07-15-97
[LOGO]
Letter Agreement No. 3 to
DAC 96-29-M
Federal Express Corporation
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Federal Express Corporation ("Federal Express") and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Corporation ("MDC") have entered into Modification Services Agreement Document
No. DAC 96-29-M (the "Modification Agreement") dated September 16, 1996, which
Modification Agreement covers Federal Express' desire to incorporate certain
modifications in its DC-10 aircraft (the "Aircraft", as defined in the
Modification Agreement) and MDC desires to perform such modifications. As a
further consideration of the parties hereto, this Letter Agreement No. 3 shall
amend and constitute a part of said Modification Agreement.
Federal Express has requested MDC to provide services for certain of the
Aircraft and Option Aircraft (the "Stored Aircraft"); and MDC has agreed to
provide such services; subject to the following terms and conditions set forth
in this Letter Agreement. Terms not otherwise defined in this Letter Agreement
shall have the same definitions ascribed to such terms in the Modification
Agreement.
1. SERVICES
Pursuant to Paragraph 2)H. of the Modification Agreement, Federal Express
has the right to store up to twenty-five Aircraft at any one time at the
Conversion Facility. Notwithstanding this, MDC hereby agrees to allow
Federal Express the right to store up to fifty Stored Aircraft at any one
time at the Conversion Facility which for the purposes of this Letter
Agreement is defined to be the Dimension facility located in Goodyear,
Arizona.
The work cards set forth in Attachment A of this Letter Agreement will be
performed by MDC or its subcontractor on each Stored Aircraft in accordance
with the ASR process at the prices listed in Attachment A. Federal Express
shall provide five days written notice of its intent to have a specific
work card completed on a Stored Aircraft. If Federal Express determines
additional storage work cards are required, such additional
07-15-97 Letter Agreement No. 3 to
DAC 96-29-M
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work may be completed in accordance with the ASR process. The ASR form
listed in Attachment D hereto shall be utilized for any additional
services provided in accordance with this Letter Agreement.
If Federal Express requests removal of the engines by MDC on any Stored
Aircraft during the term of this Letter Agreement, Federal Express shall
provide to MDC 13,000 pounds of ballast for each Stored Aircraft so stored.
Federal Express may provide used engines to be installed on the Stored
Aircraft as ballast.
2. AIRCRAFT DELIVERY
Federal Express shall be responsible for transporting each Stored Aircraft
to the Conversion Facility. Federal Express shall provide MDC with five
business days written notice of its intent to deliver a Stored Aircraft to
the Conversion Facility. Notwithstanding Paragraph 5)A.1) of the
Modification Agreement, delivery of a Stored Aircraft to the Conversion
Facility does not constitute Delivery of an Aircraft by Federal Express.
Upon arrival at the Conversion Facility, MDC shall execute a receipt in the
form of Attachment B (the "Aircraft Delivery Receipt") for each Stored
Aircraft. Upon completion of the required services listed in Attachment A,
page A-1, MDC shall execute a receipt in the form of Attachment C (the
"Aircraft Redelivery Receipt"). Any work required to have a Stored
Aircraft Delivered for performance of the Services, excluding Aircraft
towing, under the Modification Agreement may be completed by MDC or its
Subcontractor in accordance with the ASR process.
3. OVERSIGHT AND INSPECTION
Except for a Stored Aircraft on which MDC or MDC's subcontractor is
performing services, Federal Express shall be responsible for oversight and
inspection of the Stored Aircraft during the term of this Letter Agreement.
4. REMOVAL OF EQUIPMENT
Prior to and during the storage period for each Stored Aircraft, certain
Stored Aircraft components ("Parts") may be removed. Except as required
for performance of the work cards set forth in Attachment A or ASRs, no
Parts shall be removed without the prior approval of Federal Express
pursuant to an executed ASR. All such Parts removals shall be accomplished
in accordance with the procedures specified in the Modification Agreement.
07-15-97 Letter Agreement No. 3 to
DAC 96-29-M
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5. PRICE
The price per Stored Aircraft for receiving, incoming inspection and
handling of each Stored Aircraft shall be [ * ].
The price per Stored Aircraft for each work cards is set forth in
Attachment A. The price excludes any material identified as BFE. The work
cards, 11.1-01, 11.1-02, 11.1-03, 11.1-04, 11.1-05, 11.1-06 and 11.9 shall
be accomplished on a Time and Material (T&M) basis with a Not-to-Exceed
(NTE) price as listed for each of the first two Stored Aircraft and
re-negotiated downward if feasible for subsequent Stored Aircraft.
The price for additional work shall be set forth in the relevant ASR.
All pricing is stated in 1996 year dollars and shall be escalated in
accordance with the following escalation formula.
ESCALATION FORMULA
[ * ]
where:
AP = The Final Adjusted Price
MP = The Base Price
ECI = The latest released ECI Index value at the completion of
the services computed to one decimal place (Note: 1.05 rounds to 1.1)
138.2 = The ECI Index value for June 1996
6. PAYMENT
a. MDC will invoice Federal Express upon completion of the services
provided hereunder. MDC's invoices shall be due and payable within
30 days of Federal Express' receipt of such invoice.
b. If Federal Express fails to make any payments at the time and in the
amounts required under this Letter Agreement, Federal Express shall pay
MDC interest on the payment from the due date until the payment is
received by MDC at the Prime Rate announced from time to time by Chase
Manhattan Bank at its principal office in
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*Blank space contained confidential information which has been filed separately
with the Securities and Exchange commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
07-15-97 Letter Agreement No. 3 to
DAC 96-29-M
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New York, New York, plus one percent, or the maximum rate allowed by
California law, whichever is lower.
c. All payments made by Federal Express to MDC under this Agreement shall
be in U.S. Dollars, made by wire transfer in immediately available
funds and made to the following address:
Chase Manhattan Bank
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ABA No. ▇▇▇▇▇▇▇▇▇
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- Account No. ▇▇▇-▇-▇▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇ (or as otherwise notified)
07-15-97 Letter Agreement No. 3 to
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7. CONVERSION FACILITY RELOCATION
In the event MDC requests relocation of the Conversion Facility during the
term of this Letter Agreement, MDC and Federal Express shall be responsible
for the following:
a. MDC RESPONSIBILITIES:
1) Re-installation of any equipment removed by MDC or MDC's
subcontractor during the performance of any services or
additional work which is required for ferry of the Firm Aircraft
and Option Aircraft which have been converted to Firm Aircraft
under the Modification Agreement;
2) Ferry of such Aircraft by an MDC flight crew to the new
conversion facility; and
3) Insuring such Aircraft during the ferry flight under its physical
damage aircraft hull insurance program and Federal Express will
be named as an additional insured. In no event will MDC's
liability to Federal Express for partial or total loss or damage
or destruction of an Aircraft during such ferry flight exceed the
declared stipulated loss value of [ * ].
b. FEDERAL EXPRESS RESPONSIBILITIES:
1) Re-installation of all equipment other than that listed in 1) a)
above which was removed from the Stored Aircraft;
2) Maintaining and or providing a Certificate of Airworthiness for
each Stored Aircraft;
3) Completion of all mandatory Airworthiness Directives required to
obtain a ferry permit for the ferry flight of each Stored
Aircraft;
4) Replacement of any parts which have exceeded their safe life
limit required to obtain a ferry permit for the ferry flight of
each Stored Aircraft; and
5) Providing a ferry permit, if required, for the Stored Aircraft.
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*Blank space contained confidential information which has been filed separately
with the Securities and Exchange commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
07-15-97 Letter Agreement No. 3 to
DAC 96-29-M
Page 6
8. TERM
This Letter Agreement will commence on the date of execution hereof and
will remain in effect until either the completion of all Services performed
under the Modification Agreement on all Aircraft or the earlier termination
by written notice of Federal Express or MDC. In the event of early
termination by Federal Express of this Letter Agreement, Federal Express
shall pay for all work completed on each Stored Aircraft and not
previously invoiced including all reasonable non-recurring material costs
incurred up to a maximum of $500.00 per Stored Aircraft. Federal
Express may continue to store the Aircraft in accordance with the terms and
conditions of the Modification Agreement following early termination of
this Letter Agreement.
9. INSURANCE
a. Federal Express' General Coverage
1) Prior to the commencement of the services hereunder, Federal
Express shall provide to MDC evidence of satisfactory insurance
coverage for the Stored Aircraft. Said insurance coverage shall:
a) be maintained at Federal Express' expense at all times
during the term of this Letter Agreement and for a period of
not less than two (2) years thereafter;
b) name MDC and MDC's employees, officers, directors,
representatives, subcontractors and agents as additional
insureds under Federal Express' third party liability
insurance;
c) contain a severability of interest clause; and
d) provide that the insurance is primary and without
contribution from other insurance which may be available to
the additional insureds; and
e) include the following insurance in the amounts noted:
(1) Federal Express shall maintain hull insurance coverage
(in the amount of such Stored Aircraft's value prior to
modification, including
07-15-97 Letter Agreement No. 3 to
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all components and parts removed from the Stored
Aircraft and parts shipped from the Conversion
Facility to other locations on the instructions of
Federal Express or pursuant to the provisions of this
Letter Agreement).
(2) Third party liability coverage (in the amount of
Federal Express' current coverage, but not less than
$300,000,000).
b. MDC's subcontractor Coverage
1) Prior to the commencement of the services hereunder, MDC's
subcontractor shall provide Federal Express evidence of
satisfactory insurance coverage. Said insurance coverage shall:
a) be maintained at MDC's subcontractor's expense at all times
during the term of this Letter Agreement and for a period of
not less than two (2) years thereafter;
b) name MDC and their respective employees, officers,
directors, representatives and agents as additional insureds
as regards work performed by subcontractor under its third
party liability insurance, excluding gross negligence and
willful misconduct of MDC;
c) name Federal Express and their respective employees,
officers, directors, representatives and agents as
additional insureds as regards work performed by
subcontractor under Subcontractor's third party liability
insurance excluding operational liability, gross negligence
and willful misconduct of Federal Express;
d) contain a severability of interest clause;
e) provide that the insurance is primary as regards work
performed by subcontractor and without contribution from
other insurance which may be available to the additional
insureds; and,
f) include the following insurance in the amounts noted:
07-15-97 Letter Agreement No. 3 to
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(i) Aviation Comprehensive Liability Insurance with a
combined single limit of liability of not less than
Three Hundred Million U.S. Dollars ($300,000,000.00)
for Bodily Injury and Property Damage under Products
Liability, Completed Operations Coverage and Premises
Operation Liability;
(ii) Hangar Keeper's Liability Insurance providing
property damage coverage with limits of liability of
Three Hundred Million U.S. Dollars ($300,000,000.00)
per occurrence; and
(iii) Worker's Compensation as required by applicable law
and Employer's Liability Insurance of not less than
One Million U.S. Dollars ($1,000,000.00) per
occurrence unless a greater amount is required by
law.
g) In the event MDC performs the services, it will provide
Federal Express evidence of insurance like the subcontractor
coverage above.
c. All insurance coverage set forth in Paragraphs a., and b. above shall:
1) except for workers compensation insurance, contain a waiver of
subrogation by such parties insurers of any rights it may have
against the other party and the other parties employees,
officers, directors, representatives, agents and subcontractors;
and
2) contain a clause which states that any cancellation, restriction
or reduction in coverage shall only be effective upon thirty (30)
days written notice to the other party of such cancellation,
restriction or reduction in coverage.
d. Except for any damage caused by gross negligence or willful misconduct
on the part of MDC or MDC's subcontractors, Federal Express shall
assume the risk of loss, damage or destruction of a Stored Aircraft or
equipment for the period that such Stored Aircraft or equipment is in
storage pursuant to this Letter Agreement. Federal Express will cause
its physical damage aircraft hull
07-15-97 Letter Agreement No. 3 to
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Page 9
insurers to waive all rights of subrogation against MDC and its
subcontractors, except as may arise by the gross negligence or willful
misconduct on the part of MDC or MDC's subcontractor.
10. EXECUTION
This Letter Agreement and any amendments hereto may be executed in
counterparts, each of which shall be deemed an original and all of which
shall constitute one and the same Agreement. Execution by either party may
be confirmed by electronic facsimile transmission of the signature page of
the Agreement to the other party, and confirmation of receipt by telephonic
or facsimile transmission.
11. LIMITATION OF LIABILITY
a. With respect to the transactions contemplated by this Letter Agreement,
neither party shall be liable for any consequential damages arising
from claims brought by the other.
b. In no event will MDC's or MDC's subcontractor's liability under this
Letter Agreement to Federal Express for partial or total loss, damage
or destruction of each Stored Aircraft exceed the sum of the stipulated
loss value of [ * ].
c. Federal Express agrees to be solely liable for any and all
environmental contamination (including but not limited to contamination
of air, water or soil and any fines, penalties or clean up costs
associated with such damage) as well as any other liability, penalties
or fines associated with the use or release of, or exposure to
hazardous substances directly arising out of or in connection with the
storing of Stored Aircraft at the Conversion Facility prior to
Delivery, except for any such environmental contamination arising out
of or caused by MDC or its subcontractor's actions or failures to act.
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*Blank space contained confidential information which has been filed separately
with the Securities and Exchange commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
07-15-97 Letter Agreement No. 3 to
DAC 96-29-M
Page 10
If the foregoing correctly sets forth our understanding, please execute this
Letter Agreement in the space provided below.
FEDERAL EXPRESS CORPORATION ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ CORPORATION
/S/ ▇▇▇▇▇ ▇▇▇▇ /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Signature Signature
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Printed Name Printed Name
VP - AIRCRAFT BASE MAINTENANCE VICE PRESIDENT - CONTRACTS
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Title Title
JULY 29, 1997
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Date
APPROVED
AS TO LEGAL FORM
KHS 7-23-97
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LEGAL DEPT
Attachment A to
Letter Agreement No. 3
DAC 96-29-M
Page A-1
FEDERAL EXPRESS MD-10 AIRCRAFT
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WORK CARDS
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CARD REVISION PRICE PER
NUMBER CARD TITLE DATE AIRCRAFT
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11.1 Engines/Thrust Reversers/APU Preservation 6/2/97 [ * ]
(material is BFE) (Ballast)
Engine Thrust Reverser (TR) [ * ]
*11.1-01 Removal #1 + 6/2/97 [ * ]
*11.1-02 Removal #2 + 6/2/97 [ * ]
*11.1-03 Removal #3 + 6/2/97 [ * ]
Engine [ * ]
*11.1-04 Removal #1 +@ 6/2/97 [ * ]
*11.1-05 Removal #2 +@ 6/2/97 [ * ]
*11.1-06 Removal #3 +@ 6/2/97 [ * ]
11.1-07 APU Removal preserve fuel control unit 6/2/97 [ * ]
(work items 1,2 & 3 only)
11.2 Lavatory Commode Removal (items 1 & 3 4/29/97 [ * ]
only)
11.3 Potable Water System - Preservation 4/29/97 [ * ]
11.4 Aircraft Batteries - Removal 4/29/97 [ * ]
11.5 Cockpit/Emergency Exit Windows - 4/1/97 [ * ]
Preservation
11.6 Landing Gear - Preservation Temporary 4/1/97 [ * ]
Location
11.7 Landing Gear - Preservation Final Location 4/29/97 [ * ]
11.8 Pitot/Static Ports - Preservation 4/1/97 [ * ]
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*Blank space contained confidential information which has been filed separately
with the Securities and Exchange commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
07-15-97 Attachment A to
Letter Agreement No. 3 to
DAC 96-29-M
Page 2
CARD REVISION PRICE PER
NUMBER CARD TITLE DATE AIRCRAFT
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*11.9 Aircraft Lubrication 5/1/97 [ * ]
12.1 Forward Avionics compartment Equipment 4/29/97 [ * ]
Removal
12.5 Bilge Areas L-48 to R-48 - Preservation 4/1/97 [ * ]
12.6 Landing Gear Wheel Well LPS Treatment 4/1/97 [ * ]
12.7 Engine Mounts/Truss Fittings - Preservation 4/1/97 [ * ]
12.8 Aircraft Fuel System - Preservation (fuel 4/1/97 [ * ]
ballasting to 40,000 lbs.) (material is BFE)
New Install ▇▇▇▇▇▇ ▇▇▇▇ Locks (material is BFE) [ * ]
New Leave 3 Passenger doors open. Install ▇▇▇▇ [ * ]
liner material with avionic filter tapes inside
for fuselage ventilation (material is BFE)
New Cap Engine Inlets and Exhaust (No. 1, 2 and [ * ]
3) (material is BFE)
New Remove Oxygen canisters from seats, [ * ]
discharge and pack in hazardous material
drum for shipping/disposal by Federal
Express.
Note: The above pricing assumes the engine shipping stands, TR shipping
containers, APU shipping stand and BFE designated items are furnished
by Federal Express in a timely manner.
* These work cards are to be accomplished on a T&M basis for the
first two Stored Aircraft with NTE exceed pricing as noted and
re-negotiated downward if feasible for subsequent Stored
Aircraft.
+ Price includes loading unit into truck for shipping.
@ Price includes removal of exhaust cone as required for shipping.
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*Blank space contained confidential information which has been filed separately
with the Securities and Exchange commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
07-15-97
Attachment B to
Letter Agreement No. 3
DAC 96-29-M
AIRCRAFT DELIVERY RECEIPT
MDC does hereby accept delivery of one (1)_____________________ aircraft,
Factory Serial no.____________ , FAA Registration No.____________ , together
with three (3)__________________ engines (if installed), Manufacturer's Serial
Nos._______________ ,______________ , and__________________ , together with all
fixed equipment, parts, components and accessories installed thereon and all
loose equipment specified in the inventory list from Federal Express, such
delivery having been made at___________________________________________ , at
_______________(a.m./p.m.) on the__________________day of___________________ ,
in accordance with Letter Agreement No. 3 to DAC 96-29-M between FEDERAL
EXPRESS AND MDC.
MDC does hereby accept delivery of the Aircraft for the services required by
this Letter Agreement No. 3.
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BY:
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TITLE:
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Fuel on Board: (U.S. gallons)
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07-15-97
Attachment C to
Letter Agreement No. 3 to
DAC 96-29-M
AIRCRAFT REDELIVERY RECEIPT
MDC does hereby certify that one (1)_____________________________ aircraft,
Factory Serial no._____________ , FAA Registration No.______________ , together
with three (3)______________engines (if installed), Manufacturer's Serial Nos.
____________ ,__________________ ,________________ , has had services
completed in accordance with Letter Agreement No. 3 to DAC 96-29-M.
Redelivery is hereby made by MDC of the above referenced aircraft together with
all fixed equipment, parts, components and accessories installed thereon and all
loose equipment specified in the inventory list provided by Federal Express at
delivery.
Place: Date: Time:
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FEDERAL EXPRESS CORPORATION ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ CORPORATION
BY: BY:
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TITLE: TITLE:
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Fuel on Board: (U.S. gallons)
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07-15-97
Attachment D to
Letter Agreement No. 3
DAC 96-29-M
Page A-2
ADDITIONAL SERVICES REQUEST
[LOGO] AUTHORIZATION FORM ASR NUMBER _______
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FEDEX GENERATING ITEM: MDC W/O NUMBER:
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TECHNICAL DOCUMENTS AND SPECIFICATIONS:
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GENERAL DESCRIPTION:
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MATERIALS:
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MATERIAL PROVISIONING RESPONSIBILITY: SCHEDULING IMPACT:
/ / MDC / / FedEx
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ESTIMATED MATERIAL COST: ESTIMATED MAN-HOURS:
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DELIVERY DATE: MDC ENGINEERING:
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REDELIVERY DATE: AGREED TO FIXED PRICE:
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OTHER: (Specify)
Authorized By: Date:
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Federal Express Corporation
Accepted By: Date:
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