<PAGE>

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                            TRANSPORTATION AGREEMENT

                                     BETWEEN

                        THE UNITED STATES POSTAL SERVICE

                                       AND

                           FEDERAL EXPRESS CORPORATION

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<PAGE>

                            TRANSPORTATION AGREEMENT
                                     BETWEEN
                        THE UNITED STATES POSTAL SERVICE
                                       AND
                           FEDERAL EXPRESS CORPORATION

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                         <C>
Preamble.....................................................................1
ARTICLE 1 - DEFINITIONS .....................................................1
ARTICLE 2 - FEDEX SERVICES ..................................................8
ARTICLE 3 - DISPUTE RESOLUTION ..............................................9
ARTICLE 4 - INDEPENDENT CONTRACTOR...........................................11
ARTICLE 5 - TAXES ...........................................................11
ARTICLE 6 - FEDEX COMPENSATION...............................................13
ARTICLE 7 - PAYMENTS ........................................................13
ARTICLE 8 - GENERAL OBLIGATIONS OF FEDEX ....................................14
ARTICLE 9 - GOVERNMENT REGULATION............................................18
ARTICLE 10 - DISCLOSURE/TRADEMARKS ..........................................18
ARTICLE 11 - OBLIGATIONS OF USPS ............................................21
ARTICLE 12 - LIABILITIES OF THE PARTIES......................................23
ARTICLE 13 - RISK OF LOSS; CLAIMS PROCEDURE;
             LIMITATION OF LIABILITY.........................................25
ARTICLE 14 - REPRESENTATIONS AND WARRANTIES..................................25
ARTICLE 15 - TERM AND TERMINATION............................................26
ARTICLE 16 - EVENTS OF DEFAULT...............................................29
ARTICLE 17 - CONFIDENTIALITY.................................................30
ARTICLE 18 - FORCE MAJEURE...................................................30
ARTICLE 19 - STANDARD USPS CLAUSES...........................................31
ARTICLE 20 - APPLICABLE LAW..................................................47
ARTICLE 21 - ENTIRE AGREEMENT................................................47
ARTICLE 22 - AMENDMENTS OR MODIFICATIONS.....................................48
ARTICLE 23 - ASSIGNMENT......................................................48
ARTICLE 24 - WAIVER OF BREACH................................................48
ARTICLE 25 - NOTICES.........................................................48
ARTICLE 26 - REPRESENTATIVES.................................................49
ARTICLE 27 - SEVERABILITY....................................................50
ARTICLE 28 - ORDER OF PRECEDENCE CLAUSE......................................50
EXHIBIT A -- OPERATION SPECFICATIONS
               Attachment I Day-turn Operating Plan
               Attachment II Night-turn Operating Plan
               Attachment III Airworthiness
               Attachment IV Unacceptable Packages
EXHIBIT B -- RATES
EXHIBIT C -- PAYMENT PROCEDURES
EXHIBIT D -- MEDIATORS LIST
EXHIBIT E -- FORM OF ESCROW AGREEMENT
</TABLE>

<PAGE>

                            TRANSPORTATION AGREEMENT

THIS TRANSPORTATION AGREEMENT (this "AGREEMENT") is entered into as of January
10, 2001 between:

THE UNITED STATES POSTAL SERVICE, an independent establishment of the United
States of America established pursuant to 39 United States Code Section 101
et seq., having an office at 475 L'Enfant Plaza S.W., Washington, D.C.
20260-1135 ("USPS"), and

FEDERAL EXPRESS CORPORATION, a company organized and existing under the laws of
Delaware, having an office at 3610 Hacks Cross Roads, Memphis, Tennessee 38125
(together with its Affiliate, "FEDEX" and together with USPS, the "PARTIES" and
each individually, a "PARTY").

                                    PREAMBLE

WHEREAS, USPS is engaged in the transportation and delivery of, among other
things, deferred, day-certain and time-sensitive shipments to various
destinations throughout the United States and around the world,

WHEREAS, FedEx is engaged in the integrated air and ground transportation of, as
well as providing import and export customs services for, time-sensitive and
time-definite shipments to various destinations throughout the United States and
around the world,

WHEREAS, USPS desires to provide for the transportation and delivery of the
Products (as such term is defined in this Agreement) in accordance with the
Operating Specifications (as such term is defined in this Agreement),

WHEREAS, USPS desires FedEx to perform and FedEx is willing to provide the FedEx
Services (as such term is defined in this Agreement) to USPS.

FOR AND IN CONSIDERATION of the mutual covenants contained in this Agreement,
the Parties agree as follows:

                                    ARTICLE 1

                                   DEFINITIONS

For purposes of this Agreement and its Schedules, the following terms shall have
the following meanings:

"ACTUAL AIRCRAFT ARRIVAL" means the actual time that an aircraft blocks in at a
destination ramp.

"ADVERTISEMENT" means a free or paid mass or targeted communication under the
control of a party intended for the general public or a specific potential or
existing customer, the ultimate purpose of which is to promote the sale of such
party's products or services, including, but not limited to, television, radio
and internet commercials, out-of-home ads (e.g., billboards,

<PAGE>

sports stadium displays, transit signs), direct mail ads, print ads and free
standing inserts in newspapers, magazines, and electronic media.

"AREA DISTRIBUTION CENTER" (ADC) means any USPS or third Party location that
receives packages inbound to a market from FedEx or acts as a destination that
receives Packages inbound to a market from FedEx.

"AIR MAIL CENTER " (AMC) means any USPS or third Party location that acts as an
origin or destination location for tendering USPS packages to or from FedEx
outbound or inbound from a market or acts as an origin or destination location
for tendering USPS packages to or from FedEx outbound or inbound.

"AIRWORTHY" means the conformity of an ULD with the conditions set forth in
Attachment III to the Operation Specifications.

"AFFILIATE" means an entity that Controls or is directly or indirectly
Controlled by a Party or is under joint Control with a Party that Controls. An
Affiliate is also an entity that is under the common Control of another entity
that also Controls a Party.

"ALL PURPOSE CONTAINER" (APC) is a type of USPS mail transport equipment into
which Packages are sorted.

"ANNUAL TOTAL AIR FORECAST" means the forecast provided to FedEx by USPS
pursuant to Section 4.2.0 of the Operating Specifications.

"BASELINE COMMITMENT" means the Baseline Commitment by origin that FedEx is
committed to transport and that USPS is obligated to provide as set forth in the
Operating Plans.

"BY-PASS NETWORK FLOW" means the By-pass Network Flow that is to be developed by
the parties from time to time pursuant to the provisions of Section 3.6.0 of the
Operating Specifications.

"BY-PASS TARGET RATE" means the percentage, determined on a system-wide
aggregate basis, of ULDs that will be By-pass ULDs (which will not be less than
25% unless otherwise agreed by FedEx in writing). The By-pass Target rate will
be determined on a Schedule Period basis in accordance with the procedures set
forth in Section 3 of the Operating Specifications.

"BY-PASS ULDs" means a single ULD loaded at the origin location for a particular
destination. The volume in the ULD will not be individually processed in the
FedEx sort operation. USPS sometimes refers to By-pass ULDs as "intacts".

"CHANGE OF CONTROL EVENT" shall mean

     (a)  any Person or group (within the meaning of the Securities Exchange Act
          of 1934, as amended (the "Exchange Act"), and the rules of the
          Securities and Exchange Commission promulgated thereunder as in effect
          on the date thereof) who is not a stockholder of FedEx Corporation as
          of the date hereof becoming the beneficial owner pursuant to Rule
          13d-3 or 13d-5 under the Exchange Act of Voting Stock of FedEx
          Corporation having more than 30%


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<PAGE>

          of the voting power of all of the then outstanding Voting Stock of
          FedEx Corporation;

     (b)  individuals who are not Continuing Directors constituting a majority
          of the Board of Directors of FedEx Corporation, or individuals who are
          not appointed or designated by FedEx Corporation constituting a
          majority of the Board of Directors of FedEx;

     (c)  FedEx Corporation consolidating with or merging into any other Person,
          or any other Person consolidating with or merging into FedEx
          Corporation, unless the stockholders of FedEx immediately prior to
          such transaction hold at least 50% of the outstanding Voting Stock of
          the surviving corporation;

     (d)  FedEx consolidating with or merging into any other Person that is not
          a direct or indirect subsidiary of FedEx Corporation, or any other
          such Person merging with or into FedEx, unless Federal Express is the
          surviving corporation;

     (e)  FedEx, in one transaction or a series of related transactions,
          conveying, transferring or leasing, directly or indirectly, all or
          substantially all of its assets to any other Person that is not a
          direct or indirect subsidiary of FedEx Corporation; and

     (f)  FedEx Corporation and one or more of its direct or indirect
          wholly-owned subsidiaries ceasing to own and control 80% of the issued
          and outstanding Voting Stock of FedEx.


"COMMITTED VOLUMES" means the volumes that USPS is committed to providing FedEx
and that FedEx is committed to transporting during any Schedule Period as more
fully described in Section 3.6.0 of the Operating Specifications.

"COMMITTED VOLUME SCHEDULE" means the schedule developed by FedEx as described
in Section 3.6.0 of the Operating Specifications.

"CONSOLIDATION SCAN" (CONS) is a scan that associates multiple package tracking
numbers to a consolidated unit and can associate multiple consolidated units to
a single unit. This is the scan that is performed when individual pieces are
consolidated into a ULD.

"CONTINUING DIRECTOR" means an individual who is a member of the Board of
Directors of FedEx Corporation on the date of this Agreement or who shall have
become a member of the Board of Directors of FedEx Corporation subsequent to
such date and who shall have been nominated or elected by a majority of the
other Continuing Directors then members of the Board of Directors of FedEx
Corporation.


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<PAGE>

"CONTAINERIZED TRANSPORT VEHICLE" (CTV) means any truck that is used to
transport ULDs.

"CONTROL" or "TO CONTROL" means with respect to an entity ownership of more than
50% of the capital stock or equity interest and voting control of any entity and
the power to designate a majority of the board of directors of such entity.

"DAILY RECONCILED AMOUNT" means the FedEx invoice amount for the specified
shipping day.

"DANGEROUS GOODS" OR "HAZARDOUS MATERIAL" means articles or substances which are
capable of posing a significant risk to health, safety or to property when
transported by air and which are classified according to Section 3
(Classification) of the International Air Transport Association (IATA) Dangerous
Good Regulations, regardless of variations, exceptions, exemptions, or limited
quantity allowances.

"DAY-TURN OPERATING PLAN" means the Day-turn operating plan attached to the
Operating Specifications as Attachment I and relates to the Day-turn Operations.

"DAY-TURN OPERATIONS" means the FedEx operation that operates Tuesday through
Sunday and processes FedEx Economy Service volume.

"DELIVERY SCAN" means a scan performed by FedEx that indicates that FedEx has
tendered volume to USPS.

"DISPATCH AND ROUTING TAG" (D&R TAG) means a bar coded USPS label that is
attached to Handling Units. The D&R Tag provides an identification number that
is unique for thirty days from generation in human and machine-readable format
as well as the destination FedEx ramp identifier of the Handling Unit in human
readable format.

"EMPLOYEES WITH ACCESS TO THE MAIL" means FedEx employees who transport, sort,
load and unload mail to and from the aircraft including supervisors of such
employees.

"ESCROW AGREEMENT" means the form Escrow Agreement attached to this Agreement as
Exhibit E into which funds may be deposited pursuant to the provisions of
Section 3.1 and 7.3 of this Agreement.

"FEDEX HOLIDAYS" means the holidays that FedEx does not operate as listed in
Section 3.9.1 of the Operating Specifications.

"FEDEX SERVICES" means the services described in the Operating Specifications to
be provided by FedEx to USPS.

"GOVERNMENTAL BODY" means any:

     (i)  international, federal, state or local jurisdiction of any nature;

     (ii) international, federal, state or local government;


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     (iii)     international, federal, state or local governmental or
               quasi-governmental authority of any nature (including any
               governmental agency, branch, department, official, or entity
               and any court or other tribunal); and

     (iv)      international, federal, state or local body exercising, or
               entitled to exercise, any administrative, executive, judicial,
               legislative, police, regulatory, or taxing authority or power
               of any nature.

"INBOUND MARKET VOLUME" means all inbound Handling Units to a destination AMC or
ADC.

"HANDLING UNIT" means a ULD (other than a Partial ULD), Mailbag, Tub, Mail Tray,
or Outside that is individually processed by FedEx. The term "Handling Unit"
does not include the contents of a By-pass ULD.

"HAZARDOUS MATERIALS" has the meaning set forth in the definition for Dangerous
Goods.

"HUB SCAN" means a scan performed by FedEx at a HUB.

"LEGAL REQUIREMENT" means any federal, state, local or other administrative
order, constitution, law, ordinance, principle of common law, rule, regulation,
statute, policy, procedure, directive, binding guideline or interpretation, or
treaty.

"LOCAL" means the location closest to where an event or circumstance exists.

"LOCAL PLAN" means the individual plans that will be entered into at the Local
level between FedEx and USPS in accordance with the Operating Specifications.

"MAIL BAGS" means USPS bags with maximum dimensions of 30 inches by 15 inches by
15 inches. The closure of the Mail Bag must be such that no straps or strings
are hanging loose. The Mail Bag must have a permanently affixed location on the
side of the bag which allows the routing label to be affixed in such a manner
that it can be scanned by the FedEx automated sorting equipment.

"MAIL TRAYS" means closed and secured containers with dimensions no greater than
21 inches by 19 inches by 19 inches used to carry mail.

"MARKET LANE" has the meaning set forth in Section 3.2.0 of the Operating
Specifications.

"MARKET SERVICE COMMITMENT TIME" means the time specified by which FedEx commits
to tender volume to USPS as more fully described in Section 8.5 hereof.

"MEDIATOR'S LIST" means the list of potential mediators as jointly agreed by the
parties and attached as Exhibit D hereto.

"MINIMUM GUARANTEED VOLUMES" means the minimum volumes that USPS is obligated to
provide to FedEx as more fully set forth in Section 11.1 hereof.


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<PAGE>

"NATIONAL DISRUPTION" means the declaration of a national disruption by FedEx in
accordance with its standard procedures for its national customer base [*].

"NETWORK EXPANSION REIMBURSEMENT" means an amount equal to [*] to be paid by
USPS to FedEx pursuant to the provisions of Section 6.3 of this Agreement and
any additional amounts that become payable by USPS to FedEx pursuant to the
provisions of Section 11.4 of this Agreement.

"NIGHT-TURN OPERATING PLAN" means the Operating Plan attached to the Operating
Specifications as Attachment II that relates to the Night-turn Operations.

"NIGHT-TURN OPERATIONS" means the FedEx operation that operates Monday night
through Friday night and Sunday and processes primarily FedEx Overnight
packages.

"OPERATING PLAN" means either the Day-turn Operating Plan or the Night-turn
Operating Plan, individually or collectively.

"OPERATING SPECIFICATIONS" means the description of the services to be provided
by FedEx under this Agreement and the responsibilities and obligations of each
of the parties in connection therewith as set forth in Exhibit A to this
Agreement.

"ORDER" means any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.

"OUTBOUND MARKET VOLUME" means all outbound Handling Units originating from the
geographic area served by an AMC.

"OUTSIDES" means individual packages with dimensions no greater than 108 inches
in combined length and girth and with no single dimension greater than 84
inches.

"PACKAGE" means any box or envelope that is accepted by USPS for delivery to the
consignee.

"PARTIAL ULD" means a ULD that is used to convey loose Handling Units from the
AMC to the FedEx ramp. This ULD will be unloaded at the origin ramp.

"PERSON" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.

"POSSESSION SCAN" means a scan performed by FedEx that indicates FedEx has
accepted volume from USPS.

"PRELIMINARY NETWORK FLOW" has the meaning set forth in Section 3.6.0 of the
Operating Specifications.

"PROCEEDING" means any action, arbitration, audit, hearing, investigation,
litigation or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought,


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<PAGE>

conducted or heard by or before, or otherwise involving, any Governmental Body
or arbitrator.

"PROCESS CODE" means the code set forth in each Operating Plan that describes
the method of and time periods for the pickup and delivery from and to each AMC
and ADC.

"READY FOR CARRIAGE" means adequately packaged, labeled and secured Shipments in
the condition required by the Operating Specification.

"REGIONAL DISRUPTION" means a major event that adversely affects transportation
networks on a regional basis as evidenced by the declaration of a state of
emergency by a state or Federal Governmental Body.

"SCANNING SPECIFICATIONS" means the specifications that are attached to the
Operating Specifications as Attachment VI and which relate to the requirements
for the D&R Tag and the scanning devices to be used by FedEx personnel in the
performance of the FedEx Services.

"SCHEDULED AIRCRAFT ARRIVAL" means the planned block-in time at the FedEx ramp
in accordance with the Schedule Period Operations Schedule.

"SCHEDULE BLOCK" means one or more Schedule Periods grouped together by FedEx
for purposes of determining flight schedules during such period.

"SCHEDULE BLOCK IMPLEMENTATION DATE" means the first day of scheduled flights
during any Schedule Block Period.

"SCHEDULE PERIOD" means one of the twelve periods ranging from twenty-eight (28)
to thirty-five (35) days as shall from time to time be specified by FedEx.

"SCHEDULE PERIOD IMPLEMENTATION DATE" means the first day of scheduled flights
during any `Schedule Period.


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<PAGE>

"SCHEDULE PERIOD OPERATIONS SCHEDULE" means the flight schedule that is
applicable during each Schedule Block as developed pursuant to the provisions of
Section 3.6.0.

"SCHEDULE PERIOD REQUEST FORECAST" means the forecast provided to FedEx by USPS
pursuant to the provisions of Section 3.5.0 of the Operating Specifications.

"SCHEDULE PERIOD TOTAL AIR FORECAST" means the forecast provided to FedEx by
USPS pursuant to the provisions of Section 3.4.0 of the Operating
Specifications.

"SERVICE COMMENCEMENT DATE" means August 27, 2001 or any earlier or later date
on which FedEx begins the performance of the FedEx Services.

"SERVICE LEVEL" means the measurement of FedEx's performance calculated in the
manner described in Section 8.5 of this Agreement.

"SERVICE LEVEL COMMITMENT" means the percentage of service level that FedEx
commits to achieve as provided in Section 8.5 of this Agreement.

"SHIPMENT" means all Packages moving on an individually processed D&R Tag.

"SHIPPING DAY" means a day on which FedEx performs the FedEx Services.

"SHIPPING PERIOD" means Saturday through Friday.

"SHIPPING PERIOD RECONCILED AMOUNT" means the FedEx invoiced amount for the
Shipping Period.

"TRANS LOG FILE" means the USPS data file that contains, for each D&R Tag, the
actual weight, origin, and destination market for each Handling Unit. All
changes to the Trans-Log File including layout, valid data values or data
definitions must be communicated to FedEx not later than 60 calendar days prior
to the implementation of the change unless otherwise mutually agreed.

"UNACCEPTABLE PACKAGES" means packages that are unacceptable for transportation
in the FedEx network as described in Attachment IV to the Operating
Specifications.

"UNIT LOAD DEVICE" (ULD) means the general name used to refer to FedEx air
containers.

"UNIVERSAL ROUTING AND SORT AID" (URSA) means the alphanumeric code on FedEx
packages to designate its routing.

"VOTING STOCK" means all outstanding shares of capital stock of a Person
entitled to vote generally in the election of directors.

                                   ARTICLE 2

                                 FEDEX SERVICES

Effective as of the Service Commencement Date, USPS wishes FedEx to provide the
FedEx Services and FedEx hereby agrees to perform the FedEx Services. The
Parties expressly agree


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<PAGE>

that, subject to the condition that FedEx shall remain liable hereunder, FedEx
may provide the FedEx Services through an Affiliate or any sub-contractor. FedEx
may not sub-contract the FedEx Services except in the ordinary course of
business and in a manner that does not discriminate against USPS without the
prior written consent of USPS. Notwithstanding the foregoing, FedEx may not
sub-contract more than [*].

                                    ARTICLE 3

                               DISPUTE RESOLUTION

3.1  The parties shall attempt in good faith to resolve any dispute arising out
     of or relating to this Agreement in the following manner:

     (a)  Either Party may give the other Party written notice of any dispute
          not resolved in the normal course of business. Said notice as it
          relates to FedEx shall be the submission of a claim as described in
          Article 19, Clause B-9. Said notice as it relates to USPS shall be the
          provision to FedEx of a Contracting Officer's written Final Decision
          as described in Article 19, Clause B-9. That notice must set forth the
          basis for the initiating Party's claim and the documentation that the
          initiating Party believes supports its claim. The authorized
          representatives of both parties (the "Representatives"), will meet at
          a mutually acceptable time and place within ten days after the date of
          the delivery of that notice and as often after that time as they
          reasonably deem necessary for the purpose of exchanging relevant
          information and attempting to resolve the dispute.

     (b)  If, following the referral of the matter to their respective
          Representatives, either Party declares the matter to be at an impasse,
          the parties will jointly select a mediator from the Mediators List. If
          the parties cannot agree upon the selection of a mediator within seven
          days, each Party will select a mediator and the two mediators will
          then select a third mediator. The parties will develop the Mediators
          List, within 60 days of the execution of this Agreement (or such later
          time as the parties mutually agree). If parties fail to agree upon the
          Mediators List within such time frame, then upon declaration of an
          impasse as referred to above, each Party will designate a mediator and
          the two mediators will then select a third mediator. In each case
          where the parties select a mediator that then selects a third
          mediator, the three mediators will serve as a panel at the Mediation
          Hearing referred to in (c) below. Any required action of the mediators
          will be as determined by a majority of the mediators.

     (c)  The place of mediation (the "Mediation Hearing") will be held in
          Washington DC and shall be held within five days of the


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<PAGE>

          appointment of the mediator or mediators, as the case may be. At the
          mediation hearing each Party will make a presentation supporting its
          position on the matter in dispute. No later than five days following
          the Mediation Hearing the mediator or the mediators, as the case may
          be, shall render an opinion as to whether it is improbable or probable
          that the initiating Party will prevail on the disputed matter if the
          matter were to be litigated in a court of competent jurisdiction
          without a jury. The mediator or mediators, as the case may be, must
          base their decision on the evidence introduced at the hearing,
          including all logical and reasonable inferences from that evidence. In
          rendering their decision, the mediators will determine the parties'
          rights and obligations according to the substantive and procedural
          laws of the law governing this Agreement and the terms of this
          Agreement.

     (d)  If the mediator or mediators have opined that it is probable that the
          initiating Party will prevail on the disputed matter, and the
          non-initiating Party remains unwilling to pay the amount of the claim,
          the non-initiating party will make the payments referred to in Section
          7.3 of this Agreement into an interest bearing escrow account pursuant
          to the terms of the Escrow Agreement attached hereto as Exhibit E. The
          dispute will then be resolved in accordance with the provisions of
          Clause B-9 of Article 19 below. Upon resolution of the dispute, the
          amount held in escrow will be released to the initiating Party if and
          to the extent that a payment is to be made to the initiating Party
          otherwise the amounts on deposit in the escrow account will be paid to
          the non-initiating Party.

3.2  Either Party, in its discretion, may be represented by an attorney at the
     Mediation Hearing.

3.3  The parties may extend any deadline specified in this Article 3 by mutual
     agreement.

3.4  The parties will treat all negotiations conducted in accordance with the
     requirements of this Article 3, including, without limitation, the exchange
     of any position memoranda, as confidential and as compromise and settlement
     negotiations for purposes of the Federal Rules of Evidence and the rules of
     evidence of any court having jurisdiction over the dispute.

3.5  The provisions of this Article 3 shall not be applicable to the payment of
     any amounts invoiced or reconciled in accordance with the provisions of
     Exhibit C hereunder. All disputes arising from such payments will be
     handled in accordance with Section 7.3 of this Agreement.

3.6  Each Party shall be responsible for the payments of its own costs incurred
     in connection with the provisions of this Article 3. Each Party will bear
     one-half of the costs of the Mediators utilized in connection with this
     Article 3.


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<PAGE>

                                    ARTICLE 4

                             INDEPENDENT CONTRACTOR

     The Parties intend that an independent contractor relationship will be
created by this Agreement. Each Party is interested only in the results of the
other Party's work and shall not exercise any control over the conduct or
supervision of the work or the means of its performance. Each Party shall have
full responsibility for the collection and payment of its own international,
federal, state and local employment-related taxes and contributions, including
penalties and interest, insurance, social security, income tax, workers'
compensation or any other similar statute Each Party shall indemnify and hold
the other harmless for any liability (including taxes, interest, and penalties)
resulting from its improper or incorrect tax reporting, withholding, remitting,
and similar activities or obligations, or from the failure to file, collect,
report or pay any of the above mentioned employment taxes.

                                    ARTICLE 5

                                      TAXES

5.1       Except as provided in 5.2 below, any and all taxes, excises, fees,
          duties and assessments whatsoever (including interest and
          penalties) ("Tax" or "Taxes") arising out of the sale or
          performance of the FedEx Services, in any manner levied, assessed
          or imposed by any Governmental Body or subdivision or agency
          thereof having jurisdiction shall be the sole responsibility and
          liability of USPS. FedEx reserves the right to add the amount of
          any such Tax to its charges for the Services.

5.2       Except as provided in Section 5.3 below, USPS' obligations under
          5.1 shall not extend to taxes based upon, measured by or with
          respect to, the net or gross income, items of tax preference or
          minimum tax or excess profits, receipts, capital, franchise, net
          worth or conduct of business or any other similarly-based taxes of
          FedEx.

5.3       USPS represents that it has obtained from the Internal Revenue
          Service (IRS) a ruling which permits USPS to pay directly to IRS
          the federal excise tax applicable to the air transportation of mail
          within the United States, and which relieves air transportation
          carriers of mail of any obligation to collect and remit to IRS such
          excise tax on the air transportation of mail. USPS further
          represents that IRS has recognized that the terminal handling of
          mail is an accessorial service that is not subject to the federal
          excise tax, provided the charges therefor are separately stated on
          billing documents. In light of these representations the parties
          agree as follows:

     (a)  USPS shall be exclusively responsible for payment to the IRS of
          federal excise taxes on air transportation services under this
          contract.

     (b)  Bills submitted by FedEx to USPS for air transportation services under
          this contract shall not include any amounts for federal excise taxes,
          whether separately stated or incorporated as an element of charges for
          air transportation services. All charges for taxable transportation
          and non-taxable terminal handling services shall be clearly identified
          as such and shall be separately stated on all bills submitted by


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          Fedex to USPS under this contract. This separate statement shall be
          made in a manner consistent with Generally Accepted Accounting
          Principles and with FedEx's then current methodology for calculating
          its federal excise tax liability.

     (c)  USPS shall hold harmless, save and defend FedEx from any demand or
          claim of, or on behalf of, the IRS or the United States based on the
          application of federal excise taxes (including interest and penalties
          thereon) to the transportation services performed by FedEx under this
          contract, or any portion thereof. If FedEx's excise tax liability on
          its services other than the FedEx Services provided to USPS is
          increased as a result of providing the FedEx Services to USPS, USPS
          shall indemnify FedEx for such increase as if such increase were a tax
          subject to the indemnity of the first sentence of this Section 5.3(c).
          Such increase shall be the difference between (x) FedEx's excise tax
          liability if it had not provided the FedEx Services to USPS and (y)
          FedEx's actual excise tax liability. The accuracy of the calculation
          by FedEx of an amount payable pursuant to this Section 5.3(c) shall be
          verified, upon the request of USPS, by a firm of independent public
          accountants reasonably acceptable to FedEx and to USPS. In order to
          enable such accountants to verify such calculations, FedEx shall
          provide to such accountants (for their own confidential use and not to
          be disclosed to USPS or any other person and subject to the execution
          of a satisfactory confidentiality agreement) all information
          reasonably necessary for such verification, including any computer
          analyses used by FedEx to calculate such amount or amounts. This
          verification shall be made in a manner consistent with Generally
          Accepted Accounting Principles and with FedEx's then current
          methodology for calculating its federal excise tax liability. The cost
          of such verification shall be borne by USPS unless it is determined
          that the actual amount payable deviates in favor of USPS by more than
          5% from the amount originally determined by FedEx, in which case such
          costs will be borne by FedEx.

     (d)  FedEx may, in its sole discretion, apply for a ruling from the
          Internal Revenue Service to the effect that it may exclude the
          revenues and transportation costs of providing the FedEx Services to
          USPS in determining FedEx's excise tax liability on its services for
          customers other than USPS. Such ruling application may include further
          guidance as determined by FedEx. USPS agrees to fully cooperate with
          FedEx in the application for any such ruling, including, but not
          limited to, joining FedEx as a named Party on such ruling application.


                                       12
<PAGE>

                                    ARTICLE 6

                               FEDEX COMPENSATION

6.1  As consideration for the performance of the FedEx Services, FedEx shall
     receive compensation from USPS in accordance with Exhibit B.

6.2  FedEx shall be entitled to compensation from USPS for any additional
     services as may be agreed in writing. Notwithstanding the foregoing, FedEx
     shall not be obligated to perform any additional services or to accept any
     changes to the obligations and responsibilities of FedEx or USPS without
     FedEx written consent.

6.3  To reimburse FedEx for a portion of certain expenses incurred or to be
     incurred to expand FedEx's existing network to enable it to perform the
     FedEx Services, USPS shall pay the Network Expansion Reimbursement as
     follows: One half of the Network Expansion Reimbursement shall (subject to
     the satisfaction of the condition set forth in Section 15. 2 (b)) be
     payable on March 30, 2001 with the balance due on October 15, 2001. USPS's
     obligation to pay the Network Expansion Reimbursement is unconditional and
     shall not be refundable except to the extent that the parties shall
     mutually agree that the costs to be reimbursed have not been and will not
     be incurred. For the avoidance of doubt, the parties acknowledge that while
     the FedEx actual expenses to be incurred will be in excess of the Network
     Expansion Reimbursement amount, USPS's obligation will be limited to such
     amount. The parties further agree that the Network Expansion Reimbursement
     represents the [*].

                                    ARTICLE 7

                                    PAYMENTS

7.1  Payments shall be made in accordance with the Payment Procedures set forth
     in EXHIBIT C to this Agreement. All payments shall be in United States
     Dollars in current funds, without offset or reduction. If such charges are
     not paid when due, the defaulting Party shall be charged interest in the
     manner and amount prescribed by the Prompt Payment Act.

7.2  In no event whatsoever shall either Party exercise a lien on any Shipment
     for reason of a claim against the other Party.

7.3  USPS agrees promptly to pay all amounts invoiced by FedEx without setoff or
     adjustment as follows: USPS will pay 100% of all amounts invoiced for FedEx
     Services rendered under the contract (whether or not such amount is
     disputed by USPS). For amounts that either Party claims entitlement
     ("Claims") as described in Article 3 , the non-initiating Party will pay
     into Escrow, in the manner described in Article 3 an amount [*].

     Payment by either Party under the dispute process is not to be construed,
     in any manner, as an admission by that Party of liability to the other or,
     in any proceeding, as evidence of entitlement on the part of such Party.
     Each Party expressly reserves its


                                       13
<PAGE>

     right to assert a claim for the recovery of any payment, or part of a
     payment, through the disputes procedures of this contract, to which it
     believes the other was not entitled. By making a payment pursuant to the
     dispute process of this Agreement, no Party is waiving any claims, defenses
     or other matters relating to or against FedEx.

                                    ARTICLE 8

                          GENERAL OBLIGATIONS OF FEDEX

8.1  FedEx shall at all times during the term of this Agreement comply in all
     material respects with the terms and conditions of this Agreement and all
     Exhibits and Schedules attached hereto, which shall be considered as an
     integral part of this Agreement.

8.2  FedEx shall provide USPS timely, reasonable assistance and cooperation to
     enable USPS representatives to understand significant individual or
     trending claims for lost, damaged or delayed Shipments.

8.3  FedEx shall provide to USPS ongoing access to a designated service
     representative who shall (i) provide prompt response to unsatisfactory
     trends, perform root cause analysis with regard to each such trend and
     help, advise and assist with the development of commercially reasonable
     corrective actions acceptable to FedEx so as to mitigate any future damage
     or injury resulting therefrom and to minimize the risk of the reoccurrence
     of the same or similar situations prospectively, and (ii) provide claims
     processing and support.

8.4  (a) FedEx and USPS will work together to determine USPS's data requirements
     relating to non-proprietary volume scans, network performance and billing
     statistics. FedEx will provide the following data to USPS:

     [*]

     (b) FedEx will provide all USPS scan data one business day following the
     Shipping Day.

     (c) The Local Plans referenced in the Operating Specifications will provide
     for the availability of data to USPS relating to:

     [*]

     (d) In addition to the foregoing data and reports, FedEx will exercise its
     good faith efforts to provide a report that sets forth actual transported
     container weights.

8.5  FedEx agrees that it will perform the FedEx Services consistent with the
     Service Level Commitments calculated in accordance with the following
     procedures:

     (a)  The Day-turn Operating Plan and the Night-turn Operating Plan shall
     each set forth a Market Service Commitment Time for each ADC or AMC. Each
     Market Service Commitment Time assumes that the ADC or AMC will be served
     by a wide-body aircraft type. If, at any time, the scheduled last aircraft
     servicing an ADC or


                                       14
<PAGE>

     AMC changes, the Market Service Commitment Time will be adjusted as
     follows: The Market Service Commitment Time will be [*] than specified if
     the aircraft is changed from a wide-body aircraft to a narrow-body aircraft
     and will be [*] than specified if the aircraft is changed form a
     narrow-body aircraft to a wide-body aircraft. This adjustment will be made
     each time the scheduled last aircraft servicing an ADC or AMC changes. If,
     as a result of either a local or national Air Traffic Control (ATC) system
     degradation, the Day-turn or Night-turn Market Service Commitment Time for
     a specific location can not be maintained, both parties will meet to
     discuss adjustments for each affected ADC or AMC. If, because of such ATC
     degradation, FedEx requests a Market Service Commitment Time later than the
     one then in effect and if USPS refuses to grant the request, FedEx may [*].

     (b)  For each Handling Unit tendered to USPS prior to the Market Service
     Commitment Time, as conclusively evidenced by the time-stamp on the
     Delivery Scan, service will have been met. The Service Levels will be
     calculated independently for the Day-turn and Night-turn network for each
     Schedule Period by dividing the total cubic feet (for the Day-turn network)
     or total weight (for the Night-turn network) of product for which service
     has been met during the Schedule Period by the total cubic feet (in the
     case of Day-turn network) or the total weight (in the case of the
     Night-turn network) of the product accepted from the USPS by FedEx during
     the Schedule Period. There shall be excluded from the calculation of the
     Service Level any days on which a [*]. In addition, if the percentage of
     By-pass ULDs shall be more than [*] less than the By-pass Target Rate,
     there shall be excluded from the calculation of the Service Level
     Commitment, the cubic footage equivalent of the deficiency below the
     By-pass Target Rate. For Handling Units that are not Bypass ULDs, the
     weight will be the weight shown in the Trans-Log file.

     (c)  The following Service Level Commitments shall apply for each network
     following the completion of a five-month transition and testing period (the
     "Transition Period"). The Transition Period shall begin on the first month
     in which FedEx carries the Minimum Guaranteed Volumes:

     [*] % of product delivered prior to the Market Service Commitment Time
     except December and January

     [*] % of product delivered prior to the Market Service Commitment Time for
     the period December 9 through and including December 24, [*]% for the rest
     of December and [*]% for January.

     The following service times shall apply during the Transition Period:

     Month 1--[*]%            Month 4 - [*]%

     Month 2--[*]%            Month 5--[*]%

     Month 3--[*]%

     Notwithstanding the foregoing, if any of the first five months after Month
     2 are a December or January, then the customary Service Level Commitments
     for December and January shall apply to those months. If either Month 1 or
     Month 2 is a December


                                       15
<PAGE>

     or January, then the Month 1 or Month 2 Service Level Commitments, as the
     case may be, shall apply.

     (d)  Should no Delivery Scan be found in the FedEx scan record for a
     Handling Unit (excluding ULDs) for which a Possession Scan has been made,
     [*]. Not less than quarterly, the parties will jointly perform a test to
     determine the number of Handling Units that have received a Possession Scan
     without a corresponding Delivery Scan. The parties will discuss methods to
     minimize this problem during the SWORD Committee meetings referred to in
     Section 13.6.0 of the Operating Specifications.

     (e)  Should the actual Service Level be less than the Service Level
     Commitment, FedEx will [*].

     (f)  [*]

8.6  (a)  Employees with Access to the Mail that are hired after the Service
     Commencement Date must undergo the pre-employment screening activities set
     forth below. These employees may commence employment on an interim basis as
     USPS completes its review. Upon completion of the USPS review, these
     employees will receive a non-sensitive clearance. If USPS does not grant
     this non-sensitive clearance, the employee may not act in the capacity of
     an Employee with Access to the Mail. In addition to completing the standard
     FedEx pre-employment screening, the following must occur:

          i).  Complete drug screening for those substances identified by the
          Substance Abuse and Mental Health Service Administration (SAMHSA) as
          the five most abused substances which are: cocaine, marijuana,
          amphetamine/methamphetamine, opiates and phencyclidine (PCP).

          ii). Complete and forward to the Contracting or his designee a single
          Finger Print card for each employee.

          iii). Forward to the Contracting Officer or his designee a completed,
          signed and dated PS From 2181-C (Contractor Authorization and Release)
          on each employee.

          iv). Forward to the Contracting Officer or his designee on each
          employee a completed, signed and dated PS Form 2025 or such other form
          as may be mutually agreed by the Parties.

          v).  Forward to the Contracting Officer or his designee a completed
          Certification and Transmittal Cover Sheet (CAT) and the items
          referenced therein to be forwarded. Items identified for retention
          therein should be retained in Memphis notwithstanding any contrary
          statement in such form.

          Said forwarded information shall be submitted to Contracting Officer
          and will be reviewed by the Postal Service Inspection Service, and
          FedEx employee


                                       16
<PAGE>

          security clearances will be granted in accordance with the Postal
          Service's standard policies.

     (b)  With respect to Employees with Access to the Mail hired before the
     Service Commencement Date, USPS will grant a waiver of the requirements
     listed in (a) above if FedEx submits to USPS within 30 days after the
     Service Commencement Date, a certification that all Employees with Access
     to the Mail have:

          (i)  Undergone a criminal history check for the seven year period
          prior the date of employment;
          (ii) If hired after 1985 have satisfactorily completed a FedEx drug
          screening test; and
          (iii) Undergone FedEx's standard pre-employment screening.

                                    ARTICLE 9

                              GOVERNMENT REGULATION

9.1  FedEx shall remain a company in good standing under the laws of the State
     of Delaware.

9.2  FedEx shall substantially comply with all laws, orders or regulations that
     may be applicable to the performance of the FedEx Services and shall obtain
     and keep current all licenses, permits and authorizations from all
     governmental agencies and authorities necessary for the performance of the
     FedEx Services.

9.3  FedEx shall not be required to perform any material FedEx Services that
     have been determined by a court of competent jurisdiction or by a
     Governmental Body with subject matter jurisdiction to be in violation of
     any applicable law or regulation.

9.4  USPS agrees that none of its obligations and rights contemplated by this
     Agreement constitute sovereign acts within the meaning of the "sovereign
     acts doctrine."

9.5  USPS shall have the right to audit FedEx's books and records for the
     limited purpose of investigating alleged criminal activity or civil fraud.
     This provision shall not be deemed to limit the audit or investigative
     rights or obligation of any Governmental Body including without limitation
     the Office of the Inspector General and the Postal Inspection Service that
     have been granted or imposed by applicable statute or regulation. In
     addition to the foregoing, FedEx will provide such supporting documentation
     as it shall in its discretion deem necessary to allow USPS properly to
     review any Claims, disputed payments, and compliance with the Service
     Standards.

                                   ARTICLE 10

                              DISCLOSURE/TRADEMARKS

[*]


                                       17
<PAGE>

10.2 Notwithstanding the provisions of Section 10.1 above, neither party shall
     be required to obtain prior written approval before providing information
     regarding this Agreement:

     a.   To Members of Congress (their staffs or designees), provided that
          while the Chairperson of the House Subcommittee with oversight
          responsibility of USPS may receive copies of this Agreement, other
          members of Congress, their staffs or designees may receive copies that
          are redacted in the same manner that will apply to a Freedom of
          Information Act request.

     b.   In response to legal process or otherwise required by law.

     c.   In response to a request from the Department of Justice Antitrust
          Division attorneys or economists in pursuit of a non-public
          investigation.

     d.   In response to requests submitted to USPS under the Freedom of
          Information Act. In this regard, the USPS shall follow the procedures
          promulgated at 39 CFR Section 265.8.

10.3 USPS shall not use in Advertisements, the trademarks, tradenames, service
     marks or logotypes of FedEx without the prior written consent of FedEx to
     do so, which consent may be withheld in FedEx's sole discretion. USPS shall
     have 120 days from the commencement date of this Agreement to obtain
     FedEx's approval of any Advertisements currently in use that include FedEx
     Marks.

10.4 FedEx shall not use in Advertisements, the trademarks, tradenames, service
     marks or logotypes of USPS without the prior written consent of USPS to do
     so, which consent may be withheld in USPS' sole discretion. FedEx shall
     have 120 days from the commencement date of this Agreement to obtain USPS'
     approval of any Advertisements currently in use that include USPS Marks.

10.5 Both Parties acknowledge the need to market their respective products and
     services aggressively.

                                   ARTICLE 11

                               OBLIGATIONS OF USPS

11.1 For the period beginning on the Service Commencement Date and ending twelve
     Schedule Periods thereafter, the average daily Minimum Guaranteed Volume
     for the Day-turn Operations will be [*] and for the Night-turn volume, will
     be [*] with not more than [*] individual Handling Units for each Schedule
     Period. This amount is calculated by dividing the total volume measured on
     a cubic foot basis for the Day-turn Operation and on weight for the
     Night-turn Operation to be moved during the Schedule Period by the total
     number of operating days for the Schedule Period (six days per operating
     week for Day-turn and five days per operating week for Night-turn minus, in
     each case, the number of FedEx Holidays occurring during that Schedule
     Period). On each anniversary of the Service Commencement Date, the Day-turn
     Minimum Guaranteed Volume for the ensuing year will increase by [*] and the
     Night-turn Minimum Guaranteed volume will increase by [*] the previous
     year's amount


                                       18
<PAGE>

     including any increased volume arising as a result of the exercise by USPS
     of its option granted in Section 11.4 below.

11.2 [*]

11.3 Except as provided in Section 11.4 below and in Sections 3.8.0 and 8.1.1 of
     the Operating Specifications, FedEx shall not be required to transport more
     than the Minimum Guaranteed Volume.

11.4 USPS is hereby granted an option, exercisable in writing only during a 12
     month period beginning on the Service Commencement Date, to increase the
     Minimum Guaranteed Volume for the Day-turn Network [*]. If USPS exercises
     this option, the pricing in effect as of the effective date of the increase
     in Minimum Guaranteed Volume will be applicable to the increased volume.
     USPS's notice of election of the exercise of this option shall specify the
     Market Lanes to which it desires the increase to apply. No volume for any
     origin market will increase by more than [*] the pro rata share of the
     request without FedEx approval. FedEx will, within 60 days of its receipt
     of the notice of the exercise of USPS's option, notify USPS of the
     implementation date of the increase in the Minimum Guaranteed Volume. The
     implementation date of the increase in the Minimum Guaranteed Volume shall
     not be later than eighteen months from the date of FedEx's receipt of USPS
     exercise of its option to increase the Minimum Guaranteed Volume. In order
     to reimburse FedEx for the continuing costs of network, USPS will pay to
     FedEx an additional Network Expansion Reimbursement payable as set forth in
     the table below. One half of the additional Network Expansion Reimbursement
     shall be payable four months prior to the implementation date of the
     increased Minimum Guaranteed Volume with the balance payable on the
     effective date of the increase. If USPS exercises the option granted in
     this Section 11.4, USPS's obligation to pay this additional Network
     Expansion Reimbursement will be unconditional and will not be refundable
     except to the extent that the parties shall mutually agree that the costs
     to be reimbursed have not been and will not be incurred. For the avoidance
     of doubt, the parties acknowledge that while the FedEx actual expenses to
     be incurred will be in excess of the amount of the additional Network
     Expansion Reimbursement amount, USPS's obligation will be limited to the
     amounts specified below. The parties further agree that the Network
     Expansion Reimbursement represents the first amounts of such costs incurred
     or to be incurred.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
NUMBER OF MONTHS FROM USPS EXERCISE OF       ADDITIONAL NETWORK EXPANSION
OPTION THAT INCREASED MINIMUM GUARANTEED     REIMBURSEMENT (NOTE: THE REIMBURSEMENT
VOLUME IS EFFECTIVE                          AMOUNT ASSUMES THAT THE INCREASED AMOUNT IS
                                             [*].
<S>                                          <C>
-----------------------------------------------------------------------------------------
ONE THROUGH EIGHT                            [*]

-----------------------------------------------------------------------------------------
NINE                                         [*]

-----------------------------------------------------------------------------------------


                                       19
<PAGE>

-----------------------------------------------------------------------------------------
TEN                                          [*]

-----------------------------------------------------------------------------------------
ELEVEN                                       [*]

-----------------------------------------------------------------------------------------
TWELVE                                       [*]

-----------------------------------------------------------------------------------------
THIRTEEN                                     [*]

-----------------------------------------------------------------------------------------
FOURTEEN                                     [*]

-----------------------------------------------------------------------------------------
FIFTEEN                                      [*]

-----------------------------------------------------------------------------------------
SIXTEEN                                      [*]

-----------------------------------------------------------------------------------------
SEVENTEEN                                    [*]

-----------------------------------------------------------------------------------------
EIGHTEEN                                     [*]

-----------------------------------------------------------------------------------------
</TABLE>

11.5 USPS shall substantially comply with all laws and regulations that may be
     applicable to this Agreement and to all transactions and activities to be
     performed hereunder. Except as provided in Section 15.4 below, USPS shall
     not be required to perform any of its obligations hereunder that have been
     determined by a court of competent jurisdiction or by a Governmental Body
     with subject matter jurisdiction to be in violation of any applicable law
     or regulation.

11.6 USPS shall tender all Shipments to FedEx Ready for Carriage.

                                  ARTICLE 12

                           LIABILITIES OF THE PARTIES

12.1 USPS shall be liable to FedEx for all Losses (as hereinafter defined) to
     the extent such Losses arise out of or result from (directly or
     indirectly), or are in connection with:

     (a)  any breach by USPS of any of the terms of this Agreement;

     (b)  any breach of any representation or warranty made by USPS in this
          Agreement, the Schedules hereto or any other certificate or document
          delivered by USPS pursuant to this Agreement;

     (c)  any failure by USPS to perform or comply with any of its covenants or
          obligations under this Agreement;

     (d)  any third Party customer claims arising from or in connection with the
          loss, damage or delay of any Shipment; or

     (e)  injuries to persons or property on or at USPS's property which arise
          from the negligent or wrongful act or omission by a USPS employee
          while within the scope of his employment, under circumstances where
          USPS, if it were a


                                       20
<PAGE>

          private person, would be liable in accordance with the law of the
          place where such negligent or wrongful act or omission occurred.

12.2 FedEx shall be liable to USPS for all Losses, to the extent such Losses
     arise out of, result from, or are in connection with:

     (a)  any breach by FedEx of any of the terms of this Agreement;

     (b)  any breach of any representation or warranty made by FedEx in this
          Agreement, or any other certificate or document delivered by FedEx
          pursuant to this Agreement (other than Article 5);

     (c)  any failure by FedEx to perform or comply with any of its covenants or
          obligations under this Agreement; or

     (d)  any injuries to persons or property on or at FedEx's property which
          arise from the negligent or wrongful act or omission by a FedEx
          employee while acting within the scope of his employment.

12.3 For purposes of this Agreement, "Losses" shall mean the aggregate of any
     and all payments for claims, liabilities, suits, actions, proceedings,
     demands, charges, damages, impositions, assessments, levies, duties,
     losses, diminution in value, costs, or expenses (including reasonable
     attorney fees, expert witness fees, court costs and other costs of
     investigation and defense) of every kind and nature, whether or not
     involving a third-Party claim, incurred by the Party suffering the Losses
     and which are awardable under Federal Contract Law.

12.4 The parties agree that in the event of any dispute arising hereunder or
     pursuant to a third Party action against a Party, the parties shall
     cooperate in good faith in providing requested information and access to
     persons with knowledge of the dispute, which includes, but is not limited
     to, the production of requested documents, securing evidence, obtaining the
     attendance and cooperation of witnesses, and providing prompt responses to
     all discovery requests.

12.5 Except as otherwise provided in this agreement, neither Party shall be
     liable to the other for the payment of any indirect, special or
     consequential damages arising as a result of the performance,
     non-performance or malperformance hereunder.

12.6 The liability of the parties set forth in this Article 12 shall not be the
     exclusive area of liability of the Parties under this Agreement.


                                       21
<PAGE>

                                   ARTICLE 13

             RISK OF LOSS; CLAIMS PROCEDURE; LIMITATION OF LIABILITY

FedEx shall not be responsible for any Losses arising as a result of any loss,
damage or delay to any shipment except to the extent of any insurance proceeds
received as a result of a catastrophic loss of an aircraft or other vehicle
transporting the shipment and attributable to USPS Packages.

                                   ARTICLE 14

                         REPRESENTATIONS AND WARRANTIES

     14.1 USPS makes the followings representations and warranties:

     (a)  The execution and delivery by USPS of this Agreement and the
          performance by USPS of its obligations hereunder have been duly
          authorized by all necessary action of USPS, and this Agreement has
          been executed and delivered by duly authorized officers of USPS.

     (b)  No authorization, approval, consent, permit, license, order,
          designation, or declaration of or filing by or with any Governmental
          Body under the federal laws of the United States is necessary in
          connection with the execution and delivery of this Agreement by USPS
          and the consummation of each of the transactions contemplated hereby.
          As promptly as possible after the date of this Agreement, USPS will
          make all notices and/or filings required by Legal Requirements to be
          made by USPS in order to consummate the transactions contemplated by
          this Agreement, and, as promptly as possible after the date of this
          Agreement, USPS will cooperate with FedEx with respect to any and all
          notices and/or filings that FedEx is required by Legal Requirements to
          make.

     (c)  To the best of the USPS' knowledge, except for the case entitled Emery
          Worldwide Airlines, Inc. v. The United States Postal Service filed
          with the United States Court of Federal Claims on January 5, 2001,
          there is no Proceeding pending, that challenges, or that prevents,
          delays, makes illegal, or otherwise interferes with, this Agreement
          and the transactions contemplated hereunder.

     (d)  To the best of the USPS' knowledge, there is no Order to which USPS is
          subject that challenges, or that may have the effect of preventing,
          delaying, making illegal, or otherwise interferes with, this Agreement
          and the transactions contemplated hereunder.

     (e)  USPS is not a Party to any exclusive contract, agreement, arrangement,
          plan or understanding with any Person to provide to USPS any of the
          products and services to be provided by FedEx to USPS under this
          Agreement.


                                       22
<PAGE>

14.2 FedEx makes the following representation and warranties:

     (a)  The execution and delivery by FedEx of this Agreement and the
          performance by FedEx of its obligations hereunder have been duly
          authorized by all necessary corporate or other action of FedEx, and
          this Agreement has been executed and delivered by duly authorized
          officers of FedEx.

     (b)  No authorization, approval, consent, permit, license, order,
          designation, or declaration of or filing by or with any Governmental
          Body under the federal laws of the United States is necessary in
          connection with the execution and delivery of this Agreement by FedEx
          and the consummation of each of the transactions contemplated hereby.
          As promptly as possible after the date of this Agreement, FedEx will
          make all notices and/or filings required by Legal Requirements to be
          made by FedEx in order to consummate the transactions contemplated by
          this Agreement, and, as promptly as possible after the date of this
          Agreement, FedEx will cooperate with USPS with respect to any and all
          notices and/or filings that USPS is required by Legal Requirements to
          make.

     (c)  Neither the execution of this Agreement nor the performance of its
          obligations hereunder violate the terms of any contract, indenture or
          other agreement under which FedEx or its properties is bound.

     (d)  To the best of the FedEx's knowledge, there is no Order to which FedEx
          is subject that challenges, or that may have the effect of preventing,
          delaying, making illegal, or otherwise interferes with, this Agreement
          and the transactions contemplated hereunder.


                                   ARTICLE 15

                              TERM AND TERMINATION

15.1 INITIAL TERM

     This Agreement shall commence on January 8, 2001 and shall expire on last
     tender by FedEx of shipments on the last day of the August Schedule Period
     in 2008. Not later than twenty-four (24) months prior to the expiration
     date, the Parties shall commence discussions with a view to renewing this
     Agreement. The Parties shall agree not later than eighteen months prior to
     the expiration of this Agreement whether this Agreement shall be renewed.
     If the parties have not agreed to extend this Agreement by such date, this
     Agreement shall expire in accordance with its terms. During the six-month
     negotiation period, USPS agrees not to negotiate with any third Party for
     the performance of the FedEx Services. At all times during the referenced
     negotiation period, FedEx shall have the resources or the capacity to
     acquire the resources necessary to provide the services to USPS which are
     the subject of the negotiations between the parties.


                                       23
<PAGE>

15.2 (a) Conditions Precedent. The Retail Agreement shall have been executed and
     delivered to FedEx and all conditions precedent to the effectiveness
     thereof shall have been satisfied.

     (b) Condition Subsequent. The obligation of FedEx to provide the FedEx
     Services hereunder is subject to the condition subsequent that [*], FedEx
     shall have entered into a letter agreement with the FedEx Pilot Association
     concerning the transactions contemplated hereby.

15.3 The following optional termination events shall apply:

     (a) Either Party may terminate this Agreement without cause upon [*] months
     prior written notice to the other Party.

     (b) If USPS terminates or is deemed to have terminated the Retail Agreement
     or defaults in the performance of its obligations thereunder, FedEx may
     terminate this Agreement upon [*] months notice without the payment of a
     penalty of any amount.

     (c) If FedEx terminates or is deemed to have terminated this Agreement or
     defaults in the performance of its obligations hereunder, USPS may
     terminate the Retail Agreement upon [*] months notice without the payment
     of a penalty of any amount.

     (d) If a Change of Control Event occurs with respect to FedEx, USPS may
     terminate this Agreement upon [*] months notice without the payment of a
     penalty of any amount.

     (e) Either Party shall have the right to terminate this Agreement on May
     15, 2001 or such earlier date as the Parties shall mutually agree if a
     Governmental Body with subject matter jurisdiction has indicated to either
     Party a concern with a material provision of this Agreement. The General
     Counsel of the Party intending to terminate this Agreement will consult
     with the General Counsel of the other not less than three days prior to its
     election of its right under this Section 15.3 (e).

15.4 Consequences of Termination

     (a) If either Party exercises its option to terminate the Agreement (other
     than a termination referred to in Section 15.4 (b) below) pursuant to
     Section 15.3 (a) above, it shall be liable to the other Party for the
     payment of termination fees in accordance with the following schedule:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Notice Date of Termination                   Termination Fee Payable
<S>                                          <C>
--------------------------------------------------------------------------------
July, 2001 through June, 2002                [*]

--------------------------------------------------------------------------------
July, 2002 through June, 2003                [*]

--------------------------------------------------------------------------------
July, 2003 through June, 2004                [*]

--------------------------------------------------------------------------------
July, 2004 through June, 2005                [*]

--------------------------------------------------------------------------------


                                       24
<PAGE>

--------------------------------------------------------------------------------
July, 2005 through June, 2006                [*]

--------------------------------------------------------------------------------
July, 2006 through June, 2007                [*]

--------------------------------------------------------------------------------
</TABLE>

     (b) If as a result of an order of a court of competent jurisdiction or any
     agency or department of a Governmental Body, this Agreement is terminated
     prior to the commencement of the FedEx Services, USPS will pay the
     following liquidated amounts to FedEx to compensate FedEx for its costs in
     preparing for the start up of the FedEx Services and not as a payment of a
     penalty. If USPS has paid the Network Expansion Reimbursement on March 30,
     2001, no additional amounts will be paid to FedEx pursuant to this Section.
     If the termination of this Agreement is as a result of a final
     determination by a court of competent jurisdiction or any agency or
     department of a Governmental Body that this Agreement is in violation of
     the provisions of United States anti-trust laws, or as a result of the
     election of a Party of its rights pursuant to Section 15.3 (e) above, the
     amount payable to FedEx will be one-half of the amount indicated below:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
If the Termination is ordered before the first         USPS pays to FedEx the following Amount:
day of this month:
<S>                                                    <C>
-----------------------------------------------------------------------------------------------
February, 2001                                         [*]

-----------------------------------------------------------------------------------------------
March, 2001                                            [*]

-----------------------------------------------------------------------------------------------
April, 2001                                            [*]

-----------------------------------------------------------------------------------------------
May, 2001                                              [*]

-----------------------------------------------------------------------------------------------
June, 2001 and thereafter until                        [*]
commencement of Services

-----------------------------------------------------------------------------------------------
</TABLE>

     (c) Upon either Party's exercise of a right to terminate this Agreement
     pursuant to this Article 15, except as otherwise provided in Section 15.4
     (a) above, neither Party shall be liable to the other, for any fees,
     expenses, other compensation or damages of any kind whatsoever including
     loss of profit, whether on account of the loss by either Party of present
     or prospective profits or fees on sales or anticipated sales, or
     expenditures, investments or commitments made in connection with the
     establishment, development, or maintenance of the services performed
     hereunder, subject to payment of all fees and compensation for the FedEx
     Services pursuant to this Agreement and without prejudice to the payment to
     one Party of any indemnities resulting from the breach by the other Party
     of any of the dispositions under the present Agreement, as the case may be.
     Such termination shall not prejudice the Parties' respective rights to be
     paid for any services rendered or debts arising prior to the effective date
     of termination.

                                   ARTICLE 16


                                       25
<PAGE>

                                EVENTS OF DEFAULT

     16.1.     The occurrence of any one or more of the following events (the
               "Events of Default") will constitute a default and breach of
               this Agreement:

     (i)       Failure by either Party to pay any fee, reimbursable or other
               payment due pursuant to this Agreement, including, but not by
               way of limitation, the obligation of either Party to make
               payments in accordance with the provisions of Section 7.3 of
               the Agreement and the continuance of that failure for more
               than forty five (45) days following the date of a notice (the
               "Default Notice") from the Senior Vice President and General
               Counsel (or an equivalent level position) of the
               non-defaulting Party to the Senior Vice-President and General
               Counsel (or an equivalent level position) of the defaulting
               Party with, in the case of USPS, a copy to the Manager,
               National Mail Transportation, Purchasing (or any successor
               position); provided, however, that if, as of the thirty fifth
               day following the date of the Default Notice, payment has not
               been received by the non-defaulting Party, the non-defaulting
               Party shall have sent a second notice (the "Second Default
               Notice") to the same parties to whom the Default Notice was
               sent. The Default Notice and the Second Notice shall be sent
               by either USPS Express Mail or FedEx Priority Overnight or any
               successor overnight product of either as confirmed by a proof
               of delivery receipt;

     (ii)      Failure of either Party to observe or perform any of the
               material covenants, conditions or provisions of this
               Agreement, other than the late payment of fees, reimbursable
               or other payments, where the failure continues for a period of
               sixty (60) days after the defaulting Party's receipt of notice
               of such failure; or

     (iii)     Failure of either Party to observe or perform its obligations
               in accordance with the provisions of Section 10.1 (c), 10.3 or
               10.4 of this Agreement.

     16.2.     Upon the occurrence of an Event of Default specified in
               Sections 16.1 (i) or (iii) above, the non-defaulting Party may
               exercise and shall be entitled to any remedies available to it
               in law or equity, including the right to terminate this
               Agreement in whole or in part without demand or judicial
               resolution, by written notice effective upon 365 days notice
               to the defaulting Party. Upon the occurrence of an Event of
               Default other than those specified in the first sentence of
               this Section 16.2, the non-defaulting Party may exercise and
               be entitled to any remedies available to it in law or equity
               but shall not be entitled to terminate this Agreement absent
               the consent of the other Party.

                                   ARTICLE 17

                                 CONFIDENTIALITY

     17.1 During the term of this Agreement and until the earlier of five (5)
          years after such termination or until such time as the information is
          no longer confidential as described in Article 17.2, each Party shall
          treat as confidential and appropriately safeguard and shall not use
          for the benefit of any person or corporation other than the other
          Party:

          (i)  written information identified in writing as confidential or oral
               information promptly confirmed in writing as being confidential;


                                       26
<PAGE>

          (ii)      written information or oral information disclosed by the
                    parties during the negotiation of this Agreement and
                    written information or oral information promptly
                    confirmed in writing as confidential pertaining to a
                    Party's pricing, business or assets which is received at
                    any time from a Party or its Affiliates that is
                    identified in writing;

          (iii)     any information or knowledge concerning the methods of
                    operation, promotion, sale, or distribution used by a
                    Party or its Affiliates which may be communicated to the
                    other Party or its Affiliates or which a Party may
                    otherwise acquire by virtue of its performance of this
                    Agreement; or

          (iv)      any information that the recipient of which actually
                    knows or should reasonably have known is confidential or
                    proprietary to the other Party.

     17.2 Information shall not be considered confidential if it is:

          (i)       Generally known to the trade or public;

          (ii)      Rightfully possessed by a Party prior to the date of this
                    Agreement;

          (iii)     Received by a Party from a third Party which rightfully
                    possesses it;

          (iv)      Independently developed by the other Party; or

          (v)       Releasable pursuant to Postal regulations addressing how
                    information is maintained by USPS. Those regulations are
                    contained at 39 CFR 265.8.

                                   ARTICLE 18

                                  FORCE MAJEURE

Each Party shall be excused from performance under this Agreement, including
delivery times and commitments, and neither Party shall be liable to the other
or any other person or entity for loss, damage, delay, mis-delivery or
non-delivery of shipments transported pursuant to this Agreement, resulting in
whole or in part from any of the following: perils of the air, public enemies,
criminal acts of any person or entity, public authorities acting with actual or
apparent authority (including U. S. Postal Inspectors), civil commotion, hazards
incident to a state of war, local or national weather conditions, national or
local disruptions in transportation networks or operations (of any mode) of
FedEx or any other entity, strikes or anticipated strikes of FedEx, USPS or any
other Person, natural disasters, disruption or failure of communication and
information systems, or any conditions that present a danger to each Party's
personnel. In every case the failure to perform must be beyond the control and
without the fault or negligence of the Party claiming that its performance is
excused hereunder. As provided in Section 8.5 (f) of this Agreement, except for
National or Regional Disruptions, nothing in this Article 18 shall relieve FedEx
of its obligations under Section 8.5 of the Agreement.

If, as a result of the occurrence of one of the foregoing events, FedEx is
excused from performance, the parties will meet to agree upon a pro rata
adjustment of the Minimum Guaranteed Volumes.


                                       27
<PAGE>

                                   ARTICLE 19

                              STANDARD USPS CLAUSES

CONTRACT TYPE

     This Agreement is a contract for the purchase of commercial services, and
is awarded pursuant to Section 4.3 of the Purchasing Manual (which may be
referred to herein as the "PM"), and is subject to such deviations from the
Purchasing Manual as have been duly authorized by USPS.

INCORPORATION BY REFERENCE

     This Agreement, including its exhibits and schedules, constitute the
parties' entire agreement on the subject matter set forth herein. There are no
contract clauses, regulations, provisions of the Purchasing Manual or other
provisions of law incorporated herein, except as explicitly stated in this
Agreement. The Christian Doctrine shall not apply to this Agreement, and the
parties specifically reject the incorporation by reference or operation of law
of any terms that are not specifically referenced or described herein.

COMMERCIAL SUBCONTRACTS

     Except as required by law, notwithstanding any other provision of this
Agreement, FedEx is not required to include any PM clause, other than those
listed below (and as may be required by an addenda to this paragraph) in a
subcontract for commercial items or commercial components:

     (1)  Clause 9-7, Equal Opportunity (January 1997)

     (2)  Clause 9-14, Affirmative Action for Disabled Veterans and Veterans of
     the Vietnam Era (January 1997)

     (3)  Clause 9-13, Affirmative Action for Handicapped Workers (January 1997)

CLAUSE B-8     ASSIGNMENT OF CLAIMS

a.   If this contract provides for payments aggregating $10,000 or more, claims
for monies due or to become due from the USPS under it may be assigned to a
bank, trust company, or other financing institution, including any federal
lending agency, and may thereafter be further assigned and reassigned to any
such institution. Any such assignment or reassignment must cover all amounts
payable and must not be made to more than one Party, except that assignment or
reassignment may be made to one Party as agent or trustee for two or more
parties participating in financing this contract. No assignment or reassignment
pursuant to the provisions of this clause will be recognized as valid and
binding upon the USPS unless a written notice of the assignment or reassignment,
together with a true copy of the instrument of assignment, is filed with:

     (1)  The contracting officer;

     (2)  The surety or sureties upon any bond; and


                                       28
<PAGE>

     (3)  The office, if any, designated to make payment, and the contracting
     officer has acknowledged the assignment in writing.

b.   Assignment of this contract or any interest in this contract other than in
accordance with the provisions of this Agreement will be grounds for termination
of the contract for default at the option of the USPS

CLAUSE B-9     CLAIMS AND DISPUTES

a.   This contract is subject to the Contract Disputes Act of 1978. (41 U.S.C.
     601-613) ("the Act").

b.   Except as otherwise provided in the Act and this Agreement (including
     specifically the provisions of Article 3, Sections 7.3 and Article 16 all
     disputes arising under or relating to this Agreement must be resolved under
     this clause.

c.   "Claim", as used in this clause, means a written demand or written
     assertion by one of the contracting parties seeking, as a matter of right,
     the payment of money in a sum certain, the interpretation of contract
     terms, or other relief arising under or relating to this Agreement.
     However, a written demand or written assertion by FedEx seeking the payment
     of money exceeding $100,000 is not a Claim under the Act until certified as
     required by subparagraph d.2 below. A voucher, invoice, or other routine
     request for payment that is not in dispute when submitted is not a Claim
     under the Act. The submission may be converted to a claim under the Act by
     complying with the submission and certification requirements of this
     clause, if it is disputed either as to liability or amount is not acted
     upon in a reasonable time.

d.   (1)  A Claim by FedEx must be made in writing and submitted to the
contracting officer for a written decision. A Claim by the USPS against FedEx is
subject to a written decision by the contracting officer.

     (2)  (a) For FedEx Claims exceeding $100,000, FedEx must submit with the
          claim the following certification:

     "I certify that the claim is made in good faith, that the supporting data
     are accurate and complete to the best of my knowledge and belief, that the
     amount requested accurately reflects the contract adjustment for which
     FedEx believes the USPS is liable, and that I am duly authorized to certify
     the claim on behalf of FedEx."

     (b) For USPS Claims exceeding $100,000, USPS must submit with the claim the
     following certification:

          "I certify that the claim is made in good faith, that the supporting
     data are accurate and complete to the best of my knowledge and belief, that
     the amount requested accurately reflects the contract adjustment for which
     USPS believes FedEx is liable, and that I am duly authorized to certify the
     claim on behalf of USPS."

(3)  The certification may be executed by any person duly authorized to bind
     FedEx with respect to the claim.


                                       29
<PAGE>

     e.   For FedEx claims of $100,000 or less, the contracting officer must, if
          requested in writing by FedEx, render a decision within 15 days of the
          request. For FedEx-certified Claims over $100,000, the contracting
          officer must, within 30 days, or such longer period as shall be
          mutually agreed by the parties, decide the claim. If the parties
          cannot agree upon a period of time for deciding claims in excess of
          the time periods provided above, the contracting officer shall be
          deemed to have denied FedEx's position if no contrary determination
          has been made within the applicable time period.

     f.   The contracting officer's decision is final unless FedEx appeals or
          files a suit as provided in the Act.

     g.   When a Claim is submitted by or against FedEx, the parties by mutual
          consent may agree to use an alternative dispute resolution (ADR)
          process to assist in resolving the claim. A certification as described
          in d(2) of this clause must be provided for any claim, regardless of
          dollar amount, before ADR is used.

     h.   The unsuccessful Party will pay interest in the amount found due and
          unpaid from the occurrence of the event giving rise to such Claim at
          the highest rate permissible by applicable law.

CLAUSE 3-2     PARTICIPATION OF SMALL, MINORITY, AND WOMAN-OWNED BUSINESSES

     a.   The policy of the USPS is to encourage the participation of small,
          minority, and woman-owned business in its purchases of supplies and
          services to the maximum extent practicable consistent with efficient
          contract performance. FedEx agrees to follow the same policy in
          performing this contract.

     b.   Subject to the agreement of FedEx and the USPS, FedEx will report
          subcontracting activity on one of the following bases:

          (1)  Showing direct subcontracting awards made;

          (2)  Showing subcontracting activity that is allocable to this
          contract using generally accepted accounting practices; or

          (3)  A combination of the methods listed above.

     c.   FedEx will submit a report to the contracting officer within 15
          calendar days after the end of each calendar-year quarter, describing
          all subcontract awards to small, minority, or woman-owned businesses.
          The contracting officer may require more frequent reports.

CLAUSE 6-1     BANKRUPTCY

     In the event FedEx enters into proceedings relating to bankruptcy, whether
     voluntary or involuntary, FedEx will furnish, by certified mail, written
     notification of the bankruptcy to the contracting officer responsible for
     administering the contract. The notification must be furnished within five
     days of the initiation of the bankruptcy proceedings. The notification must
     include the date on which the bankruptcy petition


                                       30
<PAGE>

     was filed, the court in which the petition was filed, and a list of USPS
     contracts and contracting officers for all USPS contracts for which final
     payment has not yet been made. This obligation remains in effect until
     final payment under this contract.

CLAUSE 9-1     CONVICT LABOR

     In connection with the work under this contract, FedEx agrees not to employ
     any person undergoing sentence of imprisonment, except as provided by
     Public Law 89-176, September 10, 1965 (18 U.S.C. 4082(c)(2) and Executive
     Order 11755, December 29, 1973.

CLAUSE 9-2     CONTRACT WORK HOURS AND SAFETY STANDARDS ACT - OVERTIME
COMPENSATION

     a.   Overtime Requirements. No supplier or subcontractor contracting for
     any part of the contract work may require or permit any laborer or mechanic
     to work more than 40 hours in any workweek on work subject to the
     provisions of the Contract Work Hours and Safety Standards Act, unless the
     laborer or mechanic receives compensation at a rate not less than
     one-and-one-half times the laborer's or mechanic's basic rate of pay for
     all such hours worked in excess of 40 hours.

     b.   Violation, Liability for Unpaid Wages, and Liquidated Damages. In the
     event of any violation of paragraph a above, FedEx and any subcontractor
     responsible for the violation are liable to any affected employee for
     unpaid wages. FedEx and subcontractor are also liable to the USPS for
     liquidated damages, which will be computed for each laborer or mechanic at
     $10 for each day on which the employee was required or permitted to work in
     violation of paragraph a above.

     c.   Withholding for Unpaid Wages and Liquidated Damages. The contracting
     officer may withhold from FedEx, from any moneys payable to FedEx or
     subcontractor under this or any other contract with the same supplier, or
     any other federally-assisted contract subject to the Contract Work Hours
     and Safety Standards Act held by the same supplier, sums as may
     administratively be determined necessary to satisfy any liabilities of
     FedEx or subcontractor for unpaid wages and liquidated damages pursuant to
     paragraph b above.

     d.   Records. FedEx or subcontractor must maintain for three years from the
     completion of the contract for each laborer and mechanic (including
     watchmen and guards) working on the contract payroll records which contain
     the name, address, social security number, and classification(s) of each
     such employee, hourly rates of wages paid, number of daily and weekly hours
     worked, deductions made, and actual wages paid. FedEx or subcontractor must
     make these records available for inspection, copying, or transcription by
     authorized representatives of the contracting officer and the Department of
     Labor, and must permit such representatives to interview employees during
     working hours on the job. (The Department of Labor information collection
     and record keeping requirements in this paragraph d have been approved by
     the Office of Management and Budget (OMB) under OMB control numbers
     1215-0140 and 1215-0017.)


                                       31
<PAGE>

     e.   Subcontracts. FedEx must insert paragraphs a through d of this clause
     in all subcontracts, and must require their inclusion in all subcontracts
     at any tier.

CLAUSE 9-7     EQUAL OPPORTUNITY

     a.   FedEx may not discriminate against employees or applicants because of
          race, color, religion, sex, or national origin. FedEx will take
          affirmative action to ensure that applicants are employed, and that
          employees are treated during employment, without regard to race, color
          religion, sex, or national origin. This action must include, but not
          be limited to, employment, upgrading, demotion, or transfer;
          recruitment or recruitment advertising; layoff or termination; rates
          of pay or other forms of compensation; and selection for training,
          including apprenticeship. FedEx agrees to post in conspicuous places,
          available to employees and applicants, notices provided by the
          contracting officer setting forth the provisions of this clause.

     b.   FedEx must, in all solicitations or advertisements for employees
          placed by it or on its behalf, state that all qualified applicants
          will be considered for employment without regard to race, color,
          religion, sex, or national origin.

     c.   FedEx must send to each union or workers' representative with which
          FedEx has a collective bargaining agreement or other understanding, a
          notice, provided by the contracting officer, advising the union or
          workers' representative of FedEx's commitments under this clause, and
          must post copies of the notice in conspicuous places available to
          employees and applicants.

     d.   FedEx must comply with all provisions of Executive Order (EO) 11246 of
          September 24, 1965, as amended, and of the rules, regulations, and
          relevant orders of the Secretary of Labor.

     e.   FedEx must furnish all information and reports required by the
          Executive Order, and by the rules, regulations, and orders of the
          Secretary, and must permit access to FedEx's books, records, and
          accounts by the USPS and the Secretary for purposes of investigation
          to ascertain compliance with these rules, regulations, and orders.

     f.   If FedEx fails to comply with this clause or with any of the said
          rules, regulations, or orders, this contract may be cancelled,
          terminated, or suspended, in whole or in part; FedEx may be declared
          ineligible for further contracts in accordance with the Executive
          Order; and other sanctions may be imposed and remedies invoked under
          the Executive Order, or by rule, regulation, or order of the
          Secretary, or as otherwise provided by law.

     g.   FedEx must insert this clause, including this paragraph g, in all
          subcontracts or purchase orders under this contract unless exempted by
          Secretary of Labor rules, regulations, or orders issued under the
          Executive Order. FedEx must take such action with respect to any such
          subcontract or purchase order as the USPS may direct as a means of
          enforcing the terms and conditions of this clause (including sanctions
          for non-compliance), provided, however, that if


                                       32
<PAGE>

          FedEx becomes involved in, or is threatened with, litigation as a
          result, FedEx may request the USPS to enter into the litigation to
          protect the interest of the USPS.

     h.   Disputes under this clause will be governed by the procedures in 41
          CFR 60-1.1.

CLAUSE 9-9     EQUAL OPPORTUNITY PREAWARD COMPLIANCE OF SUBCONTRACTS

          FedEx may not enter into a first-tier subcontract for an estimated or
          actual amount of $1 million or more without obtaining in writing from
          the contracting officer a clearance that the proposed subcontractor is
          in compliance with equal opportunity requirements and therefore
          eligible for award.

CLAUSE 9-10    SERVICE CONTRACT ACT

     a.   This contract is subject to the Service Contract Act of 1965, as
     amended (41 U.S.C. Section 351 et seq.), and to the following provisions
     and all other applicable provisions of the Act and regulations of the
     Secretary of Labor issued under the Act (29 CFR Part 4).

     b.   (1)  Each service employee employed in the performance of this
     contract by FedEx or any subcontractor must be (a) paid not less than the
     minimum monetary wages and (b) furnished fringe benefits in accordance with
     the wages and fringe benefits determined by the Secretary of Labor or an
     authorized representative, as specified in any wage determination attached
     to this contract.

          (2)  (a)  If a wage determination is attached to this contract, the
          contracting officer must require that any class of service employees
          not listed in it and to be employed under the contract (that is, the
          work to be performed is not performed by any classification listed in
          the wage determination) be classified by FedEx so as to provide a
          reasonable relationship (that is, appropriate level of skill
          comparison) between the unlisted classifications and the
          classifications in the wage determination. The conformed class of
          employees must be paid the monetary wages and furnished the fringe
          benefits determined under this clause. (The information collection
          requirements contained in this paragraph b have been approved by the
          Office of Management and Budget under OMB control number 1215-0150.)

          (b)  The conforming procedure must be initiated by FedEx before the
          performance of contract work by the unlisted class of employees. A
          written report of the proposed conforming action, including
          information regarding the agreement or disagreement of the authorized
          representative of the employees involved or, if there is no authorized
          representative, the employees themselves, must be submitted by FedEx
          to the contracting officer no later than 30 days after the unlisted
          class of employees performs any contract work. The contracting officer
          must review the proposed action and promptly submit a report of it,
          together with the agency's recommendation and all pertinent
          information, including the position of FedEx and the employees, to the
          Wage and Hour Division, Employment Standards Administration, U.S.
          Department


                                       33
<PAGE>

          of Labor, for review. Within 30 days of receipt, the Wage and Hour
          Division will approve, modify, or disapprove the action, render a
          final determination in the event of disagreement, or notify the
          contracting officer that additional time is necessary.

          (c)  The final determination of the conformance action by the Wage and
          Hour Division will be transmitted to the contracting officer, who must
          promptly notify FedEx of the action taken. FedEx must give each
          affected employee a written copy of this determination, or it must be
          posted as a part of the wage determination.

          (d)  (i)  The process of establishing wage and fringe benefit rates
          bearing a reasonable relationship to those listed in a wage
          determination cannot be reduced to any single formula. The approach
          used may vary from determination to determination, depending on the
          circumstances. Standard wage and salary administration practices
          ranking various job classifications by pay grade pursuant to point
          schemes or other job factors may, for example, be relied upon.
          Guidance may also be obtained from the way various jobs are rated
          under federal pay systems (Federal Wage Board Pay System and the
          General Schedule) or from other wage determinations issued in the same
          locality. Basic to the establishment of conformable wage rates is the
          concept that a pay relationship should be maintained between job
          classifications on the basis of the skill required and the duties
          performed.

          (ii) If a contract is modified or extended or an option is exercised,
          or if a contract succeeds a contract under which the classification in
          question was previously conformed pursuant to this clause, a new
          conformed wage rate and fringe benefits may be assigned to the
          conformed classification by indexing (that is, adjusting) the previous
          conformed rate and fringe benefits by an amount equal to the average
          (mean) percentage increase change in the wages and fringe benefits
          specified for all classifications to be used on the contract that are
          listed in the current wage determination, and those specified for the
          corresponding classifications in the previously applicable wage
          determination. If these conforming actions are accomplished before the
          performance of contract work by the unlisted class of employees, FedEx
          must advise the contracting officer of the action taken, but the other
          procedures in b.2(c) above need not be followed.

          (iii) No employee engaged in performing work on this contract may be
          paid less than the currently applicable minimum wage specified under
          section 6(a)(1) of the Fair Labor Standards Act of 1938, as amended.

          (e)  The wage rate and fringe benefits finally determined pursuant to
          b.2(a) and (b) above must be paid to all employees performing in the
          classification from the first day on which contract work is performed
          by them in the classification. Failure to pay unlisted employees the
          compensation agreed upon by the interested parties and/or finally
          determined by the Wage and Hour Division retroactive to the date the
          class of employees began contract work is a violation of the Service
          Contract Act and this contract.


                                       34
<PAGE>

          (f)  Upon discovery of failure to comply with b.2(a) through (e)
          above, the Wage and Hour Division will make a final determination of
          conformed classification, wage rate, and/or fringe benefits that will
          be retroactive to the date the class of employees commenced contract
          work.

          (3)  If, as authorized pursuant to section 4(d) of the Service
          Contract Act, the term of this contract is more than one year, the
          minimum monetary wages and fringe benefits required to be paid or
          furnished to service employees will be subject to adjustment after one
          year and not less often than once every two years, pursuant to wage
          determinations to be issued by the Wage and Hour Division, Employment
          Standards Administration of the Department of Labor.

     c.   FedEx or subcontractor may discharge the obligation to furnish fringe
     benefits specified in the attachment or determined conformably to it by
     furnishing any equivalent combinations of bona fide fringe benefits, or by
     making equivalent or differential payments in cash in accordance with the
     applicable rules set forth in Subpart D of 29 CFR Part 4, and not
     otherwise.

     d.   (1)  (a)  In the absence of a minimum-wage attachment for this
          contract, neither FedEx nor any subcontractor under this contract may
          pay any person performing work under the contract (regardless of
          whether they are service employees) less than the minimum wage
          specified by section 6(a)(1) of the Fair Labor Standards Act of 1938.
          Nothing in this provision relieves FedEx or any subcontractor of any
          other obligation under law or contract for the payment of a higher
          wage to any employee.

               (b)  This Agreement provides for the periodic adjustment of wages
          and fringe benefits pursuant to future determination, issued in the
          manner prescribed in Section 351 of the Services Contract Act, no less
          than one every two years during the term of this Agreement, covering
          the various classes of service employees.

          (2)  (a) If this contract succeeds a contract subject to the Service
          Contract Act, under which substantially the same services were
          furnished in the same locality, and service employees were paid wages
          and fringe benefits provided for in a collective bargaining agreement,
          in the absence of a minimum wage attachment for this contract setting
          forth collectively bargained wage rates and fringe benefits, neither
          FedEx nor any subcontractor under this contract may pay any service
          employee performing any of the contract work (regardless of whether or
          not the employee was employed under the predecessor contract), less
          than the wages and fringe benefits provided for in the agreement, to
          which the employee would have been entitled if employed under the
          predecessor contract, including accrued wages and fringe benefits and
          any prospective increases in wages and fringe benefits provided for
          under the agreement.

          (b)  No supplier or subcontractor under this contract may be relieved
          of the foregoing obligation unless the limitations of section 4.1(b)
          of 29 CFR Part 4 apply or unless the Secretary of Labor or an
          authorized representative finds, after a hearing as provided in
          section 4.10 of 29 CFR Part 4, that the wages


                                       35
<PAGE>

          and/or fringe benefits provided for in the agreement vary
          substantially from those prevailing for services of a similar
          character in the locality, or determines, as provided in section 4.11
          of 29 CFR Part 4, that the agreement applicable to service employees
          under the predecessor contract was not entered into as a result of
          arm's-length negotiations.

          (c) If it is found in accordance with the review procedures in 29 CFR
          4.10 and/or 4.11 and Parts 6 and 8 that wages and/or fringe benefits
          in a predecessor supplier's collective bargaining agreement vary
          substantially from those prevailing for services of a similar
          character in the locality, and/or that the agreement applicable to
          service employees under the predecessor contract was not entered into
          as a result of arm's-length negotiations, the Department will issue a
          new or revised wage determination setting forth the applicable wage
          rates and fringe benefits. This determination will be made part of the
          contract or subcontract, in accordance with the decision of the
          Administrator, the Administrative Law Judge, or the Board of Service
          Contract Appeals, as the case may be, irrespective of whether its
          issuance occurs before or after award (53 Comp. Gen. 401 (1973)). In
          the case of a wage determination issued solely as a result of a
          finding of substantial variance, it will be effective as of the date
          of the final administrative decision.

     e.   FedEx and any subcontractor under this contract must notify each
     service employee starting work on the contract of the minimum monetary wage
     and any fringe benefits required to be paid pursuant to the contract, or
     must post the wage determination attached to this contract. The poster
     provided by the Department of Labor (Publication WH 1313) must be posted in
     a prominent and accessible place at the work site. Failure to comply with
     this requirement is a violation of section 2(a)(4) of the Act and of this
     contract. (Approved by the Office of Management and Budget under OMB
     control number 1215-0150.)

     f.   FedEx or subcontractor may not permit services called for by this
     contract to be performed in buildings or surroundings or under working
     conditions provided by or under the control or supervision of FedEx or
     subcontractor that are unsanitary or hazardous or dangerous to the health
     or safety of service employees engaged to furnish these services, and FedEx
     or subcontractor must comply with the safety and health standards applied
     under 29 CFR Part 1925.

     g.   (1) FedEx and each subcontractor performing work subject to the Act
     must maintain for three years from the completion of the work records
     containing the information specified in (a) through (f) following for each
     employee subject to the Service Contract Act and must make them available
     for inspection and transcription by authorized representatives of the Wage
     and Hour Division, Employment Standards Administration of the U.S.
     Department of Labor (approved by the Office of Management and Budget under
     OMB control numbers 1215-0017 and 1215-0150):

          (a)  Name, address, and social security number of each employee.

          (b)  The correct work classification, rate or rates of monetary wages
          paid and fringe benefits provided, rate or rates of fringe benefit
          payments in lieu thereof, and total daily and weekly compensation of
          each employee.


                                       36
<PAGE>

          (c)  The number of daily and weekly hours so worked by each employee.

          (d)  Any deductions, rebates, or refunds from the total daily or
          weekly compensation of each employee.

          (e)  A list of monetary wages and fringe benefits for those classes of
          service employees not included in the wage determination attached to
          this contract but for whom wage rates or fringe benefits have been
          determined by the interested parties or by the Administrator or
          authorized representative pursuant to paragraph b above. A copy of the
          report required by b.2(b) above is such a list.

          (f)  Any list of the predecessor supplier's employees furnished to
          FedEx pursuant to section 4.6(1)(2) of 29 CFR Part 4.

          (2)  FedEx must also make available a copy of this contract for
     inspection or transcription by authorized representatives of the Wage and
     Hour Division.

          (3)  Failure to make and maintain or to make available the records
     specified in this paragraph g for inspection and transcription is a
     violation of the regulations and this contract, and in the case of failure
     to produce these records, the contracting officer, upon direction of the
     Department of Labor and notification of FedEx, must take action to suspend
     any further payment or advance of funds until the violation ceases.

          (4)  FedEx must permit authorized representatives of the Wage and
     Hour Division to conduct interviews with employees at the work site during
     normal working hours.

     h.   FedEx must unconditionally pay to each employee subject to the Service
     Contract Act all wages due free and clear and without subsequent deduction
     (except as otherwise provided by law or regulations, 29 CFR Part 4),
     rebate, or kickback on any account. Payments must be made no later than one
     pay period following the end of the regular pay period in which the wages
     were earned or accrued. A pay period under the Act may not be of any
     duration longer than semimonthly.

     i.   The contracting officer must withhold or cause to be withheld from the
     USPS supplier under this or any other contract with FedEx such sums as an
     appropriate official of the Department of Labor requests or the contracting
     officer decides may be necessary to pay underpaid employees employed by
     FedEx or subcontractor. In the event of failure to pay employees subject to
     the Act wages or fringe benefits due under the Act, the USPS may, after
     authorization or by direction of the Department of Labor and written
     notification to FedEx, suspend any further payment or advance of funds
     until the violations cease. Additionally, any failure to comply with the
     requirements of this clause may be grounds for termination of the right to
     proceed with the contract work. In this event, the USPS may enter into
     other contracts or arrangements for completion of the work, charging FedEx
     in default with any additional cost.

     j.   FedEx agrees to insert this clause in all subcontracts subject to the
     Act. The term "supplier," as used in this clause in any subcontract, is
     deemed to refer to the subcontractor, except in the term "supplier."


                                       37
<PAGE>

     k.   Service employee means any person engaged in the performance of this
     contract other than any person employed in a bona fide executive,
     administrative, or professional capacity, as those terms are defined in
     Part 541 of Title 29, Code of Federal Regulations as of July 30, 1976, and
     any subsequent revision of those regulations. The term includes all such
     persons regardless of any contractual relationship that may be alleged to
     exist between a supplier or subcontractor and them.

     l.   (1)  If wages to be paid or fringe benefits to be furnished service
     employees employed by FedEx or a subcontractor under the contract are
     provided for in a collective bargaining agreement that is or will be
     effective during any period in which the contract is being performed, FedEx
     must report this fact to the contracting officer, together with full
     information as to the application and accrual of these wages and fringe
     benefits, including any prospective increases, to service employees engaged
     in work on the contract, and furnish a copy of the agreement. The report
     must be made upon starting performance of the contract, in the case of
     collective bargaining agreements effective at the time. In the case of
     agreements or provisions or amendments thereof effective at a later time
     during the period of contract performance, they must be reported promptly
     after their negotiation. (Approved by the Office of Management and Budget
     under OMB control number 1215-0150.)

          (2)  Not less than ten days before completion of any contract being
          performed at a Postal facility where service employees may be retained
          in the performance of a succeeding contract and subject to a wage
          determination containing vacation or other benefit provisions based
          upon length of service with a supplier (predecessor) or successor
          (section 4.173 of Regulations, 29 CFR Part 4), the incumbent supplier
          must furnish to the contracting officer a certified list of the names
          of all service employees on FedEx's or subcontractor's payroll during
          the last month of contract performance. The list must also contain
          anniversary dates of employment on the contract, either with the
          current or predecessor suppliers of each such service employee. The
          contracting officer must turn over this list to the successor supplier
          at the commencement of the succeeding contract. (Approved by the
          Office of Management and Budget under OMB control number 1215-0150.)

     m.   Rulings and interpretations of the Service Contract Act of 1965, as
     amended, are contained in Regulations, 29 CFR Part 4.

     n.   (1)  By entering into this contract, FedEx and its officials certify
     that neither they nor any person or firm with a substantial interest in
     FedEx's firm are ineligible to be awarded government contracts by virtue of
     the sanctions imposed pursuant to section 5 of the Act.

          (2)  No part of this contract may be subcontracted to any person or
          firm ineligible for award of a government contract pursuant to section
          5 of the Act.

          (3)  The penalty for making false statements is prescribed in the U.S.
          Criminal Code, 18 U.S.C. 1001.

     o.   Notwithstanding any of the other provisions of this clause, the
     following employees may be employed in accordance with the following
     variations, tolerances,


                                       38
<PAGE>

     and exemptions, which the Secretary of Labor, pursuant to section 4(b) of
     the Act before its amendment by Public Law 92-473, found to be necessary
     and proper in the public interest or to avoid serious impairment of the
     conduct of government business:

          (1)  Apprentices, student-learners, and workers whose earning capacity
          is impaired by age, or physical or mental deficiency or injury may be
          employed at wages lower than the minimum wages otherwise required by
          section 2(a)(1) or 2(b)(1) of the Service Contract Act without
          diminishing any fringe benefits or cash payments in lieu thereof
          required under section 2(a)(2) of the Act, in accordance with the
          conditions and procedures prescribed for the employment of
          apprentices, student-learners, handicapped persons, and handicapped
          clients of sheltered workshops under section 14 of the Fair Labor
          Standards Act of 1938, in the regulations issued by the Administrator
          (29 CFR Parts 520, 521, 524, and 525).

          (2)  The Administrator will issue certificates under the Service
          Contract Act for the employment of apprentices, student-learners,
          handicapped persons, or handicapped clients of sheltered workshops not
          subject to the Fair Labor Standards Act of 1938, or subject to
          different minimum rates of pay under the two Acts, authorizing
          appropriate rates of minimum wages (but without changing requirements
          concerning fringe benefits or supplementary cash payments in lieu
          thereof), applying procedures prescribed by the applicable regulations
          issued under the Fair Labor Standards Act of 1938 (29 CFR Parts 520,
          521, 524, and 525).

          (3)  The Administrator will also withdraw, annul, or cancel such
          certificates in accordance with the regulations in Parts 525 and 528
          of Title 29 of the Code of Federal Regulations.

     p.   Apprentices will be permitted to work at less than the predetermined
     rate for the work they perform when they are employed and individually
     registered in a bona fide apprenticeship program registered with a State
     Apprenticeship Agency recognized by the U.S. Department of Labor, or if no
     such recognized agency exists in a state, under a program registered with
     the Bureau of Apprenticeship and Training, Employment and Training
     Administration, U.S. Department of Labor. Any employee not registered as an
     apprentice in an approved program must be paid the wage rate and fringe
     benefits contained in the applicable wage determination for the journeyman
     classification of work actually performed. The wage rates paid apprentices
     may not be less than the wage rate for their level of progress set forth in
     the registered program, expressed as the appropriate percentage of the
     journeyman's rate contained in the applicable wage determination. The
     allowable ratio of apprentices to journeymen employed on the contract work
     in any craft classification may not be greater than the ratio permitted to
     FedEx for its entire workforce under the registered program.

     q.   An employee engaged in an occupation in which he or she customarily
     and regularly receives more than $30 a month tips may have the amount of
     tips credited by the employer against the minimum wage required by section
     2(a)(1) or section 2(b)(1) of the Act in accordance with section 3(m) of
     the Fair Labor Standards Act and Regulations, 29 CFR Part 531. However, the
     amount of this credit may not exceed


                                       39
<PAGE>

     $1.24 per hour beginning January 1, 1980, and $1.34 per hour after December
     31, 1980. To utilize this proviso:

          (1)  The employer must inform tipped employees about this tip credit
          allowance before the credit is utilized;

          (2)  The employees must be allowed to retain all tips (individually or
          through a pooling arrangement and regardless of whether the employer
          elects to take a credit for tips received);

          (3)  The employer must be able to show by records that the employee
          receives at least the applicable Service Contract Act minimum wage
          through the combination of direct wages and tip credit (approved by
          the Office of Management and Budget under OMB control number
          1214-0017); and

          (4)  The use of tip credit must have been permitted under any
          predecessor collective bargaining agreement applicable by virtue of
          section 4(c) of the Act.

     r.   Disputes arising out of the labor standards provisions of this
     contract are not subject to the Claims and Disputes clause but must be
     resolved in accordance with the procedures of the Department of Labor set
     forth in 29 CFR Parts 4, 6, and 8. Disputes within the meaning of this
     clause include disputes between FedEx (or any of its subcontractors) and
     the USPS, the U.S. Department of Labor, or the employees or their
     representatives.


CLAUSE 9-12    FAIR LABOR STANDARDS ACT AND SERVICE CONTRACT ACT - PRICE
ADJUSTMENT

     a.   FedEx warrants that the contract prices do not include allowance for
     any contingency to cover increased costs for which adjustment is provided
     under this clause.

     b.   The minimum prevailing wage determination, including fringe benefits,
     issued under the Service Contract Act of 1965 by the Department of Labor,
     current at the beginning of each renewal period, applies to any renewal of
     this contract. When no such determination has been made as applied to this
     contract, the minimum wage established in accordance with the Service
     Contract Act clause applies to any renewal of this contract.

     c.   When, as a result of the determination of minimum prevailing wages and
     fringe benefits applicable at the beginning of the renewal option period,
     or when an increased or decreased wage determination is otherwise applied
     to this contract, or when as a result of any amendment to the Fair Labor
     Standards Act enacted after award that affects minimum wage, and whenever
     such a determination becomes applicable to this contract under law, FedEx
     increases or decreases wages or fringe benefits of employees working on the
     contract to comply, the contract price or unit price labor rates will be
     adjusted accordingly. This adjustment is limited to increases or decreases
     in wages or fringe benefits, and the concomitant increases or decreases in
     Social Security, unemployment taxes, and workers' compensation insurance,
     but may


                                       40
<PAGE>

     not otherwise include any amount for general and administrative costs,
     overhead, or profit.

     d.   FedEx must notify the contracting officer of any increases claimed
     under this clause within 30 days after the effective date of the wage
     change, unless the contracting officer extends this period in writing. In
     the case of any decrease under this clause, FedEx must promptly notify the
     contracting officer of the decrease, but nothing herein precludes the USPS
     from asserting a claim within the period permitted by law. The notice must
     state the amount claimed and give any relevant supporting data that the
     contracting officer may reasonably require. Upon agreement of the parties,
     the contract price or unit price labor rates will be modified in writing.
     Pending agreement on or determination of any such adjustment and its
     effective date, FedEx must continue performance.

     e.   The contracting officer or the contracting officer's authorized
     representative must, for three years after final payment under the
     contract, be given access to and the right to examine any directly
     pertinent books, papers, and records of FedEx.

CLAUSE 9-13    AFFIRMATIVE ACTION FOR HANDICAPPED WORKERS

     a.   FedEx may not discriminate against any employee or applicant because
     of physical or mental handicap, in regard to any position for which the
     employee or applicant is qualified. FedEx agrees to take affirmative action
     to employee, advance in employment, and otherwise treat qualified
     handicapped individuals without discrimination in all employment practices,
     such as employment, upgrading, demotion or transfer, recruitment,
     advertising, layoff or termination, rates of pay or other forms of
     compensation, and selection for training (including apprenticeship).

     b.   FedEx agrees to comply with the rules, regulations, and relevant
     orders of the Secretary of Labor issued pursuant to the Rehabilitation Act
     of 1973, as amended.

     c.   In the event of FedEx's non-compliance with this clause, action may be
     taken in accordance with the rules and regulations and relevant orders of
     the Secretary of Labor.

     d.   FedEx agrees to post in conspicuous places, available to employees and
     applicants, notices in a form to be prescribed by the Director, Office of
     Federal Contract Compliance Programs, provided by or through the
     contracting officer. These notices state FedEx's obligation under the law
     to take affirmative action to employ and advance in employment qualified
     handicapped employees and applicants, and the rights of applicants and
     employees.

     e.   FedEx must notify each union or worker's representative with which it
     has a collective bargaining agreement or other understanding that FedEx is
     bound by the terms of section 503 of the Act and is committed to taking
     affirmative action to employ, and advance in employment, handicapped
     individuals.


                                       41
<PAGE>

     f.   FedEx must include this clause in every subcontract or purchase order
          over $2,500 under this contract unless exempted by rules, regulations,
          or orders of the Secretary issued pursuant to section 503 of the Act,
          so its provisions will be binding upon each subcontractor or vendor.
          FedEx must take such action with respect to any subcontract or
          purchase order as the Director of the Office of Federal Contract
          Compliance Programs may direct to enforce these provisions, including
          action for non-compliance.

CLAUSE 9-14    AFFIRMATIVE ACTION FOR DISABLED VETERANS AND VETERANS OF THE
VIETNAM ERA

     a.   FedEx may not discriminate against any employee or applicant because
          that employee or applicant is a disabled veteran or veteran of the
          Vietnam era, in regard to any position for which the employee or
          applicant is qualified. FedEx agrees to take affirmative action to
          employ, advance in employment, and otherwise treat qualified disabled
          veterans and veterans of the Vietnam era without discrimination in all
          employment practices, such as employment, upgrading, demotion or
          transfer, recruitment, advertising, layoff or termination, rates of
          pay or other forms of compensation, and selection for training
          (including apprenticeship).

     b.   FedEx agrees to list all employment openings which exist at the time
          of the execution of this contract and those which occur during the
          performance of this contract, including those not generated by this
          contract and including those occurring at an establishment of FedEx
          other than the one where the contract is being performed, but
          excluding those of independently operated corporate affiliates, at an
          appropriate local office of the state employment service where the
          opening occurs. State and local government agencies holding USPS
          contracts of $10,000 or more will also list their openings with the
          appropriate office of the state employment service.

     c.   Listing of employment openings with the employment service system will
          be made at least concurrently with the use of any recruitment source
          or effort and will involve the normal obligations attaching to the
          placing of a bona fide job order, including the acceptance of
          referrals of veterans and nonveterans. The listing of employment
          openings does not require the hiring of any particular applicant or
          hiring from any particular group of applicants, and nothing herein is
          intended to relieve FedEx from any other requirements regarding
          non-discrimination in employment.

     d.   Whenever FedEx becomes contractually bound to the listing provisions
          of this clause, it must advise the employment service system in each
          state where it has establishments of the name and location of each
          hiring location in the state. FedEx may advise the state system when
          it is no longer bound by this clause.

     e.   Paragraphs b, c, and d above do not apply to openings FedEx proposes
          to fill from within its own organization or under a customary and
          traditional employer/union hiring arrangement. But this exclusion does
          not apply to a particular opening once FedEx decides to consider
          applicants outside its own organization or employer/union arrangements
          for that opening.


                                       42
<PAGE>

     f.   Definitions

(1)  ALL EMPLOYMENT OPENINGS. This includes all positions except executive and
     top management, those positions that will be filled from within FedEx's
     organization, and positions lasting three days or less. This also includes
     full-time employment, temporary employment of more than three days
     duration, and part-time employment. Under the most compelling
     circumstances, an employment opening may not be suitable for listing,
     including situations in which the needs of the USPS cannot reasonably be
     otherwise supplied, when listing would be contrary to national security, or
     when listing would not be in the best interest of the USPS.

(2)  APPROPRIATE OFFICE OF THE STATE EMPLOYMENT SERVICE. This means the local
     office of the federal/state national system of public employment offices
     with assigned responsibility for serving the area where the employment
     opening is to be filled, including the District of Columbia, Guam, the
     Commonwealth of Puerto Rico, and the Virgin Islands.

(3)  POSITIONS THAT WILL BE FILLED FROM WITHIN FEDEX'S OWN ORGANIZATION. This
     means employment openings for which no consideration will be given to
     persons outside FedEx's organization (including any affiliates,
     subsidiaries and parent companies) and includes any openings which FedEx
     proposes to fill from regularly established recall lists.

(4)  OPENINGS FEDEX PROPOSES TO FILL UNDER A CUSTOMARY AND TRADITIONAL
     EMPLOYER/UNION HIRING ARRANGEMENT. Employment openings FedEx proposes to
     fill from union halls as part of the customary and traditional hiring
     relationship existing between it and representatives of its employees.

     g.   FedEx agrees to comply with the rules, regulations, and relevant
          orders of the Secretary of Labor issued pursuant to the Vietnam Era
          Veterans Readjustment Assistance Act of 1972, as amended.

     h.   In the event of FedEx's non-compliance with this clause, action may be
          taken in accordance with the rules, regulations, and relevant orders
          of the Secretary.

     i.   FedEx agrees to post in conspicuous places, available to employees and
          applicants, notices in a form to be prescribed by the Director, Office
          of Federal Contract Compliance Programs, provided by or through the
          contracting officer. These notices state FedEx's obligation under the
          law to take affirmative action to employ and advance in employment
          qualified disabled veterans and veterans of the Vietnam era, and the
          rights of applicants and employees.

     j.   FedEx must notify each union or workers' representative with which it
          has a collective bargaining agreement or other understanding that
          FedEx is bound by the terms of the Act and is committed to taking
          affirmative action to employ, and advance in employment, qualified
          disabled veterans and veterans of the Vietnam era.


                                       43
<PAGE>

     k.   FedEx must include this clause in every subcontract or purchase order
          of $10,000 or more under this contract unless exempted by rules,
          regulations, or orders of the Secretary issued pursuant to the Act, so
          its provisions will be binding upon each subcontractor or vendor.
          FedEx must take such action with respect to any subcontract or
          purchase order as the Director of the Office of Federal Contract
          Compliance Programs may direct to enforce these provisions, including
          action for non-compliance.

                                   ARTICLE 20

                                 APPLICABLE LAW

20.1 This Agreement is made and shall be construed and interpreted in accordance
     with the federal law.

                                   ARTICLE 21

                                ENTIRE AGREEMENT

This Agreement, together with all Schedules Exhibits and Attachments, constitute
the entire agreement and understanding between the Parties in connection with
the subject matter described, and supersede and cancel all previous
negotiations, commitments and writings related to the subject matter.

                                   ARTICLE 22

                           AMENDMENTS OR MODIFICATIONS

In order to be binding upon USPS or FedEx any amendment, extension or renewal of
this Agreement must be in writing signed by the contracting officer on behalf of
USPS and an officer of FedEx authorized to bind the company.

                                   ARTICLE 23

                                   ASSIGNMENT

Neither Party shall, directly or indirectly (whether by succession, merger, or
otherwise) assign, delegate or otherwise transfer this Agreement or any of its
rights or obligations hereunder, without the prior written approval of the
other, (provided that FedEx may assign this Agreement to any of its Affiliates
without first obtaining such consent.

                                   ARTICLE 24

                                WAIVER OF BREACH

No waiver of breach of any of the provisions of this Agreement shall be
construed to be a waiver of any succeeding breach of the same or any other
provision.


                                       44
<PAGE>

                                   ARTICLE 25

                                     NOTICES

Any notice, report, demand, acknowledgement or other communication which under
the terms of this Agreement or otherwise must be given or made by either Party,
unless specifically otherwise provided in this Agreement, shall be in the
English language and in writing, and shall be given or made by express delivery
service with proof of delivery, certified air mail (return receipt requested),
telex or facsimile with acknowledgement of receipt/proof of receipt, or personal
delivery, addressed to the respective parties as follows, or as the Parties may
otherwise notify to each other:

To USPS :

United States Postal Service

475 L'Enfant Plaza S.W. Room 4900

Washington, D.C. 20260-6210

Attention: Manager, National Mail Transportation Purchasing

To FedEx:

Federal Express Corporation

3610 Hacks Cross Road, Building A

Memphis, Tennessee 38125

Attention: Senior Vice President Central Support Services Department

With a copy to :

Federal Express Corporation

3620 Hacks Cross Road, Building B

Memphis, Tennessee 38125

Attention: Senior Vice President and General Counsel

Such notice, report, demand, acknowledgement or other communication shall be
deemed to have been given or made in the case of express delivery service with
tracking and tracing capability on the date of signature of the proof of
delivery, in the case of certified mail on the fifth business day in the place
of receipt after the date sent, in the case of telex and facsimile on the date
of the acknowledgement of receipt/proof of receipt and in the case of personal
delivery upon receipt evidencing such delivery.


                                       45
<PAGE>

                                   ARTICLE 26

                                  REPRESENTIVES

26.1 The Contracting Officer is the person executing this Agreement on behalf of
     USPS. The Contracting Officer will appoint a Contracting Officer
     Representative ("COR") responsible for day-to-day administration of this
     Agreement. The COR will serve as the USPS contact for all routine matters.
     A copy of a notice of appointment defining such COR's authority will be
     furnished to FedEx.

26.2 This Agreement and all amendments hereto will not be valid and binding on
     FedEx unless executed by an authorized officer of FedEx.

                                   ARTICLE 27

                                  SEVERABILITY

27.1 If any term, provision, covenant or condition of this Agreement is held by
     a court or Board of competent jurisdiction or by a request, direction or
     indication of an agency or department of a Governmental Body having subject
     matter jurisdiction to be invalid or unenforceable, the remainder of the
     provisions shall continue in full force and effect unless the rights and
     obligations of the parties have been materially altered or abridged by such
     invalidation or unenforceability.

27.2 If a material provision of this Agreement is materially altered or abridged
     as the result of an order, request, or direction of a Governmental Body
     having subject matter jurisdiction, then USPS and FedEx will meet to
     negotiate in good faith to reach a mutually satisfactory modification to
     this Agreement. If the Parties are unable to reach a mutually satisfactory
     resolution, then either Party may declare the negotiations to be at an
     impasse and may terminate this Agreement upon [*] month's prior written
     notice, without the payment of a penalty or termination fee of any nature.

27.3 Notwithstanding the foregoing, the Parties agree to make their best efforts
     to oppose any changes requested by a Governmental Body to any material
     provision of this Agreement.


                                   ARTICLE 28

                           ORDER OF PRECEDENCE CLAUSE

     Any inconsistency in the provisions of this agreement will be resolved by
giving precedence in the following order:

a.   Clauses of the Agreement.

b.   Provisions contained in attachments or incorporated by reference (other
     than the Operational Specifications).

c.   The Operations Specifications.


                                       46
<PAGE>

d.   The Operating Plan.

e.   The Local Plan.


                                       47
<PAGE>

IN WITNESS WHEREOF, the Parties have signed this Agreement in duplicate, one for
each of the parties, as of January 10, 2001.

                                   UNITED STATES POSTAL SERVICE

                                   By: /s/ J. Dwight Young
                                       -----------------------------------
                                        J. Dwight Young

                                   Title: Manager, National Mail Transportation
                                          Purchasing



                                   FEDERAL EXPRESS CORPORATION

                                   By: /s/ Leonard B. Feiler
                                       -----------------------------------
                                        Leonard B. Feiler

                                   Title: Senior Vice President Central Support
                                          Services


                                       48
<PAGE>

                                                                  EXECUTION COPY




                                    EXHIBIT A



                         USPS OPERATIONAL SPECIFICATION




<PAGE>

Table of Contents
<TABLE>
<CAPTION>
Section  Title                                                           Page
<S>                                                                       <C>
1.0  Introduction...........................................................3
2.0  Definitions............................................................5
3.0  Forecasting Volume.....................................................5
4.0  Linehaul Planning......................................................7
5.0  Market Outbound Operating Plan - Day-turn..............................8
5.1  USPS Operational Requirements..........................................8
5.2  FedEx Operational Requirements........................................11
6.0  Market Inbound Operating Plan - Day-turn..............................12
6.1  FedEx Operational Requirements........................................13
6.2  USPS Operational Requirements.........................................13
7.0  FedEx Hub Requirements - Day-turn.....................................13
8.0  Market Outbound Operating Plan - Night-turn...........................14
9.0  Market Inbound Operating Plan - Night-turn............................15
10.0 FedEx Operational Requirements - Night-turn...........................15
11.0 USPS Revenue Reconciliation Process...................................15
12.0 USPS/FedEx Revenue IT Schedule........................................17
13.0 Recourse Issues.......................................................17
14.0 Data Retention........................................................18
15.0 Shutdown procedures...................................................18
16.0 Start-up requirements and timeline....................................18

Attachments................................................................19
  I - USPS Operating Plan - Day Product
 II - USPS Operating Plan - Night Product
III - Airworthiness Determination
 IV - Unacceptable Packages
</TABLE>


<PAGE>

1.0.0    INTRODUCTION

1.1.0    This document details the operational specifics between Federal Express
         Corporation ("FedEx") and the United States Postal Service ("USPS") to
         transport ULDs and packages within the FedEx network. This document is
         to be attached as an exhibit to the Transportation Agreement dated as
         of January 10, 2001 (the "Agreement") between FedEx and USPS. The
         Contracting Officer and the Contracting Officer's Representative, as
         from time to time designated by USPS, are the only USPS individuals
         authorized to approve contractual changes on behalf of USPS.

2.0.0    DEFINITIONS

         Except as otherwise defined herein, capitalized terms shall have the
         meanings set forth in the Agreement.

3.0.0    FORECASTING VOLUME

3.1.0    Schedule Periods - FedEx will, by December 1 of each year, provide to
         USPS the Schedule Periods to be in effect for the twelve month period
         commencing June 1 of the following year. The notification listing the
         Schedule Periods will include the start and finish dates for each
         Schedule Period, and will specify the groupings of Schedule Periods
         that will constitute the individual Schedule Blocks.

3.2.0    Forecast Structure -USPS will provide the forecasts described in
         Sections 3.4.0 and 3.5.0 at the times specified in Sections 3.3.0.
         Each such forecast shall list each origin market and destination
         market lane (each a "Market Lane") for night-turn movements and
         separate forecasts for day-turn movements. The forecasts will also
         include an estimate of the number of Handling Units (excluding ULDs)
         and the total Volume for each Market Lane.

3.3.0    Not later than 148 calendar days prior to each Schedule Block
         Implementation Date, USPS will deliver to FedEx the Schedule Period
         Total Air Forecast and the Schedule Period Request Forecast, each as
         more fully described below. If USPS does not make the Schedule Period
         Request Forecast available on a timely basis, the forecast for that
         period shall be deemed to be equal to previous year's forecast for the
         related periods plus the growth factor for the Day-turn and Night-turn
         product specified in Article 11 of the Agreement.

3.4.0    The Schedule Period Total Air Forecast will be provided by USPS to
         FedEx for the median day (by Volume) of the Schedule Period. USPS will
         provide daily forecasts for any higher volume days where the expected
         volume flows will be abnormally high caused by known events. The
         purpose of the Schedule Period Total Air Forecast is to provide the
         parties with information that will be useful in identifying future
         opportunities and in making adjustments to the requested Volumes.

3.5.0    [*]

3.6.0    [*]

3.7.0    [*]

3.8.0    [*]

<PAGE>


3.9.0    HOLIDAY PLANNING

3.9.1 FedEx US domestic operations are discontinued for the following days
      ("FedEx Holidays"):

      .        New Years Day
      .        Memorial Day
      .        Fourth of July
      .        Labor Day
      .        Thanksgiving
      .        Christmas

3.9.2 No Day-Turn or Night-turn products will be Tendered by USPS to FedEx the
      day of the FedEx holiday.

4.0.0 LINEHAUL REQUIREMENTS

4.1.0 Actual ULD weights cannot exceed the Maximum Allowable Weight as
      provided in Table A below. The Maximum Allowable Weights are inclusive
      of the tare weight of the ULD. ULDs weighing more than the Maximum
      Allowable Weight may be unloaded by FedEx to comply with the
      structural limitations of the aircraft. Any Handling Units that are
      unloaded for this purpose will be transported in mixed containers and
      will be handled and billed as Handling Units (other than ULDs) in the
      same manner as bulk packages. The average USPS density outbound from
      any market can not exceed the structural limits of the aircraft. If
      ULDs must be unloaded or removed in order to comply with the
      structural limitations of the aircraft and if the ULDs tendered by
      USPS are not in excess of the Maximum Allowable Weights, FedEx will
      not adversely discriminate against USPS in the unloading or removal of
      ULDs from the aircraft. In no event will any Handling Unit, as a
      result of this transload, be billed two handling charges.

                                     TABLE A
                            MAXIMUM ALLOWABLE WEIGHTS
<TABLE>
<CAPTION>
                                   Cubic Foot
                                   Capacity     Approximate        Maximum
                                   (Used for    TareWeight       Weight (lbs)
          ULD        IATA Code      Billing)       (lbs)       Including Tare
    ---------------  ---------    ----------    -----------    --------------
    <S>              <C>          <C>           <C>            <C>
     Full Contour       SAA          427            575             4890
     Full Contour       SAX          418            713             4890
       Hazardous
         Demi           AYY          202            301             2415
    Demi Hazardous      AYX          202            294             2415
         LD-3           AVE          153            182             3500
         LD-3           AKE          153            215             3500
          M-3           AAM          565            755             6950
          AMJ           AMJ          590            767             6950
    QC-11 Hazardous     AWX          265            518
</TABLE>

<PAGE>

4.2.0 LONG RANGE PLANNING.

         An Annual Total Air Forecast will be provided by USPS to FedEx by
         December 1 for the following June through May period. This forecast
         will identify the anticipated total air forecast for each day and will
         be used as the basis for fiscal year capacity planning.

5.0.0    MARKET OUTBOUND OPERATING PLAN - DAY-TURN

5.0.1    Section 5 is applicable to all Outbound Market Volume for the USPS
         Day-turn product. Attached as Attachment I is the Day-Turn Operating
         Plan. This plan details, in tabular form, the operating plan for the
         Day-Turn operations and designates whether the AMC must load volume in
         ULDs or tender the volume loose to FedEx. This plan lists the various
         USPS origin plants and the AMC location that is served by these plants.
         The Day-Turn Operating Plan lists the total cubic feet that will be
         processed from each location and provides a Process Code that describes
         the methods of and time periods for the pickup and delivery from and to
         each AMC. In addition to the Day-Turn Operating Plan, not later than 40
         days prior to the Service Commencement Date, the local USPS and FedEx
         management for each market will develop a Local Plan. These Local Plans
         will address matters of local interest and applicability such as (i)
         local operating procedures at each facility, (ii) contact information
         for key representatives of each party, (iii) the required times for
         FedEx personnel to stage the outbound equipment that FedEx has agreed
         to provide to USPS, (iv) staffing of each party in support of the
         services to be provided by FedEx and (v) other procedures unique to the
         local operations. The Local Plans may not change the Minimum Guaranteed
         Volume, Latest Tender Times, Earliest Mail Delivery Times or the
         Process Codes specified in the Day-Turn or Night-turn Operating Plan.
         Any such matters that may be addressed in the Local Plans that are
         inconsistent with the terms of the Agreement, these Operating
         Specifications or the Day-Turn Operating Plan will be null and void and
         without legal effect.

5.1.0    USPS OPERATIONAL REQUIREMENTS

5.1.1    AMCs that are  designated  to load ULDs may not tender  volume to
         FedEx other than in ULDs. Each AMC is limited to one demi container or
         LD3 container that will be designated as a Partial ULD and will have no
         D&R Tag affixed thereon. FedEx may refuse all additional Partial ULDs
         or loose Handling Units. All ULDs must be Airworthy as determined in
         accordance with Attachment IV to these Operating Specifications. All
         ULDs which have a D&R Tag affixed thereon will be treated as full and
         will be placed on the aircraft at the Origin Ramp without any sorting
         by FedEx. All ULDs which do not have a D&R Tag affixed thereon will be
         treated as partial ULDs and the contents thereof will be scanned and
         placed in other FedEx ULDs at the origin ramp. The D&R Tags for the
         Handling Units in these Partial ULDs will be scanned and equivalent
         cubic footage will be calculated in accordance with Exhibit B to the
         Agreement and standard cubic footage pricing will apply. Not more than
         one Partial ULD will be allowed at each origin location.

5.1.2    USPS will tender to FedEx all ULDs, APC or bulk trucks in accordance
         with the process described in the Day-Turn Operating Plan.

<PAGE>

5.1.3    USPS will not tender (and FedEx will not accept) any Dangerous Goods or
         Hazardous Materials, either accessible or inaccessible or any
         Unacceptable Packages.

5.1.4    USPS will reload all ULDs, identified at USPS locations by the
         receiving FedEx employee, as not Airworthy.

5.1.5    USPS will notify the local FedEx operation, in the manner described in
         the Local Plan, no later than 2 hours prior to the Latest Tender Time
         specified for such location in the Day-Turn Operating Plan of any ULDs
         that are not Airworthy. FedEx will replace these ULDs no later than 60
         minutes prior to the Latest Tender Time specified for such location in
         the Operating Plan.

5.1.6    All Handling Units must have a D&R Tag affixed thereon that satisfies
         the Scanning Specifications attached hereto as Attachment V, has a
         human readable URSA code on it and which is applied in a manner and
         orientation that allows the bar code to be scanned following procedures
         used by FedEx for all other customer packages. As of the Services
         Commencement Date at least 50% of all Mail Bags will be in compliance
         with the requirements of this Section and an additional 10% of the Mail
         Bags will become compliant each month thereafter so that within six
         months following the Services Commencement Date all Mail Bags are in
         compliance with the requirements of the this Section.

5.1.7    USPS will consolidate all originating volume at the local AMC as
         described in the Day-Turn Operating Plan.

5.1.8    USPS will tender all outbound Volume not earlier than the Earliest
         Tender Time and not later than the Latest Tender Time as described in
         the Day-Turn Operating Plan. For the locations identified with an
         asterisk in the Day-turn Operating Plan, no later than 90 days
         following the execution of the Agreement, the Sword Committee will
         review the Latest Tender Time with an objective of allowing a later
         Latest Tender Time subject to FedEx's operational constraints.

5.1.9    Local USPS AMC management will obtain and provide to FedEx all
         necessary badges and accessibility credentials for the appropriate
         FedEx employees. All FedEx employees shall be deemed to meet required
         criteria for such credentials if they possess a valid FedEx ID.

5.1.10   USPS shall provide a sufficient number of employees to assist the FedEx
         employee in onloading the outbound CTVs and dollies. Proper onloading
         will be the responsibility of the FedEx employee.

5.1.11   USPS will seal all necessary vehicles and will process and will be
         responsible for all USPS outbound paperwork necessary to dispatch the
         FedEx vehicle.

5.1.12   A minimum of [*]% of all tendered ULDs must be By-pass ULDs on a system
         aggregate basis each day. USPS will put bypass tape approved by FedEx
         on all Bypass ULDs.


<PAGE>

5.1.13   If USPS engages a third party ground handling entity to perform any of
         its obligations hereunder, USPS will have the responsibility to ensure
         that the third party entity performs the obligations of USPS. USPS will
         remain primarily responsible hereunder notwithstanding the engagement
         of any such third party.

5.1.14   USPS will secure the necessary slave pallets, ball deck, caster deck,
         Port-A-Rail devices or other facility modifications necessary to load
         the FedEx CTVs or dollies. FedEx will not accept ULDs if proper
         container handling equipment is not available at the location.

5.1.15   USPS will not utilize forklifts or pallet jacks without slave pallets
         in the movement or positioning of any FedEx ULDs at any time. USPS AMC
         management will notify local FedEx management of any incidents and
         reimburse FedEx for any ULD repairs at the rates and in the manner
         specified in the Exhibits B and C to the Agreement.

5.1.16   All origin AMC locations will be allowed to tender one partial ULD to
         the local FedEx Ramp. In addition, the parties will agree upon an
         origin trucking location table that identifies trucking locations that
         cannot build ULDs. These trucking locations will be allowed to provide
         bulk truck loose pieces directly to the Memphis FedEx facility. All
         bulk truck loose pieces delivered to the Memphis FedEx facility will be
         scanned at the Memphis FedEx facility. If the origin of the individual
         D&R Tags matches an origin in the trucking location table, the weight
         from the Trans Log file will be accumulated by origin location for the
         Shipping Day. Cubic footage will be calculated in the manner set forth
         in Exhibit B from the accumulated trucking origin location and cubic
         foot pricing will apply.

5.1.17   In order to provide FedEx sufficient space in which to unload the
         trucks, not more than 50% capacity of any truck will be loaded with
         APCs. APCs must be loaded in the nose of the truck. The remaining
         capacity of the truck can be loaded with Gaylords or loose Handling
         Units up to a maximum of 90% of the capacity of the truck.

5.1.18   USPS will make two distinct splits based on the destination of Handling
         Units loaded into non By-pass ULDs. FedEx and USPS will develop a list
         of the destinations for each split for each Schedule Period within the
         Schedule Period Operations Schedule. USPS may mix the two splits into
         no more than one ULD at each origin solely to prevent this split from
         creating additional partial ULDs.

5.2.0    FEDEX OPERATIONAL REQUIREMENTS

5.2.1    FedEx will position or stage all necessary outbound equipment at least
         four (4) hours prior to the Latest Tender Time unless otherwise agreed
         in the Local Plan.

5.2.2    FedEx will stage only Airworthy ULDs at the local AMC.

5.2.3    At the time of acceptance of tender from USPS FedEx will inspect all
         ULDs to ensure the ULDs are Airworthy. The acceptance of the ULDs by
         FedEx will be deemed to be


<PAGE>

         an agreement on the part of FedEx that the ULD is Airworthy at the time
         of its acceptance.

5.2.4    FedEx employees will perform one Possession Scan of the D&R Tag on all
         the Outbound Market Volume Handling Units. FedEx will not break-down
         tendered ULDs that have a D&R Tag affixed thereon. These ULDs will be
         loaded into the aircraft and will be transported to the Hub facility
         for processing.

5.2.5    FedEx will process the contents of all bulk trucks as identified in the
         Day-Turn Operating Plan at the Origin location.

5.2.6    FedEx will pick up all Market Outbound Volume from the AMC by the
         Latest Tender Time as required pursuant to the Day-Turn Operating Plan.
         For the locations identified with an asterisk in the Day-turn
         Operating Plan, no later than 90 days following the execution of the
         Agreement, the Sword Committee will review the Latest Tender Time with
         an objective of allowing a later Latest Tender Time subject to FedEx's
         operational constraints.

5.2.7    Local FedEx management will obtain and provide to USPS all necessary
         badges and accessibility credentials for the appropriate USPS
         employees. All USPS employees shall be deemed to meet required criteria
         for such credentials if they possess a valid USPS ID.

5.2.8    FedEx will on a local basis make commercially reasonable efforts to
         provide information to local USPS management concerning the arrival of
         third party carriers picking up or delivering volume to FedEx on behalf
         of USPS.

5.2.9    Upon notification from USPS in the manner described in the Local Plan,
         no later than 2 hours prior to the Latest Tender Time specified for
         such location in the Day-Turn Operating Plan of any ULDs that are not
         Airworthy, FedEx will replace these ULDs no later than 60 minutes prior
         to the Latest Tender Time specified for such location in the Operating
         Plan.

5.2.10   FedEx will not transport or process the separated contents of opened
         tubs, mail trays or mail bags that are discovered at any point in the
         performance of the FedEx Services. These separated contents will be
         tendered to the location specified in the Local Plan for reprocessing
         by USPS no later than two hours after the scheduled departure time of
         the Aircraft.

6.0.0    MARKET INBOUND OPERATING PLAN - DAY-TURN

6.0.1    Section 6 is applicable to all Inbound Market Volume for the USPS
         Day-turn products.

6.1.0    FEDEX OPERATIONAL REQUIREMENTS.

6.1.1    FedEx will tender to USPS all Inbound Market Volume not earlier than
         the Earliest Delivery Time (unless otherwise mutually agreed) and not
         later than the Market Service Commitment Time.

<PAGE>

6.1.2    [*]

6.1.3    In the case of late arriving aircraft, FedEx will dispatch fully loaded
         CTVs and dollies as soon as they are available to the AMC if the AMC is
         located at the airport.

6.1.4    Upon arrival at the location required by the Day-Turn Operating Plan,
         FedEx will complete a Delivery Scan on all inbound Handling Units.

6.1.5    FedEx employees will assist in off-loading any CTVs and dollies at the
         AMC.

6.2.0    USPS OPERATIONAL REQUIREMENTS

6.2.1    [*]

6.2.2    USPS will inspect all ULDs for Airworthiness when tendered by FedEx.
         The acceptance of the ULDs by USPS will be deemed to be an agreement on
         the part of USPS that a ULD is Airworthy at the time of its acceptance.

7.0.0    FEDEX HUB REQUIREMENTS - DAY-TURN

7.1.0    FedEx Day-turn Hubs will sort a maximum of 75% of the total USPS
         Volume. FedEx will setup the sort operations to accommodate a minimum
         of 138 ADC splits in the first year of the contract. Upon the written
         request of USPS, up to seven additional splits may be added on each
         anniversary date of the Service Commencement Date for the ensuing year.

7.2.0    FedEx Hubs will CONS scan all sorted Handling Units as they are loaded
         into a ULD.

7.3.0    FedEx will not transport or process the separated contents of opened
         tubs, mail trays or mail bags that are discovered at any point in the
         performance of the FedEx Services. These separated contents will be
         tendered to the location specified in the Local Plan for reprocessing
         by USPS no later than two hours after the scheduled departure time of
         the aircraft.

7.4.0    On a Schedule Period basis, at the request of USPS, FedEx's Memphis
         Hub will tender to USPS all destinating volume to AMCs that are
         designated as trucking destinations from the Memphis AMC for USPS to
         provide transportation.

7.5.0    FedEx Hubs will consolidate and tender all unlabeled volume that can be
         identified as USPS volume and USPS missorts to the location specified
         by the Local Plan by 1700 local time.

7.6.0    FedEx Hubs will scan all By-pass ULD with a Hub Scan.

8.0.0    MARKET OUTBOUND OPERATING PLAN - NIGHT-TURN

8.0.1    Section 8 is applicable to all Outbound Market Volume for the Night-
         turn Operations. Attached as Attachment II is the Night-Turn Operating
         Plan. This plan details, in


<PAGE>

         tabular form, the operating plan for the Night-Turn operations. This
         plan lists the various USPS origin plants and the AMC locations that
         are served by these plants. The Night-Turn Operating Plan lists the
         total weight that will be processed from each location and provides a
         Process Code that describes the methods of and time periods for the
         tender and acceptance from and to each AMC and ADC. The local
         management for FedEx and USPS will enter into a Local Plan concerning
         the local operations that will address the matters and be subject to
         the limitations set forth in Section 5.0.0.

8.1.0    USPS OPERATIONAL REQUIREMENTS

8.1.1    The maximum number of Handling Units (excluding ULDs) accepted by FedEx
         at each location for the Night-turn will be [*]the number of Handling
         Units (excluding ULDs) for the Schedule Period in the Committed Volume
         Schedule. FedEx may refuse additional Handling Units above this level
         at its sole discretion.

8.1.2    USPS will deliver all outbound USPS Night volume to the local FedEx
         location as designated in the Night Turn Operating Plan.

8.1.3    All USPS night volume including the By-pass ULD will be tendered with a
         D&R Tag affixed that satisfies the Scanning Specifications attached
         hereto as Attachment VI, has a human readable URSA code on it and which
         is applied in a manner and orientation that allows the bar code to be
         scanned following procedures used by FedEx for all other customer
         packages. As of the Services Commencement Date at least 50% of all
         Mail Bags will be in compliance with the requirements of this Section
         and an additional 10% of the Mail Bags will become compliant each month
         thereafter so that within six months following the Services
         Commencement Date all Mail Bags are in compliance with the requirements
         of the this Section.

8.1.4    All USPS night volume must be tendered to the FedEx location by the
         times designated by market specified in the Night Turn Operating Plan.

8.1.5    USPS will not tender (and FedEx shall not accept) Dangerous Goods or
         Hazardous Materials, either accessible or inaccessible or any
         Unacceptable Package.

8.1.6    USPS will reload all ULDs, identified at USPS locations by the
         receiving FedEx employee, as not Airworthy.

8.1.7    USPS will notify the local FedEx operation, in the manner described in
         the Local Plan, no later than 2 hours prior to the Latest Tender Time
         specified for such location in the Night-Turn Operating Plan of any
         ULDs that are not Airworthy FedEx will replace these ULDs no later than
         60 minutes prior to the Latest Tender Time specified for such location
         in the Operating Plan.

8.1.8    If USPS engages a third party ground handling entity to perform any of
         its obligations hereunder, USPS will have the responsibility to ensure
         that the third party entity performs the obligations of USPS. USPS will
         remain primarily responsible hereunder notwithstanding the engagement
         of any such third party.


<PAGE>

8.1.9    USPS will not utilize forklifts or pallet jacks without slave pallets
         in the movement or positioning of any FedEx ULDs at any time. USPS AMC
         management will notify local FedEx management of any incidents and
         reimburse FedEx for any ULD repairs at the rates and in the manner
         specified in the Exhibits B and C to the Agreement.

8.1.10    In order to provide FedEx sufficient space in which to unload the
          trucks, not more than 50% capacity of any truck will be loaded with
          APCs. APCs must be loaded in the nose of the truck. The remaining
          capacity of the truck can be loaded with Gaylords or loose Handling
          Units up to a maximum of 90% of the capacity of the truck.

8.2.0    FEDEX OPERATIONAL REQUIREMENTS

8.2.1    The local FedEx location will receive the Outbound Market Volume on the
         Night-turn Operations and place the packages into the outbound
         Night-turn linehaul network.

8.2.2    The local FedEx location will perform a Possession Scan on each USPS
         Night-turn package tendered to FedEx and will CONS (Consolidation Scan)
         the package into a ULD.

8.2.3    FedEx will position or stage all necessary outbound equipment at least
         four (4) hours prior to the Latest Tender Time unless otherwise agreed
         in the Local Plan.

8.2.4    FedEx will stage only Airworthy ULDs at the local AMC.

8.2.5    At the time of acceptance of tender from USPS FedEx will inspect all
         ULDs to ensure the ULDs are Airworthy. The acceptance of the ULDs by
         FedEx will be deemed to be an agreement on the part of FedEx that the
         ULD is Airworthy at the time of its acceptance.

8.2.6    FedEx will not transport or process the separated contents of opened
         tubs, Mail Trays or Mail Bags that are discovered at any point in the
         performance of the FedEx Services. These separated contents will be
         tendered to the location specified in the Local Plan for reprocessing
         by USPS no later than two hours after the scheduled departure time of
         the Aircraft.

9.0.0    MARKET INBOUND OPERATING PLAN - NIGHT- TURN

9.1.0    FEDEX OPERATIONAL REQUIREMENTS

9.1.1    The local FedEx ramp will receive the Inbound Market Volume from the
         Night-turn Operation and tender it to USPS employee in accordance with
         the Night-Turn Operating Plan.

9.1.2    The local FedEx ramp will perform a Delivery Scan and will have
         available for tender all inbound USPS Night volume within [*] (with the
         first volume [*]) of the Actual Aircraft Arrival. The undertakings of
         FedEx in this Section shall not be deemed to be a waiver of FedEx's
         Market Service Commitment Time or the provisions of Section 8.5 of the
         Agreement.


<PAGE>

9.2.0    USPS OPERATIONAL REQUIREMENTS.

9.2.1    Local USPS AMC employee or other designee will pick up the USPS
         Night-turn volume from the local FedEx ramp. On an exception basis, as
         defined in the Night-turn Operating Plan FedEx may deliver this volume
         to the designated USPS location.

10.0.0   FEDEX REQUIREMENTS - NIGHT TURN

10.1.0   FedEx will notify the contact individual listed in the Local Plan if
         any volume misses the outbound launch. Unless otherwise notified by
         USPS, FedEx Night-turn operation will sort any USPS Night-turn volume
         that misses the outbound launch on the next Day-turn operation.

10.2.0   FedEx Night Operation will tender all identifiable USPS Night volume
         that has no D&R Tag to the local AMC.

11.0.0   RECOURSE ISSUES

11.1.0   It will be a condition to the commencement of the FedEx Services that
         the parties have mutually determined that the USPS has produced a D&R
         Tag that provides for a [*] (the "Target Read Rate") in the normal
         course of FedEx operations. On a recurring basis (but in no event less
         than quarterly, the parties will perform a test at mutually agreeable
         locations to test the current read rate. In addition, if in between the
         quarterly tests, FedEx believes that the read rates have fallen below
         the Target Read Rates, FedEx will notify USPS and the parties will
         conduct a test of the read rates. The test will be designed to ensure
         that the D&R Tag is readable and applied to the Handling Unit in a
         manner and orientation that allows the bar code to be scanned following
         the procedures used by FedEx for all other customer packages . USPS
         will have 10 days from the date the parties verify that the D&R Tag (or
         its placement) is the problem to resolve the problems. When USPS
         believes that it has resolved the cause of the low read rate, it will
         notify FedEx electronically through mutually agreed means. The parties
         will then jointly test the system to confirm that the problem has been
         resolved. An additional handling charge, calculated in accordance with
         Exhibit B will be charged, until the parties have mutually agreed that
         the problems have been resolved, as described under the heading "Read
         Rate Discrepancy" for the number of days the discrepancy existed in
         excess of the 10 day cure period.

11.2.0   If, on any given day, bypass volume falls more than [*] below the
         bypass target for the Schedule Block, service Commitments will be
         waived for that day of shipment for the amount packages tendered over
         the 10%.

11.3.0   Packaging that does not meet FedEx acceptance standards (e.g.. bags
         with loose hanging strings and Unacceptable Packages) will be returned
         to the local designated USPS location.

11.4.0   FedEx will have the discretion, to refuse to accept or move on the next
         business day, any late tender of product or product beyond maximum.
         FedEx will notify the USPS contact as specified in the Local Plan if
         the


<PAGE>

         product will not move at the time period originally contemplated by
         USPS. USPS will have the right to repossess any packages that FedEx has
         notified USPS it will not move.

11.5.0   Loading the wrong complement of ULDs or loading non-airworthy ULDs.

         If USPS has loaded the wrong complement of ULDs or has loaded into
         non-Airworthy ULDs, USPS will reload the packages into the correct
         complements of Airworthy ULDs. FedEx may refuse to accept these
         Handling Units if such reloading can not be accomplished by the Latest
         Acceptance Time. If FedEx notifies USPS of a required change in the
         ULD complement, FedEx will provide the required complement of
         airworthy ULDs. All Handling Units already loaded in ULDs by USPS
         prior to receiving the appropriate complement will be accepted by
         FedEx and will be reloaded by FedEx at no cost to USPS.

12.0.0   START-UP REQUIREMENTS AND TIMELINE: SET FORTH BELOW IS AN
         IMPLEMENTATION SCHEDULE THAT OUTLINES THE ACTIVITIES AND CRITICAL DATES
         THAT MUST BE MET IN ORDER TO ENSURE THAT THE FEDEX SERVICES COMMENCE ON
         THE ANTICIPATED SERVICE COMMENCEMENT DATE.

<TABLE>
<CAPTION>
Months Prior to Services     Milestone Accomplishment     Responsible Party
Commencement Date
------------------------     ------------------------     -----------------
<S>                          <C>                          <C>
         [*]
</TABLE>

13.0.0   COOPERATION

13.1.0   FedEx and USPS will identify a list of contact individuals for
         communication and coordination of day-to-day operations/schedule block
         planning/fiscal year planning and long range planning. This will be
         done on a local and national level within thirty days of contract
         signing. This will be updated quarterly.

13.2.0   Local USPS AMC management will meet at least once a week with the
         designated local FedEx senior manager during two months prior to the
         Service Commencement Date to review the status of the implementation of
         the FedEx Services and during the first month of operation to review
         the past week's performance and develop resolutions.

13.3.0   The local USPS AMC management will coordinate at least once per month
         with the designated FedEx senior manager after the first month of
         operation to review performance and develop resolutions.

13.4.0   Local USPS AMC management will review and revise, as necessary, each
         local plan subject to the agreement of the designated local FedEx
         senior manager or designee for each Schedule Block no later than 21
         days prior to the Schedule Block Implementation Date.

13.5.0   Designated contact individuals from FedEx and USPS will resolve all
         day-to-day operational issues including but not limited to -


<PAGE>

13.5.1   Spot Opportunities to increase volume tendered to FedEx by USPS

13.5.2   Overflow requests for special movements

13.5.3   Service Levels and Performance

13.5.4   Revisions to finalized schedule period

13.6.0   FedEx and USPS will designate a system wide operations review
         delegation (the "SWORD Committee") to address continuous improvement.
         The review committee will meet quarterly with more frequent meetings
         during the first six months. - Discussions will include but will not be
         limited to

13.6.1   Performance parameters

13.6.2   Billing and IT issues

13.6.3   Service opportunities

13.6.4   Holiday and exception planning

13.6.5   Volume adjustments

13.6.6   Long range planning/forecasts

13.6.7   Changes to the Scanning Specifications

13.6.8   Proposals for methods of making operations more cost efficient for both
         parties.

13.7.0   FedEx and USPS contract administrators will be identified for
         communication and coordination of day-to-day revenue contract
         operational requirements and support, and fiscal year and long range
         planning.

13.8.0   FedEx will provide office space in Memphis, Tennessee for three liaison
         employees of USPS.

<PAGE>

                           ATTACHMENT I - DAY PRODUCT

                                       [*]


<PAGE>



                          ATTACHMENT II - NIGHT PRODUCT

                                       [*]


<PAGE>



                   ATTACHMENT III TO OPERATING SPECIFICATIONS

              GUIDELINES FOR DETERMINATION OF AIRWORTHINESS OF ULDS

The Airworthy ULD Inspection Checklist (laminated 3" x 5", M-8266A, LOGOS#
154731, or laminated 8-1/2" x 11", M-8266B, LOGOS# 154730) has been developed to
provide all personnel working with ULDs a set of criteria for determining
whether or not a ULD is airworthy.

The following checks must be performed (using the checklist) on any ULD prior to
use:

1. The primary inspection must be performed by the qualified designee prior to
loading the ULDs with freight.

2. The secondary (final) inspection is performed by the uppers/lowers captain.
He must inspect the ULD at the aircraft prior to loading the ULD onto the
aircraft. This ensures that only airworthy ULDs (loaded with freight) are loaded
onto aircraft. The uppers/lowers captain must enter his name and employee number
in the appropriate field of the onload control sheet confirming that all ULDs
loaded on the flight are airworthy according to the checklist. Then the onload
control sheet is filed in the Ramp Paperwork 30-day File.

         NOTE: The uppers/lowers captain does not check the checklist items
         marked with an asterisk (*).

If damage to a ULD is at or above the measurements described below, the ULD is
considered NU or TO (not usable or truck only). See Figure 1 for typical ULD,
and Figure 2 for typical pallet, structural components. If damage to the ULD is
below the measurements described in this manual, the ULD is considered an AW
(airworthy) ULD.

         NOTE: Under no circumstances is duct tape to be used for ULD repair.
         Use only aluminum speed tape (LOGOS# 115230) to patch holes in aluminum
         ULDs that fall within the measurements described in the checklist
         below. Tape should be used and properly applied to both sides of the
         damaged area and overlap the hole at least 3".

         NOTE: Aluminum speed tape must be used on HAZ cans with holes to be
         considered airworthy (SAX/AWX/AYX).

         NOTE: Aluminum speed tape should never be used on a vinyl curtain. If
         curtain damage falls within AW specifications, nothing is required.
         Cloth tape or Gill Liner tape may be used on TO or NU ULD curtains to
         secure.

         NOTE: Door locks must be operable for the container to be considered
         airworthy.

This checklist is divided into two sections, Containers (front) and Pallets/Nets
(back). Use the checklist to ensure that any damage to the ULD falls within the
measurements.

<PAGE>

CONTAINERS

         Vinyl Doors:

         Tears and/or rips are not greater than 8" x 10."
         There are no broken door cables.
         Door cables are not severely frayed (more than 25% of its strands are
         broken).
         Door bar has no cracks greater than 1" x 3/8."

         Removable Doors:

         Panels have no tears, punctures, or holes greater than 4" x 2".
         Door frame cracks are less than 3" x 1/2."

         Extrusions/Frame:

         Cracks are less than 3" x 1/2."
         Dents are less than 2."

         Aluminum Panels:

         Panels have no tears, punctures, or holes greater than 4" x 2" within
         3" of any adjoining edge extrusion.
         Panels have no tears or punctures greater than 7" x 4" beyond 3" of
         any adjoining edge extrusion.

         Lexan Panels:

         Panels have no tears, rips, cracks, or punctures within 2" of any panel
         extrusion.
         Panels have no tears or punctures greater than 10" in length beyond 2"
         of any adjoining edge extrusion.

         Base Sheet:

         Base sheet has no tears, punctures, or drilled holes greater than 1/2."

         Base Rails*:

         Cracks, splits, or dents do not exceed 3" x 1/2."

         Rivets Base Sheet:

         There are at least 5 good rivets between any 2 missing rivets.
         There are no more than 5 missing rivets.

         NOTE: Speed tape (Logos 115230) should be applied to holes that are
         within airworthy limits and be properly applied to both the interior
         and exterior of the container.


<PAGE>

PALLETS/NETS

         Base Sheet:

         Within 3" of any adjoining edge extrusion, there are no tears or
         punctures greater than 3" x 1."
         Beyond 3" of any adjoining edge extrusion, there are no tear or
         puncture greater than 6" x 2."

         Base Rails:

         Cracks, splits, or dents do not exceed 3" x 1/2."
         Inflection (bowing of edges toward center) is less than 4."

         Rivets Base Sheet:

         There are at least 5 good rivets between any 2 missing rivets.
         There are no more than 5 missing rivets.

         Net Criteria:

         Net has 4 edges corresponding to the 88" or 96" and 125" sides of the
         pallet.
         Each short side has 4 permanently attached, serviceable double
         stud locks.
         Each long side has 5 permanently attached, serviceable double stud
         locks.
         One cinching lash cord is attached at each corner. The cord must not
         be cut or excessively worn.
         Net mesh openings have:
         No more than two cut diamonds on any side.
         No more than two adjoining cut diamonds.
         No cut diamonds on the bottom two rows of diamonds.

         NOTE: A 50% load reduction or a pallet gross weight of 7,500 pounds is
         allowed if the damage above the bottom two rows of diamonds are not
         greater than two cut diamonds per side and that there is a minimum of
         one complete diamond between any two cut diamonds.

NET KIT

         Net kits are being installed on all new SAA and AMJ units. The net kit
allows a non-airworthy container to be used as if it was in an airworthy status
provided a pallet net is secured over the damaged container.

         There are two restrictions to the net kit program:


<PAGE>

         1. The maximum certified weight limit for an SAA is reduced from 13,300
lbs to 9,975 lbs., a 25% reduction. The maximum certified weight limit for an
AMJ is reduced from 15,000 lbs to 11,250 lbs., a 25% reduction.

         2. The option to use the net kit is limited to 90 days from the first
date that a net is applied to a non-airworthy container, no matter if the
netting option is used everyday or just a few days within the 90-day period.

       NOTE: Continue to mark the ULD airworthiness status on the closeout slips
       as you would normally, using the airworthiness rules. If the ULD is a TO
       status, mark the closeout slip TO. This ensures that the closeout slip
       and the ULD system match in airworthiness status. Once the ramp agent
       answers 'Y' in the weight and balance system for yes to the container is
       netted, the condition status will change to "##" (symbols that looks like
       pallet nets)

HAZARDOUS MATERIALS ULD HOSE CONNECTION

The hazardous material ULD's hose connector must be checked for stability. Push
on the outside of the connector to ensure flexibility.

WARNING: INJURY TO FLIGHT CREW OR AIRCRAFT DAMAGE WILL OCCUR IF THE HAZARDOUS
MATERIAL ULD DOES NOT FUNCTION PROPERLY DURING AN EMERGENCY.

SAA OPEN FRONT CONTAINERS

Holes, tears, or rips to the vinyl door covers are permissible as long as they
fall within the limits of the Airworthy ULD Inspection Checklist.

DROPPED ULDS

Dropping a ULD (loaded or empty) is considered an accident and must be reported.

PLACARDING DAMAGED ULDS

When a ramp agent or qualified designee discovers a damaged ULD at his ramp
location, he must determine if the ULD is AW (airworthy), TO (truck only) or NU
(not usable). Use the Airworthy ULD Inspection Checklist to determine the ULD's
airworthy status. TO or NU ULDs must be placarded with the Damaged ULD Placard
(M-8262, LOGOS 154405) (Figure 3 and Figure 4) (refer to R7-15-10-5 DAMAGED
NET/ULD PLACARD PROCEDURE). Nonairworthy ULDs must be routed to the closest
repair facility in EWR, MEM, LAX, or IND, MNL, CDG, or to a city that connects
with any of these repair sites.

       NOTE: Managers must ensure all damaged assets are entered into FAMIS,
       FS-1861 (refer to R7-15-10-5 DAMAGED NET/ULD PLACARD PROCEDURE
<PAGE>

                                  ATTACHMENT IV
                                       TO
                            OPERATING SPECIFICATIONS

                             UNACCEPTABLE PACKAGING

PACKAGING AND MARKING

All packages must be prepared and packed for safe transportation with ordinary
care in handling. Any articles susceptible to damage as a result of conditions
which may be encountered in air transportation, such as changes in temperature
or atmospheric pressure, must be adequately protected by proper packaging.

Items that cannot be packed into cartons (auto tail pipes, mufflers, tires,
rims, etc.) should have all sharp edges and protrusions wrapped and the address
label secured by pressure-sensitive tape wrapped completely around the object.

Briefcases, luggage, garment bags, aluminum cases, plastic cases, computer
cartons or similar types of items whose outer finish might be damaged by
adhesive labels, soiling, marking or other types of surface damage that is
normal with ordinary care in handling should be placed in a protective container
for shipment. Items with casters, wheels or rollers must have them removed or
packaged to prevent damage.

Blood, urine and other non-infectious liquid diagnostic specimens will be
accepted only when shipped in a sturdy outer container constructed of
cardboard/corrugated fiberboard, wood, metal or rigid plastic containing a
sealed watertight primary receptacle placed inside of a sealed watertight
secondary receptacle. Absorbent material must also be placed inside of the
secondary watertight receptacle. Packaging must be larger than 7" in length, 4"
in width, and 2" in depth. Packages smaller than the minimum size should be
placed in other packaging. Unacceptable packaging includes, but is not limited
to, StyrofoamTM, plastic bags, paper envelopes, FedEx Envelope, FedEx Packet,
FedEx Pak, FedEx Box, FedEx Tube, and FedEx 10kg and FedEx 25kg boxes. We will
refuse to accept packages not meeting these or any federal requirements. Also,
all shipments of blood and blood products must comply with all applicable local,
state and federal laws governing packing, marking and labeling.

FedEx will only accept shipments of firearms when either the shipper or
recipient is a licensed manufacturer, licensed importer, licensed dealer or
licensed collector and is not prohibited from making such shipments by federal,
state or local regulations when these conditions are met. FedEx will accept and
deliver firearms between all areas served in the U.S. and Puerto Rico. Firearms
must be shipped via FedEx Priority Overnight and may not be sent C.O.D. Upon
presenting the package for shipment, the shipper is required to inform FedEx
that the package contains a firearm. Firearms may not be shipped in one complete
piece. When tendered for shipment, the firearm must be rendered inoperable,
either by removing the firing pin in the gun and disconnecting the barrel, or by
some other means so the package does not contain a completely assembled, usable
weapon. The outside


<PAGE>

of the package should bear no label, marking, or other written notice that a
firearm is contained within. This includes the abbreviation of the name of the
shipper or recipient if the name would clearly indicate that the package could
contain a firearm. Firearms and ammunition may not be shipped in the same
package. Ammunition is always an explosive and must be shipped as dangerous
goods. The shipper and recipient are required to comply with all applicable
government regulations and laws, including those pertaining to labeling. The
local division office of the Bureau of Alcohol, Tobacco and Firearms (ATF) can
provide assistance with the packaging and shipment of firearms.

FedEx will accept alcohol shipments (beer, wine and hard liquor) when both the
shipper and recipient are either a licensed wholesaler, licensed dealer,
licensed distributor, licensed manufacturer, or licensed importer. Alcohol
service into, out of, or within the states of Massachusetts and New Hampshire is
not currently available. Shipments from licensed entities to consumers are
permitted in certain instances for wine shipments only. Shippers making direct
shipments to consumers must complete a FedEx Supplemental Wine Shippers
Agreement.

Tobacco products will be accepted only when shipped from a licensed dealer or
distributor to another licensed dealer or distributor.

Plants and plant materials, including seedlings, plant plugs and cut flowers,
must be shipped in accordance with applicable state and federal laws. Packages
containing these items may be inspected by government agencies, which may result
in a delay in delivery.

Ostrich/emu eggs may be shipped only in accordance with applicable state and
federal laws. The shipper is responsible for ensuring compliance with state and
federal law.

FedEx does not provide special handling for packages bearing "Fragile,"
"Refrigeration required," or orientation markings (e.g., "UP" arrows or "THIS
END UP" markings).

Meat, fish and poultry shipments can be shipped only in accordance with
applicable state and federal laws. The shipper is responsible for ensuring
compliance with state and federal law.

Shipments of over-the-counter and prescription pharmaceuticals will only be
accepted when tendered in accordance with applicable federal, state or local
laws. The shipper is responsible for compliance with all applicable laws.
Pharmaceutical packages should bear no label, markings, or other written notice
that a pharmaceutical is contained within. Proper packaging such as cotton or
other appropriate packing material should be used in order to protect the
contents of the shipment.

The following items are prohibited and will not be accepted:
a. Cash, currency, collectible stamps and coins
b. Live animals, including birds, reptiles, fish (Edible seafood such as live
lobsters, crabs or other types of fish/shellfish for human consumption are
acceptable, provided the shipper is in compliance with state and federal laws.)
c. Animal carcasses will not be accepted. Animal heads and other parts for
taxidermy may be accepted but must be properly packaged. Restrictions do not
apply to materials intended for consumption.

<PAGE>


d. Human corpses or body parts; cremated or disinterred human remains
e. Shipments which require us to obtain a federal, state or local license for
their transportation
f. Shipments which may cause damage or delay to equipment, personnel or other
shipments
g. Lottery tickets and gambling devices where prohibited by federal, state or
local law
h. Hazardous waste, used hypodermic needles and/or syringes or medical waste
i. Packages/shipments that are wet, leaking or emit an odor of any kind
j. Packages that are wrapped in kraft paper
k. Live insects
l. Shipments whose carriage is prohibited by law, statute or regulation of any
state in which the shipment may travel
m. Shipments whose carriage is prohibited by applicable federal, state or local
law
n. Shipments with loose hanging straps or strings.


<PAGE>

                                    EXHIBIT B

                                  RATE SCHEDULE

Pricing

A.       Day System pricing will be composed of three pricing
         components; Non-fuel transport, Fuel transport and Package
         Handling.

         1.       Non-fuel transport pricing will be based on the cubic
                  feet of lift provided by FedEx. The initial rate will
                  be [*]/ft(3) and will escalate [*]% per year beginning
                  with the Schedule Period inclusive of the following
                  dates.
<TABLE>
                             <S>         <C>
                             Year 2      August 27, 2002
                             Year 3      August 27, 2003
                             Year 4      August 27, 2004
                             Year 5      August 27, 2005
                             Year 6      August 27, 2006
                             Year 7      August 27, 2007
</TABLE>

                  Non-fuel transport rate by container type:
<TABLE>
<CAPTION>

                                   --------------------------------------------------------------------------------------------
                                                                          RATE/FT(3)
                                   --------------------------------------------------------------------------------------------
                                                                                  [*]
                                   --------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
CONTAINER            CU/FT         Year1        Year2        Year3         Year4          Year5        Year6         Year7
-------------------------------------------------------------------------------------------------------------------------------
<S>                  <C>           <C>          <C>          <C>           <C>            <C>          <C>           <C>
AMJ
AYY
AYX
AKE                      [*]                                                    [*]
AVE
AWX
SAA
SAX
AAM
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                  For containers not included in the matrix, the rate will be
                  the appropriate non-fuel transport pricing Rate/Ft(3)
                  multiplied by the container cubic feet.

                  For Handling Units that are accepted by FedEx as bulk loaded
                  (not in ULDs) the weight from the Trans-Log File will be
                  divided by [*] and then multiplied by the appropriate non-fuel
                  transport pricing rate.


<PAGE>

                  Year 1 Example

                       Weight/Pkg DIVIDED BY [*] Lbs/Ft(3) * [*]/Ft(3)

                  In the event that records are missing from the Trans-Log File
                  by Day 3 of the billing process, FedEx will calculate the
                  transportation charges using the ship day average weight per
                  Handling Unit excluding ULDs for USPS products. If no
                  Trans-Log File data is available for that operating day, FedEx
                  will use the most recent same day of week weight per Handling
                  Unit excluding ULDs to determine the transport charge. In the
                  event that the type of ULD cannot be determined by the time of
                  rating, FedEx will use the Schedule Period load plan to
                  determine the container type.

             2.   Fuel transport pricing will be based on the cubic feet of lift
                  provided by FedEx. The bill rate will be calculated based on
                  the most recently published Producer Price Index defined
                  below. Prior to each Schedule Period the Fuel transport
                  pricing will be calculated as follows:

                  a.       Fuel transport pricing will be adjusted based on
                           fluctuations in the Producer Price Index (PPI) for
                           jet fuels as published by the US Department of Labor
                           and Bureau of Labor Statistics (BLS) (Commodity Code
                           05 7203 (NOT SEASONALLY ADJUSTED ))

                  b.       The base fuel transport price is [*] at a PPI of
                           [*] in 1982 dollars.

                  c.       Fuel transport pricing adjustment factor is the
                           ratio of the most recently published PPI to the base
                           PPI.

                                       Current PPI/Base PPI (71.4)

                  d.       The fuel transport price will be calculated by
                           multiplying the base fuel transport price by the fuel
                           price adjustment factor:

                     Fuel Adjustment Factor x Base Fuel Transport Price ($[*])

                  For Handling Units that are accepted by FedEx as bulk loaded
                  (not in ULDs) the weight from the Trans-Log File will be
                  divided by [*] Lbs/Ft(3) and then multiplied by the
                  appropriate fuel transport pricing rate.

                  Year 1 Example

                  Weight/Pkg DIVIDED BY [*]Lbs/Ft(3) * Fuel Adjustment Factor X
                  Base Fuel Transport Price ([*])

                  In the event that records are missing from the Trans-Log File
                  by Day 3 of the billing process, FedEx will calculate the
                  transportation charges using the ship day average weight per
                  Handling Unit excluding ULDs for USPS products. If no
                  Trans-Log File data is available for that operating day, FedEx
                  will use the most recent same day of week weight per Handling
                  Unit excluding ULDs to determine the transport charge. In
                  the event that the type of ULD cannot be


<PAGE>

                  determined by the time of rating, FedEx will use the Schedule
                  Period load plan to determine the container type

             3.   Package h andling pricing on individual Handling Units will be
                  based on units unloaded, sorted, or reloaded by FedEx. The
                  initial rate will be $[*]/h.u. and will escalate [*]% per year
                  beginning with the Schedule Period inclusive of the following
                  dates. The package handling fee will be charged to every
                  Handling Unit where Fedex has scanned the D&R Tag. There will
                  be only one handling charge per scanned D&R tag. If FedEx must
                  re-handle packages in a bypass container due to operational
                  needs (e.g. change of aircraft gauge), billing will be
                  adjusted and a credit will be issued to the USPS on the
                  equivalent packages for the container type. Equivalent
                  packages given in the table below.

<TABLE>
<CAPTION>
                                                               NUMBER OF
                    CONTAINER              CU/FT              HANDLING UNITS
                    ---------------------------------------------------------
                    <S>                    <C>                <C>
                    AMJ                              590                  230
                    AYY                              202                   79
                    AYX                              202                   79
                    AKE                              153                   60
                    AVE                              153                   60
                    AWX                              265                  103
                    SAA                              427                  166
                    SAX                              418                  163
                    AAM                              564                  220
                    ----------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                           Date                      Rate
                <S>                   <C>                            <C>
                Year 2                August 27, 2002                 [*]
                Year 3                August 27, 2003
                Year 4                August 27, 2004
                Year 5                August 27, 2005
                Year 6                August 27, 2006
                Year 7                August 27, 2007
</TABLE>

B.       Night System pricing will be based on the weight of individual Handling
         Units excluding Bypass Containers and a cubic foot rate for Bypass
         Containers.

         1.       The non-fuel transport pricing initial rate for handling units
                  excluding bypass containers will escalate [*]% per year
                  beginning with the schedule period inclusive of the following
                  dates.

                       Year 2                 August 27, 2002
                       Year 3                 August 27, 2003
                       Year 4                 August 27, 2004
                       Year 5                 August 27, 2005
                       Year 6                 August 27, 2006
                       Year 7                 August 27, 2007

<PAGE>

<TABLE>
<CAPTION>
                      ---------------------------------------------------------------------------------------------------------
                      RATE/LB
        HANDLING UNIT
                      ---------------------------------------------------------------------------------------------------------
     WEIGHT           YEAR 1          YEAR 2           YEAR 3          YEAR 4         YEAR 5        YEAR 6       YEAR 7
     ------           ------          ------           ------          ------         ------        ------       ------
     <S>             <C>             <C>              <C>             <C>            <C>           <C>          <C>
         [*]               [*]             [*]              [*]             [*]           [*]          [*]          [*]
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                  The Handling Unit weight will be derived from the
                  Trans-Log File. In the event that records are missing from
                  the Trans-Log File by Day 3 of the billing process, FedEx
                  will calculate the transportation charges using the ship
                  day average weight per Handling Unit excluding ULDs for
                  USPS products. If no Trans-Log File data is available for
                  that operating day, FedEx will use the most recent same
                  day of week weight per Handling Unit excluding ULDs to
                  determine the transport charge.

         2.       Fuel transport pricing will be based on the weight accepted by
                  FedEx. The bill rate will be calculated based on the most
                  recently published Producer Price Index defined below. Prior
                  to each Schedule Period the Fuel transport pricing will be
                  calculated as follows:

                  A        Fuel transport pricing will be adjusted based on
                           fluctuations in the Producer Price Index (PPI) for
                           jet fuels as published by the US Department of Labor
                           and Bureau of Labor Statistics (BLS) (Commodity Code
                           05 7203 (NOT SEASONALLY ADJUSTED))

                  B        The base fuel transport price is [*]/lb at a PPI of
                           [*] in 1982 dollars.

                  C        Fuel transport pricing adjustment factor is the ratio
                           of the current PPI to the base PPI.

                                        Current PPI/Base PPI [*]

                  D        The fuel transport price will be calculated by
                           multiplying the base fuel transport price by the fuel
                           price adjustment factor:

                     Fuel Adjustment Factor X Base Fuel Transport Price ([*]/lb)

         3.       Bypass Container non-fuel pricing will be based on cubic feet
                  of lift provided by FedEx. The initial rate will be [*]/ft3
                  and will escalate [*]% per year beginning with the schedule
                  period inclusive of the following dates.
<TABLE>
                               <S>                    <C>
                               Year 2                 August 27, 2002
                               Year 3                 August 27, 2003
                               Year 4                 August 27, 2004
                               Year 5                 August 27, 2005
</TABLE>

<PAGE>

<TABLE>
                               <S>                    <C>
                               Year 6                 August 27, 2006
                               Year 7                 August 27, 2007
</TABLE>

                  Non-fuel transport rate by container type:

<TABLE>
<CAPTION>
                                                                          RATE/FT(3)
                            -------------------------------------------------------------------------------------------------------
                                      [*]            [*]           [*]            [*]             [*]            [*]           [*]
-----------------------------------------------------------------------------------------------------------------------------------
CONTAINER           CU/FT       YEAR1         YEAR2          YEAR3         YEAR4           YEAR5          YEAR6          YEAR7
---------           -----       -----         -----          -----         -----           -----          -----          -----
<S>                 <C>         <C>           <C>            <C>           <C>             <C>            <C>            <C>
AMJ                     [*]           [*]            [*]           [*]            [*]             [*]            [*]           [*]
---
AYY
---
AYX
---
AKE
---
AVE
---
AWX
---
SAA
---
SAX
---
AAM
---
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


         4.       Bypass containers fuel transport pricing will be based on
                  cubic feet of lift provided by FedEx. The bill rate will be
                  calculated based on the most recently published Producer Price
                  Index defined below. Prior to each Schedule Period the Fuel
                  transport pricing will be calculated as follows:

         a.       Fuel transport pricing will be adjusted based on fluctuations
                  in the Producer Price Index (PPI) for jet fuels as published
                  by the US Department of Labor and Bureau of Labor Statistics
                  (BLS) (Commodity Code 05 7203 (NOT SEASONALLY ADJUSTED ))

         b.       The base fuel transport price is [*]/ft(3) at a PPI of [*] in
                  1982 dollars.

         c.       Fuel transport pricing adjustment factor is the ratio of the
                  most recently published PPI to the base PPI.

                                     Current PPI/Base PPI ([*])

         d.       The fuel transport price will be calculated by multiplying the
                  base fuel transport price by the fuel price adjustment factor:
                  Fuel Adjustment Factor x Base Fuel Transport Price ([*]/ft(3))

C. Supplemental Bills

<PAGE>

         1.       Minimum Guaranteed Volume for the Day-turn Network- if Minimum
                  Guaranteed Volume is not achieved as described in paragraph
                  11.2 of the contract, FedEx will provide a supplemental bill
                  for the difference between actual volume accepted by FedEx and
                  the Minimum Guaranteed Volume for the Schedule Period as
                  calculated in paragraph 11.1 of the contract. Day-turn
                  Handling charges will be billed at the agreed upon handling
                  percentage (1-Bypass Percentage) minus [*] percentage points.
                  Day-turn Transport - fuel and non-fuel - charges will be
                  calculated at the current rates on the difference between
                  actual and Minimum Guaranteed Volume for a Schedule Period as
                  calculated in paragraph 11.1 of the contract.

         2.       Minimum Guaranteed Volume for the Night-turn Network - if
                  Minimum Guaranteed Volume is not achieved as described in
                  paragraph 11.2 of the contract, FedEx will provide a
                  supplemental bill for the difference between actual volume
                  accepted by FedEx and the Minimum Guaranteed Volume for the
                  Schedule Period as calculated in paragraph 11.1 of the
                  contract. Night-turn Transport - fuel and non-fuel - charges
                  will be calculated at the current rates on the difference
                  between actual and Minimum Guaranteed Volume for a Schedule
                  Period as calculated in paragraph 11.1 of the contract.

         3.       ULD Damage - FedEx will provide a supplemental bill for
                  containers damaged by the USPS as outlined in the Operations
                  Specification. The supplemental bill will be for [*]/ULD
                  damaged for damage to the upper portion of the ULD and for
                  [*]/ULD damaged for damage to the base of the ULD.

         4.       Read Rate Discrepancy - if a read rate discrepancy occurs as
                  described in the Operations Specification, FedEx will provide
                  a supplemental bill based on the percentage of misreads
                  greater than the standard rate. The rate will apply to product
                  accepted for the periods after the 10 day cure period and
                  prior to problem resolution.


Current Read Rate - Standard Read Rate = Read Rate Adjustment

                  a.       Day System Handling rate


Current Handling Rate * Read Rate Adjustment * Number of Handling Units

                  b.       Night System Handling rate -

Current per pound rate * Read Rate Adjustment * Number of Handling Units * .15

         5.       Shuttle Rate - If USPS requests the addition or deletion of
                  FedEx shuttle services between USPS and FedEx facilities the
                  supplemental billing or credit rate will be calculated on
                  transport mode and distance.


<PAGE>

                  a.       CTV Shuttles will be charged at a rate of [*]/mile
                           roundtrip with a minimum of [*]/trip.

                  b.       Tug and Dolly Shuttles will be charged at a rate of
                           [*]/mile roundtrip with a minimum of [*]/trip


<PAGE>




                                    EXHIBIT C
                               PAYMENT PROCEDURES

I.       DEFINITIONS

         Capitalized terms not otherwise defined herein shall have the meaning
         set forth in Agreement.

II.      RECONCILIATION AND INVOICING PROCESS

         Payment terms are ten calendar days following the close of the Shipping
         Period. The following procedures will be observed in the billing
         process:

         1.       All data exchanges between USPS and FedEx for the
                  reconciliation process will be performed electronically and
                  sent to specified Mailboxes operated by each organization.
                  Each file will have an individually specified transmission
                  interval.

         2.       For all files exchanged between FedEx and the USPS, any
                  changes to layout or data definition must be communicated to
                  the receiving party at a minimum of 60 calendar days prior to
                  implementation or sooner if mutually agreed to.

         3.       All file transfers must adhere to USPS Security & Privacy
                  rules as well as all FedEx Data Protection policies.

         4.       The reconciliation process will be:

                  a.       USPS completes shipment Day 0

                  b.       FedEx Revenue receives FedEx Scan Data on Day 1

                  c.       USPS Transmits Trans Log and Org Summary data to
                           FedEx on Day 1. If unavailable, the process
                           continues.

                  d.       FedEx compares FedEx Scan data to Trans Log data:

                           -        Identifies any D&R Tags that were scanned
                                    and not in the original Trans Log data, and
                                    returns to USPS an UnMatched Scan file of
                                    all shipments FedEx moved that were not on
                                    the original Trans Log file on Day 2.

                           -        In the event that no records are unmatched,
                                    an empty UnMatched Scan file will be
                                    transmitted. If unavailable to USPS, FedEx
                                    will decide whether to continue the process
                                    without UnMatched Scan file or delay the
                                    Revenue Reconciliation process.


<PAGE>

                  e.       USPS will research the UnMatched Scan file and return
                           an UnMatched Found file and UnMatched Not Found file
                           on Day 3.

                  f.       FedEx will calculate all applicable charges using:

                           -        Trans Log data, UnMatched Found data, and
                                    for UnMatched Not Found FedEx will use a
                                    previous ship day of week data for charge
                                    purposes and send back to the USPS the
                                    Reconcile file on Day 4. The Reconciliation
                                    file will include all shipments, both
                                    Matched and UnMatched.

                  g.       Steps B through F will be repeated for each Shipping
                           Day. On the fourth business day following the last
                           day of the Shipping Period (Friday), FedEx and the
                           USPS must have reconciled the entire Shipping Period.

                  h.       On the tenth calendar day (unless the tenth day is a
                           USPS holiday, in which case, the eleventh day)
                           following the close of the Shipping Period USPS will
                           make an electronic funds transfer "File and Funds"
                           for the entire amount charged in the Reconcile files
                           to FedEx for the Shipping Period closed.

III.     RATE STRUCTURES

         Supplemental Charges may be assessed each Schedule Period for:

         1.       Minimum Guaranteed Volume.

         2.       ULD Damage.

         3.       Read-Rate.

         4.       Shuttle Charges

         The amount to be charged is the amount determined in accordance with
         the Agreement, the Operations Specifications and Exhibit B.

IV.      DATA FILE REQUIREMENTS

         Minimum data required for each file transmitted between FedEx and the
         USPS is as follows:

         1.       Trans Log file - D&R barcode, origin zip, destination zip,
                  ship date, weight (if a piece), and Bypass or Non-Bypass
                  container indicator (if container)

         2.       UnMatched file - D&R barcode, scan date

         3.       Found file - same as Trans Log file

         4.       Not Found file - same as UnMatched file


<PAGE>

         5.       Reconcile file - D&R barcode, origin zip, destination zip,
                  ship date, weight (if a piece), and Bypass or Non-Bypass
                  container indicator (if container), Transportation charge,
                  Handling charge, Fuel charge, applicable revenue scans used in
                  the revenue reconciliation process and amount Excisable

V.       ISSUE SCENARIOS

         Issue Scenarios and Actions define potential Issues that may arise
         during normal activities between the USPS and FedEx and the actions
         that should be taken by either the USPS or FedEx.

         1.       Disputes not resolved during the reconciliation process will
                  not alter the total amount due for the Shipping Period.
                  Payment in full for the Shipping Period will be remitted to
                  FedEx 10 calendar days after close of the Shipment Period.
                  Resolution of any dispute will follow the normal FedEx invoice
                  adjustment process thought the FedEx Contract Administrator.

                  -        If initiated by USPS, contact Contract Administrator,
                           Worldwide Revenue Operations, FedEx

                  -        If initiated by FedEx, contact, Supervisor, Accounts
                           Payables, Transportation, USPS

         2.       Inability to Send or Receive Data Files at specified
                  transmission time interval

                  -        If initiated by USPS, contact Contract Administrator
                           Support, Worldwide Revenue Operations, FedEx

                  -        If initiated by FedEx, contact IP Program Manager,
                           Network Ops Mgmt, USPS

         3.       USPS EFT was not successful


                  -        If initiated by FedEx, contact Supervisor, Accounts
                           Payables, Transportation, USPS

                  -        If initiated by USPS, contact Contract Administrator,
                           Worldwide Revenue Operations, FedEx

         4.       EFT amount does not match the reconciled amount

                  -        If EFT amount is greater than reconciled amount,
                           contact Contract Administrator, Worldwide Revenue
                           Operations, FedEx

                  -        If EFT amount less than reconciled amount, contact
                           Supervisor, Accounts Payables, Transportation, USPS

         5.       USPS unable to transmit Trans Log data to FedEx by specified
                  transmission time

                  -        FedEx will identify D&R Tags not on the Trans-Log
                           File provide by USPS and notify USPS in the FedEx
                           UnMatched File.

                  -        USPS researches (attempts to find missing Trans-Log
                           data). If Trans-Log data is not available, USPS USES
                           FEDEX DATA AS UNEQUIVOCAL PROOF AS FEDEX HAS MOVED
                           AND PROCESSED USPS PRODUCT.

                  -        USPS will default to FedEx data when they are unable
                           to provide Trans-Log data within the defined
                           Reconciliation Period (three days following the
                           shipment day). FEDEX WILL CHARGE THE AVERAGE WEIGHT
                           AS DEFINED IN SECTION


<PAGE>

                           III (RATE STRUCTURE) FOR THE PRODUCT TENDERED BY THE
                           USPS TO FEDEX FOR ANY D&R TAG THAT USPS CANNOT
                           PROVIDE A TRANS-LOG DATA RECORD.

         6.       In the event there is a catastrophic equipment and/or system
                  failure

                  -        FedEx will provide an electronic file to USPS
                           identifying all D&R Tags FedEx scanned that were lost

                  -        FedEx will notify Vice President, Transportation,
                           USPS

                  -        USPS cannot produce D&R Tags - SEPARATE CONTINGENCY
                           PLAN MUST BE DEVELOPED TO INCLUDE OPERATIONAL,
                           REVENUE AND IT ISSUES.

         7.       Under what circumstances may a Delivery scan be missing for a
                  container D&R Tag

                  -        For Mixed Containers a Delivery scan will not be
                           provided since the container is unloaded during our
                           sort operations.

                  -        For the contents of Bypass Containers FedEx will not
                           have any scan data unless the Bypass Container is
                           trans-loaded for FedEx operational requirements.


<PAGE>




                                    EXHIBIT D

                                  MEDIATOR LIST

         [THIS DOCUMENT IS TO BE PROVIDED IN ACCORDANCE WITH AGREEMENT]


<PAGE>



                                    EXHIBIT E

                                     FORM OF

                                ESCROW AGREEMENT

         THIS ESCROW AGREEMENT ("Agreement"), made and entered into as of the
___ day of __________, 20__, by and among Federal Express Corporation, a
Delaware Corporation, ("FedEx"), the United States Postal Service, an
independent establishment of the United States of America ("USPS"), and
_______________________________________________, a ______________ corporation
("Escrow Holder");

                              W I T N E S S E T H:

         WHEREAS, FedEx and USPS have entered into that certain Transportation
         Agreement dated as of __________, 2001 ("Transportation Agreement"),
         pursuant to which FedEx has agreed to provide and USPS has agreed to
         purchase certain transportation services, pursuant to the terms of the
         Transportation Agreement.

         WHEREAS, in accordance with the terms and conditions of the
         Transportation Agreement, each party has agreed to deposit into escrow
         with Escrow Holder amounts that represent a portion of certain disputed
         claims as more fully described in Article 3 and Section 7.3 of the
         Transportation Agreement. Such sum together with any and all additions
         thereto and interest and earnings thereon being referred to herein as
         the "Escrow Money"), to be held, invested and disbursed by Escrow
         Holder in accordance with the terms and conditions of this Agreement;
         and

         WHEREAS, Escrow Holder agrees to act as escrow agent to hold,
         administer, invest and disburse the Escrow Money on the terms and
         conditions herein set forth;

         NOW, THEREFORE, for and in consideration of the foregoing and the
mutual covenants of the parties contained herein, the parties hereto agree as
follows:

         1. ADMINISTRATION AND INVESTMENT OF ESCROW MONEY. (a) Escrow Holder
shall hold, administer and disburse the Escrow Money pursuant to this Agreement.
Escrow Holder shall invest the Escrow Money as instructed by the party
depositing the funds (the "Depositing Party"), and shall from time to time
reinvest the Escrow Money as so instructed in writing by the Depositing Party,
in United States securities, including Treasury Bills and United States
Government guaranteed obligations, certificates of deposit, time or demand
deposits, or repurchase agreements.

         (b) Simultaneous with the delivery of the Escrow Money to Escrow
Holder, the Depositing Party shall deliver to the other party a written
statement specifically identifying the amount of the Escrow Money and any
investment directions to the Escrow Holder.


<PAGE>

         2. DISBURSEMENT. (a) In accordance with the Transportation Agreement,
FedEx and USPS shall promptly provide written notification to Escrow Holder
executed by both parties of the disposition and disbursement of the Escrow Money
("Disbursement Notice"), and Escrow Holder may rely upon such Disbursement
Notice or until ordered by final court order, decree or judgment, which is not
subject to appeal, to deliver the Escrow Money to a particular party, in which
event the Escrow Money shall be delivered in accordance with such notice,
instruction, order, decree or judgment.

         (b) Escrow Holder shall pay the entire Escrow Money in accordance with
the instructions set forth in the Disbursement Notice not later than one (1)
business day following receipt of the Disbursement Notice [as long as the
current investment can be liquidated in one (1) business day] and this Agreement
shall thereupon be null and void and the parties hereto shall have no further
liability or obligations hereunder. The Escrow Money shall be released and
delivered to the particular party from Escrow Holder upon Escrow Holder's
receipt of the Disbursement Notice as set forth in Section 2(b) above, despite
any objection or potential objection by a party. The parties agree it shall have
no right to bring any action against Escrow Holder which would have the effect
of delaying, preventing, or in any way interrupting Escrow Holder's delivery of
the Escrow Money pursuant to this Section 2.

         3. ESCROW AGREEMENT. (a) Escrow Holder will perform its obligations
hereunder fairly and impartially according to the intent of the parties as
herein expressed; provided, however, that Escrow Holder is to be considered as a
depository only, shall not be deemed to be a party to any document other than
this Agreement, and shall not be responsible or liable in any manner whatsoever
for the sufficiency, manner of execution, or validity of any written
instructions, certificates or any other documents received by it, nor as to the
identity, authority, or rights of any persons executing the same. Escrow Holder
shall be entitled to rely at all times on instructions executed by both FedEx
and USPS, as the case may be and as required hereunder, without any necessity of
verifying the authority therefor. Notices given by or in the name of the Senior
Vice President and General Counsel of FedEx shall be deemed given by FedEx.
Notices given by [Senior Vice President and General Counsel of USPS PLEASE
INSERT PROPOER TITLE] shall be deemed given by USPS.

         (b) Escrow Holder shall not at any time be held liable for actions
taken or omitted to be taken in good faith and without bad faith or gross
negligence. FedEx and USPS agree to save and hold Escrow Holder harmless from
any loss and from any claims or demands arising out of its actions hereunder and
hereby agree to indemnify Escrow Holder from any claims or demands for losses
arising out of its activities hereunder; provided, however, the indemnity set
forth herein shall not apply to any actions taken or omitted to be taken with
bad faith or gross negligence.

         (c) It is further understood by FedEx and USPS that, if Escrow Holder
shall become involved in litigation with respect to this Agreement or the
Transportation Agreement, whether as the result of any disagreement between
FedEx and USPS or adverse demands and claims being made by any of them upon
Escrow Holder or otherwise, such parties agree that they, jointly and severally,
are and shall be liable to Escrow Holder and shall reimburse Escrow Holder for
the reasonable costs, expenses and counsel fees Escrow Holder shall incur or be
compelled to pay by reason of such litigation. FedEx and USPS agree among
themselves that each shall be responsible to advance one-half (1/2) of all
amounts due Escrow Holder for its services as set forth in this Agreement,
provided that any such advance by


<PAGE>

FedEx or USPS as the result of any dispute or litigation between them shall be
without prejudice to their right to recover such amount as damages from the
breaching party.

         (d) In taking or omitting to take any action whatsoever hereunder,
Escrow Holder shall be protected in relying upon any notice, paper, or other
document reasonably believed by it to be genuine, or upon evidence deemed by it
to be sufficient, and in no event shall Escrow Holder be liable hereunder for
any act performed or omitted to be performed by it hereunder in the absence of
gross negligence or bad faith. Escrow Holder may consult with counsel in
connection with its duties hereunder and shall be fully protected in any act
taken, suffered or permitted by it in good faith and without bad faith or gross
negligence in accordance with the advice of such counsel.

         4. TERM OF AGREEMENT. The Escrow Holder is to receive the sum of
______________________________ Dollars ($_______________) for its services as
Escrow Holder. Escrow Holder shall have the right to withhold from the Escrow
Money funds to pay the escrow fee and any specific and identifiable charges
incurred as a result of the establishment and maintenance of the escrow account
required hereunder, including any safekeeping fees or service charges levied by
it.

         5. FDIC WAIVER. [This section will be required if the Escrow Holder is
a federal bank] (a) FedEx and USPS do hereby certify to Escrow Holder that they
are aware that the Federal Deposit Insurance Corporation (FDIC) coverages apply
only to a cumulative maximum amount of One Hundred Thousand Dollars
($100,000.00) for each individual depositor for all of depositor's accounts at
the same or related institutions.

         (b) FedEx and USPS understand and acknowledge that certain banking
instruments such as, but not limited to, repurchase agreements and letters of
credit are not covered by FDIC insurance.

         (c) FedEx and USPS understand and agree that Escrow Holder assumes no
responsibility for, nor will FedEx and/or USPS hold Escrow Holder liable for,
any loss occurring which arises from the fact that the amount of the escrow
account established pursuant to this Agreement may cause the aggregate amount of
any individual depositor's accounts to exceed One Hundred Thousand Dollars
($100,000.00) and that the excess amount is not insured by the FDIC.

         6. TERM OF AGREEMENT. The term of this Agreement shall be from and
after the date of this Agreement as hereinafter set forth to and including the
earlier to occur of (i) the events set forth in Section 2 hereof; or (ii) the
termination of this Agreement by written agreement of the parties hereto.

         7. NOTICES. All notices, demands, requests or other communications
which may or shall be given or served by any party to this Agreement upon any
other parties to this Agreement, shall be either (a) sent by certified mail,
return receipt requested, in which case notice shall be deemed delivered three
(3) business days after deposit, postage prepaid in the U.S. mail, (b) sent by
overnight delivery using Federal Express service or other nationally recognized
overnight courier, in which case it shall be deemed delivered one (1) business
day after deposit with such courier, (c) sent by facsimile, in which case notice
shall be deemed delivered upon transmission of such notice (provided that
confirmation of such transmission


<PAGE>

is evident), or (d) sent by personal delivery, in which case notice shall be
deemed delivered upon personal delivery. Such notices, demands, requests or
other communications shall be in writing and addressed to the following:

         IF TO FedEx:
                                     ------------------------------------

                                     Attn:
                                           ------------------------------
                                     Telephone:
                                               --------------------------
                                     Facsimile:
                                               --------------------------

         With a copy to:             #                                   #
                                     ------------------------------------

                                     Attn:
                                           ------------------------------
                                     Telephone:
                                                -------------------------
                                     Facsimile:
                                                -------------------------

         IF TO USPS:
                                     ------------------------------------

                                     Attn:
                                           ------------------------------
                                     Telephone:
                                               --------------------------
                                     Facsimile:
                                               --------------------------

         With a copy to:             #                                   #
                                     ------------------------------------

                                     Attn:
                                           ------------------------------
                                     Telephone:
                                                -------------------------
                                     Facsimile:
                                                -------------------------

         IF TO ESCROW HOLDER:
                                     ------------------------------------

                                     Attn:
                                          -------------------------------
                                     Telephone:
                                               --------------------------
                                     Facsimile:
                                               --------------------------

         All parties shall have the right from time to time to designate by
written notice to all other parties any other address or place where such
notice, demand, or request be addressed.

         8. MISCELLANEOUS. (a) No party may assign its interest in or
obligations under this Agreement except as may be permitted pursuant to the
Transportation Agreement. Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, representatives, successors and assigns.


<PAGE>

         (b) This Agreement shall be construed under and governed by the laws of
the State of Tennessee and, in the event that any provision hereof shall be
deemed illegal or unenforceable, said provision shall be severed herefrom and
the remainder of this Agreement shall be enforced in accordance with the intent
of the parties as herein expressed.

         (c) This Agreement may not be amended or altered except by an
instrument in writing executed by all the parties hereto.

         (d) Terms not specifically defined herein shall have the meanings
attributed to such terms in the Transportation Agreement.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by and through their respective, duly-authorized representatives as of
the date signed by FedEx or USPS (whichever occurs later, as indicated below).

                    FEDERAL EXPRESS CORPORATION

                    By:
                       --------------------------------------------------
                    Title:
                          -----------------------------------------------
                    Date of Signature:
                                      -----------------------------------

                    UNITED STATES POSTAL SERVICE

                    By:
                       --------------------------------------------------
                    Title:
                          -----------------------------------------------
                    Date of Signature:
                                      -----------------------------------

                    ESCROW HOLDER



                    By:
                       --------------------------------------------------
                    Title:
                          -----------------------------------------------
                    Date of Signature:
                                      -----------------------------------

* BLANK SPACES 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, AS AMENDED