As filed with the Securities and Exchange Commission on June 9, 2000
Registration No. __________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-----------------------
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)
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)
-----------------------
Copies to:
Sarah Beshar, Esq.
Juliet Cain, 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. [ ]
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. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
CALCULATION OF REGISTRATION FEE
==========================================================================================================
Proposed Proposed
Maximum Maximum
Aggregate Aggregate Amount of
Title of Each Class of Amount to Be Price Offering Registration
Securities Being Registered Registered(1) Per Unit Price(1) Fee
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pass Through Certificates........................
Owned Aircraft Equipment Certificates(2).........
Leased Aircraft Equipment Trust Certificates.....
Debt Securities..................................
Total......................................... $380,721,000 100% $380,721,000 $100,511
==========================================================================================================
</TABLE>
(1) Estimated solely for purposes of determining the registration fee.
(2) Owned Aircraft Equipment Certificates will only be issued as part of the
trust property of the relevant pass through trust.
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 $69,279,000 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.
333-80001 in respect of which a filing fee of $19,260 was paid.
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
prospectus is accompanied by a prospectus supplement. The forms of prospectus
and their supplements will be used respectively to offer for sale:
o leased aircraft equipment trust certificates
o pass through certificates
o debt securities.
Sales of the above securities may not be consummated without both the
applicable prospectus and the prospectus supplement.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 9, 2000
PROSPECTUS
$450,000,000
[COMPANY LOGO]
LEASED AIRCRAFT EQUIPMENT TRUST CERTIFICATES
-----------------------
This prospectus relates to the issuance of Certificates by an Owner
Trustee, acting not in its individual capacity but solely as the Owner Trustee
of a separate Owner Trust.
The Certificates:
o will have an aggregate public offering price of up to $450,000,000
o will be issued in one or more series
o will be issued to finance or refinance a portion of the payment by the
Owner Trustee of the cost of the Aircraft
o of each series will have a principal amount, maturity date and
interest rate specified in a prospectus supplement
o will be payable at the times and in the amount specified in a
prospectus supplement
o will be secured by a security interest in the related Aircraft and by
the Lease of that Aircraft to Federal Express, including the right to
receive rent payable by Federal Express as lessee under the Lease,
and
o will not be obligations of, or guaranteed by, Federal Express but the
amounts payable by Federal Express under the Lease will be sufficient
to pay in full when due all principal of and any premium and interest
on the Certificates, subject to any limitations specified in a
prospectus supplement.
Each Owner Trust will own:
o the specified Aircraft or, if the delivery of the Aircraft is delayed,
the proceeds of sale of the related Certificates, and
o the rights of the Owner Trustee under documentation relating to the
Aircraft.
The obligations of the Owner Trustee with respect to each series of
Certificates will rank equally with the obligations of the Owner Trustee with
respect to each other series of Certificates.
There was no public market for the Certificates of any series before their
issuance and there is no assurance that one will develop or continue. Federal
Express does not intend to apply for the listing of any series of Certificates
on a national securities exchange, unless otherwise indicated in a prospectus
supplement.
This prospectus will be accompanied by a prospectus supplement which will
describe the specific terms of the particular series of Certificates being
sold, the Indentures, Leases, leveraged lease transactions and Aircraft
relating to the Certificates. Sales of any Certificates may not be consummated
without both this prospectus and the prospectus supplement.
Investing in the Certificates involves risks. See the "Risk Factors"
section beginning on page 3 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
-----------------------
The date of this prospectus is June __, 2000.
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a Registration Statement on Form S-3 that we
filed with the SEC utilizing a "shelf" registration process. Under this shelf
process, we may sell the Certificates described in this prospectus in one or
more offerings. This prospectus provides you with a general description of the
Certificates we may offer. Each time we sell Certificates, we will provide a
prospectus supplement that will contain specific information about the terms of
that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read carefully both this
prospectus and any prospectus supplement, together with the additional
information described below under "Where You Can Find More Information." You
should also refer to the "Glossary of Terms" at the back of this prospectus and
in any prospectus supplement for definitions of specialized terms that we are
using in this prospectus and any prospectus supplement.
This prospectus does not contain all the information provided in the
Registration Statement that we filed with the SEC. For further information
about Federal Express or the Certificates, you should refer to that
Registration Statement. Statements contained in this prospectus or in any
prospectus supplement as to the contents of any contract or other document are
not necessarily complete, and you should review the full text of those
contracts and other documents.
The Registration Statement that we filed with the SEC relating to the
Certificates can be obtained from the SEC as described below under "Where You
Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports with the SEC. These SEC
filings are available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any such document we file at the
SEC's public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549,
and in New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms and copy
charges.
The SEC allows us to "incorporate by reference" the information we file
with it, which means:
o we can disclose important information to you by referring you to those
documents
o information incorporated by reference is considered to be part of
this prospectus, even though it is not repeated in this prospectus or
in any prospectus supplement, and
o information that we file with the SEC will automatically update and
supersede this prospectus and any prospectus supplement.
We incorporate by reference the documents listed below and any future
filings made with the SEC under Section 13(a), 13(c), 14, or 15(d) of the
Exchange Act after the date of the filing of this Registration Statement and
prior to its effectiveness, and until we complete our offering of the
Certificates:
o Annual Report on Form 10-K for the fiscal year ended May 31, 1999,
filed August 27, 1999, and
o Quarterly Reports on Form 10-Q for the fiscal quarters ended August
31, 1999, November 30, 1999 and February 29, 2000, filed October 13,
1999, January 14, 2000 and April 13, 2000, respectively.
You may obtain a copy of these filings, other than their exhibits, unless
those exhibits are specifically incorporated by reference in the filings, at no
cost by writing or telephoning us at the following address:
James H. Clippard
Investor Relations
2
<PAGE>
FedEx Corporation
942 South Shady Grove Road
Memphis, Tennessee 38120
(901) 818-7200
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not
authorized anyone else to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. We are not making an offer to sell any Certificates in any jurisdiction
where the offer or sale is not permitted. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front page of those documents. Also, you
should not assume that there has been no change in the affairs of Federal
Express since the date of this prospectus or any prospectus supplement.
FEDERAL EXPRESS CORPORATION
Federal Express is a wholly-owned subsidiary of FedEx Corporation. Federal
Express 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. The corporate headquarters of Federal Express are located at 2005
Corporate Avenue, Memphis, Tennessee 38132, telephone (901) 369-3600.
RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
Year Ended May 31, Nine Months Ended
-------------------------------- -------------------------
February 28, February 29,
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ------------ ------------
Ratio of Earnings to
Fixed Charges.... 2.0x 1.9x 2.0x 2.1x 2.1x 1.9x 2.0x
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 this offering of Certificates, Federal Express may be more
highly leveraged than currently reflected in this table.
RISK FACTORS
You should consider carefully the risk factors described below before you
invest. You should read the information below together with the other
information in this prospectus and the accompanying prospectus supplement.
Federal Express' business is subject to risks and uncertainties
The operations and financial condition of Federal Express are subject to
risks and uncertainties, including:
o economic conditions in the markets in which Federal Express operates
affecting demand for Federal Express' services
o competition from other providers of express services with new or
improved services
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<PAGE>
o changes in customer demand patterns
o increases in aviation and motor fuel prices
o strikes, work stoppages and slowdowns by Federal Express' employees
o Federal Express' ability to match aircraft, vehicle and sort capacity
with customer volume levels
o Federal Express' ability to obtain aviation rights in important
international markets
o contributions to financial results from the sale of engine noise
reduction kits
o changes in government regulation, weather and technological changes,
and
o availability of financing on terms acceptable to Federal Express.
Proposed new OSHA regulations could have a material adverse effect on our
business
On November 22, 1999, the U.S. Occupational Safety and Health
Administration, or OSHA, proposed regulations to mandate an ergonomics standard
that could require many businesses, including Federal Express, to make
significant changes in the workplace in order to reduce the incidence of
musculoskeletal disorders such as lower back pain. The proposal does not
specify which workplace changes would be required in order to comply with the
proposed new regulations. We, our competitors and other affected parties have
submitted comments to OSHA challenging the economic and technical feasibility
of the proposed regulations. In April 2000, OSHA completed public hearings on
the proposed regulations and is expected to release final rules later this
year.
If OSHA adopts the proposed regulations and applies them in the same way
as it attempted unsuccessfully in the past to impose ergonomic measures under
its general authority, we would be required to make extensive changes to the
layout of our sorting facilities and hire a significant number of additional
employees. We believe that the cost of compliance would be substantial and have
a material adverse effect on our business. We expect that our competitors,
along with the rest of the American industry, would also incur substantial
compliance costs.
Proceeds from the sale of an aircraft may be less than its appraised value
The prospectus supplement will contain the appraised value of each
Aircraft based upon the lesser of the average and the median value of the
Aircraft as appraised by several independent appraisers who will be named in
the prospectus supplement. The prospectus supplement may contain reports or
summaries of these appraisals. These appraisals will be based on various
assumptions and methodologies, which may vary, resulting in different appraised
values. We expect that these appraisals will be "desktop appraisals" and that
the appraisers will not physically inspect any of the Aircraft.
An appraisal is only an estimate of value and you should not rely upon it
as a measure of realizable value. The proceeds realized upon the sale of any
Aircraft may be less than the appraised value of that Aircraft because of:
o market and economic conditions at the time
o the availability of buyers
o the condition of the Aircraft
o whether the Aircraft are sold separately or as a block, and
4
<PAGE>
o other factors.
Therefore, we cannot assure you that the proceeds realized upon any sale
of an Aircraft will be as appraised or sufficient to satisfy in full payments
due on the Certificates.
Excess proceeds from the sale of one Aircraft will not be available to cover
losses on other Certificates relating to other Aircraft and events resulting in
a default under one Indenture may not result in a default under other
Indentures
The Certificates are not cross-collateralized, which means that
liquidation proceeds from the sale of an Aircraft in excess of the principal
amount of the Certificates related to that Aircraft will not be available to
cover any losses on any other Certificates. There will be no cross-default
provisions in the Indentures relating to the Certificates and consequently
events resulting in an Indenture Event of Default under any particular
Indenture may not result in an Indenture Event of Default under any other
Indenture.
Rating agencies may change their rating on the Certificates at any time
The Certificates are expected to be assigned an "investment grade" rating
by one or more Rating Agencies. The prospectus supplement will indicate the
rating assigned to the Certificates being sold. A rating is not a
recommendation to purchase, hold or sell the Certificates because a rating does
not address market price or suitability for a particular investor. We cannot
assure you that a rating will remain for any given period of time or that a
rating will not be lowered or withdrawn entirely by a Rating Agency if in its
judgment circumstances in the future so warrant, including the downgrading of
Federal Express. The ratings of the Certificates will be based primarily on the
default risk of the Certificates and the collateral value provided by the
Aircraft. The ratings are expected to address the likelihood of timely payment
of interest when due on the Certificates, at the non-default rate, and the
ultimate payment of principal of the Certificates on the final expected
distribution date. The ratings are not expected to address the possibility of a
Lease Event of Default or Indenture Event of Default or other circumstances,
such as an Event of Loss, which may result in the payment of the outstanding
principal amount of the Certificates prior to the final expected distribution
date.
The reduction, suspension or withdrawal of the ratings of the Certificates
will not, in and of itself, constitute an Indenture Event of Default, unless
the prospectus supplement specifies otherwise.
The indenture does not limit the amount of debt Federal Express may incur or
protect against a highly leveraged transaction involving Federal Express
The Indenture does not limit the amount of secured or unsecured
indebtedness which Federal Express or its subsidiaries may incur. The Indenture
does not contain debt covenants or provisions that would give the holders
protection in the event of a highly leveraged transaction involving Federal
Express.
A public market for the Certificates may not develop or continue
There was no public market for the Certificates of any series before their
issuance and we cannot assure you that one will develop or continue. Federal
Express does not intend to apply for the listing of any Certificates on a
national securities exchange, unless otherwise indicated in a prospectus
supplement. If an active public market does not develop or continue, the market
price and liquidity of the Certificates may be adversely affected.
USE OF PROCEEDS
The Owner Trustee for each Owner Trust will use the proceeds from the sale
of the Certificates to finance or refinance the debt portion and, in cases
where the Owner Participant wishes for tax purposes to prevent specific
allocation of interest expense to the related Aircraft, to repay some of the
equity portion of a separate leveraged lease transaction entered into by
Federal Express, as lessee, with respect to the Aircraft specified in the
prospectus
5
<PAGE>
supplement. For each Aircraft, Federal Express does not expect the debt portion
to be financed or refinanced to exceed 80% of the purchase price for the
Aircraft.
The related Owner Participant will pay the discounts and commissions
relating to the offering of the related Certificates. The other expenses
relating to the issuance and offering of those Certificates, other than various
expenses to be paid directly by Federal Express, will be paid by the related
Owner Participant as such other expenses become due or, if previously paid by
Federal Express, will be reimbursed to Federal Express by the related Owner
Participant.
OUTLINE OF LEVERAGED LEASE TRANSACTIONS
Each Aircraft in a leveraged lease transaction:
o has been or will be sold to the Owner Trustee for the benefit of the
Owner Participant, and
o has been or will be leased by the Owner Trustee to Federal Express
pursuant to a Lease.
Each Owner Participant will have provided or will provide at least 20% of
the purchase price of the Aircraft from sources other than the Certificates,
unless otherwise specified in the prospectus supplement.
Each prospectus supplement will specify the type and model of the
applicable Aircraft, the engines with which the Aircraft is equipped and
whether the Aircraft is already in use in Federal Express' fleet, has been used
in another operator's fleet or will be delivered new by the manufacturer to
Federal Express or to the Owner Trustee, as the case may be.
DESCRIPTION OF THE CERTIFICATES
The following is a summary description of the Certificates which we expect
will be common to all series of Certificates. The prospectus supplement will
describe the specific terms of any series of Certificates. Therefore, you
should rely on the information in the prospectus supplement, in particular if
the information in the prospectus supplement is different from the information
provided below.
Because the following description is a summary, it does not describe every
aspect of the Certificates, and it is qualified in its entirety by the detailed
information appearing in the prospectus supplement, the form of Certificates
and the related Indenture, Lease and Participation Agreement which will be
filed with the SEC, as exhibits to a post-effective amendment to the
Registration Statement of which this prospectus is a part or a Current Report
on Form 8-K, a Quarterly Report on Form 10-Q or an Annual Report on Form 10-K.
In the following description, we have included references to section
numbers of the Indenture so that you can easily locate those provisions.
General
The Owner Trustee will issue the Certificates as nonrecourse obligations.
Federal Express 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 rental and other payments will be
general obligations of Federal Express but the Certificates themselves will not
be guaranteed by Federal Express.
The Certificates will not be obligations of the Owner Trustee, in its
individual capacity, or of the Owner Participant. The Owner Trustee, in its
individual capacity, and the Owner Participant will not be liable for payment
of any principal of or any premium or interest on the Certificates.
6
<PAGE>
Book-Entry Procedures
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, DTC, and registered in its
name or in the name of Cede, its nominee. A Certificateholder holding a
Certificate initially issued as a global security will not be entitled to
receive a Certificate in certificated form, except as indicated below.
DTC has advised Federal Express that:
o 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.
o DTC was created to hold securities for 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.
o DTC Participants include securities brokers and dealers, banks, trust
companies and clearing corporations.
o 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.
The DTC Participants will be responsible for distributions to
Certificateholders and such distributions will be made in accordance with
customary industry practices. Although Certificateholders will not have
possession of the Certificates, the rules of DTC provide a mechanism by which
the Certificateholders 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.
Neither Federal Express nor the Indenture Trustee nor any agent of either
of them will be responsible or liable 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", for
purposes of the Indenture, will be Cede, as nominee of DTC, Certificateholders
will not be recognized by the Indenture Trustee as "Certificateholders", and
Certificateholders will be permitted to exercise the rights of
"Certificateholders" only indirectly through DTC and DTC Participants. DTC has
advised Federal
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Express 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 Federal
Express 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 Federal Express makes 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 DTC will require secondary market trading activity in the
Certificates to settle in immediately available funds.
Certificated Form. The Owner Trustee will issue physical certificates to
holders of a global security or their nominees if:
o DTC advises the Indenture Trustee in writing that it is no longer
willing or able to discharge properly its responsibilities as
depositary with respect to the Certificates and Federal Express is
unable to locate a qualified successor, or
o if Federal Express, 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:
o will be payable on the Certificates on the dates and at the rates per
annum indicated in the prospectus supplement, and
o will be calculated on the basis of a 360-day year consisting of twelve
30-day months.
Principal will be payable on the Certificates in scheduled amounts and on
specified dates indicated in the prospectus supplement. In general, the record
date for each interest and principal payment date will be the fifteenth day
prior to a payment date.
If the Certificates are issued in certificated form as discussed above,
principal of and any premium and interest on the Certificates 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, maintained for the payment of the Certificates of a series.
At their option, the Indenture Trustee or Paying Agent may make payments
by check mailed to the person entitled to the payments at the address shown in
the register maintained by the Indenture Trustee or any other registrar.
(Indenture, Sections 2.04, 3.02 and 3.04) 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 Certificateholder for any transfer or exchange of Certificates, but the
Certificateholder may be required to pay any tax or other governmental charges.
(Indenture, Sections 2.04, 2.06 and 3.02)
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Prepayment
The prospectus supplement will describe:
o the circumstances, whether voluntary or involuntary, under which the
related Certificates may or must be prepaid, in whole or in part,
prior to the stated maturity date,
o any premium applicable upon a prepayment, and
o other terms applying to the prepayment of the Certificates.
Security
The Certificates will be secured by:
o an assignment by the Owner Trustee to the Indenture Trustee of the
Owner Trustee's rights under the related Lease, including the right
to receive rent and other payments, but excluding the rights
described below
o a security interest in the related Aircraft, subject to the rights of
Federal Express under the Lease and to the rights of any other entity
under a sublease or assignment permitted under the Lease, so that the
Indenture Trustee will not have the right to disturb Federal Express'
quiet enjoyment of the Aircraft so long as no Lease Event of Default
has occurred and is continuing, and
o an assignment to the Indenture Trustee of the Owner Trustee's rights
relating to the Aircraft and the related engines under any agreements
for the purchase of the Aircraft between Federal Express and the
manufacturers of the Aircraft and the 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:
o indemnification by Federal Express for some matters
o proceeds of public liability insurance payable to the Owner Trustee
in its individual capacity and to the Owner Participant under
insurance maintained by Federal Express under the Lease, and
o 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 to exercise any of the rights of the
Owner Trustee under the related Lease, except the right to receive payments of
rent due under the Lease, will be subject to the limitations described in the
prospectus supplement. (Indenture, Granting Clause and Section 8.01)
The Certificates are not cross-collateralized, which means that
liquidation proceeds from the sale of an Aircraft in excess of the amounts due
on the Certificates related to that Aircraft will not be available to cover any
losses on any other Certificates. 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 under any other Indenture.
The Indenture Trustee will deposit the proceeds from the sale of the
Certificates of any series received 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, in the investments described below,
to hold as security for the Certificates pending the delivery of the Aircraft
or the consummation of the refunding. The Indenture Trustee may also hold funds
as a result of other events, including:
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o the occurrence of an Indenture Event of Default, which may cause the
Indenture Trustee to hold funds otherwise distributable to the Owner
Trustee, or
o an Event of Loss with respect to the Aircraft.
These funds will be invested in:
o obligations either of, or fully guaranteed by, the United States of
America
o certificates of deposit, bankers' acceptances and time deposits with
banks and trust companies meeting the criteria specified in the
prospectus supplement, or
o commercial paper issued by a U.S. corporation whose commercial paper
is rated at least A-1/P-1 by Standard & Poor's and Moody's Investors
Service, Inc., respectively, or if neither of these organizations
rates commercial paper, the highest rating by another nationally
recognized rating organization.
The Indenture Trustee will hold and apply any income realized as a result
of the investments, net of the Indenture Trustee's reasonable fees and expenses
incurred in making the investments, in the same manner as the principal amount
of the investment is to be applied. Any losses, after taking into account such
earnings and such reasonable fees and expenses, will be charged against the
principal amount invested. Federal Express will be responsible for those
losses. (Indenture, Section 5.08)
Registration of the Aircraft
Federal Express will be required, except under some circumstances, to
register and keep each Aircraft registered under 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 Aircraft under the Transportation
Code. The recordation will give the Indenture Trustee a perfected security
interest under the Transportation Code in each such Aircraft. The perfected
security interest will, with limited exceptions, be recognized in those
jurisdictions that have ratified the Convention.
Federal Express will be able, in some circumstances, to re-register any
Aircraft in some countries other than the United States. In general, prior to
any change in the jurisdiction of registry, the Indenture Trustee and the
related Owner Participant must receive assurances, including that the 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 the assurances are
intended to provide that Federal Express or the Owner Trustee's title to the
Aircraft and the Indenture Trustee's Lien on the Aircraft 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 Federal Express 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 and any premium 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, including rent payable by Federal Express under the related
Lease. See "The Leases -- Terms and
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Rentals" below. Federal Express' obligations to pay rent and to cause other
payments to be made under each Lease will be general obligations of Federal
Express. The Certificates will not be direct obligations of, and will not be
guaranteed by, Federal Express.
The Owner Trustee and the Indenture Trustee, in their individual
capacities, will not be liable to any Certificateholder or, in the case of the
Owner Trustee, in its individual capacity, to Federal Express 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
Federal Express will be prohibited from consolidating with or merging into
any other corporation under circumstances in which Federal Express is not the
surviving corporation, or from transferring all or substantially all of its
assets as an entirety to any other corporation, unless:
o the successor is a U.S. Citizen, and 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 of the United States
o the successor expressly assumes all the obligations of Federal
Express contained in the related Indenture, the Participation
Agreement, the Lease, the Purchase Agreement and the Purchase
Agreement Assignment
o immediately after giving effect to the consolidation, merger or
transfer, the successor or transferee is in compliance with all of
the terms and conditions of the documents, and
o the 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 Certificateholders protection in the event of a highly leveraged
transaction involving Federal Express.
Events of Default, Notice and Waiver
The prospectus supplement will indicate the Indenture Events of Default
under each Indenture.
Each Indenture will provide that the Indenture Trustee:
o must give notice to the holders of outstanding Certificates of an
Indenture Default if a responsible officer of the Indenture Trustee
has actual knowledge of its occurrence
o must give the notice within 90 days after the occurrence of the
Indenture Default but not earlier than 60 days from the date of its
occurrence, and
o may withhold the notice in the manner described above, except in the
case of a default in the payment of the principal of and any interest
on any Certificate, if the Indenture Trustee in good faith determines
that the withholding of the notice is in the interests of the holders
of outstanding Certificates. (Indenture, Section 7.12)
The holders of not less than 50% in aggregate principal amount of the
outstanding Certificates may waive some past Indenture Defaults. Consent from
each holder of an outstanding Certificate is however required for a waiver of:
o an Indenture Default in the payment of the principal of and any
premium and interest on any Certificate then outstanding, and
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o any covenant or provision of the Indenture or any other related
Operative Agreement which, pursuant to the Indenture, cannot be
modified or amended without the consent of all holders of outstanding
Certificates. (Indenture, Section 7.11)
The Owner Trustee or the related Owner Participant will have the right, as
specified in the 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 the cure
right, the Indenture Event of Default will be deemed to be cured.
Remedies
Exercise of Rights and Remedies. The Indenture Trustee may exercise the
rights or remedies available to it if an Indenture Event of Default has
occurred or is continuing, including a Lease Event of Default. If a Lease Event
of Default has occurred, the Indenture Trustee may exercise the remedies
available to it under the Lease with respect to the Aircraft pledged under the
Indenture. The Indenture Trustee's rights or remedies are subject to any right
of the Owner Trustee or the related Owner Participant to cure defaults or to
prepay the Certificates and to any limitation described in the prospectus
supplement. The Indenture Trustee may exercise the remedies to the exclusion of
the Owner Trustee and the Owner Participant. Any Aircraft sold in the exercise
of the remedies will be free and clear of any rights of those parties,
including the rights of Federal Express under the applicable Lease, provided
that no exercise of any remedies by the Indenture Trustee may affect the rights
of Federal Express under a Lease unless a Lease Event of Default under such
Lease has occurred and is continuing. (Indenture, Section 7.02(a))
Resale Value. 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 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 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.
Declaration. If an Indenture Event of Default occurs as a result of
specified events of bankruptcy, insolvency or reorganization of the Owner
Trustee, the related Owner Participant or Federal Express, then the unpaid
principal of all outstanding Certificates issued under the Indenture, together
with interest accrued but unpaid on the principal and all other amounts due
under the Certificates and under the 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 issued under the Indenture,
may declare the principal of all the Certificates immediately due and payable,
together with interest accrued but unpaid on the principal and all other
amounts due under the Certificates and under the Indenture, by written notice
or notices to the Owner Trustee and Federal Express.
Rescind Declaration. The holders of not less than 50% in aggregate
principal amount of the outstanding Certificates may rescind any declaration by
the Indenture Trustee or by 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:
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o all overdue installments of interest on all the Certificates,
together, to the extent permitted by law, with interest on the
overdue installments of interest
o the principal on any Certificates that has become due otherwise than
by the declaration
o all amounts paid or advanced by the Indenture Trustee, and
o other specified expenses
or all Indenture Events of Default under the Indenture, other than the
non-payment of principal that has become due solely because of the declaration,
have been cured or waived. (Indenture, Sections 7.02(b) and (c))
Bankruptcy. In the event of the bankruptcy of the Owner Participant, it is
possible that, notwithstanding that the Aircraft will be owned by the Owner
Trustee in trust, the Aircraft and the related Lease and Certificates might
become part of such bankruptcy proceeding. In this event, payments under the
Lease or Certificates might be interrupted and the ability of the Indenture
Trustee to exercise its remedies under the Indenture might be restricted,
although the Indenture Trustee would retain its status as a secured creditor in
respect of the Lease and Aircraft.
The right of any holder of a Certificate to institute an action for any
remedy under the Indenture pursuant to which the Certificate was issued,
including the right to enforce payment of the principal of and any premium and
interest on the 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 the 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 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 those holders of
that 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 the aircraft in compliance with the provisions of the lease, conditional
sale contract or security agreement, as the case may be, is not affected by:
o the automatic stay provision of the Bankruptcy Code, which provision
enjoins the taking of any action against a debtor by a creditor
o 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
o the confirmation of a plan by the bankruptcy court, and
o 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 defaults, other than defaults resulting solely from the
financial condition, bankruptcy, insolvency or reorganization of the debtor.
The
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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.
Payments. 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 to the Indenture Trustee prior to any payments
to holders of the Certificates with respect to which the 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. (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 by the
changes:
o reductions in the principal amount of or any premium and interest
payment payable on the Certificate or changes in the date on which
any principal and any premium or interest payment is due and payable
or which otherwise affect the terms of payment of the Certificate
o reductions in, and modifications or amendments to, any indemnities
payable by the related Owner Participant in favor of those holders
o reductions in the amount of any rent payable by Federal Express below
the amount required to pay all principal of and any premium and
interest on all the Certificates as and when due and payable
o creations of any security interest with respect to the property
subject to the Lien of the Indenture ranking prior to or on a parity
with the security interest created by the Indenture or deprivation of
the holder of any such Certificate of the benefit of the Lien of the
Indenture upon the property subject to the Lien, or
o reductions in the percentage of the aggregate principal amount of the
Certificates necessary to modify or amend any provision of the
Indenture or to waive compliance with any provision. (Indenture,
Article XIII)
Some provisions of the Indentures, the Leases, the Participation Agreements
and the Trust Agreements may be modified by the Owner Trustee, Federal Express
and the Indenture Trustee without the consent of the holders of the outstanding
Certificates. (Indenture, Section 13.01)
The Indenture Trustee
Unless otherwise indicated in the 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 Federal Express, and Federal
Express from time to time borrows from, and maintains deposit accounts with,
First Security Bank, National Association and its affiliates.
Each Indenture will be deemed to provide that in the case of any Indenture
Event of Default, the Indenture Trustee will exercise the rights and powers
vested in it by the 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 the 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
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Certificates 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 and, subject to some
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 of a related Certificate
for at least six months may, on behalf of itself and all others similarly
situated, petition any court of competent jurisdiction for the removal of 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 Federal
Express and those 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 Federal Express 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) 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 Federal Express 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 Federal
Express under each Lease will be payable on the dates specified in the
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 some cases
the scheduled rental payments under the Leases may be adjusted, under no
circumstances will the payments that Federal Express 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 prospectus supplement.
Net Lease. Federal Express' obligations under each Lease in respect of the
related Aircraft will be those of a lessee under a "net lease." Accordingly,
Federal Express 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 of the Aircraft 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 Federal Express, using
its reasonable best efforts, undertakes such cure promptly, diligently and
continuously, then Federal Express will not be in default with respect to such
obligation.
Generally, Federal Express will be obligated to replace or cause to be
replaced all Aircraft parts that may become worn out, lost, stolen, destroyed,
seized, confiscated, damaged beyond repair or permanently rendered unfit for
use. Federal Express will have the right to make other modifications and
additions to an Aircraft so long as such 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 modification or
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addition, assuming that the Aircraft was then in the condition and
airworthiness required by the related Lease. Also, in some circumstances,
Federal Express will be permitted to remove parts, without replacement, from an
Aircraft or any engine, and therefore from the Lien of the applicable
Indenture, if Federal Express deems such parts to be obsolete or no longer
suitable or appropriate for use so long as the removals do not decrease the
utility, condition or airworthiness of the Aircraft or any engine, although the
value of the Aircraft or any engine may be reduced by the removal. The
prospectus supplement will contain a description of any limitations applicable
to the provisions described above.
Insurance. The prospectus supplement will contain a description of the
insurance arrangements applicable to each Aircraft. In general, Federal Express
will be obligated to carry comprehensive aircraft liability insurance,
including property damage liability insurance and cargo legal liability
insurance as described below. The insurance must be in the amounts, against the
risks and with the retentions as Federal Express customarily maintains. The
insurance must also be with insurers of recognized responsibility and against
the other risks as are usually insured against by corporations situated
similarly to Federal Express and engaged in the same business as, or business
similar to, Federal Express and owning or operating aircraft and engines
similar to the related Aircraft and related engines. In general, Federal
Express will also be obligated to carry, with insurers of recognized
responsibility, all-risk ground and flight aircraft hull insurance covering the
related Aircraft and all-risk coverage with respect to the related engines and
parts while temporarily removed from the Aircraft and not replaced by similar
engines or parts, as described below. The insurance includes war-risk and
allied perils, hijacking and governmental confiscation and expropriation
insurance, except in the country of registry, must be in such form and amounts,
and with such retentions as Federal Express customarily maintains with respect
to other aircraft in Federal Express' fleet of the same type and model and
operating on the same routes as the related Aircraft, and may not be in an
amount below stipulated values. Federal Express may self-insure against the
risks required to be insured against under the related Lease in the reasonable
amounts as are then applicable to other aircraft or engines of Federal Express
of value comparable to the related Aircraft. The self-insurance with respect to
all aircraft in Federal Express' fleet may not, however, in the aggregate
exceed an amount equal to the lesser of 50% of the highest replacement value of
any single aircraft in such fleet, or 1.5% of the average aggregate insured
value from time to time of Federal Express' entire aircraft fleet, provided
that a standard deductible per occurrence per aircraft no greater than the
amount customarily allowed as a deductible in the industry will be permitted in
addition to such self-insurance.
Federal Express 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. In general, liability insurance
proceeds will be distributed to the respective parties entitled to such
proceeds and hull insurance proceeds in excess of certain specified amounts
will be distributed to the Indenture Trustee. The prospectus supplement will
contain a description of any limitations applicable to the provisions described
in this paragraph.
Lease Events of Default; Remedies. The 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
Federal Express will be required to indemnify each Owner Participant, the
Owner Trustee, the Indenture Trustee and the parties affiliated with the above,
but not including Certificateholders, for the liabilities, losses, fees and
expenses and for the other matters arising out of the transactions described in
this prospectus or relating to the applicable Aircraft or the use of the
Aircraft. In addition, under some circumstances, Federal Express will be
required to indemnify these persons against some taxes, levies, duties and
withholdings and for some other matters relating to the transactions or the
applicable Aircraft.
Subject to some restrictions and unless otherwise limited in the
prospectus supplement, each Owner Participant may convey all of its interest in
the related Owner Trust. Davis Polk & Wardwell has advised Federal Express
based on law in effect on the date of this prospectus that an Owner
Participant's conveyance of its right, title and
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interest in the related Owner Trust will not constitute a taxable event to the
holders of the related Certificates. However, the prospectus supplement may
provide that in some limited instances Federal Express may assume an Owner
Trust's obligations under the related Certificates on a full recourse basis. In
this event, the Certificateholders will recognize gain or loss on the related
Certificates for federal income tax purposes.
ERISA CONSIDERATIONS
Unless otherwise indicated in the prospectus supplement, Certificates may
not be purchased by, or with the assets of, any employee benefit plan subject
to Title I of 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
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.
Underwriters or agents may receive compensation from Federal Express 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 the 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 Federal
Express and any profit on the resale of Certificates by them may be deemed to
be underwriting discounts and commissions, under the Securities Act. Any
underwriter or agent will be identified, and any such compensation received
from Federal Express will be described, in the prospectus supplement.
Offers to purchase Certificates may be solicited directly and the sale of
Certificates 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 of Certificates. The terms of any sales will be described
in the prospectus supplement.
Underwriters and agents who participate in the distribution of
Certificates may be entitled to indemnification by Federal Express against some
liabilities, including liabilities under the Securities Act.
Federal Express 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 the Certificates, as permitted by applicable laws and regulations. No
underwriter would be obligated, however, to make a market in the Certificates,
and any 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.
Some of the underwriters or agents and their associates may be customers
of, engage in transactions with, and perform services for, Federal Express in
the ordinary course of business.
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LEGAL MATTERS
Unless otherwise indicated in the prospectus supplement, the legality of
the Certificates offered by this prospectus will be passed upon for Federal
Express by Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York
10017, and by Underwriters' Counsel. Unless otherwise indicated in the
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 Federal
Express, as to Federal Express' authorization, execution and delivery of the
Indentures. At June 1, 2000, Ms. Clayborne owned 13,556 shares of FedEx
Corporation's common stock and had been granted options to purchase 53,450
shares of FedEx Corporation's common stock. Of the options granted, 6,250 were
vested at such date.
EXPERTS
The consolidated financial statements and schedule of Federal Express
included or incorporated by reference in Federal Express' Annual Report on Form
10-K for the year ended May 31, 1999 and incorporated by reference in this
prospectus, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect to the consolidated
financial statements and schedule, and are incorporated by reference in this
prospectus in reliance upon the authority of Arthur Andersen LLP as experts in
giving those reports.
With respect to the unaudited interim financial information for the
quarters ended August 31, 1999, November 30, 1999 and February 29, 2000,
included in Federal Express' 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 on the unaudited
interim financial information 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.
18
<PAGE>
GLOSSARY OF TERMS
The following is a glossary of terms used in this prospectus. The glossary
may contain definitions which are different from definitions used in the
prospectus supplement. You should read the prospectus supplement in conjunction
with the glossary or other definition of terms contained in the prospectus
supplement.
"Aircraft" means an aircraft specified in a prospectus supplement which
has been or will be leased to Federal Express in connection with a leveraged
lease transaction.
"Bankruptcy Code" means Title 11 of the United States Code (11 U.S.C. et
seq.), as amended, or any successor thereto.
"Cede" means Cede & Co., as nominee for DTC.
"Certificateholder" means, as of any particular time, the person in whose
name a Certificate shall be registered.
"Certificates" means the leased aircraft equipment trust certificates
issued by the Owner Trustee pursuant to the related Indenture and any
certificate issued in exchange therefor or replacement thereof pursuant to the
related Indenture.
"Convention" means the Convention on the International Recognition of
Rights in Aircraft.
"DTC" means The Depository Trust Company.
"DTC Participants" means the participants of DTC.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Loss" means, for any Aircraft, each of the events designated as
such in the related Lease.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Federal Express" means Federal Express Corporation.
"Indenture" means a trust indenture and security agreement among the Owner
Trustee, the Indenture Trustee and Federal Express.
"Indenture Default" means any event or condition, which, with the lapse of
time or the giving of notice, or both, would constitute an Indenture Event of
Default.
"Indenture Event of Default" means, for any Indenture, each of the events
designated as an event of default in such Indenture.
"Indenture Trustee" means First Security Bank, National Association, or
another bank or trust company, in its capacity as indenture trustee under the
related Indenture and any successor under the related Indenture.
"Internal Revenue Code" means the United States Internal Revenue Code of
1986, as amended.
"Lease" means a lease agreement between the Owner Trustee, as lessor, and
Federal Express, as lessee, in each case under which the Owner Trustee leases,
or is expected to lease, the related Aircraft to Federal Express.
"Lease Event of Default" means, for any Lease, each of the events
designated as an event of default in such Lease.
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"Lien" means any mortgage, pledge, lien, charge, encumbrance, lease or
security interest or other similar interest.
"Operative Agreements" means, for any Aircraft, the related Indenture,
Equipment Certificates, Participation Agreement, Lease, Trust Agreement and any
other related documents defined as such in the Participation Agreement.
"Owner Participant" means the owner participant named in the related Trust
Agreement.
"Owner Trust" means a trust created pursuant to a Trust Agreement.
"Owner Trustee" means 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 of an Owner Trust.
"Participation Agreement" means a participation agreement among the Owner
Participant, the Owner Trustee, the Indenture Trustee, Federal Express and, in
the case of a refinancing, each holder of a loan certificate issued under the
related Indenture as originally executed.
"Paying Agent" means a paying agent appointed by the related Indenture
Trustee.
"Purchase Agreement" means, for any Aircraft, the purchase agreement
between the manufacturer and Federal Express, including all exhibits,
appendices and letter agreements attached thereto as originally executed or as
modified, amended or supplemented in accordance with the terms thereof, but
only to the extent that the foregoing relate to such Aircraft and to the extent
assigned pursuant to the Purchase Agreement Assignment.
"Purchase Agreement Assignment" means, for any Aircraft, the purchase
agreement assignment between the related Owner Trustee and Federal Express.
"Rating Agency" means a "nationally recognized statistical rating
organization", as such term is defined in Rule 436(g)(2) under the Securities
Act.
"Registration Statement" means a registration statement on Form S-3
(together with all amendments and exhibits).
"SEC" means the Securities and Exchange Commission of the United States.
"Securities Act" means the Securities Act of 1933, as amended.
"Transportation Code" means Title 49 of the United States Code, as
amended.
"Trust Agreement" means a trust agreement between the Owner Trustee and
the Owner Participant.
"U.S. Citizen" means a citizen of the United States as defined in Section
40102(a)(15) of the Transportation Code, or any analogous part of any successor
or substituted legislation or regulation at the time in effect.
"Underwriters' Counsel" means the counsel for any agents, dealers or
underwriters.
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<TABLE>
<S> <C>
=================================================== ===============================================
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 $450,000,000
prospectus. If given or made, such information or
representation must not be relied upon as having
been authorized by Federal Express or the [COMPANY LOGO]
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 Federal Express since the date of this Leased Aircraft
Prospectus. Equipment Trust Certificates
---------------------- ----------------------------
TABLE OF CONTENTS PROSPECTUS
Page -----------------------------
About this Prospectus.............................2
Where You Can Find More Information...............2
Federal Express Corporation.......................3
Ratio of Earnings to Fixed Charges................3
Risk Factors......................................3
Use of Proceeds...................................5
Outline of Leveraged Lease Transactions...........6
Description of the Certificates...................6
ERISA Considerations.............................17
Plan of Distribution.............................17 June __, 2000
Legal Matters....................................18
Experts..........................................18
Glossary of Terms................................19
=================================================== ===============================================
</TABLE>
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 9, 2000
PROSPECTUS
$450,000,000
[COMPANY LOGO]
PASS THROUGH CERTIFICATES
-----------------------
This prospectus relates to the issuance of Pass Through Certificates by
one or more Pass Through Trusts.
The Pass Through Certificates:
o will have an aggregate public offering price of up to $450,000,000
o will be issued in one or more series
o will be payable at the times and in the amounts specified in a
prospectus supplement
o will represent interests in the relevant Pass Through Trust only,
will be paid only from the assets of that Pass Through Trust and will
not represent obligations of, or be guaranteed by, Federal Express,
and
o may have one or more forms of credit or liquidity enhancement.
Each Pass Through Trust:
o will issue one or more series of Pass Through Certificates
o will own Equipment Certificates of one or more series and any other
property described in this prospectus or in a prospectus supplement,
and
o will pass through payments on the Equipment Certificates and any
other property that it owns, subject to any applicable subordination
provisions.
The Equipment Certificates:
o will be issued in one or more series, and
o will be either:
- Owned Aircraft Certificates issued by Federal Express with
recourse to Federal Express either to finance or refinance all
or a portion of the cost of the Owned Aircraft, or
- Leased Aircraft Certificates issued on a non-recourse basis by
owner trustees pursuant to leveraged lease transactions to
finance or refinance a portion of the cost of the Leased
Aircraft. The amounts due from Federal Express under such leases
will be sufficient to pay in full when due all principal of and
any premium and interest on the related Equipment Certificates,
subject to any limitations specified in a prospectus supplement.
There was no public market for the Pass Through Certificates of any series
before their issuance and there is no assurance that one will develop or
continue. Federal Express does not intend to apply for the listing of any
series of the Pass Through Certificates on a national securities exchange,
unless otherwise indicated in a prospectus supplement.
This prospectus will be accompanied by a prospectus supplement which will
describe the specific terms of the particular series of Pass Through
Certificates being sold and the underlying Equipment Certificates. Sales of any
Pass Through Certificates may not be consummated without both this prospectus
and the prospectus supplement.
Investing in the Pass Through Certificates involves risks. See the "Risk
Factors" section beginning on page 4 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The date of this prospectus is June __, 2000.
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a Registration Statement on Form S-3 that we
filed with the SEC utilizing a "shelf" registration process. Under this shelf
process, we may sell the Pass Through Certificates described in this prospectus
in one or more offerings. This prospectus provides you with a general
description of the Pass Through Certificates we may offer. Each time we sell
Pass Through Certificates, we will provide a prospectus supplement that will
contain specific information about the terms of that offering. The prospectus
supplement may also add, update or change information contained in this
prospectus. You should read carefully both this prospectus and any prospectus
supplement, together with the additional information described below under
"Where You Can Find More Information." You should also refer to the "Glossary
of Terms" at the back of this prospectus and in any prospectus supplement for
the definitions of specialized terms that we are using in this prospectus and
any prospectus supplement.
This prospectus does not contain all the information provided in the
Registration Statement that we filed with the SEC. For further information
about Federal Express or the Pass Through Certificates, you should refer to
that Registration Statement. Statements contained in this prospectus or in any
prospectus supplement as to the contents of any contract or other document are
not necessarily complete, and you should review the full text of those
contracts and other documents.
The Registration Statement that we filed with the SEC relating to the Pass
Through Certificates can be obtained from the SEC as described below under
"Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports with the SEC. These SEC
filings are available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any such document we file at the
SEC's public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549,
and in New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms and copy
charges.
The SEC allows us to "incorporate by reference" the information we file
with it, which means:
o we can disclose important information to you by referring you to those
documents
o information incorporated by reference is considered to be part of
this prospectus, even though it is not repeated in this prospectus or
in any prospectus supplement, and
o information that we file with the SEC will automatically update and
supersede this prospectus and any prospectus supplement.
We incorporate by reference the documents listed below and any future
filings made with the SEC under Section 13(a), 13(c), 14, or 15(d) of the
Exchange Act after the date of the filing of this Registration Statement and
prior to its effectiveness, and until we complete our offering of Pass Through
Certificates:
o Annual Report on Form 10-K for the fiscal year ended May 31, 1999,
filed August 27, 1999, and
o Quarterly Reports on Form 10-Q for the fiscal quarters ended August
31, 1999, November 30, 1999 and February 29, 2000, filed October 13,
1999, January 14, 2000 and April 13, 2000, respectively.
You may obtain a copy of these filings, other than their exhibits, unless
those exhibits are specifically incorporated by reference in the filings, at no
cost by writing or telephoning us at the following address:
2
<PAGE>
James H. Clippard
Investor Relations
FedEx Corporation
942 South Shady Grove Road
Memphis, Tennessee 38120
(901) 818-7200
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not
authorized anyone else to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. We are not making an offer to sell any Pass Through Certificates in any
jurisdiction where the offer or sale is not permitted. You should not assume
that the information in this prospectus or any prospectus supplement is
accurate as of any date other than the date on the front page of those
documents. Also, you should not assume that there has been no change in the
affairs of Federal Express since the date of this prospectus or any prospectus
supplement.
REPORTS TO PASS THROUGH CERTIFICATEHOLDERS
The Pass Through Trustee under each Pass Through Trust will provide each
Certificateholder with periodic statements concerning the distributions made
from such Pass Through Trust. See "Description of the Pass Through Certificates
-- Statements to Certificateholders."
FEDERAL EXPRESS CORPORATION
Federal Express is a wholly-owned subsidiary of FedEx Corporation. Federal
Express 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. The corporate headquarters of Federal Express are located at 2005
Corporate Avenue, Memphis, Tennessee 38132, telephone (901) 369-3600.
RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
Year Ended May 31, Nine Months Ended
-------------------------------- -------------------------
February 28, February 29,
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ------------ ------------
Ratio of Earnings to
Fixed Charges.... 2.0x 1.9x 2.0x 2.1x 2.1x 1.9x 2.0x
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 this offering of Pass Through Certificates, Federal Express
may be more highly leveraged than currently reflected in this table.
3
<PAGE>
RISK FACTORS
You should consider carefully the risk factors described below before you
invest. You should read the information below together with the other
information in this prospectus and the accompanying prospectus supplement.
Federal Express' business is subject to risks and uncertainties
The operations and financial condition of Federal Express are subject to
risks and uncertainties, including:
o economic conditions in the markets in which Federal Express operates
affecting demand for Federal Express' services
o competition from other providers of express services with new or
improved services
o changes in customer demand patterns
o increases in aviation and motor fuel prices
o strikes, work stoppages and slowdowns by Federal Express' employees
o Federal Express' ability to match aircraft, vehicle and sort capacity
with customer volume levels
o Federal Express' ability to obtain aviation rights in important
international markets
o contributions to financial results from the sale of engine noise
reduction kits
o changes in government regulation, weather and technological changes,
and
o availability of financing on terms acceptable to Federal Express.
Proposed new OSHA regulations could have a material adverse effect on our
business
On November 22, 1999, the U.S. Occupational Safety and Health
Administration, or OSHA, proposed regulations to mandate an ergonomics standard
that could require many businesses, including Federal Express, to make
significant changes in the workplace in order to reduce the incidence of
musculoskeletal disorders such as lower back pain. The proposal does not
specify which workplace changes would be required in order to comply with the
proposed new regulations. We, our competitors and other affected parties have
submitted comments to OSHA challenging the economic and technical feasibility
of the proposed regulations. In April 2000, OSHA completed public hearings on
the proposed regulations and is expected to release final rules later this
year.
If OSHA adopts the proposed regulations and applies them in the same way
as it attempted unsuccessfully in the past to impose ergonomic measures under
its general authority, we would be required to make extensive changes to the
layout of our sorting facilities and hire a significant number of additional
employees. We believe that the cost of compliance would be substantial and have
a material adverse effect on our business. We expect that our competitors,
along with the rest of the American industry, would also incur substantial
compliance costs.
4
<PAGE>
Proceeds from the sale of an aircraft may be less than its appraised value
The prospectus supplement will contain the appraised value of each
Aircraft based upon the lesser of the average and the median value of the
Aircraft as appraised by several independent appraisers who will be named in
the prospectus supplement. The prospectus supplement may contain reports or
summaries of these appraisals. These appraisals will be based on various
assumptions and methodologies, which may vary, resulting in different appraised
values. We expect that these appraisals will be "desk-top appraisals" and that
the appraisers will not physically inspect any of the Aircraft.
An appraisal is only an estimate of value and you should not rely upon it
as a measure of realizable value. The proceeds realized upon the sale of any
Aircraft may be less than the appraised value of that Aircraft because of:
o market and economic conditions at the time
o the availability of buyers
o the condition of the Aircraft
o whether the Aircraft are sold separately or as a block, and
o other factors.
Therefore, we cannot assure you that the proceeds realized upon any sale
of an Aircraft will be as appraised or sufficient to satisfy in full payments
due on the related Equipment Certificates or the Pass Through Certificates.
Some classes of Pass Through Certificates may be subordinate to other classes
of Pass Through Certificates
The Pass Through Trustee may enter into an intercreditor agreement which
will provide for the subordination of some classes of Pass Through Certificates
to other classes which may result in the subordinated classes receiving less
than the full amount due to them after a payment default on any Equipment
Certificates. The prospectus supplement will describe any such intercreditor
agreement and cross-subordination provisions and any related terms.
Excess proceeds from the sale of one Aircraft will not be available to cover
losses on other Equipment Certificates relating to other Aircraft and events
resulting in a default under one Indenture may not result in a default under
other Indentures
The Equipment Certificates are not cross-collateralized, which means that
liquidation proceeds from the sale of an Aircraft in excess of the principal
amount of the Equipment Certificates related to that Aircraft will not be
available to cover any losses on any other Equipment Certificates. There will
be no cross-default provisions in the Indentures relating to the Equipment
Certificates and consequently events resulting in an Indenture Event of Default
under any particular Indenture may not result in an Indenture Event of Default
under any other Indenture.
Rating Agencies may change their rating on the Pass Through Certificates at
any time
The Pass Through Certificates are expected to be assigned an "investment
grade" rating by one or more Rating Agencies. The prospectus supplement will
indicate the rating assigned to the Pass Through Certificates being sold. A
rating is not a recommendation to purchase, hold or sell Pass Through
Certificates because a rating does not address market price or suitability for
a particular investor. We cannot assure you that a rating will remain for any
given period of time or that a rating will not be lowered or withdrawn entirely
by a Rating Agency if in its judgment circumstances in the future so warrant,
including the downgrading of Federal Express or the provider of a Liquidity
Facility. The ratings of the Pass Through Certificates will be based primarily
on the default risk of the Equipment Certificates, the availability of the
Liquidity Facility for the Certificateholders, the collateral value provided by
the Aircraft and any intercreditor and cross-subordination arrangements. The
ratings are expected to address the likelihood of timely payment of interest
when due on the Pass Through Certificates, at the non-default rate, and the
5
<PAGE>
ultimate payment of principal of the Pass Through Certificates on the final
expected distribution date. The ratings are not expected to address the
possibility of an Event of Default or an Indenture Event of Default or other
circumstances, such as an Event of Loss, which may result in the payment of the
outstanding principal amount of the Pass Through Certificates prior to the
final expected distribution date.
The reduction, suspension or withdrawal of the ratings of the Pass Through
Certificates will not, in and of itself, constitute an Event of Default, unless
the prospectus supplement specifies otherwise.
Owner Participants may request changes to the underlying agreements
A prospectus supplement may specify that at the time of issuance of Pass
Through Certificates, Federal Express may still be seeking or negotiating with
Owner Participants with respect to the trusts relating to some of the Aircraft.
Federal Express will hold the beneficial interest under the Trust Agreement
relating to each of those Aircraft until the date upon which an Owner
Participant commits to purchase or purchases an Aircraft. Federal Express will
transfer to the Owner Participant on that date its beneficial interest under
the Trust Agreement. The purchase date may be up to 90 days after the scheduled
delivery date of the Aircraft. Those Owner Participants may request revisions
to the Participation Agreement, Lease, Trust Agreement and Indenture, and we
cannot assure you that the terms of the agreements applicable to those Aircraft
will be the same as the description of the agreements contained in the
prospectus supplement.
However, the terms of those agreements will be required to contain some
mandatory document terms and not vary some other mandatory economic terms.
Also, Federal Express will be obligated to certify to the Pass Through Trustee
that any modifications to these agreements will not materially and adversely
affect the Certificateholders and if the documents are modified in any material
respect, to obtain written confirmation from each Rating Agency that the use of
modified versions of those agreements will not result in a withdrawal,
suspension or downgrading of the rating of any class of Pass Through
Certificates.
The Indentures do not protect against a highly leveraged transaction involving
Federal Express
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 those Equipment
Certificates or Pass Through Certificates that would give the holders of
Equipment Certificates and Pass Through Certificates any protection in the
event of a highly leveraged transaction involving Federal Express. In addition,
the Indentures relating to the Equipment Trust Certificates and the Pass
Through Certificates do not limit the amount of secured or unsecured
indebtedness which Federal Express or its subsidiaries may incur.
A public market for the Pass Through Certificates may not develop or continue
There was no public market for the Pass Through Certificates of any series
before their issuance and we cannot assure you that one will develop or
continue. Federal Express does not intend to apply for the listing of any
series of Pass Through Certificates on a national securities exchange, unless
otherwise indicated in a prospectus supplement. If an active public market does
not develop or continue, the market price and liquidity of the Pass Through
Certificates may be adversely affected.
OUTLINE OF PASS THROUGH TRUST STRUCTURE
Federal Express will offer one or more series of Pass Through Certificates
pursuant to this prospectus and a related prospectus supplement. Each series of
Pass Through Certificates will be issued by a separate Pass Through Trust. Each
Pass Through Trust will be formed pursuant to a Series Supplement. The Pass
Through Certificates issued by a particular Pass Through Trust will represent
fractional undivided interests in such Pass Through Trust. Each Pass Through
Trust will own the Owned Aircraft Certificates or the Leased Aircraft
Certificates or both, as specified in the prospectus supplement.
6
<PAGE>
Upon or following the execution and delivery of each Series Supplement,
the Pass Through Trustee, on behalf of the Pass Through Trust formed by the
Series Supplement, will enter into one or more Participation Agreements to
purchase one or more Equipment Certificates. All of the Equipment Certificates
that constitute the property of a Pass Through Trust will have an identical
priority of payment relative to the other Equipment Certificates and an
identical interest rate, and this interest rate will be equal to the rate
applicable to the Pass Through Certificates issued by such Pass Through Trust.
The maturity date for the Equipment Certificates acquired by each Pass Through
Trust will occur on or before the final distribution date applicable to the
Pass Through Certificates issued by such Pass Through Trust.
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, any premium, and interest, received by it as holder of the Equipment
Certificates to the Certificateholders of the Pass Through Trust holding such
Equipment Certificates. See "Description of the Pass Through Certificates" and
"Description of the Equipment Certificates."
USE OF PROCEEDS
Subject to the next paragraph, the Pass Through Trustee for each Pass
Through Trust will use the proceeds from the sale of the Pass Through
Certificates to purchase Owned Aircraft Certificates or Leased Aircraft
Certificates. The prospectus supplement will specify the particular use of
proceeds for the related Equipment Certificates. We will specify in each
prospectus supplement the type and model of the applicable Aircraft, the
engines with which the Aircraft is equipped and whether the aircraft is already
in use in Federal Express' fleet, has been used in another operator's fleet or
will be delivered new by the manufacturer to Federal Express or to the Owner
Trustee, as the case may be.
To the extent that the Pass Through Trustee does not use all of the
proceeds from the sale of the Pass Through Certificates to purchase Equipment
Certificates on the date of issuance of the Pass Through Certificates, it will
invest those proceeds during the pre-funding period with a depositary, pursuant
to some other escrow arrangement or in interim debt instruments issued by
Federal Express. We will describe in the prospectus supplement how the proceeds
from an offering of Pass Through Certificates will be held or applied during
any pre-funding period. If the Pass Through Trustee does not subsequently use
any portion of those proceeds to purchase Equipment Certificates by the cut-off
date specified in the prospectus supplement, the Pass Through Trustee will
return those proceeds to the holders of the Pass Through Certificates.
In addition, we may offer Pass Through Certificates subject to the
following arrangements:
o A Pass Through Trust may purchase Leased Aircraft Certificates issued
by an Owner Trustee prior to the purchase of the Leased Aircraft by
the Owner Trustee or the commencement of the related Lease
o A Pass Through Trust may purchase Owned Aircraft Certificates issued
by Federal Express prior to the expected delivery date of the Owned
Aircraft.
DIAGRAM OF PAYMENTS
We illustrate in the diagram below some aspects of the payment flows in
the Pass Through Trust structure for a possible Leased Aircraft transaction and
a possible Owned Aircraft transaction. This illustration is merely intended as
an example and you should refer to the prospectus supplement for the particular
features of the Pass Through Trust structure in which you are making an
investment.
7
<PAGE>
Leased Aircraft Transaction
Federal Express:
o will lease each Leased Aircraft from the Owner Trustee under a
separate Lease
o will make scheduled rental payments for each Leased Aircraft under the
related Lease, and
o will make scheduled rental payments directly to the Indenture Trustee.
The Indenture Trustee:
o will, from the scheduled rental payments, pay principal and any
interest due from the Owner Trustee on the Leased Aircraft
Certificates, to the Pass Through Trustee, and
o will pay the remaining balance of scheduled rental payments 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 that Pass Through Trust. See "Description of the Pass
Through Certificates -- Payments and Distributions" and "Description of the
Equipment Certificates --Pre-Funding Period" for a discussion of payments
during any Pre-Funding Period.
Owned Aircraft Transaction
Federal Express will make scheduled payments on the Owned Aircraft
Certificates relating to each Owned Aircraft to the Indenture Trustee.
The Indenture Trustee will, from these payments, pay to the Pass Through
Trustee the principal and any interest due on the Owned Aircraft Certificates.
The Pass Through Trustee for each Pass Through Trust will distribute to
the related Certificateholders, payments received on the Owned Aircraft
Certificates held in that Pass Through Trust.
8
<PAGE>
[GRAPHIC - A diagram is included here which contains boxes representing
the parties and payment flows described above.]
DESCRIPTION OF THE PASS THROUGH CERTIFICATES
The following is a summary description of the Pass Through Certificates
which we expect will be common to all series of Pass Through Certificates. The
prospectus supplement will describe the specific terms of any series of Pass
Through Certificates. Therefore, you should rely on the information in the
prospectus supplement, in particular if the information in the prospectus
supplement is different from the information provided below.
Because the following description is a summary, it does not describe every
aspect of the Pass Through Certificates, and it is qualified in its entirety by
reference to all the provisions of the Pass Through Agreement and the
applicable Series Supplements. Federal Express has filed the form of Pass
Through Agreement as an exhibit to the Registration Statement of which this
prospectus is a part. Federal Express will file with the SEC the Series
Supplement relating to each series of Pass Through Certificates and the forms
of the related Indentures and any participation agreement, lease, intercreditor
agreement, liquidity facility, trust agreement, collateral agreement and
9
<PAGE>
depositary arrangement relating to any offering of Pass Through Certificates as
exhibits to a post-effective amendment to the Registration Statement of which
this prospectus is a part or a Current Report on Form 8-K, a Quarterly Report
on Form 10-Q or an Annual Report on Form 10-K.
The Pass Through Certificates offered pursuant to this prospectus and one
or more prospectus supplements will have an aggregate public offering price of
up to $450,000,000. To the extent that any provision in any prospectus
supplement is inconsistent with any provision of this summary, the provision of
the prospectus supplement will control.
In the following description, we have included references to section
numbers of the Pass Through Agreement so that you can easily locate those
provisions.
General
Form. The Pass Through Certificates will be issued in fully registered
form only. The Pass Through Certificates will be issued in book-entry form and
registered in the name of a nominee of the depositary, unless otherwise
specified in the prospectus supplement. See "-- Book-Entry Procedures" below.
Trust Property. 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, and all payments and distributions will be made
only from the property of the Pass Through Trust. The property of each Pass
Through Trust will include the Equipment Certificates held in such Pass Through
Trust, all monies at any time paid on the Equipment Certificates, all monies
due and to become due under the Equipment Certificates 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 prospectus supplement, rights under any
intercreditor agreement relating to cross-subordination arrangements, monies
receivable under any additional security or liquidity facility and any other
rights or property described in the prospectus supplement.
Denomination. 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 prospectus supplement, in minimum
denominations of $1,000 or any integral multiple of $1,000. (Pass Through
Agreement, Article II)
Terms. The prospectus supplement will describe the specific terms of each
series of Pass Through Certificates offered pursuant to the prospectus
supplement, including:
o the specific designation and title of the Pass Through Certificates
o the Pass Through Trustee for such series of Pass Through Certificates
o the Regular Distribution Dates and Special Distribution Dates
applicable to such Pass Through Certificates and any applicable
Cut-off Date
o the specific form of the Pass Through Certificates
o a description of:
- 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
those Equipment Certificates may or must be repaid in whole or
in part, by Federal Express or, with respect to Leased Aircraft
Certificates, the related Owner Trustee
- the payment priority of such Equipment Certificates in relation
to any other Equipment Certificates issued with respect to the
related Aircraft
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- any additional security or liquidity enhancements for those
Equipment Certificates
- any intercreditor issues between or among the holders of
Equipment Certificates having different priorities issued by the
same Owner Trustee, and
- specific terms of the Equipment Certificates during any
Pre-Funding Period
o a description of the related Aircraft, including whether the Aircraft
is a Leased Aircraft or an Owned Aircraft
o a description of the related Participation Agreements and Indentures,
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 remedies
with respect to the Equipment Certificates
o if such Pass Through Certificates relate to Leased Aircraft, a
description of the related Lease, Trust Agreement and Collateral
Agreement or Depositary Arrangement, including:
- the name of the related Owner Trustee
- 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 remedies with
respect to those Leased Aircraft Certificates, and
- any rights of the related Owner Trustee or Owner Participant to
cure failures of Federal Express to pay rent under the related
Lease
o the extent to which the provisions of the operative documents
applicable to such Equipment Certificates may be amended by the
parties to those documents 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
o a description of any cross-default or cross-collateralization
provisions in the related Indenture
o a description of any subordination provisions among
Certificateholders, including any cross- subordination provisions
among the Certificateholders in separate Pass Through Trusts
o any additional security or liquidity facilities for the Pass Through
Certificates
o any arrangements for the investment or other use of proceeds of the
Pass Through Certificates prior to the purchase of Equipment
Certificates, and any delayed aircraft financing arrangements, and
o any other special terms pertaining to such Pass Through Certificates,
including any modification of the general terms described in this
prospectus (Pass Through Agreement, Article II)
Equipment Certificates. Equipment Certificates may be issued in different
classes, which means that Equipment Certificates may have different payment
priorities even though issued by the same Owner Trustee and relate to the same
Aircraft. 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 prospectus supplement, only Equipment Certificates of the same class may be
held in the same Pass Through Trust.
Interest. 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 specified for that Pass Through Trust on
the cover page of the prospectus supplement.
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Payments. 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 Federal Express,
the Pass Through Trustee, any related Owner Participant, the Owner Trustee in
its individual capacity or any affiliate of any of the above. 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 Series
Supplement. (Pass Through Agreement, Section 3.06)
Highly Leveraged Transactions. The Pass Through Agreement does not, and
the Indentures will not, contain any debt covenants or provisions that would
give Certificateholders protection in the event of a highly leveraged
transaction involving Federal Express. 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 Pass Through Certificates in fully registered certificated form are
issued as described below, 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. A Certificateholder of a Pass Through
Certificate initially issued as a global certificate will not be entitled to
receive a certificated Pass Through Certificate, except as described below.
DTC has advised Federal Express that:
o 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.
o DTC was created to hold securities for 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.
o DTC Participants include securities brokers and dealers, banks, trust
companies and clearing corporations.
o 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.
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The DTC Participants will be responsible for distributions to
Certificateholders and such distributions will be made in accordance with
customary industry practices. Although Certificateholders will not have
possession of the Pass Through Certificates, the rules of DTC provide a
mechanism by which the Certificateholders 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.
Neither Federal Express nor the Pass Through Trustee nor any agent of
either of them will be responsible or liable 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", for purposes of the Pass Through Agreement, will be Cede,
as nominee of DTC, Certificateholders will not be recognized by the Pass
Through Trustee as "Certificateholders", and Certificateholders will be
permitted to exercise the rights of "Certificateholders" only indirectly
through DTC and DTC Participants. DTC has advised Federal Express 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 Federal Express 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 Federal Express 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 DTC will require secondary market trading
activity in the Pass Through Certificates to settle in immediately available
funds.
Certificated Form. The Owner Trustee will issue physical certificates to
holders of a global security or their nominees if:
o DTC advises the Pass Through Trustee in writing that it is no longer
willing or able to discharge properly its responsibilities as
depositary with respect to the Pass Through Certificates and Federal
Express is unable to locate a qualified successor, or
o if Federal Express, 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 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. There will be no service charge 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.
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Payments and Distributions
Federal Express 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, Federal
Express will make scheduled rental payments for each Leased Aircraft under the
related Lease. 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.
Pre-Funding Period. Until Federal Express has entered into a Lease in
connection with a Leased Aircraft, Federal Express will not be obligated to
make any scheduled rental payments and the related Leased Aircraft Certificates
will not be secured by such Leased Aircraft or the related Lease. See
"Description of the Equipment Certificates - Pre-Funding Period" for a
description of the arrangements in the event that Equipment Certificates are
issued prior to the delivery of the related Aircraft. In the event that, on the
issuance date of any Pass Through Certificates, all of the proceeds from the
sale of those Pass Through Certificates are not used to purchase Equipment
Certificates on that date, the proceeds from the sale of those Pass Through
Certificates relating to the Equipment Certificates to be purchased
subsequently will be held under an arrangement described in the prospectus
supplement, including investment of the proceeds in permitted investments, with
a depositary or pursuant to another escrow arrangement or in interim debt
instruments issued by Federal Express, which may be collateralized or otherwise
secured with other property. The prospectus supplement will also describe any
arrangements for the payment of any amounts due on the Pass Through
Certificates during the pre-funding period.
Following any Pre-Funding Period. Upon commencement of the Lease for any
Leased Aircraft, after the Indenture Trustee has made 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 any 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
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 prospectus
supplement. Subject to the effect of any cross-subordination provisions set
forth in the 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
after the Regular Distribution Date, it will be distributed on the date
received to Certificateholders. Each distribution of a Scheduled Payment will
be made by the Pass Through Trustee to Certificateholders of record of such
Pass Through Trust on the fifteenth day prior to such Regular Distribution
Date, subject to some exceptions. Each Certificateholder will be entitled to
receive a pro rata share of any distribution, except as provided in any
cross-subordination provisions of the prospectus supplement. (Pass Through
Agreement, Section 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 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
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the Pool Factor 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, any premium, 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:
o for the prepayment of such Equipment Certificates in connection with
events specified in the prospectus supplement (including payments
upon unavailability of Trust Property and prepayments during any Pre-
Funding Period)
o upon the prepayment by the related Owner Trustee of such Equipment
Certificates following a default in respect of such Equipment
Certificates, and
o on account of the sale of such Equipment Certificates by the Pass
Through Trustee
will be distributed on the dates indicated in the prospectus supplement except
that, unless otherwise specified in the prospectus supplement, payments
received by the Pass Through Trustee following a 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 prospectus supplement, 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 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 Special Distribution Date. 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 another date is specified in the prospectus
supplement. Subject to the effect of any cross-subordination provisions set
forth in the 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 Trustee is required to establish and maintain, for each
Pass Through Trust and for the benefit of the related Certificateholders, one
or more Certificate Accounts and one or more Special Payments Accounts. 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 Payment received by it in the related Special Payments
Account pending distribution of such Special Payments. (Pass Through Agreement,
Section 5.01) A Special Payment that is 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 investment will
be distributed with such Special Payment. (Pass Through Agreement, 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
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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 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 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 prospectus supplement or below in "Events of Default and Certain Rights
Upon an Event of Default," the Pool Factor and the Pool Balance 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.
The Pool Balance for each Pass Through Trust as of any Distribution Date
will be computed after giving effect to any payment of principal on the
Equipment Certificates held in such Pass Through Trust and its distribution on
that date. (Pass Through Agreement, Article I)
The Pool Factor for each Pass Through Trust as of any Distribution Date
shall be computed after giving effect to the payment of any principal on the
Equipment Certificates held in such Pass Through Trust and its distribution 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 that
distribution being made on that Distribution Date, setting forth the following
information (per $1,000 in aggregate amount of Pass Through Certificates for
the related Pass Through Trust, as to the first and second categories of
information listed below):
o the amount of that distribution allocable to principal and allocable
to any premium for the related Equipment Certificates
o the amount of that distribution allocable to interest for the related
Equipment Certificates, and
o 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.
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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 the first and second categories of
information listed 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 any time when 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 Pass Through 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 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 describes the circumstances in which the Pass Through Trustee will
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 is required to obtain
instructions from the Certificateholders of such Pass Through Trust. Prior to
an Event of Default 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 11.08) If specified in the
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 described 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 Rights Upon an Event of Default
An Event of Default for any Pass Through Trust is the occurrence and
continuance of an Indenture Event of Default under one or more of the
Indentures. The Indenture Events of Default will be described in the prospectus
supplement and, for the Leased Aircraft, will include each Lease Event of
Default. For 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.
No cross defaults. 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 the 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
prospectus supplement. Consequently, 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.
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 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, any premium and interest on such Equipment
Certificates will continue to be distributed to the Certificateholders of such
Pass Through Trust as originally scheduled. If the prospectus supplement
contains any cross-subordination provisions among Certificateholders of
separate Pass Through Trusts, however, payments made pursuant to an Indenture
under
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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 Indentures.
Cure rights. Under each Leased Aircraft Indenture, the related Owner
Trustee and the Owner Participant will have the right under some 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 its 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 prospectus supplement will contain a more detailed discussion of the
provisions described in this paragraph.
Remedies. If an Indenture Event of Default under an Indenture relating to
Equipment Certificates held in a Pass Through Trust has occurred and is
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, will 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, any
accrued and unpaid interest, and all other amounts due under such Equipment
Certificates to be due and payable.
If an Indenture Event of Default has occurred and is continuing, the Pass
Through Trustee may, unless any intercreditor agreement provides otherwise, 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 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)
Whether the Certificateholders of any one Pass Through Trust are able 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.
Conflict of Interest. 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 one of its affiliates 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 that Pass Through Trust
could for the same reason be faced with a potential conflict of interest upon
an Indenture Event of Default. In that case, the initial Pass Through Trustee
has indicated that it would resign as Pass Through Trustee of one or all of
those 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.
Sale. As an additional remedy, if an Indenture Event of Default under an
Indenture has occurred and is continuing, 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
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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 of such Equipment Certificates, 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 Federal Express 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 to those
remaining Equipment Certificates.
Distribution. 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 that Pass Through Trust following an
Indenture Event of Default under such Indenture will be deposited in the
Special Payments Account for that 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 any option it has to prepay or purchase the outstanding
Leased Aircraft Certificates issued under such Indenture as described in the
related prospectus supplement, the price paid by it 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)
Permitted Investments. 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 those
funds on a Special Distribution Date. (Pass Through Agreement, Article I and
Section 5.04)
Notice. 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 a
responsible officer of it. Under no circumstances, however, may the Pass
Through Trustee give 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 notice if it in good faith determines that withholding notice is in
the interests of such Certificateholders, except in the case of default in the
payment of principal of or any premium, interest or other amount due 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 is
disregarded. (Pass Through Agreement, Section 7.11)
Indemnity. For each Pass Through Trust, the Pass Through Trustee is
entitled to be indemnified by the Certificateholders of that Pass Through Trust
before proceeding to exercise any right or power under that Pass Through Trust
or any intercreditor agreement at the request of those Certificateholders. The
Pass Through Trustee's
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entitlement to be indemnified by the Certificateholders is subject to the duty
of the Pass Through Trustee during a default to act with the required standard
of care. (Pass Through Agreement, Section 8.03)
Waivers. Subject to any intercreditor agreement, in some cases, the
Certificateholders of a Pass Through Trust evidencing fractional undivided
interests aggregating not less than a majority in interest of such Pass Through
Trust may on behalf of all the Certificateholders of such Pass Through Trust or
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 in doing so annul any direction given by such
Certificateholders to the Pass Through Trustee or the Indenture Trustee with
respect to such default, except a default in payment of the principal of or any
premium, interest or other amount due on, any of the Equipment Certificates
held in that Pass Through Trust or 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 by such default. Any 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
under that Indenture. (Pass Through Agreement, Section 7.10)
Modifications of the Pass Through Agreement
Without the Consent of Certificateholders. Federal Express and the Pass
Through Trustee may enter into an agreement supplemental to any Pass Through
Trust, without the consent of the Certificateholders of such Pass Through
Trust, to:
o provide for the formation of any Pass Through Trust and the issuance
of the related Pass Through Certificates
o evidence the succession of another corporation to Federal Express and
the assumption by that corporation of Federal Express' obligations
under the Pass Through Agreement and the applicable Series Supplement
o add to the covenants of Federal Express for the protection of the
related Certificateholders
o surrender any right or power conferred upon Federal Express in the
Pass Through Agreement or any Series Supplement
o cure any ambiguity or correct any mistake or supplement any defective
or inconsistent provision of such Pass Through Agreement or the
applicable Series Supplement, any intercreditor agreement or any
Liquidity Facility
o modify any other provisions in regard to matters or questions arising
under the Pass Through Agreement or the applicable Series Supplement,
any intercreditor agreement or any Liquidity Facility that will not
adversely affect the interests of the related Certificateholders
o correct or amplify the description of property that constitutes Trust
Property or the conveyance of such property to the Pass Through
Trustee
o evidence and provide for a successor Pass Through Trustee for some or
all of the Pass Through Trusts
o modify, eliminate or add to the provisions of the Pass Through
Agreement or any Series Supplement to the extent necessary to
continue to qualify the Pass Through Agreement or that Series
Supplement under the Trust Indenture Act of 1939, as amended, or any
similar federal statute enacted after the date of the Pass Through
Agreement
o make any other amendments or modifications to the Pass Through
Agreement which shall only apply to one or more Series issued after
the date of such supplemental agreement, and
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o add, eliminate or change any provision under the Pass Through
Agreement that will not adversely affect the interests of the
Certificateholders.
However, in each of the above cases such supplemental agreement must not
cause the Pass Through Trust to become taxable as an association for federal
income tax purposes. (Pass Through Agreement, Section 11.01)
With the Consent of Certificateholders. Federal Express 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:
o 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
o reduce, modify or amend any indemnities in favor of any
Certificateholder (unless consented to by each such holder adversely
affected by such reduction, modification or amendment)
o create or permit the creation of any lien on the Trust Property or
deprive any holder of any such Pass Through 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
o waive, amend or modify the priority of distributions of any
intercreditor agreement in a manner adverse to the Certificateholders
o 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
o cause the Pass Through Trust to become taxable as an association for
federal income tax purposes. (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 specific 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)
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Cross-Subordination Issues
The Pass Through Trustee may enter into an intercreditor agreement which
provides that payments made to Certificateholders of a Pass Through Trust may
be subordinated to the prior payment of all amounts owing to Certificateholders
of another Pass Through Trust which holds senior Equipment Certificates issued
under all Indentures. The prospectus supplement will describe the circumstances
under which those payments may be subordinated. The prospectus supplement will
describe any such intercreditor agreement and the cross- subordination
provisions and any related terms, including who is permitted to grant waivers
of defaults under any related Indenture, consent to the amendment or
modification of any related Indentures or direct the exercise of remedial
actions under any related Indentures.
Termination of Pass Through Trusts
The obligations of Federal Express and the Pass Through Trustee with
respect to a Pass Through Trust will terminate upon the distribution to the
Certificateholders of the 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 the Pass Through
Trust. The Pass Through Trustee will notify each Certificateholder of record of
the Pass Through Trust by mail of, among other things, the termination of the
Pass Through Trust, the amount of the proposed final payment and the proposed
date for the distribution of such final payment for the Pass Through Trust. The
final distribution for each Certificateholder of the Pass Through Trust will be
made only upon surrender of the Certificateholder's Pass Through Certificates
at the office or agency of the Pass Through Trustee specified in the
termination notice. (Pass Through Agreement, Section 12.01)
Pre-funding
In the event that, on the issuance date of any Pass Through Certificates,
all of the proceeds from the sale of those Pass Through Certificates are not
used to purchase Equipment Certificates, the Equipment Certificates may be
purchased by the Pass Through Trustee at any time on or prior to the date
specified in the prospectus supplement. In that case, the proceeds from the
sale of those Pass Through Certificates will be held under an arrangement
described in the prospectus supplement. Examples of these arrangements include:
o investment of the proceeds by the Pass Through Trustee in permitted
investments
o deposit of the proceeds in a deposit or escrow account held by a
separate depositary or escrow agent or
o purchase by the Pass Through Trustee of debt instruments issued on an
interim basis by Federal Express, which debt instrument may be
secured by a collateral account or other security or property
described in the prospectus supplement.
The arrangements with respect to the payment of interest on the invested
funds will be also be described in the prospectus supplement. The prospectus
supplement will also describe any arrangements for the payment of any amounts
due to holders of Pass Through Certificates during the pre-funding period. If
any of the proceeds are not subsequently utilized to purchase Equipment
Certificates by the relevant date specified in the applicable prospectus
supplement, including by reason of casualty to one or more Aircraft, those
proceeds will be returned to the holders of the Pass Through Certificates.
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 prospectus supplement to purchase the Equipment
Certificates that were contemplated to be held in such Pass Through Trust,
Federal Express 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 prospectus
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supplement, together with interest thereon at a rate equal to the rate
applicable to such Pass Through Certificates, but without premium. Federal
Express will also pay to the Pass Through Trustee on such date an amount equal
to such interest. Federal Express will be responsible for any losses in the
deposit trust account. (Pass Through Agreement, Section 2.02)
Liquidity Facility
The 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. 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 First
Security Bank, National Association, unless otherwise specified in the related
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)
First Security Bank, National Association will be the Indenture Trustee
under the Indentures under which the Equipment Certificates have been or will
be issued, unless otherwise specified in the related prospectus supplement.
First Security Bank, National Association acts as trustee under other
indentures with respect to other indebtedness of Federal Express, and Federal
Express 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, Federal Express may remove the Pass Through Trustee, or any
Certificateholder of such Pass Through Trust holding Pass Through Certificates
for at least six months may, on behalf of that Certificateholder and all others
similarly situated, petition any court of competent jurisdiction for the
removal of the Pass Through Trustee and the appointment of a successor trustee.
In addition, the Certificateholders holding more than 50% in aggregate amount
of the related Pass Through Certificates may remove the Pass Through Trustee of
any Pass Through Trust without cause. (Pass Through Agreement, Section 10.01)
In the case of the resignation or removal of the Pass Through Trustee,
Federal Express 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 the
resignation and successor trustee provisions of the Pass Through Agreement, 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 a resignation or removal.
The Pass Through Agreement provides that Federal Express 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 Federal Express 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 made in the Pass Through Agreement,
the applicable Series Supplement or any related documents. In some
circumstances, the Pass Through Trustee is entitled to reimbursement from the
applicable Pass Through Trust
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for any tax (other than income or similar taxes) incurred in its trust capacity
in connection with the administration of that Pass Through Trust. (Pass Through
Agreement, Articles VIII and IX)
DESCRIPTION OF THE EQUIPMENT CERTIFICATES
The following is a summary description of the Equipment Certificates
which we expect will be common to all Equipment Certificates. Where no
distinction is made between the Leased Aircraft Certificates and the Owned
Aircraft Certificates or between their respective Indentures, such statements
refer to any Equipment Certificates and any Indenture. The prospectus
supplement will describe the specific terms of any series of Equipment
Certificates. Therefore, you should rely on the information in the prospectus
supplement, in particular if the information in the prospectus supplement is
different from the information provided below.
Because the following description is a summary, it does not describe every
aspect of the Equipment Certificates, and is qualified in its entirety by
reference to all the provisions of the applicable Equipment Certificates, the
Indentures, the Participation Agreements, any Leases, any Collateral Agreements
or Depositary Arrangement, and other agreements and arrangements relating to
any particular offering of Equipment Certificates.
To the extent that any provision in any prospectus supplement is
inconsistent with any provision of this summary, the provision of the
prospectus supplement will control.
General
Owned Aircraft. For each Owned Aircraft, the related Owned Aircraft
Certificates will be issued as direct obligations of Federal Express 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 prospectus supplement will specify the Owned Aircraft
relating to each Owned Aircraft Indenture and the related Owned Aircraft
Certificates. Federal Express will be directly obligated under each Owned
Aircraft Indenture to make payments of principal of, any premium and interest
on the related Owned Aircraft Certificates.
Leased Aircraft. 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 Federal Express pursuant to a separate Lease between such Owner
Trustee and Federal Express. See "Pre-Funding Period" 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.
Rental Payments. The prospectus supplement will specify the Leased
Aircraft subject to each Lease and the Leased Aircraft Certificates issued
under the related Leased Aircraft Indenture. Upon the commencement of the Lease
for any Leased Aircraft, Federal Express 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, for a Delayed Lease Aircraft on the first scheduled
payment date after the related Pre-Funding Period, any difference between the
rental payment due on such date by Federal Express and the scheduled payment of
principal, if any, and interest then due on such Leased Aircraft Certificates
will be payable from amounts payable under a depositary or other escrow
arrangement described in the prospectus supplement or, if Leased Aircraft
Certificates have been issued in respect of Delayed Lease Aircraft, such
difference will be paid pursuant to arrangements described in the prospectus
supplement. See "Pre-Funding Period" below. The Leased Aircraft Certificates
will not, however, be obligations of, or guaranteed by, Federal Express.
Federal Express' obligations to pay rent and to cause other payments to be made
under each Lease will be general obligations of Federal Express.
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In circumstances described in the prospectus supplement, Federal Express
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, similar to a financing contemplated by
an Owned Aircraft Indenture.
Sale and Leaseback. For any Owned Aircraft, if specified in the prospectus
supplement, Federal Express may arrange for an Owner Trustee, acting for an
Owner Trust for the benefit of an Owner Participant, to purchase that Owned
Aircraft from Federal Express and lease such Aircraft back to Federal Express
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
that prospectus supplement. In that case, the Owner Trustee will assume, on a
nonrecourse basis, the obligations of Federal Express 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, Federal Express, although Federal Express 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 the Owner Trustee to
the Indenture Trustee of the 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
prospectus supplement will specify the terms and conditions under which any
sale and leaseback transactions may be consummated.
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 specified in the 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 specified
in the prospectus supplement. Principal received by the Pass Through Trustee on
the Equipment Certificates will be passed through to the Certificateholders of
such Pass Through Trust as specified in the prospectus supplement.
If specified in the prospectus supplement, payments of interest and
principal due on senior Equipment Certificates issued in respect of an Aircraft
will be made prior to payments of interest and principal on Equipment
Certificates issued in respect of such Aircraft which are subordinated to such
senior Equipment Certificates.
Prepayment
The prospectus supplement will describe the circumstances, whether
voluntary or involuntary, under which the related Equipment Certificates may or
must be prepaid in whole or in part prior to their stated maturity date, any
premium applicable upon prepayment and other terms applying to the prepayment.
See "Mandatory Prepayment During the Pre-Funding Period" below for a discussion
of events which would require prepayment of Leased Aircraft Certificates 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:
o an assignment by the related Owner Trustee to the Indenture Trustee
of the Owner Trustee's rights (except for limited rights described
below) under the applicable Lease, including the right to receive
rent and other payments under the Lease
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o a security interest granted to the Indenture Trustee in the related
Leased Aircraft, subject to the rights of Federal Express under the
applicable Lease, so that the Indenture Trustee will not have the
right to disturb Federal Express' quiet enjoyment of such Aircraft so
long as no Lease Event of Default has occurred and is continuing, and
o an assignment to the Indenture Trustee of the Owner Trustee's rights
relating to such Leased Aircraft and the related engines under the
agreements for the purchase of the Leased Aircraft and engines
between Federal Express and the respective manufacturers. See
"Registration of the Aircraft" below.
The assignment by the Owner Trustee to the Indenture Trustee of its rights
under the related Lease will exclude rights of the Owner Trustee and the
related Owner Participant relating to:
o indemnification by Federal Express for some matters
o proceeds of public liability insurance payable to the Owner Trustee
in its individual capacity and to the Owner Participant under
insurance maintained by Federal Express under such Lease, and
o 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 the limitations described
in the prospectus supplement.
The Owned Aircraft Certificates issued under each Owned Aircraft Indenture
will be secured by a security interest granted to the Indenture Trustee in all
of Federal Express' right, title and interest in and to the related Owned
Aircraft and an assignment to the Indenture Trustee of some of Federal Express'
rights relating to such Owned Aircraft and the related engines under the
agreements for the purchase of such Owned Aircraft and engines between Federal
Express and the respective manufacturers. See "Registration of the Aircraft"
below.
Unless otherwise specified in the prospectus supplement, there will be no
cross-collateralization provisions in the Indentures and consequently, the
Equipment Certificates issued in respect of one of the Aircraft will be secured
only by that Aircraft and will not be secured by any other Aircraft or, in the
case of Leased Aircraft Certificates, the Leases related to any other Aircraft.
Unless otherwise specified in the prospectus supplement, there will be no
cross-default provisions in the Indentures and consequently, an Indenture Event
of Default under any particular Indenture may not result in an Indenture Event
of Default under any other Indenture. However, 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 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 and any premium and interest on
such Equipment Certificates will continue to be distributed to the
Certificateholders of such Pass Through Trust as originally scheduled, subject
to any Intercreditor Agreement.
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 (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:
o the automatic stay provision of the Bankruptcy Code, which provision
enjoins the taking of any action against a debtor by a creditor
o 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
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o the confirmation of a plan by the bankruptcy court, and
o 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 defaults, other than defaults resulting solely from the
financial condition, bankruptcy, insolvency or reorganization of the debtor.
The prospectus supplement for each offering will discuss the availability of
the benefits of Section 1110 of the Bankruptcy Code with respect to the related
Aircraft.
If the 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, Additional Collateral or by a Depositary
Arrangement. See "Pre-Funding Period" below.
Registration of the Aircraft
Federal Express will be required, except under some circumstances, to
register and keep each Aircraft registered under Title 49 of the Transportation
Code, in the name of Federal Express, in the case of an Owned Aircraft, or in
the name of the Owner Trustee, in the case of a Leased Aircraft, and to record
and maintain the recordation of the Indenture and any Lease relating to each
Aircraft under the Transportation Code. The recordation of the Indenture and
any Lease 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 limited exceptions, be recognized in
those jurisdictions that have ratified to the Convention.
Federal Express will be able, in some circumstances, to re-register any
Aircraft in specified countries other than the United States. Unless otherwise
specified in the prospectus supplement, prior to any change in the jurisdiction
of registry, the Indenture Trustee and, for Leased Aircraft, the related Owner
Participant must receive various 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 those assurances are intended
to provide that Federal Express' (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 that 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 Federal Express 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
In the case of each Aircraft, Federal Express will be prohibited from
consolidating with or merging into any other corporation under circumstances in
which Federal Express 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:
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o 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 Federal Express
contained in the related Indenture, the Participation Agreement, the
Lease, the Pass Through Agreement, the Purchase Agreement and the
related Purchase Agreement Assignment
o immediately after giving effect to the consolidation, merger or
transfer, the successor or transferee is in compliance with all of
the terms and conditions of those documents, and
o the consolidation, merger or transfer does not (or would not, if
prior to commencement of the related Lease) give rise to a Lease
Event of Default under the related Lease or, in the case of an Owned
Aircraft, an Indenture Event of Default under the related Owned
Aircraft Indenture.
Pre-Funding Period
Equipment Certificates may be issued in connection with any pre-funding
arrangement, such as the following:
o The Owner Trustee may issue Leased Aircraft Certificates prior to the
purchase of the related Leased Aircraft by the Owner Trustee or the
commencement of the related Leases
o Federal Express may issue Owned Aircraft Certificates prior to the
expected delivery date of the Owned Aircraft.
The prospectus supplement will describe any of these pre-funding
arrangements, including any arrangements for the collateralization of any
Leased Aircraft Certificates or Owned Aircraft Certificates with cash,
permitted investments or other property and the arrangements for payment of any
amounts due to holders of Pass Through Certificates during the pre-funding
period.
If the anticipated aircraft financing transactions have not been completed
by the date specified in the prospectus supplement, including by reason of a
casualty to one or more Aircraft, such Leased Aircraft Certificates or Owned
Aircraft Certificates will be prepaid at the price specified in the prospectus
supplement. Alternatively, if the Lease related to any Leased Aircraft
Certificates has not commenced by the date specified in the prospectus
supplement, Federal Express, at its option, may convert the proposed leveraged
lease financing into a type of financing available for Owned Aircraft and those
Leased Aircraft Certificates will become Owned Aircraft Certificates.
Owned Aircraft Indenture Covenants
Maintenance. Federal Express 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 of such Owned Aircraft to be maintained in good
standing at all times under the Transportation Code or, in some 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 Federal Express, using its
reasonable best efforts, undertakes such cure promptly, diligently and
continuously, then Federal Express will not be in default with respect to such
obligation.
Generally, Federal Express will be obligated to replace or cause to be
replaced all Owned Aircraft parts that become worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or permanently rendered
unfit for use. Federal Express will have the right to make other modifications
and additions to an Owned Aircraft so long as the 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 the modification or addition, assuming that
such Owned Aircraft was then in the condition and airworthiness required by the
related Indenture. Also, in some circumstances, Federal Express 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 Federal
Express
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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
prospectus supplement will contain a description of any limitations applicable
to provisions described in this paragraph.
Insurance. The prospectus supplement will contain a description of the
insurance arrangements applicable to each Aircraft. In general, Federal Express
will be obligated to carry comprehensive aircraft liability insurance,
including property damage liability insurance and cargo legal liability
insurance as described below. The insurance must be in the amounts, against
such risks and with such retentions as Federal Express customarily maintains.
The insurance must also be with insurers of recognized responsibility and
against such other risks as are usually insured against by similar corporations
situated similarly to Federal Express and engaged in the same or similar
business to Federal Express and owning or operating aircraft and engines
similar to the related Aircraft and related engines. Unless otherwise indicated
in the prospectus supplement, Federal Express will also be obligated to carry,
with insurers of recognized responsibility, all-risk ground and flight aircraft
hull insurance covering the related Aircraft and all-risk coverage with respect
to the related engines and parts while temporarily removed from such Aircraft
and not replaced by similar engines or parts, as described below. That
insurance includes war-risk and allied perils, hijacking and governmental
confiscation and expropriation insurance, except in the country of registry,
and must be in such form and amounts, and with such retentions as Federal
Express customarily maintains for other aircraft in Federal Express' fleet of
the same type and model and operating on the same routes as the related
Aircraft. Federal Express may self-insure against the risks required to be
insured against under the related Lease in such reasonable amounts as are then
applicable to other aircraft or engines of Federal Express of value comparable
to the related Aircraft. Self-insurance for all aircraft in Federal Express'
fleet may not, however, in the aggregate exceed an amount equal to the lesser
of 50% of the highest insured value of any single aircraft in such fleet, or
1.5% of the average aggregate insured value from time to time of Federal
Express' entire aircraft fleet, although a standard deductible per occurrence
per aircraft no greater than the amount customarily allowed as a deductible in
the industry will be permitted in addition to such self-insurance.
Federal Express 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. In general, 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 specified amounts. The prospectus supplement will
contain a description of any limitations 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 prospectus supplement, may be subordinated and junior in right
of payment to other Equipment Certificates related to the same Aircraft. The
prospectus supplement will specify the terms of any subordination.
Payments and Limitations of Liability
All payments of principal of, any premium and interest on any Leased
Aircraft Certificates will be made only from the assets subject to the Lien
described in the related Leased Aircraft Indenture or the income and proceeds
received by the Indenture Trustee from those assets or from other payments
received by the Indenture Trustee to be applied pursuant to the Leased Aircraft
Indenture. Those other payments include, 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 or amounts payable under a
Depositary Arrangement and, on and after the commencement of the related Lease,
rent payable by Federal Express under the related Lease. Additionally, if the
prospectus supplement provides for a Liquidity Facility to support payments of
interest on one or more series of Leased Aircraft Certificates, interest
payments on the Leased Aircraft Certificates will be made under such Liquidity
Facility to the extent provided in the Liquidity Facility. The Leased Aircraft
Certificates will not be direct obligations of, or
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guaranteed by, Federal Express. Federal Express' obligations to pay rent and to
cause other payments to be made under each Lease will be general obligations of
Federal Express.
Neither the Owner Trustee nor the Indenture Trustee (in their individual
capacities) will be liable to any Certificateholder or, in the case of the
Owner Trustee, in its individual capacity, to Federal Express 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.
Federal Express' obligations under each Owned Aircraft Indenture and under
the related Owned Aircraft Certificates will be general obligations of Federal
Express.
Indenture Events of Default and Remedies
For any Pass Through Trust, the 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 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 Federal Express 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. Federal Express will
make the scheduled rental payments under each Lease on the dates specified in
the prospectus supplement. The Owner Trustee will assign to the Indenture
Trustee the respective payments 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 Federal Express 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, Federal Express 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 Federal Express
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 or from amounts payable under a
Depositary Arrangement. 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 prospectus supplement.
Net Lease. Federal Express' obligations under each Lease in respect of the
related Leased Aircraft will be those of a lessee under a "net lease."
Accordingly, Federal Express 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
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to be maintained in good standing at all times under the Transportation Code
or, in some circumstances, under the applicable requirements of the
aeronautical authority of another country of registry.
Generally, Federal Express will be obligated to replace or cause to be
replaced all Leased Aircraft parts that become worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or permanently rendered
unfit for use. Federal Express will have the right to make other modifications
and additions to a Leased Aircraft so long as the 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 the modification or addition, assuming that
such Leased Aircraft was then in the condition and airworthiness required by
the related Lease. Also, in some circumstances, Federal Express 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 Federal
Express 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 prospectus supplement will contain a description of any
limitations applicable to provisions described above.
Insurance. The prospectus supplement will contain a description of the
insurance arrangements applicable to each Aircraft. In general, Federal Express
will be obligated to carry comprehensive aircraft liability insurance,
including property damage liability insurance and cargo legal liability
insurance as described below. The insurance must be in such amounts, against
such risks and with such retentions as Federal Express customarily maintains.
Such insurance must also be with insurers of recognized responsibility and
against such other risks as are usually insured against by similar corporations
situated similarly to Federal Express and engaged in the same or similar
business to Federal Express and owning or operating aircraft and engines
similar to the related Aircraft and related engines. In general, Federal
Express will also be obligated to carry, with insurers of recognized
responsibility, all-risk ground and flight aircraft hull insurance covering the
related Aircraft and all-risk coverage with respect to the related engines and
parts while temporarily removed from such Aircraft and not replaced by similar
engines or parts, as described below. The insurance includes war-risk and
allied perils, hijacking and governmental confiscation and expropriation
insurance, except in the country of registry, must be in such form and amounts,
and with such retentions as Federal Express customarily maintains with respect
to other aircraft in Federal Express' fleet of the same type and model and
operating on the same routes as the related Aircraft, and may not be in an
amount below certain stipulated values. Federal Express may self-insure against
the risks required to be insured against under the related lease in such
reasonable amounts as are then applicable to other aircraft or engines of
Federal Express of value comparable to the related Aircraft. Self-insurance for
all aircraft in Federal Express' fleet may not, however, in the aggregate
exceed an amount equal to the lesser of 50% of the highest insured value of any
single aircraft in such fleet or 1.5% of the average aggregate insured value
from time to time of Federal Express' entire aircraft fleet, provided that a
standard deductible per occurrence per aircraft no greater than the amount
customarily allowed as a deductible in the industry will be permitted in
addition to such self-insurance.
Federal Express 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. In general, 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 specified amounts. The prospectus
supplement will contain a description of any limitations applicable to
provisions described in this paragraph.
Lease Events of Default; Remedies. The 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.
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The Participation Agreements
Federal Express 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 or the Certificateholders), for certain liabilities, losses,
fees and expenses and for certain other matters arising out of the transactions
described in this prospectus or relating to the applicable Aircraft or the use
of such Aircraft. In addition, under certain circumstances Federal Express 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 some restrictions, each Owner Participant may
convey all of its right, title and interest relating to any Leased Aircraft.
Moreover, if so provided in the prospectus supplement, in certain limited
instances Federal Express may assume an Owner Trust's obligations under the
related Leased Aircraft Certificates on a full recourse basis.
Liquidity Facility
The 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 prospectus supplement. Unless otherwise provided in the
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
that case, the prospectus supplement will describe the priority of
distributions among the Equipment Certificates (and any related liquidity
facilities), 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 related Leases) and other
intercreditor terms and provisions.
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Davis Polk & Wardwell, tax counsel to Federal Express,
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 of the Pass Through Certificates
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 prospectus supplement. This
opinion is based on laws, regulations, rulings and decisions in effect as of
the date of this prospectus. Changes to existing law, which could have
retroactive effect, may alter the consequences described below. This discussion
only applies to owners of Pass Through Certificates that are either:
o a citizen or resident of the United States for United States federal
income tax purposes
o a corporation or other entity created or organized under the laws of
the United States or any state of the United States, or
o an estate or trust the income of which is subject to United States
federal income tax without regard to its source
and does not 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
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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 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 held 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 in
proportion to their fair market values at the time of purchase of the Pass
Through Certificate. Unless otherwise indicated in a prospectus supplement,
Federal Express 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
its 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. In the case
of 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 Federal Express assumes an
Owner Trust's obligations under the related Equipment Certificates upon a
purchase of the related Aircraft by Federal Express, or an Owner Trust assumes
Federal Express' 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. Immediately following
a taxable exchange of Equipment Certificates described in the previous
sentence, the Equipment Certificates owned by a Certificateholder will be
deemed to be newly issued Equipment Certificates (the "New Equipment
Certificates"). For this purpose, the amount realized, as determined under
current Treasury regulations on original issue discount, will be equal to a
Certificateholder's pro rata share of the New Equipment Certificate's stated
principal amount or, in the event the New Equipment Certificates do not bear
"adequate stated interest" within the meaning of Section 1274 of the Code,
their "imputed principal amount," which is generally the sum of the present
values of all payments due under the New Equipment Certificates, discounted
from the date of payment to their issue date at the appropriate "applicable
federal rate." In addition, and unless de minimis rules apply, if after a
taxable exchange the Equipment Certificates do not provide for "adequate stated
interest" and the principal amount of the New Equipment Certificates is more
than the "imputed principal amount," then the New Equipment Certificates would
have "original issue discount" ("OID"). Certificateholders would be required to
include the OID attributable to their pro rata share of the New Equipment
Certificates in income for federal tax purposes as it accrues, in advance of
receiving payment attributable to such income, under a constant yield to
maturity method.
Sales or Exchanges of Pass Through Certificates
A Certificateholder that sells or exchanges a Pass Through Certificate
will be considered to have sold its pro rata portion of the property held by
the Pass Through Trust, and will recognize gain or loss as described in the
preceding paragraph.
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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 a different series, and receives less
than the full amount of the receipts of principal or interest paid with respect
to the Equipment Certificates held by it 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 could be treated for federal income tax purposes as if they had:
o received as distributions their full share of such receipts
o paid over to the relevant preferred class of Certificateholders an
amount equal to their share of such Shortfall Amount, and
o retained the right to reimbursement of such amounts to the extent of
future amounts payable to the Subordinated Certificateholders with
respect to such Shortfall Amount.
Under this analysis:
o Subordinated Certificateholders incurring a Shortfall Amount would be
required to include as current income any interest or other income of
the corresponding Pass Through Trust which is subordinated to other
Pass Through Trusts that was a component of the Shortfall Amount,
even though such amount was in fact paid to the relevant preferred
class of Certificateholders
o a loss would only be allowed to such Subordinated Certificateholders
when their right to receive reimbursement of such Shortfall Amount
became worthless, that is, when it becomes clear that funds will not
be available from any source to reimburse such loss, and
o 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. 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.
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, special state tax counsel to the Pass Through Trustee, has advised
Federal Express that, in its opinion, under currently applicable Utah laws and
assuming the accuracy of the statements with respect to federal income taxes in
this prospectus, including the assumption that each Pass Through Trust will not
itself be subject to federal income taxation, assuming that the Equipment
Certificates will be treated as debt for federal income tax purposes and
assuming that the Pass Through Trustee will not hold legal or equitable title
to, or
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lease any real or tangible property located in Utah and will engage in only
those activities contemplated in this prospectus, that is, engaging in no
activity other than holding the Equipment Certificates, issuing the Pass
Through Certificates, distributing the payments thereon and performing other
incidental activities:
o 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 the state of Utah or any
political subdivision of the state of Utah as a result of the
transactions contemplated by the Pass Through Agreement and
o Certificateholders who are not residents of, or otherwise subject to
tax in or by, the state of 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 the state of Utah
or any political subdivision of the state of Utah 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
States 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 prospectus supplement, Pass Through
Certificates may not be purchased by, or with the assets of, any employee
benefit plan subject to Title I of ERISA, or individual retirement account or
plan subject to Section 4975 of the Internal Revenue Code. Some 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 Federal Express 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 Federal Express 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 Federal Express will be described, in the prospectus
supplement.
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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 to such sales.
Under agreements which may be entered into by Federal Express,
underwriters and agents who participate in the distribution of Pass Through
Certificates may be entitled to indemnification by Federal Express against
certain liabilities, including liabilities under the Securities Act.
Unless otherwise indicated in the prospectus supplement, Federal Express
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.
Some of the underwriters or agents and their associates may be customers
of, engage in transactions with, and perform services for, Federal Express in
the ordinary course of business.
LEGAL MATTERS
Unless otherwise indicated in the prospectus supplement, the legality of
the Pass Through Certificates offered hereby will be passed upon for Federal
Express by Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York
10017, and by Underwriters' Counsel. Unless otherwise indicated in the
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 Federal Express, as to Federal Express' authorization, execution and
delivery of the Pass Through Agreement. At June 1, 2000, Ms. Clayborne owned
13,556 shares of FedEx Corporation's common stock and had been granted options
to purchase 53,450 shares of FedEx Corporation's common stock. Of the options
granted, 6,250 were vested at such date.
EXPERTS
The consolidated financial statements and schedule of Federal Express
included or incorporated by reference in Federal Express' Annual Report on Form
10-K for the year ended May 31, 1999 and incorporated by reference in this
prospectus, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect to the consolidated
financial statements and schedule, and are incorporated by reference in this
prospectus in reliance upon the authority of Arthur Andersen LLP as experts in
giving those reports.
With respect to the unaudited interim financial information for the
quarters ended August 31, 1999, November 30, 1999 and February 29, 2000,
included in Federal Express' 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 on the unaudited
interim financial information 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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GLOSSARY OF TERMS
The following is a glossary of terms used in this prospectus. This
glossary may contain definitions which are different from definitions used in
the prospectus supplement. You should read the prospectus supplement in
conjunction with the glossary or other definition of terms contained in the
prospectus supplement.
"Aircraft" means, collectively, the Owned Aircraft and the Leased
Aircraft.
"Additional Collateral" means certain additional security which may
include, unless otherwise specified in the prospectus supplement, payments to
be made by Federal Express or 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 Federal Express'.
"Bankruptcy Code" means Title 11 of the United States Code (11 U.S.C. et
seq.), as amended, or any successor thereto.
"Business Day" means any day other than a Saturday, a Sunday or other day
on which commercial banks in New York City, Memphis, Tennessee or the city in
which the office or agency in the United States is maintained by the Pass
Through Trustee for the payment of the Pass Through Certificates are authorized
or required by law to close.
"Cede" means Cede & Co., as nominee for DTC.
"Certificate Account" means a non-interest bearing account for the deposit
of Scheduled Payments on the Equipment Certificates held in the related Pass
Through Trust.
"Certificateholder" means, for any Pass Through Trust, the registered
holder of any Pass Through Certificate issued by such Pass Through Trust.
"Collateral Account" means an account into which proceeds from the sale of
the related Leased Aircraft Certificates will be deposited by the related Owner
Trustee for the benefit of the related Indenture Trustee as set forth in this
prospectus and the prospectus supplement.
"Collateral Agreement" means a collateral agreement between the Owner
Trustee and the Indenture Trustee with respect to the related Collateral
Account.
"Convention" means the Convention on the International Recognition of
Rights in Aircraft.
"Cut-off Date" means, if applicable to an Aircraft, the date 90 days after
the scheduled delivery date for such Aircraft.
"DTC" means The Depository Trust Company.
"DTC Participants" means the participants of DTC.
"Delayed Lease Aircraft" means a Leased Aircraft to which a Pre-Funding
Period applies, which term shall be applicable to such Leased Aircraft until
commencement of the related Lease.
"Deposit Account" means the deposit account established under a Depositary
Arrangement.
"Depositary Arrangement" means the agreement of a person to pay amounts
corresponding to amounts payable on the Leased Aircraft Certificates in respect
of any related Pre-Funding Period and the debt portion of the purchase price of
the related Aircraft upon delivery thereof.
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"Distribution Date" means, collectively, the Regular Distribution Date and
the Special Distribution Date.
"Equipment Certificates" means, collectively, the Owned Aircraft
Certificates and the Leased Aircraft Certificates.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" means each of the events designated as an event of
default under the Pass Through Agreement with respect to the related Pass
Through Trust.
"Event of Loss" means, for any Aircraft, each of the events designated as
such in the related Lease or the related Owned Aircraft Indenture, as the case
may be.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Federal Express" means Federal Express Corporation.
"Holders" means the registered holders of the related Equipment
Certificates.
"Indentures" means, collectively, the Owned Aircraft Indentures and the
Leased Aircraft Indentures.
"Indenture Event of Default" means, for any Indenture, each of the events
designated as an event of default in such Indenture.
"Indenture Trustee" means First Security Bank, National Association, or
another bank or trust company, in its capacity as indenture trustee under the
related Indenture and any successor thereunder.
"Intercreditor Agreement" means the agreement among the Pass Through
Trustee of each Pass Through Trust, the subordination agent named therein and
the Liquidity Provider specified in the prospectus supplement.
"Internal Revenue Code" means the United States Internal Revenue Code of
1986, as amended.
"Lease" means a lease agreement between the Owner Trustee, as lessor, and
Federal Express, as lessee, in each case under which the Owner Trustee leases,
or is expected to lease, the related Aircraft to Federal Express.
"Lease Event of Default" means, for any Lease, each of the events
designated as an event of default in such Lease.
"Leased Aircraft" means one or more aircraft specified in a prospectus
supplement which has been or will be leased to Federal Express.
"Leased Aircraft Certificates" means the equipment trust certificates
issued as nonrecourse obligations by the related Owner Trustee, each acting not
in its individual capacity but solely as the Owner Trustee of a separate Owner
Trust in connection with a separate leveraged lease transaction relating to an
Aircraft.
"Leased Aircraft Indenture" means a trust indenture and security agreement
between the Owner Trustee and the Indenture Trustee relating to a Leased
Aircraft.
"Lien" means any mortgage, pledge, lien, charge, encumbrance, lease or
security interest or other similar interest.
"Liquidity Facility" means a liquidity facility issued by the related
Liquidity Provider as provided in the prospectus supplement.
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"Liquidity Provider" means an institution identified in the prospectus
supplement which will enter into a Liquidity Facility to support certain
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 as provided in such prospectus supplement.
"Owned Aircraft" means one or more aircraft specified in a prospectus
supplement that have been or will be purchased and owned by Federal Express.
"Owned Aircraft Certificates" means the equipment purchase certificates
relating to an Owned Aircraft issued as recourse obligations by Federal
Express.
"Owned Aircraft Indenture" means a trust indenture and security agreement
between Federal Express and the Indenture Trustee relating to an Owned
Aircraft.
"Owner Participant" means the owner participant named in the related Trust
Agreement.
"Owner Trust" means a trust created pursuant to a Trust Agreement.
"Owner Trustee" means 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 of an Owner Trust.
"Participation Agreement" means a participation agreement among the
Indenture Trustee, the Pass Through Trustee, Federal Express, any subordination
agent, in the case of a refinancing, each holder of a loan certificate issued
under the related Indenture as originally executed, and, in the case of a
Leased Aircraft, the related Owner Participant and the related Owner Trustee.
"Pass Through Agreement" means the Pass Through Trust Agreement between
Federal Express and First Security Bank, National Association, in accordance
with which each of the Pass Through Trusts will be formed pursuant to the
related Series Supplement.
"Pass Through Certificates" means the pass through certificates to be
issued by the related Pass Through Trustee pursuant to the Pass Through
Agreement and the related Series Supplements and which represent fractional
undivided interests in the related Pass Through Trusts.
"Pass Through Trust" means the pass through trust to be formed pursuant to
the related Series Supplement in accordance with the Pass Through Agreement.
"Pass Through Trustee" means First Security Bank, National Association in
its capacity as pass through trustee under the Pass Through Agreement, as
supplemented by the related Series Supplement, for the related Pass Through
Trust, and its successors and assigns thereunder.
"Permitted Investments" means:
o direct obligations of the United States of America or obligations
fully guaranteed by the United States of America,
o commercial paper rated A-1/P-1 by Standard & Poor's, a Division of the
McGraw-Hill Company, Inc., 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,
o overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, and
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o overnight repurchase agreements with respect to the securities
described in the first bullet point 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.
"Pool Balance" means, unless otherwise described in the prospectus
supplement, for each Pass Through Trust, 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 Federal Express and deposited in a deposit trust account
in connection with a delayed purchase of such Equipment Certificates.
"Pool Factors" means, unless otherwise described in the prospectus
supplement, for each Pass Through Trust, as of any Distribution Date, the
quotient (rounded to the seventh decimal place) computed by dividing the Pool
Balance, by the aggregate original principal amount of the Equipment
Certificates held in such Pass Through Trust.
"Pre-Funding Period" means:
o with respect to any Leased Aircraft, the period, if any, commencing
on the date of the issuance of the related Pass Through Certificates
to but not including the date on which the related Lease commences,
and
o with respect to any Owned Aircraft, the period, if any, commencing on
the date of the issuance of the related Pass Through Certificate to
but not including the delivery date of the Owned Aircraft.
"Purchase Agreement" means, for any Aircraft, the purchase agreement
between the manufacturer and Federal Express, including all exhibits,
appendices and letter agreements attached thereto as originally executed or as
modified, amended or supplemented in accordance with the terms thereof, but
only to the extent that the foregoing relates to that Aircraft and to the
extent assigned pursuant to the Purchase Agreement Assignment.
"Purchase Agreement Assignment" means, for any Aircraft, the purchase
agreement assignment between the related Owner Trustee and Federal Express.
"Rating Agency" means a "nationally recognized statistical rating
organization," as such term is defined in Rule 436(g)(2) under the Securities
Act.
"Registration Statement" means a registration statement on Form S-3
(together with all amendments and exhibits).
"Regular Distribution Date" means, for each Pass Through Trust, any date
specified in the prospectus supplement for distribution of a Scheduled Payment
to the related Pass Through Trustee.
"Scheduled Payment" means the payment of principal of, and interest on,
the Equipment Certificates scheduled to be received by the related Pass Through
Trustee on a Regular Distribution Date.
"SEC" means the Securities and Exchange Commission of the United States.
"Securities Act" means the Securities Act of 1933, as amended.
"Series Supplement" means each of the Series Supplements between Federal
Express and the Pass Through Trustee, in each case pursuant to which the
related Pass Through Trust will be formed in accordance with the Pass Through
Agreement and the related Pass Through Certificates will be issued.
"Shortfall Amount" means any amount less than the full amount of the
receipts of principal or interest paid with respect to the related Equipment
Certificates.
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<PAGE>
"Special Distribution Date" means any Business Day on which a Special
Payment is to be distributed.
"Special Payment" means, for any Pass Through Trust, any payment of
principal, any premium or interest, other than a Scheduled Payment, received by
the related Pass Through Trustee on any of the Equipment Certificates held in
such Pass Through Trust and any proceeds from the sale of any such Equipment
Certificates by such Pass Through Trustee.
"Special Payments Account" means a non-interest bearing account for the
deposit of Special Payments on the Equipment Certificates held in the related
Pass Through Trust.
"Subordinated Certificateholder" means the corresponding owners of
beneficial interests in the Subordinated Certificates.
"Subordinated Certificates" means any Pass Through Certificate relating to
a Subordinated Trust.
"Subordinated Trust" means any Pass Through Trust with respect to a series
which is subordinated with respect to other Pass Through Trusts of the same
series.
"Transportation Code" means Title 49 of the United States Code, as
amended.
"Trust Agreement" means a trust agreement between the Owner Trustee and
the Owner Participant.
"Trust Property" means the property held in the related Pass Through
Trust.
"U.S. Citizen" means a citizen of the United States as defined in Section
40102(a)(15) of the Transportation Code, or any analogous part of any successor
or substituted legislation or regulation at the time in effect.
"Underwriters' Counsel" means the counsel for any agents, dealers or
underwriters.
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<TABLE>
<S> <C>
==================================================== =============================================
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 $450,000,000
prospectus. If given or made, such information or
representation must not be relied upon as having been
authorized by Federal Express or the Underwriters. [COMPANY LOGO]
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 Federal Express since the date of this Pass Through Certificates
prospectus.
------------------------------------
---------------------
PROSPECTUS
TABLE OF CONTENTS
------------------------------------
Page
----
About This Prospectus.............................2
Where You Can Find More Information...............2
Reports to Pass Through Certificateholders........3
Federal Express Corporation.......................3
Ratio of Earnings to Fixed Charges................3
Risk Factors......................................4
Outline of Pass Through Trust Structure...........6
Use of Proceeds...................................7
Diagram of Payments...............................7
Description of the Pass Through Certificates......9 June__, 2000
Description of the Equipment Certificates........24
Federal Income Tax Consequences..................32
Utah Taxes.......................................34
ERISA Considerations.............................35
Plan of Distribution.............................35
Legal Matters....................................36
Experts..........................................36
Glossary of Terms................................37
==================================================== =============================================
</TABLE>
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 9, 2000
PROSPECTUS
$450,000,000
[COMPANY LOGO]
DEBT SECURITIES
-----------------------
We may offer and sell from time to time up to $450,000,000 aggregate
initial public offering price of our debt securities.
The debt securities:
o will be offered in one or more series
o will be unsecured obligations of Federal Express
o will rank equally with all other unsecured and unsubordinated
indebtedness of Federal Express, and
o will be payable at the times, in the amounts and on the terms
specified in a prospectus supplement.
There was no public market for the debt securities of any series before
their issuance and there is no assurance that one will develop or continue. We
do not intend to apply for the listing of any series of debt securities on a
national securities exchange, unless otherwise indicated in the prospectus
supplement.
This prospectus will be accompanied by a prospectus supplement which will
describe the specific terms of the particular series of debt securities being
sold and the Indenture relating to the debt securities. Sales of the debt
securities may not be consummated without both this prospectus and the
prospectus supplement.
Investing in the debt securities involves risks. See the "Risk Factors"
section beginning on page 3 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The date of this prospectus is June __, 2000.
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a Registration Statement on Form S-3 that we
filed with the SEC utilizing a "shelf" registration process. Under this shelf
process, we may sell the debt securities described in this prospectus in one or
more offerings. This prospectus provides you with a general description of the
debt securities we may offer. Each time we sell debt securities, we will
provide a prospectus supplement that will contain specific information about
the terms of that offering. The prospectus supplement may also add, update or
change information contained in this prospectus. You should read carefully both
this prospectus and any prospectus supplement, together with the additional
information described below under "Where You Can Find More Information." You
should also refer to the "Glossary of Terms" at the back of this prospectus and
in any prospectus supplement for definitions of specialized terms that we are
using in this prospectus and any prospectus supplement.
This prospectus does not contain all the information provided in the
Registration Statement that we filed with the SEC. For further information
about Federal Express or the debt securities, you should refer to that
Registration Statement. Statements contained in this prospectus or in any
prospectus supplement as to the contents of any contract or other document are
not necessarily complete, and you should review the full text of those
contracts and other documents.
The Registration Statement that we filed with the SEC relating to the debt
securities can be obtained from the SEC as described below under "Where You Can
Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports with the SEC. These SEC
filings are available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any such document we file at the
SEC's public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549,
and in New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms and copy
charges.
The SEC allows us to "incorporate by reference" the information we file
with it, which means:
o we can disclose important information to you by referring you to those
documents
o information incorporated by reference is considered to be part of
this prospectus, even though it is not repeated in this prospectus or
in any prospectus supplement, and
o information that we file with the SEC will automatically update and
supersede this prospectus and any prospectus supplement.
We incorporate by reference the documents listed below and any future
filings made with the SEC under Section 13(a), 13(c), 14, or 15(d) of the
Exchange Act after the date of the filing of this Registration Statement and
prior to its effectiveness, and until we complete our offering of debt
securities:
o Annual Report on Form 10-K for the fiscal year ended May 31, 1999,
filed August 27, 1999, and
o Quarterly Reports on Form 10-Q for the fiscal quarters ended August
31, 1999, November 30, 1999 and February 29, 2000, filed October 13,
1999, January 14, 2000 and April 13, 2000, respectively.
You may obtain a copy of these filings, other than their exhibits, unless
those exhibits are specifically incorporated by reference in the filings, at no
cost by writing or telephoning us at the following address:
James H. Clippard
Investor Relations
2
<PAGE>
FedEx Corporation
942 South Shady Grove Road
Memphis, Tennessee 38120
(901) 818-7200
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not
authorized anyone else to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. We are not making an offer to sell any debt securities in any jurisdiction
where the offer or sale is not permitted. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front page of those documents. Also, you
should not assume that there has been no change in the affairs of Federal
Express since the date of this prospectus or any prospectus supplement.
FEDERAL EXPRESS CORPORATION
Federal Express is a wholly-owned subsidiary of FedEx Corporation. Federal
Express 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. The corporate headquarters of Federal Express are located at 2005
Corporate Avenue, Memphis, Tennessee 38132, telephone (901) 369-3600.
RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
Year Ended May 31, Nine Months Ended
-------------------------------- -------------------------
February 28, February 29,
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ------------ ------------
Ratio of Earnings to
Fixed Charges.... 2.0x 1.9x 2.0x 2.1x 2.1x 1.9x 2.0x
------------------------------------------------
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, Federal Express may be more
highly leveraged than currently reflected in this table.
RISK FACTORS
You should consider carefully the risk factors described below before you
invest. You should read the information below together with the other
information in this prospectus and the accompanying prospectus supplement.
Federal Express' business is subject to risks and uncertainties
The operations and financial condition of Federal Express are subject to
risks and uncertainties, including:
o economic conditions in the markets in which Federal Express operates
affecting demand for Federal Express' services
o competition from other providers of express services with new or
improved services
o changes in customer demand patterns
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o increases in aviation and motor fuel prices
o strikes, work stoppages and slowdowns by Federal Express' employees
o Federal Express' ability to match aircraft, vehicle and sort capacity
with customer volume levels
o Federal Express' ability to obtain aviation rights in important
international markets
o contributions to financial results from the sale of engine noise
reduction kits
o changes in government regulation, weather and technological change,
and
o availability of financing on terms acceptable to Federal Express.
Proposed new OSHA regulations could have a material adverse effect on our
business
On November 22, 1999, the U.S. Occupational Safety and Health
Administration, or OSHA, proposed regulations to mandate an ergonomics standard
that could require many businesses, including Federal Express, to make
significant changes in the workplace in order to reduce the incidence of
musculoskeletal disorders such as lower back pain. The proposal does not
specify which workplace changes would be required in order to comply with the
proposed new regulations. We, our competitors and other affected parties have
submitted comments to OSHA challenging the economic and technical feasibility
of the proposed regulations. In April 2000, OSHA completed public hearings on
the proposed regulations and is expected to release final rules later this
year.
If OSHA adopts the proposed regulations and applies them in the same way
as it attempted unsuccessfully in the past to impose ergonomic measures under
its general authority, we would be required to make extensive changes to the
layout of our sorting facilities and hire a significant number of additional
employees. We believe that the cost of compliance would be substantial and have
a material adverse effect on our business. We expect that our competitors,
along with the rest of the American industry, would also incur substantial
compliance costs.
The indenture does not limit the amount of debt we may incur or protect against
a highly leveraged transaction involving us
The Indenture does not limit the amount of secured or unsecured
indebtedness which we or our subsidiaries may incur. The Indenture does not
contain any debt covenants or provisions which would give protection to the
holders of the debt securities in the event of a highly leveraged transaction.
Other indebtedness of Federal Express ranking equally with the debt securities
have covenants that would give privileges to holders of such indebtedness in
the event of a change of control of Federal Express.
Rating agencies may change their rating on our debt securities at any time
The debt securities are expected to be assigned an "investment grade"
rating by one or more Rating Agencies. The prospectus supplement will indicate
the rating assigned to the debt securities being sold. A rating is not a
recommendation to purchase, hold or sell debt securities because a rating does
not address market price or suitability for a particular investor. We cannot
assure you that a rating will remain for any given period of time or that a
rating will not be lowered or withdrawn entirely by a Rating Agency if in its
judgment circumstances in the future so warrant. The rating of the debt
securities will be based primarily on the default risk of the debt securities
and is expected to address the likelihood of timely payment of interest when
due on the debt securities and the ultimate payment of principal of the debt
securities on the final maturity date. The reduction, suspension or withdrawal
of the ratings of the debt securities will not, in and of itself, constitute an
Event of Default, unless we otherwise specify in a prospectus supplement.
4
<PAGE>
A public market for the debt securities may not develop or continue
There was no public market for the debt securities of any series before
their issuance and we cannot assure you that one will develop or continue.
Federal Express does not intend to apply for the listing of any debt securities
on a national securities exchange, unless we otherwise indicate in a prospectus
supplement. If an active public market does not develop or continue, the market
price and liquidity of the debt securities may be adversely affected.
USE OF PROCEEDS
We intend to use the net proceeds from the sale of debt securities for our
general corporate purposes. If we decide to use the net proceeds from a
particular offering of debt securities for a specific purpose, we will describe
that in a prospectus supplement.
DESCRIPTION OF DEBT SECURITIES
The following is a summary description of the material terms of the
Indenture and the debt securities. When we offer to sell a particular series of
debt securities, we will describe the specific terms of the Indenture and the
debt securities in a prospectus supplement.
The form of Indenture, which includes the form of debt securities, has
been filed as an exhibit to the Registration Statement of which this prospectus
is a part. You should read the Indenture and the form of debt securities for
provisions that may be important to you. In the following description, we have
included references to section numbers of the Indenture so that you can easily
locate those provisions.
Terms; Form and Denomination
The debt securities are to be issued under an Indenture. The Indenture
does not limit the aggregate amount of debt securities which may be issued
under the Indenture and provides that debt securities may be issued under the
Indenture in one or more series.
The debt securities will be unsecured obligations of Federal Express and
will rank equally with all other unsecured and unsubordinated indebtedness of
Federal Express.
The Indenture does not contain any debt covenants or provisions which
would give protection to the holders of the debt securities in the event of a
highly leveraged transaction. Other indebtedness of Federal Express ranking
equally with the debt securities have covenants that would give privileges to
the holders of such indebtedness in the event of a change in control of Federal
Express.
A prospectus supplement will include some or all of the following terms:
o the title of the debt securities and the series in which the debt
securities will be included
o the authorized denominations and aggregate principal amount of the
debt securities
o whether the debt securities are to be issuable in global or
certificated form
o the date or dates on which the debt securities will mature
o the rate or rates, which may be fixed or variable, per annum at which
the debt securities will bear interest, if any, and if such rate is
variable, the manner of calculation of interest and the date from
which interest will accrue
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o the place or places where the principal of and any premium and
interest on the debt securities will be payable
o the dates on which the interest will be payable and the corresponding
record dates
o any mandatory or optional sinking fund or purchase fund or analogous
provisions
o the terms and conditions of any redemption of the debt securities and
any redemption price
o the portion of the principal amount of the debt securities payable
upon declaration of acceleration of the Maturity of the debt
securities pursuant to Section 502 of the Indenture
o any provision for the defeasance of the debt securities
o if the series is denominated other than in United States dollars, the
currency in which the debt securities will be denominated and the
currency in which the principal and any premium and interest on the
debt securities will be payable, which may be United States dollars
based upon the exchange rate for the other currency unit existing on
or about the time a payment is due
o whether Additional Amounts are payable on any debt securities
o any additional Events of Default or covenants applicable to the
series, and
o any other terms of the series which are not inconsistent with the
Indenture. (Indenture, Section 301).
Unless we otherwise indicate in a prospectus supplement, all outstanding
debt securities will be exchangeable and transfers of debt securities will be
registrable, and principal of and any premium and interest on all debt
securities will be payable, at the corporate trust office of the Trustee at
Bank One Trust Company, National Association, Global Corporate Trust Services,
1 Bank One Plaza, Suite IL1-0126, Chicago, Illinois 60670-0126; provided that
payment of interest may, at our option, be made by check mailed to the address
of the person entitled to such payment 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 we otherwise indicate in a prospectus supplement, all debt
securities will be issued only in fully registered form without coupons in
denominations of $1,000 and any integral multiples of $1,000. We will not
impose any service charge for any transfer or exchange of a debt security;
however, we may ask you to pay any taxes or other governmental charges in
connection with a transfer or exchange of debt securities. (Indenture, Section
305) We may issue the debt securities in permanent global form. (Indenture,
Section 203) See "Permanent Global Securities."
The Indenture does not limit the amount of secured or unsecured
indebtedness which we may incur.
We may issue some of the debt securities at a substantial discount below
their stated principal amount because they bear no interest or bear interest at
below market rates. We will describe the United States federal income tax
consequences and any other special considerations relating to an investment in
discount securities in the prospectus supplement.
Book-Entry Procedures
Unless debt securities in certificated form are issued, 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, DTC,
and registered in its name or in the name of Cede, its nominee. No holder of a
debt security initially issued as a global certificate will be entitled to
receive a note in certificated form, except as set forth below.
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DTC has advised us as follows:
o 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
o DTC was created to hold securities for 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.
o DTC Participants include securities brokers and dealers, banks, trust
companies and clearing corporations.
o 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.
The DTC Participants will be responsible for distributions to Holders and
those distributions will be made in accordance with customary industry
practices. Although Holders will not have possession of the debt securities,
the rules of DTC provide a mechanism by which those Holders 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.
Neither Federal Express nor the Trustee nor any agent of either of them
will be responsible or liable 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", for purposes of the
Indenture, will be Cede, as nominee of DTC, Holders will not be recognized by
the Trustee as "Holders", and Holders will be permitted to exercise the rights
of "Holders" only indirectly through DTC and DTC Participants. DTC has advised
us 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 we make 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.
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Certificated Form. We will issue physical certificates to holders of a
global security, or their nominees, if:
o DTC advises the Trustee in writing that it is no longer willing, able
or eligible to discharge properly its responsibilities as depository
and we are unable to locate a qualified successor or
o We decide in our sole discretion 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. There will be no service charge 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
We have agreed not to consolidate or merge with or into any other person
or convey or transfer substantially all of our properties and assets as an
entirety, to any person, unless:
o the successor is a corporation organized and existing under the laws
of the United States of America, any State or the District of
Columbia and expressly assumes, by a supplemental indenture, the due
and punctual payment of the principal of and any premium and interest
on and any Additional Amounts with respect to all the debt securities
and the performance of every covenant of the Indenture that we would
otherwise have to perform
o immediately after giving effect to the merger, there will not be any
defaults under the Indenture, and
o we have delivered to the Trustee an Officers' Certificate or an
Opinion of Counsel, each stating that the merger and the supplemental
indenture comply with the Indenture. (Indenture, Section 801)
We would be relieved of our obligations and covenants under the Indenture
and the debt securities when the successor has complied with the provisions
indicated above. (Indenture, Section 802)
Modification, Amendment and Waiver
Federal Express and the Trustee may modify and amend the Indenture 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. However, no modification or amendment may, without the
consent of the Holder of each debt security affected thereby:
o change the Stated Maturity of the principal of, or any installment of
interest on, any debt security
o reduce the principal amount of, rate of interest on, or premium
payable upon the redemption of, any debt security
o change any place of payment where, or the currency in which, any debt
security or the interest or any premium is payable
o impair the right to institute suit for the enforcement of any payment
on or with respect to any debt security on or after the Stated
Maturity, or, in the case of redemption, on or after the Redemption
Date, or
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o 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 some
provisions of the Indenture or for waiver of some 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
When we use the term "Event of Default" in the Indenture, here are some
examples of what we mean.
Unless we indicate otherwise in a prospectus supplement, an Event of
Default with respect to a series of debt securities occurs if:
o we fail to pay interest when due on any debt security of that series
for 30 days
o we fail to pay the principal or any premium on any debt security of
that series when due
o we fail to perform any covenant in the Indenture and this failure
continues for 60 days after we receive written notice as provided in
the Indenture
o we fail to deposit any sinking fund payment when and as due by the
terms of a debt security of that series, or
o we or a court take certain actions relating to the bankruptcy,
insolvency or reorganization of our company for the benefit of our
creditors (Indenture, Section 5.01)
If an Event of Default with respect to all debt securities of any series
occurs and continues, the Trustee or the Holders of not less than 50% in
aggregate principal amount of the outstanding debt securities of that series
may, by a notice in writing to us (and to the Trustee if given by the Holders),
declare to be due and payable immediately the principal amount of all debt
securities of that series. The Holders of a majority in principal amount of the
outstanding debt securities of that series may rescind and annul such
acceleration if all Events of Default with respect to the debt securities of
that 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."
Other than its duties in case of default, the Trustee is not obligated 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 that series, unless
the Holders offer to the Trustee reasonable indemnity. (Indenture, Sections 601
and 603) If they provide this reasonable indemnity, the Holders of a majority
in principal amount of the outstanding debt securities of that series will have
the right, subject to certain limitations, 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 that 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 under
the Indenture unless:
o the Holder has previously given to the Trustee written notice of a
continuing Event of Default
o the Holders of at least 50% in principal amount of the outstanding
debt securities of that series have made written request, and offered
reasonable indemnity, to the Trustee to institute a proceeding as
trustee, and
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o the Trustee has not received from the Holders of a majority in
principal amount of the outstanding debt securities of that series a
direction inconsistent with the request and the Trustee has failed to
institute a proceeding within 60 days. (Indenture, Section 507)
However, the Holder of any debt security will have an absolute right to
receive payment of the principal of and any premium and interest on the debt
security on the dates expressed in the 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)
We are required to furnish to the Trustee annually a statement as to the
absence of defaults under the Indenture. (Indenture, Section 1005) 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 the debt
securities. (Indenture, Section 602)
Defeasance and Covenant Defeasance
When we use the term defeasance, we mean discharge from some or all of our
obligations under the Indenture. If we deposit with the Trustee sufficient cash
or Government Obligations to pay the principal, interest, any premium and any
mandatory sinking fund or analogous payments due to the Stated Maturity or a
redemption date of the debt securities of a particular series, then at our
option:
o we will be discharged from our obligations with respect to the debt
securities of that series, or
o we will no longer be under any obligation to comply with certain
restrictive covenants under the Indenture, and certain Events of
Default will no longer apply to us.
If this happens, the holders of the debt securities of the affected series
will not be entitled to the benefits of the Indenture except for registration
of transfer and exchange of debt securities and replacement of lost, stolen or
mutilated debt securities. Those holders may look only to such deposited funds
or obligations for payment.
We must deliver to the Trustee an Opinion of Counsel to the effect that
the deposit and related defeasance would not cause the holders of the debt
securities to recognize income, gain or loss for Federal income tax purposes.
We must also deliver a ruling to such effect received from or published by the
United States Internal Revenue Service if we are discharged from our
obligations with respect to the debt securities.
Concerning the Trustee
The Trustee acts as trustee under other indentures with respect to other
indebtedness of Federal Express which ranks equally with the debt securities.
We lease facilities financed with the proceeds of such indebtedness and our
obligations under the leases secure payment of such indebtedness. We also from
time to time borrow from, and maintain deposit accounts with, the Trustee.
PLAN OF DISTRIBUTION
We may sell the debt securities through underwriters or dealers, agents or
directly to one or more purchasers, through a specific bidding or auction
process or otherwise.
We may distribute the debt securities from time to time in one or more
transactions either:
o at a fixed price or prices, which may be changed
o at market prices prevailing at the time of sale
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o at prices related to such prevailing market prices, and
o at negotiated prices.
In connection with the sale of debt securities, underwriters or agents may
receive compensation from us 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, we will sell
the debt securities to the dealer as principal. The dealer may then resell the
debt securities to the public at varying prices to be determined by the 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 us and any profit on the resale of debt
securities by them may be deemed to be underwriting discounts and commissions,
under the Securities Act. We will identify any underwriters, dealers or agents,
and describe their compensation, in a prospectus supplement.
We may solicit offers to purchase our debt securities, and we may directly
sell our debt securities 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. We will describe the terms of our direct sales in a
prospectus supplement.
We may authorize underwriters, dealers or agents to solicit offers by
specified institutions to purchase debt securities from us 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. If we use delayed delivery contracts, they will be subject only to
those conditions set forth in the prospectus supplement and the prospectus
supplement will indicate the commission payable for the solicitation of these
contracts.
We may indemnify underwriters, dealers and agents who participate in the
distribution of debt securities against certain liabilities, including
liabilities under the Securities Act.
Unless we otherwise indicate in a prospectus supplement, we do 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, we cannot assure you as to the liquidity of, or
trading markets for, the debt securities of any series.
Underwriters, dealers or agents and their associates may be customers of,
engage in transactions with, and perform services for, us in the ordinary
course of business.
LEGAL MATTERS
Karen M. Clayborne, Senior Vice President and General Counsel of Federal
Express, will issue an opinion about the legality of our debt securities. At
June 1, 2000, Ms. Clayborne owned 13,556 shares of FedEx Corporation's common
stock and had been granted options to purchase 53,450 shares of FedEx
Corporation's common stock. Of the options granted, 6,250 were vested at such
date.
Any underwriters, dealers or agents will be advised about other issues
relating to any offering by their own legal counsel.
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EXPERTS
The consolidated financial statements and schedule of Federal Express
included or incorporated by reference in Federal Express' Annual Report on Form
10-K for the year ended May 31, 1999 and incorporated by reference in this
prospectus, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect to the consolidated
financial statements and schedule, and are incorporated by reference in this
prospectus in reliance upon the authority of Arthur Andersen LLP as experts in
giving those reports.
With respect to the unaudited interim financial information for the
quarters ended August 31, 1999, November 30, 1999 and February 29, 2000,
included in Federal Express' 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 on the unaudited
interim financial information 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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GLOSSARY OF TERMS
The following is a glossary of terms used in this prospectus. The
glossary may contain definitions which are different from definitions used in
the prospectus supplement. You should read the prospectus supplement in
conjunction with the glossary or other definition of terms contained in the
prospectus supplement.
"Additional Amounts" means any additional amounts which are required by
any debt security or related Indenture, under circumstances specified in the
debt security or related Indenture, to be paid by us in respect of taxes,
assessments or other governmental charges imposed on Holders specified in the
debt security or related Indenture and which are owing to such Holders.
"Cede" means Cede & Co., as nominee for DTC.
"Commission" means the Securities and Exchange Commission of the United
States.
"DTC" means The Depository Trust Company.
"DTC Participants" means the participants of DTC.
"Debt securities" means unsecured debt securities (or their equivalent in
foreign currency) relating to this prospectus and the applicable prospectus
supplement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Event of Default" means each of the events designated as an event of
default in the related Indenture.
"Federal Express" means Federal Express Corporation.
"Foreign Currency" means any currency, currency unit or composite currency
issued by the government of one or more countries other than the United States
or by any recognized confederation or association of such governments.
"Government Obligations" means securities which are:
o direct obligations of the United States of America or such other
government or governments which issued the Foreign Currency in which
the principal of or any premium or interest on any debt security or
any Additional Amounts will be payable, in each case where the payment
or payments under any debt security or Additional Amounts are
supported by the full faith and credit of such government or
governments
o obligations of a Person controlled or supervised by and acting as an
agency or instrumentality of the United States of America or such
other government or governments, in each case where the payment or
payments under any debt security or Additional Amounts are
unconditionally guaranteed as a full faith and credit obligation by
the United States of America or such other government or governments,
which, in either case, are not callable or redeemable at the option of
their issuer, and will also include a depository receipt issued by a
bank as custodian with respect to any Government Obligation or a
specific payment of principal of or interest on any Government
Obligation held by such custodian for the account of the holder of a
depository receipt provided that, except as required by law, such
custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount
received by the custodian in respect to the Government Obligation or
the specific payment of principal of or interest on the Government
Obligation evidenced by such depository receipt.
"Holder" means a Person in whose name a debt security is registered in the
Security Register.
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"Indenture" means an indenture agreement between the Trustee and Federal
Express with respect to the related debt securities.
"Maturity," with respect to any debt security, means the date on which the
principal of such debt security, or an installment of principal, becomes due
and payable, whether at the Stated Maturity or by declaration of acceleration,
notice of redemption or repurchase or otherwise and includes the Redemption
Date.
"Offered Debt Securities" means a particular series or issue of debt
securities which is offered pursuant to this prospectus and the applicable
prospectus supplement.
"Officer's Certificate" means a certificate signed by the Chairman of the
Board, the President or any Vice President, and attested by the Secretary or
any Assistant Secretary of Federal Express, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be an
employee of or of counsel to Federal Express, or other counsel reasonably
satisfactory to the Trustee.
"Person" means any individual, sole proprietorship, partnership, joint
venture, joint stock company, trust, unincorporated organization, association,
corporation, institution, entity or government (federal, state, local, foreign
or any agency, instrumentality, division or body thereof).
"Rating Agency" means a "nationally recognized statistical rating
organization", as such term is defined in Rule 436(g)(2) under the Securities
Act.
"Redemption Date," with respect to any debt security or portion of any
debt security to be redeemed, means the date fixed for such redemption by or
pursuant to the Indenture or the debt security.
"Registration Statement" means a registration statement on Form S-3
(together with all amendments and exhibits).
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" means a register in which, subject to such reasonable
regulations as it may prescribe, we will provide for the registration of debt
securities and of transfers of debt securities.
"Stated Maturity" means, with respect to any debt security or any
installment of principal or interest or any Additional Amounts, the date
established by or pursuant to the Indenture or such debt security as the fixed
date on which the principal of such debt security or such installment of
principal or interest is, or such Additional Amounts are, due and payable.
"Trustee" means Bank One Trust Company, National Association (as
successor-in-interest to The First National Bank of Chicago), as trustee under
the related Indenture.
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<TABLE>
<S> <C>
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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 $450,000,000
prospectus. If given or made, such information or
representation must not be relied upon as having
been authorized by Federal Express or the [COMPANY LOGO]
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
Federal Express since the date of this prospectus. Debt Securities
the date of this prospectus.
------------------------------------
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PROSPECTUS
TABLE OF CONTENTS
------------------------------------
Page
----
About this Prospectus.............................2
Where You Can Find More Information...............2
Federal Express Corporation.......................3
Ratio of Earnings to Fixed Charges................3
Risk Factors......................................3
Use of Proceeds...................................5
Description of Debt Securities....................5
Plan of Distribution.............................10
Legal Matters....................................11 June __, 2000
Experts..........................................12
Glossary of Terms................................13
==================================================== ===================================================
</TABLE>
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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................................................ $100,511
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
Miscellaneous....................................................... 5,000
--------
Total............................................................ $810,511
========
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.
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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) Form of Pass Through Trust Agreement between Federal Express
Corporation and First Security Bank, National Association
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 Indenture between the Registrant and Bank One Trust Company,
National Association (as successor-in-interest to 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(c)(2) Form of Debt Security (included in Exhibit 4(c)(1))
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)
II-2
<PAGE>
8(b) Tax Opinion of Ray, Quinney & Nebeker, special counsel for the Pass
Through Trustee (included under the caption "Utah Taxes" in the
Prospectus relating to Pass Through Certificates)
12 Computation of Ratio of Earnings to Fixed Charges (Filed as Exhibit
12.1 to Registrant's Form 10-Q for the quarter ended February 29,
2000, and incorporated herein by reference)
15 Letter of Arthur Andersen LLP, independent public accountants
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 Bank One Trust Company, National Association
(as successor-in-interest to The First National Bank of Chicago), as
Trustee
25(b) Form T-1 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of First Security Bank, National Association, as
Indenture Trustee and as Pass Through Trustee
II-3
<PAGE>
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(a) (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act 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.
II-4
<PAGE>
(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.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Memphis, State of Tennessee, on this 9th day of
June, 2000.
FEDERAL EXPRESS CORPORATION
By: /s/ Michael W. Hillard
-------------------------------------
Name: Michael W. Hillard
Title: Vice President and Controller
(Principal Accounting Officer)
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Alan B. Graf, Jr. and Michael W. Hillard, and each of them, his or her true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) and supplements to this registration statement and any related
registration statement filed pursuant to Rule 462(b), and to file the same,
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, and hereby grants to such
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed 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 June 9, 2000
Frederick W. Smith
/s/ Alan B. Graf, Jr.
--------------------------- Director June 9, 2000
Alan B. Graf, Jr.
/s/ Theodore L. Weise
--------------------------- Director June 9, 2000
Theodore L. Weise
/s/ Kenneth R. Masterson
--------------------------- Director June 9, 2000
Kenneth R. Masterson
/s/ T. Michael Glenn
--------------------------- Director June 9, 2000
T. Michael Glenn
II-6
<PAGE>
Signature Capacity Date
--------------------------- ---------------------------------- ------------
/s/ Dennis H. Jones
--------------------------- Director June 9, 2000
Dennis H. Jones
/s/ David J. Bronczek
--------------------------- Chief Executive Officer, President June 9, 2000
David J. Bronczek and Director (Principal Executive
Officer)
/s/ George W. Hearn
--------------------------- Director June 9, 2000
George W. Hearn
/s/ Michael L. Ducker
--------------------------- Executive Vice President - June 9, 2000
Michael L. Ducker International and Director
/s/ David F. Rebholz
--------------------------- Executive Vice President - June 9, 2000
David F. Rebholz Operations and Systems Support and
Director
/s/ Michael W. Hillard
--------------------------- Vice President and Controller June 9, 2000
Michael W. Hillard (Principal Accounting Officer)
/s/ Tracy G. Schmidt
--------------------------- Senior Vice President and Chief June 9, 2000
Tracy G. Schmidt Financial Officer (Principal
Financial Officer)
II-7
<PAGE>
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) Form of Pass Through Trust Agreement between Federal Express
Corporation and First Security Bank, National Association
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 Indenture between the Registrant and Bank One Trust Company,
National Association (as successor-in-interest to 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(c)(2) Form of Debt Security (included in Exhibit 4(c)(1))
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)
1
<PAGE>
8(b) Tax Opinion of Ray, Quinney & Nebeker, special counsel for the Pass
Through Trustee (included under the caption "Utah Taxes" in the
Prospectus relating to Pass Through Certificates)
12 Computation of Ratio of Earnings to Fixed Charges (Filed as Exhibit
12.1 to Registrant's Form 10-Q for the quarter ended February 29,
2000, and incorporated herein by reference)
15 Letter of Arthur Andersen LLP, independent public accountants
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 Bank One Trust Company, National Association (as
successor-in-interest to The First National Bank of Chicago), as
Trustee
25(b) Form T-1 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of First Security Bank, National Association, as
Indenture Trustee and as Pass Through Trustee
2
