<PAGE>
                                                                   Exhibit 10.3


                                    GUARANTY



         THIS GUARANTY (this "Guaranty") is made as of the 13th day of December,
2000, by Federal Express Corporation, a Delaware corporation, Viking Freight,
Inc., a California corporation, FedEx Ground Package System, Inc., a Delaware
corporation, and FedEx Custom Critical, Inc., an Ohio corporation (collectively,
the "Initial Guarantors" and along with any Significant Subsidiaries which
become parties to this Agreement by executing an Addendum hereto in the form
attached as Annex I, the "Guarantors") in favor of the Administrative Agent, for
the ratable benefit of the Lenders, under (and as defined in) the Credit
Agreement referred to below. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings ascribed to them in the Credit Agreement.



                              W I T N E S S E T H:
                              - - - - - - - - - --

         WHEREAS, FedEx Corporation, a Delaware corporation (the "Borrower"),
The Chase Manhattan Bank, as administrative agent (the "Administrative Agent"),
and certain Lenders have entered into a certain Credit Agreement dated as of
December 13, 2000 (as the same may be amended, modified, supplemented and/or
restated, and as in effect from time to time, the "Credit Agreement"),
providing, subject to the terms and conditions thereof, for extensions of credit
to be made by the Lenders to the Borrower;

         WHEREAS, it is a condition precedent to the initial extensions of
credit by the Lenders under the Credit Agreement that each of the Guarantors
execute and deliver this Guaranty, whereby each of the Guarantors shall
guarantee the payment when due, subject to SECTION 8 hereof, of any and all of
the Obligations; and

         WHEREAS, in consideration of the financial and other support that the
Borrower has provided, and such financial and other support as the Borrower may
in the future provide, to the Guarantors, and in order to induce the Lenders and
the Administrative Agent to enter into the Credit Agreement, each of the
Guarantors is willing to guarantee the Obligations of the Borrower under the
Credit Agreement;

         NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

<PAGE>

                                                                               2

         SECTION 1. DEFINITIONS. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein.

         SECTION 2. REPRESENTATIONS AND WARRANTIES. Each of the Guarantors
represents and warrants (which representations and warranties shall be deemed to
have been renewed at the time of the making of any Advance) that:

               (a)  It is a corporation, limited liability company, partnership
                    or other commercial entity duly incorporated or formed,
                    validly existing and in good standing under the laws of its
                    jurisdiction of incorporation or formation and has all
                    requisite authority to conduct its business as a foreign
                    Person in each jurisdiction in which its business is
                    conducted, except where the failure to have such requisite
                    authority would not have a Material Adverse Effect.

               (b)  It has the power and authority and legal right to execute
                    and deliver this Guaranty and to perform its obligations
                    hereunder. The execution and delivery by it of this Guaranty
                    and the performance by it of its obligations hereunder have
                    been duly authorized by proper proceedings, and this
                    Guaranty constitutes a legal, valid and binding obligation
                    of such Guarantor enforceable against such Guarantor in
                    accordance with its terms, except as enforceability may be
                    limited by bankruptcy, insolvency or similar laws affecting
                    the enforcement of creditors' rights generally, and subject
                    also to the availability of equitable remedies if equitable
                    remedies are sought.

               (c)  Neither the execution and delivery by it of this Guaranty,
                    nor the consummation by it of the transactions herein
                    contemplated, nor compliance by it with the terms and
                    provisions hereof, will violate any law, rule, regulation,
                    order, writ, judgment, injunction, decree or award binding
                    on it or its certificate or articles of incorporation or
                    by-laws, limited liability company or partnership agreement
                    or the provisions of any indenture, instrument or material
                    agreement to which it is a party or is subject, or by which
                    it, or its property, is bound, or conflict with or
                    constitute a default thereunder, or result in the creation
                    or imposition of any Lien in, of or on its property pursuant
                    to the term of any such indenture, instrument or material
                    agreement. No order, consent, approval, license,
                    authorization, or validation of, or filing, recording or
                    registration with, or exemption by, any governmental
                    authority, is required to authorize, or is required in
                    connection with the execution, delivery and performance by
                    it of, or the legality, validity, binding effect or
                    enforceability of, this Guaranty.

<PAGE>
                                                                               3

         SECTION 3. THE GUARANTY. Subject to SECTION 8 hereof, each of the
Guarantors hereby unconditionally guarantees, jointly with the other Guarantors
and severally, the full and punctual payment when due (whether at stated
maturity, upon acceleration or otherwise) of the Obligations, (the foregoing,
subject to the provisions of SECTION 8 hereof, being referred to collectively as
the "Guaranteed Obligations"). Upon failure by the Borrower to pay punctually
any such amount, each of the Guarantors agrees that it shall forthwith on demand
pay such amount at the place and in the manner specified in the Credit Agreement
or the relevant Loan Document, as the case may be. Each of the Guarantors hereby
agrees that this Guaranty is an absolute, irrevocable and unconditional guaranty
of payment and is not a guaranty of collection.

         SECTION 4. GUARANTY UNCONDITIONAL. Subject to SECTION 8 hereof, the
obligations of each of the Guarantors hereunder shall be unconditional and
absolute and, without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by:

                  (i) any extension, renewal, settlement, indulgence,
                  compromise, waiver or release of or with respect to the
                  Guaranteed Obligations or any part thereof or any agreement
                  relating thereto, or with respect to any obligation of any
                  other guarantor of any of the Guaranteed Obligations, whether
                  (in any such case) by operation of law or otherwise, or any
                  failure or omission to enforce any right, power or remedy with
                  respect to the Guaranteed Obligations or any part thereof or
                  any agreement relating thereto, or with respect to any
                  obligation of any other guarantor of any of the Guaranteed
                  Obligations;

                  (ii) any modification or amendment of or supplement to the
                  Credit Agreement or any other Loan Document, including,
                  without limitation, any such amendment which may increase the
                  amount of the Obligations guaranteed hereby;

                  (iii) any release, surrender, compromise, settlement, waiver,
                  subordination or modification, with or without consideration,
                  of any collateral securing the Guaranteed Obligations or any
                  part thereof, any other guaranties with respect to the
                  Guaranteed Obligations or any part thereof, or any other
                  obligation of any person or entity with respect to the
                  Guaranteed Obligations or any part thereof, or any
                  nonperfection or invalidity of any direct or indirect security
                  for the Guaranteed Obligations;

                  (iv) any change in the corporate, partnership or other
                  existence, structure or ownership of the Borrower or any other
                  guarantor of any of the Guaranteed Obligations, or any
                  insolvency, bankruptcy, reorganization or other similar
                  proceeding affecting the Borrower or any other guarantor of
                  the Guaranteed Obligations, or any of their respective assets
                  or any resulting release or discharge of any obligation of the
                  Borrower or any other guarantor of any of the Guaranteed
                  Obligations;

                  (v) the existence of any claim, setoff or other rights which
                  the Guarantors may have at any time against the Borrower, any
                  other guarantor of any of the Guaranteed Obligations, the
                  Administrative Agent, any Lender or any other Person, whether
                  in connection herewith or in connection with any unrelated

<PAGE>

                                                                               4

                  transactions, PROVIDED that nothing herein shall prevent the
                  assertion of any such claim by separate suit or compulsory
                  counterclaim;

                  (vi) the enforceability or validity of the Guaranteed
                  Obligations or any part thereof or the genuineness,
                  enforceability or validity of any agreement relating thereto
                  or with respect to any collateral securing the Guaranteed
                  Obligations or any part thereof, or any other invalidity or
                  unenforceability relating to or against the Borrower or any
                  other guarantor of any of the Guaranteed Obligations, for any
                  reason related to the Credit Agreement, any other Loan
                  Document, or any provision of applicable law or regulation
                  purporting to prohibit the payment by the Borrower or any
                  other guarantor of the Guaranteed Obligations, of any of the
                  Guaranteed Obligations;

                  (vii) the failure of the Administrative Agent to take any
                  steps to perfect and maintain any security interest in, or to
                  preserve any rights to, any security or collateral for the
                  Guaranteed Obligations, if any;

                  (viii) the election by, or on behalf of, any one or more of
                  the Lenders, in any proceeding instituted under Chapter 11 of
                  Title 11 of the United States Code (11 U.S.C. 101 et seq.)
                  (the "Bankruptcy Code"), of the application of Section
                  1111(b)(2) of the Bankruptcy Code;

                  (ix) any borrowing or grant of a security interest by the
                  Borrower, as debtor-in-possession, under Section 364 of the
                  Bankruptcy Code;

                  (x) the disallowance, under Section 502 of the Bankruptcy
                  Code, of all or any portion of the claims of any of the
                  Lenders or the Administrative Agent for repayment of all or
                  any part of the Guaranteed Obligations;

                  (xi) the failure of any other Guarantor to sign or become
                  party to this Guaranty or any amendment, change, or
                  reaffirmation hereof; or

                  (xii) any other act or omission to act or delay of any kind by
                  the Borrower, any other guarantor of the Guaranteed
                  Obligations, the Administrative Agent, any Lender or any other
                  Person or any other circumstance whatsoever which might, but
                  for the provisions of this Section 4, constitute a legal or
                  equitable discharge of any Guarantor's obligations hereunder.

         SECTION 5. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN
CERTAIN CIRCUMSTANCES. Except as otherwise provided in Section 9.16 of the
Credit Agreement, each of the Guarantors' obligations hereunder shall remain in
full force and effect until all Guaranteed Obligations shall have been paid in
full and the Revolving Commitments under the Credit Agreement shall have
terminated or expired. If at any time any payment of any portion of the
Obligations is rescinded or must be otherwise restored or returned upon the
insolvency, bankruptcy or reorganization of the Borrower or otherwise, each
Guarantor's obligations hereunder with respect to such payment shall be
reinstated as though such payment had been due but not made at such time.

         SECTION 6. GENERAL WAIVERS. Each of the Guarantors irrevocably waives
acceptance hereof, presentment, demand or action on delinquency, protest, the
benefit of any statutes of

<PAGE>

                                                                               5

limitations and, to the fullest extent permitted by law, any notice not provided
for herein, as well as any requirement that at any time any action be taken by
any Person against the Borrower, any other guarantor of the Guaranteed
Obligations, or any other Person.

         SECTION 7. SUBORDINATION OF SUBROGATION. Until the Obligations have
been indefeasibly paid in full in cash, the Guarantors (i) shall have no right
of subrogation with respect to such Obligations and (ii) waive any right to
enforce any remedy which the Lenders or the Administrative Agent now have or may
hereafter have against the Borrower, any endorser or any guarantor of all or any
part of the Obligations or any other Person, and the Guarantors waive any
benefit of, and any right to participate in, any security or collateral given to
the Lenders and the Administrative Agent to secure the payment or performance of
all or any part of the Obligations or any other liability of the Borrower to the
Lenders. Should any Guarantor have the right, notwithstanding the foregoing, to
exercise its subrogation rights, each Guarantor hereby expressly and irrevocably
(a) subordinates any and all rights at law or in equity to subrogation,
reimbursement, exoneration, contribution, indemnification or set off that the
Guarantor may have to the indefeasible payment in full in cash of the
Obligations and (b) waives any and all defenses available to a surety, guarantor
or accommodation co-obligor until the Obligations are indefeasibly paid in full
in cash. Each Guarantor acknowledges and agrees that this subordination is
intended to benefit the Administrative Agent and the Lenders and shall not limit
or otherwise affect such Guarantor's liability hereunder or the enforceability
of this Guaranty, and that the Administrative Agent, the Lenders and their
respective successors and assigns are intended third party beneficiaries of the
waivers and agreements set forth in this SECTION 7.

         SECTION 8. LIMITATION. Notwithstanding any provision herein contained
to the contrary, each Guarantor's liability under this Guaranty (which liability
is in any event in addition to amounts for which such entity may be primarily
liable) shall be limited to an amount not to exceed as of any date of
determination the greater of:

               (a)  the net amount of all Loans advanced to the Borrower under
                    this Agreement and then re-loaned or otherwise transferred
                    to, or for the benefit of, such Guarantor; and

               (b)  the amount which could be claimed by the Administrative
                    Agent and the Lenders from such Guarantor under this
                    Guaranty without rendering such claim voidable or avoidable
                    under Section 548 of Chapter 11 of the Bankruptcy Code or
                    under any applicable state Uniform Fraudulent Transfer Act,
                    Uniform Fraudulent Conveyance Act or similar statute or
                    common law after taking into account, among other things,
                    such Guarantor's right of contribution and indemnification
                    from each other Guarantor under SECTION 9.

         SECTION 9. CONTRIBUTION WITH RESPECT TO GUARANTY OBLIGATIONS.

               (a)  To the extent that any Guarantor shall make a payment under
                    this Guaranty (a "Guarantor Payment") which, taking into
                    account all other Guarantor Payments then previously or
                    concurrently made by any other Guarantor, exceeds the amount
                    which such Guarantor would otherwise have paid if each
                    Guarantor had paid the aggregate Obligations satisfied by
                    such Guarantor Payment in the same proportion that such
                    Guarantor's "Allocable Amount" (as defined below) (as
                    determined immediately prior to such Guarantor

<PAGE>

                                                                               6

                    Payment) bore to the aggregate Allocable Amounts of each of
                    the Guarantors as determined immediately prior to the making
                    of such Guarantor Payment, THEN, following indefeasible
                    payment in full in cash of the Obligations and termination
                    of the Revolving Commitments, such Guarantor shall be
                    entitled to receive contribution and indemnification
                    payments from, and be reimbursed by, each other Guarantor
                    for the amount of such excess, PRO RATA based upon their
                    respective Allocable Amounts in effect immediately prior to
                    such Guarantor Payment.

               (b)  As of any date of determination, the "Allocable Amount" of
                    any Guarantor shall be equal to the maximum amount of the
                    claim which could then be recovered from such Guarantor
                    under this Guaranty without rendering such claim voidable or
                    avoidable under Section 548 of Chapter 11 of the Bankruptcy
                    Code or under any applicable state Uniform Fraudulent
                    Transfer Act, Uniform Fraudulent Conveyance Act or similar
                    statute or common law.

               (c)  This SECTION 9 is intended only to define the relative
                    rights of the Guarantors and nothing set forth in this
                    SECTION 9 is intended to or shall impair the obligations of
                    the Guarantors, jointly and severally, to pay any amounts as
                    and when the same shall become due and payable in accordance
                    with the terms of this Agreement.

               (d)  The parties hereto acknowledge that the rights of
                    contribution and indemnification hereunder shall constitute
                    assets of the Guarantor to which such contribution and
                    indemnification is owing.

               (e)  The rights of the indemnifying Guarantors against other
                    Guarantors under this SECTION 9 shall be exercisable upon
                    the full and indefeasible payment of the Obligations and the
                    termination of the Revolving Commitments.
<PAGE>

                                                                               7

         SECTION 10. STAY OF ACCELERATION. If acceleration of the time for
payment of any of the Obligations is stayed upon the insolvency, bankruptcy or
reorganization of the Borrower, all such amounts otherwise subject to
acceleration under the terms of the Credit Agreement, or any other Loan Document
shall nonetheless be payable by each of the Guarantors hereunder forthwith on
demand by the Administrative Agent.

         SECTION 11. NO WAIVERS. No failure or delay by the Administrative Agent
or any Lender in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies provided in this Guaranty,
the Credit Agreement, and the other Loan Documents shall be cumulative and not
exclusive of any rights or remedies provided by law.

         SECTION 12. SUCCESSORS AND ASSIGNS. This Guaranty is for the benefit of
the Administrative Agent and the Lenders and their respective successors and
permitted assigns and in the event of an assignment of any amounts payable under
the Credit Agreement, or the other Loan Documents in accordance with the
respective terms thereof, the rights hereunder, to the extent applicable to the
indebtedness so assigned, may be transferred with such indebtedness. This
Guaranty shall be binding upon each of the Guarantors and their respective
successors and assigns.

         SECTION 13. CHANGES IN WRITING. Neither this Guaranty nor any provision
hereof may be changed, waived, discharged or terminated orally, but only in
writing signed by each of the Guarantors and the Administrative Agent with the
consent of the Lenders required for such change, waiver, discharge or
termination pursuant to the terms of the Credit Agreement.

         SECTION 14. GOVERNING LAW. ANY DISPUTE BETWEEN ANY GUARANTOR AND THE
ADMINISTRATIVE AGENT OR ANY LENDER ARISING OUT OF, CONNECTED WITH, RELATED TO,
OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH,
THIS GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS, AND WHETHER ARISING IN
CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE
INTERNAL LAWS (WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE
OF NEW YORK.

         SECTION 15. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.

                    (A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN
SUBSECTION (B), EACH OF THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS GUARANTY OR ANY OF THE OTHER
LOAN DOCUMENTS WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE
RESOLVED EXCLUSIVELY BY STATE OR FEDERAL COURTS LOCATED IN NEW YORK, BUT THE
PARTIES HERETO ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK. EACH OF THE PARTIES HERETO WAIVES
IN ALL DISPUTES BROUGHT PURSUANT TO THIS SUBSECTION (A) ANY OBJECTION THAT IT
MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.

<PAGE>

                                                                               8

                    (B) OTHER JURISDICTIONS. EACH OF THE GUARANTORS AGREES THAT
THE ADMINISTRATIVE AGENT, ANY LENDER OR ANY INDEMNITEE SHALL HAVE THE RIGHT TO
PROCEED AGAINST SUCH GUARANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO
ENABLE SUCH PERSON TO (1) OBTAIN PERSONAL JURISDICTION OVER SUCH GUARANTOR OR
(2) ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PERSON.
EACH OF THE GUARANTORS AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE
COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY SUCH PERSON TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF SUCH PERSON. EACH OF THE GUARANTORS WAIVES ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH PERSON HAS
COMMENCED A PROCEEDING DESCRIBED IN THIS SUBSECTION (B).

                    (C) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF,
CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG
THEM IN CONNECTION WITH THIS GUARANTY OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH OF THE PARTIES
HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO
MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS GUARANTY WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.

                    (D) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO
EACH OTHER PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY,
THE PROVISIONS OF THIS SECTION 15, WITH ITS COUNSEL.

         SECTION 16. NO STRICT CONSTRUCTION. The parties hereto have
participated jointly in the negotiation and drafting of this Guaranty. In the
event an ambiguity or question of intent or interpretation arises, this Guaranty
shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Guaranty.

         SECTION 17. TAXES, EXPENSES OF ENFORCEMENT, ETC. All payments required
to be made by any of the Guarantors hereunder shall be made without setoff or
counterclaim and free and clear of and without deduction or withholding for or
on account of, any present or future taxes, levies, imposts, duties or other
charges of whatsoever nature imposed by any government or any political or
taxing authority thereof, PROVIDED, HOWEVER, that if any of the Guarantors is
required by law to make such deduction or withholding, such Guarantor shall
forthwith pay to the Administrative Agent or any Lender, as applicable, such
additional amount as results in the net amount received by the Administrative
Agent or any Lender, as applicable, equaling the full amount which would have
been received by the Administrative Agent or any Lender, as applicable, had no
such deduction or withholding been made. The Guarantors also agree to reimburse
the Administrative Agent and the Lenders for any reasonable costs, internal
charges and out-of-pocket expenses (including reasonable attorneys' fees and
time charges of attorneys for the Administrative Agent and the Lenders, which
attorneys may be employees of the Administrative Agent or the Lenders) paid or
incurred by the

<PAGE>

                                                                               9

Administrative Agent or any Lender in connection with the collection and
enforcement of amounts due under the Loan Documents, including without
limitation this Guaranty.

         SECTION 18. SETOFF. At any time after all or any part of the Guaranteed
Obligations have become due and payable (by acceleration or otherwise), each
Lender and the Administrative Agent may, without notice to any Guarantor and
regardless of the acceptance of any security or collateral for the payment
hereof, appropriate and apply toward the payment of all or any part of the
Guaranteed Obligations (i) any indebtedness due or to become due from such
Lender or the Administrative Agent to any Guarantor, and (ii) any moneys,
credits or other property belonging to any Guarantor, at any time held by or
coming into the possession of such Lender or the Administrative Agent or any of
their respective affiliates.

         SECTION 19. FINANCIAL INFORMATION. Each Guarantor hereby assumes
responsibility for keeping itself informed of the financial condition of the
Borrower and any and all endorsers and/or other Guarantors of all or any part of
the Guaranteed Obligations, and of all other circumstances bearing upon the risk
of nonpayment of the Guaranteed Obligations, or any part thereof, that diligent
inquiry would reveal, and each Guarantor hereby agrees that none of the Lenders
or the Administrative Agent shall have any duty to advise such Guarantor of
information known to any of them regarding such condition or any such
circumstances. If any Lender or the Administrative Agent, in its sole
discretion, undertakes at any time or from time to time to provide any such
information to a Guarantor, such Lender or the Administrative Agent shall be
under no obligation (i) to undertake any investigation not a part of its regular
business routine, (ii) to disclose any information which such Lender or the
Administrative Agent, pursuant to accepted or reasonable commercial finance or
banking practices, wishes to maintain confidential or (iii) to make any other or
future disclosures of such information or any other information to such
Guarantor.

         SECTION 20. SEVERABILITY. Wherever possible, each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.

         SECTION 21. MERGER. This Guaranty represents the final agreement of
each of the Guarantors with respect to the matters contained herein and may not
be contradicted by evidence of prior or contemporaneous agreements, or
subsequent oral agreements, between the Guarantor and any Lender or the
Administrative Agent.

         SECTION 22. EXECUTION IN COUNTERPARTS. This Guaranty may be executed in
any number of counterparts, all of which taken together shall constitute one
agreement, and any of the parties hereto may execute this Guaranty by signing
any such counterpart.

         SECTION 23. HEADINGS. Section headings in this Guaranty are for
convenience of reference only and shall not govern the interpretation of any
provision of this Guaranty.

<PAGE>

                                                                              10

         IN WITNESS WHEREOF, each of the Guarantors has caused this Guaranty to
be duly executed by its authorized officer as of the day and year first above
written.

                         FEDERAL EXPRESS CORPORATION


                         By:      /s/ Tracy G. Schmidt
                                  --------------------------------------
                         Name:    Tracy G. Schmidt
                                  -----------------------------------
                         Title:   Senior Vice President and Chief
                                  ------------------------------------
                                  Financial Officer
                                  -----------------------------------


                         FEDEX GROUND PACKAGE SYSTEM, INC.


                         By:      /s/ Daniel J. Sullivan
                                  --------------------------------------
                         Name:    Daniel J. Sullivan
                                  --------------------------------------
                         Title:   President and Chief Executive Officer
                                  --------------------------------------


                         FEDEX CUSTOM CRITICAL, INC.


                         By:      /s/ R. Bruce Simpson
                                  --------------------------------------
                         Name:    R. Bruce Simpson
                                  -----------------------------------
                         Title:   President and Chief Executive Officer
                                  --------------------------------------

                         VIKING FREIGHT, INC.


                         By:      /s/ Douglas G. Duncan
                                  --------------------------------------
                         Name:    Douglas G. Duncan
                                  -----------------------------------
                         Title:   President and Chief Executive Officer
                                  --------------------------------------



<PAGE>



                               ANNEX I TO GUARANTY



         Reference is hereby made to the Guaranty (the "Guaranty") made as of
the _____ day of December, 2000 by Federal Express Corporation, a Delaware
corporation, Viking Freight, Inc., a California corporation, FedEx Ground
Package System, Inc., a Delaware corporation, and FedEx Custom Critical, Inc.,
an Ohio corporation (collectively, the "Initial Guarantors" and along with any
Significant Subsidiaries which have become parties thereto and together with the
undersigned, the "Guarantors") in favor of the Administrative Agent, for the
ratable benefit of the Lenders, under the Credit Agreement. Capitalized terms
used herein and not defined herein shall have the meanings given to them in the
Guaranty. By its execution below, the undersigned [NAME OF NEW GUARANTOR], a
_______________________, agrees to become, and does hereby become, a Guarantor
under the Guaranty and agrees to be bound by such Guaranty as if originally a
party thereto. By its execution below, the undersigned represents and warrants
as to itself that all of the representations and warranties contained in SECTION
2 of the Guaranty are true and correct in all respects as of the date hereof.

         IN WITNESS WHEREOF, [NAME OF NEW GUARANTOR], a ________________________
has executed and delivered this Annex I counterpart to the Guaranty as of this
________________  day of _______________, ________________.






                          [NAME OF NEW GUARANTOR]



                          By:
                              -------------------------------------------------
                          Name:
                                -----------------------------------------------
                          Title:
                                 ----------------------------------------------