Exhibit 10.3
01-27-99
Letter Agreement No. 9
DAC 96-29-M
Federal Express Corporation
2005 Corporate Avenue
Memphis, Tennessee 38132
Federal Express Corporation (Federal Express) and McDonnell Douglas Corporation,
a wholly-owned subsidiary of The Boeing Company (MDC), have entered into
Modification Services Agreement Document No. DAC 96-29-M (the "Agreement") dated
September 16, 1996, which Agreement covers Federal Express' desire to
incorporate certain modifications in its DC-10 aircraft (the "Aircraft", as
defined in the Agreement) and MDC desires to perform such modifications. As a
further consideration of the parties hereto, this Letter Agreement No. 9 shall
constitute a part of said Agreement.
WHEREAS, Boeing and FedEx have jointly concluded that it is in the best
interests of the MD-10 Program to allow FedEx to accept responsibility to
accomplish, either directly or by contracting with a subcontractor, only the
touch labor, administration of such contract and oversight related to the
following tasks (collectively the "Specified Services"):
- - The work cards listed in Attachments B1 through B5 of Exhibit K to the
Agreement (the "Heavy Maintenance Check")
- - The work cards from Exhibit C to the Agreement (Standardization)
- - The work cards from Exhibit F to the Agreement (Refurbishment)
- - The Non Routine Services associated with the above
NOW, THEREFORE, contingent on MDC executing an agreement with Aeronavali in
which MDC is relieved of its obligations to Aeronavali to provide any additional
Heavy Maintenance Check work packages for accomplishment by Aeronavali, and
contingent on Aeronavali and FedEx executing an agreement to accomplish the
Specified Services, and in consideration of the mutual covenants herein, MDC and
Federal Express agree to amend the Agreement to reflect the reduction of work
scope resulting from FedEx accomplishing the Specified Services subject to the
following terms and conditions:
1. In consideration of FedEx's performance of the Specified Services set forth
above, the Price to be paid to MDC by FedEx upon Redelivery of the
twentieth (20th) Aircraft Delivered to MDC (designated as fuselage 42) and
subsequent (collectively the "Non-Mx Aircraft") shall not include [ *
]
a) Any of the Services not performed by FedEx or its subcontractor which
are required by the Specified Services, or any additional workscope
added to the MJCS in a subsequent revision, shall, at FedEx's request,
be performed by MDC pursuant to the prices noted in Exhibit K,
Attachment A or C to the Agreement, or an individually negotiated and
executed Additional Services Request (ASR) via the ASR process defined
in the Agreement, as applicable. The fixed labor price for such an ASR
shall be calculated [ *
]
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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.
1-27-99 Letter Agreement No. 9
DAC 96-29-M
Page 2
[ *
]
b) The prices set forth in Exhibit K shall be due and payable by FedEx
for any given Non-Mx Aircraft only to the extent that the Services
specified in Exhibit K (i) have been issued on the FedEx MJCS
applicable to that specific Non-Mx Aircraft (ii) the applicable MJCS
was submitted to MDC and (iii) the Services specified on the
applicable MJCS were actually accomplished by MDC on the applicable
Non-Mx Aircraft.
c) The Aircraft shall be deemed completed when the Services required to
be accomplished by MDC have been substantially accomplished, without
regard to the level of completion of the Specified Services
accomplished or yet to be accomplished by FedEx or its subcontractor.
FedEx and Boeing shall mutually establish a milestone or group of
milestones and associated progress payment schedule by no later than
February 12, 1999. The milestone and progress payment schedule shall
be used to determine when specific Services are complete and the
associated progress payment is due. The final balance payment shall be
due and payable upon Redelivery, subsequent to the completion of the
Services and the Specified Services.
2. FedEx and MDC shall each be responsible for the costs associated with
preparation for ferry flight, and the subsequent ferry flight(s) for each
Non-Mx Aircraft as stipulated below:
a) FedEx shall be responsible for [ *
] as noted in
Exhibit O - Schedule for commencement of the Services by MDC. FedEx
and MDC acknowledge that in certain instances, the same subcontractor
will concurrently accomplish the Specified Services on behalf of FedEx
and the Services on behalf of MDC. (See Paragraph 6. below)
b) Notwithstanding Paragraph 2.a) above, for a Non-Mx Aircraft currently
in storage at Goodyear, AZ, [ *
]
c) For a Non-Mx Aircraft currently in storage at Goodyear, AZ, [ *
]
3. At the request of FedEx or its subcontractor, MDC shall provide Parts in
connection with non-routine tasks accomplished on an Aircraft in accordance
with the process outlined in "Non-Routine Part Processing", included as
Attachment A herein. All such Parts
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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.
1-27-99 Letter Agreement No. 9
DAC 96-29-M
Page 3
provided by MDC will be charged to FedEx in accordance with the Agreement,
plus a handling charge of [ * ] of such price. The handling charge for each
Part shall not exceed [ * ].
4. FedEx hereby irrevocably and unconditionally waives any of MDC's warranties
which are exclusively related to workmanship for the Specified Services on
the Non-Mx Aircraft performed by or for FedEx (unless performed by MDC),
provided, however, nothing in this Paragraph 4. shall extend to or
otherwise affect warranties which may be applicable to Parts.
5. Except as expressly set forth in Paragraph 4. above, the performance of the
Services by FedEx or its subcontractor as contemplated herein shall in no
manner change, modify, terminate or otherwise affect MDC's warranties
regarding the Non-Mx Aircraft or in any manner whatsoever modify the terms
and conditions of the Agreement except as expressly set forth herein.
6. FedEx and MDC mutually acknowledge that a potential resource conflict
exists as a result of a subcontractor entering into two separate contracts
with MDC and FedEx to accomplish work concurrently on one aircraft. FedEx
and MDC agree to mutually develop a priority of tasks, and mutually resolve
any resource conflicts that arise to prevent any materially adverse impact
to the Non-Mx Aircraft Redelivery Date. If a resource conflict arises, then
the party identifying the conflict shall immediately notify the other
party. If the resource conflict cannot be resolved within two days of
notification of the conflict by MDC or FedEx, and such conflict results in
a delay of MDC's or FedEx's ability to accomplish the services in
accordance with the scheduled planning in MDC's or FedEx's respective
contract with the subcontractor, then any resultant delay in the Redelivery
Date will constitute an Excusable Delay as defined in the Agreement.
7. All of the terms of the Agreement shall remain in full force and effect,
except as herein expressly changed, modified or supplemented, or except
insofar as the terms thereof have been completed, performed or complied
with prior to the date hereof.
If the foregoing correctly sets forth our understanding, please execute this
Letter Agreement in the space provided below.
FEDERAL EXPRESS CORPORATION MCDONNELL DOUGLAS CORPORATION
/s/MICHAEL CUKOR /s/CHARLES STREITZ
- ---------------------------------- ---------------------------------------
Signature Signature
Michael Cukor Charles Streitz
- ---------------------------------- ---------------------------------------
Printed Name Printed Name
Acting VP Contracts Manager
- ---------------------------------- ---------------------------------------
Title Title
APPROVED
AS TO LEGAL FORM 1-28-99
SSL 1/28/99 Legal Dept. ---------------------------------------
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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.