Exhibit 10.42
Compensation Arrangements with Named Executive Officers
Base Salaries
The following table sets forth the fiscal 2010 annual base salaries of FedEx’s
named executive officers in effect as of June 1, 2009:

          Name and       Current Position   Base Salary  
Frederick W. Smith

  $ 1,188,048  
Chairman, President and
Chief Executive Officer
       
 
       
Alan B. Graf, Jr.

  $ 840,948  
Executive Vice President and
Chief Financial Officer
       
 
       
David J. Bronczek

  $ 878,184  
President and Chief Executive Officer — FedEx Express
       
 
       
T. Michael Glenn
  $ 775,188  
Executive Vice President,
Market Development and
Corporate Communications
       
 
       
Christine P. Richards

  $ 581,760  
Executive Vice President,
General Counsel and Secretary
       

Fiscal 2010 Annual Incentive Compensation Program
Chairman, President and Chief Executive Officer
Frederick W. Smith’s fiscal 2010 annual bonus will be determined by the
achievement of corporate objectives for consolidated pre-tax income for fiscal
2010. The independent members of the Board of Directors, upon the recommendation
of the Compensation Committee, may adjust Mr. Smith’s bonus amount upward or
downward based on their evaluation of Mr. Smith’s performance, including the
quality and effectiveness of his leadership and the following corporate
performance measures:

  •   FedEx’s stock price performance relative to the Standard & Poor’s 500
Composite Index, the Dow Jones Transportation Average, the Dow Jones Industrial
Average and competitors;

  •   FedEx’s stock price to earnings (P/E) ratio relative to the Standard &
Poor’s 500 Composite Index, the Dow Jones Industrial Average and competitors;

  •   FedEx’s market capitalization;

 

 

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  •   FedEx’s revenue and operating income growth relative to competitors;

  •   FedEx’s free cash flow (excluding business acquisitions), return on
invested capital (excluding certain unusual items), and weighted average cost of
capital;

  •   Analyst coverage and ratings for FedEx’s stock;

  •   FedEx’s U.S. and international revenue market share; and

  •   FedEx’s reputation rankings by various publications and surveys.

None of these factors will be given any particular weight in determining whether
to adjust Mr. Smith’s bonus amount.
Mr. Smith’s annual bonus target for fiscal 2010 is 130% of his annual base
salary (at fiscal year-end), with a maximum payout of 300% of his target bonus.
Non-CEO Named Executive Officers
The fiscal 2010 annual bonus target payouts for the non-CEO named executive
officers, as a percentage of annual base salary (at fiscal year-end), are as
follows:

          Name   Target Payout  
 
       
Alan B. Graf, Jr.
    90 %
David J. Bronczek
    100 %
T. Michael Glenn
    90 %
Christine P. Richards
    90 %

The maximum payout for each executive is 240% of his or her target bonus.
The fiscal 2010 annual bonus for the non-CEO named executive officers will be
based on:

  •   the achievement of individual objectives established at the beginning of
the fiscal year for each executive (30% of each executive’s target bonus); and

  •   the achievement of corporate objectives for consolidated pre-tax income
for fiscal 2010 (70% of each executive’s target bonus).

The annual bonus payout opportunity relating to individual performance is
contingent upon achievement of consolidated pre-tax income objectives under the
bonus plan (as well as achievement of the individual performance objectives).
Mr. Smith will determine the achievement level of each executive’s individual
objectives at the conclusion of fiscal 2010.
The annual bonus payout opportunity relating to company financial performance
ranges, on a sliding scale, from a minimum amount if the annual bonus plan’s
pre-established consolidated pre-tax income threshold is achieved up to a
maximum amount if such financial performance goal is substantially exceeded.

 

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Long-Term Incentive Program
FedEx’s long-term incentive (“LTI”) plans for the three-fiscal-year periods 2008
through 2010, 2009 through 2011 and 2010 through 2012, provide long-term cash
bonus opportunities to members of upper management, including the named
executive officers, for fiscal 2010, 2011 and 2012, respectively, if certain
aggregate fully diluted earnings-per-share (“EPS”) goals established by the
Board of Directors are achieved with respect to those periods. No amounts can be
earned for the fiscal 2008 through 2010, 2009 through 2011 and 2010 through 2012
plans until 2010, 2011 and 2012, respectively, because achievement of the EPS
goals can only be determined following the conclusion of the applicable
three-fiscal-year period.
FedEx acquired Kinko’s, Inc. (now known as FedEx Office) in fiscal 2004. During
the fourth quarter of fiscal 2008, FedEx recorded a charge of approximately
$891 million ($696 million, net of tax, or $2.23 per diluted share),
predominantly for impairment of the value of the Kinko’s trade name and the
goodwill recorded as a result of the Kinko’s acquisition. The Board of
Directors, upon the recommendation of its Compensation Committee, decided that
this charge would be excluded from fiscal 2008 EPS for the purposes of
(i) determining achievement levels under the LTI plan for the three-fiscal-year
period 2008 through 2010, and (ii) setting EPS goals under the LTI plan for the
three-fiscal-year period 2009 through 2011.
Traditionally, the base-year number over which the three-year average annual EPS
growth rate goals are measured for an LTI plan is the final full-year EPS of the
preceding fiscal year. For the FY2010-FY2012 LTI plan, however, the base-year
number will be equal to the amount so that with 12.5% growth from such base-line
EPS, the FY2010 business plan EPS goal will be achieved.
The following table sets forth the possible future payouts to each of FedEx’s
named executive officers under FedEx’s LTI plans:

                                              Potential Future Payouts      
Performance   Threshold     Target     Maximum   Name   Period   ($)     ($)    
($)    
Frederick W. Smith
  FY2008 – FY2010     875,000       3,500,000       5,250,000  
 
  FY2009 – FY2011     875,000       3,500,000       5,250,000  
 
  FY2010 – FY2012     875,000       3,500,000       5,250,000  
 
                               
Alan B. Graf, Jr.
  FY2008 – FY2010     300,000       1,200,000       1,800,000  
 
  FY2009 – FY2011     300,000       1,200,000       1,800,000  
 
  FY2010 – FY2012     300,000       1,200,000       1,800,000  
 
                               
David J. Bronczek
  FY2008 – FY2010     375,000       1,500,000       2,250,000  
 
  FY2009 – FY2011     375,000       1,500,000       2,250,000  
 
  FY2010 – FY2012     375,000       1,500,000       2,250,000  
 
                               
T. Michael Glenn
  FY2008 – FY2010     300,000       1,200,000       1,800,000  
 
  FY2009 – FY2011     300,000       1,200,000       1,800,000  
 
  FY2010 – FY2012     300,000       1,200,000       1,800,000  
 
                               
Christine P. Richards
  FY2008 – FY2010     300,000       1,200,000       1,800,000  
 
  FY2009 – FY2011     300,000       1,200,000       1,800,000  
 
  FY2010 – FY2012     300,000       1,200,000       1,800,000  

 

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The potential individual future payouts set forth in the table above are set
dollar amounts ranging from threshold (minimum) amounts, if the EPS goal
achieved is less than target, up to maximum amounts, if the plan goal is
substantially exceeded. There can be no assurance that the potential future
payouts shown in this table will be achieved.
Other Arrangements
FedEx’s named executive officers are eligible to receive certain other annual
compensation, including certain perquisites and other personal benefits, such as
personal use of corporate aircraft (though the officers are required to
reimburse FedEx for substantially all of the incremental cost of such usage),
security services and equipment (pursuant to FedEx’s executive security
procedures) and tax return preparation and financial counseling services.
In addition, FedEx’s named executive officers receive tax reimbursement payments
relating to restricted stock awards, certain business-related use of corporate
aircraft and certain perquisites.

 

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