasers of Pass
Through Certificates for whom they may act as agents in the form of discounts,
concessions or commissions. Underwriters may sell Pass Through Certificates to
or through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters or commissions from
the purchasers for whom they may act as agents. Underwriters, dealers and agents
that participate in the distribution of Pass Through Certificates may be deemed
to be underwriters, and any discounts or commissions received by them from the
Corporation and any profit on the resale of Pass Through Certificates by them
may be deemed to be underwriting discounts and commissions, under the Securities
Act. Any such underwriter or agent will be identified, and any such compensation
received from the Corporation will be described, in the applicable Prospectus
Supplement.
Offers to purchase Pass Through Certificates may be solicited directly and
the sale thereof may be made directly to institutional investors or others, who
may be deemed to be underwriters within the meaning of the Securities Act with
respect to any resale thereof. The terms of any such sales will be described in
the Prospectus Supplement relating thereto.
Under agreements which may be entered into by the Corporation, underwriters
and agents who participate in the distribution of Pass Through Certificates may
be entitled to indemnification by the Corporation against certain liabilities,
including liabilities under the Securities Act.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporation does not intend to apply for the listing of any Series of Pass
Through Certificates on a national securities exchange. If the Pass Through
Certificates of any Series are sold to or through underwriters, the underwriters
may make a market in such Pass Through Certificates, as permitted by applicable
laws and regulations. No underwriter would be obligated, however, to make a
market in such Pass Through Certificates, and any such market-making could be
discontinued at any time at the sole discretion of the underwriters.
Accordingly, no assurance can be given as to the liquidity of, or trading
markets for, the Pass Through Certificates of any Series.
Certain of the underwriters or agents and their associates may be customers
of, engage in transactions with, and perform services for, the Corporation in
the ordinary course of business.
LEGAL MATTERS
Unless otherwise indicated in the applicable Prospectus Supplement, the
legality of the Pass Through Certificates offered hereby will be passed upon for
the Corporation by Davis Polk & Wardwell, 450 Lexington Avenue, New York, New
York 10017, and by counsel for any agents, dealers or underwriters
("Underwriters' Counsel"). Unless otherwise indicated in the applicable
Prospectus Supplement, both Davis Polk & Wardwell and Underwriters' Counsel may
rely on the opinion of counsel for the Pass Through Trustee, as to matters
relating to the authorization, execution and delivery of the Pass Through
Agreement and of each Series of Pass Through Certificates by the Pass Through
Trustee, and of Karen M. Clayborne, Senior Vice President and General Counsel of
the Corporation, as to the Corporation's authorization, execution and delivery
of the Pass Through Agreement. At February 28, 1998, Ms. Clayborne owned 2,000
shares of FDX Corporation's common stock and had been granted options to
purchase 32,500 shares of FDX Corporation's common stock. Of the options
granted, 6,800 were vested at such date.
EXPERTS
The consolidated financial statements and schedules of the Corporation
included or incorporated by reference in the Corporation's Annual Report on Form
10-K for the year ended May 31, 1997 and incorporated by reference herein, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said reports.
With respect to the unaudited interim financial information for the
quarters ended August 31, 1997 and November 30, 1997, included in the
Corporation's Quarterly Reports on Form 10-Q for such periods, which are
incorporated by reference in this Prospectus, Arthur Andersen LLP has applied
limited procedures in accordance with professional standards for a review of
such information. However, their separate reports thereon state that they did
not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their reports on that
information should be restricted in light of the limited nature of the review
procedures applied. In addition, the accountants are not subject to the
liability provisions of Section 11 of the Securities Act for their reports on
the unaudited interim financial information because those reports are not
"reports" or a "part" of the Registration Statement, of which this Prospectus is
a part, prepared or certified by the accountants within the meaning of Sections
7 and 11 of the Securities Act.
================================================================================
No dealer, salesperson or other individual has been authorized to give any
information or to make any representations not contained in this Prospectus in
connection with the offering covered by this Prospectus. If given or made, such
information or representation must not be relied upon as having been authorized
by the Corporation or the Underwriters. This Prospectus does not constitute an
offer to sell, or the solicitation of an offer to buy, the Pass Through
Certificates in any jurisdiction where, or to any person to whom, it is unlawful
to make such offer or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create an implication
that there has not been any change in the facts set forth in this Prospectus or
in the affairs of the Corporation since the date hereof.
$1,000,000,000
[COMPANY LOGO]
$1,000,000,000
Pass Through Certificates
---------------------------
PROSPECTUS
---------------------------
April__, 1998
TABLE OF CONTENTS
Page
----
Available Information...............................3
Reports to Pass Through Certificateholders..........3
Incorporation of Certain Documents by
Reference......................................3
Federal Express Corporation.........................4
Ratio of Earnings to Fixed Charges..................4
Outline of Pass Through Trust Structure.............4
Use of Proceeds.....................................5
Diagram of Payments.................................6
Description of the Pass Through Certificates........8
Description of the Equipment Certificates..........23
Federal Income Tax Consequences....................32
Certain Utah Taxes.................................34
ERISA Considerations...............................34
Plan of Distribution...............................34
Legal Matters......................................35
Experts............................................35
================================================================================
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to the registration statement or qualification under the securities laws of any
such state.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED APRIL 3, 1998
PROSPECTUS
[COMPANY LOGO]
DEBT SECURITIES
Up to $1,000,000,000 aggregate principal amount of Federal Express
Corporation (the "Corporation") unsecured debt securities (the "Debt
Securities") (or the equivalent thereof in foreign currency) may be offered for
sale from time to time pursuant to this Prospectus and one or more Prospectus
Supplements. The Debt Securities may be offered in one or more series in
amounts, at prices and on terms to be determined at the time of sale. The Debt
Securities will be unsecured obligations of the Corporation and will rank on a
parity with all other unsecured and unsubordinated indebtedness of the
Corporation.
When a particular series or issue of Debt Securities is offered (the
"Offered Debt Securities"), a supplement to this Prospectus (the "Prospectus
Supplement") will be delivered with this Prospectus setting forth with respect
to the offered securities: (i) the terms of any Offered Debt Securities
including the specific designation, aggregate principal amount, denominations,
purchase price, currency, maturity, rate (which may be fixed or variable) and
time of payment of interest (if any), redemption terms and the other terms in
connection with the offering and sale of the Offered Debt Securities; and (ii)
any initial public offering price, the net proceeds to the Corporation and the
other specific terms of the Offered Debt Securities.
Interest will be payable on the Debt Securities of each series on the dates
and at the rates per annum set forth for such Debt Securities in the applicable
Prospectus Supplement. Principal will be payable on the Debt Securities of each
series in scheduled amounts and on specified dates as set forth in the
applicable Prospectus Supplement. The Debt Securities will be issued in
registered form only and, unless otherwise specified in the applicable
Prospectus Supplement, in accordance with a book-entry system.
The Debt Securities may be sold on a negotiated or competitive bid basis to
or through underwriters or dealers or directly to other purchasers or through
agents. See "Plan of Distribution." The Prospectus Supplement relating to each
offering will set forth the names of any underwriters, dealers or agents
involved in the sale of the Debt Securities in connection with which this
Prospectus is being delivered, the amounts, if any, to be purchased by
underwriters and the compensation, if any, of such underwriters, dealers or
agents.
Prior to their issuance there will have been no market for the Debt
Securities of any series and there can be no assurance that one will develop.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporation does not intend to apply for the listing of any series of Debt
Securities on a national securities exchange.
This Prospectus may not be used to consummate sales of any Debt Securities
unless accompanied by the Prospectus Supplement applicable to the Debt
Securities being sold.
-----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------------
The date of this Prospectus is April __, 1998.
AVAILABLE INFORMATION
Federal Express Corporation (the "Corporation") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy and information statements and other information filed by the
Corporation with the Commission can be inspected, and copies may be obtained at
prescribed rates, at the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as at the following Regional
Offices of the Commission: Chicago Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and New York Regional Office, 7 World
Trade Center, New York, New York 10048. Such material can also be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov. and inspected and copied at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a registration statement on Form S-3
(together with all amendments and exhibits, herein referred to as the
"Registration Statement") filed by the Corporation under the Securities Act of
1933, as amended (the "Securities Act"). This Prospectus does not contain all of
the information included in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
Reference is made to such Registration Statement and to the exhibits relating
thereto for further information with respect to the Corporation and the
securities offered hereby.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission in accordance with the
provisions of the Exchange Act are incorporated herein by reference and made a
part hereof.
1. The Corporation's Annual Report on Form 10-K for the fiscal year
ended May 31, 1997 filed August 8, 1997.
2. The Corporation's Quarterly Reports on Form 10-Q for the fiscal
quarters ended August 31, 1997 and November 30, 1997, respectively, filed
October 14, 1997 and January 13, 1998, respectively.
3. The Corporation's Current Reports on Form 8-K dated May 22, June 11,
June 30, July 7, August 8, September 30 and October 6, 1997, and February
26, 1998, respectively, filed June 2, June 19, July 7, July 9, August 14,
October 8 and October 8, 1997, and March 6, 1998, respectively.
All documents filed by the Corporation pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and before the
termination of the offering made by this Prospectus shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein, or contained in this Prospectus, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Corporation will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any or all documents incorporated by reference
in this Prospectus, without exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Requests for such
copies should be directed to: Elizabeth R. Allen, Investor Relations, FDX
Corporation, by mail at Box 727, Memphis, Tennessee 38194-1854 or by telephone
at (901) 395-3478.
FEDERAL EXPRESS CORPORATION
The Corporation is a wholly-owned subsidiary of FDX Corporation. The
Corporation 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. Corporate headquarters are located at 2005 Corporate Avenue,
Memphis, Tennessee 38132, telephone (901) 369-3600.
RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
Nine Months
Ended
Year Ended May 31, February 28,
-------------------------------- ------------
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ----- -----
Ratio of Earnings to
Fixed Charges(a) ........... 1.4x 1.7x 2.0x 1.9x 2.0x 1.9x 2.0x
- -------------------
(a) Earnings included in the calculation of the ratio of earnings to fixed
charges represent income before income taxes plus fixed charges (other than
capitalized interest). Fixed charges include interest expense, capitalized
interest, amortization of debt issuance costs and a portion of rent expense
representative of interest.
As a result of an offering of Debt Securities, the Corporation may be
more highly leveraged than currently reflected in this table.
USE OF PROCEEDS
Unless otherwise set forth in a Prospectus Supplement, the net proceeds
from the sale of the Debt Securities will be added to the general funds of the
Corporation and used for general corporate purposes.
DESCRIPTION OF DEBT SECURITIES
The discussion that follows is a summary and does not purport to be
complete. The summary includes descriptions of the material terms of the
Indenture (defined herein) and the Debt Securities, the form of which has been
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. For the Debt Securities offered pursuant to this Prospectus and any
Prospectus Supplement, this summary will be qualified in its entirety by the
detailed information appearing in such Prospectus Supplement, as well as by the
form of the Debt Securities of each series offered thereby and the Indenture.
This summary makes use of terms defined in and is qualified in its entirety by
reference to the Indenture.
Except as otherwise indicated below or as described in the applicable
Prospectus Supplement, the following summary will apply to the Debt Securities
and the Indenture. Additional provisions with respect to the Indenture and the
Debt Securities relating to any particular offering of Debt Securities will be
described in the applicable Prospectus Supplement. To the extent that any
provision in any Prospectus Supplement is inconsistent with any provision of
this summary, the provision of such Prospectus Supplement will control.
General
The Debt Securities are to be issued under an Indenture (the "Indenture"),
between the Corporation and The First National Bank of Chicago as trustee (the
"Trustee"). The Indenture does not limit the aggregate amount of Debt Securities
which may be issued thereunder and provides that Debt Securities may be issued
thereunder in one or more series.
The Debt Securities will be unsecured obligations of the Corporation and
will rank on a parity with all other unsecured and unsubordinated indebtedness
of the Corporation.
The Indenture does not contain any debt covenants or provisions which would
afford the holders of the Debt Securities protection in the event of a highly
leveraged transaction. Other indebtedness of the Corporation ranking pari passu
with the Debt Securities have covenants that would afford those holders
privileges in the event of a change in control of the Corporation.
Reference is made to the Prospectus Supplement relating to the particular
series of Debt Securities for the following terms of such Debt Securities:
(1) the title of such Debt Securities and the series in which such Debt
Securities will be included;
(2) the authorized denominations and aggregate principal amount of such
Debt Securities;
(3) whether the Debt Securities are to be issuable in global or
certificated form;
(4) the date or dates on which such Debt Securities will mature;
(5) the rate or rates (which may be fixed or variable) per annum at
which such Debt Securities will bear interest, if any, and if such rate is
variable, the manner of calculation thereof and the date from which
interest will accrue;
(6) the place or places where the principal of (and premium, if any) and
interest, if any, on such Debt Securities shall be payable;
(7) the dates on which such interest will be payable and the
corresponding record dates;
(8) any mandatory or optional sinking fund or purchase fund or analogous
provisions;
(9) the terms and conditions upon which such Debt Securities may be
redeemed, if any, and any redemption price;
(10 ) if other than the principal amount thereof, the portion of the
principal amount of such Debt Securities which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section 502
of the Indenture;
(11 ) provisions, if any, for the defeasance of such Debt Securities;
(12 ) the currency in which payments of principal of (and premium, if
any) and interest, if any, on such Debt Securities will be payable;
(13 ) whether Additional Amounts are payable with respect to any Debt
Securities;
(14 ) any additional Events of Default or covenants applicable to such
series; and
(15 ) any other terms of such series (which terms shall not be
inconsistent with the Indenture). (Indenture, Section 301).
If a Prospectus Supplement specifies that a series of Debt Securities is
denominated in a currency or currency unit other than United States dollars,
such Prospectus Supplement shall also specify the denomination in which such
Debt Securities will be issued and the currency in which the principal, premium,
if any, and interest, if any, on such Debt Securities will be payable, which may
be United States dollars based upon the exchange rate for such other currency
unit existing on or about the time a payment is due. (Indenture, Section 301)
Unless otherwise indicated in the Prospectus Supplement relating thereto,
all outstanding Debt Securities will be exchangeable and transfers thereof will
be registrable, and principal of, premium, if any, and interest, if any, on all
Debt Securities will be payable, at the corporate trust office of the Trustee at
One First National Plaza, Chicago, Illinois; provided that payment of interest
may, at the option of the Corporation, be made by check mailed to the address of
the person entitled thereto as it appears in the Security Register or by
transfer to an account maintained by the payee with a bank located in the United
States. (Indenture, Sections 301, 307 and 1002)
Unless otherwise indicated in the Prospectus Supplement relating thereto,
all Debt Securities will be issued only in fully registered form without coupons
in denominations of $1,000 and any integral multiples thereof. No service
charge will be made for any registration of transfer or exchange of any Debt
Securities, but the Corporation may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
(Indenture, Section 305) The Indenture provides that the Debt Securities may
be issuable in permanent global form. (Indenture, Section 203) See
"Permanent Global Securities."
The Corporation's right and the rights of its creditors, including the
Holders of any Debt Securities, to participate in the assets of any subsidiary
upon its liquidation or recapitalization would be subject to the prior claims of
such subsidiary's creditors, except to the extent that the Corporation may
itself be a creditor with recognized claims against such subsidiary. The
Indenture does not limit the amount of secured or unsecured indebtedness which
may be incurred by the Corporation or its subsidiaries.
Some of the Debt Securities may be issued as discounted Debt Securities
(bearing no interest or interest at a rate which at the time of issuance is
below market rates) to be sold at a substantial discount below their stated
principal amount.
Certain federal income tax consequences and special considerations
applicable to any such securities will be described in the applicable Prospectus
Supplement.
Book-Entry Procedures
Unless otherwise specified in the applicable Prospectus Supplement, the
Debt Securities will be subject to the provisions described below. Upon
issuance, each Series of Debt Securities will be represented by one or more
fully registered global certificates. Each global note will be deposited with,
or on behalf of, The Depository Trust Company (the "DTC"), and registered in its
name or in the name of Cede & Co. ("Cede"), its nominee. No Holder will be
entitled to receive a note in certificated form, except as set forth below.
DTC has advised the Corporation that DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered pursuant to Section
17A of the Securities Exchange Act of 1934, as amended. DTC was created to hold
securities for its participants ("DTC Participants") and to facilitate the
clearance and settlement of securities transactions between DTC Participants
through electronic book-entries, thereby eliminating the need for physical
movement of certificates. DTC Participants include securities brokers and
dealers, banks, trust companies and clearing corporations. Access to DTC's
book-entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly.
Holders that are not DTC Participants but desire to purchase, sell or
otherwise transfer ownership of, or other interests in, Debt Securities may do
so only through DTC Participants. In addition, Holders will receive all
distributions of principal and interest from the Trustee through the DTC
Participants. Under the rules, regulations and procedures creating and affecting
DTC and its operation, DTC is required to make book-entry transfers of Debt
Securities among DTC Participants on whose behalf it acts and to receive and
transmit distributions of principal of, and interest on, the Debt Securities.
Under the book-entry system, Holders may experience some delay in receipt of
payments, since such payments will be forwarded by the Trustee to Cede, as
nominee for DTC, and DTC in turn will forward the payments to the appropriate
DTC Participants.
Distributions by DTC Participants to Holders will be the responsibility of
such DTC Participants and will be made in accordance with customary industry
practices. Accordingly, although Holders will not have possession of the Debt
Securities, the rules of DTC provide a mechanism by which participants will
receive payments and will be able to transfer their interests. Although the DTC
Participants are expected to convey the rights represented by their interests in
any global security to the related Holders, because DTC can only act on behalf
of DTC Participants, the ability of Holders to pledge Debt Securities to persons
or entities that are not DTC Participants or to otherwise act with respect to
such Debt Securities, may be limited due to the lack of physical certificates
for such Debt Securities.
None of the Corporation, the Trustee or any other agent of the Corporation
or the Trustee will have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the Debt Securities or for supervising or reviewing any records
relating to such beneficial ownership interests. Since the only "Holder" will be
Cede, as nominee of DTC, Holders will not be recognized by the Trustee as
Holders, as such term is used in the Indenture, and Holders will be permitted to
exercise the rights of Holders only indirectly through DTC and DTC Participants.
DTC has advised the Corporation that it will take any action permitted to be
taken by a Holder under the Indenture and any Prospectus Supplement only at the
direction of one or more DTC Participants to whose accounts with DTC the related
Debt Securities are credited.
Same-Day Settlement and Payment. All payments made by the Corporation to
the Trustee will be in immediately available funds and will be passed through to
DTC in immediately available funds.
The Debt Securities will trade in DTC's Same-Day Funds Settlement System
until maturity, and secondary market trading activity in the Debt Securities
will be required by DTC to settle in immediately available funds. No assurance
can be given as to the effect, if any, of settlement in immediately available
funds on trading activity in the Debt Securities.
Certificated Form. The Debt Securities will be issued in fully registered,
certificated form to Holders, or their nominees, rather than to DTC or its
nominee, only if DTC advises the Trustee in writing that it is no longer
willing, able or eligible to discharge properly its responsibilities as
depository with respect to the Debt Securities and the Corporation is unable to
locate a qualified successor or if the Corporation, at its option, elects to
terminate the book-entry system through DTC. In such event, the Trustee will
notify all Holders through DTC Participants of the availability of such
certificated Debt Securities. Upon surrender by DTC of the definitive global
note representing the series of Debt Securities and receipt of instructions for
reregistration, the Trustee will reissue the Debt Securities in certificated
form to Holders or their nominees. (Indenture, Section 305)
Debt Securities in certificated form will be freely transferable and
exchangeable at the office of the Trustee upon compliance with the requirements
set forth in the Indenture. No service charge will be imposed for any
registration of transfer or exchange, but payment of a sum sufficient to cover
any tax or other governmental charge may be required. (Indenture, Section 305)
Merger and Consolidation
The Indenture does not prevent any consolidation or merger of the
Corporation with or into any other Person, or successive consolidations or
mergers in which the Corporation or its successor or successors may be a party,
or any conveyance, transfer or lease of the property of the Corporation as an
entirety or substantially as an entirety, to any Person, unless:
(i) in case the Corporation 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 Corporation is merged or the Person which
acquires by conveyance, transfer, or lease the properties and assets of the
Corporation, 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 Corporation to be performed or observed;
(ii) 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
(iii) the Corporation shall have delivered to the Trustee an Officers'
Certificate or an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and such supplemental indenture
comply with the Indenture and that all conditions precedent therein
provided for relating to such transaction have been complied with.
(Indenture, Section 801)
Upon compliance with such provisions by a successor corporation or Person,
the Corporation (except in the case of a lease) would be relieved of its
obligations and covenants under the Indenture and the Debt Securities.
(Indenture, Section 802)
Modification, Amendment and Waiver
Modifications and amendments of the Indenture may be made by the
Corporation and the Trustee with the consent of the Holders 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; provided, however, that no
such modification or amendment may, without the consent of the Holder of each
debt security affected thereby:
(a) change the Stated Maturity of the principal of, or any installment
of interest on, any such debt security;
(b) reduce the principal amount of, rate of interest on, or premium
payable upon the redemption of, any such debt security;
(c) change any place of payment where, or the currency in which, any
debt security or the interest or any premium thereon is payable;
(d) impair the right to institute suit for the enforcement of any
payment on or with respect to any such debt security on or after the Stated
Maturity thereof (or, in the case of redemption, on or after the Redemption
Date); or
(e) reduce the percentage in principal amount of outstanding Debt
Securities the consent of whose Holders is required for modification or
amendment of the Indenture, for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults. (Indenture
Section 902)
The Holders of a majority in principal amount of the outstanding Debt
Securities of any series may on behalf of the Holders of all Debt Securities of
such series waive any past default under the Indenture and its consequences,
except a default in the payment of the principal, premium, if any, or interest
on any Debt Securities or in respect of a covenant or provision which under the
Indenture cannot be modified or amended without the consent of the Holder of
each outstanding debt security affected. (Indenture, Section 513)
Events of Default
The following are "Events of Default" under the Indenture with respect to
each series of Debt Securities:
(a) default for more than 30 days in the payment of any interest on any
debt security of such series;
(b) default in the payment of principal of, or premium, if any, on, any
debt security of such series at its Maturity;
(c) default in the performance, or breach, of any other covenant of the
Corporation in the Indenture for more than 60 days after written notice as
provided in the Indenture;
(d) default in the deposit of any sinking fund payment when and as due
by the terms of a Debt Security of such series; and
(e) certain events in bankruptcy, insolvency or reorganization in
respect of the Corporation. (Indenture, Section 501)
If an Event of Default with respect to all Debt Securities of any series
occurs and is continuing, then and in every such case the Trustee or the Holders
of not less than 50% in aggregate principal amount of the outstanding Debt
Securities of such series may, by a notice in writing to the Corporation (and to
the Trustee if given by Holders), declare to be due and payable immediately the
principal amount of all Debt Securities of such series. However, at any time
after such a declaration of acceleration with respect to the Debt Securities of
such series has been made, but before the Stated Maturity thereof, the Holders
of a majority in principal amount of the outstanding Debt Securities of such
series may, subject to certain conditions, rescind and annul such acceleration
if all Events of Default with respect to the Debt Securities of such series,
other than the nonpayment of accelerated principal, have been cured or waived as
provided in the Indenture. (Indenture, Section 502) For information as to waiver
of defaults, see "Modification and Waiver."
Subject to the duties of the Trustee, if an Event of Default with respect
to the Debt Securities of any series occurs and is continuing, the Indenture
provides that the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
Holders of the Debt Securities of such series, unless such Holders offer to the
Trustee reasonable indemnity. (Indenture Sections 601 and 603) Subject to such
provision for indemnity, certain conditions and certain other rights of the
Trustee, the Holders of a majority in principal amount of the outstanding Debt
Securities of such series will 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 Debt
Securities of such series. (Indenture, Section 512)
No Holder of any debt security of any series will have any right to
institute any proceeding with respect to the Indenture or for any remedy
thereunder unless such Holder has previously given to the Trustee written notice
of a continuing Event of Default, and unless the Holders of at least 50% in
principal amount of the outstanding Debt Securities of such series has made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as trustee, and the Trustee has not received from the Holders of
a majority in principal amount of the outstanding Debt Securities of such series
a direction inconsistent with such request and the Trustee has failed to
institute such proceeding within 60 days. (Indenture, Section 507) However, the
Holder of any debt security of such series will have an absolute right to
receive payment of the principal of (and premium, if any, on) and interest on
such debt security on or after the respective Stated Maturities expressed in
such debt security (or, in the case of redemption, on the Redemption Date) and
to institute suit for the enforcement of any such payment. (Indenture, Section
508)
The Indenture requires the Corporation to furnish to the Trustee annually a
statement as to the absence of certain defaults under the Indenture. (Indenture
Section 1005) The Indenture provides that the Trustee may withhold notice to the
Holders of Debt Securities of any default (except as to payment of principal or
interest with respect to such Debt Securities) if it considers such withholding
to be in the interest of the Holders of such Debt Securities. (Indenture,
Section 602)
Defeasance and Covenant Defeasance
The Indenture provides, if such provision is made applicable to the Debt
Securities of any series, that the Corporation may elect either (A) to defease
and be discharged from any and all obligations with respect to such Debt
Securities (except for the obligations to register the transfer or exchange of
such Debt Securities, to replace temporary or mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in respect of the Debt
Securities and to hold moneys for payment in trust) ("defeasance") or (B)(i) to
be released from its obligations with respect to such Debt Securities under
Sections 801 (consolidation, merger and sale of assets), 1005 (certificates of
compliance) and (ii) that Sections 501(3) (as to Sections 801 and 1005), 501(5),
501(6) and 501(7) (if Section 501(7) is specified in the Prospectus Supplement),
as described in the last three clauses of the first sentence under "Events of
Default" above, shall not be deemed to be events of default under the Indenture
with respect to such series ("covenant defeasance"), upon the deposit with the
Trustee (or other qualifying trustee), in trust for such purpose, of money, or
Government Obligations which through the payment of principal and interest in
accordance with their terms will provide money, in an amount sufficient to pay
the principal of (and premium, if any) and interest on such Debt Securities, and
any mandatory sinking fund or analogous payments thereon, on the scheduled due
dates therefor.
In the case of defeasance, the holders of such Debt Securities are entitled
to receive payments in respect of such Debt Securities solely from such trust.
Such a trust may only be established if, among other things, the Corporation has
delivered to the Trustee an Opinion of Counsel (as specified in the Indenture)
to the effect that the holders of such Debt Securities will not recognize
income, gain or loss for federal income tax purposes as a result of such
defeasance or covenant defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same time as would have been the
case if such defeasance or covenant defeasance had not occurred. Such Opinion of
Counsel, in the case of defeasance under clause (A) above, must refer to and be
based upon a ruling of the Internal Revenue Service or a change in applicable
federal income tax law occurring after the date of the Indenture. (Indenture,
Article Thirteen)
Concerning the Trustee
The Trustee acts as trustee under other indentures with respect to other
indebtedness of the Corporation which ranks pari passu with the Debt Securities.
The Corporation leases facilities financed with the proceeds of such
indebtedness and the Corporation's obligations under such leases secure payment
of such indebtedness. The Corporation also from time to time borrows from, and
maintains deposit accounts with, the Trustee.
PLAN OF DISTRIBUTION
The Debt Securities may be sold in any of the following ways: (1) through
underwriters or dealers; (2) through agents; or (3) directly to one or more
purchasers (through a specific bidding or auction process or otherwise).
The distribution of the Debt Securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed, or
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Debt Securities, underwriters or agents may
receive compensation from the Corporation or from purchasers of Debt Securities
for whom they may act as agents in the form of discounts, concessions or
commissions. Underwriters may sell Debt Securities to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters or commissions from the purchasers for whom
they may act as agents. If a dealer is utilized to sell the Debt Securities, the
Corporation will sell such Debt Securities to the dealer as principal. The
dealer may then resell such Debt Securities to the public at varying prices to
be determined by such dealer at any time of resale.
Underwriters, dealers and agents that participate in the distribution of
Debt Securities may be deemed to be underwriters, and any discounts or
commissions received by them from the Corporation and any profit on the resale
of Debt Securities by them may be deemed to be underwriting discounts and
commissions, under the Securities Act. Any such underwriter, dealer or agent
will be identified, and any such compensation received from the Corporation will
be described, in the applicable Prospectus Supplement.
Offers to purchase Debt Securities may be solicited directly and the sale
thereof may be made directly to institutional investors or others, who may be
deemed to be underwriters within the meaning of the Securities Act with respect
to any resale thereof. The terms of any such sales will be described in the
Prospectus Supplement relating thereto, including the terms of any bidding or
auction process.
If so indicated in the Prospectus Supplement, the Corporation will
authorize underwriters, dealers or agents to solicit offers by certain specified
institutions to purchase Debt Securities from the Corporation at the public
offering price set forth in the Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in the
future. Such contracts will be subject only to those conditions set forth in the
Prospectus Supplement and the Prospectus Supplement will set forth the
commission payable for the solicitation of such contracts.
Under agreements which may be entered into by the Corporation,
underwriters, dealers and agents who participate in the distribution of Debt
Securities may be entitled to indemnification by the Corporation against certain
liabilities, including liabilities under the Securities Act or to contribution
with respect to payments which the agents, underwriters or dealers may be
required to make in respect thereof.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporation does not intend to apply for the listing of any Series of Debt
Securities on a national securities exchange. If the Debt Securities of any
Series are sold to or through underwriters, the underwriters may make a market
in such Debt Securities, as permitted by applicable laws and regulations. No
underwriter would be obligated, however, to make a market in such Debt
Securities, and any such market-making could be discontinued at any time at the
sole discretion of the underwriters. Accordingly, no assurance can be given as
to the liquidity of, or trading markets for, the Debt Securities of any Series.
Certain of the underwriters, dealers or agents and their associates may be
customers of, engage in transactions with, and perform services for, the
Corporation in the ordinary course of business.
LEGAL MATTERS
Unless otherwise indicated in the Prospectus Supplement relating to the
Offered Securities, the legality of the Debt Securities will be passed upon for
the Corporation by Karen M. Clayborne, Senior Vice President and General Counsel
of the Corporation, and by counsel for any underwriters, dealers and agent. At
February 28, 1998, Ms. Clayborne owned 2,000 shares of FDX Corporation's common
stock and had been granted options to purchase 32,500 shares of FDX
Corporation's common stock. Of the options granted, 6,800 were vested at such
date.
EXPERTS
The consolidated financial statements and schedules of the Corporation
included or incorporated by reference in the Corporation's Annual Report on Form
10-K for the year ended May 31, 1997 and incorporated by reference herein, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said reports.
With respect to the unaudited interim financial information for the
quarters ended August 31, 1997 and November 30, 1997, included in the
Corporation's Quarterly Reports on Form 10-Q for such periods, which are
incorporated by reference in this Prospectus, Arthur Andersen LLP has applied
limited procedures in accordance with professional standards for a review of
such information. However, their separate reports thereon state that they did
not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their reports on that
information should be restricted in light of the limited nature of the review
procedures applied. In addition, the accountants are not subject to the
liability provisions of Section 11 of the Securities Act for their reports on
the unaudited interim financial information because those reports are not
"reports" or a "part" of the Registration Statement, of which this Prospectus is
a part, prepared or certified by the accountants within the meaning of Sections
7 and 11 of the Securities Act.
================================================================================
No dealer, salesperson or other individual has been authorized to give any
information or to make any representations not contained in this Prospectus in
connection with the offering covered by this Prospectus. If given or made, such
information or representation must not be relied upon as having been authorized
by the Corporation or the Underwriters. This Prospectus does not constitute an
offer to sell, or the solicitation of an offer to buy, the Securities in any
jurisdiction where, or to any person to whom, it is unlawful to make such offer
or solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create an implication that there has
not been any change in the facts set forth in this Prospectus or in the affairs
of the Corporation since the date hereof.
$1,000,000,000
[COMPANY LOGO]
$1,000,000,000
Debt Securities
-----------------------
PROSPECTUS
-----------------------
April __, 1998
TABLE OF CONTENTS
Page
Available Information...............................2
Incorporation of Certain Documents by
Reference......................................2
Federal Express Corporation.........................3
Ratio of Earnings to Fixed Charges..................3
Use of Proceeds.....................................3
Description of Debt Securities......................4
Plan of Distribution...............................10
Legal Matters......................................11
Experts............................................11
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following are the estimated expenses of the issuance and distribution
of the securities (other than underwriting discounts and commissions) being
registered, all of which will be paid by the Registrant:
SEC Registration Fee....................................... 292,630
Printing and Engraving..................................... 25,000
Fees of Transfer Agent and Registrar....................... 10,000
Attorneys' Fees and Expenses............................... 500,000
Trustees' Fees............................................. 20,000
Accounting Fees and Expenses............................... 20,000
Blue Sky Fees and Expenses................................. 5,000
Rating Agency Fees......................................... 125,000
New York Stock Exchange Listing Fee........................ 25,000
Miscellaneous.............................................. 5,000
---------
Total............................................. 1,027,630
=========
All of the above amounts, other than the SEC Registration Fee, are
estimated.
Item 15. Indemnification of Directors and Officers
(a) Reference is made to Section 145 of the Delaware General Corporation
Law ("DGCL") as to indemnification by the Registrant of officers and
directors.
(b) Section 13 of Article III of the by-laws of the Registrant provides
for indemnification of directors as follows:
Section 13. The corporation shall indemnify to the full extent
authorized or permitted by the General Corporation Law of the State of
Delaware any person made, or threatened to be made, a party to any
threatened, pending or completed action, suit or proceeding (whether
civil, criminal, administrative or investigative) by reason of the
fact that he, his testator or intestate is or was a director of the
corporation or serves or served as a director, officer, employee or
agent of any other enterprise at the request of the corporation.
Section 18 of Article V of the by-laws of the Registrant provides for
indemnification of officers as follows:
Section 18. The corporation shall indemnify to the full extent
authorized or permitted by the General Corporation Law of the State of
Delaware any person made, or threatened to be made, a party to any
threatened, pending or completed action, suit or proceeding (whether
civil, criminal, administrative or investigative) by reason of the
fact that he, his testator or intestate is or was an officer or
Managing Director of the corporation or serves or served as a
director, officer, employee or agent of any other enterprise at the
request of the corporation.
(c) The Underwriting Agreements filed as Exhibits 1(a), 1(b) and 1(c) to
this Registration Statement provide, under certain circumstances, for
indemnification for the Registrant and certain other persons against
certain liabilities.
(d) The Registrant has purchased insurance designed to protect the
Registrant and its directors and officers against losses arising from
certain claims, including claims under the Securities Act of 1933, as
amended.
Item 16. Exhibits
1(a) Form of Underwriting Agreement relating to Equipment Trust
Certificates (Filed as Exhibit 1(a) to Registrant's Registration
Statement on Form S-3, Commission File No. 33-52142, and incorporated
herein by reference, except that reference in such Exhibit to such
File Number shall be left blank)
1(b) Form of Underwriting Agreement relating to Pass Through Certificates
(Filed as Exhibit 1(b) to Registrant's Registration Statement on Form
S-3, Commission File No. 333-07691, and incorporated herein by
reference)
1(c) Form of Underwriting Agreement relating to Debt Securities (Filed as
Exhibit 1(c) to Registrant's Registration Statement on Form S-3,
Commission File No. 333-07691, and incorporated herein by reference)
4(a)(1) Pass Through Trust Agreement, dated as of May 1, 1997, between
Federal Express Corporation and First Security Bank, National
Association (Filed as Exhibit 4.a.3 to Registrant's Current Report on
Form 8-K dated May 12, 1997, Commission File No. 1-7806, and
incorporated herein by reference)
4(a)(2) Form of Pass Through Certificate (included in Exhibit 4(a)(1))
4(b)(1) Form of Trust Indenture and Security Agreement among the Owner
Trustee, the Indenture Trustee and Federal Express Corporation, as
Lessee, for an offering of Equipment Trust Certificates (Filed as
Exhibit 4(b)(1) to Registrant's Registration Statement on Form S-3,
Commission File No. 33-52142, and incorporated herein by reference)*
4(b)(2) Form of Equipment Trust Certificate (included in Exhibit 4(b)(1))
4(c)(1) Form of Trust Indenture and Security Agreement (Leased Aircraft
Indenture) between the Owner Trustee and the Indenture Trustee,
relating to Equipment Certificates (Leased Aircraft Certificates) in
connection with an offering of Pass Through Certificates (Filed as
Exhibit 4(c) to Registrant's Registration Statement on Form S-3,
Commission File No. 33-52142, and incorporated herein by reference)*
4(c)(2) Form of Trust Indenture and Security Agreement (Leased Aircraft
Indenture--Prefunding) between the Owner Trustee and the Indenture
Trustee, relating to Equipment Certificates (Leased Aircraft
Certificates) in connection with an offering of Pass Through
Certificates (Filed as Exhibit 4(c)(2) to Registrant's Registration
Statement on Form S-3, Commission File No. 333-07691, and
incorporated herein by reference)*
4(d) Form of Trust Indenture, Mortgage and Security Agreement (Owned
Aircraft Indenture) between Federal Express Corporation and the
Indenture Trustee, relating to Equipment Certificates (Owned Aircraft
Certificates) in connection with an offering of Pass Through
Certificates (Filed as Exhibit 4(d)(1) to Registrant's Registration
Statement on Form S-3, Commission File No. 33-56569, and incorporated
herein by reference)*
4(e)(1) Form of Participation Agreement among Federal Express Corporation, as
Lessee, the Owner Participant, the Owner Trustee, the Original Loan
Participants, if any, the Indenture Trustee and, when in connection
with an offering of Pass Through Certificates, the Pass Through
Trustee, relating to Equipment Trust Certificates or, when in
connection with an offering of Pass Through Certificates, Equipment
Certificates (Leased Aircraft Certificates) (Filed as Exhibit 4(e)(1)
to Registrant's Registration Statement on Form S-3, Commission File
No. 33-52142, and incorporated herein by reference)*
4(e)(2) Form of Participation Agreement among Federal Express Corporation, as
Lessee, the Owner Participant, the Owner Trustee, the Indenture
Trustee and the Pass Through Trustee, relating to Equipment
Certificates in connection with an offering of Pass Through
Certificates (Leased Aircraft Certificates--Prefunding) (Filed as
Exhibit 4(e)(2) to Registrant's Registration Statement on Form S-3,
Commission File No. 333-07691, and incorporated herein by reference)*
4(e)(3) Form of Participation Agreement among Federal Express Corporation,
the Pass Through Trustee and the Indenture Trustee for Equipment
Certificates (Owned Aircraft Certificates) in connection with an
offering of Pass Through Certificates (Filed as Exhibit 4(e)(2) to
Registrant's Registration Statement on Form S-3, Commission File No.
33-56569, and incorporated herein by reference)*
4(f)(1) Form of Trust Agreement between the Owner Participant and the Owner
Trustee relating to Equipment Certificates (Leased Aircraft
Certificates) in connection with an offering of Equipment Trust
Certificates or Pass Through Certificates (Filed as Exhibit 4(f) to
Registrant's Registration Statement on Form S-3, Commission File No.
33-52142, and incorporated herein by reference)*
4(f)(2) Form of Trust Agreement between the Owner Participant and the Owner
Trustee relating to Equipment Certificates (Leased Aircraft
Certificates--Prefunding) in connection with an offering of Pass
Through Certificates (Filed as Exhibit 4(f)(2) to Registrant's
Registration Statement on Form S-3, Commission File No. 333-07691,
and incorporated herein by reference)*
4(g)(1) Form of Lease Agreement between the Owner Trustee, as the Lessor, and
Federal Express Corporation, as Lessee, relating to Equipment
Certificates (Leased Aircraft Certificates) in connection with an
offering of Equipment Trust Certificates or Pass Through Certificates
(Filed as Exhibit 4(g) to Registrant's Registration Statement on Form
S-3, Commission File No. 33-52142, and incorporated herein by
reference)*
4(g)(2) Form of Lease Agreement between the Owner Trustee, as the Lessor, and
Federal Express Corporation, as Lessee, relating to Equipment
Certificates (Leased Aircraft Certificates-Prefunding) in connection
with an offering of Pass Through Certificates (Filed as Exhibit
4(g)(2) to Registrant's Registration Statement on Form S-3,
Commission File No. 333-07691, and incorporated herein by reference)*
4(h) Form of Collateral Agreement between the Owner Trustee and the
Indenture Trustee (Filed as Exhibit 4(g) to Registrant's Registration
Statement on Form S-3, Commission File No. 33-51623, and incorporated
herein by reference)
4(i) Form of Indenture dated as of July 1, 1996 between the Registrant and
The First National Bank of Chicago, as Trustee (Filed as Exhibit 4(i)
to Registrant's Registration Statement on Form S-3, Commission File
No. 333-07691, and incorporated herein by reference)
4(j) Form of Debt Security (included in Exhibit 4(i))
5(a)(1) Opinion of Davis Polk & Wardwell, counsel for Federal Express
Corporation, relating to Equipment Trust Certificates
5(a)(2) Opinion of Davis Polk & Wardwell, counsel for Federal Express
Corporation, relating to Pass Through Certificates
5(b) Opinion of Ray, Quinney & Nebeker, counsel for the Pass Through
Trustee
5(c) Opinion of Bingham Dana LLP, counsel for the Owner Trustee
5(d)(1) Opinion of Karen M. Clayborne, Senior Vice President and General
Counsel of Federal Express Corporation, relating to Equipment Trust
Certificates and Pass Through Certificates
5(d)(2) Opinion of Karen M. Clayborne, Senior Vice President and General
Counsel of Federal Express Corporation, relating to Debt Securities
8(a) Tax Opinion of Davis Polk & Wardwell, counsel for Federal Express
Corporation (included under the caption "Federal Income Tax
Consequences" in the Prospectus relating to Pass Through
Certificates)
8(b) Tax Opinion of Ray, Quinney & Nebeker, special counsel for the Pass
Through Trustee (included under the caption "Certain Utah Taxes" in
the Prospectus relating to Pass Through Certificates) (included in
Exhibit 5(b))
12 Computation of Ratio of Earnings to Fixed Charges
15 Letters of Arthur Andersen LLP, independent public accountants (Filed
as Exhibits 15.1 to Registrant's FY98 First and Second Quarterly
Reports on Form 10-Q, Commission File No. 1-7806, and incorporated
herein by reference)
23(a) Consent of Davis Polk & Wardwell, counsel for Federal Express
Corporation (included in Exhibits 5(a)(1) and 5(a)(2))
23(b) Consent of Ray, Quinney & Nebeker, counsel for the Pass Through
Trustee (included in Exhibit 5(b))
23(c) Consent of Bingham Dana LLP, counsel for the Owner Trustee (included
in Exhibit 5(c))
23(d) Consent of Karen M. Clayborne (included in Exhibits 5(d)(1) and
5(d)(2))
23(e) Consent of Arthur Andersen LLP, independent public accountants
25(a) Form T-1 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of State Street Bank and Trust Company, as
Indenture Trustee (Filed as Exhibit 25(a) to Registrant's
Registration Statement on Form S-3, Commission File No. 333-07691,
and incorporated herein by reference)
25(b) Form T-1 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The First National Bank of Chicago, as Trustee
(Filed as Exhibit 25(b) to Registrant's Registration Statement on
Form S-3, Commission File No. 333-07691, and incorporated herein by
reference)
25(c) Form T-1 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of First Security Bank, National Association, as
Pass Through Trustee (Filed as Exhibit 4.a.3 to Registrant's Current
Report on Form 8-K dated May 12, 1997, Commission File No. 1-7806,
and incorporated herein by reference)
- -------------------
* Separate Indentures, Participation Agreements, Trust Agreements and Lease
Agreements will be entered into with respect to each Leased Aircraft in
connection with any particular offering of Equipment Trust Certificates or
Pass Through Certificates. Separate Indentures and Participation Agreements
will be entered into with respect to each Owned Aircraft in connection with
an offering of Pass Through Certificates. The Prospectus Supplement for
each offering of Equipment Trust Certificates or Pass Through Certificates
will set forth any material details in which such Indentures, Participation
Agreements, Trust Agreements or Lease Agreements, as the case may be,
differ from the corresponding Exhibit for the form of such documents.
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(a) (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) under the Securities Act of 1933 if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
provided, however, the paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
Registration Statement is on Form S-3, Form S-8 or Form F-3 and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
Registrant pursuant to section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions referred to in Item 15 of this
Registration Statement, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(d) To file an application for the purpose of determining the eligibility
of the trustee to act under subsection (a) of Section 310 of the Trust Indenture
Act of 1939 in accordance with the rules and regulations prescribed by the
Commission under Section 305(b)(2) of the Trust Indenture Act of 1939.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Memphis, State of Tennessee, on this __ day of April
1998.
FEDERAL EXPRESS CORPORATION
By: /s/ Michael W. Hillard
---------------------------------------
Name: Michael W. Hillard
Title: Vice President and Controller
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Capacity Date
- ---------------------------------- -------------------- -----
/s/ Frederick W. Smith
------------------------------- Chairman of the Board and Director
Frederick W. Smith
/s/ Alan B. Graf, Jr.
------------------------------- Director
Alan B. Graf, Jr.
/s/ Theodore L. Weise
------------------------------- President, Chief Executive Officer
Theodore L. Weise and Director (Principal Executive
Officer)
/s/ Kenneth R. Masterson
------------------------------- Director
Kenneth R. Masterson
/s/ T. Michael Glenn
------------------------------- Director
T. Michael Glenn
/s/ Dennis H. Jones
------------------------------- Director
Dennis H. Jones
/s/ David J. Bronczek
------------------------------- Executive Vice President, Chief
David J. Bronczek Operating Officer and Director
/s/ Michael W. Hillard
------------------------------- Vice President and Controller
Michael W. Hillard (Principal Accounting Officer)
/s/ Tracy G. Schmidt
------------------------------- Senior Vice President and Chief
Tracy G. Schmidt Financial Officer (Principal
Financial Officer)
EXHIBIT INDEX
Exhibits Exhibit Description
- -------- -------------------
1(a) Form of Underwriting Agreement relating to Equipment Trust Certificates
(Filed as Exhibit 1(a) to Registrant's Registration Statement on Form
S-3, Commission File No. 33-52142, and incorporated herein by
reference, except that reference in such Exhibit to such File Number
shall be left blank)
1(b) Form of Underwriting Agreement relating to Pass Through Certificates
(Filed as Exhibit 1(b) to Registrant's Registration Statement on Form
S-3, Commission File No. 333-07691, and incorporated herein by
reference)
1(c) Form of Underwriting Agreement relating to Debt Securities (Filed as
Exhibit 1(c) to Registrant's Registration Statement on Form S-3,
Commission File No. 333-07691, and incorporated herein by reference)
4(a)(1) Pass Through Trust Agreement, dated as of May 1, 1997 between Federal
Express Corporation and First Security Bank, National Association
(Filed as Exhibit 4.a.3 to Registrant's Current Report on Form 8-K
dated May 12, 1997, Commission File No. 1-7806, and incorporated herein
by reference)
4(a)(2) Form of Pass Through Certificate (included in Exhibit 4(a)(1))
4(b)(1) Form of Trust Indenture and Security Agreement among the Owner Trustee,
the Indenture Trustee and Federal Express Corporation, as Lessee, for
an offering of Equipment Trust Certificates (Filed as Exhibit 4(b)(1)
to Registrant's Registration Statement on Form S-3, Commission File No.
33-52142, and incorporated herein by reference)*
4(b)(2) Form of Equipment Trust Certificate (included in Exhibit 4(b)(1))
4(c)(1) Form of Trust Indenture and Security Agreement (Leased Aircraft
Indenture) between the Owner Trustee and the Indenture Trustee,
relating to Equipment Certificates (Leased Aircraft Certificates) in
connection with an offering of Pass Through Certificates (Filed as
Exhibit 4(c) to Registrant's Registration Statement on Form S-3,
Commission File No. 33-52142, and incorporated herein by reference)*
4(c)(2) Form of Trust Indenture and Security Agreement (Leased Aircraft
Indenture--Prefunding) between the Owner Trustee and the Indenture
Trustee, relating to Equipment Certificates (Leased Aircraft
Certificates) in connection with an offering of Pass Through
Certificates (Filed as Exhibit 4(c)(2) to Registrant's Registration
Statement on Form S-3, Commission File No. 333-07691, and incorporated
herein by reference)*
4(d) Form of Trust Indenture, Mortgage and Security Agreement (Owned
Aircraft Indenture) between Federal Express Corporation and the
Indenture Trustee, relating to Equipment Certificates (Owned Aircraft
Certificates) in connection with an offering of Pass Through
Certificates (Filed as Exhibit 4(d)(1) to Registrant's Registration
Statement on Form S-3, Commission File No. 33-56569, and incorporated
herein by reference)*
4(e)(1) Form of Participation Agreement among Federal Express Corporation, as
Lessee, the Owner Participant, the Owner Trustee, the Original Loan
Participants, if any, the Indenture Trustee and, when in connection
with an offering of Pass Through Certificates, the Pass Through
Trustee, relating to Equipment Trust Certificates or, when in
connection with an offering of Pass Through Certificates, Equipment
Certificates (Leased Aircraft Certificates) (Filed as Exhibit 4(e)(1)
to Registrant's Registration Statement on Form S-3, Commission File No.
33-52142, and incorporated herein by reference)*
4(e)(2) Form of Participation Agreement among Federal Express Corporation, as
Lessee, the Owner Participant, the Owner Trustee, the Indenture Trustee
and the Pass Through Trustee, relating to Equipment Certificates in
connection with an offering of Pass Through Certificates (Leased
Aircraft Certificates--Prefunding) (Filed as Exhibit 4(e)(2) to
Registrant's Registration Statement on Form S-3, Commission File No.
333-07691, and incorporated herein by reference)*
4(e)(3) Form of Participation Agreement among Federal Express Corporation, the
Pass Through Trustee and the Indenture Trustee for Equipment
Certificates (Owned Aircraft Certificates) in connection with an
offering of Pass Through Certificates (Filed as Exhibit 4(e)(2) to
Registrant's Registration Statement on Form S-3, Commission File No.
33-56569, and incorporated herein by reference)*
4(f)(1) Form of Trust Agreement between the Owner Participant and the Owner
Trustee relating to Equipment Certificates (Leased Aircraft
Certificates) in connection with an offering of Equipment Trust
Certificates or Pass Through Certificates (Filed as Exhibit 4(f) to
Registrant's Registration Statement on Form S-3, Commission File No.
33-52142, and incorporated herein by reference)*
4(f)(2) Form of Trust Agreement between the Owner Participant and the Owner
Trustee relating to Equipment Certificates (Leased Aircraft
Certificates--Prefunding) in connection with an offering of Pass
Through Certificates (Filed as Exhibit 4(f)(2) to Registrant's
Registration Statement on Form S-3, Commission File No. 333-07691, and
incorporated herein by reference)*
4(g)(1) Form of Lease Agreement between the Owner Trustee, as the Lessor, and
Federal Express Corporation, as Lessee, relating to Equipment
Certificates (Leased Aircraft Certificates) in connection with an
offering of Equipment Trust Certificates or Pass Through Certificates
(Filed as Exhibit 4(g) to Registrant's Registration Statement on Form
S-3, Commission File No. 33-52142, and incorporated herein by
reference)*
4(g)(2) Form of Lease Agreement between the Owner Trustee, as the Lessor, and
Federal Express Corporation, as Lessee, relating to Equipment
Certificates (Leased Aircraft Certificates-Prefunding) in connection
with an offering of Pass Through Certificates (Filed as Exhibit 4(g)(2)
to Registrant's Registration Statement on Form S-3, Commission File No.
333-07691, and incorporated herein by reference)*
4(h) Form of Collateral Agreement between the Owner Trustee and the
Indenture Trustee (Filed as Exhibit 4(g) to Registrant's Registration
Statement on Form S-3, Commission File No. 33-51623, and incorporated
herein by reference)
4(i) Form of Indenture dated as of July 1, 1996 between the Registrant and
The First National Bank of Chicago, as Trustee (Filed as Exhibit 4(i)
to Registrant's Registration Statement on Form S-3, Commission File No.
333-07691, and incorporated herein by reference)
4(j) Form of Debt Security (included in Exhibit 4(i))
5(a)(1) Opinion of Davis Polk & Wardwell, counsel for Federal Express
Corporation, relating to Equipment Trust Certificates
5(a)(2) Opinion of Davis Polk & Wardwell, counsel for Federal Express
Corporation, relating to Pass Through Certificates
5(b) Opinion of Ray, Quinney & Nebeker, counsel for the Pass Through Trustee
5(c) Opinion of Bingham Dana LLP, counsel for the Owner Trustee
5(d)(1) Opinion of Karen M. Clayborne, Senior Vice President and General
Counsel of Federal Express Corporation, relating to Equipment Trust
Certificates and Pass Through Certificates
5(d)(2) Opinion of Karen M. Clayborne, Senior Vice President and General
Counsel of Federal Express Corporation, relating to Debt Securities
8(a) Tax Opinion of Davis Polk & Wardwell, counsel for Federal Express
Corporation (included under the caption "Federal Income Tax
Consequences" in the Prospectus relating to Pass Through Certificates)
8(b) Tax Opinion of Ray, Quinney & Nebeker, special counsel for the Pass
Through Trustee (included under the caption "Certain Utah Taxes" in the
Prospectus relating to Pass Through Certificates) (included in Exhibit
5(b))
12 Computation of Ratio of Earnings to Fixed Charges
15 Letters of Arthur Andersen LLP, independent public accountants (Filed
as Exhibits 15.1 to Registrant's FY98 First and Second Quarterly
Reports on Form 10-Q, Commission File No. 1-7806, and incorporated
herein by reference)
23(a) Consent of Davis Polk & Wardwell, counsel for Federal Express
Corporation (included in Exhibits 5(a)(1) and 5(a)(2))
23(b) Consent of Ray, Quinney & Nebeker, counsel for the Pass Through Trustee
(included in Exhibit 5(b))
23(c) Consent of Bingham Dana LLP, counsel for the Owner Trustee (included in
Exhibit 5(c))
23(d) Consent of Karen M. Clayborne (included in Exhibits 5(d)(1) and
5(d)(2))
23(e) Consent of Arthur Andersen LLP, independent public accountants
25(a) Form T-1 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of State Street Bank and Trust Company, as Indenture
Trustee and as Pass Through Trustee (Filed as Exhibit 25(a) to
Registrant's Registration Statement on Form S-3, Commission File No.
333-07691, and incorporated herein by reference)
25(b) Form T-1 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The First National Bank of Chicago, as Trustee
(Filed as Exhibit 25(b) to Registrant's Registration Statement on Form
S-3, Commission File No. 333-07691, and incorporated herein by
reference)
25(c) Form T-1 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of First Security Bank, National Association (Filed
as Exhibit 4.a.3 to Registrant's Current Report on Form 8-K dated May
12, 1997, Commission File No. 1-7806, and incorporated herein by
reference)
- -------------------
* Separate Indentures, Participation Agreements, Trust Agreements and Lease
Agreements will be entered into with respect to each Leased Aircraft in
connection with any particular offering of Equipment Trust Certificates or
Pass Through Certificates. Separate Indentures and Participation Agreements
will be entered into with respect to each Owned Aircraft in connection with
an offering of Pass Through Certificates. The Prospectus Supplement for
each offering of Equipment Trust Certificates or Pass Through Certificates
will set forth any material details in which such Indentures, Participation
Agreements, Trust Agreements or Lease Agreements, as the case may be,
differ from the corresponding Exhibit for the form of such documents.
[Letterhead of Davis Polk & Wardwell]
April 3, 1998
Federal Express Corporation
2005 Corporate Avenue
Memphis, Tennessee 38132
Ladies and Gentlemen:
We have acted as special counsel for Federal Express Corporation, a
Delaware corporation (the "Corporation"), in connection with the
preparation and filing with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), of a shelf Registration Statement on Form S-3 (the "Registration
Statement"). The Registration Statement relates to up to $1,000,000,000
aggregate principal amount of Equipment Trust Certificates (the
"Certificates") that may be issued by the Corporation in one or more series
from time to time on a delayed basis. Each series of Certificates will be
issued pursuant to the provisions of a separate Trust Indenture and
Security Agreement to be entered into between State Street Bank and Trust
Company of Connecticut, National Association, as Owner Trustee (the "Owner
Trustee") and First Security Bank, National Association, as Indenture
Trustee (the "Indenture Trustee"), substantially in the form filed as
Exhibit 4(c)(2) to the Registration Statement (each, an "Indenture" and, in
the case of a refinancing transaction, each, as originally executed and as
supplemented by a related Indenture Supplement, an "Original Indenture").
In connection with the opinions expressed below, we have examined
originals, or copies certified to our satisfaction, of such agreements,
documents and certificates of governmental officials and corporate officers as
we have deemed necessary or advisable as a basis for such opinions. In such
examination, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity
with the originals of all documents submitted to us as copies. We have also
examined the form of Indenture filed with the Commission. Unless otherwise
defined herein, capitalized terms used herein have the meanings assigned
thereto in the related Indentures.
Based on the foregoing, it is our opinion that:
Assuming (i) the due authorization, execution and delivery of the
Indentures and the Trust Agreements and, in the case of a refinancing
transaction, the Original Indentures and the related Indenture Supplements
by each of the parties thereto, (ii) that the Trust Agreements, the
Original Indentures, if any, and the related Indenture Supplements have not
been terminated, varied, transferred or assigned, (iii) the due
authorization, execution, issuance and delivery by the Owner Trustee, and
the due authentication and delivery by the Indenture Trustee, of the
Certificates to be issued under each such Indenture, in each case in
accordance with the terms of such Indenture and (iv) in the case of a
refinancing transaction, that the outstanding Original Loan Certificate
under each Original Indenture is delivered by the holder thereof to the
Indenture Trustee thereunder for cancellation and is cancelled, (A) the
Indentures, when duly executed and delivered, will constitute valid and
binding agreements of each of the parties thereto, and (B) the
Certificates, when duly authorized, executed, issued and delivered by the
Owner Trustee and duly authenticated and delivered by the Indenture Trustee
in accordance with the terms of the respective Indentures and sold in
accordance with the related purchase agreement or underwriting agreement
between the Corporation and the purchasers or underwriters, as the case may
be, named therein, will be valid and binding obligations of the Owner
Trustee and will be entitled to the benefits of the applicable Indenture.
In giving the foregoing opinion we do not purport to be experts on, or to
express any opinion herein concerning, any laws other than the laws of the
state of New York and the laws of the United States. In giving the forgoing
opinion, we express no opinion as to the priority of the security interests
created by the Original Indentures, if any, or the Indentures.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the prospectus, and in any subsequently filed prospectus
supplements, relating to the Certificates that constitutes part of the
Registration Statement.
Very truly yours,
/s/ DAVIS POLK & WARDWELL
[Letterhead of Davis Polk & Wardwell]
April 3, 1998
Federal Express Corporation
2005 Corporate Avenue
Memphis, Tennessee 38132
Ladies and Gentlemen:
We have acted as special counsel for Federal Express Corporation, a
Delaware corporation (the "Corporation"), in connection with the preparation
and filing with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Securities Act"), of a shelf
Registration Statement on Form S-3 (the "Registration Statement"). The
Registration Statement relates to up to $1,000,000,000 aggregate amount of Pass
Through Certificates (the "Pass Through Certificates") that may be issued by
the Corporation in one or more series from time to time on a delayed basis.
The Pass Through Certificates will be issued pursuant to the provisions of the
Pass Through Trust Agreement dated as of May 1, 1997 between the Corporation
and First Security Bank, National Association, as Pass Through Trustee (the
"Pass Through Trustee"), filed as Exhibit 4(a)(1) to the Registration
Statement (the "Pass Through Agreement") as supplemented by a separate Series
Supplement for each series of Pass Through Certificates (each, a "Series
Supplement").
In connection with the opinions expressed below, we have examined
originals, or copies certified to our satisfaction, of such agreements,
documents and certificates of governmental officials and corporate officers as
we have deemed necessary or advisable as a basis for such opinions. In such
examination, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity
with the originals of all documents submitted to us as copies. We have also
examined the Pass Through Agreement filed with the Commission. Unless
otherwise defined herein, capitalized terms used herein have the meanings
assigned thereto in the Pass Through Agreement.
Based on the foregoing, it is our opinion that:
Assuming (i) the due authorization, execution and delivery of the Pass
Through Agreement and each applicable Series Supplement by each of the parties
thereto (other than the Corporation), (ii) that the Pass Through Agreement and
each applicable Series Supplement have not been terminated, varied, transferred
or assigned, (iii) the due authorization, execution, issue, delivery and
authentication by the Pass Through Trustee of the Pass Through Certificates to
be issued under the Pass Through Agreement and each applicable Series
Supplement, in each case in accordance with the terms of such Pass Through
Agreement and each such Series Supplement and (iv) that any outstanding
equipment trust certificates previously issued by the Owner Trustee under any
related Indenture have been delivered to the Indenture Trustee thereunder for
cancellation and have been cancelled, (A) the Pass Through Agreement
constitutes, and each applicable Series Supplement when duly executed and
delivered will constitute, valid and binding agreements of each of the parties
thereto, and (B) the Pass Through Certificates, when duly authorized,
executed, issued, delivered and authenticated by the Pass Through Trustee in
accordance with the terms of the Pass Through Agreement and each applicable
Series Supplement and sold in accordance with the related purchase agreement
or underwriting agreement between the Corporation and the purchasers or
underwriters, as the case may be, named therein, will be valid and binding
obligations of the Pass Through Trustee and will be entitled to the benefits
of the Pass Through Agreement and each applicable Series Supplement.
In giving the foregoing opinion we do not purport to be experts on, or to
express any opinion herein concerning, any laws other than the laws of the
state of New York and the laws of the United States.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to our firm under the captions
"Legal Matters" and "Federal Income Tax Consequences" in the prospectus, and
in any subsequently filed prospectus supplements, relating to the Pass Through
Certificates that constitutes part of the Registration Statement.
Very truly yours,
/s/ DAVIS POLK & WARDWELL
[Letterhead of Ray, Quinney & Nebeker]
April 3, 1998
Federal Express Corporation
2005 Corporate Avenue
Memphis, Tennessee 38132
Attention: Chief Financial Officer
Re: Federal Express Corporation
Ladies and Gentlemen:
We are acting as counsel to First Security Bank, National Association, a
national banking association, individually ("FSB"), and as Pass Through
Trustee (the "Pass Through Trustee") under the Pass Through Trust Agreement
dated as of May 1, 1997 (the "Agreement"), between Federal Express Corporation
(the "Company") and the Pass Through Trustee. Pursuant to the Agreement and
one or more supplemental agreements to be entered into from time to time
between the Company and the Pass Through Trustee, the Pass Through Trustee
will execute, authenticate and deliver, upon the Company's request, Pass
Through Certificates in one or more series in an aggregate principal amount of
up to $1,000,000,000 ("Pass Through Certificates"), to be registered with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "1933 Act"), under the Company's Registration Statement on Form
S-3 (the "Registration Statement"). Except as otherwise defined herein, terms
used herein shall have the meanings set forth in the Agreement.
Our representation of the Pass Through Trustee has been as special counsel for
the purposes stated above. As to all matters of fact (including factual
conclusions and characterizations and descriptions of purpose, intention or
other state of mind), we have relied entirely upon (i) the representations of
the parties set forth in the Operative Agreements and (ii) certificates
delivered to us by the management of FSB and have assumed, without independent
inquire, the accuracy of those representations and certificates.
We have examined the Agreement and the Pass Through Certificates, and
originals, or copies certified or otherwise identified to our satisfaction, of
such other records, documents, certificates, or other instruments as we have
deemed necessary or advisable for the purposes of this opinion.
Based on and subject to the foregoing, we are of the opinion that:
1. FSB is a national banking association duly organized and validly
existing in good standing under the law of the United States of America with
the power and authority to execute, deliver and carry out, individually or as
Pass Through Trustee, as the case may be, the terms of the Agreement, the
supplements contemplated thereby and the Pass Through Certificates.
2. With respect to the Pass Through Certificates, when (a) the Agreement
establishing the terms of the Pass Through Certificates of such series and
forming the related Pass Through Trust shall have been duly authorized,
executed and delivered by the Company and the Pass Through Trustee in
accordance with the terms and conditions of the Agreement, and (b) the Pass
Through Certificates shall have been duly executed, authenticated, issued and
delivered by the Pass Through Trustee and sold as contemplated by each of the
Registration Statement and the prospectus included therein relating to the
Pass Through Certificates, the supplement or supplements to such prospectus
relating to the Pass Through Certificates of such series, the purchase
agreement or underwriting agreement between the Company and the purchasers or
underwriters named therein, as the case may be, relating thereto and the
Agreement, assuming that the terms of the Pass Through Certificates are in
compliance with then applicable law, (i) the Agreement will constitute a valid
and binding obligation of the Pass Through Trustee enforceable against the
Pass Through Trustee in accordance with its terms, and (ii) the Pass Through
Certificates will be validly issued and will be entitled to the benefits of
the Agreement pursuant to which it was issued.
3. The discussion in the prospectus forming part of the Registration
Statement entitled "Certain Utah Taxes", insofar as it relates to statements
of law or legal conclusions, is correct in all material respects.
The foregoing opinions are subject to the following assumptions, exceptions
and qualifications:
A. The foregoing opinions are limited to the laws of the State of Utah
and the federal laws of the United States of America governing the banking and
trust powers of FSB. In addition, without limiting the foregoing we express
no opinion with respect to (i) federal securities laws, including the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal
Aviation Act of 1958, as amended or (iii) state securities or blue sky laws.
Insofar as the foregoing opinions relate to the legality, validity, binding
effect and enforceability of the documents involved in these transactions,
which by their terms are governed by the laws of a state other than Utah, we
have assumed that such documents constitute legal, valid, binding and
enforceable agreements under the laws of such other state, as to which we
express no opinion.
B. The foregoing opinions regarding enforceability of any document or
instrument are subject to (i) applicable bankruptcy, insolvency, moratorium,
reorganization, receivership and similar laws affecting the rights and
remedies of creditors generally, and (ii) general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
C. As to the documents involved in these transactions, we have assumed
that each is a legal, valid and binding obligation of each party thereto,
other than FSB or the Pass Through Trustee, and is enforceable against each
such party in accordance with their respective terms.
D. We have assumed that all signatures, other than those of the Pass
Through Trustee or FSB, on documents and instruments involved in these
transactions are genuine, that all documents and instruments submitted to us
as originals are authentic, and that all documents and instruments submitted
to us as copies conform with the originals, which facts we have not
independently verified.
E. We do not purport to be experts in respect of, or express any opinion
concerning laws, rules or regulations applicable to the particular nature of
the equipment involved in these transactions.
F. In addition to any other limitation by operation of law upon the
scope, meaning, or purpose of this opinion, this opinion speaks only as of the
date hereof. We have no obligation to advise the recipients of this opinion
(or any third party) of changes of law or fact that may occur after the date
hereof, even though the change may affect the legal analysis, a legal
conclusion or an information confirmation herein.
G. The opinions expressed in this letter are solely for the use of the
parties to which it is addressed in matters directly related to the Agreement
and the transactions contemplated thereunder and these opinions may not be
relied on by any other persons or for any other purpose without our prior
written approval. The opinions expressed in this letter are limited to the
matter set forth in this letter, and no other opinions should be inferred
beyond the matters expressly stated.
[Rest of this page left intentionally blank]
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement, and to the reference to us under the captions "Legal
Matters" and "Certain Utah Taxes" in the prospectus and in any subsequently
filed prospectus supplements. In giving this consent, we do not thereby admit
that we are in the category of person whose consent is required under Section
7 of the 1933 Act or the Rules and Regulations of the Securities and Exchange
Commission.
Very truly yours,
RAY, QUINNEY & NEBEKER
/s/ M. JOHN ASHTON
---------------------------------
M. John Ashton
[Letterhead of Bingham Dana LLP]
April 3, 1998
Federal Express Corporation
2005 Corporate Avenue
Memphis, Tennessee 38132
Re: Federal Express Corporation $1,000,000,000 Shelf Registration
Ladies and Gentlemen:
We have acted as counsel to State Street Bank and Trust Company of
Connecticut, National Association, a national banking association in its
individual capacity ("State Street") and in its capacity as Owner Trustee (the
"Owner Trustee") under one or more Trust Agreements ("Trust Agreements"), in
connection with the filing by Federal Express Corporation ("Federal Express")
with the Securities and Exchange Commission under the Securities Act of 1933,
as amended (the "1933 Act"), of the Registration Statement on Form S-3 to
which this opinion is attached as Exhibit 5(c), which Registration Statement
we understand is to be filed with the Securities and Exchange Commission on
the date hereof (as such Registration Statement may be amended from time to
time, the "Registration Statement"). The Registration Statement relates to
the issuance from time to time of up to $1,000,000,000 aggregate principal
amount of Equipment Trust Certificates (the "Certificates") that will be
issued by the Owner Trustee in connection with certain leveraged lease finance
transactions pursuant to one or more Trust Agreements, each between State
Street and the owner participant named therein (the "Owner Participant"), and
one or more Trust Indenture and Security Agreements (individually an
"Indenture", collectively the "Indentures") between the Owner Trustee and First
Security Bank, National Association ("First Security") as indenture trustee.
Except as otherwise defined herein, all capitalized terms used herein shall
have the respective meanings set forth in, or by reference to, the Indentures.
State Street has requested that we deliver this opinion to you.
Our representation of State Street has been as special counsel for
the purposes stated above. As to all matters of fact (including factual
conclusions and characterizations and descriptions of purpose, intention or
other state of mind), we have relied entirely upon (i) the representations of
the parties set forth in the Operative Agreements and (ii) certificates
delivered to us by the management of State Street and have assumed, without
independent inquiry, the accuracy of those representations and certificates.
We have examined a form of Trust Agreement and a form of Indenture
which you have furnished to us and which have been filed as exhibits to the
Registration Statement, the Certificate of the Comptroller of the Currency
relating to State Street and originals, or copies certified or otherwise
identified to our satisfaction, of such other corporate records, documents,
certificates and other instruments as we have deemed necessary or advisable
for the purposes of rendering this opinion.
Each opinion set forth below relating to the enforceability of any
agreement or instrument against State Street, the Owner Trustee or the Owner
Participant, as applicable, is subject to the following general qualifications:
(i) as to any agreement to which State Street or the Owner
Trustee, as applicable, is a party (other than the Trust Agreement with
respect to the Owner Participant), we assume that such agreement will be
the legal, valid and binding obligation of each other party thereto;
(ii) the enforceability of any obligation of State Street,
the Owner Trustee and the Owner Participant, may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, marshaling or other similar laws and rules of law affecting
the enforcement generally of creditors' rights and remedies (including
such as may deny giving effect to waivers of debtors' or guarantors'
rights);
(iii) no opinion is given herein as to the enforceability of
any particular provision of any of the Indentures relating to remedies
after default or as to the availability of any specific or equitable
relief of any kind. However, we are of the opinion that, subject to the
other limitations and qualifications contained in this opinion, the
remedies provided in the Indentures, taken as a whole, are adequate for
the realization of the principal benefits or security of said agreements
(except for the economic consequences of procedural or other delay); and
(iv) the enforcement of any rights and the availability of
any specific or equitable relief of any kind may in all cases be subject
to an implied duty of good faith and to general principles of equity
(regardless of whether such enforceability or relief is considered in a
proceeding at law or in equity) and, as to any of your rights to
collateral security, will be subject to a duty to act in a commercially
reasonable manner.
Subject to the limitations set forth herein, we have made such
examination of law as we have deemed necessary for the purposes of this
opinion. The opinions expressed herein are limited solely to the internal
substantive laws of the State of Connecticut and the Federal laws of the
United States of America governing the banking and trust powers of State
Street and, solely with respect to the validity and binding nature of the
Indentures and the Certificates, the laws of the State of New York. Insofar
as the opinions expressed herein involve the laws of the State of New York, we
have with your permission and without independent investigation relied
entirely upon the opinion letter dated April 3, 1998 of Davis Polk & Wardwell,
and the opinions set forth herein are subject to each of the assumptions,
exceptions, qualifications and limitations contained in such opinion letter.
We have assumed that the Trust Agreements and the Indentures will not differ
in any material respect from the forms of Trust Agreement and Indenture filed
as exhibits to the Registration Statement and that no relevant provision of
Connecticut, New York or United States of America federal law will have
differed in any material respect from such law as in effect on the date
hereof. No opinion is expressed herein as to the application or effect of
federal securities laws or as to the securities or so-called "Blue Sky" laws
of any state or other jurisdiction. In addition, no opinion is expressed as
to matters governed by the Transportation Code, or by any other law, statute,
rule or regulation of the United States relating to the acquisition,
ownership, registration, use, operation, maintenance, repair, replacement or
sale of or the nature of the Aircraft, Airframe or the Engines.
We have made no examination of, and no opinion is given herein as
to the Owner Trustee's or Owner Participant's title to or other ownership
rights in, or the existence of any liens, charges or encumbrances on, or
adverse claims against, any of the Indenture Estates. In addition, we express
no opinion as to the creation, attachment, perfection or priority of any
mortgage, security interest or lien in any of the Indenture Estates.
This opinion is rendered solely for your benefit in connection
with the transactions contemplated by the Operative Agreements and may not be
used or relied upon by any other person or for any other purpose.
Based upon the foregoing and subject to the assumptions, exceptions
and qualifications set forth below, we are of the opinion that:
1. State Street is a national banking association duly organized,
validly existing and in good standing with the Comptroller of the
Currency under the laws of the United States of America, holding a valid
certificate to do business as a national banking association, with
banking and trust powers.
2. Upon the execution and delivery by State Street and the Owner
Trustee, as the case may be, of each of the Trust Agreements and the
execution and delivery of the Trust Agreements by the respective owner
participant and assuming that at the time of such execution and delivery
State Street continues in existence as a national banking association in
good standing with trust powers and has maintained its current full
corporate power and authority to enter into and perform the Trust
Agreements, each of the Trust Agreements will constitute a legal, valid
and binding obligation of the Owner Trustee (and, to the extent set
forth in the respective Trust Agreements, of State Street) enforceable
against the Owner Trustee (and, to the extent set forth in the
respective Trust Agreements, against State Street) in accordance with
its terms; and assuming each of the Trust Agreements is properly
authorized, executed and delivered by such owner participant and that
the terms of the Trust Agreements are not, and the performance by the
applicable owner participant is not, in violation of its charter or
by-laws or any laws (federal, state or otherwise), documents, judgments,
regulations or other provisions applicable to such participant, each of
the Trust Agreements will constitute, under the laws of the State of
Connecticut, a legal, valid and binding obligation of the owner
participant enforceable against the owner participant named therein in
accordance with its terms.
3. Assuming (i) the due authorization, execution and delivery of
each of the Indentures by each of the parties to each such document
(other than State Street or the Owner Trustee, as the case may be), (ii)
that each such party (other than State Street or the Owner Trustee, as
the case may be) has, at the time of execution, the corporate power,
authority and legal right to execute, deliver and perform each Indenture
to which it is a party, (iii) that each such party (other than State
Street or the Owner Trustee, as the case may be) continues to have such
power, authority and legal right, (iv) that the execution, delivery and
performance of each such Indenture by each such party (other than State
Street or the Owner Trustee, as the case may be) will not violate such
party's respective charter or by-laws and fully complies with all laws
and governmental rules and regulations (federal, state, or otherwise)
that may be applicable to such party, in its individual or trust
capacity, as the case may be, (v) that no such document has been
terminated, amended, transferred or assigned, and (vi) that the
conditions to the closing of the transactions contemplated by the Trust
Agreements and the Indentures set forth in the Trust Agreements, the
Indentures and the Indentures set forth in the Trust Agreements, the
Indentures and the other Operative Agreements, as applicable, will have
been satisfied, and (vii) that State Street or the Owner Trustee, as the
case may be, has maintained its current full corporate power and
authority to enter into and perform the Trust Agreements and Indentures
and to enter into, issue and perform the Certificates to be issued under
each Indenture, (a) upon the execution and delivery of the Indentures by
State Street or the Owner Trustee, as the case may be, the Indentures
will constitute valid and binding agreements of State Street or the
Owner Trustee, as the case may be, and (b) upon the due execution by the
Owner Trustee and the due authentication by First Security as indenture
trustee of each Certificate to be issued under each such Indenture, in
each case in accordance with the terms of each such Indenture, each such
Certificate, when issued and sold in accordance with the purchase
agreement or underwriting agreement between Federal Express and the
purchasers or underwriters, as the case may be, named therein will be a
valid and binding obligation of the Owner Trustee and will be entitled
to the benefits of the Indenture pursuant to which it was issued.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in any subsequently filed prospectus supplements forming part of the
Registration Statement. In giving this consent, we do not thereby admit that
we are in the category of persons whose consent is required under Section 7 of
the 1933 Act or the rules and regulations of the Securities and Exchange
Commission.
Very truly yours,
c/o BINGHAM DANA LLP
BINGHAM DANA LLP
[Letterhead of Federal Express Corporation]
April 3, 1998
Federal Express Corporation
2005 Corporate Avenue
Memphis, Tennessee 38132
Ladies and Gentlemen:
I am Senior Vice President and General Counsel of Federal Express
Corporation (the "Company") and have acted as such in connection with the
preparation and filing of a Registration Statement on Form S-3, as amended (the
"Registration Statement") and the three prospectuses contained therein
(collectively, the "Prospectuses") with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"). The
Registration Statement relates to:
(i) Equipment Trust Certificates, to be issued in one or more series in
an aggregate principal amount of up to $1 billion pursuant to one or more Trust
Indenture and Security Agreements (the "Indentures") to be entered into among
the Company, First Security Bank, National Association, as Indenture Trustee,
and State Street Bank and Trust Company of Connecticut, National
Association, as Owner Trustee;
(ii) Pass Through Certificates, to be issued in one or more series in an
aggregate amount of up to $1 billion pursuant to a Pass Through Trust Agreement
(the "Pass Through Agreement") dated as of May 1, 1997 between the Company and
First Security Bank, National Association, as Pass Through Trustee; or
(iii) Debt Securities, to be issued in one or more series in an aggregate
principal amount of up to $1 billion pursuant to a Trust Indenture to be
entered into between the Company and The First National Bank of Chicago, as
Trustee.
In connection with the opinions expressed below, I or attorneys under my
supervision have examined originals, or copies certified to my satisfaction, of
such agreements, documents, certificates and statements of government officials
and other papers as we have deemed necessary or advisable as a basis for such
opinions. In such examination we have assumed the genuineness of all
signatures and the authenticity of all documents submitted to us as originals,
and the conformity with the originals of all documents submitted to us as
copies. I or attorneys under my supervision have also examined the Pass
Through Agreement and the forms of Indentures filed with the Securities and
Exchange Commission.
Based upon the foregoing, it is my opinion that:
1. The Company is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware and is duly authorized to
carry on the business in which it is engaged.
2. The execution and delivery by the Company of each Indenture and the
Pass Through Agreement has been duly authorized by the Company.
I am qualified to practice law in the State of Tennessee and I do not
purport to be an expert on, or to express any opinion herein concerning, any
laws other than the laws of the State of Tennessee, the corporate laws of the
State of Delaware and the federal laws of the United States.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me under the heading "Legal
Matters" in the Prospectuses and in any subsequently filed Prospectus
Supplements. In giving such consent, I do not admit that I am in the category
of persons whose consent is required under Section 7 of the Securities Act.
Sincerely,
FEDERAL EXPRESS CORPORATION
/s/ KAREN M. CLAYBORNE
-------------------------------------
Karen M. Clayborne
Senior Vice President and General
Counsel
[Letterhead of Federal Express Corporation]
April 3, 1998
Federal Express Corporation
2005 Corporate Avenue
Memphis, Tennessee 38132
Ladies and Gentlemen:
I am Senior Vice President and General Counsel of Federal Express
Corporation (the "Company") and have acted as such in connection with the
preparation and filing of a Registration Statement on Form S-3, as amended (the
"Registration Statement") and the three prospectuses contained therein
(collectively, the "Prospectuses") with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"). The
Registration Statement relates to:
(i) Equipment Trust Certificates, to be issued in one or more series in
an aggregate principal amount of up to $1 billion pursuant to one or more Trust
Indenture and Security Agreements to be entered into among the Company,
First Security Bank, National Association, as Indenture Trustee, and State
Street Bank and Trust of Connecticut, National Association, as Owner Trustee;
(ii) Pass Through Certificates, to be issued in one or more series in an
aggregate amount of up to $1 billion pursuant to a Pass Through Trust Agreement
dated as of May 1, 1997 between the Company and First Security Bank, National
Association, as Pass Through Trustee; or
(iii) Debt Securities, to be issued in one or more series in an
aggregate principal amount of up to $1 billion pursuant to a Trust Indenture
(the "Trust Indenture") to be entered into between the Company and The First
National Bank of Chicago, as Trustee.
In connection with the opinions expressed below, I or attorneys under my
supervision have examined originals, or copies certified to my satisfaction, of
such agreements, documents, certificates and statements of government officials
and other papers as we have deemed necessary or advisable as a basis for such
opinions. In such examination we have assumed the genuineness of all
signatures and the authenticity of all documents submitted to us as originals,
and the conformity with the originals of all documents submitted to us as
copies. I or attorneys under my supervision have also examined the form of
Trust Indenture filed with the Securities and Exchange Commission.
Based upon the foregoing, it is my opinion that:
1. The Company is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware and is duly authorized to
carry on the business in which it is engaged.
2. The execution and delivery by the Company of the Trust Indenture has
been duly authorized by the Company.
3. Subject to (i) the determination of the terms of the Debt Securities
in accordance with the Trust Indenture, (ii) the issuance, sale,
authentication and delivery of the Debt Securities as contemplated by the
Trust Indenture and the underwriting agreement for debt securities in
substantially the form filed as Exhibit 1(c) to the Registration Statement,
and (iii) the Registration Statement being declared effective, the Debt
Securities, when issued and sold, will be legally issued and the valid and
binding obligations of the Company enforceable in accordance with their terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles relating to
or limiting creditors rights generally.
I do not find it necessary for purposes of this opinion and,
accordingly, do not purport to cover herein the application of the "Blue Sky"
or securities laws of the various states to the sales of the Debt Securities.
I am qualified to practice law in the State of Tennessee and I do not
purport to be an expert on, or to express any opinion herein concerning, any
laws other than the laws of the State of Tennessee, the corporate laws of the
State of Delaware and the federal laws of the United States.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me under the heading "Legal
Matters" in the Prospectuses and in any subsequently filed Prospectus
Supplements. In giving such consent, I do not admit that I am in the category
of persons whose consent is required under Section 7 of the Securities Act.
Sincerely,
FEDERAL EXPRESS CORPORATION
/s/ KAREN M. CLAYBORNE
-------------------------------------
Karen M. Clayborne
Senior Vice President and General
Counsel
FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended May 31, February 28,
----------------------------------------------------- -------- --------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
(In thousands, except ratios)
Earnings: $203,576 $378,462 $522,084 $ 539,959 $ 628,221 $397,661 $500,562
Income before
income taxes
Add back:
Interest
expense,
net of
capitalized
interest..... 168,762 152,170 130,923 105,449 95,689 69,986 90,736
Amortization of
debt issuance
costs.......... 4,906 2,860 2,493 1,628 1,328 997 1,091
Portion of rent
expense
representative
of interest
factor......... 262,724 285,261 329,370 386,254 434,846 324,341 373,246
-------- -------- -------- ---------- ---------- -------- --------
Earnings as
adjusted......... $639,968 $818,753 $984,870 $1,033,290 $1,160,084 $792,985 $965,635
======== ======== ======== ========== ========== ======== ========
Fixed Charges:
Interest expense,
net of
capitalized
interest....... $168,762 $152,170 $130,923 $ 105,449 $ 95,689 $ 69,986 $ 90,736
Capitalized
interest....... 31,256 29,738 27,381 39,254 39,449 29,133 22,257
Amortization of
debt issuance
costs.......... 4,906 2,860 2,493 1,628 1,328 997 1,091
Portion of rent
expense
representative
of interest
factor......... 262,724 285,261 329,370 386,254 434,846 324,341 373,246
-------- -------- -------- ---------- ---------- -------- --------
$467,648 $470,029 $490,167 $ 532,585 $ 571,312 $424,457 $487,330
======== ======== ======== ========== ========== ======== ========
Ratio of Earnings
to Fixed
Charges.......... 1.4 1.7 2.0 1.9 2.0 1.9 2.0
======== ======== ======== ========== ========== ======== ========
</TABLE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Form S-3 registration statement of our
reports dated June 30, 1997, included (or incorporated by reference) in
Federal Express Corporation's Form 10-K for the year ended May 31, 1997, and
to all references to our firm included in this registration statement.
ARTHUR ANDERSEN LLP
Memphis, Tennessee
March 27, 1998.
