-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, jj1onAzId/LUBRZYEMTQf7ieU4GVitzJ8pplrUJenozzR0O6lKMLrNwBpVEZ0Gja gaUg5hfpB6D8YJ7chtHQUw== 0000912057-94-002510.txt : 19940808 0000912057-94-002510.hdr.sgml : 19940808 ACCESSION NUMBER: 0000912057-94-002510 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19940531 FILED AS OF DATE: 19940805 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FEDERAL EXPRESS CORP CENTRAL INDEX KEY: 0000230211 STANDARD INDUSTRIAL CLASSIFICATION: 4513 IRS NUMBER: 710427007 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07806 FILM NUMBER: 94542042 BUSINESS ADDRESS: STREET 1: 2005 CORPORATE AVENUE CITY: MEMPHIS STATE: TN ZIP: 38132 BUSINESS PHONE: (901)-395-3382 MAIL ADDRESS: STREET 1: 2005 CORPORATE AVENUE CITY: MEMPHIS STATE: TN ZIP: 38132 10-K 1 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (MARK ONE) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) FOR THE FISCAL YEAR ENDED MAY 31, 1994 COMMISSION FILE NUMBER 1-7806 FEDERAL EXPRESS CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 71-0427007 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2005 CORPORATE AVENUE, MEMPHIS, TENNESSEE 38132 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (901) 369-3600 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ------------------------------------------ Common Stock, Par Value New York Stock Exchange $.10 per share SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / As of July 29, 1994, 55,906,097 shares of the Registrant's Common Stock were outstanding and the aggregate market value of the voting stock held by non-affiliates of the Registrant (based on the closing price of such stock on the New York Stock Exchange) was approximately $3,346,046,518. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Stockholders for the fiscal year ended May 31, 1994 are incorporated by reference into Parts II and IV. Portions of the Proxy Statement for the Annual Meeting of Stockholders on September 26, 1994 are incorporated by reference into Part III. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS PAGE ---- PART I ITEM 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ITEM 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ITEM 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 11 ITEM 4. Submission of Matters to a Vote of Security Holders. . . . . . 12 Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . 12 PART II ITEM 5. Market for the Registrant's Common Stock and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 ITEM 6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . 15 ITEM 7. Management's Discussion and Analysis . . . . . . . . . . . . . 15 ITEM 8. Financial Statements and Supplementary Data. . . . . . . . . . 15 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . 15 PART III ITEM 10. Directors and Executive Officers of the Registrant . . . . . . 15 ITEM 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . 15 ITEM 12. Security Ownership of Certain Beneficial Owners and Management 15 ITEM 13. Certain Relationships and Related Transactions . . . . . . . . 16 PART IV ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 16 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 FINANCIAL STATEMENT SCHEDULES INDEX Report of Independent Public Accountants on Financial Statement Schedules S-1 SCHEDULE II Amounts Receivable from Related Parties . . . . . . . . . S-2 SCHEDULE V Property and Equipment. . . . . . . . . . . . . . . . . . S-3 SCHEDULE VI Accumulated Depreciation and Amortization . . . . . . . . S-4 SCHEDULE VIII Valuation and Qualifying Accounts . . . . . . . . . . . . S-5 SCHEDULE IX Short-Term Borrowings . . . . . . . . . . . . . . . . . . S-6 SCHEDULE X Supplementary Income Statement Information. . . . . . . . S-7 EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1 PART I ITEM 1. BUSINESS INTRODUCTION AND RECENT DEVELOPMENTS Federal Express Corporation (the "Company") was incorporated in Delaware on June 24, 1971 and began operations in 1972. The Company offers a wide range of express services for the time-definite transportation of documents, packages and freight throughout the world using an extensive fleet of aircraft and vehicles and leading-edge information technologies. During fiscal year 1994, the Company continued to improve its global network of aviation, ground and information links between the major trading centers of the Americas, Europe and Asia. The Company added new Airbus A300 aircraft, for example, and unveiled new services and innovative technologies aimed at enhancing service and improving customer satisfaction. The Company also updated its corporate identity by adopting "FedEx" as its new brand name. DOMESTIC SERVICES The Company offers three domestic overnight delivery services: FedEx Priority Overnight Service, FedEx Standard Overnight Service and FedEx Overnight Freight Service. Overnight document and package service extends to virtually the entire United States population and overnight freight service covers all major and most medium-size metropolitan areas. Packages and documents are either picked up from shippers by Company couriers or are dropped off by shippers at Company facilities, including city stations, Business Service Centers, Mini-Centers or Drop Boxes strategically located throughout the country. FedEx Priority Overnight Service, scheduled for delivery in most communities no later than 10:30 a.m. local time the following business day, is designed for packages weighing up to 150 pounds with a maximum combined length and girth of 165 inches and a maximum length of 119 inches. Also available are Saturday delivery service and Saturday pick-up for delivery the following Monday. FedEx Standard Overnight Service is similar to, though more economical than, Priority Overnight Service with delivery scheduled no later than 3:00 p.m. local time the following business day in most communities. Company-provided packaging (FedEx Letter envelope, FedEx Pak, FedEx Large, Medium and Small Boxes, FedEx Tube and FedEx Diagnostic Specimen Envelope) is provided as part of these overnight services. FedEx Overnight Freight Service is scheduled for delivery by noon or 4:30 p.m. the following business day, depending on the recipient's location, and is designed for individual shipments weighing 151 to 750 pounds. Shipments exceeding 750 pounds will be accepted if advance approval is obtained. Two domestic second-day services are available for less urgent shipments: FedEx Economy Two-Day Service and FedEx Two-Day Freight Service. Economy Two-Day Service is designed for packages weighing up to 150 pounds, 165 inches in combined length and girth and a maximum length of 119 inches. Economy Two-Day Service shipments are scheduled for delivery in most communities no later than 4:30 p.m. the second business day following pick-up. Two-Day Freight Service is a time-definite domestic freight service for individual shipments weighing 151 to 1500 pounds. Shipments exceeding 1500 pounds will be accepted if advance approval is obtained. Shipments are scheduled for delivery no later than 4:30 p.m. the second business day in all major and most medium-size metropolitan areas. Domestic overnight and second-day services are primarily used by customers for shipment of time-sensitive documents and goods, high-value machines and machine parts, computer parts, software and consumer items from manufacturers, distributors and retailers and to retailers, manufacturers and consumers. Company employees handle virtually every shipment from origin to destination. The Company's Collect On Delivery (C.O.D.) service provides the fastest payment return in the express industry. C.O.D. payments are returned to shippers within one or two business days compared to competitors' services which can take as long as 45 days. Like the Company's other domestic services, C.O.D. service offers money-back guarantees on timely delivery and on the Company's ability to track and locate any package in its system. INTERNATIONAL SERVICES The Company offers five international document and package delivery services and two international freight services. International Priority ("IP") Service is a time-definite service for documents and packages weighing up to 150 pounds. Customs clearance is included as part of this service. The broker selection option for IP Service permits customers to designate their own customs broker for clearance. Pick-up and delivery are provided from any point in the Company's domestic and international network around the world. Delivery is generally scheduled within one to three business days depending on the destination of the shipment and commodity limitations imposed by authorities in the destination country. Size, weight and commodity limitations vary according to destination. International Priority Freight Service is an expansion of IP Service and is a time-definite service for international shipments exceeding 150 pounds or 250 inches in length and girth combined. Customs clearance is included as part of this service and customers are permitted to designate their own customs broker for clearance. Pick-up and delivery are provided from many points in the Company's domestic and international network around the world. Delivery is generally scheduled within one to three business days depending on the destination of the shipment and commodity limitations imposed by authorities in the destination country. Size, weight and commodity limitations vary according to destination. International Priority Plus is an overnight service for packages (up to 70 pounds) and documents shipped from New York City to Amsterdam, Brussels, Frankfurt (documents only), Geneva, London, Madrid (documents only), Milan (documents only), Paris, Rio De Janeiro, Rome, Sao Paulo (documents only) and Zurich and from Washington, D.C. to London and Paris. IP Plus shipments must be picked up or dropped off by 3:00 p.m. for delivery the next business day. EXPRESSfreighter routing, discussed below, allows overnight service from major locations in Europe and Asia to be scheduled for 10:30 a.m. delivery on the next business day to most United States destinations and to major business centers in Canada, Mexico and the Caribbean. More economical than IP Service, International Priority Distribution Service is a time-definite service for bulk shipments destined to several different recipients in one country. Once the bulk shipment arrives in the destination country, the individual packages are separated and delivered to the recipients. Weight and size restrictions are the same as for IP Service, with transit time one or two days longer. FedEx International MailService provides for the pick-up, transportation and sorting of nondutiable, printed material and certain low-value, dutiable items which are tendered for delivery to postal services throughout the world. Generally, material sent by International MailService for premium service is delivered to recipients within three to six days, while receipt of material sent by International MailService for standard service takes four to ten days. FedEx International Express Freight Service, a freight service for shipments of nearly any weight, size or shape, is available between major markets in North America, Asia, Australia, Europe and South America. This service, providing scheduled delivery from one to three business days depending on destination, is designed for shippers desiring time-definite, committed delivery with the option of customs clearance provided by the Company. Commodity limitations vary according to destination. FedEx International Airport-to-Airport Cargo Service is an international airfreight service designed for freight forwarders and agents who do not require a time-definite, committed delivery. Space-available service is offered to and from virtually any airport around the world for airfreight shipments of nearly any weight, size or 2 shape, with arrival at the destination airport from two to four days after tender of the shipment. If the Company's aircraft do not serve the destination airport, another carrier's services are used pursuant to an "interline" agreement or other arrangement with such carrier. Commodity limitations vary according to destination. CHARTER SERVICES AND CRAF PARTICIPATION The Company offers commercial and military charter services which supplement the utilization of aircraft capacity when not needed in the Company's scheduled operations. In addition to providing these charter services the Company participates in the Civil Reserve Air Fleet ("CRAF") program. Under this program, the Department of Defense may requisition for military use certain of the Company's wide-bodied aircraft in the event of a declared need, including a national emergency. The Company is compensated for the operation of any aircraft requisitioned under the CRAF program at standard contract rates established each year in the normal course of awarding contracts. Through its participation in the CRAF program, the Company is entitled to bid on peacetime military cargo charter business. The Company, together with a consortium of other carriers, currently contracts with the U.S. Government for charter flights. The Company, while continuing to participate in the CRAF program and continuing to bid on military charters with respect to the carriage of cargo, discontinued military passenger flights at the end of September 1992. During fiscal 1994, revenues from charter operations accounted for approximately 1.3% of the Company's total revenues and approximately 1.4% and 2.5% of total revenues during fiscal 1993 and 1992, respectively. Charter results for the first quarter of 1992 were positively affected by elevated charter activity related to Operation Desert Storm. FEDEX LOGISTICS SERVICES FedEx Logistics Services ("FLS") is a division of the Company which offers a full range of global and regional logistics solutions, including transportation and logistics management as well as other innovative services. FLS also offers an extensive array of services for catalogers and direct marketers, including customized promotional strategies, telemarketing training, operational support and international mailing services. FLS has offices in Memphis and other key U.S. sites, the United Kingdom, Belgium, the Netherlands, Singapore and Hong Kong to serve its more than 2,000 clients. PRICING The Company periodically publishes list prices in its Service Guides for the majority of its services. In general, domestic shipping rates are based on the service selected, weight, size, any ancillary service charge and whether or not the shipment is picked up by a Company courier or dropped off by the customer at a Company location. International rates are based on the type of service provided and vary with size, weight and destination. The Company offers its customers volume discounts based on actual or potential average daily revenue produced. Discounts are determined by reference to several local and national revenue bands developed by the Company. In general, the more revenue a particular customer produces, the greater the discount. Of the more than two million current customers of the Company, a significant portion participates in its discount program. 3 SERVICE REVENUES The following table shows the amount of revenues generated for each class of service offered for the fiscal years ending May 31 (amounts in thousands):
1994 1993 1992 ---- ---- ---- Priority Overnight Services $3,707,974 $3,433,106 $3,342,956 Standard Overnight Services 1,166,808 1,013,076 841,439 Economy Two-Day Service 1,091,511 968,780 786,837 Domestic Freight Services 113,939 87,365 74,284 International Priority Services 1,317,856 1,116,589 1,039,337 International Freight Services 504,738 570,154 699,939 Charter 113,446 112,416 188,165 FedEx Logistics Services and Other* 463,184 506,557 577,103 ---------- ---------- ----------- Total $8,479,456 $7,808,043 $7,550,060 ---------- ---------- ----------- ---------- ---------- ----------- *Includes revenues generated by the specialized services summarized above under "FedEx Logistics Services" and does not include express and freight service revenue generated by FLS clients. In addition, includes revenues from non-U.S. intra-country operations (a portion of the U.K. and all continental Europe intra-country operations were discontinued on May 4, 1992), Warren Transport, Inc. (sold September 1993), aircraft noise-reduction kit sales and fees paid by customers for additional casualty coverage and C.O.D. Service.
SEASONALITY OF BUSINESS The Company's express package business and international airfreight business are both seasonal in nature. Historically, the domestic package business experiences an increase in late November and December. International business, particularly in the Asia to U.S. markets, peaks in October and November due to domestic holiday sales. The latter part of the Company's third fiscal quarter and late summer, being post-winter holiday and summer vacation seasons, have historically exhibited lower volumes relative to other periods. OPERATIONS The Company's global transportation and distribution services are provided through an extensive international network consisting of numerous aviation and ground transportation operating rights and authorities, 462 aircraft, approximately 30,900 vehicles, sorting facilities, city stations, Business Service Centers, Mini-Centers, Drop Boxes and sophisticated package tracking, billing and communications systems. The Company's primary domestic sorting facility, the SuperHub located in Memphis, serves as the center of the Company's multiple hub-and-spokes domestic system. A second national hub is located in Indianapolis. In addition to these national hubs, the Company operates regional hubs in Newark and Oakland and major metropolitan sorting facilities in Los Angeles and Chicago. A facility in Anchorage serves as a sorting facility for express package and freight traffic moving to and from Asia, Europe and North America. Major sorting and freight handling facilities are located at Narita Airport in Japan, Charles de Gaulle Airport in Paris and Stansted Airport outside London. The Company trucks some shipments point-to-point, utilizing national, regional and metropolitan sorting facilities. In January 1991, the Company implemented EXPRESSfreighter flights which provide faster international service through direct flights between major markets in Asia, Europe and North America. For example, EXPRESSfreighter flights from Hong Kong, Osaka, Singapore, Taipei and Tokyo to the Company's facility in Anchorage and from there to the SuperHub in Memphis allow for next business day delivery by 10:30 a.m. in the United States and to major business centers in Canada, Mexico and the Caribbean. Cargo on those EXPRESSfreighter flights bound for Europe is flown for next-day delivery to sixteen European cities. Westbound 4 from Europe, EXPRESSfreighter service is available from Amsterdam, Antwerp, Basel, Brussels, Frankfurt, London, Luxembourg, Milan, Paris and Zurich for 10:30 a.m. next-day delivery in most of North America. Throughout its worldwide network, the Company operates city stations and employs a staff of customer service agents, cargo handlers and couriers who pick up and deliver shipments in the station's service area. In some cities, the Company operates Business Service Centers which are staffed, store-front facilities located in high-traffic, high-density areas. Manned or unmanned Mini-Centers and unmanned Drop Boxes provide customers the opportunity to drop off packages at locations in office buildings, shopping centers and corporate or industrial parks. In 1994, the Company formed alliances with certain retailers to extend this customer convenience network to new drop-off sites in such retailers' locations. In international regions where low package traffic makes our direct presence less economical, Global Service Participants have been selected to complete deliveries. The Company has an advanced package tracking and billing system, COSMOS, that utilizes hand-held electronic scanning equipment and computer terminals. This system provides proof of delivery information, an electronically reproduced airbill for the customer and information regarding the location of a package within the Company's system. For international shipments, the Company has developed ExpressClear, a worldwide electronic customs clearance system, which speeds up customs clearance by allowing customs agents in destination countries to review information about shipments before they arrive. The Company has 16 computerized telephone customer service centers in the United States which handle thousands of customer calls daily. In general, the Company's international locations handle customer calls locally. The Company provides many of its customers POWERSHIP 2, an automated computer system, which provides package tracking, produces shipping labels, calculates shipping charges, invoices the customer daily and produces customized reports. For customers that ship 100 or more packages a day, the Company offers POWERSHIP Plus software, which performs the same functions as POWERSHIP 2 but can be integrated with the customer's own computer systems for customer service, accounting, inventory control and financial analysis purposes. POWERSHIP PassPort is an automated shipping system which is automatically updated with the Company's system information, such as routing codes and rates. POWERSHIP 3 enables customers who ship as few as three packages per day to enjoy the advantage of automated shipping. In 1994, the Company began offering FEDEX Tracking Software, free of charge, that can be used on a customer's own personal computer. FUEL SUPPLIES AND COSTS The Company's aviation fuel is purchased from various suppliers under contracts which vary in length from three to twenty-one months and which provide for specific amounts of fuel to be delivered. Approximately 60% of the fuel represented by these contracts is prepriced, i.e., preset or "price not to exceed." The remainder is purchased at market price which may fluctuate daily. The Company believes that, barring a substantial disruption in supplies of crude oil, these agreements will ensure the availability of an adequate supply of fuel for the Company's needs for the immediate future, as well as provide fuel-cost stability for the term of the contracts. However, a substantial reduction of oil supplies from oil producing regions or refining capacity, or other events causing a substantial reduction in the supply of aviation fuel, could have a significant adverse effect on the Company. The Company has also entered into contracts which are designed to limit its exposure to fluctuations in jet fuel prices. The contracts extend through May 1995. These agreements are based on a notional sum of 10 million gallons per month, which is approximately 20 to 25% of the Company's monthly consumption of jet fuel. As of the date of this Report, the Company had neither received nor made any payments related to these contracts. 5 The following table sets forth the Company's costs for aviation fuel and its percentage of total operating expense for the previous five fiscal years:
Total Cost Percentage of Total Fiscal Year (in thousands) Operating Expense ----------- -------------- ------------------- 1994 $374,561 4.7% 1993 $403,597 5.4% 1992 $414,481 5.5% 1991 $554,637 7.5% 1990 $431,601 6.5%
Approximately 40% of the Company's requirement for vehicle fuel is purchased in bulk under fixed-price agreements. The remainder of the Company's requirement is satisfied by retail purchases, discounted from 1% to 3%. The percentage of total operating expense for vehicle fuel purchases for each of the last five fiscal years has not exceeded 1.5%. COMPETITION The overnight express market is highly competitive and sensitive to both price and service. Competitors in this market include passenger airlines offering package express services, regional express delivery concerns, airfreight forwarders and other express package concerns, principally United Parcel Service and Airborne Express. The international express package and freight markets are also highly competitive. Ability to compete effectively internationally depends principally upon price, frequency and capacity of scheduled service, extent of geographic coverage and reliability. The Company currently holds certificates of authority to serve more foreign countries than any other United States all-cargo carrier and its extensive, scheduled international route system allows it to offer single-carrier service to many points not offered by its principal all-cargo competitors. This international route system, combined with an integrated air and ground network, enables the Company to offer international customers more extensive single-carrier service to a greater number of domestic points than can be provided currently by competitors. However, many of the Company's competitors in the international market are government owned, controlled, or subsidized carriers which may have greater resources, lower costs, less profit sensitivity and more favorable operating conditions than the Company. The Company's principal competitors in the international freight market are foreign national air carriers, United States passenger airlines and all-cargo airlines and other express package companies including United Parcel Service and DHL. REGULATION AIR Under the Federal Aviation Act of 1958, as amended, both the Department of Transportation ("DOT") and the Federal Aviation Administration ("FAA") exercise regulatory authority over the Company. The DOT's authority relates primarily to economic aspects of air transportation. The DOT's jurisdiction extends to aviation route authority, pricing oversight and to other of the Company's business practices, including interlocking relations, competitive practices and cooperative agreements. The Company holds an all-cargo certificate and air carrier certificate to carry cargo and mail. The Company's international authority permits it to carry cargo and mail from several points in its domestic route system to numerous points throughout the world. The DOT regulates international routes, fares, rates and practices and is authorized to investigate and take action against discriminatory treatment of United States air carriers abroad. The right of a United States carrier to serve foreign points is subject to the DOT's approval and generally requires a bilateral agreement between the United States and the foreign government. The carrier must then be granted the permission of such foreign government to provide specific flights and services. The FAA's regulatory authority relates primarily to safety aspects of air transportation, including aircraft standards and maintenance, personnel and ground facilities. The Company holds an operating 6 certificate granted by the FAA pursuant to Part 121 of the Federal Aviation Regulations. This certificate is of unlimited duration and remains in effect so long as the Company maintains its standards of safety and meets the operational requirements of the regulations. GROUND Much of the ground transportation performed by the Company is integral to its air transportation services and is exempt from regulation by the Interstate Commerce Commission ("ICC") under the Motor Carrier Act of 1980. The Company is required to register as an exempt ICC operator in each of the states in which it operates. In addition, the Bureau of Motor Carrier Safety of the Federal Highway Administration of the DOT regulates the safety aspects of the Company's motor vehicle operations. The Company also holds nationwide motor carrier common and contract carrier authorities issued by the ICC which authorizes the express carriage of general commodities between points in the United States. In addition to federal regulation of ground transportation, certain states have local regulations which restrict the use of ground transportation. The Company has attempted through legislative and judicial avenues to eliminate these intrastate transportation regulations. Though some success has been achieved, significant regulatory barriers still exist that prevent the maximum use of the Company's ground transportation network. COMMUNICATION Because of the extensive use of radio and other communication facilities in its aircraft and ground transportation operations, the Company is subject to the Federal Communications Commission Act of 1934, as amended. Additionally, the Federal Communications Commission regulates and licenses the Company's activities pertaining to satellite communications. ENVIRONMENTAL Pursuant to the Federal Aviation Act, the FAA with the assistance of the Environmental Protection Agency is authorized to establish standards governing aircraft noise. The Company's present aircraft fleet is in compliance with current noise standards contained in Part 36, Part 91 and Part 161 of the Federal Aviation Regulations. The Company's aircraft are also subject to, and are in compliance with, the regulations limiting the level of engine smoke emissions. In addition to federal regulation of aircraft noise, certain airport operators have local noise regulations which limit aircraft operations by type of aircraft and time of day. These regulations have had a restrictive effect on the Company's aircraft operations in some of the localities where they apply but do not have a material effect on any of the Company's significant markets. Congress' passage of the Airport Noise and Capacity Act of 1990 established a National Noise Policy which enabled the Company to plan for noise reduction and better respond to local noise constraints. Under the Clean Air Act Amendments of 1990, many states will be required to implement alternative fuel programs for fleet vehicles operating in certain nonattainment areas. As states begin to implement their clean fuel fleet programs, the Company anticipates acquiring new delivery vehicles or modifying its existing delivery vehicles in order to comply with the regulations. Additionally, facility modifications may be required to accommodate the use of alternative fuels at the Company stations and ramps. The Company believes these new alternative fuel programs will impose additional expenditures on the Company; however, the magnitude of the impact has not yet been determined nor has the Company decided what steps to take in response to any new regulations enacted. Two other aspects of the Clean Air Act Amendments are also expected to have an impact on the Company. The Amendments require the Company to develop an emissions inventory for its facilities which emit prescribed levels of pollutants. In addition, the Amendments mandate that the Company explore alternatives to reduce the number of vehicles transporting its employees to and from work at certain facilities during certain time periods. The Company is in the process of developing the emissions inventory in anticipation of an October 1995 deadline and is also studying ways to comply with the trip reduction mandates of the Amendments. Though 7 additional expenditures will be required to accomplish these tasks, the anticipated impact is not expected to be material. The states, in response to the requirements contained in the Clean Water Act, are implementing programs related to the capture and treatment of aircraft deicing fluids and the capture and treatment of aircraft and vehicle wash water discharge. During periods of cold weather flying, the Company is required to deice its aircraft by applying fluids which dissolve and inhibit the formation of ice on the body and wings of the aircraft. These fluids may be applied to the aircraft while it is on the runway or in the ramp area next to the terminal. In either case, various states and airport authorities have begun to regulate the discharge and disposal of such fluids. In some cases, the airport authorities are splitting the cost of containment systems among all of the airlines using the airport authorities' deicing facilities. In other cases, each individual carrier is required to pay the cost of its own deicing facilities and the cost of the disposal of its own discharge. Capture and disposal of vehicle wash discharge is also required by the Clean Water Act. In this case, the Company is exploring ways to reduce the amount of contaminants contained in the discharge as well as treat the discharge itself to comply with state and local pollution control requirements. For both aircraft deicing and vehicle washing, the Company cannot accurately predict the precise amount of future costs associated with compliance with the Clean Water Act given the developing nature of the regulations, the variety of local responses to the requirements and the multiple solutions being considered by the Company to the requirements. Increased expenditures will be necessary to comply in the short and long term, but the Company does not expect these expenditures to be material. EMPLOYEES At June 30, 1994, the Company employed approximately 66,000 permanent full-time and 35,000 permanent part-time employees, of which approximately 22% are employed in Memphis. Employees of the Company's international branches and subsidiaries in the aggregate comprise approximately 12% of all employees. The Company believes its relationship with its employees is excellent. Following the Company's flight crewmembers' decision to form a collective bargaining unit, the Company and the Air Line Pilots Association ("ALPA") began negotiations on certain interim issues on August 26, 1993 in preparation for a comprehensive collective bargaining agreement. In March 1994, the Company and ALPA entered into two agreements, one creating a dispute resolution system for certain disciplinary matters, the other permitting ALPA crewmembers to be excused from flying to perform ALPA related duties in exchange for ALPA's agreement to reimburse the Company for the loss of those crewmembers. Negotiations toward a comprehensive collective bargaining agreement began in May 1994 and are continuing. Attempts by other labor organizations to organize certain other groups of employees have been initiated. Although the Company cannot predict the outcome of these labor activities or their effect on the Company or its employees, if any, the Company is vigorously opposing these organization attempts. FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS For information concerning financial results for domestic and international operations for the three years ended May 31, 1994, 1993 and 1992, refer to Note 10 of Notes to Consolidated Financial Statements contained in the Company's 1994 Annual Report to Stockholders, which Note is incorporated herein by reference. ITEM 2. PROPERTIES The Company's principal owned or leased properties include its aircraft, vehicles, national, regional and metropolitan sorting facilities, administration buildings, city stations, Service Centers, Mini-Centers, Drop Boxes and data processing and telecommunications equipment. 8 AIRCRAFT AND VEHICLES The Company's operating jet fleet at July 31, 1994 consisted of Airbus A300-600, A310-200, McDonnell Douglas MD-11, DC-10-10, DC-10-30 and Boeing B727-100, B727-200 and B747-200 aircraft. The A300s and A310s are two-engine, wide bodied aircraft which have a longer range and more capacity than B727s. The MD- 11s are three-engine, wide-bodied aircraft which have a longer range and larger capacity than DC-10s. The DC- 10s are three-engine, wide-bodied aircraft which have been specially modified to meet the Company's cargo requirements. The B747s are four-engine, wide-bodied aircraft. The B727s are three-engine aircraft configured for cargo service. At July 31, 1994, the Company also owned 32 Fokker F-27 and 216 Cessna 208 turbo-prop aircraft which, in general, are leased to unaffiliated operators to support Company operations in remote areas. An inventory of spare engines and parts is maintained for each aircraft type. The Company's fleet at July 31, 1994 consisted of the following aircraft:
Approximate Revenue Payload Description Number (Pounds per Aircraft) - ----------- ------ --------------------- Boeing B747-200 6* 250,000 McDonnell Douglas MD-11 13* 198,500 McDonnell Douglas DC-10-30 20* 172,000 Airbus A300-600 4* 117,700 McDonnell Douglas DC-10-10 11* 105,000 Airbus A310-200 1* 74,200 Boeing B727-200 90* 59,500 Boeing B727-100 69* 46,000 Fokker F-27-500 24 14,000 Fokker F-27-600 8 12,500 Cessna 208B 206 3,460 Cessna 208A 10 2,960 --- Total 462 --- --- ___________________________ *Four A300, one A310, 13 MD-11, two DC-10-10, 15 DC-10-30, six B747-200, five B727-100 and 13 B727-200 aircraft are subject to operating leases.
In addition, the Company "wet leases" approximately 30 smaller piston-engine and turbo-prop aircraft which feed packages to and from airports served by the Company's larger jet aircraft. The wet lease agreements call for the owner-lessor to provide flight crews, insurance and maintenance, as well as fuel and other supplies required to operate the aircraft. The Company's wet lease agreements are for terms not exceeding one year and are generally cancelable upon 30 to 60 days notice. At July 31, 1994, the Company operated approximately 30,900 ground transport vehicles, including pick-up and delivery vans, larger trucks called container transport vehicles and over-the-road tractors and trailers. AIRCRAFT PURCHASE COMMITMENTS Under various contracts, the Company is committed to purchase 21 Airbus A300 and 25 Cessna 208B aircraft to be delivered through 1999. The Company also has options to purchase up to 46 additional A300 aircraft for delivery beginning in 1997. 9 SORTING AND HANDLING FACILITIES At June 30, 1994, the Company was operating the following sorting and handling facilities:
SORTING LEASE SQUARE CAPACITY EXPIRATION LOCATION ACRES FEET (per hour)* LESSOR YEAR - -------- ----- ------ ----------- ------ ---------- NATIONAL Memphis, Tennessee 510 1,828,000 491,000 Memphis-Shelby County 2014 Airport Authority Indianapolis, Indiana 170 645,000 153,000 Indianapolis Airport 2016 Authority REGIONAL Newark, New Jersey 60 374,000 85,000 Port Authority of New 2010 York and New Jersey Oakland, California 36 191,000 50,000 City of Oakland 2011 METROPOLITAN Los Angeles, California 25 130,000 53,000 City of Los Angeles 2009 Chicago, Illinois 35 286,000 45,000 City of Chicago 2018 Anchorage, Alaska** 42 208,000 16,000 Alaska Department of 1998 Transportation and Public Facilities ________________________ * Documents and packages ** Handles international express package and freight shipments to and from Asia, Europe and North America.
The Company's facilities at the Memphis International Airport also consist of aircraft hangars, flight training and fuel facilities, administrative offices and warehouse space. The Company leases these facilities from the Memphis-Shelby County Airport Authority under several leases. The leases cover land, the administrative and sorting buildings, other facilities, hangars and ramps and certain related equipment. The Company has the option to purchase certain equipment (but not buildings or improvements to real estate) leased under such leases at the end of the lease term for a nominal sum. The leases obligate the Company to maintain and insure the leased property and to pay all related taxes, assessments and other charges. The leases are subordinate to, and the Company's rights thereunder could be affected by, any future lease or agreement between the Authority and the United States Government. In addition to the facilities noted above, the Company has major international sorting and freight handling facilities located at Narita Airport in Japan, Charles de Gaulle Airport in Paris, France and Stansted Airport outside London, England. The Company is also developing a transloading facility in Subic Bay, The Philippines which is expected to become operational in 1995. ADMINISTRATIVE AND OTHER PROPERTIES AND FACILITIES The Company has facilities housing administrative and technical operations on approximately 200 acres adjacent to the Memphis International Airport. Of the seven buildings located on this site, four are subject to long- 10 term leases and the other three are owned by the Company. The Company also leases 64 facilities in the Memphis area for its corporate headquarters, warehouse facilities and administrative offices. The Company owns 14 and leases 762 facilities for city station operations in the United States. In addition, 161 city stations are owned or leased throughout the Company's international network. The majority of the leases are for terms of five to ten years. The Company believes that suitable alternative facilities are available in each locale on satisfactory terms, if necessary. As of June 30, 1994, the Company leased space for 406 Service Centers in the United States and had placed approximately 29,676 Drop Boxes. The Company also owns stand- alone Mini-Centers located on leaseholds in parking lots adjacent to office buildings, shopping centers and office parks of which 285 were operating at June 30, 1994. Internationally, the Company leases space for 31 Business Service Centers and has approximately 733 Drop Boxes. The Company leases central processing units and most of the disk drives, printers and terminals used for data processing. Owned equipment consists primarily of Digitally Assisted Dispatch Systems ("DADS") terminals used in communications between dispatchers and couriers, computerized routing, tracing and billing equipment used by customers and mobile radios used in the Company's vehicles. The Company also leases space on C-Band and Ku-Band satellite transponders for use in its telecommunications network. ITEM 3. LEGAL PROCEEDINGS The Company has reached a tentative settlement of the shareholder class-action lawsuit filed in 1990 against it, Frederick W. Smith, Chairman and Chief Executive Officer, and James L. Barksdale, the Company's former Executive Vice President and Chief Operating Officer. The settlement, which still must be approved by the United States District Court for the Western District of Tennessee, is for an immaterial amount (the Company's portion of which has been recorded in the 1994 financial statements). The Company's insurance carrier will pay a majority of the settlement amount. The Company currently believes that the Court will approve or disapprove the settlement agreement before the end of its current fiscal year. Prior to the Court's decision, the purchasers of the Company's Common Stock affected by the settlement agreement must be notified of the terms of the settlement and a hearing must be held in the District Court. The Internal Revenue Service ("IRS") issued an Examination Report on October 31, 1991 asserting the Company underpaid federal excise taxes for the calendar quarters ended December 31, 1983 through March 31, 1987. The Examination Report contains a primary position and a mutually exclusive alternative position asserting the Company underpaid federal excise taxes by $54,000,000 and $26,000,000, respectively. Disagreeing with essentially all of the proposed adjustments contained in the Examination Report, the Company filed a Protest on March 16, 1992 which set forth the Company's defenses to both IRS positions and a claim for refund of overpaid federal excise taxes of $23,500,000. On March 19, 1993, the IRS issued another Examination Report to the Company asserting the Company underpaid federal excise taxes by $105,000,000 for the calendar quarters ended June 30, 1987 through March 31, 1991. On June 17, 1993, the Company filed a Protest contesting the March 19 Examination Report which set forth the Company's defenses to the IRS position and a claim for refund of overpaid federal excise taxes of $46,500,000. Interest would be payable on the amount of any refunds by the IRS to the Company or underpaid federal excise taxes payable by the Company to the IRS at statutorily determined rates. The interest rates payable by the Company for underpaid taxes are higher than the rates payable by the IRS on refund amounts. The Company plans to vigorously pursue its Protests administratively with the IRS Appeals Division. If it is unsuccessful with the IRS Appeals Division, the Company intends to pursue its position in court. Pending resolution of this matter, the IRS can be expected to take positions similar to those taken in their Examination Reports for periods after March 31, 1991. Given the inherent uncertainties in the excise tax matter referred to above, management is currently unable to predict with certainty the outcome of this matter or the ultimate effect, if any, its resolution would have 11 on the Company's financial condition or results of operations. No amounts have been reserved for this contingency. In November 1987, The Flying Tiger Line Inc. ("Flying Tigers"), a company acquired by the Company in 1989, received a notice from the United States Environmental Protection Agency ("EPA") identifying Flying Tigers as a potentially responsible party ("PRP") in connection with a "Superfund" site located in Monterey Park, California. The site is a 190-acre landfill which operated from 1948 through 1984. In June 1985, the EPA began a remedial investigation of the site to identify the extent of soil, air and water contamination. The EPA estimates that approximately .1% of the waste disposed at the site is attributable to Flying Tigers. Flying Tigers participated in a partial settlement relating to remedial actions for management of leaching contamination and site control. Partial consent decrees were entered in the United States District Court for the Central District of California in 1989 and 1992, which provided, in part, for payments of $109,000 and $230,000, respectively, by Flying Tigers and Federal Express to the partial-settlement escrow account. However, the Company does not expect all outstanding issues to be resolved for several years. Due to several variables which are beyond the Company's control, it is impossible to accurately estimate the Company's potential share of the remaining costs, but based on Flying Tigers' relatively insignificant contribution of waste to the site, the Company believes that its remaining liability will not be material. However, if negotiations with the EPA are not successful, it could decide to issue a unilateral remedial order which could name one or more PRP as responsible for the entire liability. Any PRP named in such an order would, however, be expected to seek contribution from the unnamed PRPs. The Company is subject to other legal proceedings and claims which arise in the ordinary course of its business. In the opinion of management, the aggregate liability (if any) with respect to these other actions will not materially adversely affect the financial position or results of operations of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year ended May 31, 1994. EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding executive officers of the Company is as follows (included herein pursuant to General Instruction G(3) of Form 10-K):
Officer, Year First Elected as Officer Age Positions with Company - -------------------- --- ---------------------- Frederick W. Smith 49 Chairman, President and Chief Executive 1971 Officer since April 1983; Chief Executive Officer since April 1977; Chairman since February 1975; and President from June 1971 to February 1975. Founder of the Company. William J. Razzouk 46 Executive Vice President - Worldwide Customer 1983 Operations since June 1993; Senior Vice President - Sales and Customer Service from October 1991 to June 1993; Senior Vice President - Sales and Customer Information from September 1990 to October 1991; Vice President - U.S. Sales from 1988 to September 1990; Vice President - Field Sales from 1986 to 1988; and Vice President - Electronic Product Sales from August 1983 to 1986. David J. Bronczek 40 Senior Vice President - Europe, Africa and 1987 Mediterranean since March 1993; Vice President - Canadian Operations from March 1987 to March 1993; and several sales and operations managerial positions from 1976 to 1987. 12 T. Michael Glenn 38 Senior Vice President - Worldwide Marketing, 1985 Customer Service and Corporate Communications since June 1994; Senior Vice President - Marketing and Corporate Communications from December 1993 to June 1994; Senior Vice President - Worldwide Marketing, Catalog Services and Corporate Communications from June 1993 to December 1993, Senior Vice President - Catalog and Remail Services from September 1992 to June 1993; Vice President - Marketing from August 1985 to September 1992, various management positions in sales and marketing and senior sales specialist from 1981 to 1985. Alan B. Graf, Jr. 40 Senior Vice President and Chief Financial 1987 Officer since November 1991; Vice President and Treasurer from July 1987 to November 1991; and various management positions in finance and a senior financial analyst from 1980 to 1987. Dennis H. Jones 42 Senior Vice President and Chief Information 1986 Officer since November 1991; Vice President - Customer Automation and Invoicing from December 1986 to November 1991; and various management positions in finance and a financial analyst from 1975 to 1986. Kenneth R. Masterson 50 Senior Vice President and General 1980 Counsel since February 1981; Secretary since September 1993; and Vice President - Legal from January 1980 to February 1981. Joseph C. McCarty, III 49 Senior Vice President - Asia, Pacific and 1983 Middle East since October 1991; Vice President - International Legal from March 1987 to October 1991; Vice President - Properties & Facilities from November 1984 to March 1987; and Vice President - Legal from February 1983 to November 1984. James A. McKinney 49 Senior Vice President, President FedEx 1989 Logistics Services since December 1993; Vice President - Business Logistics Services - North America from October 1992 to December 1993; Vice President - Information Systems from July 1992 to October 1992; Vice President - Operations - FEDEX Aeronautics Corporation from January 1992 to July 1992; Vice President - Flight Operations from June 1989 to January 1992; and various managerial positions from 1984 to 1989. Kenneth R. Newell 56 Senior Vice President - Retail Service 1983 Operations since June 1993; Senior Vice President - Europe, Mediterranean and Africa Operations from October 1991 to June 1993; Vice President - United Kingdom/Ireland from 1990 to October 1991; Vice President - Domestic Ground Operations, Central Region; Vice President - Business Service Centers; & Service Systems; Vice President - Business Service Operations & Sales from September 1983 to 1987; and various managerial positions from 1975 to 1983. James A. Perkins 50 Senior Vice President and Chief Personnel 1979 Officer since June 1979 and various personnel managerial positions from 1974 to 1979. David F. Rebholz 41 Senior Vice President - Sales and Customer 1988 Services since June 1993; Vice President of the Central Region for the Americas and Caribbean from October 1991 to June 1993; Vice President of Customer Service from December 1988 to October 1991; and Regional Sales Director-Western Region and various operating management positions from 1976 to 1988. 13 Jeffrey R. Rodek 40 Senior Vice President - Americas and 1986 Caribbean since July 1991; Senior Vice President - Central Support Services from December 1989 to July 1991; President of The Flying Tiger Line Inc. from June 1989 to August 1989; Vice President - Financial Planning and Control from January 1986 to December 1989; and various management positions in finance and an operations research analyst from 1978 to 1986. Tracy G. Schmidt 37 Senior Vice President - Air Ground Terminal 1990 and Transportation since July 1994; Vice President - Corporate Financial Planning from January 1990 to July 1994; and various management positions in financial planning and reporting from 1980 to 1990. Mary Alice Taylor 44 Senior Vice President - Central Support 1985 Services since September 1991; Regional Vice President - Ground Operations - Southern Region from May 1988 to September 1991; Vice President - Logistics and Publishing Services from November 1985 to May 1988. Various management positions in Finance and management information consultant from 1980 to 1985. Theodore L. Weise 50 Senior Vice President - Air Operations since 1978 July 1991; Senior Vice President - United States and Canada from June 1990 to July 1991; Senior Vice President - Domestic Ground Operations from 1987 to June 1990; Senior Vice President - Central Support Services from 1985 to 1987; Senior Vice President/ General Manager - Business Service Centers from 1983 to 1985; Senior Vice President - Operations Planning from 1979 to 1983; Vice President - Operations Resource and Corporate Planning from 1978 to 1979; Vice President Special Projects and Advanced Planning from April 1977 to 1978; and Director of Special Projects from 1972 to 1977.
14 GRAHAM R. SMITH 46 Vice President and Controller since September 1988 1990; Vice President-International Finance from December 1988 to September 1990; and various management positions in finance from 1977 to 1988. Officers are elected by, and serve at the discretion of, the Board of Directors. There is no arrangement or understanding between any officer and any person, other than a director or executive officer of the Company acting in his or her official capacity, pursuant to which any officer was selected. There are no family relationships between any executive officer and any other executive officer or director of the Company. There has been no event involving any executive officer under any bankruptcy act, criminal proceeding, judgment or injunction during the past five years. PART II Information for Items 5 through 8 of this Report appears in the Company's 1994 Annual Report to Stockholders as indicated in the following table and is incorporated herein by reference. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Information regarding market information, stockholders and dividends is contained in the Corporate Information Section of the 1994 Annual Report to Stockholders, on page 56 under the headings, "Stock Listing," "Stockholders" and "Market Information" and is incorporated herein by reference. No cash dividends have been declared. PAGE(S) IN ANNUAL REPORT TO STOCKHOLDERS ---------------------- ITEM 6. SELECTED FINANCIAL DATA Selected Consolidated Financial Data.................. 52 - 53 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............. 26 - 32 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated Statements of Operations............ 33 Consolidated Balance Sheets...................... 34 - 35 Consolidated Statements of Cash Flows............ 36 Consolidated Statements of Changes in Common Stockholders' Investment................. 37 Notes to Consolidated Financial Statements....... 38 - 50 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE........... Not Applicable PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding members of the Company's Board of Directors is presented in Sections "Voting Securities and Principal Holders Thereof - Security Ownership of Management and Certain Beneficial Owners," "Election of Directors," "Meetings and Committees," "Transactions with Management and Others" and 15 "Compensation of Directors" on pages 1 through 5 and 11 through 12 of the Definitive Proxy Statement for the Company's 1994 Annual Meeting of Stockholders which will be held September 26, 1994 and is incorporated herein by reference. Information regarding executive officers of the Company is included above in Part I of this Form 10-K under the caption "Executive Officers of the Registrant" pursuant to Instruction 3 to Item 401(b) of Regulation S-K and General Instruction G(3) of Form 10-K. Information required by Item 405 of Regulation S-K is presented in "Section 16 Filings" on page 12 of the Definitive Proxy Statement and is incorporated herein by reference. Information for Items 11 through 13 of this Report appears in the Definitive Proxy Statement for the Company's 1994 Annual Meeting of Stockholders to be held on September 26, 1994 and, as indicated in the following table, is incorporated herein by reference. PAGE IN PROXY STATEMENT ------------- ITEM 11. EXECUTIVE COMPENSATION Compensation Information........................... 6 - 11 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Voting Securities and Principal Holders Thereof...... 1 - 3 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Transactions with Management and Others.............. 11 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. FINANCIAL STATEMENTS The consolidated financial statements of the Company, together with the report thereon of Arthur Andersen & Co., dated June 29, 1994, are presented on pages 33 through 51 of the Company's 1994 Annual Report to Stockholders and are incorporated herein by reference. With the exception of the aforementioned information and the information incorporated by reference in Items 5, 6, 7 and 8 hereof, the Company's 1994 Annual Report to Stockholders is not to be deemed as filed as part of this Report. 2. FINANCIAL STATEMENT SCHEDULES PAGE NUMBER IN FORM 10-K -------------- Report of Independent Public Accountants on Financial Statement Schedules.................................... S-1 Schedule II - Amounts Receivable from Related Parties and Underwriters, Promoters and Employees Other than Related Parties................................... S-2 Schedule V - Property and Equipment.............................. S-3 Schedule VI - Accumulated Depreciation and Amortization of Property and Equipment................................. S-4 Schedule VIII - Valuation and Qualifying Accounts................ S-5 Schedule IX - Short-Term Borrowings.............................. S-6 16 Schedule X - Supplementary Income Statement Information.......... S-7 All other financial statement schedules have been omitted because they are not applicable or the required information is included in the consolidated financial statements, or the notes thereto, contained in the Company's 1994 Annual Report to Stockholders and incorporated herein by reference. 3. EXHIBITS The documents attached hereto as Exhibits 3.1, 3.2, 4.1 through 4.25, 10-1 through 10.71, 11.1, 12.1, 13.1, 21.1, 23.1 and 24.1 are being filed in connection with and incorporated by reference herein. The Exhibit Index on pages E-1 through E-9 is hereby incorporated herein by reference. (b) REPORTS ON FORM 8-K During the last quarter of the period covered by this Report on Form 10-K, the Registrant filed two Current Reports on Form 8-K. The first Current Report was dated March 11, 1994 and contained Registrant's press release dated March 11, 1994. The second Current Report was dated March 16, 1994 and contained documents relating to Registrant's 1994 Pass Through Certificates, Series A310-A1, A310-A2 and A310-A3. 17 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. FEDERAL EXPRESS CORPORATION (Registrant) BY: /s/ GRAHAM R. SMITH ----------------------------------- Graham R. Smith Vice President and Controller (Principal Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. SIGNATURE CAPACITY DATE --------- -------- ---- /s/ FREDERICK W. SMITH * Chairman, President - -------------------------- and Chief Executive Officer Frederick W. Smith (Principal Executive Officer) /s/ WILLIAM J. RAZZOUK * Executive Vice President - -------------------------- Worldwide Customer William J. Razzouk Operations /s/ ALAN B. GRAF, JR.* Senior Vice President and - -------------------------- Chief Financial Officer Alan B. Graf, Jr. (Principal Financial Officer) /s/ GRAHAM R. SMITH Vice President and Controller - --------------------------- (Principal Accounting Officer) August 5, 1994 Graham R. Smith /s/ ROBERT H. ALLEN * Director - --------------------------- Robert H. Allen /s/ HOWARD H. BAKER, JR. * Director - --------------------------- Howard H. Baker, Jr. /s/ ANTHONY J.A. BRYAN * Director - --------------------------- Anthony J.A. Bryan /s/ ROBERT L. COX * Director - --------------------------- Robert L. Cox /s/ RALPH D. DENUNZIO * Director - --------------------------- Ralph D. DeNunzio 18 SIGNATURE CAPACITY DATE --------- -------- ---- /s/ JUDITH L. ESTRIN * Director - --------------------------- Judith L. Estrin /s/ PHILIP GREER * Director - --------------------------- Philip Greer /s/ J. R. HYDE, III * Director - --------------------------- J. R. Hyde, III /s/ CHARLES T. MANATT * Director - --------------------------- Charles T. Manatt /s/ JACKSON W. SMART, JR. * Director - --------------------------- Jackson W. Smart, Jr. /s/ JOSHUA I. SMITH * Director - --------------------------- Joshua I. Smith /s/ PETER S. WILLMOTT * Director - --------------------------- Peter S. Willmott *By:/s/ GRAHAM R. SMITH August 5, 1994 ------------------------ Graham R. Smith Attorney-in-Fact 19 S-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES To Federal Express Corporation: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Federal Express Corporation's 1994 Annual Report to Stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated June 29, 1994. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The financial statement schedules on pages S-2 through S-7 are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. The financial statement schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ ARTHUR ANDERSEN & CO. --------------------------------- ARTHUR ANDERSEN & CO. Memphis, Tennessee, June 29, 1994. S-2 SCHEDULE II FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES FOR THE YEARS ENDED MAY 31, 1994, 1993 AND 1992
BALANCE AT END DEDUCTIONS OF YEAR ------------------- ------------------ BALANCE AT AMOUNTS NAME OF BEGINNING AMOUNTS WRITTEN NOT DEBTOR(A) OF YEAR ADDITIONS COLLECTED OFF CURRENT CURRENT --------- ---------- --------- --------- ------- ------- ------- 1994 - ---- Thomas R. Oliver(B) $1,775,817 - $1,775,817 - - - William J. Razzouk - $ 350,007 350,007 - - - Theodore L. Weise 619,031 - - - - $ 619,031 Ronald D. Wickens 242,790 - 223,103 - - 19,687 1993 - ---- Larry W. McMahan $ 101,690 - $ 101,690 - - - Thomas R. Oliver(B) 400,997 $1,374,820 - - - $1,775,817 William J. Razzouk - 199,803 199,803 - - - Theodore L. Weise 619,031 - - - - 619,031 Ronald D. Wickens 242,790 - - - - 242,790 1992 - ---- David C. Anderson(C) $ 482,802 - $ 482,802 - - - A. Doyle Cloud 70,874 - 70,874 - - - John M. Dauernheim 122,203 - 122,203 - - - Larry W. McMahan 101,690 - - - - $ 101,690 Thomas R. Oliver 400,997 - - - - 400,997 Ron J. Ponder(C) 636,832 - 636,832 - - - William J. Razzouk - $ 160,138 160,138 - - - Michael A. Staunton 113,218 - 113,218 - - - Theodore L. Weise 619,031 - - - - 619,031 Ronald D. Wickens 242,790 - - - - 242,790 (A) Consists of loans to certain key employees for the purchase of Common Stock under the Company's stock incentive plans. Loans are non-interest bearing and are due on demand or when the individual leaves the employment of the Company. (B) Mr. Oliver, the Company's former Executive Vice President-Worldwide Customer Operations, resigned from the Company effective July 31, 1993. (C) Mr. Anderson, the Company's former Chief Financial Officer, and Mr. Ponder, the Company's former Senior Vice President and Chief Information Officer, resigned from the Company during 1992.
S-3 SCHEDULE V FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES PROPERTY AND EQUIPMENT FOR THE YEARS ENDED MAY 31, 1994, 1993 AND 1992 (In thousands)
BALANCE AT BALANCE BEGINNING ADDITIONS AT END DESCRIPTION OF YEAR AT COST RETIREMENTS OTHER (E) OF YEAR - ----------- ---------- --------- ----------- --------- ------- 1994 - ---- Flight equipment . . . . . . . . . . . . $2,843,253 $ 582,477(A) $(597,422)(D) $ (287) $2,828,021 Package handling and ground support equipment . . . . . . . . . . . 1,413,793 221,859(B) (49,387) (2,837) 1,583,428 Computer and electronic equipment. . . . 947,913 181,417(C) (160,903) (1,521) 966,906 Other property and equipment . . . . . . 1,501,250 103,622 (90,815) (2,187) 1,511,870 ---------- ------------ --------- ------------ ---------- $6,706,209 $ 1,089,375 $(898,527) $ (6,832) $6,890,225 ---------- ------------ ---------- -------- ---------- ---------- ------------ --------- -------- ---------- 1993 - ---- Flight equipment . . . . . . . . . . . . $2,540,350 $ 571,639(A) $(268,343)(D) $ (393) $2,843,253 Package handling and ground support equipment . . . . . . . . . . . 1,352,659 79,104 (69) (17,901) 1,413,793 Computer and electronic equipment. . . . 851,686 126,465(C) (32,951) 2,713 947,913 Other property and equipment . . . . . . 1,433,212 89,779 (22,838) 1,097 1,501,250 ---------- ---------- --------- --------------- ---------- $6,177,907 $ 866,987 $(324,201) $(14,484) $6,706,209 ---------- ---------- --------- -------- ---------- ---------- ---------- --------- -------- ---------- 1992 - ---- Flight equipment . . . . . . . . . . . . $2,394,326 $ 538,544(A) $(392,966)(D) $ 446 $2,540,350 Package handling and ground support equipment. . . . . . . . . . . . 1,296,706 53,440 (30,048) 32,561 1,352,659 Computer and electronic equipment. . . . 756,638 110,993(C) (16,987) 1,042 851,686 Other property and equipment . . . . . . 1,447,501 67,793 (85,060) 2,978 1,433,212 ---------- ---------- --------- -------- ---------- $5,895,171 $ 770,770 $(525,061) $ 37,027 $6,177,907 ---------- ---------- --------- -------- ---------- ---------- ---------- --------- -------- ---------- (A) Additions to flight equipment primarily relate to the purchase of aircraft and related equipment as follows: five MD-11 and three B727- 200 in 1994; 19 B727-200 and four MD-11 in 1993; and two B727-100, nine B727-200, three MD-11, six F-27 and 24 Cessna 208B in 1992. (B) Additions to package handling and ground support equipment in 1994 primarily relate to the acquisition of pick-up and delivery vehicles, container transport vehicles and expansion of the Company's national and regional sorting and package handling facilities. (C) Additions to computer and electronic equipment relate primarily to computer mainframe expansion and upgrades and expansions of the Company's customer automation systems (POWERSHIP) and, with respect to 1993 and 1992, the Company's advance package tracking and billing systems (COSMOS). (D) Retirements of flight equipment primarily relate to sale-leasebacks of six MD-11 aircraft in 1994; three MD-11 aircraft in 1993; and five B727-100, two DC-10-10 and three MD-11 aircraft in 1992. (E) Includes foreign currency translation adjustments and reclassifications.
S-4 SCHEDULE VI FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT FOR THE YEARS ENDED MAY 31, 1994, 1993 AND 1992 (In thousands)
ADDITIONS BALANCE AT CHARGED TO BALANCE BEGINNING COSTS AND AT END DESCRIPTION OF YEAR EXPENSES RETIREMENTS OTHER (B) OF YEAR - ----------- ---------- ---------- ----------- --------- ------- 1994 - ---- Flight equipment . . . . . . . . . . . . $1,097,985 $234,086 $ (68,609)(A) $ (94) $ 1,263,368 Package handling and ground support equipment . . . . . . . . . . . 851,739 135,408 (48,998) (1,923) 936,226 Computer and electronic equipment. . . . 677,567 120,736 (158,963) (925) 638,415 Other property and equipment . . . . . . 602,650 92,432 (90,634) (1,325) 603,123 ---------- -------- --------- -------- ----------- $3,229,941 $582,662 $(367,204) $ (4,267) $ 3,441,132 ---------- -------- --------- -------- ----------- ---------- -------- --------- -------- ----------- 1993 - ---- Flight equipment . . . . . . . . . . . . $ 899,993 $221,088 $ (22,890) $ (206) $ 1,097,985 Package handling and ground support equipment . . . . . . . . . . . 746,730 124,120 - (19,111) 851,739 Computer and electronic equipment. . . . 601,582 111,299 (32,854) (2,460) 677,567 Other property and equipment . . . . . . 518,305 105,302 (16,147) (4,810) 602,650 ---------- -------- ---------- -------- ----------- $2,766,610 $561,809 $ (71,891) $(26,587) $ 3,229,941 ---------- -------- ---------- -------- ----------- ---------- -------- ---------- -------- ----------- 1992 - ---- Flight equipment . . . . . . . . . . . . $ 741,256 $204,262 $ (45,820)(A) $ 295 $ 899,993 Package handling and ground support equipment . . . . . . . . . . . 594,896 133,171 (11,953) 30,616 746,730 Computer and electronic equipment. . . . 503,853 104,970 (7,241) - 601,582 Other property and equipment . . . . . . 431,140 114,410 (26,995) (250) 518,305 ---------- -------- ---------- -------- ----------- $2,271,145 $556,813 $ (92,009) $ 30,661 $ 2,766,610 ---------- -------- ---------- -------- ----------- ---------- -------- ---------- -------- ----------- (A) Retirements of flight equipment relate primarily to sale-leasebacks of aircraft. (B) Includes foreign currency translation adjustments and reclassifications.
S-5 SCHEDULE VIII FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED MAY 31, 1994, 1993 AND 1992 (In thousands)
ADDITIONS --------------------------- BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING COSTS AND OTHER END OF DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS(A) YEAR - ----------- ---------- ---------- ---------- ------------- ---------- Allowance for Doubtful Accounts ----------------- 1994 . . . . . . . . . . . $31,308 $45,763 - $43,138 $33,933 ------- ------- --------- ------- ------- ------- ------- --------- ------- ------- 1993 . . . . . . . . . . . $32,074 $33,552 - $34,318 $31,308 ------- ------- --------- ------- ------- ------- ------- --------- ------- ------- 1992 . . . . . . . . . . . $37,694 $31,670 $ 4,596 $41,886 $32,074 ------- ------- --------- ------- ------- ------- ------- --------- ------- ------- (A) Accounts written off net of recoveries.
S-6 SCHEDULE IX FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES SHORT-TERM BORROWINGS FOR THE YEARS ENDED MAY 31, 1994, 1993 AND 1992 (In thousands, except percentages)
MAXIMUM AVERAGE WEIGHTED WEIGHTED AMOUNT AMOUNT AVERAGE BALANCE AVERAGE OUTSTANDING OUTSTANDING INTEREST CATEGORY OF AGGREGATE AT END INTEREST DURING DURING RATE DURING SHORT-TERM BORROWINGS OF YEAR RATE THE YEAR THE YEAR THE YEAR(C) - --------------------- ------- -------- ----------- ----------- ----------- 1994 (A) - ---- Commercial paper . . . . . . . . - - $ 95,000 $ 1,781 3.8% Revolving credit agreement . . . - - 45,000 1,082 6.0% 1993 (A) - ---- Commercial paper . . . . . . . . - - $202,328 $ 43,058 4.2% Revolving credit agreement . . . - - 125,000 13,075 6.2% 1992 (B) - ---- Commercial paper . . . . . . . . $120,413 4.7% $277,771 $185,455 5.9% Revolving credit agreements. . . 75,000 6.5% 530,000 245,413 6.6% (A) The Company has a revolving credit agreement with domestic and foreign banks at May 31, 1994, which was also in place at May 31, 1993. International borrowings with foreign banks are denominated in U.S. dollars. During 1993 there were certain international borrowings with foreign banks denominated in currencies other than U.S. dollars. Those borrowings were translated based on the foreign currency rates of exchange in effect for the period. The average amount outstanding during the year was computed by dividing the sum of daily outstanding principal balances by 365 for commercial paper and revolving credit borrowings. (B) The Company had revolving credit agreements with domestic and foreign banks. International borrowings with foreign banks denominated in currencies other than U.S. dollars were translated based on the foreign currency rates of exchange in effect for the period. The average amount outstanding during the year was computed by dividing the sum of daily outstanding principal balances by 365 for commercial paper and domestic revolving credit borrowings and by dividing the sum of the month-end outstanding principal balances by 13 for international revolving credit borrowings. (C) The weighted average interest rate was computed by dividing actual interest expense by average short-term borrowings outstanding during the year. The weighted average interest rates for domestic and international borrowings under revolving credit agreements were both approximately 6% for 1993, and 6% and 11%, respectively, for 1992. There were no international borrowings under the revolving credit agreement in 1994.
S-7 SCHEDULE X FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE YEARS ENDED MAY 31, 1994, 1993 AND 1992 (In thousands)
1994 1993 1992 ---------- ---------- ---------- Maintenance and repairs (A). . . $554,301 $527,856 $530,566 Advertising. . . . . . . . . . . 122,002 109,323 123,592 (A) The above amounts include salaries and employee benefits and other expenses associated with the Company's internal maintenance and repair functions for aircraft and vehicle fleets, facilities and sort equipment.
EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION OF EXHIBIT 3.1 Restated Certificate of Incorporation of Registrant (Filed as Exhibit 3.1 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 3.2 By-laws of Registrant (Filed as Exhibit 3.2 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 4.1 Indenture dated as of April 1, 1987 between Registrant and NationsBank of Tennessee, National Association ("NationsBank"), as Trustee, relating to Registrant's 10% Senior Notes due April 15, 1999. (Filed as Exhibit 10.36 to Registrant's 1988 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 4.2 Supplemental Indenture No. 2 dated as of April 18, 1989 between Registrant and NationsBank, relating to Registrant's 10% Senior Notes due April 15, 1999. (Filed as Exhibit 4(a) to Registrant's Current Report on Form 8-K dated April 25, 1989, Commission File No. 1-7806, and incorporated herein by reference.) 4.3 Supplemental Indenture No. 3 dated as of April 21, 1989 between Registrant and NationsBank and form of note relating to Registrant's 10% Senior Notes due April 15, 1999. (Filed as Exhibit 4(b) to Registrant's Current Report on Form 8-K dated April 25, 1989, Commission File No. 1-7806, and incorporated herein by reference.) 4.4 Indenture dated as of May 15, 1989 between Registrant and NationsBank, relating to Registrant's 9-3/4% Senior Notes due May 15, 1996. (Filed as an exhibit to Registrant's Registration Statement No. 33-28796 on Form S-3 and incorporated herein by reference.) 4.5 Supplemental Indenture No. 1 dated as of May 22, 1989 between Registrant and NationsBank and form of note relating to Registrant's 9-3/4% Senior Notes due May 15, 1996. (Filed as Exhibit 4 to Registrant's Current Report on Form 8-K dated May 24, 1989, Commission File No. 1-7806, and incorporated herein by reference.) 4.6 Supplemental Indenture No. 2 dated as of August 11, 1989 between Registrant and NationsBank, relating to Registrant's 9 5/8% Sinking Fund Debentures due October 15, 2019. (Filed as Exhibit 4.2 to Registrant's Registration Statement No. 33-30415 on Form S-3 and incorporated herein by reference.) 4.7 Supplemental Indenture No. 3 dated as of October 15, 1989 between Registrant and NationsBank, relating to Registrant's 9 5/8% Sinking Fund Debentures due October 15, 2019. (Filed as Exhibit 4.2 to Registrant's Current Report on Form 8-K dated October 16, 1989, Commission File No. 1-7806, and incorporated herein by reference.) 4.8 Supplemental Indenture No. 4 dated as of November 15, 1989 between Registrant and NationsBank, relating to Registrant's 9.20% Senior Notes due November 15, 1994. (Filed as Exhibit 4.1 to Registrant's Current Report on Form 8-K dated November 13, 1989, Commission File No. 1-7806, and incorporated herein by reference.) 4.9 Form of 9.20% Senior Note due November 15, 1994. (Filed as Exhibit 4.2 to Registrant's Current Report on Form 8-K dated November 13, 1989, Commission File No. 1-7806, and incorporated herein by reference.) E-1 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT 4.10 Supplemental Indenture No. 5 dated as of August 15, 1990 between Registrant and NationsBank, relating to Registrant's Medium-Term Notes, Series A, the last of which is due November 20, 1995. (Filed as Exhibit 4(c) to Registrant's Current Report on Form 8-K dated August 28, 1990, Commission File No. 1-7806, and incorporated herein by reference.) 4.11 Form of Fixed Rate Medium-Term Note, Series A, the last of which is due November 20, 1995. (Filed as Exhibit 4(a) to Registrant's Current Report on Form 8-K dated August 28, 1990, Commission File No. 1-7806, and incorporated herein by reference.) 4.12 Form of Floating Rate Medium-Term Note, Series A, the last of which is due November 20, 1995. (Filed as Exhibit 4(b) to Registrant's Current Report on Form 8-K dated August 28, 1990, Commission File No. 1-7806, and incorporated herein by reference.) 4.13 Indenture dated May 15, 1989 including Supplemental Indentures Nos. 1 through 5 dated as described above, between Registrant and NationsBank, relating to Registrant's Medium-Term Notes, Series B, the last of which is due August 15, 2006, Registrant's 9 7/8% Notes due April 1, 2002, Registrant's 9.65% Notes due June 15, 2012 and Registrant's 6 1/4% Notes due April 15, 1998. (Filed as described above.) 4.14 Form of Fixed Rate Medium-Term Note, Series B, the last of which is due August 15, 2006. (Filed as Exhibit 4.4 to Registrant's Registration Statement No. 33-40018 on Form S-3 and incorporated herein by reference.) 4.15 Form of Floating Rate Medium-Term Note, Series B, the last of which is due August 15, 2006. (Filed as Exhibit 4.5 to Registrant's Registration Statement No. 33-40018 on Form S-3 and incorporated herein by reference.) 4.16 Form of 9 7/8% Note due April 1, 2002. (Filed as Exhibit 4.1 to Registrant's Current Report on Form 8-K dated March 23, 1992, Commission File No. 1-7806, and incorporated herein by reference.) 4.17 Form of 9.65% Note due June 15, 2012. (Filed as Exhibit 4.1 to Registrant's Current Report on Form 8-K dated June 18, 1992, Commission File No. 1-7806, and incorporated herein by reference.) 4.18 Form of 6 1/4% Note due April 15, 1998. (Filed as Exhibit 4.1 to Registrant's Current Report on Form 8-K dated April 21, 1993, Commission File No. 1-7806, and incorporated herein by reference.) 4.19 Pass Through Trust Agreement dated as of February 1, 1993 between Registrant and NationsBank of South Carolina, National Association, as Pass Through Trustee, relating to Registrant's 1993 Pass Through Certificates, Series A1 and A2, Series B1 and B2 and Series C1 and C2. (Filed as Exhibit 4.19 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 4.20 Form of 1993 Pass Through Certificates, Series A1 and A2. (Filed as Exhibit 4(a)(2) to Registrant's Current Report on Form 8-K dated February 4, 1993, Commission File No. 1-7806, and incorporated herein by reference.) 4.21 Form of 1993 Pass Through Certificates, Series B1 and B2. (Filed as Exhibit 4.a.2 to Registrant's Current Report on Form 8-K dated September 23, 1993, Commission File No. 1-7806, and incorporated herein by reference.) E-2 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT 4.22 Form of 1993 Pass Through Certificates, Series C1 and C2. (Filed as Exhibit 4.a.2 to Registrant's Current Report on Form 8-K dated December 2, 1993, Commission File No. 1-7806, and incorporated herein by reference.) 4.23 Pass Through Trust Agreement dated as of March 1, 1994 between Registrant and NationsBank of South Carolina, National Association, as Pass Through Trustee, relating to Registrant's 1994 Pass Through Certificates, Series A310-A1, A310-A2 and A310-A3. (Filed as Exhibit 4.a.1 to Registrant's Current Report on Form 8-K dated March 16, 1994, Commission File No. 1-7806, and incorporated herein by reference.) 4.24 Form of 1994 Pass Through Certificates, Series A310-A1, A310-A2 and A310-A3. (Filed as Exhibit 4.a.2 to Registrant's Current Report on Form 8-K dated March 16, 1994, Commission File No. 1-7806, and incorporated herein by reference.) 4.25 Loan Agreement dated July 15, 1992, between Registrant and Kreditanstalt Fur Wiederaufbau relating to the financing of predelivery payments on Airbus A300 aircraft. Confidential treatment has been granted for confidential commercial and financial information pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. (Filed as Exhibit 4.2 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.1 Indenture between the Memphis Shelby County Airport Authority (the "Authority") and NationsBank, as Trustee, dated as of August 1, 1979. (Refiled as Exhibit 10.1 to Registrant's 1990 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.2 Second Supplemental Indenture dated as of May 1, 1982 between NationsBank and the Authority relating to 8.30% Special Facilities Revenue Bonds, Series 1982B due September 1, 2012. (Refiled as Exhibit 10.2 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.3 Third Supplemental Indenture dated as of November 1, 1982 between the Authority and NationsBank. (Refiled as Exhibit 10.3 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.4 Fourth Supplemental Indenture dated as of December 1, 1984 between the Authority and NationsBank, relating to 7 7/8% Special Facilities Revenue Bonds, Series 1984 due September 1, 2009. (Filed as Exhibit 10.18 to Registrant's 1985 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.5 Fifth Supplemental Indenture dated as of July 1, 1992 between the Authority and NationsBank, relating to 6 3/4% Special Facilities Revenue Bonds, Refunding Series 1992 due July 1, 2012. (Filed as Exhibit 10.5 to Registrant's 1992 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.6 Guaranty dated as of August 1, 1979 between Registrant and NationsBank. (Refiled as Exhibit 10.5 to Registrant's 1990 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.7 Reaffirmation of Guaranty dated as of May 1, 1982 between NationsBank and Registrant relating to Special Facilities Revenue Bonds, Series 1982B. (Refiled as Exhibit 10.7 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) E-3 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT 10.8 Reaffirmation of Guaranty dated as of December 1, 1984 between NationsBank and Registrant relating to Special Facilities Revenue Bonds, Series 1984. (Refiled as Exhibit 10.10 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.9 Reaffirmation of Guaranty dated as of July 30, 1992 between NationsBank and Registrant relating to Special Facilities Revenue Bonds, Refunding Series 1992. (Filed as Exhibit 10.11 to Registrant's 1992 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.10 Consolidated and Restated Lease Agreement dated as of August 1, 1979 between the Authority and Registrant. (Refiled as Exhibit 10.11 to Registrant's 1990 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.11 First Supplemental Lease Agreement dated as of April 1, 1981 between Registrant and the Authority. (Filed as Exhibit 10.13 to Registrant's 1992 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.12 Second Supplemental Lease Agreement dated as of May 1, 1982 between the Authority and Registrant. (Refiled as Exhibit 10.14 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.13 Third Supplemental Lease Agreement dated November 1, 1982 between the Authority and Registrant. (Filed as Exhibit 28.22 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.14 Fourth Supplemental Lease Agreement dated July 1, 1983 between the Authority and Registrant. (Filed as Exhibit 28.23 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1- 7806, and incorporated herein by reference.) 10.15 Fifth Supplemental Lease Agreement dated February 1, 1984 between the Authority and Registrant. (Filed as Exhibit 28.24 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.16 Sixth Supplemental Lease Agreement dated April 1, 1984 between the Authority and Registrant. (Filed as Exhibit 28.25 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1- 7806, and incorporated herein by reference.) 10.17 Seventh Supplemental Lease Agreement dated June 1, 1984 between the Authority and the Registrant. (Filed as Exhibit 28.26 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.18 Eighth Supplemental Lease Agreement dated July 1, 1988 between the Authority and Registrant. (Filed as Exhibit 28.27 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1- 7806, and incorporated herein by reference.) 10.19 Ninth Supplemental Lease Agreement dated July 12, 1989 between the Authority and Registrant. (Filed as Exhibit 28.28 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1- 7806, and incorporated herein by reference.) E-4 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT 10.20 Tenth Supplemental Lease Agreement dated October 1, 1991 between the Authority and Registrant. (Filed as Exhibit 28.29 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.21 Twelfth Supplemental Lease Agreement dated July 1, 1993 between the Authority and Registrant. (Filed as Exhibit 10.23 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.22 Special Facility Lease Agreement between the Authority and Registrant dated as of August 1, 1979. (Refiled as Exhibit 10.15 to Registrant's 1990 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.23 First Special Facility Supplemental Lease Agreement dated as of May 1, 1982 between the Authority and Registrant. (Filed as Exhibit 10.25 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.24 Second Special Facility Supplemental Lease Agreement dated as of November 1, 1982 between the Authority and Registrant. (Filed as Exhibit 10.26 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.25 Third Special Facility Supplemental Lease Agreement dated as of December 1, 1984 between the Authority and Registrant. (Filed as Exhibit 10.14 to Registrant's 1985 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.26 Fourth Special Facility Supplemental Lease Agreement dated as of July 1, 1992 between the Authority and Registrant. (Filed as Exhibit 10.20 to Registrant's 1992 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.27 Special Facility Lease Agreement between the Authority and Registrant dated as of July 1, 1993. (Filed as Exhibit 10.29 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.28 Special Facility Ground Lease Agreement between the Authority and Registrant dated as of July 1, 1993. (Filed as Exhibit 10.30 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.29 Indenture between the Authority and NationsBank, as Trustee, dated as of July 1, 1993 relating to 6.20% Special Facility Revenue Bonds, Series 1993, due July 1, 2014. (Filed as Exhibit 10.31 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.30 Guaranty dated as of July 1, 1993 between Registrant and NationsBank, relating to 6.20% Special Facility Revenue Bonds, Series 1993. (Filed as Exhibit 10.32 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.31 Ground Lease dated as of February 27, 1979 between the City of Los Angeles and The Flying Tiger Line Inc. ("FTL") covering acreage at the Los Angeles International Airport. (Filed as Exhibit 28.1 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) E-5 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT 10.32 First Amendment dated September 18, 1979, to Ground Lease, dated February 27, 1979, between the City of Los Angeles and FTL covering acreage at the Los Angeles International Airport. (Filed as Exhibit 28.2 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.33 Second Amendment dated March 9, 1983 to Ground Lease, dated February 27, 1979, between the City of Los Angeles and FTL covering acreage at the Los Angeles International Airport. (Filed as Exhibit 28.3 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.34 Interim Exchange Agreement dated as of September 11, 1990 between the City of Los Angeles and Registrant relating to the Los Angeles International Airport. (Filed as Exhibit 28.4 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.35 Lease Agreement dated as of May 7, 1985 between the City of Oakland and Registrant. (Filed as Exhibit 28.5 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.36 Affirmative Action Agreement dated as of May 14, 1985, to Lease Agreement dated May 7, 1985, between the City of Oakland and Registrant. (Filed as Exhibit 28.6 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.37 First Supplemental Agreement dated August 5, 1986, to Lease Agreement dated May 7, 1985, between the City of Oakland and Registrant. (Filed as Exhibit 28.7 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.38 Second Supplemental Agreement dated February 17, 1987 to Lease Agreement dated May 7, 1985, between the City of Oakland and Registrant. (Filed as Exhibit 28.8 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.39 Third Supplemental Agreement dated February 1989 to Lease Agreement dated May 7, 1985, between the City of Oakland and Registrant. (Filed as Exhibit 28.9 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.40 Lease and First Right of Refusal Agreement dated July 22, 1988 between the State of Alaska, Department of Transportation and Public Facilities and Registrant. (Filed as Exhibit 28.10 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.41 Development Agreement dated July 22, 1988 to Lease and First Right of Refusal Agreement, dated July 22, 1988, between the State of Alaska, Department of Transportation and Public Facilities and Registrant. (Filed as Exhibit 28.11 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.42 Supplement No. 1 dated May 19, 1989 to Development Agreement between the State of Alaska, Department of Transportation and Public Facilities and Registrant. (Filed as Exhibit 28.12 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) E-6 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT 10.43 Supplement No. 1 dated July 19, 1989 to Lease and First Right of Refusal Agreement, dated July 22, 1988, between the State of Alaska, Department of Transportation and Public Facilities and Registrant. (Filed as Exhibit 28.13 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.44 Right-of-Way Agreement dated September 19, 1989 to Lease and First Right of Refusal Agreement, dated July 22, 1988, between the State of Alaska, Department of Transportation and Public Facilities and Registrant. (Filed as Exhibit 28.14 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.45 Supplement No. 2 dated April 23, 1991 to Lease and First Right of Refusal Agreement dated July 22, 1988, between the State of Alaska, Department of Transportation and Public Facilities and the Registrant. (Filed as Exhibit 28.15 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.46 Lease Agreement dated October 1, 1983 between The Port Authority of New York and New Jersey and Registrant. (Filed as Exhibit 28.16 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.47 Supplement No. 1, dated October 1, 1983 to Lease Agreement dated October 1, 1983 between The Port Authority of New York and New Jersey and Registrant. (Filed as Exhibit 28.17 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.48 Supplement No. 2 dated September 1, 1985 to Lease Agreement dated October 1, 1983 between the Port Authority of New York and New Jersey and Registrant. (Filed as Exhibit 28.18 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.49 Supplement No. 3 dated June 1, 1992 to Lease Agreement dated October 1, 1983 between The Port Authority of New York and New Jersey and Registrant. (Filed as Exhibit 28.19 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.50 Amended and Restated Airport Use Agreement and Terminal Facilities Lease dated as of January 1, 1985 between the City of Chicago and FTL. (Filed as Exhibit 28.20 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.51 Cargo Building Site Lease dated September 23, 1987 between the City of Chicago and FTL. (Filed as Exhibit 28.21 to Registrant's 1993 Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.52 Amended and Restated Land Lease Agreement dated August 1993 between Registrant and the Indianapolis Airport Authority. 10.53 Indenture between the City of Indianapolis and Indiana and National Bank of Detroit, as Trustee, dated as of September 1, 1993 relating to the City of Indianapolis Airport Facility Revenue Refunding Bonds, Series 1994, due April 1, 2017. (Filed as Exhibit 10.1 to Registrant's 1994 First Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) E-7 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT 10.54 Loan Agreement between the City of Indianapolis and Registrant. (Filed as Exhibit 10.2 to Registrant's 1994 First Quarter Report on Form 10-Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.55 Form of Promissory Note to the City of Indianapolis. (Filed as Exhibit 10.3 to Registrant's 1994 First Quarter Report on Form 10- Q, Commission File No. 1-7806, and incorporated herein by reference.) 10.56 1980 Stock Incentive Plan and Form of Stock Option Agreement pursuant to 1980 Stock Incentive Plan, as amended. (Filed as Exhibit 10.59 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.57 1983 Stock Incentive Plan and Form of Stock Option Agreement pursuant to 1983 Stock Incentive Plan, as amended. (Filed as an exhibit to Registrant's Registration Statement No. 2-95720 on Form S-8 and incorporated herein by reference.) 10.58 1984 Stock Incentive Plan and Form of Stock Option Agreement pursuant to 1984 Stock Incentive Plan, as amended. (Filed as an exhibit to Registrant's Registration Statement No. 2-95720 on Form S-8 and incorporated herein by reference.) 10.59 1987 Stock Incentive Plan and Form of Stock Option Agreement pursuant to 1987 Stock Incentive Plan, as amended. (Filed as an exhibit to Registrant's Registration Statement No. 33-20138 on Form S-8 and incorporated herein by reference.) 10.60 1989 Stock Incentive Plan and Form of Stock Option Agreement pursuant to 1989 Stock Incentive Plan, as amended. (Filed as Exhibit 10.26 to Registrant's 1990 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.61 1993 Stock Incentive Plan and Form of Stock Option Agreement pursuant to 1993 Stock Incentive Plan. (1993 Stock Incentive Plan was filed as Exhibit A to Registrant's 1993 Definitive Proxy Statement, Commission File No. 1-7806, and incorporated herein by reference.) 10.62 Amendment to Registrant's 1980, 1983, 1984, 1987 and 1989 Stock Incentive Plans. (Filed as Exhibit 10.27 to Registrant's 1990 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.63 Amendment to Registrant's 1983, 1984, 1987, 1989 and 1993 Stock Incentive Plans. 10.64 1986 Restricted Stock Plan and Form of Restricted Stock Agreement pursuant to 1986 Restricted Stock Plan. (Filed as Exhibit 10.28 to Registrant's 1990 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.65 Registrant's Retirement Parity Pension Plan. (Filed as Exhibit 10.67 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.66 Management Performance Bonus Plan. (Description of the performance bonus plan contained in the Definitive Proxy Statement for Registrant's 1994 Annual Meeting of Stockholders, under the heading "Report on Executive Compensation of the Compensation Committee of the Board of Directors" is incorporated herein by reference.) E-8 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT 10.67 Registrant's Retirement Plan for Outside Directors. (Filed as Exhibit 10.30 to Registrant's 1990 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.68 Long-term Performance Bonus Plan. (Description of the long-term performance bonus plan contained in the Definitive Proxy Statement for Registrant's 1994 Annual Meeting of Stockholders, under the heading "Report on Executive Compensation of the Compensation Committee of the Board of Directors" is incorporated herein by reference.) 10.69 Credit Agreement dated May 7, 1993 among Registrant and The First National Bank of Chicago; Bank of America National Trust and Savings Association; The Chase Manhattan Bank, N.A.; Citibank, N.A.; Morgan Guaranty Trust Company of New York with Morgan Bank (Delaware); NationsBank of Georgia; The Bank of New York; The Bank of Tokyo Trust Company; CIBC, Inc.; Commerzbank A.G., Atlanta Agency; Credit Suisse; Societe Generale Bank, Southwest Agency; Kredietbank N.V., Grand Cayman Branch; The Long-Term Credit Bank of Japan, LTD.; Mellon Bank, N.A.; National Westminister Bank PLC; Union Bank of Switzerland New York Branch and The Toronto-Dominion Bank. (Filed as Exhibit 10.70 to Registrant's 1993 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.70 Amendment dated as of December 1, 1993 to Credit Agreement dated May 7, 1993 among the Registrant and the parties listed in Exhibit 10.69 above. 10.71 Purchase Agreement between AVSA and Registrant for purchase of Airbus A300 aircraft. Confidential treatment has been granted for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. (Filed as Exhibit 10.36 to Registrant's 1991 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 11.1 Statement re Computation of Earnings Per Share. 12.1 Statement re Computation of Earnings to Fixed Charges. 13.1 Registrant's Annual Report to Stockholders for the fiscal year ended May 31, 1994. 21.1 Subsidiaries of Registrant. 23.1 Consent of Independent Public Accountants. 24.1 Powers of Attorney. E-9 EX-10.52 2 EXHIBIT 10.52 LAND LEASE AMENDED AND RESTATED LAND LEASE AGREEMENT FEDERAL EXPRESS CORPORATION AUGUST 1993 INDEX TO AMENDED AND RESTATED LAND LEASE AGREEMENT ARTICLE I - LEASED PREMISES.............................................2 A. DESCRIPTION OF LEASED PREMISES..............................2 B. EXPANSION AREA - OPTION.....................................2 C. EXPANSION AREA - LEASED.....................................3 ARTICLE II - OBJECTIVES AND PURPOSES OF LEASE...........................3 A. USE OF LEASED PREMISES......................................3 B. PROHIBITED USES.............................................4 ARTICLE III - LESSEE'S CONSTRUCTION REQUIREMENTS........................5 A. REQUIREMENT FOR IMPROVEMENTS ON LEASED PREMISES....................................................5 B. CONSTRUCTION DATES..........................................5 C. APPROVAL OF PLANS...........................................5 D. EXTENSION OF UTILITIES OR SPECIAL FACILITIES..................................................6 E. CONSTRUCTION OF ADDITIONAL FACILITIES.......................6 F. ALTERATIONS OR MODIFICATIONS TO PREMISES....................7 G. LIEN INDEMNIFICATION........................................7 H. COST OF CONSTRUCTION, ALTERATIONS AND STRUCTURAL REPAIRS..........................................7 I. AS-BUILT DRAWINGS...........................................8 J. MORTGAGE OF LEASEHOLD INTEREST..............................8 K. OWNERSHIP OF IMPROVEMENTS...................................9 ARTICLE IV - TERM......................................................10 A. PRIMARY....................................................10 B. RENEWAL....................................................10 C. HOLDING OVER...............................................10 ARTICLE V - RENTALS, FEES AND RECORDS..................................11 A. LEASED PREMISES............................................11 B. RENTAL ADJUSTMENTS.........................................11 C. EXPANSION AREA.............................................12 D. FIELD USE CHARGES..........................................12 E. TIME AND PLACE OF PAYMENTS.................................12 F. DELINQUENT RENTALS.........................................13 ARTICLE VI - OBLIGATIONS OF LESSEE.....................................13 A. NET LEASE..................................................13 B. MAINTENANCE AND OPERATION..................................13 C. UTILITIES..................................................15 D. TRASH, GARBAGE, ETC........................................16 E. SIGNS......................................................16 F. NONDISCRIMINATION..........................................16 G. AFFIRMATIVE ACTION.........................................17 H. OBSERVANCE OF STATUTES, ETC................................18 I. HAZARD LIGHTS..............................................18 ARTICLE VII - OBLIGATIONS OF AUTHORITY.................................19 A. OPERATION AS PUBLIC AIRPORT................................19 B. INGRESS AND EGRESS.........................................19 C. CONSTRUCTION BY AUTHORITY..................................20 D. MAINTENANCE AND OPERATIONS.................................20 ARTICLE VIII - AUTHORITY'S RESERVATIONS................................20 A. IMPROVEMENT, RELOCATION OR REMOVAL OF STRUCTURES.................................................20 B. INSPECTION OF LEASED PREMISES..............................21 C. SUBORDINATION TO U.S. GOVERNMENT...........................21 D. WAR OR NATIONAL EMERGENCY..................................21 ARTICLE IX - INDEMNITY AND INSURANCE...................................22 A. INDEMNIFICATION............................................22 B. LIABILITY INSURANCE........................................23 C. FIRE AND EXTENDED COVERAGE INSURANCE.......................23 D. APPLICATION OF INSURANCE PROCEEDS..........................24 E. PERFORMANCE BONDS..........................................24 ARTICLE X - TERMINATION OF LEASE BY LESSEE.............................26 A. TERMINATION................................................26 B. TERMINATION BY LESSEE......................................26 ARTICLE XI - TERMINATION OF LEASE BY AUTHORITY.........................27 A. TERMINATION BY AUTHORITY...................................27 B. WAIVER OF STATUTORY NOTICE TO QUIT.........................28 C. POSSESSION BY AUTHORITY....................................28 D. SUSPENSION OF LEASE........................................29 E. DESTRUCTION OF PREMISES - TERMINATION......................29 ARTICLE XII - RIGHTS UPON TERMINATION..................................30 A. FIXED IMPROVEMENTS.........................................30 B. TEMPORARY BUILDINGS........................................30 C. PERSONAL PROPERTY..........................................30 ARTICLE XIII - ASSIGNMENT AND SUBLETTING...............................31 A. SUCCESSORS AND ASSIGNMENT..................................31 B. SUBLETTING.................................................32 ARTICLE XIV - QUIET ENJOYMENT..........................................32 ARTICLE XV - GENERAL PROVISIONS........................................32 A. NON-INTERFERENCE WITH OPERATION OF AIRPORT.................32 B. AUTHORITY's CONSENT........................................33 C. TAXES......................................................33 D. LICENSE FEES AND PERMITS...................................33 E. PARAGRAPH HEADINGS.........................................34 F. INTERPRETATIONS............................................34 G. NOTICES....................................................34 H. FORCE MAJEURE..............................................34 I. NON WAIVER OF RIGHT TO PROCEED IN CONDEMNATION...............................................35 J. EFFECTIVE DATE.............................................35 SIGNATURE PAGE.............................................36 AMENDED AND RESTATED LAND LEASE AGREEMENT FEDERAL EXPRESS CORPORATION THIS AMENDED AND RESTATED LAND LEASE AGREEMENT with Federal Express Corporation made and entered into this _____ day of _____________, 1993, by and between the Indianapolis Airport Authority, a municipal corporation, existing under and by virtue of the laws of the State of Indiana, (hereinafter called "AUTHORITY"), and Federal Express Corporation, a Delaware corporation with its principal offices in Memphis, Tennessee, and authorized to do business in the State of Indiana, (hereinafter called "LESSEE"), W I T N E S S E T H: WHEREAS, AUTHORITY owns and operates the Indianapolis International Airport, (hereinafter called "Airport"), located in Marion County, Indiana; and WHEREAS, LESSEE is a corporation primarily engaged in the business of providing nationwide door-to-door transportation of time sensitive cargo; and WHEREAS, AUTHORITY has right, title and interest in and to the real property on the Airport, together with the facilities, easements, rights, licenses, and privileges hereinafter granted, and AUTHORITY has full power and authority to enter into this Lease in respect thereof; and WHEREAS, LESSEE desires to lease certain property and to construct a distribution and sort facility and related offices and buildings thereon upon the terms and conditions hereinafter stated; NOW, THEREFORE in consideration of the mutual covenants and considerations herein contained, AUTHORITY lets and demises to LESSEE and LESSEE takes from AUTHORITY the following described Leased Premises, and all described rights incident thereto, subject to the following: ARTICLE I - LEASED PREMISES A. DESCRIPTION OF LEASED PREMISES The term "Leased Premises", as used in this Lease, shall include real estate located at Indianapolis International Airport in Marion County, Indiana, as described on the attached Exhibit "A", dated April 27, 1993, and any improvements, including the right of ingress thereto and egress therefrom. B. EXPANSION AREA - OPTION LESSEE is granted an option to lease an expansion area of real property lying contiguous to and southwest of the Leased Premises which is more particularly identified on the attached Exhibit "A" dated April 27, 1993. LESSEE may elect to exercise said option to lease for part or all of said expansion area during the term hereof by giving AUTHORITY written notice of such intention and by paying the additional rent therefore, starting ninety (90) days thereafter, as provided in Article V, C. Exercise of the option as a part of the expansion area shall not terminate the option as to the remainder of the expansion area. At any time prior to the exercise of such option, AUTHORITY may give LESSEE written notice of its intent to lease, use, or otherwise dispose of said expansion area or part thereof specifying therein the nature of use for which the premises are intended. Upon receipt of such written notice, LESSEE shall have ninety (90) days to notify AUTHORITY if it intends to exercise its option to lease the premises specified in AUTHORITY's notice and to begin paying the appropriate additional rental therefore. In the event such election is not made within said ninety (90) day period, the option of LESSEE to lease the specified premises shall terminate, provided, however, if the transaction contemplated in AUTHORITY's notice to LESSEE is not consummated within one (1) year of AUTHORITY's notice to LESSEE, the option to lease the specified area reverts back to LESSEE. In addition to the notice of election, LESSEE shall also tender the additional rent as provided in Article V. C. EXPANSION AREA - LEASED Any portion of the expansion area with respect to which LESSEE's option is exercised shall become a part of the Leased Premises, shall be subject to the terms of this Lease and shall not serve to extend the lease term. ARTICLE II - OBJECTIVES AND PURPOSES OF LEASE A. USE OF LEASED PREMISES LESSEE shall use the Leased Premises for the operation of its business of transportation of cargo and for other purposes reasonably incidental thereto, subject to the following: (1) All parking of automobiles and trucks operated by officers, employees and business invitees of LESSEE incidental to its operation, except for those vehicles in the process of loading or unloading and servicing aircraft, shall be confined to the parking lot provided by LESSEE on the Leased Premises. (2) LESSEE agrees that aircraft and ramp equipment stored on the ramp will be parked in accordance with a plan approved by AUTHORITY. (3) Fueling, servicing and minor repairs, as defined in AUTHORITY's rules and regulations, of aircraft and ramp equipment operated by or for the LESSEE in connection with its operations shall be performed in accordance with AUTHORITY's rules and regulations. LESSEE and its subcontractors shall not perform major maintenance of aircraft on the ramp. (4) LESSEE covenants that LESSEE shall not use or permit the Leased Premises to be used for any other purpose without the prior written consent of AUTHORITY. B. PROHIBITED USES LESSEE shall not permit the loading, unloading or storage of any hazardous animate or inanimate materials or objects in violation of any applicable law or regulation. LESSEE shall not store or transport Class-A Explosives as defined in 49 CFR Part 107.3. LESSEE's handling of any hazardous material shall be in accordance with 49 CFR, parts 100-199, dated December 31, 1976, or as same may be amended. In no event shall LESSEE handle any materials which would adversely affect the insurance coverage of the Leased Premises required of LESSEE herein. ARTICLE III - LESSEE'S CONSTRUCTION REQUIREMENTS A. REQUIREMENT FOR IMPROVEMENTS ON LEASED PREMISES Except as provided in Article VII, C, LESSEE shall, at its sole expense, construct on the Leased Premises, as provided in Paragraphs D and H of this Article, such buildings, structures, roadways, utility lines, additions, and improvements as LESSEE may desire in furtherance of the purposes set forth in Article II, and shall install therein and thereon such equipment and facilities as LESSEE may deem necessary or desirable, provided, however, that no building, structure, roadway, utility lines, addition, or improvement of any nature shall be made or installed by LESSEE without the prior written consent of the AUTHORITY as herein provided. B. CONSTRUCTION DATES Construction of the improvement shall begin not later than July 1, 1985, and shall be completed no later than December 31, 1987. In the event LESSEE shall fail to begin construction by July 1, 1985, and pursue diligently the completion thereof, AUTHORITY shall have the right to terminate this Lease pursuant to the provisions of Article XI herein, and LESSEE shall reimburse AUTHORITY for any costs and expenses for the design, engineering and construction of the aircraft apron and related site improvements actually incurred by AUTHORITY up to date of termination. C. APPROVAL OF PLANS LESSEE covenants and agrees that prior to the preparation of detailed construction plans, specifications and architectural renderings of any such building, structure, roadway, addition or improvement, it shall first submit plans showing the general site plan, design and character of improvements and their locations, including drainage and roadways, to AUTHORITY's Executive Director for approval. LESSEE's plans shall meet AUTHORITY's design standards for the type of development proposed. LESSEE covenants and agrees that prior to the installation or construction of any such building, roadway, structure, addition or improvement on the Leased Premises, it shall first submit to the AUTHORITY for approval, final detailed construction plans and specifications and architectural renderings prepared by registered architects and engineers, and that all construction will be in accordance with such plans and specifications and AUTHORITY's Building and Land Use Provisions as outlined in Exhibit "B", attached hereto. D. EXTENSION OF UTILITIES OR SPECIAL FACILITIES LESSEE shall construct at its expense all necessary utility lines within the Leased Premises required for LESSEE to connect to the line of existing service as shown on Exhibit "C". LESSEE shall construct within the Leased Premises, at its expense, the connecting roadways to the existing roadway system as shown on Exhibit "C". E. CONSTRUCTION OF ADDITIONAL FACILITIES LESSEE has the right to construct additional buildings, facilities and necessary site improvements on the Leased Premises. Prior to such construction, LESSEE agrees to submit to AUTHORITY for approval, final plans, specifications and architectural renderings prepared by registered architects and engineers, and comply with all other requirements of Paragraph C of this Article. F. ALTERATIONS OR MODIFICATIONS TO PREMISES LESSEE shall not construct, install, remove and/or modify any of the buildings or premises leased hereunder without prior written approval of the AUTHORITY. LESSEE shall submit for approval by AUTHORITY, its plans and specifications for any proposed project as well as complying with such other conditions considered by AUTHORITY to be necessary. G. LIEN INDEMNIFICATION In the event any person or corporation shall attempt to assert a Mechanic's Lien against the Leased Premises, LESSEE shall hold AUTHORITY harmless from such claim, including the cost of defense. H. COST OF CONSTRUCTION, ALTERATIONS AND STRUCTURAL REPAIRS Within thirty (30) days of completion of the construction, alterations, or structural repairs, LESSEE shall present to AUTHORITY for examination and approval a sworn statement of the "Construction, Alteration and/or Structural Repair Costs". "Construction, Alteration and/or Structural Repair Costs" for the purpose of this Article, are hereby defined as all money paid by LESSEE for actual demolition, construction, alteration, or structural repair, including architectural and engineering costs plus pertinent fees in connection therewith. The cost of the required initial improvements constructed and equipment installed, in accordance with Paragraph A of this Article, shall be not less than $24,000,000.00 and shall be substantiated by LESSEE as provided hereinabove. In the event that LESSEE makes further improvements, alterations, or structural repairs on the Leased Premises, the use thereof shall be enjoyed by LESSEE during the term hereof without the payment of additional rental therefore, but such additions, alterations, improvements, or structural repairs shall become the property of AUTHORITY upon the completion of the construction. I. AS-BUILT DRAWINGS Within thirty (30) days following completion of any additions, alterations or improvements, LESSEE shall present to AUTHORITY a complete set of reproducible (mylar) "record" drawings including, but not limited to, specifications and shop drawings. In addition and upon request of the AUTHORITY, this information shall be submitted on a computer diskette using the AutoCAD format. J. MORTGAGE OF LEASEHOLD INTEREST LESSEE shall have the right to place a First Mortgage Lien upon its leasehold interest in an amount not to exceed eighty percent (80%) of the cost of capital improvements thereon, the terms and conditions of such mortgage loan shall be subject to the approval of AUTHORITY. Lender's duties and rights are as follows: 1. The Lender shall have the right, in case of default, to assume the rights and obligations of LESSEE herein, with the further right to assign the LESSEE's interest to a third party, subject to approval of AUTHORITY. Lender's obligations under this Lease, as substituted LESSEE, shall cease upon assignment to a third party and approval by AUTHORITY. 2. As a condition precedent to the exercise of the right granted to Lender by this Paragraph, Lender shall notify AUTHORITY of all action taken by it in the event payments on such loans shall become delinquent. Lender shall also notify AUTHORITY in writing of any change in the identity or address of the Lender. 3. All notices required by Article XI to be given by AUTHORITY to LESSEE shall also be given to Lender at the same time and in the same manner. Upon receipt of such notice, Lender shall have the same rights as LESSEE to correct any default. K. OWNERSHIP OF IMPROVEMENTS Upon completion of construction, any building, fixture, structure, addition or improvement, excluding personal property as defined in Article XII, C, on the Leased Premises shall immediately become the property of AUTHORITY, as owner, subject only to the right of LESSEE to use during the term of this Lease and shall remain the property of AUTHORITY thereafter with the sole right, title and interest thereto. ARTICLE IV - TERM A. PRIMARY The term of this lease is a minimum of thirty (30) years, commencing the first day of the month following the date the improvements to be made by LESSEE, as more particularly described in Article III, are completed and ready for occupancy, or January 1, 1987, whichever shall be the first to occur, unless extended by written agreement of the parties with respect to any delay in completion and occupancy caused by AUTHORITY. B. RENEWAL LESSEE shall have an option to extend this Lease for one (1) additional term of ten (10) years upon the rental terms outlined in Article V, C, by mailing or delivering to AUTHORITY written notice of such intention not later than ninety (90) days prior to the date of expiration of the primary term. C. HOLDING OVER In the event LESSEE shall continue to occupy the Leased Premises beyond the Lease term or any extension thereof without AUTHORITY's written renewal thereof, such holding over shall not constitute a renewal or extension of this Lease, but shall create a tenancy from month to month which may be terminated at any time by AUTHORITY or LESSEE by giving thirty (30) days written notice to the other party. LESSEE further agrees that upon the expiration of the term of this Lease or sooner cancellation thereof, the Leased Premises will be delivered to AUTHORITY in good condition, reasonable wear and tear and matters covered by insurance excepted. Reasonable wear and tear shall be determined at the sole discretion of AUTHORITY upon inspection of the Leased Premises from time to time. ARTICLE V - RENTALS, FEES AND RECORDS During the term hereof, LESSEE shall pay to AUTHORITY rentals for the Leased Premises according to the following schedule: A. LEASED PREMISES September 1, 1992 thru October 31, 1993 LEASED PREMISES Ground Rent 4,356,000 sq.ft. @ $.152 = ANNUAL RENT $662,112.00 LEASED EXPANSION AREA Ground Rent 487,436.4 sq.ft. @ $.05 = ANNUAL RENT 24,371.82 ----------- TOTAL ANNUAL RENT $686,483.82 MONTHLY RENT $57,206.00 November 1, 1993 thru December 31, 1996 LEASED PREMISES Ground Rent 4,356,000 sq. ft. @ $.152 = ANNUAL RENT $662,112.00 LEASED EXPANSION AREA Ground Rent 2,139,667.2 sq.ft. @ $.05 = ANNUAL RENT $106,983.36 ----------- TOTAL ANNUAL RENT $769,095.36 MONTHLY RENT $64,091.28 B. RENTAL ADJUSTMENTS 1. Next ten (10) years (1/1/97 - 12/31/2006) LEASED PREMISES Ground Rent 4,356,000 sq.ft. @ $1.66 = ANNUAL RENT $723,096.00 LEASED EXPANSION AREA Ground Rent 2,139,667.2 sq.ft. @ $.07 = ANNUAL RENT $149,776.70 ----------- TOTAL ANNUAL RENT $872,872.70 MONTHLY RENT $72,739.39 2. Next ten (10) years (1/1/2007 - 12/31/2016) LEASED PREMISES Ground Rent 4,356,000 sq.ft. @ $.196 = ANNUAL RENT $853,776.00 LEASED EXPANSION AREA Ground Rent 2,139,556,2 sq.ft. @ $.10 = ANNUAL RENT $213,966.72 ------------- TOTAL ANNUAL RENT $1,067,742.70 MONTHLY RENT $88,978.56 3. Renewal term (if exercised by LESSEE - January 1, 2017 through December 31, 2026) ground rental rate will be subject to negotiation, but shall not exceed $.20 per square foot per year for 4,356,000 square feet of leased area and the 2,139,667.2 sq. ft. of expansion area now leased. C. EXPANSION AREA 1. Through December 31, 1996 @ $.05 (ground rent rate) per square foot per year. 2. 1/1/97 - 12/31/2006 @ $.07 (ground rent rate) per square foot per year. 3. 1/1/2007 - 12/31/2016 @ $.10 (ground rent rate) per square foot per year. 4. Renewal Term (if exercised by LESSEE - January 1, 2017 through December 31, 2026) ground rent rte will be subject to negotiation, but shall not exceed $.20 per square foot per year. D. FIELD USE CHARGES Fees and charges for the use of the landing area and facilities necessary thereto, shall be calculated and paid in accordance with the Airline Operating Agreement between the parties dated September 25, 1985. E. TIME AND PLACE OF PAYMENTS The foregoing fixed rentals shall be payable in equal monthly installments in advance on or before the first business day of each calendar month of the term at the office of: Executive Director Indianapolis Airport Authority Indianapolis International Airport Box 100, 2500 S. High School Road Indianapolis, IN 46241 F. DELINQUENT RENTALS There shall be added to all sums due AUTHORITY and unpaid, as may be established by AUTHORITY, an interest charge of one and one-half percent (1 1/2%) of the principal sum for each full calendar month of delinquency computed as simple interest. No interest shall be charged upon that portion of any debt which, in good faith, is in dispute. No interest shall be charged upon any account until payment is thirty (30) days overdue, but such interest when assessed thereafter, shall be computed from the due date. The interest rate, established by Ordinance by the Airport Authority Board, may change from time to time. ARTICLE VI - OBLIGATIONS OF LESSEE A. NET LEASE The use and occupancy of the Leased Premises by LESSEE will be without cost or expense to AUTHORITY. It shall be the sole responsibility of LESSEE to maintain, repair and operate the entirety of the Leased Premises and any improvements and facilities constructed thereon including aircraft apron constructed by AUTHORITY, at LESSEE's sole cost and expense. B. MAINTENANCE AND OPERATION LESSEE shall maintain the Leased Premises at all times in a safe, neat and attractive condition, and shall not permit the accumulation of any trash, paper, or debris on the Airport premises. LESSEE shall repair all damages to the Leased Premises caused by its employees, patrons, or its operation thereon; shall maintain and repair all equipment thereon, including any buildings and improvements, and shall repaint the buildings as necessary. LESSEE shall be responsible for and perform all maintenance, including but not limited to: 1. Janitorial services, providing janitorial supplies, window washing, rubbish, and trash removal. 2. Supply and replacement of light bulbs in and on all buildings, obstruction lights and replacement of all glass in the building, including plate glass. 3. Cleaning of stoppages in plumbing fixtures, drain lines and septic system to the first manhole outside the Leased premises. 4. Replacement of floor covering. 5. Maintenance of all building and overhead doors and door operating systems including weather stripping and glass replacement. 6. Building interior and exterior maintenance, including painting, repairing and replacement. 7. Repair or replacement of equipment and utilities to include electrical, mechanical and plumbing in all buildings, including but not limited to air conditioning and heating equipment. All repairs to electrical and mechanical equipment are to be made by licensed personnel. Other repairs are to be made by craftsmen skilled in work done and performing such work regularly as a trade. 8. LESSEE shall keep the concrete apron clean and free of oil and other accumulated deposits. 9. LESSEE shall be responsible for all snow removal on the Leased Premises and shall do so in a manner which does not interfere with AUTHORITY's Airport operations or damage to property. 10. LESSEE shall perform all maintenance on LESSEE-constructed structures, pavements, and equipment; and utilities to the point where connected to the main source of supply or the first manhole outside of the Leased Premises, or to the utility corridor. 11. LESSEE shall advise AUTHORITY and obtain AUTHORITY's consent in writing before making changes involving structural changes to building or premises, modifications or additions to plumbing, electrical or other utilities. To prevent the voiding of roof bond(s) and to maintain correct records by AUTHORITY, any penetration of the roof shall be considered a structural change. 12. LESSEE is responsible for maintaining electric loads within the designed capacity of the system. Prior to any change desired by LESSEE in the electrical loading which would exceed such capacity, written consent shall be obtained from the Executive Director. 13. LESSEE shall maintain and relamp all lights in and on the buildings and on the ramp. 14. LESSEE shall provide and maintain hand fire extinguishers for the interior of all buildings, shop parking and storage areas in accordance with applicable safety codes. 15. LESSEE shall maintain and replace all landscaping and grounds as originally approved and installed, and will not allow the removal of trees without permission of AUTHORITY. AUTHORITY, at its discretion, shall be the sole judge of the quality of maintenance; and LESSEE, upon written notice by AUTHORITY to LESSEE, shall be required to perform whatever maintenance AUTHORITY deems necessary. If said maintenance is not undertaken by LESSEE within thirty (30) days after receipt of written notice, AUTHORITY shall have the right to enter upon the Leased Premises and perform the necessary maintenance, the cost of which shall be borne by LESSEE. No waste shall be committed or damage done to the property of AUTHORITY. C. UTILITIES LESSEE shall assume and pay for all costs or charges for utilities services furnished to LESSEE during the term hereof; provided, however, that LESSEE shall have the right to connect to any and all storm and sanitary sewers and water and utility outlets at its own cost and expense; and LESSEE shall pay for any and all service charges incurred therefore. D. TRASH, GARBAGE, ETC. LESSEE shall pick up, and provide for, an complete and proper arrangement for the adequate sanitary handling and disposal, away from the Airport, of all trash, garbage, and other refuse caused as a result of the operation of its business. LESSEE shall provide and use suitable covered metal receptacles for all such garbage, trash, and other refuse. Piling of boxes, cartons, barrels, pallets, debris, or similar items in an unattractive or unsafe manner, on or about the Leased Premises, shall not be permitted. E. SIGNS LESSEE shall not erect, maintain, or display upon the outside of any improvements on the Leased Premises any billboards or advertising signs; provided, however, that LESSEE may maintain on the outside of said buildings, its own name(s) and services on signs, the size, location and design of which shall be subject to prior written approval by AUTHORITY. F. NONDISCRIMINATION LESSEE, for itself, its personal representatives, successors in interest, and assigns, as part of the consideration hereof, does hereby covenant and agree, (1) that no person on the grounds of race, color, or national origin shall be excluded from participation in, denied the benefits of, or be otherwise subjected to discrimination in the use of the Leased Premises; (2) that in the construction of any improvements on, over, or under such land and the furnishing of services thereof, no person on the grounds of race, color or national origin shall be excluded from participation in, denied the benefits of, or otherwise be subjected to discrimination; (3) that LESSEE shall use the Leased Premises in compliance with all other requirements imposed by or pursuant to Title 49, Code of Federal Regulations, Department of Transportation, Subtitle A, Office of the Secretary, Part 21, Nondiscrimination in Federally-assisted programs of the Department of Transportation, Effectuation of Title VI of the Civil Rights Act of 1964, and as said Regulations may be amended, to the extent that said requirements are applicable, as a matter of law, to LESSEE. With respect to the Leased Premises, LESSEE agrees to furnish services on a fair, equal and not unjustly discriminatory basis to all users thereof, and to charge fair, reasonable and not unjustly discriminatory prices for each unit or service; provided, that the LESSEE may be allowed to make reasonable and nondiscriminatory discounts, rebates, or other similar types of price reductions to volume purchasers. G. AFFIRMATIVE ACTION With respect to the Leased premises, the LESSEE assures that it will undertake an affirmative action program as required by 14 CFR part 152, Subpart E, to insure that no person shall, on the grounds of race, creed, color, national origin or sex be excluded from participating in any employment activities covered in 14 CFR Part 152, Subpart E; that no person shall be excluded on these grounds from participating in or receiving the services or benefits of any program or activity covered by that Subpart; and that it will require that its covered suborganizations provide assurance to the LESSEE that they similarly will undertake affirmative action programs, and that they will require assurances from their suborganizations, as required by 14 CFR Part 152, Subpart E, to the same effect, to the extent that said requirements are applicable, as a matter of law, to LESSEE. H. OBSERVANCE OF STATUTES, ETC. The granting of this Lease and its acceptance by LESSEE is conditioned upon the right to use the Airport facilities in common with others authorized to do so, provided, however, that LESSEE shall observe and comply with any and all requirements of the constituted public authorities and with all Federal, State and Local statutes, ordinances, regulations and standards applicable to LESSEE for its use of the Leased Premises, including but not limited to, rules and regulations promulgated from time to time by the Executive Director for the administration of the Airport. I. HAZARD LIGHTS LESSEE shall, at its expense, provide and maintain hazard lights on any structure erected by LESSEE on the Leased Premises, if required by AUTHORITY of Federal Aviation Administration regulations. Any hazard lights so required shall comply with the specifications and standards established for such installations by the FAA. ARTICLE VII - OBLIGATIONS OF AUTHORITY A. OPERATION AS PUBLIC AIRPORT AUTHORITY covenants and agrees that at all times it will develop, operate and maintain, 24 hours a day, 365 days a year, except as limited by law or operational requirements of AUTHORITY, the Airport facilities as a public airport consistent with the Airport Master Plan, which is incorporated herein by reference, and pursuant to the Sponsor's Assurances given by AUTHORITY to the United States Government under the Federal Airport Act. B. INGRESS AND EGRESS Upon paying the rental hereunder and performing the covenants of this Lease, LESSEE shall have the right of ingress to and egress from the Leased Premises for the LESSEE, its officers, employees, agents, servants, customers, vendors, suppliers, patrons, and invitees over the roadway provided by AUTHORITY serving the Leased Premises. AUTHORITY's roadway shall be used jointly with other tenants on the Airport, and LESSEE shall not interfere with the rights and privileges of other persons or firms using said facilities and shall be subject to such weight and type use restrictions as AUTHORITY deems necessary. C. CONSTRUCTION BY AUTHORITY AUTHORITY provided a sort building site prepared to subgrade level, including utilities and road access to the Leased Premises, and major drainage and retention basin. In addition, AUTHORITY constructed two (2) connecting taxiways to the existing Runway 31, now renumbered 32, two (2) temporary connecting taxiways to the existing Runway 22L, now renumbered 23L, and approximately fifty (50) acres of aircraft apron extending to within 25 feet of the sort buildings constructed by LESSEE. The aircraft apron was designed to accommodate Boeing 727-100 aircraft. A layout of AUTHORITY's construction obligations referred to in this Paragraph is included in page 3 of Exhibit "A" attached hereto. D. MAINTENANCE AND OPERATIONS AUTHORITY shall be responsible for snow removal from the runways, taxiways and public use areas of the Airport, but not the Leased Premises. ARTICLE VIII - AUTHORITY'S RESERVATIONS A. IMPROVEMENT, RELOCATION OR REMOVAL OF STRUCTURES AUTHORITY, at its sole discretion, reserves the right to further develop or improve the aircraft operating area and other portions of the Airport, including the right to remove or relocate any structure on the Airport, as it sees fit, and to take any action it considers necessary to protect the aerial approaches of the Airport against obstructions, together with the right to prevent LESSEE from erecting or permitting to be erected, any building or other structure on the Airport which, in the opinion of AUTHORITY would limit the usefulness of the airport or constitute a hazard to aircraft. In the event AUTHORITY requires the Leased Premises for expansion, improvements, or the development of the Airport, or protection of the aerial approaches to the Airport, AUTHORITY reserves the right, on six (6) months notice, to relocate or replace LESSEE's improvements in substantially similar form at another generally comparable location on the Airport. B. INSPECTION OF LEASED PREMISES AUTHORITY, through its duly authorized agent, shall have at any reasonable time, the full and unrestricted right to enter the Leased Premises for the purpose of periodic inspection for fire protection, maintenance and to investigate compliance with the terms of this Lease. C. SUBORDINATION TO U.S. GOVERNMENT This Lease shall be subordinate to the provisions of any existing or future agreement(s) between AUTHORITY and the United States, relative to the operation and maintenance of the Airport, the terms and execution of which have been or may be required as a condition precedent to the expenditure or reimbursement to AUTHORITY for Federal funds for the development of the Airport. D. WAR OR NATIONAL EMERGENCY During the time of war or national emergency, AUTHORITY shall have the right to lease the Airport or any part thereof to the United States Government for military use, and if any such lease is executed, the provisions of this Lease insofar as they are inconsistent with the Lease to the Government shall be subpended, and in that event, a just and proportionate part of the rent hereunder shall be abated. ARTICLE IX - INDEMNITY AND INSURANCE A. INDEMNIFICATION LESSEE agrees to fully indemnify, and save forever harmless the AUTHORITY from and against all claims and actions and all reasonable expenses incidental to the investigation and defenses thereof, based on or arising out of claims for damages or injuries to third persons, including wrongful death, and arising out of LESSEE's use or occupancy of the Leased Premises; provided, however, that AUTHORITY shall give to LESSEE prompt and reasonable notice of any such claims or actions, and LESSEE shall have the right to investigate, compromise and defend the same; and provided further that LESSEE shall not be liable for any claims, actions, injury, damage or loss occasioned by any negligence or intentional acts of authority, its agents or employees. LESSEE shall indemnify and save and hold AUTHORITY harmless from and against any claim by carriers serving LESSEE, provided, however, LESSEE shall not be liable for any claims, actions, injury, damage or loss occasioned by any negligence or intentional acts of AUTHORITY, its agents or employees. B. LIABILITY INSURANCE LESSEE shall, at its expense, procure and keep in force at all times during the term of this Lease from a financially sound and reputable company acceptable to AUTHORITY, public liability insurance, insuring LESSEE and AUTHORITY for personal injury and property damage, and such other insurance necessary to protect AUTHORITY from such claims and actions aforesaid. Without limiting its liability, LESSEE agrees to carry and keep in force insurance with single limit liability for personal injury or death and property damage in a sum not less than Twenty Million Dollars ($20,000,000.00) with said policy designating AUTHORITY as an additional insured. LESSEE shall maintain aircraft liability insurance with limits not less than Twenty Million Dollars ($20,000,000.00). LESSEE shall furnish AUTHORITY with a certificate of insurance as evidence of such coverage. Said insurance shall not be cancelled or materially modified except upon ten (10) days advance written notice to AUTHORITY. Coverage is to be written on the broadest liability form which is customarily available at reasonable cost for LESSEE's use of and operations at Indianapolis International Airport. C. FIRE AND EXTENDED COVERAGE INSURANCE LESSEE shall, at its expense, procure and keep in force at all times during the term of this Lease with a company suitable to AUTHORITY, insurance on the improvements on the Leased Premises against loss and damage by fire, aircraft and extended coverage perils. Such policy shall be in an amount of not less than eighty percent (80%) of the replacement cost of the improvements with satisfactory evidence of such coverage furnished AUTHORITY. D. APPLICATION OF INSURANCE PROCEEDS If the fixed improvements placed upon the Leased Premises shall be totally destroyed or extensively damaged and LESSEE shall elect not to restore the same to their previous condition, the proceeds of insurance payable by reason of such loss shall be apportioned between AUTHORITY and LESSEE, with AUTHORITY receiving the same proportion of such proceeds as the then expired portion of the Lease term bears to the full Lease term, including the renewal term, and LESSEE receiving the balance. The Lease shall then be cancelled. If the damage results from an insurable cause and the LESSEE shall elect to restore the same with reasonable promptness, it shall be entitled to receive and apply the entire proceeds of any insurance covering such loss to said restoration, in which event this Lease shall continue in full force and effect. E. PERFORMANCE BONDS LESSEE shall deliver to AUTHORITY a surety bond in the amount of $100,000.00, within thirty (30) days after the execution date first above mentioned. Said bond shall be conditioned on the faithful performance of all terms, conditions, and covenants of this Lease, shall be renewable annually, and shall be kept in full force and effect for the complete term of this Lease, except as hereinafter provided. At LESSEE's option, a total amount equal to three (3) months fixed rental may be deposited with AUTHORITY in lieu of said performance bond within thirty (30) days after the execution date first above mentioned. In lieu of said surety bond or rental deposit, LESSEE may deposit with AUTHORITY's Controller, within thirty (30) days after the execution date first above mentioned, a letter of credit, bonds of the United States of America, or such other securities or bank certificate of deposit, acceptable to AUTHORITY, in the name of AUTHORITY or assigned to AUTHORITY in the amount of $90,000.00 as security for faithful performance by LESSEE as hereinabove provided and LESSEE may have the right to reserve to itself payable on said U.S. Bonds or such other securities. AUTHORITY agrees to return any security posted by LESSEE under this Paragraph at such time as LESSEE has occupied the building, operated its business and paid rent for a continuous period of one (1) year, all as required by this Lease. Any time that LESSEE undertakes construction of any facilities, LESSEE shall, at its own cost and expense, cause to be made, executed, and delivered to AUTHORITY separate bonds, as follows: 1. Prior to the date of commencement of construction, a contract surety bond in a sum equal to the full amount of the construction contract awarded. Said bond shall be drawn in a form and from such company as approved by AUTHORITY; shall guarantee the faithful performance of necessary construction and completion of improvements in accordance with approved final plans and detailed specifications; and shall guarantee AUTHORITY against any losses and liability, damages, expenses claims and judgments caused by or resulting from any failure of LESSEE to perform completely, the work described herein provided. 2. Prior to the date of commencement of construction, a payment bond with LESSEE's contractor or contractors as principal, in a sum equal to the full amount of the construction contract awarded. Said bond shall guarantee payment of all wages for labor and services engaged and of all bills for materials, supplies and equipment used in the performance of said construction contract. ARTICLE X - TERMINATION OF LEASE BY LESSEE A. TERMINATION This Lease shall terminate at the end of the primary term and any renewal term, if exercised, and LESSEE shall have no further right to interest in any of the leasehold improvements hereby demised, except as provided in Article IV, C. B. TERMINATION BY LESSEE LESSEE, in addition to all other rights at law or in equity, may terminate this Lease and terminate its obligations hereunder at any time that LESSEE is not in default in the payment of rentals to AUTHORITY by giving AUTHORITY sixty (60) days advance written notice to be served as hereinafter provided, and by surrender of the Leased Premises, upon or after the happening of any one of the following events: 1. The issuance by any court of competent jurisdiction of an injunction or order, or the enactment of any law, ordinance, or regulation or other act of a governmental body that in any way prevents or restrains the use of the Airport, so as to substantially affect LESSEE's use of the Airport. 2. The default by AUTHORITY in the performance of any covenant or agreement herein required to be performed by AUTHORITY, and the failure of AUTHORITY to undertake and be continuing to remedy such default for a period of sixty (60) days after receipt from LESSEE of written notice to remedy the same; provided, however, that no notice of termination, as above provided, shall be of any force or effect if AUTHORITY shall have remedied the default prior to receipt of LESSEE's notice of termination. 3. The assumption by the United States Government or any authorized agency thereof of the operation, control, or use of the Airport and facilities, or any substantial part or parts thereof, in a manner as substantially to restrict LESSEE for a period of at least ninety (90) days from full use of its Leased Premises, and in that event, a just and proportionate part of the rent hereunder shall be abated. ARTICLE XI - TERMINATION OF LEASE BY AUTHORITY A. TERMINATION BY AUTHORITY AUTHORITY, in addition to all other rights at law or in equity, may declare this Lease terminated in its entirety, subject to and in the manner provided in Paragraph B, upon or after the happening of any one or more of the following events, and may exercise all rights of entry and re-entry upon the Leased Premises: 1. The failure to pay all installments of rent then due (with interest) within thirty (30) days after receipt by LESSEE of written notice to pay such rent. 2. The filing by LESSEE of a voluntary petition in bankruptcy or the making of any assignment of all or any part of LESSEE's assets for benefit of creditors. 3. The adjudication of LESSEE as a bankrupt pursuant to any involuntary bankruptcy proceedings. 4. The taking by a court of competent jurisdiction of LESSEE or its assets pursuant to proceedings brought under the provisions of any federal reorganization act. 5. The appointment of a receiver or a trustee of LESSEE's assets by a court of competent jurisdiction and the failure of LESSEE to dismiss the same within ninety (90) days or a voluntary agreement with LESSEE's creditors. 6. The breach by LESSEE of any of the covenants or agreements herein contained, and the failure of LESSEE to take appropriate action to remedy such breach within thirty (30) days after receipt by LESSEE of written notice from AUTHORITY. 7. The abandonment of the Leased Premises. 8. The failure to commence the replacement of any improvements which have been destroyed by fire, explosion, wind, etc. within six (6) months from the date of such destruction. B. WAIVER OF STATUTORY NOTICE TO QUIT In the event AUTHORITY exercises its option to cancel this Lease upon the happening of any or all of the events set forth in this Article, a notice of cancellation shall be sufficient to cancel this Lease; and, upon such cancellation, LESSEE hereby agrees that it will forthwith surrender up possession of the Leased Premises to AUTHORITY. In this connection, LESSEE hereby expressly waives the receipt of any statutory notice to quit or notice of termination which would otherwise be given by AUTHORITY. C. POSSESSION BY AUTHORITY In any of the aforesaid events, AUTHORITY may take immediate possession of the Leased Premises and remove LESSEE's effects, forcibly if necessary, without being deemed guilty of trespassing. Upon said default, all rights of LESSEE shall be forfeited, provided, however, AUTHORITY shall have and reserve all of its available remedies at law as a result of said breach of this Lease. Failure of AUTHORITY to declare this Lease terminated upon default of LESSEE for any of the reasons set out shall not operate to bar, destroy, or waive the right of AUTHORITY to cancel this Lease by reason of any subsequent violation of the terms hereof. D. SUSPENSION OF LEASE During the time of war or national emergency, AUTHORITY shall have the right to lease the landing area or any part thereof to the United States Government for military use. If any such lease is executed, any provisions of this instrument which are inconsistent with the provisions of the lease to the Government shall be suspended, provided that the term of this Lease shall be extended by the amount of the period of suspension. E. DESTRUCTION OF PREMISES - TERMINATION In the event of damages to or destruction or loss of the building or buildings by an insured or insurable risk, LESSEE shall promptly repair, restore and rebuild said building or buildings as nearly as possible to the condition they were in immediately prior to such damage or destruction, except as provided in Article IX, D. If the building or buildings shall be damaged in such manner as to render them unusable in whole or in part, and LESSEE elects to rebuild, the rental provided to be paid under the terms of this Lease shall be abated or reduced proportionately during the period from the date of such damage or destruction until the work of repairing, restoring or reconstructing said building or buildings is completed. ARTICLE XII - RIGHTS UPON TERMINATION A. FIXED IMPROVEMENTS It is the intent of this Agreement that the real estate, leasehold improvements, except trade and business fixtures, and alterations thereto shall be and remain the property of AUTHORITY during the entire term of this Lease and thereafter. B. TEMPORARY BUILDINGS At the termination of this Lease, LESSEE shall have the right within thirty (30) days thereafter, to remove all temporary buildings, furniture, fixtures, machinery, equipment and signs installed on the premises leased hereunder, but shall repair at its own expense, all damage to the Leased Premises caused by such removal. All other improvements erected or installed on the Leased Premises shall, on such termination, remain on the Leased Premises. C. PERSONAL PROPERTY Upon termination of this Lease, LESSEE shall remove all personal property, including trade and business fixtures from the Leased Premises within thirty (30) days after said termination, subject, however, to a lien in favor of AUTHORITY for unpaid rents or fees, and repair any damage to the Leased Premises caused by such removal. If LESSEE fails to remove said personal property, said property may thereafter be removed by AUTHORITY at LESSEE's expense. ARTICLE XIII - ASSIGNMENT AND SUBLETTING A. SUCCESSORS AND ASSIGNMENT Except as otherwise provided herein, LESSEE shall not assign this Lease or any part thereof in any manner whatsoever or assign any of the privileges recited herein without the prior written consent of AUTHORITY, provided, however, in the event of such assignment, LESSEE remain liable to AUTHORITY for the remainder of the term of the Lease to pay to AUTHORITY any portion of the rental and fees provided for herein upon failure of the assignee to pay the same when due. Said assignees shall not assign the Lease except with the prior written approval of the AUTHORITY and the LESSEE herein, and any assignment by the LESSEE shall contain a clause to this effect. LESSEE may assign this Lease or any part hereof to Federal Express Corporation or any direct or indirect wholly owned subsidiary of Federal Express Corporation, without the prior written approval of AUTHORITY, but no such assignment shall be effective until notice thereof is received by AUTHORITY and provided however, LESSEE shall remain liable to AUTHORITY for the remainder of the term of the Lease to pay to AUTHORITY any portion of the rental and fees provided for herein upon failure of the assignee to pay the same when due. B. SUBLETTING Except as otherwise provided herein, LESSEE shall not sublease or permit any part of the Leased Premises to be occupied by others without the prior written consent of AUTHORITY. LESSEE may sublet any portion of the Leased Premises to Federal Express Corporation, or any direct or indirect wholly owned subsidiary of Federal Express Corporation without the prior written approval of AUTHORITY, but no such sublease shall be effective until notice thereof is received by AUTHORITY and provided however, LESSEE shall remain liable to AUTHORITY for the remainder of the term of the Lease to pay to AUTHORITY any portion of the rental and fees provided for herein upon failure of the sublessee to pay the same when due. ARTICLE XIV - QUIET ENJOYMENT AUTHORITY covenants that LESSEE, upon payment of the rentals reserved herein and the performance of each and every one of the covenants, agreements, and conditions on the part of LESSEE to be observed and performed, shall and may, peaceably and quietly, have, hold and enjoy the Leased Premises for the term aforesaid, free from molestation, eviction or disturbance. ARTICLE XV - GENERAL PROVISIONS A. NON-INTERFERENCE WITH OPERATION OF AIRPORT LESSEE, by accepting this Lease, expressly agrees for itself, its successors and assigns that it will not make use of the Leased Premises in any manner which might interfere with the landing and taking off of aircraft at the Airport or otherwise constitute a hazard. In the event the aforesaid covenant is breached, the AUTHORITY reserves the right to enter upon the Leased Premises and cause the abatement of such interference at the expense of the LESSEE. AUTHORITY shall maintain and keep in repair the Airport landing areas and taxiways, and shall have the right to direct and control all activities of the LESSEE in this regard. B. AUTHORITY'S CONSENT Whenever any provision of this Lease requires the approval, consent or exercise of discretion of AUTHORITY, such action shall not be unreasonably withheld or unreasonably exercised. C. TAXES LESSEE shall pay any leasehold interest tax assessed and all property taxes which may be assessed against equipment, merchandise, or other personal property belonging to LESSEE located on the Leased Premises, or other permitted portions of the Airport. In the event any real estate taxes are assessed against the Leased Premises during the term of this Lease, such taxes shall be paid AUTHORITY. D. LICENSE FEES AND PERMITS LESSEE shall obtain and pay for all licenses, permits, fees or other authorization or charges as required under Federal, State or local laws and regulations insofar as they are necessary to comply with the requirements of this Lease and the privileges extended hereunder. E. PARAGRAPH HEADINGS The paragraph headings contained herein are for convenience in reference and are not intended to define or limit the scope or any provision of the Lease. F. INTERPRETATIONS This Lease shall be interpreted in accordance with the laws of the State of Indiana. G. NOTICES Whenever any notice or payment is required by this Lease to be made, given or transmitted to the parties hereto, such notice or payment shall be enclosed in an envelope with sufficient postage attached to insure delivery and deposited in the United States Mail, addressed to: AUTHORITY.......... Executive Director Indianapolis Airport Authority Indianapolis International Airport Box 100, 2500 S. High School Road Indianapolis, IN 46241 and notices, consents and approvals to LESSEE addressed to: LESSEE............ Federal Express Corporation 2005 Corporate Avenue Memphis, TN 38132 H. FORCE MAJEURE Neither AUTHORITY nor LESSEE shall be deemed to be in breach of this Lease by reason of failure to perform any of its obligations hereunder if, while, or to the extent such failure is due to strikes, boycotts, labor disputes, embargoes, shortages of materials, acts of God, acts of the public enemy, acts of superior governmental authority, weather conditions, floods, riots, rebellion, sabotage or any other circumstances for which it is not responsible, and which are not within its control. This provision shall not apply to failures by LESSEE to pay rents, fees, or other charges, or to make any other money payments when required by this Lease, but may apply to extend the time at which rent, and other such money payments, begin to accrue. This provision shall not prevent either party from exercising its respective rights of termination under Article X, B, 1 and 3; Article XI, A, 1-5 and 7; and other provision for termination not related to force majeure. I. NON WAIVER OF RIGHT TO PROCEED IN CONDEMNATION Notwithstanding any provision of this Lease to the contrary, such as, but not limited to Article VIII, C and D; Article X, B, 1 and 3; and Article XI, D, LESSEE and AUTHORITY agree that LESSEE does not intend to, and has not, waived any right which may accrue to it for damages and compensation arising out of or relating to any taking, by condemnation or other act of an authorized entity, of any right, title, or interest of LESSEE in the Leased Premises and the improvements and equipment relating thereto. J. EFFECTIVE DATE This Amended and Restated Land Lease Agreement amends and restates the Land Lease Agreement dated March 28, 1984, between Purolator Courier Corporation and AUTHORITY, which Agreement was assigned to Federal Express Corporation on November 12, 1987. The parties agree that the effective date of the Amended and Restated Land Lease Agreement is March 28, 1984, and that in accordance with Article IV, A, of this Lease, the commencement date of the primary term is January 1, 1987. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed as of the date first above mentioned at Indianapolis, Indiana. INDIANAPOLIS AIRPORT AUTHORITY By /s/ Michael W. Wells _____________________________________ Michael W. Wells, President By /s/ Gordon St. Angelo _____________________________________ Gordon St. Angelo, Vice President By /s/ Betty J. Johnson _____________________________________ Betty J. Johnson, Secretary By /s/ Lawrence A. O'Connor, Jr. _____________________________________ Lawrence A. O'Connor, Jr., Member By /s/ Murvin S. Enders _____________________________________ Murvin S. Enders, Member AUTHORITY FEDERAL EXPRESS CORPORATION By /s/ Gilbert Mook __________________________ Title Vice President - Properties _______________________ ATTEST: By /s/ Sybille S. Noble __________________________ Title Assistant Secretary _______________________ LESSEE Attachments: Exhibit A: Leased Premises and Expansion Area Exhibit B: Building & Land Use Provisions Exhibit C: Roads and Utilities Provided by AUTHORITY STATE OF INDIANA ) ) SS: COUNTY OF MARION ) Personally appeared before me Michael W. Wells, President, Gordon St. Angelo, Vice President, Betty J. Johnson, Secretary, Lawrence A. O'Connor, Jr., Member, and Murvin S. Enders, Member, respectively, of the Indianapolis Airport Authority, a municipal corporation, who acknowledged that the execution of the foregoing Amended and Restated Land Lease Agreement, for and on behalf of said municipal corporation, was their free, and duly authorized act and deed this 20th day of August, 1993. /s/ Robert A. Duncan _________________________________ Notary Public Robert A. Duncan _________________________________ (printed) My Commission Expires: Resident in Hendricks County Indiana 10/22/96 STATE OF TENNESSEE ) ) SS COUNTY OF SHELBY ) Personally appeared before me Gilbert Mook, and Sybille S. Noble, as the Vice - President - Real Estate and Assistant Secretary, respectively, of Federal Express Corporation, a Delaware corporation, who acknowledged that the execution of the foregoing Amended and Restated Land Lease Agreement, for and on behalf of said corporation, was their free, and duly authorized act and deed this 19 day of August, 1993. /s/ Kimble H. Scott _________________________________ Notary Public Kimble H. Scott _________________________________ (printed) My Commission Expires: Resident in Shelby County Indiana July 25, 1995 This instrument was prepared by ROBERT A. DUNCAN, GENERAL COUNSEL Indianapolis Airport Authority FEDERAL EXPRESS LEASED AREA 149.12 ACRES A part of Section 26 and the Southeast corner of Section 23, Township 15 North, Range 2 East, Marion County Indiana, described as follows: Commencing at Indianapolis Airport Authority Monument 25-0 which marks the southeast corner of the northeast quarter of the above captioned Section 26; thence north no degrees 10 minutes 9 seconds West (assumed bearing) with the west line of said Northeast Quarter, 384.43 feet to the POINT OF BEGINNING of the parcel herein described; thence, continuing with the east line of Northeast Quarter, North no degrees 10 minutes 9 seconds West 902.48 feet; thence North 45 degrees 2 minutes 25 seconds West 1968.37 feet; thence South 44 degrees 57 minutes 35 seconds West 2311.92 feet; thence South 64 degrees 58 minutes 59 seconds West 364.41 feet; thence South 44 degrees 57 minutes 35 seconds West 748.55 feet; thence South 45 degrees no minutes 32 seconds East 1334.12 feet to a point on a curve; thence along a curve, having a radius of 1986.86 feet, a central angle of 18 degrees 34 minutes 11 seconds, a chord bearing North 73 degrees 6 minutes 23 seconds East 641.13 feet, an arc distance of 643.95 feet; thence North 82 degrees 23 minutes 4 seconds East 492.59 feet; thence North 7 degrees 34 minutes 51 seconds West 503.14 feet; thence North 83 degrees 26 minutes 58 seconds East 1921.98 feet to the Point of Beginning and containing 149.12 acres, more or less. EXHIBIT "A" PAGE 1 OF 3 DESCRIPTION OF LEASED PREMISES (including Leased Expansion Area) APRIL 27, 1993 Page 2 contains a diaphragm of the roads and utilities provided by the Authority. Page 3 contains a diaphragm of the leased premises. 3-1-77 LAND LEASE GENERAL BUILDING AND USE PROVISIONS FOR ALL AIRPORTS OWNED BY THE INDIANAPOLIS AIRPORT AUTHORITY This document outlines the Indianapolis Airport Authority's restrictions and conditions associated with airport land use. Full compliance will be expected except in those cases where the provisions are not applicable. Any deviations from the regulations outlined herein must be approved by the Executive Director. AUTHORITY reserves the right to make periodic inspections to insure compliance with these Provisions and to initiate appropriate corrective measures. CLAUSE I PURPOSE OF CONDITIONS AND RESTRICTIONS 1. All improvements constructed on airport property are subject to conditions, restrictions and reservations for the following purposes: (a) To establish aesthetic values designed to complement and benefit all Airport Authority facilities; (b) To develop all airports with a park-like character which will insure their being a continuing asset to the Indianapolis Metropolitan area and to the State of Indiana; (c) To insure adequate and reasonable development of all airport; (d) To insure proper, desirable use and appropriate development and improvement of each site within each airport; (e) To protect lessees and/or tenants of buildings against improper and undesirable use of surrounding building sites which will depreciate the value of their properties; (f) To guard against the erection of structures built of improper or unsuitable materials; (g) To encourage the erection of attractive improvements with appropriate locations on building sites thereof; (h) To insure and maintain proper setbacks from streets, highways, runways, taxiways and aprons, and adequate open spaces between structures which will insure a park-like character; (i) In general, to provide for a high type and quality of improvement of said property; (j) To insure the safety and security of the airport operation and the operation of airport tenants; CLAUSE II LOT AND BUILDING CONSTRUCTION REQUIREMENTS (See CLAUSE V, pages 18 thru 25, SPECIAL CONSTRUCTION (T-HANGARS) 1. No building or other structure shall be erected, permitted or placed upon any part of said real estate which shall have any part thereof including, but not limited to, any windows, eaves, steps, chimneys, or other projections nearer than 80 feet from the nearest boundary line or right-of-way line of any street or streets, or which is nearer than 50 feet from any boundary line of said real estate which does not border a street. No fence, sign, hedge, or mass planting shall be constructed or permitted to exist in the front setback area established herein except upon securing, in advance, the written consent of AUTHORITY. 2. The area between the front of any building and the street shall be restricted to planting and landscaping only and shall not be used for parking or driveway. A grass strip at least 25 feet wide shall be maintained on both sides and at the rear of every plot. 3. One combination entrance and exit drive shall be permitted for each lease area. 4. No excavations or excavating work shall be permitted on any part of said real estate except excavations for the purpose of constructing buildings and physical improvements on such real estate immediately prior to and during the construction of such buildings and tangible improvements. No soil, sand gravel, minerals, aggregate or earth materials shall be removed from said real estate except as part of such excavations made for the purpose of constructing buildings and tangible improvements on said real estate. 5. Elevations and grade lines shall be marked on drawings to indicate depths necessary for work. 6. Bottom of all foundation excavations shall be made to exact grade as called for on drawings; and spaces deeper than those shown shall be filled with concrete, with no backfill of earth permitted in such spaces. 7. Excavation shall be made outside of walls to allow for inspection, placing and removal of forms. All trenches must be left open until all work has been inspected and approved by Lessee's representative. 8. Pier and ball-type or spread footings unless approved otherwise, shall be drilled true to size and depth called for on drawings. All loose earth must be removed from bottom of footing excavation and excavation must be kept clean until concrete is placed. 2 9. Existing piping, conduits, etc., if encountered in excavating unless called for to be removed, shall be temporarily supported and maintained until permanent support has been restored or AUTHORITY has otherwise disposed of them. When required to be removed, they shall be cut off and capped outside the excavation by Contractor at his expense. 10. Bilge pumps, suction and discharge lines, well points, etc., must be provided, if necessary, to keep all excavation free from standing water. 11. No backfill will be permitted until foundations or other work in excavation has been inspected and approved by Lessee's representative. 12. Sufficient time must be allowed after notice is given that work is ready for inspection in order for Lessee to make all necessary examinations and tests. 13. No backfill will be permitted against retaining walls until they have attained sufficient strength to support same. 14. Material frozen in lumps or material softer than adjoining soil shall not be used. All fillings must be tamped in 6 to 10 inch layers, with special care taken in tamping fillings under floors, etc., to prevent settlement. These fillings should be puddled with water where necessary, using very little water for puddling and none at all for sandy, clay soil. All filling must be compacted to 90% of standard Proctor density. The preferred method would be to use a sand or gravel fill in these areas. 15. All utility trenches must be tamped outside and inside buildings as above specified to prevent settlement, with compaction to 95% of standard Proctor density under pavings and 90% under lawn and planting areas. 16. Should additional material be required for backfilling in excess of that obtained from excavation, it shall be provided and shall be suitable, clean approved material. Again the preferred method is to utilize sand or gravel to avoid settling. 17. All fills under floors, if required, must be made with subsoil up to within 4 inches of elevation of bottom of slab, with compaction the same as called for hereinbefore under "BACKFILLING." The top 4 inches under all floor slabs shall be of approved sand. The top 2 inches under sidewalks shall be of approved sand. A good grade of course, clean river sand will be acceptable. 18. All fills and all grading must conform to contours as shown on the plot plan. If approved earth is not available on site to do the grading, this material must be provided and hauled in. 19. Where planting areas are designated, elevations should be lowered 4 inches, to accommodate topsoil or sod. 3 20. Stockpiled topsoil must be spread over planting areas to a depth of 4 inches as directed, with areas hand-raked to elevations called for on the drawings. Additional approved topsoil must be provided to obtain full depth coverage if stockpiled topsoil is not of sufficient quantity. 21. Fills shall be constructed at locations and to lines and grades indicated on the drawings and as directed by Lessee. The completed fill shall correspond to the shape of the typical sections shown on the drawings or shall meet the requirements of the particular case. All fill material shall be reasonably free from roots or other organic material, trash, frozen material, and from all stones having a maximum dimension greater than 6 inches. Stones larger than 3 inches, maximum dimension, shall not be permitted in the upper 6 inches of fill or embankment. The material shall be placed in successive horizontal layers not exceeding 6 inches in thickness after compaction. Contractors shall add moisture to or dry by aeration each layer as may be necessary to meet the requirements of this specification for compaction. 22. Subgrade preparation under any proposed apron pavement area shall be in accordance with Item P-152 of the F.A.A. Standards for specifying construction of Airport, October 24, 1974, with latest revisions. 23. Uniformly smooth grading of all finished base areas shall be accomplished. The finished surface shall be reasonably smooth, compacted and free from irregular surface changes. The degree of finish shall be that ordinarily obtainable from either blade-grader or planer operations. The finished surface shall be not more than 0.15 foot above or below the established grade or approved cross section. The surface of base for pavement shall not vary more than 0.05 foot from the established grade and approved cross section. 24. Finished subgrade base shall not be disturbed by traffic or other operations and shall be maintained in satisfactory condition until operations to place finish courses are commenced. If base becomes softened by rain or frost action, or any other cause to the extent that it does not have specified density and moisture content at time of placement of subsequent courses, the base shall be recompacted to not less than 95% of the specified density either by additional passes of a sheepsfoot and/or pneumatic roller or other approved roller, or by scarifying and rerolling. Recompacted base shall be finished as called for hereinbefore. 25. All dirt, loose materials and miscellaneous articles which are not a part of the finished leased area shall be removed from the existing and proposed airport boundaries. The site of such disposal shall be approved by the Executive Director. 26. All buildings, both principal and appurtenant that are constructed on the property, shall conform to the standards specified at the time of such construction by the latest edition of the National Building Code and National Fine Code. 4 27. All buildings shall be non-combustible and constructed of approved masonry or metal materials with a quality of finish in keeping with the overall attractiveness of each airport. 28. The following protection shall remain in force during all phases of construction work: (a) Provide protection to adjoining property, including buildings, walks, roads, trees, fences and shrubs. (b) Provide, erect and maintain all fences, planking, shoring, lights, warning signs and guards as necessary for protection of people and property. Remove protection devices only when authorized to do so by the Executive Director. 29. Existing utility lines, as shown on drawings or as are made known to Contractor prior to excavation and that are to be retained, as well as utility lines constructed during excavation operation, shall be protected from damage during all excavation, trenching and grading operations. Existing utility lines should be located and cleared by hand-digging 3 feet either side of the line. If damaged, shall be repaired by Contractor at his expense. Contractor shall be responsible for verification of all utility locations and shall repair all damages to the satisfaction of AUTHORITY. 30. Construction, alteration, or addition of or to any building or structure on any lot shall meet the architectural design standards provided in these specifications. Prior to said construction, alternation, or addition, lessee must submit two sets of plans and specifications for such building to AUTHORITY, its successors or assigns. A written approval of such plans and plot plans by AUTHORITY shall be required. 31. In addition to the right reserved above to approved plans and specifications for the construction or alterations of any building, AUTHORITY also reserves the right to approve plans and specifications for the construction, installation or alteration of all signs, loading docks, parking facilities, fencing, storage building or facilities, and landscape planting on each Airport. Such plans and specifications must first be submitted to and have the written approval of AUTHORITY, its successors or assigns. 32. No approval for building or structure improvements shall be made until a plan for site improvements has been submitted and approved in writing by AUTHORITY. Said plans shall indicate and include: (a) Preliminary site plan showing building orientation, entrances, parking, a water management plan that meets the requirements of Marion County Ordinance No. 62-1978, and other pertinent data. Lessee should not proceed with the other requirements listed below until this plan has been approved by AUTHORITY. 5 (b) A complete set of plans and specifications certified by an architect or engineer registered in the State of Indiana shall be submitted in duplicate to AUTHORITY. Said documents shall include: (1) A site plan showing location and design of building, structures, signs, gas lines, water lines, electrical lines, sanitary sewers, storm drainage, driveways, driveway intersection with streets, exterior material storage areas, parking areas, loading area and sidewalks. Drainage and sediment control plans shall be in accordance with specifications adopted by the City of Indianapolis Board of Public Works, on April 14, 1981, by Resolution No. 2400-1800. (2) Elevations, typical wall sections, pavement sections and details, finish and color designations, lighting and signing on the structure. No roof top heating, air-conditioning, or large fan units will be acceptable unless approved in writing by the Executive Director. (3) A plan showing the landscape treatment, type, nature, and arrangement of plantings, fences, walls, outdoor lighting and similar features. (4) A plan showing that the number of parking spaces for employees and visitors and standing areas for the loading and unloading of service vehicles is sufficient to accommodate the expected use of the lot and improvements. All parking areas shall include perimeter plantings of trees and shrubs to minimize the open paved effect of the parking area. (5) A description of proposed operations on said real estate and an estimate of the maximum number of employees contemplated. (6) Any other pertinent information requested by AUTHORITY, and any information which will show compliance with each and all of these restrictions. 33. The following pavement sections shall serve as minimum for all paving: (a) Parking lots, drives, roads, aircraft taxiways (under 12,500 pounds aircraft), and areas of this category as a minimum shall consist of: (1) 2" Hot Asphaltic Concrete Surface Type "B," (2) 2" Hot Asphaltic Concrete Binder, (3) 6" Hot Asphaltic Concrete Base OR 6 (1) 2" Hot Asphaltic Concrete Surface Type "B," (2) 3" Hot Asphaltic Concrete Base, (3) 8" Crushed Limestone Base with Prime Coat (will be approved only if proper subgrade drainage is installed). (b) All other paving shall consist of Portland Cement that complies with the "Standard Specifications for Portland Cement," ASTM Designation C-150 (latest revision), Concrete Aggregates that conform to the "Standard Specifications for Concrete Aggregates," ASTM Designation C-33 (latest revision), Metal Reinforcement that conforms to latest ASTM Specification No. A 615, and water. Any pavement areas which are planned to receive transport aircraft or transport vehicles shall be designed and constructed in compliance with the Federal Aviation Administration's Standard for specifying construction of airports, October 24, 1974, with latest revisions. All other design criteria (for each project) shall be developed and specified by AUTHORITY. CLAUSE III UTILITIES 1. No septic tank, outside toiler, or individual water well may be constructed, placed or used on any lands leased on any Airport if public utilities are available. No installation for the disposal of sanitary sewage shall be constructed or operated unless the installation shall meet all the requirements of appropriate city, county and/or State regulations. 2. Discharge from any sump pump, footing drains, roof drains, or any storm water coming on any lot shall not be allowed to flow into any sanitary sewerage facility. 3. AUTHORITY shall not approve plans and specifications for construction of any structure on any lot on which all or part of an open storm drainage ditch or swale is situated unless such plans and specifications shall provide for the installation of such culverts or for the taking of such other steps as may be specified by AUTHORITY as will insure that such ditch or swale will remain free and unobstructed. It shall be the obligation of every lessee of an airport lot on which any part of such ditch or swale is situated to keep such part of such ditch or swale continuously unobstructed and in good repair. All surface drainage must be designed in accordance with State and local regulations. Lessee must secure drainage permit if required. 4. All utilities including, but not limited to water, gas, electricity, telephone, and sewer shall be installed underground within the leased area by and at the expense of lessee. 7 5. Coordination of the installation of the required utilities with the appropriate company and AUTHORITY shall be the responsibility of lessee. 6. Lessee shall provide and pay for connections of storm sewer to facilities provided at lease line by AUTHORITY. CLAUSE IV OTHER REQUIREMENTS 1. Open storage and/or refuse collection areas and/or open work or activity areas including vehicular parking and loading and unloading activities shall be screened to a minimum height of 6 feet by evergreen plantings, masonry wall, redwood or equal fencing, or a combination thereof. 2. In the interest of safety and the free movement of commercial and private vehicles in and through the airport, employee, customer, owner, or tenant parking will not be permitted on private or public dedicated streets within the airport confines. It will be the responsibility of lessees, their successors or assigns to provide adequate parking facilities for customers, employees, and public carriers within the boundaries of the property leased to accommodate the daily or seasonal peak requirement. Parking, loading, service, or other outdoor work areas must be paved with asphalt or concrete, as determined by AUTHORITY. 3. The operation of all ground equipment, mobile or stationary, required for construction, repair or any other purpose within the limits of the airfield shall be governed as follows: (a) All equipment and materials when not in use or about to be installed shall be left in spaces approved for this purpose by the Executive Director. All equipment on the field, when in use or not in use, shall be properly marked with yellow, or orange and white checkered flags of a size not less than 2 feet square during the day and with amber electric flasher lights at night. No equipment shall be parked within 750 feet of the centerline of any runway or within 250 feet of the centerline of any taxi way, unless specifically authorized by the Executive Director. Equipment parked on the airfield area shall be kept to an absolute minimum and restricted to equipment actually used in progress the work under progress. (b) Nothing shall be placed on the airfield without the permission of the Executive Director. (c) Parking areas for contractor equipment, supplies, materials and employee vehicles will be as established by the Executive Director or as indicated on the plans. (d) Neither equipment nor personnel shall use any runway, taxiway or apron for the purpose of hauling materials or 8 access to the work unless approved by the Executive Director. Authorized equipment operating on any hard surfaces is limited to that equipment with pneumatic tires. Prior to use of any hard surface, permission shall be obtained from the Executive Director. All drivers shall be instructed to be alert for aircraft and to follow routes designated for vehicular traffic. All vehicles will be clearly marked to identify owner. No privately owned vehicle will be operated on runway or taxiways. (e) Prior to initiation of operations which will require the crossing of any hard surface used by aircraft, the contractor shall assure himself that a signalman, with visual or radio contact with the air traffic control tower, is on duty at the site of the crossing to regulate traffic. Moving aircraft have priority over all other traffic on the field. Only equipment equipped with pneumatic tires shall be allowed to cross paved areas. It shall be the responsibility of the contractor to keep paved surfaces free of any material at all times that might drop from moving vehicles while crossing paved areas. (f) Contractor shall conform to the requirements of the Executive Director as to the placement, type and service of special barricades, obstruction and hazard marking and lighting devices used to identify danger areas to aircraft; (g) Hauling across clear zones of any runway will not be permitted unless authorized by the Executive Director. (h) Contractor must agree to permit only his bona fide employees and those of his subcontractors access and use of the airfield during actual hours of work. 4. Planting and landscaping shall be in accord with an AUTHORITY approved plan. All land areas not covered by building or paving must be improved with a locally acceptable ground cover such as Kentucky-Blue grass, or equal, except for plots planted with shrubbery, flowers, or trees. 5. Lessee of any tract on the airport must at all times keep the premises, buildings, improvements, and appurtenances in a safe, clean, wholesome condition and comply in all respects with the government health and police requirements. Lessee will provide a place for the collection of rubbish that is screened from view and will remove at his own expense such rubbish of any character whatsoever which may accumulate on said property. Grass shall be kept cut on all leased lots, and AUTHORITY shall keep unleased areas in a clean, mowed, orderly manner. In the event any lessee fails to keep grass and weeds cut on the leased premises, AUTHORITY may have the grass and weeds cut and charge such expense to lessee. 9 6. The building and above-grade structures, including parking areas placed on a lot, shall not exceed seventy-five percent (75%) of the leased area. 7. Every tank for the storage of fuel on the airport shall be buried below the surface of the ground. This installation must receive prior written approval of the Executive Director. The installation of all underground fueling facilities and fuel pipe lines must have a cathodic protection system. All fueling systems must have adequate provisions to contain possible spill or leak. A spill prevention and control plan must be prepared and approved by the Executive Director and conform to all local city-state regulations and the National Fire Protection Code. 8. No free-standing antennae or transmission towers will be permitted on the airport without prior written approval of the Executive Director. 9. No animals shall be kept on any leased tract on the airport. 10. All proposed improvements shall conform to all National, State and Local codes and specifications, and in Marion County shall follow the Commercial Zoning Ordinance (80-A0-1), printed September, 1982. 11. The lessee shall require lessee's contractors doing work on airport to have the following insurance coverage: CONTRACTOR'S LIABILITY INSURANCE A. Lessee shall demand that each Contractor shall take out and maintain insurance of such types and in such amounts as are necessary to cover his responsibilities and liabilities on all projects, and shall require all his subcontractors to carry similar insurance. (1) The Owner will accept, in lieu of all subcontractors carrying similar insurance, an "Owner's and Contractor's Protective Liability Policy" paid for by the Contractor and written in the name of the Owner for the amounts specified hereinafter including all the special coverages. Said policy must protect the Owner for all claims for bodily injury and/or property damage arising out of operations for the named insured by said Contractor, or any subcontractor of said Contractor. B. No Contractor shall commence work under this contract until he has obtained all insurance required under this Section and such insurance has been approved by the Owner, nor shall any Contractor allow any subcontractor to commence work on his subcontract until the same insurance has been obtained by the subcontractor and approved by the Owner. Each and every Contractor and Subcontractor shall maintain all insurance required under paragraphs (1) and (2) of this Section for not less than one year after completion of this contract. 10 C. Each Contractor shall file with the Owner and Architect a Certificate of Insurance. Any certificate submitted and found to be altered or incomplete will be returned as unsatisfactory. D. If requested by the Owner, Contractor shall furnish the Owner with true copies of each policy required of him or his subcontractors. Said policies will not be canceled or materially altered, except after fifteen (15) days advance written notice to the Owner and Architect, mailed to the addresses indicated herein. E. Insurance under this Section, as a minimum, shall include the following coverages: (1) Workmen's Compensation and Employer's Liability Insurance: Workman's Compensation and Occupational Disease Insurance of statutory limits as provided by the state in which this contract is performed and Employers; Liability Insurance at a limit of not less than $100,000.00 for all damages arising from each accident or occupational disease. (2) Comprehensive General Liability Insurance covering: (a) Operations -- Premises Liability: including, but not limited to, Bodily Injury, including death at any time resulting therefrom, to any person or Property Damage resulting from execution of the work provided for in this contract, or due to or arising in any manner from any act or omission or negligence of the Contractor and any subcontractor, their respective employees or agents. (b) Elevator Liability: including, but not limited to, Bodily Injury, including death at any time resulting therefrom, to any person or Property Damage resulting from operation or use of any elevator or hoist, if either or both are operated or used in connection with execution of this contract. (c) Contractor's Protective Liability: including, but not limited to, Bodily Injury, including death at any time resulting therefrom, to any person or Property Damage arising from acts or omissions of any subcontractor, their employees or agents. (d) Products: 11 including, but not limited to, Bodily Injury, including death at any time resulting therefrom to any person or Property Damage because of goods, products, materials or equipment used or installed under this contract. (e) Completed Operations Liability: or because of completed operations, which may become evident within one year after acceptance of the building including damage to the building or its contents. (f) Contractual Liability: Each and every policy for liability insurance, carried by each contractor and subcontractor, as required by this Section shall specifically include Contractual Liability coverage with respect to Section F of this Division. (g) Special Requirements: The insurance required under Paragraph (2) of this Section shall specifically include the following special hazards: Property Damage caused by conditions otherwise subject to exclusions "x,c,u," Explosion, Collapse or Underground Damage. Broad Form Property Damage endorsement, which has reference to property in the "care, custody, or control" of the insured. "Occurrence" Bodily Injury coverage in lieu of "caused by accident." "Occurrence" Property Damage coverage in lieu of "caused by accident." (h) Limits of Liability: The insurance under Paragraph (2) of this Section shall be written in the following limits of liability, as a minimum: For Contracts Less than $250,000.00: BODILY INJURY: -------------- $500,000.00 each person $500,000.00 each occurrence $500,000.00 aggregate Products 12 PROPERTY DAMAGE: ---------------- $100,000.00 each occurrence $300,000.00 aggregate Operations $300,000.00 aggregate Products $500,000.00 aggregate Contractual For Contracts $250,000.00 or greater: BODILY INJURY ------------- $1,000,000.00 each person $1,000,000.00 each occurrence $1,000,000.00 aggregate Products PROPERTY DAMAGE --------------- $250,000.00 each occurrence $500,000.00 aggregate Operations $500,000.00 aggregate Protective $500,000.00 aggregate Products $500,000.00 aggregate Contractual (3) Comprehensive Automobile Liability covering: (a) All owned, hired, or non-owned vehicles including the loading or unloading thereof. (b) Special Requirements: The insurance required under paragraph (3) of this section shall specifically include the following special hazards: "Occurrence" Bodily Injury in lieu of "caused by accident." "Occurrence" Property Damage in lieu of "caused by accident." (c) The insurance under Paragraph (3) of this Section shall be written in the following limits of liability as a minimum: FOR CONTRACTS LESS THAN $250,000.00: ------------------------------------ Automobile Bodily Injury Each Person $500,000.00 Each Occurrence $500,000.00 Automobile Property Damage Each Occurrence $100,000.00 FOR CONTRACTS $250,000.00 OR GREATER: ------------------------------------- Automobile Bodily Injury Each Person $500,000.00 Each Occurrence $1,000,000.00 Automobile Property Damage 13 Each Occurrence $250,000.00 F. Hold Harmless Agreement: (1) The Contractor shall indemnify and hold harmless the Owner and the Architect and their agents and employees from and against all claims, damages, losses and expenses including attorney's fees arising out of or resulting from the performance of the work, provided that any such claim, damage, loss or expense (a) is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the work itself) including the loss of use resulting therefrom and (b) is caused in whole or part by any negligent act or omission of the Contractor, any subcontractor, anyone directly or indirectly employed by any of them or anyone for whose acts any of them may be liable, regardless of whether or not it is caused in part by a party indemnified hereunder. (2) In any and all claims against the Owner or the Architect or any of their agents or employees by any employee of the Contractor, Subcontractor, anyone directly or indirectly employed by any of them or anyone for whose acts of them may be liable, the indemnification obligation under this Hold Harmless Agreement shall not be limited in any way by any limitation on the amount payable by or for the Contractor or any Subcontractor under workmen's compensation acts, disability benefit acts or other employee benefit acts. (3) The obligations of the Contractor under this Hold Harmless Agreement shall not extend to any claim, damage, loss or expense arising out of professional services performed by the Architect, his agents, or employees, including (a) the preparation of maps, plans, opinions, reports, surveys, designs or specifications, and (b) supervisory, inspection or engineering services. 12. The lessee's contractors shall: (a) Use only those roads as designated by the Executive Director for transportation of equipment and hauling of materials. (b) Be responsible for cleanup of areas outside the leased area that may be damaged or disturbed. 14 CLAUSE V SPECIAL CONSTRUCTION T-HANGARS 1. This specification covers material for fabrication and erection of the T-Hangars which shall be constructed to be weathertight, structurally sound and in compliance with the required loading conditions. Such compliance shall be subject to approval of the AUTHORITY. This specification also provides for such foundations as are required for the T-Hangars. All materials shall be new, unused and free of defects and imperfections. 2. Pavement dimension for T-Hangar taxiways and approaches should conform to the master plan for the airport. The approaches should extend inside the T-Hangar building to provide a hardstand for the aircraft to be parked. Pavement inside and outside the T-Hangar building shall conform to the minimum pavement thicknesses established by Clause II of this document. 3. All items of work under this section shall be furnished, constructed and installed in strict conformance with the applicable latest edition of the following: (a) American Institute of Steel Construction Specifications for the Design, Fabrication and Erection of Structural Steel for Building and the Code of Standard Practice. (b) American Society for Testing Materials Standard Specification for Buildings (Serial Designation A-36). (c) Specifications of American Welding Society. (d) Any pertinent federal, state or local codes or ordinances. 4. Any incidental items of work required by any of the above mentioned authorities and not specifically shown or mentioned shall be furnished under this specification without additional cost. 5. The drawings and specifications, when in direct conflict with any of the above regulations, will govern and supersede the regulations unless such drawings and specifications are not equal to the regulations. 6. Buildings shall be constructed of steel and metal, containing all items required for complete installations, including but not limited to the following: (a) Steel post and beam or structural wall framework, columns, trusses, beams, girts, purlins, and necessary bracing and connecting members. (b) Metal wall, partition and roof panels. 15 (c) Metal flashings, closures, trim as requires to make buildings weather-tight. 7. Building shall contain either manually or electrically operated bi-fold or other approved type hangar doors. One door will be required for each airplane pocket. Each electrically operated door shall be controlled by a push button station located on the inside of wall near door. Each hangar shall have an access door (minimum 2'-0" x 6'-4") complete with hardware including cylinder lock. Locks shall be furnished masterkeyed in one set with each lock keyed differently. Door cover panels shall be compatible in design and color with building wall panels. Design loading of door shall be same as loading of building. Flex door closures shall be furnished equal to Federal Specifications HH-P-151e, Type II; bulb type in form at door sill and diaphragm type at door head. 8. The contractor shall furnish and install footings as required. 9. Electrical contractor shall furnish and install electrical wiring and lighting for the T-Hangars except for wiring required for door operators. Electrical contractor shall terminate wiring in an outlet box at the top and near center of each hanger door. Metal building contractor shall install and connect motors and push button control switches including all connecting wiring, and disconnect switches for same. All electrical wiring and control wiring shall be installed in conduit. 10. A minimum of 26-gauge steel will be required for all cover panels. (a) Roof panels shall be one piece from ridge or eave, with one piece ridge panels to match corrugations of roof panel. Panels shall be of gauge required to meet design loading requirements and shall be of galvanized steel meeting or exceeding the following: A.S.T.M. Galvanized Specification A93 (latest issue) and Federal Specifica- tion QQ-S-775a, Type I, Class d. Deflection shall be limited to 1/240 of the span. (b) Wall panels shall be one piece from eave to ground. Panels shall be of gauge required to meet design loading requirements and shall be of galvanized steel meeting or exceeding the following: A.S.T.M. Galvanized Specification A93 (latest issue) and Federal Specification QQ-S-775a, Type I, Class d. Deflection shall be limited to 1/180 of the span. (c) Partition panels if constructed shall be of one piece from roof to ground and shall be roll formed galvanized steel meeting same specifications for wall panels including wind loading. 11. The following types of fasteners shall be required: 16 (a) Structural to structural - Hex head machine bolts, except beam to column connections and splices shall be high strength bolts, A.S.T.M. A-325 or A-490. (b) Panel to structural and panel to panel - Cadmium plated or stainless steel with steel and neoprene washers. Self-threading screws will be acceptable. 12. Approved type Butyl equal to PECORA BC-158 Sealant shall be applied at side and end laps of roof panels, at top and bottom (continuous) of eave closures, and elsewhere as required to make buildings weathertight. 13. Trim and closures shall be of cold formed galvanized steel with corrugation closure at eaves. 14. Purlins and girts shall be of cold formed, galvanized high strength steel of gauge required to meet design loading requirements. 15. Structural steel shall be standard stock sections, free from flaws, cracks or injurious seams, rolled from new billets and conforming to requirements of A.I.S.C. and A.S.T.M. for steel buildings. 16. Design basis shall be "Steel Construction Manual" of American Institute of Steel Construction, current edition; and/or American Iron and Steel Institute's "Light Gauge Steel Design Specification" dated 1960, and American Welding Society Code for Welding in Building Construction, dated 1963. A.S.T.M. Standards as amended to date: A-325 and A-490 for Quenched and Tempered Steel Bolts, A-307 for Steel Machine Bolts and Nuts, ASA B-149 for Determining Tensile Stress Area of Threaded Ends of Rods. 17. Structural description will be as follows: (a) ROOF: Roof purlins shall be light gauge "Z" purlins. Continuous design will not be acceptable. Deflection shall be limited to 1/240 of their span. Maximum spacing of roof purlins shall be 6 feet. Horizontal and vertical bracing of trusses shall be in accordance with good engineering practices as required by design loads and erection requirements. (b) WALLS AND PARTITIONS: Girts shall be spaced as required by the panels. The limit of deflection shall be 1/240 of their span. They may be of hot rolled or cold-formed sections. They shall not be considered to be continuous over columns. Columns shall be spaced as required and limited by drawings. They shall be hot-rolled sections. Maximum allowable deflections shall be 1/180 of their span. 17 (c) BRACING: Standard as required by design. No moment shall be taken into the foundation. Horizontal forces at the base of the column shall be resisted by tie rods furnished and installed by the Metal Building Contractor. 18. DESIGN LOADS: All loads shall be applied as per the National Building Code: (a) Live Loads: Roof: 20 p.s.f. (b) Wind Load: 25 p.s.f. on the vertical projection. 30 p.s.f. uplift on the roof structure, including roof deck, purlins, trusses, or rigid frames, structural walls, beams and columns. (c) All building components shall be capable of resisting the most severe conditions produced by any combination of the above-mentioned loads applied in conjunction with dead loads. When wind loads are applied in conjunction with dead and live loads an overstress of 33-1/3% will be allowed. 19. PAINTING STRUCTURAL STEEL: All structural steel components, not galvanized, shall be shop cleaned thoroughly to remove all loose mill scale, rust, dirt, oil and other foreign substance and given one shop coat of a first class rust inhibitive primer on all surfaces concealed, in contact, and exposed. Scarred or damaged places must be touched up after erection. Asphaltum paint will not be accepted. Field painting of interior structural steel other than touch-up work will not be required. Exterior structural steel shall be painted with two (2) coats of oil base paint. 20. PAINTING GALVANIZED STEEL: Painting will not be required on any galvanized metal other than that specified under alternate. 21. SHOP DRAWINGS shall be submitted before construction. Drawings shall clearly indicate scope of work, type of footings, anchor bolt setting plan, and erection drawings and necessary information for proper assembly of the structure. With shop drawings, builders shall submit complete data showing structure, including doors to be compatible with the required loads. (a) All drawings and data shall bear the seal of a registered professional engineer and shall be subject to approval by the AUTHORITY. (b) Data for the metal building shall be arranged in an orderly manner beginning with a statement of the loads and continuing through the roof and wall panel components, purlins and girts, frame, walls, columns and bracing. 18 (c) Reference to standard tabular data and details developed by the building manufacturer shall be clearly explained and adequately marked. (d) Tables of section properties of all building components shall be furnished with the data unless they are included in the A.I.S.C. Manual of Steel Construction. 22. Erection shall be performed by a qualified erector using proper tools and equipment. All components and parts shall be located as shown on erection drawings supplied by the manufacturer. 23. There shall be no field welding, burning, or other field fabrication of any primary structural members, unless otherwise specified on manufacturer's drawings. 24. Hollow metal doors and frames for office spaces at ends of hangar shall be furnished with the T-hangars. Doors shall be furnished glazed with 7/32" thick glass and complete with the following hardware or equal: FOR EACH DOOR: 1-1/2 Pr. Butts STANLEY FBBK 179p 4-1/2 X 4-1/2 NRP 1 Closer CORBIN 70-6 X SBL 1 Bracket CORBIN 016-1/2=456 X SBL l Lock CORBIN 700-7551 x WBX x US26D l Stop CORBIN 360-12 x US26D 1 Threshold VON DUPRIN AL-355 Weatherstripping ZERO Series 18L. NOTE: Furnish cylinders masterkeyed to cylinders furnished with locks on access doors in bi-fold hangar doors. 19 EX-10.61 3 EXHIBIT 10.61 STOCK PLAN EXHIBIT 10.61 FEDERAL EXPRESS CORPORATION 1993 STOCK INCENTIVE PLAN 1. Purpose of Plan The purpose of the Federal Express Corporation 1993 Stock Incentive Plan (the "Plan") is to aid Federal Express Corporation (the "Company") and its subsidiaries in securing and retaining key employees and directors of outstanding ability and to provide additional motivation to such employees and directors to exert their best efforts on behalf of the Company and its subsidiaries. The Company expects that it will benefit from the added interest which such employees and directors will have in the welfare of the Company as a result of their ownership or increased ownership of the Company's Common Stock. 2. Stock Subject to the Plan The total number of shares of Common Stock of the Company that may be optioned under the Plan is 1,500,000 shares, which may consist, in whole or in part, of unissued shares or treasury shares. Any shares optioned hereunder that are canceled or cease to be subject to the option may again be optioned under the Plan. 3. Administration The Compensation Committee of the Board of Directors (the "Committee") shall administer the Plan. Except as otherwise provided herein with respect to the participation in the automatic grant of options to directors, no member of the Committee shall be eligible to participate in the Plan while serving on the Committee nor shall he or she have been at any time within one year prior to his or her appointment eligible for selection as a person to whom shares might have been optioned pursuant to the Plan or to whom stock options, stock appreciation rights, or stock of the Company or any of its affiliates may have been granted pursuant to any other plan of the Company or its affiliates. The Committee shall have the authority, consistent with the Plan, to determine the provisions of the options to be granted, to interpret the Plan and the options granted under the Plan, to adopt, amend and rescind rules and regulations for the administration of the Plan and generally to administer the Plan and to make all determinations in connection therewith which may be necessary or advisable, and all such actions of the Committee shall be binding upon all participants. Committee decisions and selections shall be made by a majority of its members present at the meeting at which a quorum is present, and shall be final. Any decision or selection reduced to writing and signed by all of the members of the Committee shall be as fully effective as if it had been made at a meeting duly held. 4. Eligibility Key employees, including officers, of the Company and its subsidiaries (but excluding members of the Committee except as provided in paragraph 7), who are from time to time responsible for the management, growth and protection of the business of the Company and its subsidiaries are eligible to be granted options under the Plan. The employees who shall receive options under the Plan shall be selected from time to time by the Committee in its sole discretion, from among those eligible, and the Committee shall determine, in its sole discretion, the number of shares to be covered by the option or options granted to each such employee selected. 5. Limitations No option may be granted under the Plan after June 1, 2003, but options theretofore granted may extend beyond that date. 6. Terms and Conditions of Stock Options All options granted under this Plan shall be subject to all the applicable provisions of the Plan, including the following terms and conditions, and to such other terms and conditions not inconsistent therewith as the Committee shall determine. (a) The option price per share for options granted to employees shall be determined by the Committee, but shall not be less than 100% of the fair market value at the time the option is granted. The fair market value shall, for all purposes of the Plan, be the mean between the high and low prices at which shares of such stock are traded on the New York Stock Exchange on the day on which the option is granted. In the event that the method for determining the fair market value of the shares provided for in this paragraph (a) shall not be practicable, then the fair market value per share shall be determined by such other reasonable method as the Committee shall, in its discretion, select and apply at the time of grant of the option concerned. (b) Each option shall be exercisable during and over such period ending not later than ten years from the date it was granted, as may be determined by the Committee and stated in the option. (c) No option shall be exercisable during the year ending on the first anniversary date of the granting of the option, except as provided in paragraphs 6(e), 6(f), 6(g) and 13 of the Plan. (d) Each option may be exercised by giving written notice to the Company specifying the number of shares to be purchased and accompanied by payment in full (including applicable taxes, if any) in cash therefor. No option shall be exercised for less than the lesser of 50 shares or the full number of shares for which the option is then exercisable. No optionee shall have any rights to dividends or other rights of a stockholder with respect to shares subject to his or her option until he or she has given written notice of exercise of his or her option, paid in full for such shares and, if requested, given the representation described in paragraph 10 of the Plan. (e) If an optionee's employment by the Company or a subsidiary or if a director's directorship terminates by reason of such person's retirement, the optionee's option may thereafter be exercised to the extent to which it was exercisable at the time of retirement but may not be exercised after the expiration of the period of twelve months from the date of such termination of employment or directorship or of the stated period of the option, whichever period is the shorter; provided, however, that if the optionee dies within twelve months after such termination of employment or directorship, any unexercised option, to the extent to which it was exercisable at the time of the optionee's death, may thereafter be exercised by the legal representative of the estate or by the legatee of the option under a last will for a period of twelve months from the date of the optionee's death or the expiration of the stated period of the option, whichever period is shorter. (f) If an optionee's employment by the Company or a subsidiary or if a director's directorship terminates by reason of permanent disability, the optionee's option may thereafter be exercised in full but may not be exercised after the expiration of the period of twelve months from the date of such termination of employment or directorship or of the stated period of the option, whichever period is the shorter; provided, however, that if the optionee dies within a period of twelve months after such termination of employment or directorship, any unexercised option, to the extent to which it was exercisable at the time of the optionee's death, may thereafter be exercised by the legal representative of the estate or by the legatee of the option under a last will for a period of twelve months from the date of the optionee's death or the expiration of the stated period of the option, whichever period is the shorter. (g) If an optionee's employment by the Company or a subsidiary or if a director's directorship terminates by reason of the optionee's death, the optionee's option may thereafter be immediately exercised in full by the legal representative of the estate or by the legatee of the option under a last will, and for a period of twelve months from the date of the optionee's death or the expiration of the stated period of the option, whichever period is the shorter. (h) If an optionee's employment or if a director's directorship terminates for any reason other than death, retirement or permanent disability, the optionee's option shall thereupon terminate. (i) The option by its terms shall be personal and shall not be transferable by the optionee otherwise than by will or by the laws of descent and distribution. During the lifetime of an optionee, the option shall be exercisable only by the optionee, or by a duly appointed legal representative. 7. Automatic Grant of Options to Directors Notwithstanding any other provision of the Plan, the grant of options hereunder to directors who are not also employees of the Company shall be subject to the following terms and conditions. (a) Immediately following each of the five consecutive Annual Meetings of the Stockholders of the Company beginning with the 1994 Annual Meeting, each director of the Company who is then incumbent and is not also an employee of the Company shall be granted a non-incentive stock option to purchase 1,000 shares of the Common Stock of the Company. (b) If, during the period beginning with the 1994 Annual Meeting and ending with the 1998 Annual Meeting, a person who is not also an employee of the Company is elected or appointed a director other than at an Annual Meeting, such person shall thereupon be granted a non-incentive stock option to purchase 1,000 shares of the Common Stock of the Company. (c) Each option granted to directors under this paragraph 7 shall be exercisable at an exercise price equal to 100% of the fair market value of the price of the Common Stock on the date of the grant, as determined in accordance with the second sentence of paragraph 6(a) hereof. (d) Each option granted to directors under this paragraph 7 shall be exercisable on and after the first anniversary of the date of grant. (e) Unless otherwise provided in the Plan, all provisions with respect to the terms of non-incentive stock options hereunder shall be applicable to stock options granted to directors. (f) The automatic grants described in this paragraph 7 shall constitute the only grants under the Plan permitted to be made to directors who are not also employees of the Company. 8. Designation of Certain Options as Incentive Stock Options Options or portions of options granted to employees hereunder may, in the discretion of the Committee, be designated as "incentive stock options" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). In addition to the terms and conditions contained in paragraph 6 hereof, options designated as incentive stock options shall also be subject to the condition that the aggregate fair market value (determined at the time the options are granted) of the Company's Common Stock with respect to which incentive stock options are exercisable for the first time by any individual employee during any calendar year (under this Plan and all other similar plans of the Company and its subsidiaries) shall not exceed $100,000. 9. Loans to Optionees The Company may make interest-free demand loans to holders of options which are not designated or qualified hereunder or by the Code as "incentive stock options" for the purpose of exercising such options and/or for the purpose of enabling optionees to pay any tax liability associated with the exercise of any such option. Such loans shall be fully secured by shares of Common Stock of the Company and shall in any event be repayable upon the termination of the optionee's employment or directorship with the Company for any reason. The Committee shall establish written procedures concerning the application for and making of such loans. 10. Investment Representation Upon any distribution of shares of Common Stock of the Company pursuant to any provision of this Plan, the distributee may be required to represent in writing that he or she is acquiring such shares for his or her own account for investment and not with a view to, or for sale in connection with, the distribution of any part thereof. The certificates for such shares may include any legend which the Company deems appropriate to reflect any restrictions on transfers. 11. Transfer, Leave of Absence, Etc. For the purpose of the Plan: (a) a transfer of an employee from the Company to a subsidiary, or vice versa, or from one subsidiary to another, and (b) a leave of absence, duly authorized in writing by the Company, shall not be deemed a termination of employment. 12. Rights of Employees and Others (a) No person shall have any rights or claims under the Plan except in accordance with the provisions of the Plan. (b) Nothing contained in the Plan shall be deemed to give any employee the right to be retained in the service of the Company or its subsidiaries. 13. Changes in Capital or Control If the outstanding Common Stock of the Company subject to the Plan shall at any time be changed or exchanged by declaration of a stock dividend, stock split, combination of shares, recapitalization, merger, consolidation or other corporate reorganization in which the Company is the surviving corporation, the number and kind of shares subject to this Plan and the option prices shall be approximately and equitably adjusted so as to maintain the option price thereof. Notwithstanding any other provision of the Plan, upon the occurrence of a Change in Control, as hereinafter defined, each holder of an unexpired option under the Plan shall have the right to exercise such option in whole or in part without regard to the date that such option would be first exercisable, except that no option may be exercised less than six months from the date of grant, and such right shall continue, with respect to any such holder whose employment with the Company or subsidiary or whose directorship on the Board of Directors terminates following a Change in Control, for a period ending on the earlier of the date of expiration of such option or the date which is twelve months after such termination of employment or directorship. For purposes of the Plan, a "Change in Control" of the Company shall be deemed to have occurred if: (a) any person, as such term is used in Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, as amended, becomes a beneficial owner (within the meaning of Rule 13d-3 under such Act) of 20% or more of the Company's outstanding Common Stock; (b) there occurs within any period of two consecutive years any change in the directors of the Company such that the members of the Company's Board of Directors prior to such change do not constitute a majority of the directors after giving effect to all changes during such two-year period unless the election, or the nomination for election by the Company's stockholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period; or (c) the Company is merged, consolidated or reorganized into or with, or sells all or substantially all of its assets to, another corporation or other entity, and immediately after such transaction less than 80% of the voting power of the then-outstanding securities of such corporation or other entity immediately after such transaction is held in the aggregate by holders of the Company's Common Stock immediately before such transaction. In addition, if the Company enters into an agreement or series of agreements or the Board of Directors of the Company adopts a resolution which results in the occurrence of any of the foregoing events, and the employment or directorship of a holder of an option under the Plan is terminated after the entering into of such agreement or series of agreements or the adoption of such resolution, then, upon the occurrence of any of the events described above, a Change in Control shall be deemed to have retroactively occurred on the date of entering into of the earliest of such agreements or the adoption of such resolution. 14. Use of Proceeds Proceeds from the sale of shares pursuant to options granted under this Plan shall constitute general funds of the Company. 15. Amendments The Board of Directors may discontinue the Plan and the Committee may amend the Plan from time to time, but no amendment, alteration or discontinuation shall be made which, without the approval of the stockholders, would: (a) Except as provided in paragraph 13 of the Plan, increase the total number of shares reserved for the purposes of the Plan; (b) Decrease the option price of an option to less than 100% of the fair market value on the date of the granting of the option; (c) Extend the duration of the Plan; or (d) Amend or modify paragraph 7 of the Plan.8 Neither shall any amendment, alteration or discontinuation impair the rights of any holder of an option theretofore granted without the optionee's consent; provided, however, that if the Committee after consulting with management of the Company determines that application of an accounting standard in compliance with any statement issued by the Financial Accounting Standards Board concerning the treatment of employee stock options would have a significant adverse effect on the Company's financial statements because of the fact that options granted before the issuance of such statement are then outstanding, then the Committee in its absolute discretion may cancel and revoke all outstanding options to which such adverse effect is attributed and the holders of such options shall have no further rights in respect thereof. Such cancellation and revocation shall be effective upon written notice by the Committee to the holders of such options. STOCK OPTION AGREEMENT PURSUANT TO FEDERAL EXPRESS CORPORATION 1993 STOCK INCENTIVE PLAN A STOCK OPTION for a total of ________ shares of Common Stock, par value $.10 per share, of Federal Express Corporation, a Delaware corporation (the "Company"), is hereby granted to _____________________ (the "Optionee"), at the price determined as provided herein, and in all respects subject to the terms, definitions and provisions of the Company's 1993 Stock Incentive Plan (the "Plan"), which is incorporated herein by reference. 1. OPTION PRICE. The option price is $________ for each share, being one hundred percent (100%) of the fair market value, as determined by the Committee, of the Common Stock on the date of grant of this Option. 2. EXERCISE OF OPTION. This Option shall be exercisable in accordance with provisions of Section 6 of the Plan as follows: (i) SCHEDULE OF RIGHTS TO EXERCISE. Twenty percent (20%) after one year from the date of grant; forty percent (40%) after two years; sixty percent (60%) after three years; eighty percent (80%) after four years; and one hundred percent (100%) after five years. (ii) METHOD OF EXERCISE. This Option shall be exercisable by a written notice which shall: (a) state the election to exercise the Option, the number of shares in respect of which it is being exercised, the person in whose name the stock certificate or certificates for such shares of Common Stock is to be registered and the address and Social Security Number of such person (or if more than one, the names, addresses and Social Security Numbers of such persons); (b) contain such representations and agreements as to the holder's investment intent with respect to such shares of Common Stock as may be satisfactory to the Company's counsel; (c) be signed by the person or persons entitled to exercise the Option and, if the Option is being exercised by any person or persons other than the Optionee, be accompanied by proof, satisfactory to counsel for the Company, of the right of such person or persons to exercise the Option; and (d) be in writing and delivered in person or by first class or interdepartmental mail to the President of the Company or his designee. Payment of the purchase price of any shares with respect to which the Option is being exercised shall be by certified or bank cashier's check. (iii) RESTRICTIONS ON EXERCISE. This Option may not be exercised if the issuance of the shares upon such exercise would constitute a violation of any applicable federal or state securities or other law or regulation. As a condition to the exercise of this Option, the Company may require the person exercising this Option to make any representation and warranty to the Company as may be required by any applicable law or regulation. 3. DESIGNATION OF CERTAIN OPTION SHARES AS INCENTIVE STOCK OPTIONS. The maximum number of option shares granted hereunder are (as permitted by Section 7 of the Plan) hereby designated incentive stock options, as that term is defined in Section 422(b) of the Internal Revenue Code (the "ISO Shares"). Pursuant to the exercise schedule as provided in Section 2(i) of this Agreement, the number of ISO Shares and non-qualified option shares ("NQO Shares") exercisable on and after the anniversaries described in such Section 2(i) shall be as set forth in the table below; provided, however, that if pursuant to any provision of the Plan or amendment to this Agreement any of the option shares hereby granted become exercisable sooner than as provided in Section 2(i) hereof, then the number of option shares that may be ISO Shares shall, notwithstanding the table below, be limited to the quotient obtained by with respect to any calendar year during which they are first exercisable shall, notwithstanding the table below, be limited to the quotient obtained by dividing $100,000 by the option price set forth in Section 1 hereof. Anniversary of Grant Date ISO Shares NQO Shares -------------- ---------- ---------- (i) NOTICE TO COMPANY OF DISPOSITION OF ISO SHARES. Optionee agrees that, in the event the Optionee disposes of any of the ISO Shares within one year after the date of exercise of the option to purchase same, the Optionee will promptly notify the Company of such disposition. Such notice shall be in writing and shall specify (i) the number of ISO Shares so disposed of, (ii) the price paid for such shares by the Optionee upon the exercise of the option, and (iii) the price or other consideration received for such shares. All certificates for Common Stock issued upon the exercise of an option to purchase ISO Shares shall bear such legend or other distinctive impression, as determined by the Committee, as will notify the transfer agent of such stock to advise the Company of the disposition of ISO Shares within one year after the issuance thereof. 4. TRANSFERABILITY OF OPTION. This Option may not be transferred in any manner otherwise than by will or the laws of descent or distribution and may be exercised during the lifetime of the Optionee only by the Optionee. The terms of this Option shall be binding upon the heirs, personal representatives and successors of the Optionee. 5. TERM OF OPTION. This Option may not be exercised more than ten (10) years from the date of grant of this Option, as set forth below, and may be exercised during such term only in accordance with the Plan and the terms of this Option. 6. OPTIONEE ACKNOWLEDGMENT. Optionee acknowledges receipt of a copy of the Plan, which is annexed hereto, and represents that such Optionee is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all the terms and provisions thereof. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Plan or this Option. Date of Grant: ___________________. FEDERAL EXPRESS CORPORATION By:________________________ CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER ___________________________ OPTIONEE EX-10.63 4 EXHIBIT 10.63 AMEND STOCK PLAN EXHIBIT 10.63 AMENDMENT TO FEDERAL EXPRESS CORPORATION 1983, 1984, 1987, 1989 AND 1993 STOCK INCENTIVE PLANS Paragraph 12 of the Company's 1983, 1984 and 1987 Stock Incentive Plans, as amended, are amended by adding the following phrase to the first sentence of each such paragraph after the words "first exercisable" and before the words "and such right" in the sixth line of each such paragraph: , except that no option may be exercised less than six months from the date of grant, Paragraph 13 of the Company's 1989 Stock Incentive Plan, as amended, is amended by adding the following phrase to the first sentence of such paragraph after the words "first exercisable" and before the words "and such right" in the sixth line of such paragraph: , except that no option may be exercised less than six months from the date of grant, Paragraph 15 of the Company's 1989 and 1993 Stock Incentive Plans, as amended, are amended by adding to each such paragraph the following sentence after subparagraph (d) of such paragraph: Notwithstanding subparagraph (d) above, paragraph 7 shall not be amended more than once every six months, other than to comply with changes in the tax laws. Adopted by the Compensation Committee of the Board of Directors of the Company on July 18, 1994. EX-10.70 5 EXHIBIT 10.70 AMEND CREDIT AGREE FIRST AMENDMENT TO FEDERAL EXPRESS CORPORATION CREDIT AGREEMENT This First Amendment (this "Amendment") is entered into as of December 1, 1993 by and among FEDERAL EXPRESS CORPORATION (the "Borrower"), the Lenders party to the Agreement (as hereinafter defined), and THE FIRST NATIONAL BANK OF CHICAGO as agent (in such capacity the "Agent"). The parties hereto agree as follows: WHEREAS, the Borrower, the Lenders, and the Agent are parties to that certain Credit Agreement dated as of May 7, 1993 (the "Agreement"); and WHEREAS, the Borrower has requested certain amendments of the Agreement and the Lenders and the Agent have agreed to the requested amendments upon the conditions set forth in this Amendment; NOW, THEREFORE, the parties hereto hereby agree as follows: 1. DEFINED TERMS. Capitalized terms used and not otherwise defined in this Amendment shall have the meanings attributed to them in the Agreement. 2. AMENDMENT OF AGREEMENT. The Agreement is hereby amended as follows: (a) The following definition is inserted in Article I (Definitions) in the appropriate alphabetical position: "'Dealer' means a Lender, First Tennessee Bank, N.A., Union Planters National Bank of Memphis or any other national or state bank or trust company or dealer or broker of government securities having either (A) capital, surplus and undivided profits or (B) total equity of at least $250,000,000, or any affiliate thereof authorized to deal in the commercial products described in clauses (i), (ii), and (iii) of Section 6.17(e)." (b) Section 6.1(ii) is deleted in its entirety and the following is inserted in lieu thereof: "(ii) Within 45 calendar days after the end of each of the first three quarters of each fiscal year of the Borrower, for itself and the Consolidated Subsidiaries, consolidated unaudited balance sheets as at the close of each such period and consolidated profit and loss and reconciliation of surplus statements and a statement of cash flows for the period from the beginning of such fiscal year to the end of such quarter, all certified as complete and accurate and prepared in accordance with GAAP by its Financial Officer, Treasurer or Controller. (c) Section 6.17(e) is deleted in its entirety and the following is inserted in lieu thereof. "(e) For a period not in excess of one year, (i) marketable direct obligations of the United States of America, or an instrumentality or agency thereof, or (ii) instruments fully supported by marketable direct obligations of the United States of America, or an instrumentality or agency thereof, or (iii) open market commercial paper maturing within one year after acquisition of such commercial paper, which is rated A1 or better by S&P or P1 or better by Moody's; in each case, purchased by the Borrower or a Consolidated Subsidiary and actually Page 1 delivered to or held by a Dealer for the account of the Borrower or a Consolidated Subsidiary under a repurchase agreement with the Dealer from which such obligations or commercial paper was purchased obligating such Dealer to repurchase such obligations or commercial paper within fourteen calendar days after the date of such repurchase agreement," 3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby confirms, reaffirms and restates the representations and warranties set forth in Article V of the Agreement as of the Effective Date (as defined in Section 4 of this Amendment) as though such representations and warranties were fully set forth herein. A Default under and as defined in the Agreement as amended by this Amendment shall be deemed to have occurred if any representation or warranty made pursuant to the preceding sentence shall be materially false on the date as of which it was made. 4. EFFECTIVE DATE. This Amendment shall become effective as of the date first written above (the "Effective Date") upon receipt by the Agent of counterparts of this Amendment duly executed by the Borrower, the Agent and the Required Lenders. 5. RATIFICATION. Except as amended hereby, the Agreement shall remain in full force and effect and is hereby ratified, approved, and confirmed in all respects. Upon the effectiveness of this Amendment, all references in the Agreement to "this Agreement" (and all indirect references such as "hereby," "herein," "hereof" and "hereunder") shall be deemed to be references to the Agreement as amended by this Amendment. 6. COUNTERPARTS. This Amendment may be executed in separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument. 7. ENTIRE AGREEMENT. This Agreement, the Agreement as amended hereby, and the other Loan Documents embody the entire agreement and understanding among the Borrower, the Agent and the Lenders and supersede any and all prior agreements and understandings among the Borrower, the Agent and the Lenders relating to the subject matter thereof. 8. GOVERNING LAW. This Amendment and the rights and obligations of the parties hereto shall be construed in accordance with and governed by the laws of the State of Illinois (without giving effect to any conflicts of law provisions contained therein). IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed as of the date first written above. FEDERAL EXPRESS CORPORATION By /s/ Charles M. Buchas, Jr. ------------------------------------- Charles M. Buchas, Jr. Vice President and Treasurer THE FIRST NATIONAL BANK OF CHICAGO individually and as Agent By /s/ William S. Lear ------------------------------------- William S. Lear Senior Vice President Page 2 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By ------------------------------------- Name ----------------------------------- Title ---------------------------------- BANK OF HAWAII By ------------------------------------- Name ----------------------------------- Title ---------------------------------- Page 3 EX-11.1 6 EXHIBIT 11.1 COMPUTATION EXHIBIT 11.1 FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE Net income (loss) applicable to common and common equivalent shares and the weighted average number of shares used in the calculation of earnings (loss) per share for the years ended May 31 were as follows (in thousands, except earnings per share amounts):
YEAR ENDED MAY 31 ---------------------------------- 1994 1993 1992 ------- ------- ------- Income (loss) before cumulative effect of change in accounting principle . . . . . . . . . . . $204,370 $ 109,809 $(113,782) Cumulative effect of change in accounting for postretirement benefits, net of tax benefit . . . . . . - (55,943) - -------- --------- --------- Net income (loss) applicable to common and common equivalent shares. . . . . . . . . . . . . . . . $204,370 $ 53,866 $(113,782) -------- --------- --------- -------- --------- --------- Average shares of common stock outstanding . . . . . . . 55,333 54,370 53,770 Common Equivalent Shares: Assumed exercise of outstanding dilutive options . . . . . . . . . . . . . . . . . . . 2,867 2,213 1,831 Less shares repurchased from proceeds of assumed exercise of options. . . . . . . . . . . . . . (2,188) (1,864) (1,640) -------- --------- --------- Average common and common equivalent shares . . . . . . 56,012 54,719 53,961 -------- --------- --------- -------- --------- --------- Earnings (loss) per share: Before cumulative effect of change in accounting principle . . . . . . . . . . . . . . . . . $ 3.65 $ 2.01 $ (2.11) Cumulative effect of change in accounting for postretirement benefits. . . . . . . . . . . . . . . . - (1.03) - -------- --------- --------- Net earnings (loss) per share. . . . . . . . . . . . . . $ 3.65 $ .98 $ (2.11) -------- --------- --------- -------- --------- ---------
- - The computation of the number of shares repurchased from the proceeds of the assumed exercise of outstanding dilutive options is based upon the average market price of the Company's Common Stock during the periods. Common equivalent shares are excluded in periods in which their assumed exercise would have an anti-dilutive effect. - - Fully diluted earnings per share are substantially the same as earnings per share for the years ended May 31, 1994, 1993 and 1992. EX-12.1 7 EXHIBIT 12.1 COMPUTATION FIXED EXHIBIT 12.1 FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Unaudited)
Year Ended May 31, -------------------------------------------------------------------------- 1990 1991 1992 1993 1994 ------------- ------------ ------------ ------------- ------------ (In thousands, except ratios) Earnings: Income (loss) before income taxes . . . . . . . . . . . $218,423 $ 40,942 $(146,828) $203,576 $378,462 Add back: Interest expense, net of capitalized interest . . . 199,237 196,982 176,321 168,762 152,170 Amortization of debt issuance costs . . . . . . 2,989 1,634 2,570 4,906 2,860 Portion of rent expense representative of interest factor. . . . . . 248,830 292,840 299,012 262,724 285,261 -------- -------- -------- -------- -------- Earnings as adjusted. . . . . . . . . . $669,479 $532,398 $ 331,075 $639,968 $818,753 -------- -------- --------- -------- -------- -------- -------- --------- -------- -------- Fixed Charges: Interest expense, net of capitalized interest . . . . . . . $199,237 $196,982 $176,321 $168,762 $152,170 Capitalized interest. . . . . . . . . . 16,986 35,442 26,603 31,256 29,738 Amortization of debt issuance costs. . . . . . . . . . . . . . . 2,989 1,634 2,570 4,906 2,860 Portion of rent expense representative of interest factor. . . . . . . . . . 248,830 292,840 299,012 262,724 285,261 -------- -------- -------- -------- -------- $468,042 $526,898 $504,506 $467,648 $470,029 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Ratio of Earnings to Fixed Charges. . . 1.4 1.0 (A) 1.4 1.7 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- (A) Earnings were inadequate to cover fixed charges by $173.4 million for the year ended May 31, 1992.
EX-13.1 8 EXHIBIT 13.1 AR Financial Highlights Federal Express Corporation and Subsidiaries
Years ended May 31 - ------------------------------------------------------------------------------------------------------------------- In thousands, except per share amounts and Other Operating Data 1994 1993 % Change OPERATING RESULTS Revenues $8,479,456 $7,808,043 + 9 Operating income 530,632 377,173 + 41 Income before income taxes 378,462 203,576 + 86 Income before cumulative effect of change in accounting principle 204,370 109,809 + 86 Net income 204,370 53,866 +279 Earnings per share: Before cumulative effect of change in accounting principle 3.65 2.01 + 82 Earnings per share $ 3.65 $ .98 +272 Average shares outstanding 56,012 54,719 + 2 FINANCIAL POSITION Property and equipment, net $3,449,093 $3,476,268 - 1 Total assets 5,992,498 5,793,064 + 3 Long-term debt 1,632,202 1,882,279 - 13 Common stockholders' investment 1,924,705 1,671,381 + 15 OTHER OPERATING DATA* Express package: Average daily package volume 1,925,105 1,710,561 + 13 Average pounds per package 6.0 5.8 + 3 Average revenue per pound $ 2.48 $ 2.60 - 5 Average revenue per package $ 14.95 $ 15.17 - 2 Airfreight: Average daily pounds 1,844,270 2,050,033 - 10 Average revenue per pound $ 1.06 $ 1.09 - 3 Operating weekdays 257 255 Aircraft fleet 458 461 Vehicle fleet 30,900 28,100 Average number of employees (based on a standard full-time workweek) 88,502 84,104 - ------------------------------------------------------------------------------------------------------------------- * Beginning in 1994, U.S. domestic express airfreight is reported as package volume in express package operating data rather than as pounds in airfreight operating data. Data for 1993 has been restated to conform to this presentation.
17 Financial Section 26 MANAGEMENT'S DISCUSSION AND ANALYSIS 33 CONSOLIDATED STATEMENTS OF OPERATIONS 34 CONSOLIDATED BALANCE SHEETS 36 CONSOLIDATED STATEMENTS OF CASH FLOWS 37 CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' INVESTMENT 38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 51 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 52 SELECTED CONSOLIDATED FINANCIAL DATA 25 MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS In 1994, the Company recorded the highest annual net income and earnings per share in its history. These results, which are significantly better than the prior three years, are largely due to improvements in the Company's international operations. During 1991 to 1993, management introduced key initiatives which reduced the size and scope of the Company's international operations. These initiatives, along with growth in the Company's intercontinental express business, have produced consistently lower international losses since 1992. The Company's U.S. domestic operations, in comparison, have been pressured by increased competition and unfavorable economic conditions. These factors combined with declines in average revenue per package (yield), which has declined faster than the cost per package, have reduced U.S. domestic operating profits and margins since 1991. Consolidated net income for 1994 was $204 million ($3.65 per share) compared with net income of $54 million ($.98 per share) in 1993 and a net loss of $114 million ($2.11 per share) in 1992. The following factors affecting comparability should be considered when reviewing these results. In 1993, the Company adopted Statement of Financial Accounting Standards No. 106, "Accounting for Postretirement Benefits Other Than Pensions." The adoption of this standard resulted in a cumulative after-tax charge of $56 million ($1.03 per share) and increased 1993 operating expense by $15 million ($.16 per share after tax). Earnings for 1992 included pre-tax charges of $254 million ($3.12 per share after tax) related to a restructuring of operations in Europe and the United Kingdom. This restructuring eliminated certain intra-European and intra-country services that were incompatible with the Company's express business and substantially reduced the costs associated with serving certain European markets. A comparison of consolidated results, excluding the effects of the cumulative charge related to the 1993 adoption of SFAS No. 106 and the restructuring charge in 1992, is presented below:
Years ended May 31 - ------------------------------------------------------------------ In millions, except per share data 1994 1993 1992 Revenues $8,479 $7,808 $7,550 Operating income 531 377 277 Pre-tax income 378 204 107 Net income 204 110 55 Earnings per share $ 3.65 $ 2.01 $ 1.01
Revenue growth for 1992 to 1994 is primarily the result of increased U.S. domestic revenues associated with double-digit express package volume growth and year-over-year increases in the Company's intercontinental express business partially offset by declining international airfreight revenues. 26 Federal Express Corporation and Subsidiaries Total operating expenses increased 7.0% in 1994 compared with 1993 and declined 1.3% in 1993 compared with 1992. The table below shows a comparison of operating expenses for 1992 to 1994:
Years ended May 31 - ------------------------------------------------------------------------------------------ Dollars in millions 1994 1993 1992 1993 to 1994 1992 to 1993 Salaries and employee benefits $4,105 $3,808 $3,637 + 7.8% + 4.7% Rentals and landing fees 703 658 672 + 6.8 - 2.1 Depreciation and amortization 599 580 577 + 3.3 + 0.5 Fuel 473 495 509 - 4.4 - 2.8 Maintenance and repairs 465 405 404 + 14.8 + 0.2 Restructuring charge -- (13) 254 -- -- Other 1,604 1,498 1,474 + 7.1 + 1.6 -------------------------- $7,949 $7,431 $7,527 + 7.0 - 1.3 -------------------------- --------------------------
Salaries and employee benefits for 1992 to 1994 have increased primarily due to increased employee headcount associated with growing U.S. domestic volumes. Improved productivity, however, has resulted in lower salaries and benefits on a per package basis. A portion of the 7.8% increase in 1994 is attributable to provisions under the Company's performance-based incentive compensation plans which are related to overall profitability. The 4.7% increase in 1993, in addition to increased employee headcount, was due to postretirement health care provisions under SFAS No. 106, rising workers' compensation claims and health care costs. In 1994, the Company experienced significant decreases in its workers' compensation expense and only modest increases in its group health care expense. These results are primarily attributable to favorable claims experience in both the group health care and workers' compensation plans and actions by management to establish managed health care and safety programs. The 6.8% increase in rentals and landing fees in 1994 is primarily due to rentals for additional leased MD-11 aircraft. Rentals and landing fees decreased in 1993 because of lower landing fees and a reduced need for leased aircraft associated with restructured operations in Europe. It is expected that rent expense will increase in 1995 because of Airbus A300 and A310 aircraft leases. Fuel expense for 1992 to 1994 has declined primarily because of lower average aircraft fuel prices (6.9% and 1.0% declines in 1994 and 1993, respectively) and reduced aircraft fuel consumption (1.4% and 1.0% declines in 1994 and 1993, respectively) attributable to the utilization of more fuel-efficient aircraft. In prior years, fuel expense has been greatly impacted by widely fluctuating per-gallon costs of aircraft fuel. Management takes steps to mitigate significant price fluctuations by entering into fuel price agreements for some of the Company's fuel. These agreements confine the fuel price per gallon within a close range of the current market price. Under the Omnibus Budget Reconciliation Act of 1993, a 4.3 cents per gallon increase in the excise tax on aviation fuel will become effective beginning in October 1995. For 1994 consumption levels, this increase in excise tax would have increased the Company's annual aircraft fuel expense by approximately $24 million. Maintenance and repairs expense increased 14.8% in 1994 primarily because of DC-10 and MD-11 engine maintenance. Scheduled aircraft maintenance generally follows a predictable pattern over the life of the aircraft. Year-over-year variations in maintenance and repairs expense occur because of a combination of factors: timing of aircraft deliveries, condition of the aircraft at delivery, utilization, and specifics of an aircraft's maintenance program. Certain combinations of these factors can condense scheduled maintenance into cyclical peaks. In 1994, such a cyclical peak related to DC-10 engines resulted in greater maintenance and repairs expense. Also in 1994, maintenance and repairs expense increased because of the expansion of the MD-11 fleet 27 from eight to thirteen aircraft and the beginning of scheduled maintenance related to the initial MD-11 aircraft acquired. Maintenance and repairs expense, in addition to scheduled maintenance, is impacted by periodic maintenance directives issued by regulatory agencies. The Company is currently evaluating the impact of regulatory maintenance directives as they relate to B727 and MD-11 aircraft engines. It is anticipated that the requirements of these maintenance directives along with the continued expansion and maturation of the Company's fleet will result in increased maintenance and repairs expense in 1995 and beyond. OTHER INCOME AND EXPENSE AND INCOME TAXES Net interest expense declined $19 million in 1994. This decline is primarily due to lower debt levels and reduced interest rates on borrowings. A decline of $3 million in 1993 is principally the result of lower interest rates on borrowings. The increase in Other, net for 1993 was primarily due to a write-off of deferred financing costs and the call premium from a refunding of approximately $96 million of Memphis-Shelby County Airport Authority Special Facilities Revenue Bonds and a write-off of deferred financing costs related to an early redemption of $100 million of 10 5/8% Senior Notes. The Company's effective tax rate for 1994 was 46.0% compared with rates of 46.1% and 48.9% for 1993 and 1992, respectively, excluding the effect of the restructuring charge for 1992. In each year, the effective tax rate exceeded the statutory U.S. federal tax rate primarily because of state income taxes and the impact of foreign operations. U.S. DOMESTIC SERVICES Operating results and selected express package statistics for U.S. domestic services were as follows:
Years ended May 31 - ------------------------------------------------------------------------------- Dollars in millions, except yields 1994 1993 1992 Revenues $6,200 $5,668 $5,195 Operating income 560 559 636 Operating margin 9.0% 9.9% 12.2% Express package statistics: Average daily packages (000's) 1,792 1,596 1,364 Revenue per package $13.20 $13.52 $14.56 Package mix: Priority Overnight 49% 51% 55% Economy Two-Day 26% 24% 21% Standard Overnight 25% 25% 24% Operating weekdays 257 255 254
The Company's U.S. domestic results for 1992 to 1994 have been influenced by a market in which customers have demanded high quality express delivery services at lower prices. Furthermore, in the U.S. domestic express market, customers can select from a number of express delivery providers. These two factors have combined to create a very price-sensitive U.S. domestic express market. 28 Federal Express Corporation and Subsidiaries Management's response to these economic and competitive conditions was to increase the level of discounting and to offer new, lower-priced deferred services. These actions resulted in lower revenues per package and faster growth in lower-priced, deferred services compared with premium-priced priority services. At the same time, productivity measures continued to reduce cost per package. These actions have resulted in consistently greater volumes and revenues but lower operating profits because declines in yield have exceeded declines in cost per package. This trend is expected to continue in 1995. Revenues increased 9% in 1994 and 1993 while operating expenses, though declining on a per package basis, increased 10% and 12% over these same periods. Operating income remained essentially flat in 1994 and fell 12% in 1993. In 1994, the Company's operations were affected by severe weather during the winter months in the eastern United States, an earthquake in Southern California and less than anticipated package volumes from holiday operations during the last week of December. Furthermore, the Company's B747 aircraft were transferred from international to U.S. domestic operations beginning in March 1993 in conjunction with flight schedule adjustments and aircraft capacity reduction on certain international routes. The B747 aircraft are not as efficient on U.S. domestic routes as B727 or DC-10 aircraft. Despite the additional costs associated with the above, the Company was able to continue to reduce the decline in U.S. domestic operating margins. The Company is working to improve its current level of U.S. domestic profitability by seeking further means to lower costs, managing the decline in yield, and cultivating close working relationships with its customers. To lower average transaction costs, the Company will replace certain of its older aircraft with Airbus A300 and A310 aircraft. Despite higher ownership costs, these aircraft are expected to produce immediate benefits with relatively lower fuel, maintenance and crew costs. The most significant benefit of using these aircraft will ultimately be realized on routes where more than one B727 aircraft can be replaced with a single A300 or A310 aircraft and where incremental volume can be absorbed without additional aircraft. The Company is also reducing handling expenses through automation of its major processes that support package pick-up, delivery, sorting and transportation operations. As part of the process of reducing costs by optimizing the Company's air and ground distribution system, management has attempted through legislative and judicial avenues to eliminate intrastate transportation regulations which, in certain jurisdictions, restrict the use of ground transportation. Though some success has been achieved, significant regulatory barriers still exist that prevent the maximum use of the Company's lower-cost ground transportation network. On a year-over-year basis beginning in the second half of 1993, the Company has been able to slow the rate of yield declines for its higher-yielding priority services. This is attributable to programs intended to moderate the level of discounting, to promote heavier weights per package and to attract lower-volume but higher-yielding customers. It is expected that yield will continue to fall primarily due to faster growth in deferred services compared with priority services and selective discounting. Management recognizes the importance of enhancing effective working relationships with its customers, especially in the highly competitive market in which the Company operates. Accordingly, plans are under way to increase the number of convenience locations, implement direct aircraft service to new locations, develop alliances with retail businesses and increase the placement of customer automation devices. In addition, the Company plans to intensify its sales and marketing efforts by increasing its advertising expenditures, adding sales personnel, and targeting selected customer groups for special marketing promotions. 29 Management's Discussion and Analysis INTERNATIONAL SERVICES Operating results and selected express and airfreight statistics for international operations, excluding a restructuring charge of $254 million in 1992, were as follows:
Years ended May 31 - -------------------------------------------------------------------------------- Dollars in millions, except yields 1994 1993 1992 Revenues: International Priority Services (IP) $1,318 $1,117 $1,039 International EXPRESSfreight (IXF) and Airport-to-Airport (ATA) airfreight services 505 570 700 Charter 113 112 188 International FedEx Logistics Services and other 344 341 428 ------------------------------ 2,280 2,140 2,355 Operating loss $ (29) $ (182) $ (359) Operating margin (1.3)% (8.5)% (15.2)% Express and airfreight statistics: Average daily IP packages (000's) 133 115 108 Revenue per package $38.60 $38.18 $37.54 Average daily airfreight pounds (000's) 1,844 2,050 2,258 Revenue per pound $ 1.06 $ 1.09 $ 1.22 Operating weekdays 257 255 254
During 1991 to 1994, the Company took actions which have dramatically reduced losses from international operations during the last two years. In 1991, the EXPRESSfreighter system was introduced which gave the Company competitive advantages for its premium international express package service (IP) from key Asian and European countries. In 1992, the Company restructured its European operations by discontinuing certain intra-region and intra-country services in Europe and the United Kingdom. In 1993, the Company adjusted its flight schedules to reduce flight hours, reduced its aircraft capacity on certain international routes through equipment changes and eliminated certain airfreight terminal operations. In 1994, these actions along with year-over-year growth in IP revenue, volumes and yields have combined to substantially reduce international losses and, in the second and fourth quarters, produce operating profits. The international operating loss, excluding a restructuring charge in 1992, declined 84% and 49% in 1994 and 1993, respectively. Revenues increased 7% in 1994 compared with 1993 and decreased 9% in 1993 compared with 1992 while operating expenses, excluding the restructuring charge, declined 1% and 14% in 1994 and 1993, respectively. IP revenues increased 18% and 8% in 1994 and 1993, respectively, while volumes increased 16% and 6% for these same periods. Excluding certain intra-European services that were discontinued in 1992, IP revenue and volume growth in 1993 would have been approximately 17% and 15%, respectively. IP yields increased 1% and 2% in 1994 and 1993, respectively. Competitive service advantages, increased penetration of global businesses and aggressive sales and marketing promotions are largely responsible for IP revenue and volume growth. Yields, especially in the Far East, were bolstered by an increasing proportion of packages to documents and selected pricing actions. 30 Federal Express Corporation and Subsidiaries Airfreight revenues (ATA and IXF) decreased 11% and 19% in 1994 and 1993, respectively. These decreases reflect declines in volumes (10% and 9% in 1994 and 1993, respectively) and declines in yields (3% and 11%, respectively). The Company's ATA service operates in a very competitive and price-sensitive market with a large number of participants offering relatively similar services. Consequently, ATA prices, in large part, are determined by market conditions. The Company's IXF service is an alternative to ATA which features space confirmation and time-definite delivery for its higher price. The space-confirmed aspect of IXF creates advantages particularly during seasons of peak volume and for customers who ship to or from U.S. locations without direct international air service. During 1994, IXF prices were lowered relative to ATA. As a result, there was greater growth in IXF than ATA which resulted in a larger percentage of IXF revenue to total airfreight revenue than in 1993. This change in airfreight mix had the effect of stabilizing airfreight yields which helped improve the Company's overall international results. Charter revenues remained flat in 1994 and decreased 40% in 1993. The decrease in 1993 is the result of the Company discontinuing its passenger charter service with the U.S. Military Airlift Command and a comparatively higher level of military charters during 1992's first quarter related to Operation Desert Storm. Sustained improvement in the Company's international operations is dependent on continued growth in IP, the Company's ability to manage incremental costs associated with that growth and system efficiencies. To promote IP growth, aggressive sales and marketing efforts will target time-sensitive industries to capture new business. Also, as economic conditions improve in certain global markets, the Company's distribution network will be positioned to benefit from increased volumes associated with the respective recoveries. To contain costs, management will monitor customer demand patterns and make changes to its distribution network to make optimum use of company resources. Furthermore, through technological advances that aid in the sorting, routing and delivery of packages, the Company has the ability to add incremental volume without adding a corresponding amount of incremental cost. - ------------------------------------------------------------------------------- FINANCIAL CONDITION CAPITAL EXPENDITURES AND RESOURCES The Company's operations are capital intensive, characterized by significant investments in aircraft, package handling facilities, sort equipment, vehicles, and computer and telecommunication equipment. The amount and timing of capital additions are dependent on various factors including volume growth, new or enhanced services, geographical expansion of services, competition and availability of satisfactory financing. Capital expenditures for 1994 totaled $1.1 billion and included five MD-11 aircraft (all of which, together with a sixth aircraft acquired in 1993, were subsequently sold and leased back), three B727-200 aircraft, deposits on future Airbus A300 aircraft, vehicle and ground support equipment, and customer automation and computer equipment. In comparison, prior year expenditures totaled $1.0 billion and included four MD-11 aircraft, nineteen B727-200 aircraft, deposits on MD-11 and Airbus A300 aircraft, aircraft equipment, facilities expansion, sort equipment, vehicle fleet additions and computer and customer automation equipment. At May 31, 1994, the Company had commitments aggregating approximately $1.6 billion, net of deposits and progress payments of $307 million, for the acquisition of 23 Airbus A300 aircraft (scheduled for delivery through 1999), aircraft modifications and related parts and the development and upgrade of aircraft simulators. An estimated $551 million will be expended in 1995, $420 million in 1996, $242 million in 1997, $298 million in 1998 and $61 million thereafter, in connection with these commitments. At May 31, 1994, the Company also had options for up to 46 additional Airbus A300 aircraft for delivery beginning in 1997. In addition, the Company has other commitments related to facility and other equipment acquisitions that 31 Managements' Discussion and Analysis approximated $321 million at May 31, 1994, of which an estimated $262 million will be expended in 1995, $16 million in 1996, $6 million in 1997, $21 million in 1998 and $16 million thereafter. The Company has historically financed its capital investments through the use of lease, debt and equity financing in addition to the use of internally generated cash from operations. Management's practice in recent years with respect to funding new aircraft acquisitions has been to finance such aircraft through long-term lease transactions that qualify as off balance sheet operating leases under applicable accounting rules. Management has determined that these operating leases provide economic benefits favorable to ownership with respect to residual value risk, liquidity and after-tax cash flows. The Company has been successful in obtaining investment capital, both U.S. domestic and international, for long-term leases on terms acceptable to it although the marketplace for such capital can become restricted depending on a variety of economic factors beyond the control of the Company. Refer to Note 3 of Notes to Consolidated Financial Statements for additional information concerning the Company's debt and credit facilities. Management believes that the capital resources available to the Company, including backstop financing for the 23 Airbus A300 aircraft the Company is committed to purchase in 1995 to 1999, $100 million of unsecured notes available under a shelf registration filed with the Securities and Exchange Commission in June 1992 and the ability to draw upon the public and private debt markets for leveraged lease financing, provide the Company with the appropriate flexibility to gain access to the most efficient market with respect to any particular aircraft acquisition and afford adequate capital resources for its future capital needs. LIQUIDITY AND FINANCIAL POSITION Cash and cash equivalents totaled $393 million, an increase of $237 million during 1994 compared with an increase of $77 million in 1993 and a decrease of $40 million in 1992. Cash provided from operations during 1994 was $767 million compared with $725 million in 1993 and $521 million in 1992. Cash from operations was significantly lower in 1992 because of substantially higher losses in international operations and a settlement of a contractual commitment with a major customer in connection with a discontinuance of certain services in the United Kingdom in 1991. The Company currently has available a $1 billion revolving bank credit facility that is generally used to finance temporary operating cash requirements and to provide support for the issuance of commercial paper. At May 31, 1993, the Company had negative working capital of $10 million. Management does not view negative working capital as an indication of lack of liquidity for either short-term or long-term purposes. Due to the highly capital-intensive nature of its business, the Company generally reinvests earnings to meet its capital requirements rather than accumulate cash and short-term investments. Furthermore, receivables are of high quality and turn over more frequently than the Company's short-term obligations. At May 31, 1994, the Company had receivables net of allowances of $1,021 million, an increase of $98 million in 1994. This 11% increase, though slightly more than the 9% increase in U.S. domestic express revenue in the year, is primarily a result of the increase in revenue rather than a deterioration in the quality or aging of the receivables. The Company has readily available sources of funds from its revolving credit facility and its commercial paper program sufficient to manage its day-to-day cash requirements. Effective June 1, 1992, the Company adopted SFAS No. 109, "Accounting for Income Taxes," which did not have a significant effect on its financial position or results of operations. At May 31, 1994, the Company had a net cumulative deferred tax asset of $109 million consisting of $454 million of deferred tax assets (including $56 million of alternative minimum tax credit carryovers which have no expiration date) and $345 million of deferred tax liabilities. The reversals of deferred tax liabilities in future periods will offset similar amounts of deferred tax assets. Based upon historical levels of taxable income, the Company believes that it is more likely than not that sufficient levels of future taxable income will be generated to realize the remaining deferred tax asset. 32 Consolidated Statements of Operations Federal Express Corporation and Subsidiaries
Years ended May 31 - ----------------------------------------------------------------------------------------------- In thousands, except per share amounts 1994 1993 1992 REVENUES $8,479,456 $7,808,043 $7,550,060 ----------------------------------------- OPERATING EXPENSES: Salaries and employee benefits (Notes 8 and 9) 4,104,800 3,807,493 3,637,080 Rentals and landing fees (Note 4) 703,028 658,138 672,341 Depreciation and amortization 599,357 579,896 577,157 Fuel 472,786 495,384 508,386 Maintenance and repairs 464,557 404,639 404,311 Restructuring charge (Note 13) -- (12,500) 254,000 Other 1,604,296 1,497,820 1,473,818 ----------------------------------------- 7,948,824 7,430,870 7,527,093 ----------------------------------------- OPERATING INCOME 530,632 377,173 22,967 ----------------------------------------- OTHER INCOME (EXPENSE): Interest, net (Note 1) (142,392) (160,923) (164,315) Other, net (9,778) (12,674) (5,480) ----------------------------------------- (152,170) (173,597) (169,795) INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 378,462 203,576 (146,828) PROVISION (CREDIT) FOR INCOME TAXES (NOTE 7) 174,092 93,767 (33,046) ----------------------------------------- INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 204,370 109,809 (113,782) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, NET OF TAX BENEFIT OF $34,287 (NOTE 9) -- (55,943) -- ----------------------------------------- NET INCOME (LOSS) $ 204,370 $ 53,866 $ (113,782) ----------------------------------------- ----------------------------------------- EARNINGS (LOSS) PER SHARE (NOTE 6): Before cumulative effect of change in accounting principle $ 3.65 $ 2.01 $ (2.11) Cumulative effect of change in accounting principle (Note 9) -- (1.03) -- ----------------------------------------- $ 3.65 $ .98 $ (2.11) ----------------------------------------- ----------------------------------------- AVERAGE SHARES OUTSTANDING (NOTE 6) 56,012 54,719 53,961 ----------------------------------------- -----------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 33 Consolidated Balance Sheets
May 31 - ------------------------------------------------------------------------------------ In thousand 1994 1993 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 392,923 $ 155,456 Receivables, less allowance for doubtful accounts of $33,933 and $31,308 1,020,511 922,727 Spare parts, supplies and fuel 173,993 164,087 Deferred income taxes (Note 7) 113,035 133,875 Prepaid expenses and other 61,234 63,573 ------------------------- Total current assets 1,761,696 1,439,718 ------------------------- PROPERTY AND EQUIPMENT, AT COST (NOTES 1, 3, 4 AND 11): Flight equipment 2,828,021 2,843,253 Package handling and ground support equipment 1,583,428 1,413,793 Computer and electronic equipment 966,906 947,913 Other 1,511,870 1,501,250 ------------------------- 6,890,225 6,706,209 Less accumulated depreciation and amortization 3,441,132 3,229,941 ------------------------- Net property and equipment 3,449,093 3,476,268 ------------------------- OTHER ASSETS: Goodwill (Note 1) 415,178 432,215 Equipment deposits and other assets (Note 11) 366,531 444,863 ------------------------- Total other assets 781,709 877,078 ------------------------- $5,992,498 $5,793,064 ------------------------- -------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets. 34 Federal Express Corporation and Subsidiaries
- -------------------------------------------------------------------------------------- 1994 1993 LIABILITIES AND STOCKHOLDERS' INVESTMENT CURRENT LIABILITIES: Current portion of long-term debt (Note 3) $ 198,180 $ 133,797 Accounts payable 518,849 554,111 Accrued expenses (Note 2) 819,399 761,357 ----------------------- Total current liabilities 1,536,428 1,449,265 ----------------------- LONG-TERM DEBT, LESS CURRENT PORTION (NOTE 3) 1,632,202 1,882,279 ----------------------- DEFERRED INCOME TAXES (NOTE 7) 3,563 72,479 ----------------------- OTHER LIABILITIES (NOTE 1) 895,600 717,660 ----------------------- COMMITMENTS AND CONTINGENCIES (NOTES 11 AND 12) COMMON STOCKHOLDERS' INVESTMENT (NOTE 6): Common Stock, $.10 par value; 100,000 shares authorized; 55,885 and 54,743 shares issued 5,589 5,474 Additional paid-in capital 759,229 699,385 Retained earnings 1,162,160 969,515 ------------------------ 1,926,978 1,674,374 Less treasury stock and deferred compensation stock plans 2,273 2,993 ------------------------ Total common stockholders' investment 1,924,705 1,671,381 ------------------------ $5,992,498 $5,793,064 ------------------------ ------------------------
35 Consolidated Statements of Cash Flows Federal Express Corporation and Subsidiaries
Years ended May 31 - ----------------------------------------------------------------------------------------------------- In thousands 1994 1993 1992 OPERATING ACTIVITIES Net income (loss) $ 204,370 $ 53,866 $(113,782) Adjustments to reconcile income (loss) to net cash provided by operating activities: Depreciation and amortization 599,357 579,896 577,157 Provision for uncollectible accounts 45,763 33,552 31,670 Provision (credit) for deferred income taxes and other 3,810 19,910 (75,219) (Gain) loss from disposals of property and equipment (11,897) (5,648) 1,810 Cumulative effect of accounting change -- 55,943 -- Changes in assets and liabilities, net of effects from purchases and dispositions of businesses: (Increase) in receivables (173,902) (41,535) (727) (Increase) decrease in other current assets (7,826) (5,813) 61,749 Increase in accounts payable, accrued expenses and other liabilities 110,508 13,651 33,620 Other, net (2,905) 21,259 4,543 ----------------------------------- Net cash provided by operating activities 767,278 725,081 520,821 ----------------------------------- INVESTING ACTIVITIES Purchases of property and equipment, including deposits on aircraft of $112,138, $177,564 and $212,291 (1,087,708) (1,023,723) (915,878) Proceeds from disposition of property and equipment: Sale-leaseback transactions 581,400 216,444 400,433 Reimbursements of A300 deposits 38,794 -- -- Other dispositions 46,148 5,984 12,851 Other, net 27,843 1,992 621 ----------------------------------- Net cash used in investing activities (393,523) (799,303) (501,973) ----------------------------------- FINANCING ACTIVITIES Proceeds from debt issuances 10,777 878,499 437,709 Principal payments on debt (198,243) (737,334) (507,283) Proceeds from stock issuances 53,759 24,512 19,272 Other, net (2,581) (14,176) (8,061) ----------------------------------- Net cash provided by (used in) financing activities (136,288) 151,501 (58,363) ----------------------------------- Net increase (decrease) in cash and cash equivalents 237,467 77,279 (39,515) Cash and cash equivalents at beginning of period 155,456 78,177 117,692 ----------------------------------- Cash and cash equivalents at end of period $ 392,923 $ 155,456 $ 78,177 ----------------------------------- ----------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for: Interest (net of capitalized interest) $ 158,149 $ 162,648 $ 178,943 Income taxes 167,209 188,943 89,729 Non-cash investing and financing activities:
In November 1992, approximately $73,000,000 of secured debt related to a portion of the purchase price of one MD-11 aircraft acquired by the Company was assumed by a third party in a sale-leaseback of the aircraft. The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 36 Consolidated Statements of Changes in Common Stockholders' Investment Federal Express Corporation and Subsidiaries
- ---------------------------------------------------------------------------------------------------- In thousands, except common shares Common Additional Retained Treasury Deferred Stock Paid-in Earnings Stock Compensation Capital BALANCE AT MAY 31, 1991 $5,363 $652,045 $1,015,205 $ (14) $(3,979) Purchase of treasury stock -- -- -- (3,099) -- Forfeiture of restricted stock -- -- -- (1,292) -- Issuance of common and treasury stock under employee incentive plans (554,269 shares) 47 20,682 (287) 4,373 (2,792) Amortization of deferred compensation -- -- -- -- 1,833 Foreign currency translation adjustment -- -- 5,419 -- -- Net loss -- -- (113,782) -- -- ----------------------------------------------------------- BALANCE AT MAY 31, 1992 5,410 672,727 906,555 (32) (4,938) Purchase of treasury stock -- -- -- (472) -- Forfeiture of restricted stock -- -- -- (63) -- Issuance of common and treasury stock under employee incentive plans (655,938 shares) 64 26,658 (85) 531 (393) Amortization of deferred compensation -- -- -- -- 2,374 Foreign currency translation adjustment -- -- 9,179 -- -- Net income -- -- 53,866 -- -- ----------------------------------------------------------- BALANCE AT MAY 31, 1993 5,474 699,385 969,515 (36) (2,957) Purchase of treasury stock -- -- -- (185) -- Forfeiture of restricted stock -- -- -- (1,224) -- Issuance of common and treasury stock under employee incentive plans (1,153,248 shares) 115 59,844 -- 670 (8) Amortization of deferred compensation -- -- -- -- 1,467 Foreign currency translation adjustment -- -- (11,725) -- -- Net income -- -- 204,370 -- -- ----------------------------------------------------------- BALANCE AT MAY 31, 1994 $5,589 $759,229 $1,162,160 $ (775) $(1,498) ----------------------------------------------------------- -----------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 37 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the accounts of Federal Express Corporation and its wholly-owned subsidiaries (the "Company"). All significant intercompany accounts and transactions have been eliminated. PROPERTY AND EQUIPMENT. Expenditures for major additions, improvements, flight equipment modifications, and certain overhaul costs are capitalized. Maintenance and repairs are charged to expense as incurred, except for B747 airframe and engine overhaul maintenance which is accrued and charged to expense on the basis of hours flown. The cost and accumulated depreciation of property and equipment disposed of are removed from the related accounts and any gain or loss reflected in the results of operations. For financial reporting purposes, depreciation and amortization of property and equipment is provided on a straight-line basis over the asset's service life or related lease term as follows: Flight equipment 7 to 20 years Package handling and ground support equipment 5 to 30 years Computer and electronic equipment 3 to 10 years Other 2 to 30 years
Aircraft airframes and engines are assigned residual values ranging from 10% to 20% of asset cost. All other property and equipment have no assigned residual values. For income tax purposes, depreciation is generally computed using accelerated methods. DEFERRED GAINS. Gains on the sale and leaseback of aircraft and other property and equipment are deferred and amortized over the life of the lease as a reduction of rent expense. Included in Other Liabilities at May 31, 1994 and 1993, were deferred gains of $230,234,000 and $186,087,000, respectively. DEFERRED LEASE OBLIGATIONS. While certain of the Company's aircraft and facility leases contain fluctuating or escalating payments, the related rent expense is recorded on a straight-line basis over the lease term. Included in Other Liabilities at May 31, 1994 and 1993, was $185,508,000 and $148,231,000, respectively, representing the cumulative difference between rent expense and rent payments. SELF-INSURANCE RESERVES. The Company is self-insured up to certain levels for workers' compensation, employee health care and vehicle liabilities. Reserves are based on the actuarialy estimated cost of claims. Included in Other Liabilities at May 31, 1994 and 1993, was $270,000,000 and $198,000,000, respectively, representing self-insurance reserves for the Company's workers' compensation and vehicle liabilities. CAPITALIZED INTEREST. Interest on funds used to finance the acquisition and modification of aircraft and construction of certain facilities up to the date the asset is placed in service is capitalized and included in the cost of the asset. Capitalized interest was $29,738,000, $31,256,000, and $26,603,000, for 1994, 1993 and 1992, respectively. CASH EQUIVALENTS. Cash equivalents are cash in excess of current operating requirements invested in short-term, interest-bearing instruments with maturities of three months or less at the date of purchase and are stated at cost, which approximates market value. Interest income was $9,778,000 in 1994, $7,839,000 in 1993, and $12,006,000 in 1992. SPARE PARTS, SUPPLIES AND FUEL. Spare parts, supplies and fuel are stated principally at standard cost (approximates actual cost on a first-in, first-out basis) which is not in excess of current replacement cost. 38 Federal Express Corporation and Subsidiaries GOODWILL. Goodwill is the excess of purchase price over the fair value of net assets of businesses acquired. It is amortized on a straight-line basis over periods ranging up to 40 years. Accumulated amortization was $87,202,000 and $71,313,000 at May 31, 1994 and 1993, respectively. FOREIGN CURRENCY TRANSLATION. The Company conducts a significant amount of its business and has a number of operating facilities in countries outside the United States. Translation gains and losses of foreign operations that use local currencies as the functional currency are accumulated and reported as a separate component of common stockholders' investment. Transaction gains and losses that arise from exchange rate fluctuations on the transactions denominated in a currency other than the local functional currency are included in the results of operations. INCOME TAXES. Deferred income taxes are provided for the tax effect of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. The Company uses the liability method to account for income taxes, which requires deferred taxes to be recorded at the statutory rate expected to be in effect when the taxes are paid. REVENUE RECOGNITION. Revenue is generally recognized upon delivery of shipments. For shipments in transit, revenue is recorded based on the percentage of service completed. EARNINGS PER SHARE. Earnings per share is computed based on the weighted average number of common and common equivalent shares outstanding during the year. Common equivalent shares are the number of shares of common stock that would be issued upon the exercise of all dilutive outstanding stock options, less the assumed repurchase of treasury shares. Earnings per share assuming full dilution is substantially the same as earnings per share as stated and, accordingly, is not shown separately. RECLASSIFICATIONS. Certain amounts for 1993 and 1992 have been reclassified to conform to the 1994 presentation. - -------------------------------------------------------------------------------- NOTE 2: ACCRUED EXPENSES
May 31 - -------------------------------------------------------------------------------- In thousands 1994 1993 Compensated absences $180,105 $163,553 Insurance 156,906 169,176 Taxes other than income taxes 130,801 114,460 Employee benefits 86,352 91,651 Salaries 82,563 64,716 Aircraft overhaul 50,933 59,507 Interest 32,374 38,353 Other 99,365 59,941 ----------------------- $819,399 $761,357 ----------------------- -----------------------
39 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- NOTE 3: LONG-TERM DEBT
May 31 - -------------------------------------------------------------------------------- In thousands 1994 1993 Unsecured notes payable, interest rates of 6.25% to 10.57%, due through 2013 $1,384,942 $1,493,700 ------------------------- Unsecured sinking fund debentures, interest rate of 9.63%, due through 2020 98,254 98,185 ------------------------- Capital lease obligations, Memphis-Shelby County Airport Authority Special Facilities Revenue Bonds, due through 2013, interest rates of 6.75% to 8.30% 210,100 245,070 Less bond reserve funds 11,096 23,330 ------------------------- 199,004 221,740 ------------------------- Other debt, effective rates of 4.28% to 11.25% 148,182 202,451 ------------------------- 1,830,382 2,016,076 Less current portion 198,180 133,797 ------------------------- $1,632,202 $1,882,279 ------------------------- -------------------------
The Company has a revolving credit agreement with domestic and foreign banks that provides for a commitment of $1,000,000,000 through May 31, 1996, all of which was available at May 31, 1994. Interest rates on borrowings under this agreement are generally determined by maturities selected and prevailing market conditions. The agreement contains certain covenants and restrictions, none of which is expected to significantly affect operations or the ability to pay dividends. As of May 31, 1994, approximately $454,000,000 was available for the payment of dividends. Commercial paper borrowings are backed by unused commitments under the revolving credit agreement and reduce the amount available under the agreement. Borrowings under this credit agreement and commercial paper borrowings are classified as long-term based on the Company's ability and intent to refinance such borrowings. The Special Facilities Revenue Bonds were issued by the Memphis-Shelby County Airport Authority ("MSCAA") to finance the acquisition and construction of various facilities and equipment at the Memphis International Airport. Lease agreements with the MSCAA covering the facilities and equipment financed with the bond proceeds obligate the Company to pay rentals equal to principal and interest due on the bonds. In August 1993, an agreement was executed to issue $45,000,000 of City of Indianapolis Airport Facility Revenue Refunding Bonds in September 1994. The refunding bonds will be used to retire 11.25% Indianapolis Special Facilities Revenue Bonds, Series 1984 which were originally issued in November 1984 to finance the acquisition, construction and equipping of an express package sorting hub at the Indianapolis International Airport for a third party. In 1988, the Company acquired the hub facility from the third party and assumed liability for the lease obligation and the guarantee position related to the bonds. The refunding bonds have a maturity date of April 1, 2017 and a coupon rate of 6.85%, which will be adjusted in the event of any changes to the Company's credit rating on its long-term debt prior to the date of issuance. The Company filed a registration statement in August 1993 with the Securities and Exchange Commission for the issuance of up to $233,600,000 of equipment trust certificates and pass through certificates. During October and December 1993, $152,320,000 and $236,000,000, respectively, of pass through certificates were issued under a September 1992 and the August 1993 registration statements to refinance the 40 Federal Express Corporation and Subsidiaries debt portion of leveraged leases related to five MD-11 aircraft. The pass through certificates are not direct obligations of, or guaranteed by, the Company but amounts payable by the Company under the five leveraged leases are sufficient to pay the principal and interest on the certificates. In December 1993, the Company filed a registration statement with the Securities and Exchange Commission for the issuance of up to $400,000,000 of pass through certificates. In March 1994, $377,112,000 of pass through certificates were issued under this registration statement to finance the debt portion of leveraged leases related to 13 Airbus A310 aircraft to be acquired under operating leases and to pay certain expenses. Future payments related to lease commitments for these aircraft are included in the summary of future minimum lease payments in Note 4. In 1993, the Company entered into a $140,000,000 foreign bank facility to provide term loans for predelivery payments on seven Airbus A300 aircraft, two of which were delivered during the fourth quarter of 1994 and five of which are to be delivered in 1995. Principal and interest on borrowings is payable upon delivery of the aircraft. As of May 31, 1994, the Company had $100,000,000 outstanding under this facility at a net interest rate of 4.28%. Scheduled annual principal maturities of long-term debt for the five years subsequent to May 31, 1994, are as follows: $198,180,000 in 1995; $253,700,000 in 1996; $24,400,000 in 1997; $124,700,000 in 1998 and $255,700,000 in 1999. At May 31, 1994, the Company's long-term debt, exclusive of capital leases, had a carrying value of approximately $1,630,000,000 and a fair value of approximately $1,740,000,000. The estimated fair value was determined based on quoted market prices or on the current rates offered for debt with similar terms and maturities. - -------------------------------------------------------------------------------- NOTE 4: LEASE COMMITMENTS The Company utilizes certain aircraft, land, facilities and equipment under capital and operating leases which expire at various dates through 2024. In addition, supplemental aircraft are leased under agreements which generally provide for cancellation upon 60 days' notice. Property and equipment recorded under capital leases at May 31 was as follows:
- -------------------------------------------------------------------------------- In thousands 1994 1993 Package handling and ground support equipment $372,194 $372,724 Facilities 133,435 133,435 Computer and electronic equipment and other 7,152 29,535 ----------------------- 512,781 535,694 Less accumulated amortization 330,155 340,741 ----------------------- $182,626 $194,953 ----------------------- -----------------------
Rent expense under operating leases for the years ended May 31 was as follows:
- -------------------------------------------------------------------------------- In thousands 1994 1993 1992 Minimum rentals $621,174 $563,646 $570,377 Contingent rentals 21,540 35,353 40,043 -------------------------------------- $642,714 $598,999 $610,420 -------------------------------------- --------------------------------------
Contingent rentals are based on mileage under supplemental aircraft leases. 41 Notes to Consolidated Financial Statements A summary of future minimum lease payments under capital leases and non-cancelable operating leases (principally aircraft and facilities) with an initial or remaining term in excess of one year at May 31, 1994 follows:
- -------------------------------------------------------------------------------- In thousands Capital Operating Leases Leases 1995 $ 15,561 $ 540,139 1996 15,561 562,776 1997 15,561 521,918 1998 15,561 471,839 1999 15,561 454,345 Thereafter 387,206 5,060,735 ----------------------- $465,011 $7,611,752 ----------------------- -----------------------
At May 31, 1994, the present value of future minimum lease payments for capital lease obligations was $199,004,000. - -------------------------------------------------------------------------------- NOTE 5: PREFERRED STOCK The Certificate of Incorporation authorizes the Board of Directors, at its discretion, to issue up to 4,000,000 shares of Series Preferred Stock. The stock is issuable in series which may vary as to certain rights and preferences and has no par value. As of May 31, 1994, none of these shares had been issued. 42 Federal Express Corporation and Subsidiaries - -------------------------------------------------------------------------------- NOTE 6: COMMON STOCKHOLDERS' INVESTMENT Under the provisions of the Company's stock incentive plans, options may be granted to certain key employees (and, under the 1989 and 1993 plans, to directors who are not employees of the Company) to purchase common stock of the Company at a price not less than its fair market value at the date of grant. The following summarizes information for the past three years with respect to those plans:
- -------------------------------------------------------------------------------- Number of Shares Option Price Under Option Per Share Outstanding at May 31, 1991 3,856,930 $23.59-$70.19 Granted 526,500 34.50- 53.63 Exercised (467,469) 23.59- 47.00 Canceled (262,158) 34.31- 62.00 ------------------------- Outstanding at May 31, 1992 3,653,803 23.59- 70.19 Granted 260,750 36.88- 56.25 Exercised (643,563) 23.59- 56.63 Canceled (123,947) 34.31- 70.19 ------------------------- Outstanding at May 31, 1993 3,147,043 30.56- 70.19 Granted 982,750 54.31- 70.81 Exercised (1,142,249) 30.56- 70.19 Canceled (111,758) 34.31- 62.94 ------------------------- Outstanding at May 31, 1994 2,875,786 $30.56-$70.81 ------------------------- Exercisable at May 31, 1994 1,181,289 $30.56-$70.19 -------------------------
At May 31, 1994, there were 796,446 shares available for future grants under the above plans. Under the terms of the Company's 1986 Restricted Stock Plan, shares of the Company's common stock are granted to key employees. Restrictions on the shares expire over a period of two to five years from their date of grant. Compensation expense related to this plan is recorded as a reduction of common stockholders' investment and is being amortized as restrictions on such shares expire. The shares granted under this plan were 11,000 in 1994, 12,500 in 1993, and 120,500 in 1992. During 1994, 1993 and 1992, 18,438, 1,500 and 33,750 shares, respectively, were forfeited. At May 31, 1994, there were 10,938 shares available for future grants under this plan. At May 31, 1994, there were 3,683,170 shares of common stock reserved for issuance under the above-mentioned incentive plans. In 1988, the Board of Directors authorized the purchase of up to 5,300,000 shares of the Company's common stock on the open market. As of May 31, 1994, a total of 2,765,243 shares at an average cost of $41.68 per share had been purchased and substantially all reissued under the above-mentioned plans. 43 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- NOTE 7: INCOME TAXES The components of the provision (credit) for federal and other income taxes for the years ended May 31 were as follows:
- -------------------------------------------------------------------------------- In thousands 1994 1993 1992 Current provision: Federal $131,724 $64,130 $ 10,886 Foreign 16,387 9,318 17,512 State 26,862 3,170 7,471 ---------------------------- 174,973 76,618 35,869 ---------------------------- Deferred provision (credit): Federal 2,263 6,899 (63,754) Foreign 2,524 -- -- State (5,668) 10,250 (5,161) ---------------------------- (881) 17,149 (68,915) ---------------------------- $174,092 $93,767 $(33,046) ---------------------------- ----------------------------
The Company's operations included the following activity with respect to entities operating in foreign locations for the years ended May 31:
- ------------------------------------------------------------------------ In thousands 1994 1993 1992 Entities with pre-tax income $ 127,000 $ 67,000 $ 76,000 Entities with pre-tax losses (210,000) (247,000) (538,000) --------------------------------- $ (83,000) $(180,000) $(462,000) --------------------------------- ---------------------------------
Income (losses) from entities which are structured as foreign subsidiaries are not included in the U.S. consolidated income tax return. Approximately $14,000,000 of net foreign subsidiary income was not taxable for federal income tax purposes in 1994. In 1993 and 1992, approximately $7,000,000 and $27,000,000, respectively, of net foreign subsidiary losses were not deductible for federal income tax purposes. Income taxes have been provided for foreign operations based upon the various tax laws and tax rates of the countries in which the Company's operations are conducted. There is no direct relationship between the Company's foreign income tax provision and foreign pre-tax book income due to the different methods of taxation used by countries throughout the world. A reconciliation of the statutory federal income tax rate to the Company's effective income tax rate for the years ended May 31 follows:
- -------------------------------------------------------------------------------- 1994 1993 1992 Statutory U.S. income tax rate 35.0% 34.0% (34.0)% Increase resulting from: Goodwill amortization 1.3 2.5 5.9 Foreign operations 3.5 1.3 0.4 State income taxes, net of federal benefit 3.6 4.4 1.0 Other, net 2.6 3.9 4.2 -------------------- 46.0% 46.1% (22.5)% -------------------- --------------------
44 The Omnibus Budget Reconciliation Act of 1993 increased the statutory U.S. income tax rate from 34% to 35% retroactive to January 1, 1993. The adverse impact of the increase in the statutory rate was offset in 1994 by a corresponding revaluation of the Company's deferred tax assets in accordance with SFAS No. 109, "Accounting for Income Taxes." The net impact of these adjustments was immaterial. The effective tax rate for 1992, excluding the effects of a restructuring charge, was 48.9%. At May 31, 1994, the Company had alternative minimum tax credit carryovers of approximately $56,000,000, which have no expiration date. The significant components of deferred tax assets and liabilities for the years ended May 31 were as follows:
- -------------------------------------------------------------------------------- In thousands 1994 1993 ----------------------------------------------- Deferred Deferred Tax Deferred Deferred Tax Tax Assets Liabilities Tax Assets Liabilities Depreciation $ -- $285,524 $ -- $289,466 Deferred gains on sales of assets 45,969 -- 24,305 -- Alternative minimum tax credits 55,844 -- 82,777 -- Employee benefits 66,875 -- 87,307 -- Self-insurance reserves 148,426 -- 122,032 -- Other 137,205 59,323 120,829 86,388 --------------------------------------------- $454,319 $344,847 $437,250 $375,854 --------------------------------------------- ---------------------------------------------
Effective June 1, 1992, the Company adopted SFAS No. 109. This statement superseded SFAS No. 96, "Accounting for Income Taxes," which was adopted by the Company as of June 1, 1989. The adoption of SFAS No. 109 did not change the Company's method of accounting for income taxes. The standard was adopted on a prospective basis, and amounts presented for prior years were not restated. The adoption of SFAS No. 109 did not have a significant impact on the Company's financial position or results of operations. The following table sets forth the tax effect of items included in the federal deferred tax provision (credit) for the year ended May 31, 1992:
- -------------------------------------------------------------------------------- In thousands Depreciation $ 11,282 Gains on sales of assets (18,678) Alternative minimum tax (29,675) European/UK restructuring charges (12,496) Employee benefits (743) Self-insurance reserves (35,276) Other 21,832 -------- $(63,754) -------- --------
- -------------------------------------------------------------------------------- NOTE 8: PENSION AND PROFIT SHARING PLANS The Company sponsors pension plans covering substantially all employees. The largest plan, the Federal Express plan, covers U.S. domestic employees age 21 and over, with at least one year of service and provides benefits based on final average earnings and years of service. Plan funding is actuarially determined, subject to certain tax law limitations. 45 Notes to Consolidated Financial Statements International defined benefit plans provide benefits primarily based on final earnings and years of service and are funded in accordance with local laws and income tax regulations. The following table sets forth the funded status of the plans as of May 31:
- ---------------------------------------------------------------------------------------------------------------------- In thousands 1994 1993 Actuarial present value of the projected benefit obligation for service rendered to date $1,800,187 $1,676,608 Less plan assets at fair value 1,733,446 1,591,507 ------------------------ Projected benefit obligation in excess of plan assets 66,741 85,101 Unrecognized net gains from past experience different from that assumed and effects of changes in assumptions 21,555 44,435 Prior service cost not yet recognized in net periodic cost (31,581) (28,022) Unrecognized transition amount (797) (5,468) ------------------------ Pension liability $ 55,918 $ 96,046 ------------------------ ------------------------ Accumulated benefit obligation $1,106,076 $1,046,694 ------------------------ ------------------------ Vested benefit obligation $ 998,024 $ 950,785 ------------------------ ------------------------
Net pension costs for the years ended May 31 included the following components:
- ---------------------------------------------------------------------------------------------------------------------- In thousands 1994 1993 1992 Service cost--benefits earned during the period $176,861 $ 161,100 $154,024 Interest cost on projected benefit obligation 127,959 117,086 105,274 Actual return on plan assets (82,019) (160,977) (92,841) Net amortization and deferral (64,727) 36,055 590 ------------------------------------ Net periodic pension cost $158,074 $ 153,264 $167,047 ------------------------------------ ------------------------------------
The weighted-average discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation were 8.1% and 6.0%, respectively, in 1994 and 8.0% and 6.0%, respectively, in both 1993 and 1992. The expected long-term rate of return on assets was 9.5% in 1994, 1993 and 1992. Plan assets consist primarily of marketable equity securities and fixed income instruments. The Company also has a profit sharing plan, which covers substantially all U.S. domestic employees age 21 and over, with at least one year of service with the Company as of the contribution date, as defined. The plan provides for discretionary contributions by the Company which are determined annually by the Board of Directors. Profit sharing expense was $36,800,000 in 1994, $21,900,000 in 1993 and $8,400,000 in 1992. - -------------------------------------------------------------------------------- NOTE 9: POSTRETIREMENT AND POSTEMPLOYMENT BENEFIT PLANS The Company offers medical and dental coverage to all eligible U.S. domestic retirees and their eligible dependents. Vision coverage is provided for retirees only. Substantially all of the Company's U.S. domestic employees become eligible for these benefits at age 55 and older, if they have permanent, continuous service with the Company of at least 10 years after attainment of age 45 if hired prior to January 1, 1988, or at least 20 years after attainment of age 35, if hired on or after January 1, 1988. Life insurance benefits are provided only to retirees of the former Tiger International, Inc. who retired prior to acquisition. 46 Federal Express Corporation and Subsidiares Effective June 1, 1992, the Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions." This standard requires that the expected cost of providing postretirement benefits be charged to expense during the years employees render service. Prior to the adoption of SFAS No. 106, the Company charged retiree benefits to expense when paid. These amounts were not significant. The cumulative effect of adopting this standard was $90,230,000 before taxes ($55,943,000 after tax benefit, or $1.03 per share). The following table sets forth the status of the plan as of May 31:
- -------------------------------------------------------------------------------- In thousands 1994 1993 Accumulated postretirement benefit obligation: Retirees $ 34,581 $ 31,854 Fully eligible active employees 25,698 18,952 Other active employees, not fully eligible 66,472 66,114 ----------------------- 126,751 116,920 Unrecognized net loss (958) (11,513) ----------------------- Accrued postretirement benefit cost $125,793 $105,407 -----------------------
Net postretirement benefit expense for the years ended May 31 was as follows:
- -------------------------------------------------------------------------------- In thousands 1994 1993 Service cost $12,392 $ 9,161 Interest cost 10,174 8,434 Transition obligation -- 90,230 ---------------------- $22,566 $107,825 ----------------------
Future medical benefit costs were estimated to increase at an annual rate of 11.5% during 1995, decreasing to an annual growth rate of 6.0% in 2006 and thereafter. Future dental benefit costs were estimated to increase at an annual rate of 9.0% during 1995, decreasing to an annual growth rate of 6.0% in 2007 and thereafter. The Company's cost is capped at 150% of 1993 employer cost and, therefore, will not be subject to medical and dental trends after the capped cost is attained, projected to be in 1997. Primarily because of the cap on the Company's cost, a 1% increase in these annual trend rates would not have a significant impact on the accumulated postretirement benefit obligation at May 31, 1994 or 1994 benefit expense. The weighted average discount rates used in estimating the accumulated postretirement obligation were 7.7% and 8.0% at May 31, 1994 and 1993, respectively. The Company pays claims as incurred. In 1994, the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits," which requires recognition of a liability for the estimated cost of benefits provided to former or inactive employees after active employment but before retirement. The adoption of SFAS No. 112 did not have a significant impact on the Company's financial position or results of operations. 47 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- NOTE 10: BUSINESS SEGMENT INFORMATION The Company is in a single line of business--the worldwide transportation and distribution of goods and documents. For reporting purposes, operations are classified into two services, U.S. domestic and international. International services are defined as shipments which either originate in or are destined to locations outside the U.S. A summary of selected financial information for U.S. domestic and international operations for the years ended May 31, 1994, 1993 and 1992, follows:
- -------------------------------------------------------------------------------- In thousands U.S. Total Domestic International Worldwide Revenues: 1994 $6,199,940 $2,279,516 $8,479,456 1993 5,667,964 2,140,079 7,808,043 1992 5,194,684 2,355,376 7,550,060 Operating Income (Loss): 1994 $ 559,629 $ (28,997) $ 530,632 1993 559,140 (181,967) 377,173 1992 635,872 (612,905)(1) 22,967 Identifiable Assets: 1994 $4,883,644 $1,108,854 $5,992,498 1993 4,432,578 1,360,486 5,793,064 1992 3,941,022 1,522,164 5,463,186 (1) Includes charges related to restructuring European operations in 1992.
Identifiable assets used jointly in U.S. domestic and international operations (principally aircraft) have been allocated based on estimated usage. International revenues related to services originating in the U.S. totaled $1,019,500,000, $928,200,000 and $914,800,000 for the years ended May 31, 1994, 1993 and 1992, respectively. - -------------------------------------------------------------------------------- NOTE 11: COMMITMENTS AND CONTINGENCIES The Company's annual purchase commitments under various contracts as of May 31, 1994 are as follows:
- ------------------------------------------------------------------------------ In thousands Aircraft Aircraft-Related(1) Other(2) Total 1995 $466,000 $85,000 $262,400 $813,400 1996 409,700 10,300 15,700 435,700 1997 241,800 -- 5,600 247,400 1998 298,300 -- 21,300 319,600 1999 61,300 -- 15,600 76,900 (1) Primarily aircraft modifications, rotables, and development and upgrade of aircraft simulators. (2) Primarily facilities, vehicles, computers and other equipment.
The Company is committed to purchase 23 Airbus A300 and 25 Cessna 208B aircraft to be delivered through 1999. At May 31, 1994, deposits and progress payments of $306,600,000 had been made toward these purchases. At May 31, 1994, the Company had options to purchase up to 46 additional Airbus A300 aircraft for delivery beginning in 1997. 48 Federal Express Corporation and Subsidiaries The Company has entered into contracts which are designed to limit the Company's exposure to fluctuations in jet fuel prices. The contracts extend through May 1995. The agreements are based on a notional sum of 10 million gallons per month, which is approximately 20 to 25% of the Company's monthly consumption of jet fuel. As of May 31, 1994, the Company had neither received nor made any payments related to these contracts. Based on current market prices, the fair value of these contracts at May 31, 1994, was approximately $800,000. - -------------------------------------------------------------------------------- NOTE 12: LEGAL PROCEEDINGS The Company has reached a tentative settlement to the shareholder class-action lawsuit filed in 1990 against it, Frederick W. Smith, Chairman and Chief Executive Officer, and James L. Barksdale, the Company's former Executive Vice President and Chief Operating Officer. The settlement, which still must be approved by the United States District Court for the Western District of Tennessee, is for an immaterial amount (the Company's portion of which has been recorded in the 1994 financial statements). The Company's insurance carrier will pay a majority of the settlement amount. The Company currently believes that the Court will approve or disapprove the settlement agreement before the end of its current fiscal year. Prior to the Court's decision, the purchasers of the Company's common stock affected by the settlement agreement must be notified of the terms of the settlement and a hearing must be held in the District Court. The Internal Revenue Service ("IRS") issued an Examination Report on October 31, 1991 asserting the Company underpaid federal excise taxes for the calendar quarters ended December 31, 1983 through March 31, 1987. The Examination Report contains a primary position and a mutually exclusive alternative position asserting the Company underpaid federal excise taxes by $54,000,000 and $26,000,000, respectively. Disagreeing with essentially all of the proposed adjustments contained in the Examination Report, the Company filed a Protest on March 16, 1992, which set forth the Company's defenses to both IRS positions and a claim for refund of overpaid federal excise taxes of $23,500,000. On March 19, 1993, the IRS issued another Examination Report to the Company asserting the Company underpaid federal excise taxes by $105,000,000 for the calendar quarters ended June 30, 1987 through March 31, 1991. On June 17, 1993, the Company filed a Protest contesting the March 19 Examination Report which set forth the Company's defenses to the IRS position and a claim for refund of overpaid federal excise taxes of $46,500,000. Interest would be payable on the amount of any refunds by the IRS to the Company or underpaid federal excise taxes payable by the Company to the IRS at statutorily determined rates. The interest rates payable by the Company for underpaid taxes are higher than the rates payable by the IRS on refund amounts. The Company plans to vigorously pursue its Protests administratively with the IRS Appeals Division. If it is unsuccessful with the IRS Appeals Division, the Company intends to pursue its position in court. Pending resolution of this matter, the IRS can be expected to take positions similar to those taken in their Examination Reports for periods after March 31, 1991. Given the inherent uncertainties in the excise tax matter referred to above, management is currently unable to predict with certainty the outcome of this matter or the ultimate effect, if any, its resolution would have on the Company's financial condition or results of operations. No amount has been reserved for this contingency. The Company is subject to other legal proceedings and claims which arise in the ordinary course of its business. In the opinion of management, the aggregate liability, if any, with respect to these other actions will not materially adversely affect the financial position or results of operations of the Company. 49 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- NOTE 13: RESTRUCTURING In May 1992, the Company substantially reduced the scope of its European and United Kingdom operations by discontinuing its intra-region and certain intra-country services and recorded a restructuring charge of $254,000,000. The primary components of the charge were to cover severance costs, facility closures, equipment dispositions and expected future operating losses of the discontinued services through May 4, 1992. The restructuring charge reduced earnings per share by $3.12 in 1992. In August 1992, the Company reduced its restructuring reserve by $12,500,000 due to favorable settlements of certain estimated liabilities associated with the restructuring. This adjustment increased net income by $8,200,000 ($.15 per share). - -------------------------------------------------------------------------------- NOTE 14: SUMMARY OF QUARTERLY OPERATING RESULTS (Unaudited) - --------------------------------------------------------------------------------
In thousands, except per share amounts First Second Third Fourth Quarter Quarter Quarter Quarter 1994 Revenues $ 2,015,725 $ 2,121,525 $ 2,077,414 $ 2,264,792 Operating income 101,907 149,718 85,317 193,690 Income before income taxes 60,835 110,539 57,717 149,371 Net income 32,851 59,691 31,167 80,661 Earnings per share $ .60 $ 1.07 $ .55 $ 1.43 Average shares outstanding 55,186 55,850 56,445 56,569 1993 Revenues $ 1,864,936 $ 1,964,674 $ 1,939,781 $ 2,038,652 Operating income 69,724 112,655 58,321 136,473 Income before income taxes 20,216 70,519 16,875 95,966 Income before cumulative effect of change in accounting principle 10,148 35,401 8,488 55,772 Net income (loss) (45,795) 35,401 8,488 55,772 Earnings (loss) per share: Before cumulative effect of change in accounting principle .19 .65 .15 1.01 Cumulative effect of change in accounting principle (1.03) -- -- -- Net earnings (loss) per share $ (.84) $ .65 $ .15 $ 1.01 Average shares outstanding 54,277 54,292 55,117 55,189
50 Report of Independent Public Accountants To the Stockholders of Federal Express Corporation: We have audited the accompanying consolidated balance sheets of Federal Express Corporation (a Delaware corporation) and subsidiaries as of May 31, 1994 and 1993, and the related consolidated statements of operations, common stockholders' investment and cash flows for each of the three years in the period ended May 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Federal Express Corporation and subsidiaries as of May 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended May 31, 1994, in conformity with generally accepted accounting principles. As discussed in Notes 7 and 9 of the Consolidated Financial Statements, effective June 1, 1992, the Company changed its methods of accounting for income taxes and postretirement benefits other than pensions. Memphis, Tennessee, Arthur Andersen & Co. June 29, 1994. 51 Selected Consolidated Financial Data
Years ended May 31 - --------------------------------------------------------------------------------------------------------- In thousands, except per share data and Other Operating Data 1994 1993 1992 OPERATING RESULTS Revenues $8,479,456 $7,808,043 $7,550,060 Operating income 530,632 377,173 22,967 Income (loss) before income taxes 378,462 203,576 (146,828) Income (loss) from continuing operations 204,370 109,809 (113,782) Net income (loss) $ 204,370 $ 53,866 $ (113,782) PER SHARE DATA Earnings (loss) per share: Continuing operations $ 3.65 $ 2.01 $ (2.11) Discontinued operations -- -- -- Cumulative effects of changes in accounting principles -- (1.03) -- ---------------------------------------- Net earnings (loss) per share $ 3.65 $ .98 $ (2.11) Average shares outstanding 56,012 54,719 53,961 Cash dividends -- -- -- FINANCIAL POSITION Property and equipment, net $3,449,093 $3,476,268 $3,411,297 Total assets 5,992,498 5,793,064 5,463,186 Long-term debt 1,632,202 1,882,279 1,797,844 Common stockholders' investment 1,924,705 1,671,381 1,579,722 OTHER OPERATING DATA* Express package: Average daily package volume 1,925,105 1,710,561 1,472,642 Average pounds per package 6.0 5.8 5.7 Average revenue per pound $ 2.48 $ 2.60 $ 2.87 Average revenue per package $ 14.95 $ 15.17 $ 16.25 Airfreight: Average daily pounds 1,844,270 2,050,033 2,258,303 Average revenue per pound $ 1.06 $ 1.09 $ 1.22 Operating weekdays 257 255 254 Aircraft fleet: Airbus A300-600 2 -- -- Boeing 747-100 -- -- 4 Boeing 747-200 6 8 9 McDonnell Douglas MD-11 13 8 4 McDonnell Douglas DC-10-10 11 11 11 McDonnell Douglas DC-10-30 19 19 17 McDonnell Douglas DC-8 -- -- -- Boeing 727-100 69 80 85 Boeing 727-200 90 87 66 Cessna 208A 10 10 10 Cessna 208B 206 206 206 Fokker F-27 32 32 32 Vehicle fleet 30,900 28,100 30,400 Average number of employees (based on a standard full-time workweek) 88,502 84,104 84,162 * Beginning in 1994, U.S. domestic express airfreight is reported as package volume in express package operating data rather than as pounds in airfreight operating data. Data for 1990, when the U.S. domestic airfreight services were initially offered, through 1993 has been restated to conform to this presentation.
52 Federal Express Corporation and Subsidiaries
- ----------------------------------------------------------------------------------------- 1991 1990 1989 1988 1987 1986 1985 $7,688,296 $7,015,069 $5,166,967 $3,882,817 $3,178,308 $2,573,229 $2,015,920 252,126 387,355 414,787 379,452 364,743 344,021 258,617 40,942 218,423 298,332 302,328 311,885 305,085 212,272 5,898 115,764 166,451 187,716 166,952 192,671 138,740 $ 5,898 $ 115,764 $ 184,551 $ 187,716 $ (65,571) $ 131,839 $ 76,077 $ .11 $ 2.18 $ 3.18 $ 3.56 $ 3.21 $ 3.86 $ 2.94 -- -- -- -- (4.48) (1.22) (1.33) -- -- .35 -- -- -- -- - ----------------------------------------------------------------------------------------- $ .11 $ 2.18 $ 3.53 $ 3.56 $ (1.27) $ 2.64 $ 1.61 53,350 53,161 52,272 52,670 51,905 49,840 46,970 -- -- -- -- -- -- -- $3,624,026 $3,566,321 $3,431,814 $2,231,875 $1,861,432 $1,551,845 $1,346,023 5,672,461 5,675,073 5,293,422 3,008,549 2,499,511 2,276,362 1,899,506 1,826,781 2,148,142 2,138,940 838,730 744,914 561,716 607,508 1,668,620 1,649,187 1,493,524 1,330,679 1,078,920 1,091,714 812,267 1,310,890 1,234,174 1,059,882 877,543 704,392 550,306 406,049 5.6 5.4 5.4 5.3 5.1 5.3 5.6 $ 3.07 $ 3.10 $ 3.04 $ 3.10 $ 3.33 $ 3.40 $ 3.45 $ 17.19 $ 16.61 $ 16.28 $ 16.32 $ 16.97 $ 17.92 $ 19.19 2,650,204 3,148,290 4,019,353 -- -- -- -- $ 1.20 $ 1.13 $ 1.06 -- -- -- -- 255 255 255 257 254 254 255 -- -- -- -- -- -- -- 8 9 8 -- -- -- -- 10 10 13 -- -- -- -- 1 -- -- -- -- -- -- 11 10 8 8 8 6 6 16 16 16 13 11 9 5 -- 6 6 -- -- -- -- 92 89 80 47 39 35 35 57 41 26 21 21 18 18 10 37 38 38 39 34 9 183 147 109 71 27 -- -- 26 19 7 5 -- -- -- 32,800 31,000 28,900 21,000 18,700 14,500 12,300 81,711 75,102 58,136 48,556 41,047 31,582 26,495
53 Federal Express Corporation and Subsidiaries Board of Directors Robert H. Allen (2) Private Investor and Managing Partner Challenge Investment Partners Howard H. Baker, Jr. (1) Partner Baker, Worthington, Crossley & Stansberry LAW FIRM Anthony J. A. Bryan (1) Chairman, Executive Committee Hospital Corporation International OWNS, MANAGES AND BUILDS HOSPITALS AND HEALTH-RELATED FACILITIES IN VARIOUS COUNTRIES AROUND THE WORLD Robert L. Cox (1) Partner Waring Cox LAW FIRM Ralph D. DeNunzio (2) President Harbor Point Associates, Inc. PRIVATE INVESTMENT AND CONSULTING FIRM Judith L. Estrin Chief Executive Officer and President Network Computing Devices, Inc. DISPLAY STATIONS FOR NETWORK COMPUTING ENVIRONMENTS Philip Greer (1*) General Partner Weiss, Peck & Greer Investments DIVERSIFIED INVESTMENT MANAGEMENT AND SECURITIES FIRM J.R. Hyde, III (2) Chairman and Chief Executive Officer AutoZone, Inc. AUTO PARTS RETAIL CHAIN Charles T. Manatt (1) Senior Partner Manatt, Phelps & Phillips LAW FIRM Jackson W. Smart, Jr. (2*) Chairman and Chief Executive Officer MSP Communications, Inc. RADIO BROADCASTING COMPANY Frederick W. Smith Chairman, President and Chief Executive Officer Federal Express Corporation Dr. Joshua I. Smith (2) Chairman, President and Chief Executive Officer The MAXIMA Corporation INFORMATION AND DATA PROCESSING FIRM Peter S. Willmott (1) Chairman and Chief Executive Officer Willmott Services, Inc. RETAIL AND CONSULTING FIRM (1) Audit Committee (2) Compensation Committee (*) Committee Chairman 54 Federal Express Corporation and Subsidiaries Senior Officers Frederick W. Smith Chairman, President and Chief Executive Officer William J. Razzouk Executive Vice President Worldwide Customer Operations David J. Bronczek Senior Vice President Europe, Africa and Mediterranean T. Michael Glenn Senior Vice President Worldwide Marketing, Customer Service and Corporate Communications Alan B. Graf, Jr. Senior Vice President and Chief Financial Officer Dennis H. Jones Senior Vice President and Chief Information Officer Kenneth R. Masterson Senior Vice President, General Counsel and Secretary Joseph C. McCarty, III Senior Vice President Asia, Pacific and Middle East James A. McKinney Senior Vice President President, FedEx Logistics Services Kenneth R. Newell Senior Vice President Retail Service Operations James A. Perkins Senior Vice President and Chief Personnel Officer David F. Rebholz Senior Vice President Global Sales and Trade Services Jeffrey R. Rodek Senior Vice President Americas and Caribbean Tracy G. Schmidt Senior Vice President Air Ground Terminal and Transportation Mary Alice Taylor Senior Vice President Central Support Services Theodore L. Weise Senior Vice President Air Operations Graham R. Smith Vice President, Controller and Chief Accounting Officer 55 Corporate Information FORM 10-K: A copy of the Company's Annual Report on Form 10-K (excluding exhibits), filed with the Securities and Exchange Commission, is available free of charge. You will be mailed a copy upon request to Thomas L. Holland, Investor Relations Department, Federal Express Corporation, Box 727, Dept. 1854, Memphis, Tennessee 38194, (901) 395-3478. STOCK LISTING: The Company's common stock is listed on The New York Stock Exchange under the ticker symbol FDX. STOCKHOLDERS: At July 14, 1994, there were 7,843 stockholders of record. MARKET INFORMATION: Following are high and low closing prices, by quarter, for Federal Express Corporation common stock in fiscal 1994 and 1993. No cash dividends have been declared.
- ---------------------------------------------------------------------------- Closing Prices of Common Stock First Second Third Fourth Quarter Quarter Quarter Quarter FY 1994 High $60.25 $71.50 $77.50 $77.25 Low 44.63 55.25 68.25 64.88 ------------------------------------------ FY 1993 High $46.75 $50.00 $60.75 $58.50 Low 37.63 35.13 49.25 48.00 ------------------------------------------
ANNUAL MEETING: The annual meeting of stockholders will be held at The Peabody Hotel, 149 Union Avenue, Memphis, Tennessee, on Monday, September 26, 1994, at 10:00 a.m., CDT. REGISTRAR AND TRANSFER AGENT: First Chicago Trust Company of New York, Shareholder Services, P.O. Box 2500, Jersey City, NJ 07303-2500, (800) 446-2617/Michael Phalen (312) 407-4885. CORPORATE HEADQUARTERS: 2005 Corporate Avenue, Memphis, Tennessee 38132, (901) 369-3600. INQUIRIES: For financial information, contact Thomas L. Holland, Manager of Investor Relations, Federal Express Corporation, Box 727, Dept. 1854, Memphis, Tennessee 38194, (901) 395-3478. For general information, contact Shirlee M. Finley, Manager of Media Relations, Federal Express Corporation, Box 727, Dept. 1850, Memphis, Tennessee 38194, (901) 395-3463. AUDITORS: Arthur Andersen & Co., Memphis, Tennessee. 56 EX-21.1 9 EXHIBIT 21.1 SUBSIDARIES EXHIBIT 21.1 FEDERAL EXPRESS CORPORATION
Jurisdiction Status I. Federal Express Aviation Services, Incorporated Delaware Active A. Federal Express Aviation Services International, Delaware Active Ltd. 1. Federal Express Aviation Services United Kingdom Active International, Ltd. II. Federal Express Canada Ltd. Canada Active III. Federal Express International, Inc. Delaware Active A. Dencom Investments Limited Northern Ireland Inactive 1. Dencom Freight Holdings Limited (54%) Northern Ireland Inactive a. Federal Express (N.I.) Limited Northern Ireland Inactive b. Fedex (Ireland) Limited Ireland Inactive c. F.E.D.S. (Ireland) Limited Ireland Inactive B. Federal Express (Australia) PTY Ltd. Australia Active C. Federal Express (Deutschland) Holdings Gmbh Germany (FRG) Liquidation 1. Federal Express (Deutschland) Gmbh Germany (FRG) Liquidation 2. Federal Express (Deutschland) Logistik Germany (FRG) Active Management Gmbh a. Continentale Tankfahrt und Germany (FRG) Inactive Lagerungsgesellschaft b. Federal Express (Deutschland) Germany (FRG) Inactive Transport Gmbh D. Federal Express Europe, Inc. Delaware Active 1. Federal Express Europe, Inc. & Co., Belgium Active V.O.F. S.N.C. (99%) 2. Federal Express Europe, Inc. (Svenska) A.B. Sweden Liquidation 3. Federal Express European Services, Inc. Delaware Active Jurisdiction Status 4. Federal Express (Schweiz) A.G. Switzerland Liquidation 5. PIK Holdings Limted United Kingdom Active (8.28%) E. Federal Express Europlex, Inc. Delaware Active F. Federal Express Holdings, B.V. Netherlands Liquidation 1. Federal Express (Nederland) B.V. Netherlands Liquidation G. Federal Express Holdings, S.A. Delaware Active 1. Aeroenvios S.A. de C.V. Mexico Active 2. Federal Express (Antigua) Limited Antigua Active 3. Federal Express (Antilles Francaises) S.A.R.L. French West Indies Active 4. Federal Express (Bahamas) Limited (40%) Bahamas Active 5. Federal Express (Barbados) Limited Barbados Active 6. Federal Express (Bermuda) Limited Bermuda Active (40%) 7. Federal Express Cayman, Limited (60%) Cayman Islands Active 8. Federal Express (Dominicana) S.A. Dominican Republic Active a. Inversiones Sagitario, S.A. Dominican Republic Active b. Inversiones Piscis, S.A. Dominican Republic Active c. Inversiones Geminis, S.A. Dominican Republic Active 9. Federal Express (Grenada) Limited Grenada Active 10. Federal Express (Haiti) S.A. Haiti Inactive 11. Federal Express (Jamaica) Ltd. Jamaica Active 12. Federal Express (St. Kitts) Ltd. St. Kitts and Nevis Active 13. Federal Express (St. Lucia) Limited St. Lucia Active Jurisdiction Status 14. Federal Express (St. Maarten) N.V. Netherland Antilles Active a. Federal Express (Aruba) N.V. Netherland Antilles Active 15. Federal Express (Turks & Caicos) Limited Turks & Caicos Active 16. Federal Express Virgin Islands, Inc. U.S. Virgin Active Islands 17. Federal Express Entregas Rapidas, Ltd. Brazil Inactive (99.9988%.) H. Federal Express (Hong Kong) Limited Hong Kong Active I. Federal Express International (France) SNC France Active (95%) J. Federal Express Italy Inc. Delaware Inactive 1. Federal Express Italia SpA Italy Liquidation K. Federal Express (Japan) K.K. Japan Active L. Federal Express Limited England and Wales Liquidation 1. Federal Express Finance P.L.C. England and Wales Active 2. Federal Express International Limited England and Wales Inactive 3. Federal Express Parcel Services Limited England and Wales Inactive 4. Federal Express (U.K.) Limited United Kingdom Active a. Federal Express (U.K.) Pension United Kingdom Active Trustees Ltd. 5. Winchmore Developments Ltd. England and Wales Inactive a. Concorde Advertising Limited England and Wales Inactive M. Federal Express Luxembourg, Inc. Delaware Active N. Federal Express Pacific, Inc. Delaware Active 1. Federal Express Services (Malaysia) Sdn. Malaysia Active Bhd. (51%.) 2. Udara Express Courier Services Sdn. Bhd. Malaysia Active (47%) Jurisdiction Status O. Federal Express (Singapore) PTE, LTD. Singapore Active P. Federal Express (U. K.) Limited Delaware Inactive Q. Fedex (N. I.) Limited Northern Ireland Inactive IV. Federal Express Leasing Corporation Delaware Active V. Federal Express Logistics, Inc. Delaware Inactive VI. Federal Express Redevelopment Corporation Missouri Inactive VII. FEDEX Aeronautics Corporation Delaware Active VIII. Fedex Air Charter Corporation Delaware Inactive IX. Fedex Customs Brokerage Corporation Delaware Inactive X. Fedex Foreign Sales Corporation Virgin Islands Active XI. Fedex International Transmission Corporation Delaware Active XII. Fedex Mexicana S.A. de C.V. Mexico Active XIII. Fedex Partners, Inc. Delaware Active XIV. Flying Tiger Air Services, Inc. Delaware Inactive XV. Skyvoyager Air, Inc. Delaware Inactive XVI. SWAP, Inc. Delawre Inactive XVII. Tiger Intermodal, Inc. Delaware Inactive XIII. Tiger International Insurance Ltd. Cayman Islands Active XIX. Tiger Leasing Group, Inc. Delaware Liquidation A. Pegasus, Inc. Delaware Inactive B. TigerAir, Inc. Delaware Inactive 1. NAL-ONE, Ltd. Delaware Inactive 2. Permez Holdings, B.V. C. Tiger Equipment and Services, Ltd. Delaware Inactive D. Tiger Leasing Deutschland Gmbh Germany Liquidation Jurisdiction Status E. Tiger Leasing, Ltd. Delaware Inactive F. Tiger Leasing, S.A. Belgium Liquidation XX. Tiger Trading Company Delaware Inactive
EX-23.1 10 EXHIBIT 23.1 CONSENT EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in Federal Express Corporation's previously filed Form S-8 registration statement Nos. 2-74000, 2-95720, 33-20138 and 33-38041 and Form S-3 registration statement Nos. 33-47176, 33-50013 and 33-51623 of our reports dated June 29, 1994, included (or incorporated by reference) in Federal Express Corporation's Form 10-K for the year ended May 31, 1994. /s/ ARTHUR ANDERSEN & CO. ----------------------------------- ARTHUR ANDERSEN & CO. Memphis, Tennessee, August 2, 1994. EX-24.1 11 EXHIBIT 24.1 POA EXHIBIT 24.1 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, William J. Razzouk, Alan B. Graf, Jr. and Graham R. Smith, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1994, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of June, 1994. /s/ ROBERT H. ALLEN ---------------------------------------- Robert H. Allen STATE OF TEXAS ) ) SS. ) COUNTY OF HARRIS ) I, Earlene L. Barbeau, a Notary Public in and for said County, in the aforesaid State, DO HEREBY CERTIFY that Robert H. Allen, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ EARLENE L. BARBEAU ---------------------------------------- Notary Public EARLENE L. BARBEAU Notary Public, State of Texas My Commission Expires March 8, 1997 - ---------------------- 4543.MEM2 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, William J. Razzouk, Alan B. Graf, Jr. and Graham R. Smith, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1994, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of June, 1994. /s/ HOWARD H. BAKER, JR. ---------------------------------------- Howard H. Baker, Jr. STATE OF TENNESSEE ) ) SS. ) COUNTY OF SCOTT ) I, Kathy D. West, a Notary Public in and for said County, in the aforesaid State, DO HEREBY CERTIFY that Howard H. Baker, Jr., personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ KATHY D. WEST ---------------------------------------- Notary Public My Commission Expires: 12-26-94 - ---------------------- 4543.MEM2 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, William J. Razzouk, Alan B. Graf, Jr. and Graham R. Smith, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1994, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 16th day of June, 1994. /s/ ANTHONY J.A. BRYAN ---------------------------------------- Anthony J. A. Bryan STATE OF RHODE ISLAND ) ) SS. ) COUNTY OF WASHINGTON ) I, Jennifer E. Adams, a Notary Public in and for said County, in the aforesaid State, DO HEREBY CERTIFY that Anthony J. A. Bryan, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/JENNIFER E. ADAMS ---------------------------------------- Notary Public My Commission Expires: 6/18/95 - ---------------------- 4543.MEM2 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, William J. Razzouk, Alan B. Graf, Jr. and Graham R. Smith, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1994, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 3rd day of June, 1994. /s/ ROBERT L. COX ---------------------------------------- Robert L. Cox STATE OF TENNESSEE ) ) SS. ) COUNTY OF SHELBY ) I, Lillian W. Powers, a Notary Public in and for said County, in the aforesaid State, DO HEREBY CERTIFY that Robert L. Cox, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ LILLIAN W. POWERS ---------------------------------------- Notary Public My Commission Expires: My Commission Expires 4-29-97 - ------------------------ 4543.MEM2 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, William J. Razzouk, Alan B. Graf, Jr. and Graham R. Smith, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1994, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of June, 1994. /s/ RALPH D. DENUNZIO ---------------------------------------- Ralph D. DeNunzio STATE OF NEW YORK ) ) SS. ) COUNTY OF NEW YORK ) I, Barbara MacCarthy, a Notary Public in and for said County, in the aforesaid State, DO HEREBY CERTIFY that Ralph D. DeNunzio, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ BARBARA MACCARTHY ---------------------------------------- Notary Public My Commission Expires: BARBARA MAC CARTHY NOTARY PUBLIC, State of New York ___________________________ No. 31-7645700 Qualified in New York County Commission Expires June 30, 1996 4543.MEM2 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, William J. Razzouk, Alan B. Graf, Jr. and Graham R. Smith, and each of them, with full power of substitution and resubstitution, her true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1994, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of June, 1994. /s/ JUDITH L. ESTRIN ---------------------------------------- Judith L. Estrin STATE OF CALIFORNIA ) ) SS. ) COUNTY OF SANTA CLARA ) I, Lisa M. Cinfio, a Notary Public in and for said County, in the aforesaid State, DO HEREBY CERTIFY that Judith L. Estrin, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that she signed and delivered the said instrument as her free and voluntary act, for the uses and purposes therein set forth. /s/LISA M. CINFIO ---------------------------------------- Notary Public LISA M. CINFIO Comm. #981937 Notary Public - California SANTA CLARA COUNTY My Comm. Expires DEC 27, 1996 My Commission Expires: December 27, 1996 - ------------------------- 4543.MEM2 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, William J. Razzouk, Alan B. Graf, Jr. and Graham R. Smith, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1994, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 6th day of June, 1994. /s/ PHILIP GREER ---------------------------------------- Philip Greer STATE OF NEW YORK ) ) SS. ) COUNTY OF NEW YORK ) I, Kathleen M. Rode, a Notary Public in and for said County, in the aforesaid State, DO HEREBY CERTIFY that Philip Greer, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ KATHLEEN M. RODE ---------------------------------------- Notary Public My Commission Expires: KATHLEEN M. RODE Notary Public, State of New York 5/31/96 No. 43-4819454 - ------------------------ Qualified in Richmond County Commission Expires 5/31/96 ------- 4543.MEM2 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, William J. Razzouk, Alan B. Graf, Jr. and Graham R. Smith, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1994, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 15th day of June, 1994. /s/ J. R. HYDE, III ---------------------------------------- J. R. Hyde, III STATE OF TENNESSEE ) ) SS. ) COUNTY OF SHELBY ) I, Tina M. McDaniel, a Notary Public in and for said County, in the aforesaid State, DO HEREBY CERTIFY that J. R. Hyde, III, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ TINA M. MCDANIEL ---------------------------------------- Notary Public My Commission Expires: My Commission Expires Sept. 01, 1997 _______________________________________ 4543.MEM2 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, William J. Razzouk, Alan B. Graf, Jr. and Graham R. Smith, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1994, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 12th day of July, 1994. /s/ CHARLES T. MANATT ---------------------------------------- Charles T. Manatt STATE OF CALIFORNIA ) ) SS. ) COUNTY LOS ANGELES ) I, Peter MacDonald, a Notary Public in and for said County, in the aforesaid State, DO HEREBY CERTIFY that Charles T. Manatt, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. July 12, 1994 /s/ PETER MACDONALD ---------------------------------------- Notary Public My Commission Expires: PETER MAC DONALD Comm. #886048 9-4-94 Notary Public - California - ------------------------ LOS ANGELES COUNTY My Comm. Expires SEP. 4, 1994 4543.MEM2 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, William J. Razzouk, Alan B. Graf, Jr. and Graham R. Smith, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1994, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 15th day of June, 1994. /s/ JACKSON W. SMART, JR. ---------------------------------------- Jackson W. Smart, Jr. STATE OF ILLINOIS ) ) SS. ) COUNTY OF COOK ) I, Esparanza Acosta, a Notary Public in and for said County, in the aforesaid State, DO HEREBY CERTIFY that Jackson W. Smart, Jr., personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ ESPERANZA ACOSTA ---------------------------------------- Notary Public OFFICIAL SEAL My Commission Expires: ESPERANZA ACOSTA NOTARY PUBLIC, STATE OF ILLINOIS 2-8-97 MY COMMISSION EXPIRES 2-8-97 - ------------------------ 4543.MEM2 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, William J. Razzouk, Alan B. Graf, Jr. and Graham R. Smith, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1994, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 27th day of June, 1994. /s/ JOSHUA I. SMITH ---------------------------------------- Joshua I. Smith STATE OF MARYLAND ) ) SS. ) COUNTY OF PRINCE GEORGE'S ) I, Robyn Proctor Armstrong, a Notary Public in and for said County, in the aforesaid State, DO HEREBY CERTIFY that Joshua I. Smith, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ ROBYN PROCTOR ARMSTRONG ---------------------------------------- Notary Public My Commission Expires: ROBYN PROCTOR ARMSTRONG NOTARY PUBLIC STATE OF MARYLAND My Commission Expires Feberuary 16, 1998 - -------------------------------- 4543.MEM2 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, William J. Razzouk, Alan B. Graf, Jr. and Graham R. Smith, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1994, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 7th day of June, 1994. /s/ PETER S. WILLMOTT ---------------------------------------- Peter S. Willmott STATE OF ILLINOIS) ) SS. ) COUNTY OF COOK ) I, Joan L. Noble, a Notary Public in and for said County, in the aforesaid State, DO HEREBY CERTIFY that Peter S. Willmott, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ JOAN L. NOBLE ---------------------------------------- Notary Public My Commission Expires: 3/5/95 - ------------------------ "OFFICIAL SEAL" Joan L. Noble Notary Public, State of Illinois My Commission Expires 03/05/95 4543.MEM2 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, the Chief Financial Officer of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, William J. Razzouk and Graham R. Smith, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such officer, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1994, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 2nd day of June, 1994. /s/ ALAN B. GRAF, JR. ---------------------------------------- Alan B. Graf, Jr. STATE OF TENNESSEE ) ) SS. ) COUNTY OF SHELBY ) I, Edna M. Kennon, a Notary Public in and for said County, in the aforesaid State, DO HEREBY CERTIFY that Alan B. Graf, Jr., personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ EDNA M. KENNON ---------------------------------------- Notary Public My Commission Expires: My Commission Expires October 24, 1994 - ---------------------------------------- 4543.MEM2 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, the Executive Vice President, Worldwide Customer Operations, of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and Graham R. Smith, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such officer, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1994, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 7th day of June, 1994. /s/ WILLIAM J. RAZZOUK ---------------------------------------- William J. Razzouk STATE OF TENNESSEE ) ) SS. ) COUNTY OF SHELBY ) I, Sharon A. Smith, a Notary Public in and for said County, in the aforesaid State, DO HEREBY CERTIFY that William J. Razzouk, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ SHARON A. SMITH ---------------------------------------- Notary Public My Commission Expires: 3-16-97 - ------------------------ 4543.MEM2 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, the principal executive officer and a director of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint William J. Razzouk, Alan B. Graf, Jr. and Graham R. Smith, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such officer and director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1994, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 6th day of June, 1994. /s/ FREDERICK W. SMITH ---------------------------------------- Frederick W. Smith STATE OF TENNESSEE ) ) SS. ) COUNTY OF SHELBY ) I, June Y. Fitzgerald, a Notary Public in and for said County, in the aforesaid State, DO HEREBY CERTIFY that Frederick W. Smith, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ JUNE Y. FITZGERALD ---------------------------------------- Notary Public My Commission Expires: My Commission Expires Mar. 28, 1995 - -------------------------------------- 4543.MEM2 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, the principal accounting officer of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, William J. Razzouk and Alan B. Graf, Jr., and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such officer, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 1994, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 2nd day of June, 1994. /s/ GRAHAM R. SMITH ---------------------------------------- Graham R. Smith STATE OF TENNESSEE ) ) SS. ) COUNTY OF SHELBY ) I, Delores M. Wolfmeyer, a Notary Public in and for said County, in the aforesaid State, DO HEREBY CERTIFY that Graham R. Smith, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ DELORES M. WOLFMEYER ---------------------------------------- Notary Public My Commission Expires: MY COMMISSION EXPIRES DEC. 1, 1996 - ----------------------------------- 4543.MEM2 -----END PRIVACY-ENHANCED MESSAGE-----