Document:

exv10w2

 

Exhibit 10.2

 

TRANSPORTATION AGREEMENT

between

THE UNITED STATES POSTAL SERVICE

and

FEDERAL EXPRESS CORPORATION

 

	*	 	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.

 

 

 

TRANSPORTATION AGREEMENT

Between

THE UNITED STATES POSTAL SERVICE

And

FEDERAL EXPRESS CORPORATION

TABLE OF CONTENTS

	 	 	 	 	 
	Preamble

	 	 	1	 
	ARTICLE 1 — DEFINITIONS

	 	 	2	 
	ARTICLE 2 — FEDEX SERVICES

	 	 	10	 
	ARTICLE 3 — DISPUTE RESOLUTION

	 	 	11	 
	ARTICLE 4 — INDEPENDENT CONTRACTOR

	 	 	13	 
	ARTICLE 5 — TAXES

	 	 	13	 
	ARTICLE 6 — FEDEX COMPENSATION

	 	 	15	 
	ARTICLE 7 — PAYMENTS

	 	 	15	 
	ARTICLE 8 — GENERAL OBLIGATIONS OF FEDEX

	 	 	16	 
	ARTICLE 9 — GOVERNMENT REGULATION

	 	 	21	 
	ARTICLE 10 — DISCLOSURE/TRADEMARKS

	 	 	22	 
	ARTICLE 11 — OBLIGATIONS OF USPS

	 	 	23	 
	ARTICLE 12 — LIABILITIES OF THE PARTIES

	 	 	24	 
	ARTICLE 13 — RISK OF LOSS; CLAIMS PROCEDURE; LIMITATION OF LIABILITY

	 	 	26	 
	ARTICLE 14 — REPRESENTATIONS AND WARRANTIES

	 	 	26	 
	ARTICLE 15 — TERM AND TERMINATION

	 	 	27	 
	ARTICLE 16 — EVENTS OF DEFAULT

	 	 	28	 
	ARTICLE 17 — CONFIDENTIALITY

	 	 	29	 
	ARTICLE 18 — FORCE MAJEURE

	 	 	30	 
	ARTICLE 19 — STANDARD USPS CLAUSES

	 	 	31	 
	ARTICLE 20 — APPLICABLE LAW

	 	 	52	 
	ARTICLE 21 — ENTIRE AGREEMENT

	 	 	52	 
	ARTICLE 22 — AMENDMENTS OR MODIFICATIONS

	 	 	52	 
	ARTICLE 23 — ASSIGNMENT

	 	 	52	 
	ARTICLE 24 — WAIVER OF BREACH

	 	 	52	 
	ARTICLE 25 — NOTICES

	 	 	52	 
	ARTICLE 26 — REPRESENTATIVES

	 	 	54	 
	ARTICLE 27 — SEVERABILITY

	 	 	55	 
	ARTICLE 28 — ORDER OF PRECEDENCE CLAUSE

	 	 	55	 

EXHIBIT A — OPERATING SPECIFICATIONS

Attachment I Day-turn Operating Plan

Attachment II Night-turn Operating Plan

Attachment III Airworthiness

Attachment IV Unacceptable Packages

Attachment V Feeder Operating Plan

Attachment VI Scanning Specifications

Attachment VII Dangerous Goods, Registered Mail and Live Animal Transportation Specifications

EXHIBIT B —  RATES

EXHIBIT C —  PAYMENT PROCEDURES

EXHIBIT D —  MEDIATORS LIST

EXHIBIT E —  FORM OF ESCROW AGREEMENT

EXHIBIT F — SECURITY PROTOCOL

EXHIBIT G — SERVICE LEVEL CALCULATION PROCEDURES

	*	 	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.

 

 

 

Transportation Agreement

THIS TRANSPORTATION AGREEMENT (this “Agreement”) is entered into as of July 31, 2006 between:

THE UNITED STATES POSTAL SERVICE, an independent establishment of the executive branch of the
United States of America established pursuant to 39 United States Code §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 and FedEx entered into a Transportation Agreement dated as of January 10, 2001
(“Original Agreement”) for the transportation and delivery of Products (as such term is defined in
this Agreement),

WHEREAS, USPS desires to provide for the transportation of Products in accordance with the
Operating Specifications and this Agreement (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.

	*	 	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.

 

1

 

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.

“Acceptable Dangerous Goods and Acceptable Hazardous Material” means those articles or substances
which satisfy the air transportation requirements for the transportation of Hazardous Goods set
forth in Chapter 601.10.0, of the Domestic Mail Manual and which are not required by applicable
federal regulation to be accessible to crew members during flight.

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

“Area Distribution Center” (ADC) or “Regional Distribution Center” (RDC) 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 ) or “Air Transfer Center” (ATC) 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.

	*	 	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.

 

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“Billable Volume” means the amount billable for FedEx Services calculated in accordance with the
provisions of Section 11.2 of this Agreement.

“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 20% 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% 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.

	*	 	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.

 

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“Committed Volume Schedule” means the schedule developed by FedEx as described in Section 3.4.0 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.

“Containerized Transport Vehicle” (CTV) means any truck that is used to transport ULDs.

“Contracting Officer” means the authorized representative of the USPS with a warrant to bind the
USPS.

“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 Invoiced Amount” means the FedEx invoice amount for the specified shipping day presented to
the USPS.

“Daily Reconciled Amount” means the invoice amount as agreed upon by the USPS and FedEx as a result
of the reconciliation process.

“Dangerous Goods” or “Hazardous Material” means, except for Acceptable Dangerous Goods or
Acceptable Hazardous Material, 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.

	*	 	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.

 

4

 

“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.

“Domestic Mail Manual” means the USPS Domestic Mail Manual in effect as of the date of this
Agreement.

“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.

“Exception Mail” has the meaning given in Sections 5.2.11 and 8.2.7 of the Operating
Specifications.

“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.

“Feeder"means an aircraft normally used for local transport (for carriage of cargo and/or
containers) to and from locations not scheduled to be serviced by primary aircraft from the Hub,
directly connecting these locations to the Hub.

“Feeder Locations” means those cities to which USPS volume is transported by FedEx via feeder
aircraft and which are listed in Attachment V to Exhibit A.

“Feeder Operating Plan” has the meaning given in Attachment V to Exhibit A.

“Governmental Body” means any:

	 	(i)	 	federal, state or local jurisdiction of any nature;
	 
	 	(ii)	 	federal, state or local government;
	 
	 	(iii)	 	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)	 	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.

	*	 	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.

 

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“Handling Unit” means a ULD, Mailbag, Tub, Mail Tray, Pallet, Outside or Registered Mail that
is individually processed by FedEx. The term “Handling Unit” does not include the contents of a
By-pass ULD. For purposes of payment, ULDs and Pallets will not receive a handling charge.

“Hazardous Materials” has the meaning set forth in the definition for Dangerous Goods.

“HEX 84 Scan” means the hub exception scan which is performed by FedEx on those Handling Units
which are routed by the USPS to an incorrect Hub and which is referenced in Section 8.5.

“Hub” means a central sort facility that supports multiple markets via air and ground networks
on a regional or national level by means of connecting flights and ground transportation.

“HUB Scan” means a scan performed by FedEx at a HUB.

“Interim Period” means the rolling eighteen month period for which the parties agree to the Interim
Period Commitment Volumes as set forth in Section 11.1(b) of this Agreement.

“Interim Period Committed Volumes” means the volumes that USPS is committed to providing FedEx and
that FedEx is committed to transporting for each Schedule Block the Interim Period as more fully
described in Section 11.1(b) of this Agreement.

“Inbound Market Volume” means all inbound Handling Units to a destination AMC or ADC.

“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.

“Live Animals” means animals accepted by the USPS in accordance with Chapter 601.9.3 of the
Domestic Mail Manual and which satisfy the requirements for transportation set forth in Attachment
VII to Exhibit A.

“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 which are used by USPS in the transportation of mail. 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.

	*	 	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.

 

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“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.

“Market Specific Service Level” has the meaning set forth in Section 8.5.

“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.

“National Disruption” means the declaration of a national disruption by FedEx in accordance with
its standard procedures for its national customer base [ * ].

“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.

"Non-Widely Observed Holiday” means Columbus Day, Veteran’s Day, President’s Day and Martin Luther
King Day.

“Offshore Locations” means [ * ].

“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.

“Original Agreement” means the Transportation Agreement dated January 10, 2001 between the
USPS and FedEx.

“Outbound Market Volume” means all outbound Handling Units originating from the geographic area
served by an AMC.

“Outsides” means individual mail piece, with dimensions no greater than 108 inches in combined
length and girth and with no single dimension greater than 84 inches which is not otherwise
containerized and must be processed as a Handling Unit.

	*	 	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.

 

7

 

“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.

“Perishables” means those items which are susceptible to decay, spoilage or destruction.

“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, 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.

“Products” means items tendered for transportation to FedEx by USPS under and according to the
terms of this Agreement.

“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.

“Registered Mail” means a mail piece which is mailed in accordance with the requirements of Chapter
501.2.0 of the Domestic Mail Manual.

“Scanning Specifications” means the specifications that are attached to the Operating
Specifications 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.

	*	 	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.

 

8

 

“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 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 3.4.0 of the Operating Specifications.

“Schedule Period Implementation Date” means the first day of scheduled flights during any ‘Schedule
Period.

“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 3.3.0 of the Operating Specifications.

“Security Protocol” means that document which sets forth the U.S. Postal Inspection Service’s
requirements for U.S. Mail Investigations and mail security while FedEx is transporting the Mail as
set forth in Exhibit F to this Agreement.

“Service Commencement Date” means September 25, 2006.

“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 Invoiced Amount” means the FedEx invoiced amount for the Shipping Period presented
to the Postal Service.

“Shipping Period Reconciled Amount” means the invoiced amount for the Shipping Period as agreed
upon by the Postal Service and FedEx as a result of the reconciliation process.

“Sort Location” means a FedEx ramp or Hub at which sorting of Handling Units and other cargo takes
place.

	*	 	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.

 

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“Surface Air Management System” means the USPS system which is located in the FedEx Memphis Hub and
used to process Exception Mail as provided in Sections 5.2.13 and 8.2.8 of the Operating
Specifications.

[ * ]

“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.

"Trucking Location” means those cities to which mail volume is transported via truck as described
in Attachment 1 to Exhibit B.

“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.

“Weekend Volume” means the combined volume tendered by USPS on Saturday and Sunday for the Day-turn
Operations.

ARTICLE 2

FEDEX SERVICES

	2.1	 	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
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 [ * ].
	 
	2.2	 	The parties agree that prior to the Service Commencement Date, the rights, remedies and
obligations of the parties with respect to transportation of Products by FedEx for the USPS
shall be governed by the Original Agreement including all amendments and addenda relating
thereto. Effective on the Service Commencement Date, the Original Agreement is hereby
terminated and superseded by this Agreement without costs owed to either party other than for
services already performed but not yet paid.

	*	 	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.

 

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The parties agree that except with respect to claims arising pursuant to Article 5 of the
Original Agreement, each party hereby, [ * ]

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 the 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.

	*	 	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.

 

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

	*	 	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.

 

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	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 7.4 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.

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

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	 	 	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
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.
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.

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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.

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 for FedEx Services in accordance with the
payment procedures set forth in Exhibit C and the rates in Exhibit B, without setoff or
adjustment.
	 
	7.4	 	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 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 the other Party..

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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 and the procedures set
forth in Exhibit G:

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(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 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:

[ * ] 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 18, [ * ] of product delivered prior to the
Market Service Commitment Time for the period December 19 through and including December 24
and [ * ] for the rest of December and [ * ] for January.

The parties agree that for the period December 19 through and including December 24, FedEx
will have the right to adjust the Market Service Commitment Time for the Night-turn
Operations by [ * ] provided that the

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revised Market Service Commitment Time shall not be more than [ * ] later than the
original Market Service Commitment Time. FedEx agrees to provide the USPS by December 1 of
each year with the [ * ] for the following December 19 through December 24.

(d) Should no Delivery Scan be found in the FedEx scan record for a Handling Unit
(excluding non By-Pass ULDs) for which a Possession Scan has been made (a “NDSP”), [ * ].
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 have agreed to establish a goal of [ * ] for the Day Network and [ *
] for the Night Network. FedEx and USPS will work jointly to determine which locations, if
any, should have a goal in excess of those percentages. If a location exceeds the
established
goal for the Schedule Period, FedEx will work with the local FedEx operators to provide an
action plan to improve performance. The parties acknowledge and agree that the [ * ] is
not to be used in the computation of the Service Level or the Market Specific Service
Levels. The parties will discuss methods to minimize this problem during the SWORD
Committee meetings referred to in Section 12.5.0 of the Operating Specifications.

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

(f) Except for the December Schedule Period and except for any Schedule Period in
which the Service Level for the network is less than [ * ], FedEx agrees to a
market specific destination performance measurement system (“Market Specific Service
Level”) for the Day-turn Operations as follows: For any destination market which falls
below the Market Specific Service Level for that Schedule Period except as set forth above
due to a FedEx controllable event (such as maintenance, crew, sort delays, etc.), FedEx
will [ * ].

(g) There shall be excluded from the calculation of the Service Level any Handling Units
[ * ].

(h) [ * ]

	8.6	 	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).

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ii). Complete and forward to the Contracting Officer or his designee two Finger
Print cards and a criminal background check 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 security
clearances will be granted in accordance with the Postal Service’s standard
policies.

	8.7	 	Effective with the March, 2007 Schedule Period, FedEx will provide an MD-10 or MD-11 from
Ontario or Los Angeles, California to Honolulu, Hawaii at the rates provided on Exhibit B.
	 
	8.8	 	FedEx agrees to accept for transport during the Night-turn Operations only, Perishables and
Acceptable Dangerous Goods and Acceptable Hazardous Materials, in accordance with the
requirements of Exhibit A and applicable Federal regulations.
	 
	8.9	 	FedEx agrees to accept for transport certain “live” animals as defined in the USPS Domestic
Mail Manual. The USPS and FedEx agree to develop procedures for the tender, loading
requirements and other administrative and operational requirements for the safe transport of
live animals through their systems. The parties agree that if at any time during the first
twelve months of the term of this Agreement, an Unacceptable Survival Rate of the Lives
tendered for transport during a Schedule Period occurs, a moratorium (not to exceed 30 days)
shall immediately go into effect at the option of either party. During the moratorium period,
the parties will meet to identify and implement corrective measures to
bring the survival rate to acceptable levels. For purposes of this Agreement, an [ * ]

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	8.10	 	FedEx agrees to accept for transport, on the Day-turn Network only, Registered Mail.
	 
	8.11	 	FedEx agrees to open a ramp in Mobile, Alabama in consideration for [ * ].

	8.12	 	(a) FedEx and USPS agree to form a team (the “Fuel Team”) comprised of finance, operations
and fuel procurement professionals from each organization that will study the current
methodology for the pricing of fuel under this Agreement. The Fuel Team shall research and
investigate alternatives to the current methodology to determine if opportunities exist to (i)
more closely reflect the actual cost and timing of fuel purchased by FedEx in order to perform
its obligations hereunder and (ii) reduce the overall cost of fuel through the direct purchase
by the USPS of fuel in one or more locations, while providing an adequate supply and
availability of fuel to enable FedEx to perform its obligations hereunder and to its other
customers.

In order to assist the Fuel Team in its efforts, FedEx will provide [ * ] for the [ * ]
months prior to the execution of this Agreement and for the [ * ] months thereafter that
details by month [ * ] such periods. The previous [ * ] months’ operational data will
be given to the Fuel Team members no later than [ * ] after the execution of this
Agreement. Not later than one week following the Fuel Team’s receipt of this information,
the Fuel Team will meet in person or via telephone to discuss that data. The parties
agree to meet in person or via telephone each month thereafter the initial meeting to
discuss the current operational data received.

The Fuel Team shall determine by not later than [ * ] whether a new pricing index exists
that satisfies the requirements of paragraph (b) below. In addition, as part of its
analysis of the pricing index, the Fuel Team will [ * ]. The non-fuel pricing shall be
increased by such amount and shall escalate in accordance with the procedures set forth in
Exhibit B, Sections A.1, A.3, B.1, B.4, and C.4.

If by [ * ], the Fuel Team has identified a new pricing index that satisfies the
requirements of paragraph (b) below, this Agreement will be modified to reflect the new
index. The new pricing index will be effective on the date specified in the modification
to the Agreement, but in no event will the change be effective retroactively. If the
parties cannot agree as to whether a new pricing index satisfies the requirements of
paragraph (b) the matter shall be finally resolved in accordance with the provisions of
Article 3 of this Agreement provided that the mediator will be an independent party with
expertise in the fuel industry.

The Fuel Team will also research [ * ] and shall be guided by the considerations set
forth in paragraph (c) below.

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(b) In determining whether the index for the purchase of fuel should be changed, the parties
shall review other indices and algorithms to be applied thereto (which algorithms must be
easily understandable and easily capable of implementation) to determine if a different
index more closely correlates to the price of fuel as compared to the current PPI index
referenced in Exhibit B. Any alternative index must [ * ].

(c) In determining whether [ * ] to be used by FedEx in the performance of its obligations
[ * ], the Fuel Team will consider [ * ]. If, in light of the foregoing considerations,
it is determined that USPS [ * ].

(d) The parties agree that on the [ * ] of the adoption of a new index and each [ * ]
thereafter, the parties may review the application of the index to determine whether the new
index has achieved the anticipated correlation to the cost of fuel. If the parties mutually
determine that the index has not achieved the anticipated correlation the parties will
re-form the Fuel Team in order to again study and make a recommendation for any adjustments
to the index. The parties agree that any adjustments to the index will be prospective from
the adoption of a new index and that retroactive adjustments will not be made.

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 comply in all material respects 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 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

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	 	 	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

[ * ]

	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.

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ARTICLE 11

OBLIGATIONS OF USPS

	11.1	 	(a) During the term of this Agreement, the average daily Minimum Guaranteed Volume
for the Day-turn Operations will be [ * ] cubic feet. This amount is calculated by
dividing the total volume measured on a cubic foot basis for the Day-turn Operation by the
total number of operating days for the Schedule Period (six days per operating week for
Day-turn minus the number of FedEx Holidays occurring during that Schedule Period). If during
any Schedule Period [ * ]. If during the Schedule Period a holiday is observed on
a weekend, the average weekend period will be adjusted to exclude the holiday from the
calculation. For the Night-turn Operations, the average daily Minimum Guaranteed Volume is
[ * ] with not more than [ * ] individual Handling Units for each
Schedule Period. This amount is calculated by dividing the total weight for the Night-turn
Operation to be moved during the Schedule Period by the total number of operating days for the
Schedule Period five days per operating week for Night-turn minus the number of FedEx Holidays
occurring during that Schedule Period).

(b) On or before the Service Commencement Date and for the Day-turn Operations only, the
USPS will submit to FedEx its Interim Period Committed Volume Request for each Schedule
Block from September 1, 2006 through March 31, 2008. Commencing March 1, 2007 and on the
first business day of each September and March thereafter, the USPS will submit its Interim
Period Committed Volume Request for the Schedule Blocks occurring thirteen through eighteen
months thereafter. Each Interim Period Committed Volume Request may be submitted by
providing a minimum volume request (which in no event shall be less than the Minimum
Guaranteed Volume) and a maximum volume request for each applicable Schedule Block in which
the range of cubic feet between the two amounts may not exceed [ * ]. If the
USPS fails to provide the Interim Period Committed Volume Request on any March 1 or
September 1, but in no event later than March 15 or September 15, as the case may be, the
Interim Period Committed Volume Request for the Schedule Periods during the Interim Period
that should have been contained in the request, shall be [ * ]. FedEx shall
accept or reject the Interim Period Committed Volume Request within thirty (30) days of its
receipt. If FedEx rejects the Interim Period Committed Volume Request, the parties shall
mutually agree on a revised Interim Period Committed Volume Request within thirty (30)
days. If the parties cannot agree within such thirty day period, the Minimum Guaranteed
Volumes will apply until the Parties come to an agreement. Upon acceptance by FedEx, the
Interim Period Committed Volume Request shall become the Interim Period Committed Volume for the
applicable Schedule Blocks; provided that, if USPS submitted the Interim Period Committed
Volume Request as a range, the Interim Period Committed

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Volume will be the minimum volume
level of the range as finally agreed. The Schedule Period Committed Volumes will be
calculated in accordance with Section 3.4.0 of the Operating Specifications but in no event
shall the Schedule Period Committed Volumes be less than the Interim Period Committed
Volumes.

	11.2	 	[ * ]

	11.3	 	FedEx shall not be required to transport more than [ * ] of the Schedule
Period Committed Volume for the Day-Turn Operations and [ * ] of the Night-turn
Operations Minimum Guaranteed Volume.

	11.4	 	USPS shall comply in all material respects with all laws and regulations that may be
applicable to this Agreement and to all transactions and activities to be performed hereunder.
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.

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

	11.6	 	USPS shall, unless otherwise mutually agreed by the parties, submit to FedEx not later than
60 calendar days prior to the implementation of any changes to the format of the Trans-Log
File, including changes to the layout, valid data values, or data definitions.

	11.7	 	USPS shall submit to FedEx any changes to the Domestic Mail Manual which could affect any
FedEx Services relating to the transportation of Registered Mail, Perishables, Acceptable
Dangerous Goods and Acceptable Hazardous Materials and Live Animals. The parties acknowledge
that FedEx’s agreement to transport such items is based upon the Domestic Mail Manual as in
effect on the date of this Agreement and the parties will discuss any affect that the changes
may have on the FedEx Services. If the parties cannot resolve any adverse affect caused by
changes to the Domestic Mail Manual, the parties will apply the Domestic Mail Manual as in
effect on the date of this Agreement.

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 or are in connection with:

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

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	 	(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 USPS 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 would be liable under federal law.

	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, costs, or expenses (including 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 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.

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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, 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.

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	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 govern the rights and obligations of the parties as to the FedEx
Services commencing as of the Service Commencement Date and shall expire on last tender by
FedEx of shipments on the last day of the September Schedule Period in 2013. Not later than
twenty-four (24) months prior to the expiration date, the Parties shall commence
discussions with a view to renewing this Agreement. 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.

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	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 subject to the payment by the terminating party to the
non-terminating party a termination fee of [ * ], payable upon the effective date of
termination.

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

ARTICLE 16

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, Transportation Portfolio; 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 written notice of such failure; or

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	 	(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 upon written notice to the
defaulting party in whole without demand or judicial resolution. Upon the occurrence of an
Event of Default specified in Section 16.1 (ii), the non-defaulting Party may exercise and
shall be entitled to any remedies available to it in law or in equity, including the right to
terminate this Agreement upon 365 days written notice subject to the agreement of the parties
to certain wind down provisions including a periodic reduction in the Minimum Guaranteed
Volumes applicable during the wind down period. If the parties cannot agree to the wind down
provisions, the parties will resolve the matter in accordance with the provisions of Article 3
of this Agreement.

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;
	 
	 	(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:

 

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	 	(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.
(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
volume 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 (g) of this
Agreement, except for National or Regional Disruptions and for the calculation of the Market
Specific Service Level, 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, and the Postal Service is excused from meeting its minimum volume commitment for the
identified period, the parties will meet to agree upon the pro-rata adjustments to be made.

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ARTICLE 19

STANDARD USPS CLAUSES

Contract Type

This Agreement is an indefinite quantity contract for the purchase of commercial services
pursuant to 39 Code of Federal Regulations, Part 601 et seq.

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 clause, other than those listed below (and as may be required by
a modification to this paragraph) in a subcontract. In particular, these clauses must appear in
those subcontracts approved by the USPS pursuant to Article 2.1:

	 	(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)
	 
	 	(4)	 	Clause 9-10, Service Contract Act

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

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	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.

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	 	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.

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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 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,

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	 	 	 	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.)
	 
	 	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.

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	 	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 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

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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 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.

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(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.

(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.

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	 	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 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

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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.

(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

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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.”

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	 	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.

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(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, 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

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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 $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.
	 
	 	s.	 	The parties agree that no wage determination will be attached to this Agreement.
FedEx will log onto to the Department of Labor’s website in order to access the applicable
wage determinations applicable to its covered workforce performing services under this
Agreement.

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Clause 9-12 Fair Labor Standards Act and Service Contract Act — Price Adjustment (Modified)

	 	a.	 	FedEx warrants that the contract prices 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, it is agreed that any increases in the contract price or unit price labor rates
are accounted for by way of the rate increases included within this contract.
	 
	 	d.	 	Not Applicable.
	 
	 	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, but only if in accordance
with other clauses of this contract.

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.

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	 	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.
	 
	 	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.

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	 	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.
	 
	 	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.

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	(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.
	 
	 	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.

Clause 2-22 Value Engineering Incentive

a. General.

The right of each party to improve its own methods for its own benefit, absent a change to
the obligations of the other party which requires an modification to this Agreement, and to
retain such savings for itself is not affected by this clause.
The supplier is encouraged to develop and submit Value Engineering Change Proposals (VECPs)
voluntarily. The supplier will share in savings realized from an accepted VECP as provided
in paragraph (h) below. No document submitted by Supplier shall be considered to be a VECP
unless supplier specifically marks

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on the document that it is to be considered a VECP and contains a statement that the
supplier intends the document to be a VECP subject to the provisions of this Clause of the
Agreement.

b. Definitions

(1) Value Engineering Change Proposal (VECP). A proposal that:

(a) Requires a change to the instant contract;

(b) Results in savings to the instant contract; and

(c) Does not involve a change in:

(i) Deliverable end items only;

(ii) Test quantities due solely to results of previous testing
under the instant contract; or

(iii) Contract type only.

(2) Instant Contract. The contract under which a VECP is submitted. It does not include
additional contract quantities.

(3) Additional Contract Quantity. An increase in quantity after acceptance of a VECP due to
contract modification, exercise of an option, or additional orders (except orders under
indefinite-delivery contracts within the original maximum quantity

limitations).

(4) Postal Service Costs. Costs to the Postal Service resulting from developing and
implementing a VECP, such as net increases in the cost of testing, operations, maintenance,
logistics support, or property furnished. Normal administrative costs of processing the
VECP are excluded.

(5) Instant Contract Savings. The estimated cost of performing the instant contract without
implementing a VECP minus the sum of (a) the estimated cost of performance after
implementing the VECP and (b) Postal Service costs.

(6) Additional Contract Savings. The estimated cost of performance or delivering additional
quantities without the implementation of a VECP minus the sum of (a) the estimated cost of
performance
after the VECP is implemented and (b) Postal Service cost.

(7) Supplier’s Development and Implementation Costs. Supplier’s cost in developing,
testing, preparing, and submitting a VECP. Also included are the supplier’s cost to make
the contractual changes resulting from the Postal Service acceptance of the
VECP.

c. Content. A VECP must include the following:

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(1) A description of the difference between the existing contract requirement and that
proposed, the comparative advantages and disadvantages of each, a justification when an
item’s function or characteristics are being altered, the effect of the change on the

end item’s performance, and any pertinent objective test data.

(2) A list and analysis of the contract requirements that must be changed if the VECP is
accepted, including any suggested specification revisions.

(3) A separate, detailed cost estimate for (a) the affected portions of the existing
contract requirement and (b) the VECP. The cost reduction associated with the VECP must
take into account the supplier’s allowable development and implementation costs.

(4) A description and estimate of costs the Postal Service may incur in implementing the
VECP, such as test and evaluation and operating and support costs.

(5) A prediction of any effects the proposed change would have on Postal Service costs.

(6) A statement of the time by which a contract modification accepting the VECP must be
issued in order to achieve the maximum cost reduction, noting any effect on the contract
completion time or delivery schedule.

(7) Identification of any previous submissions of the VECP to the Postal Service, including
the dates submitted, purchasing offices,contract numbers, and actions taken.

d. Submission. The supplier must submit VECPs to the contracting officer.

e. Postal Service Action

(1) The contracting officer will give the supplier written notification of action taken on
a VECP within 60 days after receipt. If additional time is needed, the contracting officer
will notify the supplier, within the 60-day period, of the expected date of a decision. The
Postal Service will process VECPs expeditiously but will not be liable for any delay in
acting upon a VECP.

(2) If a VECP is not accepted, the contracting officer will so notify the supplier,
explaining the reasons for rejection.

f. Withdrawal. The supplier may withdraw a VECP, in whole or in part, at any time before
its acceptance.

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50

 

g. Acceptance

(1) Acceptance of a VECP, in whole or in part, will be by execution of a supplemental
agreement modifying this contract and citing this clause. If agreement on price (see
paragraph h below) is reserved for a later supplemental agreement, and if such agreement
cannot be reached, the disagreement is subject to the Claims and Disputes clause of this
contract, or another clause of the contract dealing with disputes.

(2) Until a VECP is accepted by contract modification, both parties must perform in
accordance with the existing contract.

(3) The contracting officer’s decision to accept or reject all or any part of a VECP is
final and not subject to the Claims and Disputes clause or otherwise subject to litigation
under the Contract Disputes Act of 1978 (41 U.S.C. 601-613).

h. Sharing. If a VECP is accepted, the FedEx and the Postal Service shall negotiate their
respective shares of the contract savings. The contract savings are calculated by
subtracting the estimated cost of the performing the contract with the VECP, Postal Service
costs, and the allowable development and implementation costs from the estimated cost of
performing the contract with out the VECP. Profit is excluded when calculating contract
savings.

i. Data

(1) The supplier may restrict the Postal Service’s right to use any part of a VECP or the
supporting data by marking the following legend on the affected parts:

“These data, furnished under the Value Engineering Incentive clause of contract, may not be
disclosed outside the Postal Service or duplicated, used, or disclosed, in whole or in
part, for any purpose other than to evaluate a value engineering change proposal submitted
under the clause. This restriction does not limit the Postal Service’s right to use
information contained in these data if it has been obtained or is otherwise available from

the supplier or from another source without limitation.”

(2) If a VECP is accepted, the supplier hereby grants the Postal Service unlimited rights
in the VECP and supporting data, except that, with respect to data qualifying and submitted
as limited rights technical data, the Postal Service will have the rights specified in the
contract modification implementing the VECP and will appropriately mark the data.

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51

 

ARTICLE 20

APPLICABLE LAW

	20.1	 	This Agreement is made and shall be construed and interpreted in accordance with 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, novate, 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.

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

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52

 

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, Transportation Portfolio

 

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.

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53

 

ARTICLE 26

REPRESENTATIVES

	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 and a duly authorized Postal Service Contracting
Officer.

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54

 

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
a final and binding order 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 the parties shall
resolve the dispute in accordance with the provisions of Article 3 of this Agreement.

	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 Exhibits, attachments or incorporated by reference (other than the
Operational Specifications).
	 
	c.	 	The Operations Specifications.
	 
	d.	 	The Operating Plan.
	 
	e.	 	The Local Plan.

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55

 

IN WITNESS WHEREOF, the Parties have signed this Agreement in duplicate, one for each of
the parties, as of July 31, 2006.

	 	 	 	 	 
	 	 	THE UNITED STATES POSTAL SERVICE
	 
	 	 	 	 
	 

	 	By:
	 	/s/ LESLIE A. GRIFFITH
	 

	 	 	 	 
	 	 	Printed Name: Leslie A. Griffith
	 	 	Printed Title: Manager, Air Transportation
	 
	 	 	 	 
	 	 	FEDERAL EXPRESS CORPORATION
	 

	 	By:
	 	/s/ PAUL J. HERRON
	 

	 	 	 	 
	 	 	Printed Name: Paul J. Herron
	 	 	Printed Title: VP, Postal Transportation

	*	 	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.

 

56

 

EXHIBIT A

USPS Operating Specifications

	*	 	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.

 

 

 

Table of Contents

	 	 	 	 	 	 	 	 	 
	Section	 	 	Title	 	Page	 
	 	 	 	 	 
	 	 	 	 
	 	1.0	 	 	Introduction
	 	 	3	 
	 	2.0	 	 	Definitions
	 	 	3	 
	 	3.0	 	 	Forecasting Volume
	 	 	3	 
	 	4.0	 	 	Linehaul Requirements
	 	 	4	 
	 	5.0	 	 	Market Outbound Operating Plan — Day-turn
	 	 	5	 
	 	5.1	 	 	USPS Operational Requirements
	 	 	5	 
	 	5.2	 	 	FedEx Operational Requirements
	 	 	8	 
	 	6.0	 	 	Market Inbound Operating Plan — Day-turn
	 	 	11	 
	 	6.1	 	 	FedEx Operational Requirements
	 	 	11	 
	 	6.2	 	 	USPS Operational Requirements
	 	 	11	 
	 	7.0	 	 	FedEx Hub Requirements — Day-turn
	 	 	11	 
	 	8.0	 	 	Market Outbound Operating Plan — Night-turn
	 	 	12	 
	 	9.0	 	 	Market Inbound Operating Plan — Night-turn
	 	 	15	 
	 	10.0	 	 	FedEx Operational Requirements — Night-turn
	 	 	16	 
	 	11.0	 	 	Recourse Issues
	 	 	16	 
	 	12.0	 	 	Cooperation
	 	 	17	 
	 	13.0	 	 	Dangerous Goods, Registered Mail (RML) and Lives
	 	 	18	 
	 	 	 	 	 
	 	 	 	 
	Attachments	 	 	 	 

I — USPS Operating Plan — Day Product

II — USPS Operating Plan — Night Product

III —  Airworthiness Determination

IV —  Unacceptable Packages

V — Feeder Operating Plan

VI —  Scanning Specifications

VII — Dangerous Goods, Registered Mail and Live Animal Procedures

 

2

 

	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 July 31, 2006 (the “Agreement”) between FedEx and USPS. The Contracting
Officer is 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 3.3.0 and 3.4.0 at
the times specified in those sections. 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 118 calendar days prior to each Schedule Block Implementation Date, USPS will
deliver to FedEx the Schedule Period Request Forecast, as more fully described below. This
forecast details the specific Volumes by Market Lane that USPS requests FedEx to transport
during the Schedule Period. The aggregate volume requested by USPS will not be less than the
Interim Period Committed Volumes for that Schedule Period as set forth in the Agreement. If
USPS does not make the Schedule Period Request Forecast available 118 days before the Schedule
Period Implementation Date, the Schedule Period Request Forecast for that period shall be
deemed to be equal to previous year’s forecast for the related periods..
	 
	3.4.0	 	[ * ].
	 
	 	 	[ * ]:

	 	 	 
	[ * ]

	 	[ * ]
	[ * ]

	 	[ * ]
	[ * ]

	 	[ * ]
	[ * ]

	 	[ * ]

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3

 

	3.5.0	 	[ * ].
	 
	3.6.0.	 	[ * ].
	 
	3.7.0.	 	HOLIDAY PLANNING
	 
	3.7.1	 	FedEx US domestic operations are discontinued for the following days (“FedEx Holidays”):

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

	3.7.2	 	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

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Maximum Weight
	 	 	 	 	Cubic Foot Capacity	 	Approximate Tare	 	(lbs) Including
	ULD	 	IATA Cod	 	(Used for Billing	 	Weight (lbs)	 	Tare
	Full Contour
	 	SAA
	 	427
	 	575
	 	4890
	Full Contour 

Hazardous
	 	SAX
	 	418
	 	713
	 	4890
	Demi
	 	AYY
	 	202
	 	301
	 	2415

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4

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Maximum Weight
	 	 	 	 	Cubic Foot Capacity	 	Approximate Tare	 	(lbs) Including
	ULD	 	IATA Cod	 	(Used for Billing	 	Weight (lbs)	 	Tare
	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	 	 

	4.2.0	 	Long Range Planning.

USPS agrees to provide FedEx with its Committed Volume Requests on a rolling eighteen (18) month
basis as more particularly described in Section 11.1(b) of the Agreement.

	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.
Attachment I is the Day-Turn Operating Plan and will be provided by September 1, 2006. 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 21
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)
retention of Terminal Handling Service training records (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.
All ULDs will have a D&R Tag affixed thereon. Each AMC is limited to one demi container or
LD3 container as agreed to by both parties in the applicable matrix, which will be designated
as a Partial ULD. FedEx may refuse all additional Partial ULDs or loose Handling Units. All
ULDs must be Airworthy as determined in accordance with Attachment III to these Operating
Specifications. No more than one Partial ULD will be allowed at each location.

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5

 

	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.

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

	5.1.4	 	USPS will tender to FedEx any Perishables in accordance with appropriate packaging
requirements specified in Attachment IV.

	5.1.5	 	USPS will tender each Registered Mail receptacle to FedEx with an RML sticker affixed next
to the D&R Tag. USPS will not tender and FedEx will not accept any coded Outside shipments
for transport as Registered Mail.

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

	5.1.7	 	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 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.

	5.1.8	 	All Handling Units must have a D&R Tag affixed thereon 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. USPS will notify FedEx before making
any modifications to the Scanning Specifications of the D& R Tag. USPS will allow ample time
for FedEx to make the necessary system changes before implementing the modifications. For
those Handling Units which are tendered without a D&R Tag, FedEx may process such Handling
Units in accordance with Section 5.2.23 below.

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

	5.1.10	 	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.

	5.1.11	 	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.

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6

 

	5.1.12	 	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.

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

	5.1.14	 	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.

	5.1.15	 	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.

	5.1.16	 	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.

	5.1.17	 	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.

	5.1.18	 	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.

	5.1.19	 	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.

	5.1.20	 	USPS will make three 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

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7

 

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.

	5.1.21	 	USPS will tender to FedEx [ * ]of its ULD’s by 0400 and the remaining [ * ] by 0500.

	5.1.22	 	USPS will be limited to the following maximum volumes into and out of the following
Offshore Locations:

	 	 	 	 	 
	Location	 	Volume into	 	Volume out of
	[ * ]

	 	[ * ]
	 	[ * ]
	[ * ]

	 	[ * ]
	 	[ * ]
	[ * ]

	 	[ * ]
	 	[ * ]

	5.1.23	 	USPS agrees to provide and install a SAMS server in the Hub and to maintain the SAMS
system. In lieu of providing a SAMS server, the operating speeds of the SAMS units should be
increased so that each unit produces a D&R Tag at the rate of six (6) per minute. USPS shall also
furnish all supplies necessary for operation of the SAMS server, SAMS units and printers.
	 
	5.1.24	 	USPS agrees to provide all necessary SAMS processing training to those employees designated
by FedEx. During such training, USPS agrees to address the requirements set forth under the “User
Responsibility Agreement Statement” section of USPS Form 1357 and collect the signed forms from the
designated FedEx employees. Notwithstanding the provisions of Form 1357, USPS acknowledges and
agrees that it has no authority to discipline FedEx employees.
	 
	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 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.

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8

 

	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.

	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.

	5.2.11	 	USPS agrees that if the Weekend Volume it tenders to FedEx consists of roughly equal
amounts of volume for the Saturday and Sunday, FedEx may tender not less than [ * ] of the
Saturday volume to USPS on Saturday and, when combined with the amounts delivered on Saturday, an
amount equal to [ * ] (local time at the destination market) to USPS with the remaining total of
Saturday and Sunday volumes not later than the Sunday tender times set forth in Attachment 1 to the
Agreement. However, the parties agree that if USPS desires a Weekend Volume which consists of a
higher volume on Saturday than on Sunday, USPS may do so by indicating its intent when it submits
the Revised Schedule Period Request Forecast which is required to be submitted no later than 118
calendar days prior to each Schedule Block Implementation Date. In such event, FedEx will only be
required to tender not less than 35% of the aggregate Weekend Volume on Saturday and not less than
[ * ] of the aggregate [ * ]. The parties shall cooperate in good faith to identify those USPS
locations where the distribution pattern described in this paragraph will minimize inefficiencies
in each organization.

	5.2.12	 	If USPS tenders any of the following types of Handling Units, such items will be designated
as Exception Mail:

	 	(a)	 	A Handling Unit without a D&R Tag;

	*	 	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.

 

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	 	(b)	 	A Handling Unit with an Air Contract Transportation tag;
	 
	 	(c)	 	A Handling Unit which lacks any routing information;
	 
	 	(d)	 	A Handling Unit that has the routing information rendered illegible or which
becomes detached during operations; and
	 
	 	(e)	 	A Handling Unit which contains conflicting routing information within the D&R
Tag.

	5.2.13	 	FedEx agrees to process the Exception Mail by operating the Surface Air Management System
(“SAMS”) units located in the FedEx Memphis, Indianapolis and Oakland Hubs. FedEx agrees to
operate the SAMS units as follows:

	 	(a)	 	All Exception Mail which is processed prior to the down-time of the Hub’s
primary input belt will be provided with a new D&R Tag and moved on the same day;
	 
	 	(b)	 	Any Exception Mail which is not processed prior to the down-time of the Hub’s
primary belt will be moved the next business day, but in no event shall FedEx be
required to process more than 5,000 D&R Tags per operating day;
	 
	 	(c)	 	FedEx shall conduct SAMS processing six days per week, Tuesday through
Sunday;
	 
	 	(d)	 	One day each week, FedEx shall conduct a manual audit of the Exception Mail
which is processed in the SAMS unit for that day. The audit shall be performed on a
minimum of 12.5% of the Exception Mail and the following summary information will be
provided to the USPS:

	 	(i)	 	The origin zip code or origin AMC of the Exception Mail item;
	 
	 	(ii)	 	The nature of the irregularity that caused the Handling Unit
to be classified as Exception Mail; and
	 
	 	(iii)	 	The zip code of the destination and the three letter
identifier on the original D&R Tag.

	 	(e)	 	Any Exception Mail which is routed through the Memphis Hub’s west exception
slide where the human readable D&R Tag number is legible and a replacement bar code
can be created will be processed in accordance with normal operations and will not
receive a D&R Tag from the SAMS unit. In such event, no additional charge will be
assessed for such item.
	 
	 	(f)	 	Any Exception Mail which is unable to be processed due to the inoperability
or malfunction of the SAMS system shall be processed the following business day,
provided the SAMS system becomes operable. However, in the event the SAMS system is
inoperable the following business day, the additional Exception Mail will be loaded on
USPS supplied trailers and USPS will remove for relabeling. If the SAMS unit becomes
inoperable, FedEx shall immediately notify the USPS Manager at the FedEx Hub.
	 
	 	(g)	 	FedEx will charge USPS for the relabeling in accordance with Exhibit B.

	*	 	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.

 

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	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.
	 
	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 80% of the total USPS ULD’s.
FedEx will setup the sort operations to accommodate a minimum of 106 ADC splits 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. FedEx
Hubs will scan all By-pass ULD’s with a Hub Scan.

	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 processed as Exception Mail.

	*	 	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.

 

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	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. USPS will provide
transportation for such volume.
	 
	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.
Attachment II is the Night-Turn Operating Plan and will be provided by September 1, 2006. This
plan details, in 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 [ * ] times 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.
	 
	 	 	(d)

	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. USPS
will notify FedEx before making any modifications to the Scanning Specifications of the D & R
Tag. USPS will allow ample time for FedEx to make the necessary system changes before
implementing the modifications. For those Handling Units which are tendered without a D&R Tag,
FedEx may process such Handling Units in accordance with Section 8.2.7 below.

	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) any Unacceptable Package, as described in
Attachment IV.

	*	 	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.

 

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	8.1.6	 	USPS will tender to FedEx any Acceptable Dangerous Goods or Acceptable Hazardous Materials
at least [ * ] to the tender time specified in Attachment II. Acceptable Dangerous Goods
include toxic and infectious substances, radioactive materials and ORM-D as specified in the
FedEx Service Guide in effect at the time of shipment USPS agrees that each package which
contains Acceptable Dangerous Goods or Acceptable Hazardous Materials will have affixed to it
a declaration form and any required markings or labels. Each such package must be separately
tendered to FedEx and not placed in a ULD. USPS shall only tender items of Inaccessible
Dangerous Goods which are properly packaged in accordance with the FedEx Service Guide in
effect at the time of shipment and Section 601.10.0 of the Domestic Mail Manual.
	 
	8.1.7	 	USPS will tender to FedEx any Perishables in accordance with appropriate packaging
requirements specified in Attachment IV.

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

	8.1.9	 	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.

	8.1.10	 	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.

	8.1.11	 	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.

	8.1.12	 	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.
	 
	8.1.13	 	USPS agrees to provide and install a SAMS server in the Hub and to maintain the SAMS
system. In lieu of providing a SAMS server, the operating speeds of the SAMS units should be
increased so that each unit produces a D&R Tag at the rate of six (6) per minute. USPS shall
also furnish all supplies necessary for operation of the SAMS server, SAMS units and
printers.

	*	 	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.

 

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	8.1.14	 	USPS agrees to provide all necessary SAMS processing training to those employees
designated by FedEx. During such training, USPS agrees to address the requirements set forth
under the “User Responsibility Agreement Statement” section of USPS Form 1357 and collect the
signed forms from the designated FedEx employees. Notwithstanding the provisions of Form
1357, USPS acknowledges and agrees that it has no authority to discipline FedEx employees.
	 
	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	 	Unless an exception location is identified by the parties, 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.

	8.2.7	 	If USPS tenders any of the following types of Handling Units, such items will be
designated as Exception Mail:

	 	(a)	 	A Handling Unit without a D&R Tag;
	 
	 	(b)	 	A Handling Unit with an Air Contract Transportation tag;
	 
	 	(c)	 	A Handling Unit which lacks any routing information;
(d) A Handling Unit that has the routing information rendered illegible or which
becomes detached during operations; and
(e) A Handling Unit which contains conflicting routing information within the D&R
Tag.

	8.2.8	 	FedEx agrees to process the Exception Mail by operating the Surface Air Management System
(“SAMS”) units located in the FedEx Memphis, Indianapolis and Oakland Hubs. FedEx agrees to
operate the SAMS units as follows:

	*	 	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.

 

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	 	(a)	 	All Exception Mail which is processed prior to the down-time of the Hub’s primary
input belt will be provided with a new D&R Tag and moved on the same day;
	 
	 	(b)	 	Any Exception Mail which is not processed prior to the down-time of the Hub’s
primary belt will be moved the next business day, but in no event shall FedEx be
required to process more than 5,000 D&R Tags per operating day;
	 
	 	(c)	 	FedEx shall conduct SAMS processing five days per week, Monday through Friday;
	 
	 	(d)	 	One day each week, FedEx shall conduct a manual audit of the Exception Mail which
is processed in the SAMS unit for that day. The audit shall be performed on a minimum
of 12.5% of the Exception Mail and the following summary information will be provided to
the USPS:

	 	a.	 	The origin zip code or origin AMC of the Exception Mail item;
	 
	 	b.	 	The nature of the irregularity that caused the Handling Unit to be
classified as Exception Mail; and
	 
	 	c.	 	The zip code of the destination and the three letter identifier on
the original D&R Tag.

	 	(e)	 	Any Exception Mail which is routed through the Hub’s west exception slide where
the human readable D&R Tag number is legible and a replacement bar code can be created
will be processed in accordance with normal operations and will not receive a D&R Tag
from the SAMS unit. In such event, no additional charge will be assessed for such item.
	 
	 	(f)	 	Any Exception Mail which is unable to be processed due to the inoperability or
malfunction of the SAMS system shall be processed the following business day, provided
the SAMS system becomes operable. However, in the event the SAMS system is inoperable
the following business day, the additional Exception Mail will be loaded on USPS
supplied trailers and USPS will remove for relabeling. If the SAMS unit becomes
inoperable, FedEx shall immediately notify the USPS Manager at the FedEx Hub.
	 
	 	(g)	 	FedEx will charge USPS for the relabeling in accordance with Exhibit B.

	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 or designated agent 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.

	*	 	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.

 

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	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 unidentifiable USPS Night volume to the local USPS
employee.

	11.0.0	 	Recourse Issues

	11.1.0	 	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.

	11.2.0	 	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 have the right to refuse to
accept or tender back to USPS any Dangerous Goods or Hazardous Goods packages that are damaged
or that FedEx reasonably believes may compromise the safety of its operations. FedEx will
notify the USPS contact as specified in the Local Plan if the 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.
	 
	11.3.0	 	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.

	*	 	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.

 

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	12.0.0	 	Cooperation
	 
	12.1.0	 	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 updated quarterly.
	 
	12.2.0	 	The local USPS 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.
	 
	12.3.0	 	Local USPS 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.
	 
	12.4.0	 	Designated contact individuals from FedEx and USPS will resolve all day-to-day operational
issues including but not limited to —
	 
	12.4.1	 	Spot Opportunities to increase volume tendered to FedEx by USPS;
	 
	12.4.2	 	Overflow requests for special movements;
	 
	12.4.3	 	Service Levels and Performance; and
	 
	12.4.4	 	Revisions to finalized schedule period.
	 
	12.5.0	 	FedEx and USPS will designate a system wide operations review delegation (the “SWORD
Committee”) to address continuous improvement. The review committee will meet quarterly.
Discussions will include but will not be limited to:
	 
	12.5.1	 	Performance parameters;
	 
	12.5.2	 	Billing and IT issues;
	 
	12.5.3	 	Service opportunities;
	 
	12.5.4	 	Holiday and exception planning;
	 
	12.5.5	 	Volume adjustments

	*	 	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.

 

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	12.5.6	 	Long range planning/forecasts;
	 
	12.5.7	 	Changes to the Scanning Specifications; and
	 
	12.5.8	 	Proposals for methods of making operations more cost efficient for both parties.
	 
	12.6.0	 	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.
	 
	12.7.0	 	FedEx will provide office space in Memphis, Tennessee for four liaison employees of USPS.
	 
	13.0.0	 	Operational Requirements for the Shipment of Acceptable Dangerous Goods, Registered Mail
(RML) and Lives.
	 
	13.1.0	 	The transportation by FedEx of Acceptable Dangerous Goods and Acceptable Hazardous
Materials, Registered Mail and Lives shall be in accordance with the procedures set forth in
Attachment VII to this Exhibit A.

	*	 	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.

 

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ATTACHMENT I TO OPERATING SPECIFICATIONS

DAY-TURN OPERATING PLAN

[ * ]

	*	 	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.

 

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ATTACHMENT II TO OPERATING SPECIFICATIONS

NIGHT-TURN OPERATING PLAN

[ * ]

	*	 	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.

 

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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.

	*	 	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.

 

21

 

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.

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*:

	*	 	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.

 

22

 

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.

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.

	*	 	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.

 

23

 

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:

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.

	*	 	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.

 

24

 

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).

	*	 	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.

 

25

 

ATTACHMENT IV

TO 

OPERATING SPECIFICATIONS

UNACCEPTABLE PACKAGING

A. PACKAGING AND MARKING — GENERAL

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 infectious substances will be accepted only when shipped in a strong outer
shipping 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 and paper envelopes,. 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.
Any diagnostic specimens must be properly packaged in accordance with 49 CFR 173.134 and 173.199,
ICAO Packaging Instruction 650 and Domestic Mail Manual C023.8.0. and must have the shipper’s name
and address permanently affixed to the package.

FedEx will only accept shipments of firearms when (i) 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; and (2)
the shipper and recipient are of legal age as identified by applicable state law.. FedEx will
accept and deliver firearms between all areas served in the U.S. and Puerto Rico. Upon presenting
the package for shipment, the shipper is required to inform FedEx that the package contains a
firearm. Firearms may not be

	*	 	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.

 

26

 

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 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.

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” or “Refrigeration required”
FedEx does provide attention for 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.

B. PACKAGING AND MARKING — LIVE ANIMAL SHIPMENTS

	*	 	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.

 

27

 

Any mailing container used for mailable animals must be made of at least 275-pound test, double
wall, corrugated, weather-resistant fiberboard (W5c) or equivalent and must be adequately
ventilated. The container must be constructed to prevent escape of the animals while in the mail
and to preclude the container and its contents from being crushed in normal handling. The outside
of the container must include a return address and a description of the contents. A container
marked “If Undeliverable, Abandon” is not accepted.

C. PROHIBITED ITEMS

The following items are prohibited and will not be accepted:

a. Cash, currency, collectible stamps and coins.

b. Warm-blooded animals (e.g., hamsters, mice, rats, guinea pigs, rabbits, cats, dogs, squirrels,
parakeets and canaries) and 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.

d. Human corpses, human body parts, human embroyos or 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, except as provided in Section 9.3 of the Domestic Mail Manual.

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.

	*	 	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.

 

28

 

ATTACHMENT V TO OPERATING SPECIFICATIONS

FEEDER OPERATING PLAN

[ * ]

	*	 	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.

 

29

 

ATTACHMENT VI TO OPERATING SPECIFICATIONS

SCANNING SPECIFICATIONS

[USPS Logo]

USPS Engineering

Material Handling Technology

Dispatch and Routing Tag

Air Assignment Label

Specification

	*	 	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.

 

30

 

CONTENTS

	 	 	 	 	 	 	 	 	 	 	 
	1.0	 	 	 	Introduction	 	 	94	 
	 	 	1.1	 	Scope	 	 	94	 
	 	 	1.2	 	Background	 	 	94	 
	 	 	 	 	1.2.1
	 	Barcode Information	 	 	94	 
	 	 	 	 	1.2.2
	 	Human Readable Information	 	 	94	 
	2.0	 	 	 	Referenced Documents	 	 	96	 
	 	 	2.1	 	Government Documents	 	 	96	 
	 	 	 	 	2.1.1
	 	USPS Manuals	 	 	96	 
	 	 	2.2	 	Non-Government Documents	 	 	96	 
	 	 	 	 	2.2.1
	 	Specifications	 	 	96	 
	3.0	 	 	 	Requirements	 	 	97	 
	 	 	3.1	 	Description	 	 	97	 
	 	 	3.2	 	Performance	 	 	97	 
	 	 	3.3	 	D&R Label Layout	 	 	97	 
	 	 	 	 	3.3.1
	 	Barcode Location	 	 	97	 
	 	 	 	 	3.3.2
	 	Barcode 93 Contents	 	 	97	 
	 	 	 	 	3.3.3
	 	Barcode 128 Contents	 	 	101	 
	 	 	 	 	3.3.4
	 	Barcode 93 Dimensions	 	 	101	 
	 	 	 	 	3.3.5
	 	Barcode 128 Dimensions	 	 	102	 
	 	 	 	 	3.3.6
	 	Reflectance Specifications	 	 	103	 
	 	 	 	 	3.3.7
	 	Human Readable Information	 	 	103	 
	 	 	 	 	3.3.8
	 	Label Stock Specifications	 	 	105	 

	*	 	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.

 

 

 

FIGURES

	 	 	 	 	 	 	 
	Figure 3-1.

	 	Reserved	 	 	 	 
	Figure 3-2.

	 	D&R Label Layout, One Leg
	 	 	107	 
	Figure 3-3.

	 	D&R Label Layout, Two Legs
	 	 	108	 
	Figure 3-4.

	 	D&R Label Layout, Three Legs
	 	 	109	 
	Figure 3-6.

	 	D&R Label Sample, One Leg
	 	 	110	 
	Figure 3-7.

	 	D&R Label Sample, Two Legs
	 	 	111	 
	Figure 3-8.

	 	D&R Label Sample, Three Legs
	 	 	112	 
	Figure 3-9.

	 	HAZMAT/PERISH D&R Label Sample
	 	 	113	 

	*	 	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.

 

 

 

TABLES

	 	 	 	 	 	 	 
	Table 3-1.

	 	Base 36 Characters
	 	 	97	 
	Table 3-2.

	 	Base 36 to Base 10 Conversion Calculation
	 	 	98	 
	Table 3-3.

	 	Base 10 to Base 36 Conversion Calculation
	 	 	99	 
	Table 3-4.

	 	Mail Class Characters
	 	 	99	 
	Table 3-5.

	 	Base 42 Characters
	 	 	100	 
	Table 3-6.

	 	Base 10 to Base 42 Conversion Calculation
	 	 	100	 
	Table 3-7.

	 	Base 42 to Base 10 Conversion Calculation
	 	 	101	 
	Table 3-8.

	 	Unique Sequence ID Examples
	 	 	101	 
	Table 3-9.

	 	Face Stock Characteristics
	 	 	105	 
	Table 3-10.

	 	Adhesive Characteristics
	 	 	105	 
	Table 3-11.

	 	Liner Characteristics
	 	 	106	 

	*	 	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.

 

 

 

			
	1.0	 	Introduction

Scope

This document details specifications for the bar-coded D&R (Dispatch and Routing) Labels used in
the United Stated Postal Service STARSHIP Program. D&R Labels are used when assigning unit loads to
air transportation.

Background

The USPS is improving the quality of distribution and mail service via airlines by installing MPEs
(Mail Processing Equipment), such as SWYB (Scan-Where-You-Band) systems and others that generate
D&R labels, at new and existing mail facilities. The SWYB system prints a bar-coded D&R label,
which is affixed to a unit load at the time of flight assignment. A unit load is defined as a
half-MM tray, an MM tray, a tub, sack, pouch, or an outside.

Barcode Information

The D&R label consists of two barcodes, Code 93 and Code 128. The first 10 characters represented
by the Code 128 barcode are the same as the 10 characters represented in the Code 93 barcode.

Code 93

The Code 93 barcode data located on the lower half of the D&R label includes the following
information. See section 3.3.2 for complete definitions.

	 	•	 	Day of assignment and destination ZIP Code (SCF)
	 
	 	•	 	Mail class
	 
	 	•	 	Routing index number
	 
	 	•	 	Unique sequence number

Code 128

The 128 barcode data located on the top portion of the D&R label includes the following
information. See section 3.3.3 for complete definitions.

	 	•	 	Day of assignment and destination ZIP Code (SCF)

	*	 	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.

 

94

 

	 	•	 	Mail class

	 	•	 	Routing index number

	 	•	 	Unique sequence number

	 	•	 	Mailpiece weight

Human Readable Information

Human readable information on the label includes the following information. See section 3.3.5 for
complete definitions.

	 	•	 	NASS Code

	 	•	 	Bar Code Text (for the 128 barcode only)

	 	•	 	Mail Class

	 	•	 	BIN/Dock Number

	 	•	 	Air Flight Legs 1 – 3

	 	•	 	Departure time

	 	•	 	Arrival Time

	 	•	 	SWYB Node Address

	 	•	 	Departure Date

	 	•	 	Mailpiece Weight

	 	•	 	Destination ZIP Code

	*	 	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.

 

95

 

REFERENCED DOCUMENTS

Government Documents

The following documents, the most current issue available, form part of this specification:

USPS Manuals

Domestic Mail Manual (DMM)

Copies of the DMM may be obtained from:

Information Resource Management Department

USPS Headquarters

Washington, DC 20260-1571

Non-Government Documents

The following documents, the most current issue available, form part of this specification:

Specifications

Automatic Identification Manufacturers

AIM/USD-7: Automated Identification Manufacturers Uniform Symbol Description — CODE 93

AIM Documents are copyrighted and copies may be obtained from:

Automatic Identification Manufacturers, Inc.

634 Alpha Dr.

Pittsburgh, PA 15238

(412) 963-8588

	*	 	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.

 

96

 

REQUIREMENTS

Description

The labels must conform to the specifications of this document.

Performance

The barcode label shall meet or exceed all requirements specified in the AIM International
Symbology specifications document. In addition, the label must be in accordance with the
requirements specified in this document.

D&R Label Layout

Barcode Location

Figures 3-2, 3-3, 3-4, and 3-5 display the dimensions of the labels, and the location of the
information printed on them. Figures 3-6, 3-7, and 3-8 are examples of 1, 2, and 3 leg D&R labels.
Figure 3-9 is a sample of a HAZMAT/PERISH D&R label that happens to be a 2 leg HAZMAT label.

Barcode 93 Contents

The barcode located on the bottom of the D&R label is Code 93 consisting of ten (10)
alphanumeric characters.

	 	•	 	Characters 1-3 represent the SCF (Sectional Center Facility) and the
day of assignment.

	 	•	 	Character 4 is the Mail Class identifier.
	 
	 	•	 	Characters 5-8 represent an Index Number tied to the National Routing
Database maintained in St. Louis.
	 
	 	•	 	Character 9 & 10 are a unique sequence number.

SCF and Day of the Month

The first three characters represented by the barcode are encoded in base-36 format.
The first three characters of the barcode data represent the SCF and the dispatch day
of the month. The following character set is used for base 36 calculation:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Position
	 	 	0	 	 	 	1	 	 	 	2	 	 	 	3	 	 	 	4	 	 	 	5	 	 	 	6	 	 	 	7	 	 	 	8	 	 	 	9	 	 	 	10	 	 	 	11	 	 	 	12	 	 	 	13	 	 	 	14	 	 	 	15	 	 	 	16	 	 	 	17	 
	Character
	 	 	0	 	 	 	1	 	 	 	2	 	 	 	3	 	 	 	4	 	 	 	5	 	 	 	6	 	 	 	7	 	 	 	8	 	 	 	9	 	 	 	A	 	 	 	B	 	 	 	C	 	 	 	D	 	 	 	E	 	 	 	F	 	 	 	G	 	 	 	H	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Position
	 	 	18	 	 	 	19	 	 	 	20	 	 	 	21	 	 	 	22	 	 	 	23	 	 	 	24	 	 	 	25	 	 	 	26	 	 	 	27	 	 	 	28	 	 	 	29	 	 	 	30	 	 	 	31	 	 	 	32	 	 	 	33	 	 	 	34	 	 	 	35	 
	Character
	 	 	I	 	 	 	J	 	 	 	K	 	 	 	L	 	 	 	M	 	 	 	N	 	 	 	O	 	 	 	P	 	 	 	Q	 	 	 	R	 	 	 	S	 	 	 	T	 	 	 	U	 	 	 	V	 	 	 	W	 	 	 	X	 	 	 	Y	 	 	 	Z	 

Table 3-1. Base 36 Characters

	*	 	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.

 

97

 

Values are calculated as follows:

Day of the month multiplied by 1000, then add the SCF. This number (base 10) is then
converted to base 36. For example, SCF of 907 dispatched on the 23rd would be
calculated as follows:

23 X 1000 = 23000 + 907 = 2390710 à IG336

Table 3-2 demonstrates the calculation for converting base 36 number to the base 10.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 
	 	I = Position 18

	 	18 x 362 =
	 	 	23328	 	 	 	 	23328	 	 
	 	G = Position 16
	 	16 x 361=	 	 	576	 	 	 	 	576	 	 
	 	3 = Position 3

	 	3 x 360 =
	 	 	3	 	 	 	+	3	 	 
	 	 	 	 	 	 
	 	IG336
	 	=	 	 	 	 	 	 	2390710	 
	 	 	 	 	 	 

Table 3-2. Base 36 to Base 10 Conversion Calculation

To extract the dispatch day and the SCF from the barcode data, first convert the base
36 values to base 10, then divide the number by 1000. The integer number represents the
dispatch day and the decimal value is the SCF. For example, the value of IG3 is
extracted as follows:

IG336
à 2390710 / 1000 = 23.907

Where:

23 is the day of dispatch and 907 represents the SCF.

	*	 	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.

 

98

 

Table 3-3 depicts the conversion of the base 10 value to base 36.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 

	 	23907 / (36)2
	 	= 18.446
	 	à
	 	18 =
	 	 	 	I	 	 
	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	18 x
(36)2 =

	 	- 23328	 	 	 	 	 	 	 	 	 	 	 	 
	 	 

	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 

	 	597 / (36)1
	 	= 16.083
	 	à
	 	16 =
	 	 	 	G	 	 
	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	16 x (36)1=

	 	- 576	 	 	 	 	 	 	 	 	 	 	 	 
	 	 

	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 

	 	3
	 	= 3x 360
	 	à
	 	3 =
	 	 	 	3	 	 
	 	 	 	 	 	 
	 	2390710

	 	 
	 	 
	 	=
	 	 
	 	 	IG336
	 
	 	 	 	 	 	 

Table 3-3. Base 10 to Base 36 Conversion Calculation

			
	Note:	 	The first three characters apply to both the Code 128 and Code 93 barcodes
of the D&R label.

Mail Class

The fourth character of the barcode represents the Mail Class. Refer to examples in
Table 3-4 below.

	 	 	 
	Character	 	Description
	F
	 	1st Class

	P
	 	Priority

	E
	 	Express

	R
	 	Registered

Table 3-4. Mail Class Characters

	*	 	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.

 

99

 

For more information on Mail Class descriptions, refer to the Domestic Mail Manual (DMM). See
Section 2.1.1 of this document.

			
	Note:	 	The fourth character applies to the Code 128 and Code 93 barcodes of the D&R
label.

National Routing Index

The fifth through eighth characters of the D&R label barcode symbol represent the Index Number per
the National Routing Database. The Index number is a value that identifies the origin to
destination routing.

			
	Note:	 	Characters five through eight apply to both the Code 128 and Code 93
barcodes of the D&R label.

Unique Sequence Number

The ninth and tenth characters in the barcode represent a unique sequence identifier
for each Routing Index number. The unique sequence number is derived using the Binary
to Code 93 (BIN93) algorithm, a USPS defined base 42 encryption routine. The key’s
unique character set begins with the consonants, followed by the special characters
(-$/+%.), and ends with the vowels. The character set is:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Position

	 	 	0	 	 	 	1	 	 	 	2	 	 	 	3	 	 	 	4	 	 	 	5	 	 	 	6	 	 	 	7	 	 	 	8	 	 	 	9	 	 	 	10	 	 	 	11	 	 	 	12	 	 	 	13	 
	Character

	 	 	B	 	 	 	C	 	 	 	D	 	 	 	F	 	 	 	G	 	 	 	H	 	 	 	J	 	 	 	K	 	 	 	L	 	 	 	M	 	 	 	N	 	 	P	 	 	 	 	Q	 	 	 	R	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Position

	 	 	14	 	 	 	15	 	 	 	16	 	 	 	17	 	 	 	18	 	 	 	19	 	 	 	20	 	 	 	21	 	 	 	22	 	 	 	23	 	 	 	24	 	 	 	25	 	 	 	26	 	 	 	27	 
	Character

	 	 	S	 	 	 	T	 	 	 	V	 	 	 	W	 	 	 	X	 	 	 	Y	 	 	 	Z	 	 	 	0	 	 	 	1	 	 	 	2	 	 	 	3	 	 	 	4	 	 	 	5	 	 	 	6	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Position

	 	 	28	 	 	 	29	 	 	 	30	 	 	 	31	 	 	 	32	 	 	 	33	 	 	 	34	 	 	 	35	 	 	 	36	 	 	 	37	 	 	 	38	 	 	 	39	 	 	 	40	 	 	 	41	 
	Character

	 	 	7	 	 	 	8	 	 	 	9	 	 	 	-	 	 	 	$	 	 	 	/	 	 	 	+	 	 	 	%	 	 	 	.	 	 	 	A	 	 	 	E	 	 	 	I	 	 	 	O	 	 	 	U	 

Table 3-5. Base 42 Characters

Table 3-6 shows the calculation of representing base 42 value for a base 10 number:

12610 à FB42

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 
	 	F = position 3

	 	3 x 421 =
	 	 	126	 	 	 	 	126	 	 
	 	B = position 0

	 	0 x 420 =
	 	 	0	 	 	 	 	0	 	 
	 	 	 	 	 	 
	 	FB42

	 	=
	 	 	 	 	 	 	12610
	 
	 	 	 	 	 	 

Table 3-6. Base 10 to Base 42 Conversion Calculation

	*	 	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.

 

100

 

Table 3-7 illustrates the calculation of base 42 to base 10.

FB42 à 12610

	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 
	 	126 / (42)1

	 	= 3
	 	à
	 	3 =
	 	 	F	 
	 	+ 0 / (42)0

	 	= 0
	 	à
	 	0 =
	 	 	B	 
	 	 	 	 	 	 
	 	126

	 	=
	 	 	 	 	 	 	FB42	 
	 	 	 	 	 	 

Table 3-7. Base 42 to Base 10 Conversion Calculation

This method allows for 1,764 unique ID numbers for each Routing Index number. See Table 3-8, for
examples.

	 	 	 	 	 
	Base 10	 	Base 42/ Unique Character Set
	1	 	 	 	BC

	2	 	 	 	BD

	42	 	 	 	CB

	126	 	 	 	FB

	1764	 	 	 	UU

Table 3-8. Unique Sequence ID Examples

			
	Note:	 	Characters nine and ten apply to both the Code 128 and Code 93 barcodes of
the D&R label.

Barcode 128 Contents

The barcode located on the top of the D&R label is Code 128 consisting of twelve (12) alphanumeric
characters. The first 10 characters of the Code 128 represent the same information as the first 10
Code 93 alphanumeric characters (see descriptions of characters 1-10 above in sections
3.3.2.1-3.3.2.4). Code 128 consists of two additional characters listed below.

	 	•	 	Characters 11 & 12 represent the mailpiece weight.

Mailpiece Weight

The 11th and 12th characters in the barcode represent the 2-digit mailpiece
weight in pounds. These characters only apply to the D&R label’s Code 128 barcode located on the
top portion of the label.

Barcode 93 Dimensions

The following are specifications for the dimensions of the barcode 93 on the D&R label.

Nominal Narrow Element Width (X Dimension)

The X dimension is defined as the nominal width of a Code 93 Module (bar elements or space
elements). The X dimension for the bottom barcode is 0.020 inch (X = 0.020 inch). The X element
must be uniform within the code.

	*	 	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.

 

101

 

Check Characters

Two check characters (C and K) are used according to AIM/USD-7, Code 93 Specification.

Element Tolerances

The symbol shall consist of barcode elements that appear as solid bars and spaces
having well-defined edges. The minimum nominal value for the width of a single module,
W, is 0.020 inch.

Three different tolerances must be considered when printing Code 93 (USD-7). These are
described as follows:

b= The tolerance on bar and space widths

e= The tolerance between similar edges of adjacent bars within a
character

p= The tolerance applied to the dimension between the leading edge of
the first bar for one character and the leading edge of the next
character.

The distance between the trailing edge of the last bar in one character, and the leading edge in
the first bar of the next character, must be no less than 0.0058 inch (0.147 mm), whichever is
greater.

Barcode Height

The height of barcode 93 shall be 3.0 ± 0.02 inches.

Barcode 128 Dimensions

The following is the specifications for the dimensions of the barcode 128 on the D&R label.

Nominal Narrow Element Width (X Dimension)

The X dimension is defined as the nominal width of a Code 128 Module (bar elements or
space elements). The X dimension for barcode 128 is 0.015 inch (X = 0.015 inch). The X
element must be uniform within the code.

Check Characters

One check-character is used according to AIM International Symbology, Code 128
Specification.

Element Tolerances

The symbol shall consist of barcode elements that appear as solid bars and spaces
having well-defined edges. The minimum nominal value for the width of a single module,
W, is 0.020 inch.

Three different tolerances must be considered when printing Code 128 (USD-7). These are
described as follows:

b= The tolerance on bar and space widths

e= The tolerance between similar edges of adjacent bars within a
character

	*	 	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.

 

102

 

p= The tolerance applied to the dimension between the leading edge of
the first bar for one character and the leading edge of the next
character.

The distance between the trailing edge of the last bar in one character, and the
leading edge in the first bar of the next character, must be no less than 0.0058 inch
(0.147 mm), whichever is greater.

Barcode Height

The height of top 128 barcode shall be 0.50 ± 0.02 inches.

Reflectance Specifications

The reflectance specifications described in the following sub-sections apply to both barcode 93 and
barcode128.

Maximum Bar Reflectance (RB)

RB (MAX) measured using the Envelope Reflectance Meter at 650 nanometer (nm)
shall be less than 30 percent.

Minimum Space Reflectance (RS)

RS (MIN) measured using the Envelope Reflectance Meter at 650 nm shall be
greater than 70 percent.

Minimum Bar-Space Reflectance Difference (MRD)

The MRD shall be greater than 40 percent.

MRD =
RS (MIN) - RB
(MAX)

Quiet Zone

A quiet zone is required on the left and right sides of the barcode, no less than 0.250 inch wide,
extending from the top to the bottom of the barcode. The quiet zone shall satisfy the criteria for
space reflectance, and must be free of spots.

Human Readable Information

Bar Code Text

The barcode text is a 12 character alphanumeric representation of the barcode areas. The character
density is 12.97 characters per inch and the character height is 0.094 + 0.010 inch.

Air Flight Legs 1 Through 3

	 	 	 	The Air Flight legs 1-3 fields contain all air flight carrier and route information. If one
flight is required, that information is presented as shown in Figure 3-2. If a transfer is
required, the two flights are presented as shown in Figure 3-3. If 2 transfers are required,
the 3 flights are presented as shown in Figure 3-4. The originating NASS codes are included
for all flight legs.	 

For labels with direct or 1 and 2-leg flights, the character density is 8.30 characters per inch
and the character height is 0.28 + 0.01 inch. See Figures 3-2 and 3-3.

	*	 	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.

 

103

 

For labels with 3-leg flights, the character density is 8.30 characters per inch and the character
height is 0.135 + 0.01 inch. See Figure 3-4. Marking to be left justified from left side
of barcode and is not to exceed width of barcode.

Weight

The weight field (WGT:) contains the weight of the mailpiece rounded to the nearest pound. For
mailpieces over 99lbs, the weight is still contained in the weight field, but the human readable
barcode contains zeroes instead of the actual weight for the 11th and 12th
characters (see section 3.3.3.2 of this document for more information). The character density is
16.7 characters per inch and the character height is 0.070 + 0.002 inch. Marking to be left
justified from left side of barcode.

Arrival Time

The Arrival Time field (AR:) contains information describing the time and city or airport of
arrival. The character density is 16.7 characters per inch and the character height is 0.070
+ 0.002 inch. Marking to be left justified from left side of barcode.

Leave Time

The Leave Time field (LV:) contains information representing the time and city or airport of
departure. The character density is 16.7 characters per inch and the character height is 0.070
+ 0.002 inch. Marking to be left justified from left side of barcode.

MPE Identification and Origin

MPE (Mail Processing Equipment) identification is contained in the origin field. The designation
should uniquely identify the facility and MPE. The field contains a maximum of 11 characters that
are right justified. For example, the ARCNET Node address can be used for this purpose.

In the sample in Figure 3-6, the origin field contains ORG: IAD: 18. The letters represent the
place of origin and the numbers identify the specific MPE. The character density is 16.7
characters per inch and the character height is 0.070 + 0.002 inch. Marking to be left
justified from left side of barcode.

Departure Date

The Departure Date represents the day a mailpiece is designated to depart its’ original
destination. This date field contains a maximum of 8 characters that are left justified. The
character density is 12.81 characters per inch and the character height is 0.094 + 0.005
inch.

NASS Code

The NASS (National Air and Surface System) code is the three-character alpha destination
airport/city representation for the mail, such as LAX. It is determined by the destination ZIP
Code. The character density is 3.20 characters per inch and the character height is 0.355 +
0.005 inch.

	*	 	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.

 

104

 

Mail Class

The Mail Class field contains the mail class information, such as F, which represents First Class.
The character density is 5.06 characters per inch and the character height is 0.287 + 0.005
inch.

Bin/Dock Number

The Bin/Dock number is a two (2) digit inverted numeric field available to the mail facility for
assistance in handling processed mail. The character density is 6.75 characters per inch and the
character height is 0.177 + 0.005 inch.

HAZMAT or PERISH In Place of Bin/Dock Number

If the mailpiece has hazardous or perishable contents, the words HAZMAT or PERISH will be printed
in place of the Bin / Dock Number space. The character density is 4.34 characters per inch and the
character height is 0.275 + 0.005 inch. Figure 3-9 shows a HAZMAT label sample.

Destination ZIP Code

The destination ZIP Code is a three-digit code that identifies ZIP Codes. The character density is
4.3 characters per inch and the character height is 0.275 + 0.005 inch.

Label Stock Specifications

The label shall have the following face, adhesive, and liner specifications.

Face Stock

The Face stock shall have the following characteristics

	 	 	 
	Type	 	High Speed Thermal Paper
	Caliper

	 	0.0035” ± 10%
	Basis Weight

	 	44lb / 3000 ft2 ± 10%
	Color

	 	White
	Image

	 	Black
	Background Reflectance

	 	80% minimum at 633 nanometers
	Print Constant Signal

	 	85% minimum at 633 nanometers
	Dimensions

	 	3.125 +0.125 / -0.000 x 5.00 +0.25 / -0.00 inches

Table 3-9. Face Stock Characteristics

Adhesive

The adhesive shall have the following characteristics

	 	 	 
	Type	 	Removable Acrylic
	Caliper

	 	0.0004” ± 10%
	Basis Weight

	 	7.0lb / 3000 ft2 ± 10%
	Peel Release

	 	10 – 50 g (2” width, 180°, 300 ipm)
	Adhesion

	 	Adhesiveness must be strong enough to adhere to the
polyurethane tub lid when applied by the applicator on the
AAA systems, but permit the removal from corrugated cardboard
sleeves of the MM Tray without extensive damage to the
sleeve.

Table 3-10. Adhesive Characteristics

	*	 	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.

 

105

 

Liner

The Liner shall have the following characteristics

	 	 	 
	Type	 	Semi-bleached Kraft, CIS Silicone
	Caliper
	 	0.0024" ± 10%
	Basis Weight

	 	42.0 lb / 3000 ft2 ± 10%

Table 3-11. Liner Characteristics

Storage

All label Stock characteristics shall be retained after 6 months of storage in the original
container, when stored in an environment having a temperature of -40° to 120° F, and relative
humidity of 5 to 95%.

	*	 	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.

 

106

 

[Diagram of label]

Figure 3-2. D&R Label Layout, One Leg

	*	 	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.

 

107

 

[Diagram of label]

Figure 3-3. D&R Label Layout, Two Legs

	*	 	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.

 

108

 

[Diagram of label]

Figure 3-4. D&R Label Layout, Three Legs

	*	 	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.

 

109

 

[Scanned picture of label]

Figure 3-6. D&R Label Sample, One Leg

	*	 	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.

 

110

 

[Scanned picture of label]

Figure 3-7. D&R Label Sample, Two Legs

	*	 	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.

 

111

 

[Scanned picture of label]

Figure 3-8. D&R Label Sample, Three Legs

	*	 	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.

 

112

 

[Scanned picture of label]

Figure 3-9. HAZMAT/PERISH D&R Label Sample

	*	 	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.

 

113

 

ATTACHMENT VII TO OPERATING SPECIFICATIONS

DANGEROUS GOODS, REGISTERED MAIL AND LIVE ANIMAL

PROCEDURES

DANGEROUS GOODS (DG)

Beginning with the October 2006 schedule block, FedEx will accept dangerous goods (DG) from the
USPS for transportation through the FedEx network. Dangerous goods will be accepted as a night only
(Mon-Fri) movement. FedEx will only accept inaccessible dangerous goods from the USPS based on
USPS Domestic Mail Manual, section 601.10, as stated on June 19, 2006 with the following
exceptions: 1). USPS must comply with FedEx variations to the IATA DG regulations as stated in the
Variations section of the regulations. 2). FedEx will not accept any Used Sharps. Any future
changes will be reviewed and must be acceptable to FedEx prior to implementation.

Due to FAA paperwork and container build up requirements at FedEx ramp locations, the tender of all
DG will be no less than two hours prior to aircraft departure. The destination tender of DG will
be with scheduled mail tender. FedEx reserves the right to reject or tender back any shipment that
is damaged or may compromise the safety of or have a negative impact on any FedEx operations.

REGISTERED MAIL (RML)

Beginning with the October 2006 schedule block, FedEx will change from the specific market test
phase of transporting USPS registered mail to system-wide transportation of registered mail.
Registered mail will be accepted on the Tuesday through Sunday daysort operations only. FedEx will
not accept any Coded Outside shipments. All other Outsides must have RML stickers attached,
preferably next to the D&R tag.

The Registered mail process will involve a tender from the USPS to the THS. The THS will build
“mixed” or “bypass” containers. Trucking markets will tender direct to the designated inbound hub.
RML containers will be part of the matrix plus flex and will be tendered based on the AOP.
Destination tender of RML will be to the THS following normal tender procedures.

LIVES

Beginning with the October 2006 schedule block, FedEx will accept Live Animal shipments from the
USPS for transportation through the FedEx network. Live Animal acceptance is per USPS Domestic Mail
Manual, section 9.3, as stated on June 19, 2006 for live animal movement by “air only”. Packaging
and tendering procedures by the THS are attached as Schedule 1. Any future changes will be
reviewed and must be acceptable to FedEx prior to implementation.

	*	 	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.

 

114

 

Live shipments will be accepted on the day network Tuesday through Saturday and the night network
Monday through Friday only. Due to potential extended delivery times, FedEx will not accept any
Live Animal shipments the day before a holiday. FedEx reserves the right to reject or tender back
to USPS any Live Animal shipment that is damaged or may compromise the safety of or have a negative
impact on any FedEx operations. To protect the shipment contents, Live Animals will only be
planned to move on FedEx aircraft. Based on potential system form changes to trucking lanes, FedEx
reserves the right to restrict or modify lane flows on a monthly basis. Live Animal volume should
be planned within the USPS forecast provided to FedEx. The cubic feet required for Live Animals
will be part of the monthly matrix plan.

The USPS will be required to supply the THS and FedEx hub/ramp locations with spacers or other
required equipment for the loading of Live Animal shipments as needed. The USPS will also be
required to supply the THS and FedEx hub/ramp locations a determined number of coverings of loosely
woven material for covering of Lives shipments in weather events to/from THS and aircraft at ramp
locations and to/from aircraft at all FedEx hub locations. FedEx will not be responsible for loss
claims. The destination tender of Lives will be with the scheduled mail tender.

USPS shall ensure that the THS follow the procedures set forth in Schedule 1 to this Attachment VII
when tendering live animal shipments to FedEx.

Day Network

All animal shipments must be tendered to FedEx on an aircraft pallet per the market
aircraft type (see Table 1.), except for Bee shipments tendered for 727 aircraft as stated
in the THS Tender Document. The pallet types and aircraft assignment per market will be
provided by FedEx at each local DAGGER meeting prior to a new schedule block. Tender will
be at the final published AOP time.

Night Network

FedEx will accept a maximum of 200 cf (approximately 20 pieces) of Live Animal pieces for
loose loading at published AOP tender. For more than 200 cf, USPS will be required to
tender no less than 2 hours prior to schedule aircraft departure. More time maybe required
based on volume and local ramp circumstances.

For Day and Night Network tender, all bee shipments must be tendered separately from the other
shipments so it can be loaded in the correct compartment of the aircraft due to crew safety
reasons.

	*	 	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.

 

115

 

Table 1. Pallet to Container Equivalents.

All pallets must be netted. Lives cannot be covered with plastic.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Base	 	 	 	 	 	 	 	Max	 	 
	 	 	 	 	ULD	 	Dimensions	 	Max	 	Billable	 	Average	 	Gross	 	 
	Aircraft Type	 	Pallet Type	 	Equivalent	 	(inches)	 	Height	 	Cubic Feet	 	Tare	 	Weight	 	Comments
	 
Narrow Body
	 	PAG, P1P

PLA, P9P
	 	SAA

AWX(1)
	 	88“x125"

60.4“x125”
	 	53"

53”
	 	427

278
	 	240 incl net

216 incl net
	 	13,300

7,000
	 	B27 height code

B27 height code
	 
Wide Body
	 	PMC, PMP, P6P, P6Q

PLA, P9P
	 	AMJ

Set of LD3’s
	 	96“x125"

60.4“x125”
	 	72"

64"(2)
	 	590

278
	 	260 incl net

216 incl net
	 	15,000

7,000
	 	NS2 height code

LD height code

(1) Only available on limited aircraft

(2) Must be built to 64” tall.

	*	 	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.

 

116

 

SCHEDULE 1 TO ATTACHMENT VII

THS Tender Document

Live Animal Procedures

Operational Overview:

The USPS will tender live animal shipments to the Terminal Handling Service Providers (THS)
starting with the October 2006 schedule for movement by FedEx Express. Live Animals will move
through the FedEx system Tuesday through Saturday on the Day Network and Tuesday through Friday on
the Night Network. Live Animals will not move on Sunday, or the day prior to a FedEx observed
holiday. The THS will be required to load and tender the live animals in accordance with the
procedures below.

Load Requirements:

Lives must be loaded on an aircraft pallet and can never be loaded in an aircraft container. The
preferred pallet for all aircraft types is the PLA pallet (60.4” X 125”). Refer to table 1 for
height restrictions per aircraft type. If volume dictates a larger pallet, refer to Table 1 based
on aircraft type for your location. Consult the FedEx ramp for guidance.

The THS must build one PLA pallet Tuesday through Saturday for each Hub if there are Live Animal
shipments moving to one of the FedEx Hubs that day. FedEx shall be responsible for balancing the
supply of pallets.

Live Animals will be sorted within the FedEx system through the three Hubs: MEM, IND, and OAK. The
safest route for the animals will be determined and indicated by URSA. The URSA on the D&R tag
indicates the sort location for pallet load assignment.

     *Bee shipments must be tendered to FedEx separately. Tender procedures are as follows per
aircraft type:

	 	•	 	727 Aircraft — Up to 5 Bee packages can be tendered loose to FedEx. More than 5
Bee packages have to be tendered in an AYY container for load in the belly
compartment. The container can contain other regular mail products to fill the cube
of the container. The bee pieces are the last items loaded at the doorway of the
container and the container door should remain off for proper air flow. Notification
of the bee shipment will be indicated on the Live Animal Acceptance Checklist (covered
in Tender section).
	 
	 	•	 	Widebody aircraft (A310, A300, MD/DC aircraft) — Bee shipments are loaded on a PLA
pallet for load in the belly compartments. Pallets must be built per the pallet
building guidelines below. A D&R tag for the pallet is attached to the cargo net.
Bees can be loaded with other compatible animal shipments on the PLA pallet since the
pallet will be loaded in the belly compartment.

	*	 	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.

 

117

 

Notification of the bee shipment will be indicated on the Live Animal Acceptance
Checklist (covered in Tender section).

General Handling -

	 	•	 	Live animal shipments cannot be placed inside closed FedEx ULDs

	 	•	 	Live animal shipments must be shipped via pallet

	 	•	 	Live animal shipments must be maintained in an upright position throughout the
transportation process to prevent fatality

	 	•	 	Do not accept or load any shipment that appears to be damaged

	 	•	 	Always ensure 4” of air space around the perimeter of stacks of boxes to ensure
adequate ventilation

	 	•	 	Do not allow Live animal shipments to remain in direct sunlight for extended
periods

	 	•	 	Do not allow Live animal shipments to remain in drafty areas or exposed to
exhaust

	 	•	 	Do not place Live animal shipments near dry ice shipments

	 	•	 	Do not cover Live animal shipments with any plastic

	 	•	 	Do not place any other cargo on top of Live animal shipments

Pallet Building — (See Pallet Building Participate Manual for more details)

	 	•	 	Pallet building for mail tender through FedEx network must be performed per
Pallet building training provided by FedEx Training Department

	 	•	 	Four inch spacers must be used around each stack of Lives to allow air flow in
and around the Lives boxes

	 	•	 	Ensure there is a minimum of 4” between Lives boxes and the edge of the pallet

	 	•	 	When building an entire pallet of Lives, boxes are stacked to a maximum of nine
high or the maximum pallet height per aircraft type which ever is less (see Table
1)

	 	•	 	Stack Lives boxes so they remain level at all times

	 	•	 	Never place plastic under cargo net covering any Lives shipments when building
a pallet

	 	•	 	Do not load any incompatible products (i.e. dangerous goods) on the same pallet
position as Lives

	 	•	 	When topping off a package built pallet with Lives, cover packages with plastic
and netting to secure before building the Lives on top. Net Lives separately
secured to the previously built pallet as not to crush the Lives but to prevent
movement

	*	 	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.

 

118

 

Container Destination and Routing Tags (D&R tags):

Each pallet must have a container D&R tag attached to the cargo net. The D&R tag is attached to a
manila tag (supplied by USPS) and secured to the net with a cable tie. Animal pallets can be
bypass or mixed.

Tender:

Live Animals are the last items to be tendered based on the market tender times. Animal tender
times and location of the tender at the FedEx ramp is agreed upon at the DAGGER meeting. The
tender location should be out of the direct weather elements. During inclement weather conditions
for tug and dolly operations, animal pallets will be covered by a breathable tarp during transport.
The tarp will be removed by the THS driver once the pallet is tendered at the designated location
out of the elements at the FedEx ramp.

The THS driver and a designated FedEx representative will inspect the animal pallet for acceptance
prior to THS driver’s departure. A Live Animal Acceptance Checklist will be filled out and signed
by both the THS and FedEx employee. The acceptance inspection will include: airworthiness of the
pallet, proper load procedures, and condition of packaging. FedEx has the right to deny acceptance
of the entire pallet if the pallet is non-airworthy, load procedures are not followed per
instructions in the pallet training material. FedEx has the right to deny an individual piece if
the packaging is compromised.

	*	 	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.

 

119

 

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 amount of Billable Volume. Non-fuel
rates apply to ULD’s and Trucking Loose. The initial rate for each tier will be as set
forth under the Column heading Year 1 and will escalate [ * ] per year beginning with the
September Schedule Period, commencing with the September 2007 Schedule Period

The rates will be based on average daily cubic feet used per Schedule Period based on the
following table:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Average Daily Cubic Feet	 	 
	 	 	Tier Range	 	Non Fuel Rate
	 	 	From	 	To	 	Year 1	 	Year 2	 	Year 3	 	Year 4	 	Year 5	 	Year 6	 	Year 7	 	Year 8
	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]

	*	 	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.

 

120

 

	 	a.	 	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 [ * ] (“Conversion Factor”) and then
multiplied by the appropriate non-fuel transport pricing rate. FedEx and USPS shall
review the Conversion Factor on an annual basis to determine whether the [ * ]
should be adjusted.
	 
	 	b.	 	Partial ULD’s will be credited at [ * ] of the non-fuel transport rate for the
container identified in the applicable matrix.

2.  Fuel transport pricing will be based on the amount of Billable Volume. Fuel rates apply
to ULD’s and Trucking Loose. 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 [ * ]

	 	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 [ * ]

The fuel transport credit for Partial ULD’s will be as follows:

	*	 	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.

 

121

 

Fuel Adjustment Factor x Base Fuel Transport Price [ * ] x .50

For Handling Units that are accepted by FedEx as bulk loaded (not in ULDs) the
Conversion Factor calculations will be made in the same manner as provided under
paragraph A.1.a of this Exhibit.

In the event there are fewer than 1,000 records in 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.

3.  Package handling pricing on individual Handling Units, excluding ULDs, will be based on
units unloaded, sorted, or reloaded by FedEx. The initial rate will be as set forth
under the Column heading Year 1 in the table below and will escalate [ * ] each year
beginning with the September Schedule Period commencing with the September 2007 Schedule
Period.

The rates will be based on the following table:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Average Daily Cubic Feet	 	 
	 	 	Tier Range	 	Non Fuel Rate
	 	 	From	 	To	 	Year 1	 	Year 2	 	Year 3	 	Year 4	 	Year 5	 	Year 6	 	Year 7	 	Year 8
	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]

	*	 	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.

 

122

 

	 	a.	 	The package handling fee will be charged to every Handling Unit, excluding ULDs, 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. The process for determining the credit
entails reviewing the list of containers reported by FedEx as having been opened (“FedEx
List”). FedEx will issue a credit to USPS for all items reported on the FedEx List. The
credit will be made for the amount of handling charges assessed to USPS as based on the
equivalent number of packages in the container type reported on the FedEx List.
Equivalent packages given in the table below.

	 	 	 	 	 
	 	 	 	 	Number of
	Container	 	Cu/ft	 	Handling Units
	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

	*	 	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.

 

123

 

The FedEx List will then be compared to the list developed by USPS which reflects the D&R
Tags of each package scanned into a bypass container (“USPS List”). The bypass containers
identified on the FedEx List will be compared to those reported on the USPS List and those
appearing on both lists will be deleted from the USPS List to avoid the issuance of a
duplicate credit. Subsequently, the USPS List will be reviewed and FedEx will then issue a
credit in the amount of [ * ] of the handling charges for the packages reported on the
remaining USPS List; provided, however, that no credit will be issued for any bypass
containers destined to a Trucking Location or any bypass container with less than 10 pieces
as indicated on the USPS List. The parties agree that the percentage amount to be credited
may be revised based on mutual agreement.

	 	b.	 	USPS shall be invoiced a handling charge of [ * ], for packages unloaded from By-pass
ULDs which are destined to a Trucking Location. FedEx and USPS agree to the following
methodology to simplify invoicing: FedEx will invoice USPS on the daily invoice at the
contractual rate for all Handling Units, including packages unloaded from a By-Pass ULD
destined for a Trucking Location. The List of Trucking Locations is provided on Attachment 1.

FedEx will then calculate a credit at the end of each day. The credit shall equal the
difference between the Agreement’s base handling charge and the trucking location handling
charge for the packages unloaded from a By-Pass ULD destined for a Trucking Location. The
number of packages to be credited will be determined by taking the number of By-Pass ULD’s
destined for a Trucking Location per Schedule Period as determined by the D&R Tags scanned
multiplied by the packages per ULD type in the above table.
	 
	 	c.	 	USPS and FedEx each maintain lists of the type of ULD used to transport product tendered
under the Agreement. USPS’s list is known as the assignment log and it lists the D&R Tag
number for each ULD on such log FedEx obtains the ULD type when it performs a pick-up scan
of the D&R tag on a ULD (“FedEx ULD Type”). The D&R tag numbers on such ULD’s are also
listed on the FedEx Flight Data Record (“FDR”) The FedEx ULD Type is used to bill the
cubic footage pursuant to the table above. In order to resolve discrepancies between ULD
type as reported between FedEx and USPS, the parties agree that the FDR shall prevail. For
those instances in which a D&R Tag reported by USPS is not located on the FDR, the parties
agree that the cubic footage reported on the USPS assignment log will be compared to the
cubic footage billed by FedEx. The difference between the two amounts shall be adjusted by
[ * ] of the fuel and non-fuel charges. The parties agree that the adjustment percentage
may be revised on mutual agreement.

	*	 	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.

 

124

 

	 	d.	 	USPS shall pay FedEx a fee for each Handling Unit which receives a HEX 84 scan. This
fee shall be calculated in the monthly reconciliation using the applicable tier rates as
follows:

[ * ] (Non-fuel transport rate + Fuel transport rate) + Package Handling rate

4.   Exception Mail.

If FedEx processes Exception Mail as described in Section 5.2.13 of Exhibit A, USPS agrees to pay [ * ]
for each piece of Exception Mail, which is relabeled by FedEx using the SAMS unit;.

	*	 	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.

 

125

 

	 	B.	 	Night System pricing will be based on the weight of individual Handling Units.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	1. The non-fuel	 	Rate/Lb
	transport pricing	 	 
	initial rate for	 	 
	handling units will	 	 
	escalate [ * ]	 	 
	per year on the	 	 
	September Schedule	 	 
	Period commencing	 	 
	with the September	 	 
	2007 Schedule	 	 
	Period.	 	Year 1	 	Year 2	 	Year 3	 	Year 4	 	Year 5	 	Year 6	 	Year 7	 	Year 8
	 
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]

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 and applies to
all Handling Units. 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:

	*	 	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.

 

126

 

	 	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
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 [ * ]

3.  Exception Mail

If FedEx processes Exception Mail as described in Section 8.2.8 of Exhibit A, USPS agrees to pay
Fuel, Non-Fuel and Handling Charges for each piece of Exception Mail, which is relabeled by FedEx
using the SAMS unit. The amount of the Handling Charge will be [ * ] per piece relabeled. Fuel
and Non-Fuel rates as described in Sections B.1. and B.2 of this Exhibit will be discounted by [ * ].
The parties agree that the discount percentage may be revised on mutual agreement.

4.  Feeder Operations.

Handling Units transported to the Feeder Locations shall be subject to an additional charge per
pound as listed in the following table. This charge shall be added to the Non-Fuel transport rate.
Each time a Handing Unit originates or is destined to a Feeder Location, the charge shall be
applied.

	*	 	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.

 

127

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Year 1	 	Year 2	 	Year 3	 	Year 4	 	Year 5	 	Year 6	 	Year 7	 	Year 8
	Feeder Operations
(the rate will
escalate [ * ]
per year on the
September Schedule
commencing with the
September 2007
Schedule Period.
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]

i)

5.  Acceptable Dangerous Goods

Pursuant to Section 8.1.6 of Exhibit A, FedEx agrees to accept for transport Acceptable Dangerous
Goods on the Night-turn Operations. However, FedEx agrees that although it will invoice USPS for
the transportation and handling of such items based on Night System rates, FedEx will make
adjustments for such charges to reflect Day System rates. USPS agrees to track all shipments of
Acceptable Dangerous Goods and submit to FedEx for an appropriate credit to be made in accordance
with the revenue reconciliation process.

C.  Commencing March 2007 FedEx will provide lift from ONT or LAX to HNL. The A/C used
will be either a MD 10-10 or MD 10-30 (minimum of 15,420 cu ft) or an MD11 (minimum of 18,398
cu ft).

	 	1.	 	The Non Fuel Transport rate will initially be [ * ]/cu ft provided. The rate
will escalate on the Schedule Period commencing with the September 2007 Schedule
Period each year in accordance with the Day System Non Fuel Rate.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Year 1	 	Year 2	 	Year 3	 	Year 4	 	Year 5	 	Year 6	 	Year 7	 	Year 8
	HNL Non Fuel Transport Rate	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]
	 	[ * ]

	 	2.	 	The Fuel Rate is [ * ]/cu feet and will be made in the same manner as
provided under paragraph A.2. of this Exhibit.

	*	 	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.

 

128

 

	 	C.	 	Supplemental Bills

	 	1.	 	Schedule Period Committed Volume for the Day-turn Network— if the Schedule Period
Committed 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 greater of the Minimum Guaranteed Volume or the Schedule Period
Committed Volume as calculated in paragraph 11.2 of the contract. Day-turn Transport
 — fuel and non-fuel — charges will be calculated at the current rates on the
difference between actual and the greater of the Minimum Guaranteed Volume or the
Schedule Period Committed Volume as calculated in paragraph 11.2 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
11.2 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
initially 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

	*	 	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.

 

129

 

	 	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.

	 	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.

	 	6.	 	Day-turn Operations versus Night-turn Operations.
	 
	 	 	 	The parties acknowledge that the USPS contracts with third party handlers (“THS”) to
build containers for product tendered to FedEx for the Day-turn Operations only (with
exception of Anchorage, Alaska where THS builds containers for Day-turn and Night-turn
Operations). THS scans the packages which are placed in such containers (“THS Scans”).
THS Scans only occur on product destined for the Day Sort except as noted above.
Therefore, the parties agree that FedEx shall refund 98.75% of the fuel and non-fuel
charges on packages which are derived from THS Scans and rated as Night-turn Operations.
Instead, such packages shall be rated and charged with handling charges for Day-turn
Operations. The parties agree that the refund percentage may be revised on mutual
agreement. Night-turn rated pieces without both THS and FedEx PSP scans will be reviewed
to determine intended service. Both parties will resolve these issues using the current
reconciliation process. The invoice will be adjusted accordingly.

	*	 	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.

 

130

 

	 	7.	 	Ad-Hoc Truck Volume.
	 
	 	 	 	The parties acknowledge that excess volume from origin locations is transported by truck
to the hub or major sort location for processing during the Day-turn Operations. For
purposes of rating, the parties agree that each truck shall be assumed to carry 3,000
cubic feet. The parties agree that this assumption may be revised on mutual agreement.
FedEx will calculate the transportation charges to be added to the month-end revenue
reconciliation for the volume on each truck as follows:

	 	a.	 	3,000 cubic feet x non-fuel transport rate set forth in paragraph
A, subparagraph 1 of this Exhibit; plus
	 
	 	b.	 	3,000 cubic feet x fuel transport rate set forth in paragraph A,
subparagraph 2 of this Exhibit.

	*	 	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.

 

131

 

ATTACHMENT 1 TO EXHIBIT B

TRUCKING LOCATIONS

The Trucking Locations are as follows:

	1.	 	[ * ]
	 
	2.	 	[ * ]
	 
	3.	 	[ * ]
	 
	4.	 	[ * ]
	 
	5.	 	[ * ]
	 
	6.	 	[ * ]
	 
	7.	 	[ * ]
	 
	8.	 	[ * ]

The list of Trucking Locations may be amended during the term of the Agreement by mutual agreement
of the parties.

	*	 	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.

 

132

 

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 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.

	 	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:

	*	 	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.

 

133

 

	 	•	 	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 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.

	 	i.	 	In order to accommodate the differences between the manner in which the
USPS and FedEx systems round the calculation of shipping charges, the parties agree
to tolerate variations of up to $1.00 between the amount billed and the amount paid
per Shipping Period.

	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
	 
	 	5.	 	Charters
	 
	 	6.	 	Ad-Hoc Truck Volume

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

	*	 	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.

 

134

 

	 	4.	 	Not Found file — same as UnMatched file
	 
	 	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.	 	If amounts remain in dispute after the reconciliation process, such dispute
will be resolved pursuant to the provisions of Article 3 of the Agreement.

	 	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 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
which FedEx scanned and that were lost in such catastrophic equipment or system
failure.
	 
	 	•	 	FedEx will notify Manager, Logistics, of USPS.

	*	 	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.

 

135

 

EXHIBIT D

MEDIATOR LIST

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

	*	 	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.

 

136

 

EXHIBIT E

FORM OF

ESCROW AGREEMENT

THIS ESCROW AGREEMENT (“Agreement”), made and entered into as of the ___day of ___,
2006, 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
___, 2006 (“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 7.4 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.

	*	 	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.

 

137

 

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 the Senior Vice President and General Counsel of USPS 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 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.

	*	 	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.

 

138

 

(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 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:

	*	 	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.

 

139

 

	 	 	 	 	 	 	 
	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.

(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

	*	 	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.

 

140

 

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.

 

141

 

EXHIBIT F

Investigative/Security Protocol and Guidelines U.S. Postal Inspection

Service and FedEx Express Security

This document contains the protocol and guidelines that will be used by the U,S. Postal Inspection
Service (“Inspection Service”) and Federal Express Corporation (“FedEx Express”), Security, to
address U.S. Mail investigations and security matters related to the Transportation Agreement which
commences September 25, 2006 between FedEx Express and the United States Postal Service (“USPS”)
(“the Agreement”). These guidelines are not intended to be all-inclusive but are designed to
provide a broad framework that will allow flexibility for the parties to accomplish their
respective security and investigative missions. In no event should this protocol be construed as an
expansion of FedEx Express’ obligations or the Inspection Service’s authority under applicable law
or regulation or to expand either party’s rights or obligations under the Agreements. For purposes
of this protocol, the term “mail” shall mean any item that is tendered to FedEx Express by USPS for
transport pursuant to the terms of the Agreement This protocol is based on open communication and
cooperation between the parties at each organizational level to the fullest extent possible in
postal related matters.

Coordination

	1.	 	The local contact points for the coordination of any mail related investigations and security
issues related to this alliance will be at the FedEx Express Regional Security Director level
and the Inspection Service Division level. (Attachments A- lnspection Service and Attachment
B — FedEx Express Security).

	2.	 	The FedEx Express Vice President Customer Security Services and the Inspection Service Deputy
Chief Inspector for Investigations, or their designee, will address all policy issues and any
investigative or operational issues not resolved at the local level. If these parties cannot
reach an understanding, the provisions on dispute resolution set forth in Article 3 of the
respective Agreements shall control.

Communication

	1.	 	FedEx Express Security will notify the appropriate Inspection Service Division of any known
theft, vandalism or criminal activity involving the mails while in the custody of FedEx
Express.

	2.	 	The Inspection Service Division will notify the appropriate FedEx Express Security Director
of any criminal activity or security issues related to FedEx Express or USPS customers and
employees occurring on USPS owned or leased property.

	3.	 	The parties will cooperate and assist, subject to the terms and conditions hereof and on a
commercially reasonable basis, with relevant security and investigative information related to
the transportation and handling of the mail on USPS owned or leased property.

	*	 	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.

 

142

 

Security of U.S. Mails

	1.	 	Except as otherwise permitted by law or provided herein, mail while in the custody of FedEx
Express, its employees or agents, may not be opened, searched or seized unless expressly
authorized by a Postal Inspector. In situations where other law enforcement agencies request
access to the mails, a properly executed federal search warrant is required. FedEx Express
shall attempt to notify a Postal Inspector of any warrants served for mail in the custody of
FedEx Express before coordinating the warrant execution.

	2.	 	Address information from the mail in the custody end control of FedEx Express may not be
recorded or disclosed by FedEx Express employees, except as required for operational purposes
regarding the sortation and transportation of the mail. Address information from the mail may
only be disclosed to another law enforcement or government agency upon express approval by a
Postal Inspector in accordance with USPS regulations. FedEx Express shall notify a Postal
Inspector of all requests from law enforcement for information about mail in the custody of
FedEx Express.

	3.	 	In situations where FedEx Express has reason to believe that mail contains dangerous and
injurious contents (including hazmat) that pose potential danger to FedEx Express employees,
equipment, products or facilities, FedEx Express may take actions necessary to secure the item
and minimize the risk. In these situations, the Inspection Service will be immediately
notified and FedEx Express and the Inspection Service will coordinate the disposition of the
item.

Investigations

	1.	 	FedEx Express Security will notify the Inspection Service of all investigative and security
issues involving the mails in the custody of FedEx Express.

	2.	 	The Inspection Service will be responsible for conducting all criminal investigations
involving the theft or obstruction of mail or contraband found in the mails while in the FedEx
Express system and for criminal activities directed at FedEx Express customers, or employees
on USPS owned or leased property.

Criminal and Administrative Proceedings

	1.	 	FedEx Express Security (subject to the receipt of a properly issued subpoena or other similar
“compulsions to appear”) and Inspection Service personnel will serve as witnesses in criminal
and administrative proceedings that result from these investigations.

Access to FedEx Operations Facilities, Personnel and Loss Data

	1.	 	Subject always to the matters addressed under the heading Noninterference, FedEx
Express Security will provide the Inspection Service access to its facilities, operations, and
records when necessary for investigations involving the mails, pursuant to Article 9.4 of the
Agreement. The Inspection Service will provide reasonable advance notice to FedEx Express for
access for its investigative or security purposes.

	2.	 	FedEx Express Security will coordinate interviews of its employees with the Inspection
Service relevant to their investigations involving the mails as required. FedEx Express
Security may not participate in custodial interviews conducted by Postal Inspectors; provided,
however, FedEx may be present at any non-custodial or witness interviews of any FedEx Express
employee conducted by Postal Inspectors.

	*	 	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.

 

143

 

	3.	 	Investigative reports prepared by FedEx Express Security may be provided to the Inspection
Service in response to a validly issued subpoena after the FedEx Express investigation has
been completed. FedEx Express management will make independent determinations about the
discipline or discharge of any FedEx Express employee. The Inspection Service shall not
attempt to dictate, direct or carry out such actions.

	4.	 	The Inspection Service will provide its investigative reports to FedEx Express through the
USPS Contracting Officer and will provide an information copy directly to FedEx Express
Security.

Surveillance Operations

	1.	 	FedEx Express security will provide access to its CCTV systems and assist the Inspection
Service with the installation of temporary camera systems required in investigations involving
the mails. The installation of Inspection Service camera systems will be in compliance with
federal and state laws governing video surveillance investigations and reasonable expectations
of privacy in the workplace.

	2.	 	Upon request by FedEx Express Security, the Inspection Service will share the information
obtained from the use of its investigative camera systems installed in FedEx Express
facilities and other surveillance equipment used in their investigations.

Undercover Operations

	1.	 	FedEx Express Security may, subject to the heading Noninterference below, authorize
the placement of Inspection Service undercover personnel in its facilities where deemed
necessary for investigations involving the mails.

	2.	 	In accordance with the provisions of Section 12.1 of the Transportation Agreement, USPS
will defend and indemnify FedEx for any loss, damage or other liability arising from the use
of undercover personnel in FedEx facilities.

Contingency Planning and Notification

	1.	 	FedEx Express Security will ensure the Inspection Service is listed as a party to be notified
in its critical incident or contingency plans related to the loss, destruction, or delay of
the mails caused by catastrophic losses of an aircraft or other vehicle transporting the mail,
or a FedEx Express facility. FedEx Express Security will cooperate with the Inspection Service
in the recovery of the mail where necessary.

Overgoods Operations

	1.	 	FedEx Express Security will provide security to any identified mail or mail contents
processed in its overgoods operations and will ensure its transfer to the USPS in accordance
with local operating plans.

	2.	 	When directly relevant to mail security end investigations, FedEx Express Security may, in
its sole discretion, provide information to the Inspection Service regarding related losses of
FedEx product identified in its overgoods operations.

Protection and Disclosure of Information from Investigations

	1.	 	FedEx Express Security and the Inspection Service agree to protect all information obtained
in the course of their respective investigations from unauthorized disclosure. Any proprietary
or privileged sensitive information obtained during the course of an investigation will be
handled in accordance with article 17 of the Transportation Agreement.

	*	 	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.

 

144

 

	2.	 	All information related to Inspection Service investigations involving mail in the FedEx
Express system or investigations of FedEx Express employees, will be maintained in the
Inspection Service Investigative File System as prescribed by the Privacy Act of 1974, 5
U.S.C. 552a. Any requests by third parties for records maintained in this system will be
processed in accordance with requirements of the Privacy Act.

	3.	 	All public disclosures of information related to investigations conducted by the Inspection
Service and FedEx Express security, including media requests or press releases, will be
coordinated between the Inspection Service and FedEx Express Media Relations in accordance
with a mutually agreed communications plan.

Noninterference

	1.	 	The Inspection Service agrees that in the exercise of its rights under this protocol it will
not unreasonably disrupt or interfere with any FedEx Express operations.

Modifications

	1.	 	This protocol and guidelines may be modified based on the mutual agreement of FedEx Express
Security and the Inspection Service.

	 	 	 
	Kenneth W. Newman

Deputy Chief Inspector

Investigations

U.S. Postal Inspection Service

	 	Terrell L. Harris

Federal Express Corporation

Vice President

Customer Security Services

	*	 	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.

 

145

 

Attachment A

[ * ]

	*	 	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.

 

146

 

Attachment B

Regional Directors

FedEx Express Security

[ * ]

Southern & Eastern Regions

1790 Kirby Parkway, Suite #500

Memphis, TN 38138

[ * ]

[ * ]

Western Region

4200 Regent Blvd.

Building C, 2nd Floor

Irving, TX 75063

[ * ]

[ * ]

Central Region

1100 Lake-Cook Blvd., 4th Floor

Buffalo Grove, IL 60089

[ * ]

[ * ]

Corporate

3610 Hacks Cross Rd.

Building A, 1st Floor

Memphis, TN 38125

[ * ]

[ * ]

International

3620 Hacks Cross Rd.

Building B, 3rd Floor

Memphis, TN 38125

[ * ]

	*	 	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.

 

147

 

EXHIBIT G — SERVICE LEVEL PROCEDURES

Current Final Service Level Report Elements And Calculations

DAY

Area = Area as defined by USPS structure

Scanned = Total Number of D&Rs scanned (for the time period)

Failed = Total Number of D&Rs where the Delivery timestamp is greater than the Commit timestamp (for the time period)

NDSP = Total Number of D&Rs where no valid DSP exists at the Est Del Loc or Surrogate (for the time period)

SVC% = (Total Scanned-Total Failed-NDSP)/(Total Scanned-NDSP)

Total Cu Ft = Total Cu Ft associated with Total Number of D&Rs scanned (for the time period)

Failed Cu Ft = Total Failed Cu Ft associated with Total Number of D&Rs scanned for the time period where the Delivery time stamp is greater than the Commit timestamp (for the time period)

NDSP Cu Ft = Total Cu Ft associated with Total Number of D&Rs scanned where no valid DSP exists at the Est Del Loc or Surrogate

Cu Ft SVC% = (Total Cu Ft-Total Failed Cu Ft-Total NDSP Cu Ft)/(Total Cu Ft-Total NDSP Cu Ft)

Day Component Measurements

Bypass ULD service commences with the PSP scan at origin. The Bypass DSP is compared to the market
commitment time for the planned destination or the surrogate delivery location to determine
service. The DSP scan must be by the Market Service Level Commit time at the delivery location or
surrogate location or it fails service.

To adjust service for the absence of the PSP, FedEx looks up all the BYPASS ULDs that miss the sort
to ensure they received a PSP scan. If it does not have a PSP scan, the cubic footage will be
included in the service adjustment at the end of the month along with the Mixed cubic feet.

Mixed ULD service is not measured since mixed ULDs terminate at the hub. Service is measured for
the contents of Mixed ULD’s. Because FedEx’s first scan on these pieces is a Hub scan, service
commences at the hub. Since this process does not account for service failures for transportation
into the hub, a process has been developed to account for mixed product missing the hub sort.

	*	 	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.

 

148

 

MIXED Cubic Feet Missing Day Sort Adjustment Process

After the close of the service period all MIXED cubic footage missing a DAY sort is doubled and
added to the Failed Cu Ft total for that operating month. It is doubled because the clock starts
with the first Hub scan. If a MIXED container misses the sort the clock does not start until the
next day when inducted into the sort. Example: MIXED AKE1234 misses Tuesday Day Sort and is rolled
to Wednesday Day Sort. It will appear on time for the Wednesday delivery date if not adjusted,
when in reality is it should fail for the scheduled delivery day of Tuesday.

As part of reconciliation, at the end of each service period, FedEx will identify all mixed ULD
D&Rs that fail service. This information will be provided daily Monday through Friday. The USPS
will use THS build scans to identify destination cubic feet for product in these mixed ULDs. FedEx
will make adjustments weekly to monitor the Service Level by Destination Market. The USPS will
forward the lane specific information to FedEx no less than once per week and FedEx will adjust
lanes that have failed the service period service.

Misrouted containers built at the hub with sorted product are counted as a service failure if the
delivery location differs from the planned destination or the surrogate location. The DSP scan must
be by the Market Service Level Commit time or it fails service.

Trucked product is delivered to the Hub and does not receive a PSP. Service measurement begins at
the Hub with the Hub scan. These pieces are then sorted and service is measured the same as the
mixed product.

A Hex 84 scan is put on a package when it is transported incorrectly to the either IND or OAK hubs.
If the USPS is at fault and the piece was sent to the wrong hub, these pieces will be excluded
from service measurement. If FedEx was at fault and the pieces were sent to the wrong Hub or if
FedEx misroutes a container to the wrong hub and it cannot move to the proper destination it is
counted as a service failure.

Service for Offshore Locations

The Market Service Commitment Time provided for in Attachments 1 (Day Product Area Operating
Plan) and 2 (Night Product Area Operating Plan) to Exhibit A for volume to or from the Offshore
Locations will be adjusted by an additional [ * ] and the Market Service Commitment time for each
such shipment shall be adjusted accordingly. If USPS requests FedEx to accept for transport an
amount in excess of the maximum volumes for the Offshore Locations but FedEx is unable to transport
the excess volume to such destination by such adjusted Market Service Commitment Time, FedEx shall

	*	 	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.

 

149

 

tender such excess volume to the gateway for the destination not later than the adjusted Market
Service Commitment Time. The gateway locations for the following destinations are:

	 	 	 	 	 
	 

	 	Destination
 
	 	Gateway
 
	i)

	 	San Juan, PR
	 	Miami, FL and Newark, NJ
	ii)

	 	Honolulu, HI
	 	Ontario, CA
	iii)

	 	Anchorage, AK
	 	Seattle, WA

If USPS requests FedEx to hold volume for the Offshore locations in Memphis or one of the
Gateway’s for movement on a Charter flight to one of the Offshore locations the volume will receive
a DSP scan where the traffic is accumulated in Memphis or at the Gateway location.

FedEx will tender weekend volume Day product as outlined in Exhibit A, Section 5.2.11

NIGHT

Area = Area as defined by USPS structure

Scanned = Total Number of D&Rs scanned (for the time period)

Failed = Total Number of D&Rs where the Delivery timestamp is greater than the Commit timestamp (for the time period)

NDSP = Total Number of D&Rs where no valid DSP exists at the Est Del Loc or Surrogate (for the time period)

SVC% = (Total Scanned-Total Failed-NDSP)/(Total Scanned-NDSP)

Total Billable Weight = Total Billable Weight associated with Total Number of D&Rs scanned (for the time period)

Failed Billable Weight = Total Failed Billable Weight associated with Total Number of D&Rs scanned for the time period where the Delivery time stamp is greater than the Commit timestamp (for the time period)

NDSP Billable Weight = Total Billable Weight associated with Total Number of D&Rs scanned where no valid DSP exists at the Est Del Loc or Surrogate

Billable Weight SVC% = (Total Billable Weight-Total Failed Billable Weight-Total NDSP Billable Weight)/(Total Billable Weight-Total NDSP Billable Weight)

	*	 	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.

 

150

 

Current Adjustment Procedures:

Disaster Delays or Severe Weather/Airport Closures

All cubic footage or billable weight elements are removed completely from the effected service.
Example: BOS Ramp is closed on Tuesday due to airport closure for 4 feet of snow during the Day
Sort arrival window. BOS flight is diverted and does not arrive BOS until Wednesday. All cubic
footage for BOS is removed from the Final Service Level Report for Tuesday.

Changes to Final Service Level Report Elements and Calculations to a By Lane Metric

Report structure will not change

Calculations for service percentages will not change.

The Final Monthly Service Level Report will be used to identify destination locations below [ * ].

A Service Penalty will be paid for each destination location failing to achieve a controllable
service level of [ * ] for the month. The service level by destination location is excluded in
December and adjusted to [ * ] for the month January annually.

For each market that falls below the Service Level Commitment for a month, the Service Level will
be recalculated, excluding those days when Service Level was impacted by an event beyond the
control of FedEx such as Air Traffic Control or Weather delays

	*	 	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.

 

151Variable Deferred Compensation Plan for Executives

    EXHIBIT
      10.1

     

     

     

     

    
 

    CHARMING
      SHOPPES

     

    VARIABLE
      DEFERRED COMPENSATION PLAN

     

    FOR
      EXECUTIVES

     

    Amended
      and Restated Effective
      January 1, 2005

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    CHARMING
      SHOPPES 

    VARIABLE
      DEFERRED COMPENSATION PLAN

    FOR
      EXECUTIVES

     

    Amended
      and Restated Effective January 1, 2005

     

    TABLE
      OF CONTENTS

     

    
      	
              Article
                1

               

            	
              Preamble

               

            	
              1

               

            
	
              Article
                2

               

            	
              Definitions

               

            	
              2

               

            
	
              Article
                3

               

            	
              Administration
                of the Plan

               

            	
              9

               

            
	
              Article
                4

               

            	
              Participation

               

            	
              9

               

            
	
              Article
                5

               

            	
              Distribution
                Option Accounts

               

            	
              14

               

            
	
              Article
                6

               

            	
              Benefits
                to Participants

               

            	
              16

               

            
	
              Article
                7

               

            	
              Disability

               

            	
              19

               

            
	
              Article
                8

               

            	
              Survivor
                Benefits

               

            	
              20

               

            
	
              Article
                9

               

            	
              Emergency
                Benefit

               

            	
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              Article
                10

               

            	
              Miscellaneous

               

            	
              21

               

            

    

    

    

    
      
        
          
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    CHARMING
      SHOPPES 

    VARIABLE
      DEFERRED COMPENSATION PLAN

    FOR
      EXECUTIVES

     

    Amended
      and Restated Effective January 1, 2005

     

    ARTICLE
      1  

     

    Preamble

     

    1.1  Purpose.
      The
      purpose of the Charming Shoppes Variable Deferred Compensation Plan for
      Executives (the “Plan”) is to provide a means whereby Charming Shoppes, Inc.
      (hereinafter referred to as “Charming Shoppes”) may afford increased financial
      security, on a tax-favored basis, to a select group of key management employees
      of the Company who have rendered and continue to render valuable services to
      the
      Company which constitute an important contribution towards the Company’s
      continued growth and success, by providing for additional future compensation
      so
      that such employees may be retained and their productive efforts
      encouraged.

     

    1.2  Amended
      and Restated Plan.
      The
      Company hereby amends and restates the Plan, effective January 1, 2005. The
      Plan
      was previously amended and restated on several occasions, and the Limited and
      Lane Bryant deferred compensation plans were merged with and into the Plan.
      The
      Plan is further amended to merge the Arizona Mail Order Company, Inc. 2005
      Deferred Compensation Plan (the “Arizona Mail Order 2005 Plan”) with and into
      the Plan, effective March 1, 2006. Any individual who is or becomes an Eligible
      Employee on or after January 1, 2005, and who wishes to participate in the
      Plan,
      shall be subject to the terms and conditions as set forth herein on or after
      that date. 

     

    1.3  Grandfathered
      Accounts.
      This
      January 1, 2005 amendment and restatement shall not affect Grandfathered
      Accounts (as defined below), which shall continue to be subject to, and governed
      by, the terms of the relevant plan as in effect on December 31, 2004, as set
      forth on the attached Exhibit A (Charming Shoppes Inc. Deferred Compensation
      Plan for Executives) and Exhibit B (Arizona Mail Order Company, Inc. Deferred
      Compensation Plan).

     

     

    
      
         

      

      
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    ARTICLE
      2  

     

    Definitions

     

    For
      ease
      of reference, the following definitions will be used in the Plan:

     

    2.1  Affiliate.
      “Affiliate” means any firm, partnership, or corporation that directly or
      indirectly, through one or more intermediaries, controls, is controlled by,
      or
      is under common control with the Company. “Affiliate” also includes any other
      organization similarly related to the Company that is designated as such by
      the
      Board.

     

    2.2  Base
      Salary.
“Base
      Salary” means with respect to a Participant for any Plan Year such Participant’s
      annual base salary, before deferral pursuant to this Plan or any agreement
      or
      any other plan of the Company whereby compensation is deferred, including,
      without limitation, a plan whereby compensation is deferred in accordance with
      Code Section 401(k) or reduced in accordance with Code Section 125. Any amount
      once taken into account as Base Salary for purposes of this Plan shall not
      be
      taken into account thereafter.

     

    2.3  Base
      Salary Deferral.
“Base
      Salary Deferral” means that portion of Base Salary as to which an Eligible
      Employee has made an election pursuant to Article 4.

     

    2.4  Beneficial
      Owner, Beneficially Owns and Beneficial Ownership.
      “Beneficial Owner, Beneficially Owns and Beneficial Ownership” shall have the
      meanings ascribed to such terms for purposes of Section 13(d) of the Securities
      Exchange Act of 1934 and the rules thereunder, except that, for purposes of
      this
      definition, “Beneficial Ownership” (and the related terms) shall include Voting
      Securities that a Person has the right to acquire pursuant to any agreement,
      or
      upon exercise of conversion rights, warrants, options or otherwise, regardless
      of whether any such right is exercisable within 60 days of the date as of which
      Beneficial Ownership is to be determined.

     

    2.5  Beneficiary.
      “Beneficiary” means the person or persons designated as such in accordance with
      Section 10.3.

     

    2.6  Board.
“Board”
      means the Board of Directors of Charming Shoppes, Inc.

     

    2.7  Bonus
      Compensation.
“Bonus
      Compensation” means with respect to a Participant for any Plan Year such
      Participant’s annual bonus compensation before deferral pursuant to this Plan or
      any agreement or any other plan of the Company whereby compensation is deferred,
      including, without limitation, a plan whereby compensation is deferred in
      accordance with Code Section 401(k) or reduced in accordance with Code Section
      125. “Bonus Compensation” also means with respect to a Participant for any Plan
      Year such Participant’s award from the Charming Shoppes, Inc. Long-Term
      Incentive Program before deferral pursuant to this Plan. Any amount once taken
      into account as Bonus Compensation for purposes of this Plan shall not be taken
      into account thereafter.

     

    2.8  Bonus
      Compensation Deferral.
“Bonus
      Compensation Deferral” means that portion of Bonus Compensation as to which an
      Eligible Employee has made an election pursuant to Article 4. 

     

     

    
      
         

      

      
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    2.9  Break
      in Service.
“Break
      in Service” means a Vesting Year during which a Participant is not credited with
      more than 500 Hours of Service.

     

    Change
      of Control.
“Change
      of Control” means and shall be deemed to have occurred if:

    

    (a) any
      Person, other than the Company or a Related Party, acquires directly or
      indirectly the Beneficial Ownership of any Voting Security and immediately
      after
      such acquisition such Person has, directly or indirectly, the Beneficial
      Ownership of Voting Securities representing 20 percent or more of the total
      voting power of all the then-outstanding Voting Securities; or

    

    (b) those
      individuals who as of the day after the Charming Shoppes, Inc.’s annual
      shareholders meeting in the Plan Year prior to the determination constitute
      the
      Board or who thereafter are elected to the Board and whose election, or
      nomination for election, to the Board was approved by a vote of at least
      two-thirds (2/3) of the directors then still in office who either were directors
      as of the day after the Charming Shoppes, Inc.’s annual shareholders meeting in
      the Plan Year prior to the determination or whose election or nomination for
      election was previously so approved, cease for any reason to constitute a
      majority of the members of the Board ; or

    

    (c) consummation
      of a merger, consolidation, recapitalization or reorganization of Charming
      Shoppes, Inc., a reverse stock split of outstanding Voting Securities, or an
      acquisition of securities or assets by Charming Shoppes, Inc. (a “Transaction”),
      or consummation of such a Transaction if shareholder approval is not obtained,
      other than a Transaction which would result in the holders of Voting Securities
      having at least 80 percent of the total voting power represented by the Voting
      Securities outstanding immediately prior thereto continuing to hold Voting
      Securities or voting securities of the surviving entity having at least 60
      percent of the total voting power represented by the Voting Securities or the
      voting securities of such surviving entity outstanding immediately after such
      transaction and in or as a result of which the voting rights of each Voting
      Security relative to the voting rights of all other Voting Securities are not
      altered; or

    

    (d) the
      complete liquidation of Charming Shoppes, Inc. or sale or disposition by
      Charming Shoppes, Inc. of all or substantially all of Charming Shoppes, Inc.’s
      assets other than any such transaction which would result in Related Parties
      owning or acquiring more than 50 percent of the assets owned by Charming
      Shoppes, Inc. immediately prior to the transaction.

    

    2.10  Code.
“Code”
      means the Internal Revenue Code of 1986, as amended from time to
      time.

     

    2.11  Committee.
      “Committee” means the persons appointed by Charming Shoppes, Inc. to administer
      the Plan.

     

     

    
      
         

      

      
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    2.12  Company.
      “Company” means Charming Shoppes, Inc. and any Affiliate which is authorized by
      the Board to adopt the Plan and cover its Eligible Employees and whose
      designation as such has become effective upon acceptance of such status by
      the
      board of directors of the Affiliate. An Affiliate may revoke its acceptance
      of
      such designation at any time, but until such acceptance has been revoked, all
      the provisions of the Plan and amendments thereto shall apply to the Eligible
      Employees of the Affiliate. In the event the designation is revoked by the
      board
      of directors of an Affiliate, the Plan shall be deemed terminated only with
      respect to such Affiliate.

     

    2.13  Company
      Stock.
      “Company Stock” means shares of common stock of Charming Shoppes,
      Inc.

     

    2.14  Disabled.
      “Disabled” means a mental or physical condition which qualifies a Participant
      for benefits under the Charming Shoppes Long Term Disability Plan. 

     

    2.15  Distribution
      Option.
      “Distribution Option” means the two distribution options which are available
      under the Plan, consisting of the Retirement Distribution Option and the
      In-Service Distribution Option.

     

    2.16  Distribution
      Option Account.
      “Distribution Option Account” or “Account” means, with respect to a Participant,
      the Retirement Distribution Account and/or the In-Service Distribution Account
      established on the books of account of the Company, pursuant to Section
      5.1.

     

    2.17  Earnings
      Crediting Options.
      “Earnings Crediting Options” means the options selected by the Participant from
      time to time pursuant to which earnings are credited to the Participant’s
      Distribution Option Accounts.

     

    2.18  Effective
      Date.
      “Effective Date” means the effective date of the Plan as amended and restated,
      which is January 1, 2005.

     

    2.19  Eligible
      Employee.
      “Eligible Employee” means an Employee who is a member of the group of selected
      management and/or highly compensated Employees of the Company designated by
      the
      Company’s Chief Executive Officer as eligible to participate in the
      Plan.

     

    2.20  Employee.
      “Employee” means any person employed by the Company or an affiliate on a regular
      full-time salaried basis or who is an officer of the Company or an
      affiliate.

     

    2.21  End
      Termination Date.
“End
      Termination Date” means the date of termination of a Participant’s Service with
      the Company and its Affiliates.

     

    2.22  Enrollment
      Agreement.
      “Enrollment Agreement” means the written authorization form which an Eligible
      Employee files with the Committee to participate in the Plan. 

     

     

    
      
         

      

      
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    2.23  Equity
      Plans.
“Equity
      Plans” means Charming Shoppes, Inc.’s 1993 Employees Stock Incentive Plan, 1999
      Associates Stock Incentive Plan, 2000 Associates Stock Incentive Plan and 2004
      Stock Award and Incentive Plan and any similar plan adopted by Charming Shoppes,
      Inc after the Effective Date.

     

    2.24  Excess
      Compensation.
“Excess
      Compensation” means amounts of Base Salary and Bonus Compensation equal to the
      excess, if any, of (a) the sum of the Participant’s Base Salary and Bonus
      Compensation over (b) the maximum amount of compensation permitted to be taken
      into account under the terms of the Savings Plan.

     

    2.25  Fair
      Market Value.
“Fair
      Market Value” with respect to Company Stock means: (i) if the Company Stock is
      publicly traded, then the Fair Market Value per share shall be determined as
      follows: (A) if the principal trading market for the Company Stock is a national
      securities exchange or the Nasdaq Stock Market, Inc.(“Nasdaq”) the
      last
      reported sale price thereof on the relevant date or (if there were no trades
      on
      that date) the latest preceding date upon which a sale was reported, or (B)
      if
      the Company Stock is not principally traded on such exchange or market, the
      mean
      between the last reported “bid” and “asked” prices of Company Stock on the
      relevant date, as reported on Nasdaq or, if not so reported, as reported by
      the
      National Daily Quotation Bureau, Inc. or as reported in a customary financial
      reporting service, as applicable and as the Board determines; or (ii) if the
      Company Stock is not publicly traded or, if publicly traded, is not subject
      to
      reported transactions or “bid” or “asked” quotations as set forth below, the
      Fair Market Value per share shall be as determined by the
      Committee.

     

    2.26  Grandfathered
      Account.
      “Grandfathered Account” means that portion of an Eligible Employee’s
      Distribution Option Account that was earned and vested as of December 31, 2004,
      and shall include earnings credited to such amount under the terms of the Plan.
      The term “Grandfathered Account” includes the account balance of an Eligible
      Employee who was a participant under the Charming Shoppes Deferred Compensation
      Plan as in effect on December 31, 2004 or the Arizona Mail Order Company, Inc.
      Deferred Compensation Plan that was earned and fully vested as of December
      31,
      2004. The Grandfathered Account shall be calculated in accordance with section
      409A of the Code. The Company shall maintain a separate record of Grandfathered
      Accounts. All Grandfathered Accounts, other than Grandfathered Accounts with
      respect to account balances under the Arizona Mail Order Company, Inc. Deferred
      Compensation Plan, shall be subject to, and governed by, the terms of the Plan
      as in effect on December 31, 2004, attached hereto as Appendix A. Grandfathered
      Accounts with respect to account balances under the Arizona Mail Order Company,
      Inc. Deferred Compensation Plan, shall be subject to, and governed by, the
      terms
      of the Arizona Mail Order Company, Inc. Deferred Compensation Plan as in effect
      on December 31, 2004, attached hereto as Appendix B. 

     

     

    
      
         

      

      
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    2.27  Hour
      of Service.
“Hour
      of Service” means each hour for which an Employee is directly or indirectly paid
      or entitled to be paid by the Company or an Affiliate for the performance of
      employment duties and each hour for which back pay, irrespective of mitigation
      of damages, has been either awarded or agreed to by the Company or an Affiliate.
      These hours shall be credited to an Employee for the computation period during
      which his or her employment duties were performed or to which a back pay
      agreement or award pertains irrespective of when payment is made. No Employee
      shall be credited with duplicate Hours of Service as a result of a back pay
      agreement or award. An Employee shall also be credited with one Hour of Service
      for each hour for which the Employee is directly or indirectly paid, or entitled
      to payment, by the Company or an Affiliate on account of a period during which
      no duties are performed due to vacation, holiday, illness, incapacity,
      disability, layoff, jury duty or Leave of Absence; provided, however, that
      not
      more than 501 Hours of Service shall be credited to an Employee under this
      sentence on account of any single, continuous period during which the Employee
      performs no duties, and provided further that no credit shall be given if
      payment is made or due under a plan maintained solely for the purpose of
      complying with applicable workers’ compensation, unemployment compensation or
      disability insurance laws, or is made solely to reimburse an Employee for
      medical or medically related expenses incurred by the Employee.

     

    (a)  For
      purposes of determining the number of Hours of Service completed in any
      applicable computation period, the Committee may maintain accurate records
      of
      actual hours completed for all Employees. The number of Hours of Service to
      be
      credited to an Employee for periods during which no employment duties are
      performed shall be determined in accordance with sections 2530.200b-2(b) and
      2530.200b-2(c) of the Department of Labor regulations in Title 29 of the Code
      of
      Federal Regulations.

     

    (b)  If
      the
      Committee does not maintain records of actual Hours of Service, an Employee
      shall be credited with 45 Hours of Service for each week in which such Employee
      would otherwise be credited with at least one Hour of Service.

     

    (c)  Solely
      for the purpose of preventing a Break in Service, an Employee shall be credited
      with Hours of Service during an absence by reason of:

     

    (i)  the
      pregnancy of the Employee;

     

    (ii)  the
      birth
      of a child of the Employee;

     

    (iii)  the
      placement of a child with the Employee in connection with the adoption of such
      child by the Employee; or

     

    (iv)  for
      purposes of caring for a child beginning immediately after such birth or
      placement;

     

    
      
         

      

      
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    provided
      the Employee shall, during the period of his or her absence, be credited with
      the number of Hours of Service which would have been credited to him at his
      or
      her normal work rate but for such absence, or, if the number of Hours of Service
      based on a normal rate is indeterminable, the Employee shall be credited with
      eight Hours of Service per day of such absence. Notwithstanding the foregoing,
      the Employee shall be credited with no more than 501 Hours of Service during
      said absence. These hours shall be credited to the Break in Service computation
      period in which the absence began if necessary to avoid a Break in Service
      or,
      if not necessary, then to the following computation period. The Employee shall
      be responsible for reporting to the Committee any Hours of Service that are
      to
      be credited under this Section 2.28. Nothing contained in the Section shall
      be
      deemed to expand or extend any maternity or paternity leave policy of the
      Company or an Affiliate.

     

    2.28  In-Service
      Distribution Account.
      “In-Service Distribution Account” means the Account maintained for a Participant
      to which Base Salary Deferrals and/or Bonus Compensation Deferrals and Matching
      Contributions are credited pursuant to the Participant’s election in accordance
      with Section 4.1.

     

    2.29  In-Service
      Distribution Option.
      “In-Service Distribution Option” means the Distribution Option pursuant to which
      benefits are payable in accordance with Section 6.3.

     

    2.30  Leave
      of Absence.
“Leave
      of Absence” means any temporary absence from employment authorized by the
      Company or an Affiliate based on its normal practices.

     

    2.31  Matching
      Contributions.
      “Matching Contributions” are those credited to a Participant’s Distribution
      Option Accounts by the Company pursuant to Section 4.4.

     

    2.32  Matching
      Units.
      “Matching Units” are those credited to a Participant’s Distribution Option
      Accounts by the Company pursuant to Section 4.6(d).

     

    2.33  Participant.
      “Participant” means an Eligible Employee who has filed a completed and executed
      Enrollment Agreement with the Committee or its designee and is participating
      in
      the Plan in accordance with the provisions of Article 4. A Participant shall
      also mean an Eligible Employee who was a participant under the Limited Plan,
      the
      Lane Bryant Plan and/or the Arizona Mail Order 2005 Plan with respect to any
      prior account balances in such plans that are consolidated under this
      Plan.

     

    2.34  Person.
      “Person” shall have the meaning ascribed for purposes of Section 13(d) of the
      Exchange Act and the rules thereunder.

     

    2.35  Plan.
“Plan”
      means this plan, called the Charming Shoppes Variable Deferred Compensation
      Plan
      for Executives, as amended from time to time.

     

    2.36  Plan
      Year.
“Plan
      Year” means the 12 month period beginning on each January 1 and ending on the
      following December 31. 

     

     

    
      
         

      

      
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    2.37  Related
      Party.
      “Related Party” means (a) a majority-owned subsidiary of Charming Shoppes, Inc.;
      or (b) a trustee or other fiduciary holding securities under an employee benefit
      plan of Charming Shoppes or any majority-owned subsidiary of Charming Shoppes,
      Inc.; or (c) a corporation owned directly or indirectly by the shareholders
      of
      Charming Shoppes, Inc. in substantially the same proportion as their ownership
      of Voting Securities.

     

    2.38  Retirement.
      “Retirement” means the termination of the Participant’s Service with the Company
      and its Affiliates (for reasons other than death) at or after attainment of
      age
      65, or, if the Participant has 10 or more years of Service, at or after
      attainment of age 55.

     

    2.39  Retirement
      Distribution Account.
      “Retirement Distribution Account” means the Account maintained for a Participant
      to which Base Salary Deferrals, Bonus Compensation Deferrals, and Matching
      Contributions are credited pursuant to the Participant’s election in accordance
      with Section 4.1 and to which Company Stock Units and/or Matching Units, if
      any,
      are credited in accordance with Section 4.6.

     

    2.40  Retirement
      Distribution Option.
      “Retirement Distribution Option” means the Distribution Option pursuant to which
      benefits are payable in accordance with Section 6.2.

     

    2.41  Savings
      Plan.
      “Savings Plan” means the Charming Shoppes, Inc. Employees’ Retirement Savings
      Plan.

     

    2.42  Service.
      “Service” means the period of time during which an employment relationship
      exists between an Employee and the Company or an affiliate, including any period
      during which the Employee is on an approved leave of absence, whether paid
      or
      unpaid. 

     

    2.43  Unit.
“Unit”
      means a phantom share of Company Stock, which is credited to a Participant’s
      Retirement Distribution Account as described in Section 4.6.

     

    2.44  Vesting
      or Vested.
      “Vesting” or “Vested” refers to the Participant’s permanent ownership rights to
      amounts credited to the Participant’s account under this plan. 

     

    2.45  Vesting
      Year. “Vesting
      Year” means the twelve consecutive month period beginning with a Participant’s
      date of hire.

     

    2.46  Voting
      Securities.
“Voting
      Securities” means any securities of Charming Shoppes which carry the right to
      vote generally in the election of directors.

     

    2.47  Year
      of Service.
      A “Year
      of Service” for Vesting purposes is a twelve-month period beginning on a
      Participant’s date of hire. If a Participant incurs a Break in Service, his
      Years of Service before that Break in Service (and not disregarded by reason
      of
      any prior Break in Service) shall be taken into account only if following the
      Break in Service the Participant completes one Year of Service,
      and:

     

    (a)  before
      the Break in Service the Participant had a Vested interest in his or her accrued
      benefits under the Plan; or

     

     

    
      
         

      

      
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    (b)  the
      aggregate number of the Participant’s consecutive Breaks in Service is less than
      five.

     

     

    ARTICLE
      3  

     

    Administration
      of the Plan

     

    3.1  Committee.
      The
      Committee is hereby authorized to administer the Plan and establish, adopt,
      or
      revise such rules and regulations as it may deem necessary or advisable for
      the
      administration of the Plan. The Committee shall have discretionary authority
      to
      construe and interpret the Plan, to make determinations, including factual
      determinations, and to determine the rights, if any, of Participants and
      Beneficiaries under the Plan. The Committee’s resolution of any matter
      concerning the Plan shall be final and binding upon any Participant and
      Beneficiary affected thereby.  Members of
      the
      Committee shall be eligible to participate in the Plan while serving as members
      of the Committee, but a member of the Committee shall not vote or act upon
      any
      matter which relates solely to such member’s interest in the Plan as a
      Participant.

     

     

    ARTICLE
      4  

     

    Participation

     

    4.1  Election
      to Participate.
      

     

    (a)  Annual
      Elections.
      Annually, and in accordance with Code section 409A, all Eligible Employees
      will
      be offered the opportunity to defer Base Salary and Bonus Compensation to be
      earned in the following Plan Year. Any Eligible Employee may enroll in the
      Plan
      effective as of the first day of a Plan Year by filing a completed and fully
      executed Enrollment Agreement with the Committee before the beginning of such
      Plan Year. Notwithstanding the foregoing, an Eligible Employee may defer that
      portion of Bonus Compensation attributable to an award from the Charming
      Shoppes, Inc. Long-Term Incentive Program, provided such election is made in
      accordance with Code section 409A and is made no later than six months before
      the end of the performance period attributable to such award, or such other
      time
      as determined by the Committee. 

     

    (b)  Enrollment
      Agreement.
      

     

    (i)  Pursuant
      to an Enrollment Agreement, a Participant shall irrevocably elect (a) the whole
      percentage of Base Salary and Bonus Compensation that will be deferred for
      a
      Plan Year, and (b) the Distribution Option Accounts to which such deferred
      amounts will be credited. A Participant may elect to defer up to 77% of Base
      Salary (or up to 80% of Base Salary, in the case of Excess Compensation) or
      up
      to 100% of Bonus Compensation for the Plan Year, calculated in each case after
      required payroll tax deductions. However, any election by a Participant to
      defer
      Base Salary or Bonus Compensation for any Plan Year by less than 2%, or such
      other amount as the Committee may determine from time to time, shall not be
      given effect. The Enrollment Agreement shall be in such form, and the deferral
      election shall be made at such time, as the Committee directs, in accordance
      with Code section 409A. 

     

     

    
      
         

      

      
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    (ii)  In
      each
      Enrollment Agreement, the Participant shall allocate his or her Base Salary
      Deferral and/or Bonus Compensation Deferral (and related Matching Contributions)
      for the Plan Year between the Distribution Options described in Section 5.2
      (
i.e.,
      Retirement Distribution Option or In-Service Distribution Option) in increments
      of one percent, provided, however that 100 percent of such deferrals and
      Matching Contributions may be allocated to one or the other of the Distribution
      Options. Once made, such allocation shall be irrevocable.

     

    (iii)  Each
      Enrollment Agreement filed by an Eligible Employee shall also set forth the
      Participant’s election as to the time and manner of distribution from the
      Retirement Distribution Account and/or In-Service Distribution Account of all
      amounts to be credited to such Accounts for the Plan Year under the Enrollment
      Agreement (and earnings thereon) in accordance with the rules set forth under
      Article 6. 

     

    4.2  Acknowledgement
      of Committee’s Authority.
      A
      Participant’s execution of the Enrollment Agreement shall also constitute
      acknowledgment that all decisions, interpretations and determinations by the
      Committee shall be final and binding on the Company, Affiliates, Participants,
      Beneficiaries and any other persons having or claiming an interest
      thereunder.

     

    4.3  New
      Eligible Employees.
      The
      Committee may, in its discretion, permit Eligible Employees who are hired by
      the
      Company after the beginning of a Plan Year to enroll in the Plan for that Plan
      Year by filing a completed and fully executed Enrollment Agreement, in
      accordance with Section 4.1, as soon as practicable following the date the
      Employee becomes an Eligible Employee but, in any event, within 30 days after
      such date. Any election by an Eligible Employee, pursuant to this Section,
      to
      defer Base Salary and/or Bonus Compensation shall apply only to such amounts
      as
      are earned by the Eligible Employee after the date on which such Enrollment
      Agreement is filed, consistent with Code section 409A.

     

    4.4  Matching
      Contributions.
      

     

    (i)  An
      Eligible Employee who elects to participate in the Plan pursuant to Section
      4.1
      and/or Section 4.3 shall be eligible to receive Matching Contributions by the
      Company if, and only when, such Eligible Employee is eligible to receive
      matching contributions under the Savings Plan. The amount of such Matching
      Contributions for a Plan Year shall be 50% of the Base Salary Deferrals and
      Bonus Compensation Deferrals made under this Plan to the extent that such
      deferrals do not exceed 3% of Base Salary and Bonus Compensation; provided,
      however, that, for deferrals with respect to Excess Compensation, Matching
      Contributions (at the rate of 50%) will be made to the extent that such
      deferrals do not exceed 6% of Base Salary and Bonus Compensation. 

     

    (b)  Matching
      Contributions will be credited to the Distribution Option Account to which
      the
      matched Base Salary Deferrals or Bonus Compensation Deferrals are credited.
      Matching Contributions will be credited as frequently as determined by the
      Committee, acting on behalf of the Company, but in any event at least once
      per
      year. Matching Contributions will be credited as soon as practicable for a
      Participant’s final year of participation.

     

     

    
      
         

      

      
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    4.5  Transfer
      of Limited Plan, Lane Bryant Plan and/or Arizona Mail Order 2005 Plan
      Balances.
      Accounts shall be established under this Plan for the former participants in
      the
      Limited Plan, Lane Bryant Plan and Arizona Mail Order 2005 Plan who had accounts
      under those plans as of the effective date of the merger of the applicable
      plan
      into this Plan. An Eligible Employee who was a participant under the Limited
      Plan or the Lane Bryant Plan shall have his or her prior balances under such
      plans consolidated and credited to a Retirement Distribution Account for such
      individual. The Earnings Crediting Options available under Article 5 shall
      apply
      to such account. Former participants in the Lane Bryant Plan shall also have
      available to them a hypothetical investment alternative provided under the
      Lane
      Bryant Plan as determined by the Committee for their accounts transferred from
      the Lane Bryant Plan. With respect to an Eligible Employee who was a participant
      under the Arizona Mail Order 2005 Plan, the Eligible Employee’s prior account
      balances that were credited to an in-service account shall be credited to an
      In-Service Distribution Account under this Plan and all other prior account
      balances shall be credited to a Retirement Distribution Account under this
      Plan.
      The Earnings Crediting Options available under Article 5 shall apply to such
      accounts.

     

    4.6  Company
      Stock Deferrals; Units; Matching Units.
      

     

    (a)  Eligibility
      for Deferral of Company Stock.
      The
      Company, in its sole and absolute discretion, may permit selected Eligible
      Employees to elect to defer all or a portion of the shares of Company Stock
      that
      they would otherwise receive upon the lapse of restrictions applicable to the
      restricted stock awards or restricted stock unit awards made to such Eligible
      Employees under one or more of the Equity Plans. Company Stock may only be
      deferred into a Retirement Distribution Account.

     

    (b)  Form
      and Timing of Election.
      An
      election to defer Company Stock must be made on such date as the Committee
      may
      specify in accordance with Code section 409A. An Eligible Employee may make
      an
      election by filing a completed and fully executed Enrollment Agreement with
      the
      Committee. In no event may an Eligible Employee revoke his or her election
      to
      defer receipt of all or part of his Company Stock once made.

     

    (c)  Deferral
      of Company Stock.
      Upon
      receipt by the Committee of an Eligible Employee’s completed and executed
      Enrollment Agreement for the deferral of Company Stock, the Company shall credit
      the Eligible Employee’s Retirement Distribution Account with a number of Units
      equal to the number of shares of Company Stock that the Eligible Employee
      elected to defer. If the Eligible Employee elected to defer a restricted stock
      award, the restricted stock award shall be cancelled with respect to the number
      of shares of Company Stock that the Eligible Employee elected to
      defer.

     

    (d)  Matching
      Units.
      Matching Units shall be credited to an Eligible Employee’s Retirement
      Distribution Account as follows:

     

     

    
      
         

      

      
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    (i)  If
      an
      Eligible Employee elects to defer Company Stock, the Committee will determine
      whether the value of the deferred Company Stock upon vesting, when aggregated
      with all other compensation payable to the Eligible Employee for the fiscal
      year
      in which such vesting occurs (including amounts deferred from current
      compensation for the fiscal year under this Plan to a Retirement Distribution
      Account), would have otherwise (if not deferred) been in excess of Code section
      162(m)’s limit on deductible compensation (the “162(m) limit”). If the 162(m)
      limit would have been exceeded for the year in which the deferred Company Stock
      vests, the Company shall credit to such Eligible Employee’s Retirement
      Distribution Account a Unit equivalent to two-tenths of a share of Company
      Stock
      for every share of Company Stock that the Eligible Employee elected to defer
      (but only to the extent that such shares would have otherwise cause the Eligible
      Employee’s compensation to exceed the 162(m) limit). The Matching Unites shall
      be credited such that for every five shares of Company Stock an Eligible
      Employee elects to defer (but only to the extent that such shares would have
      otherwise caused the Eligible Employee’s compensation to exceed the 162(m)
      limit), the Company shall credit a number of Units equivalent to one whole
      share
      of Company Stock to such Eligible Employee’s Retirement Distribution Account.

     

    (ii)  For
      every
      dollar of cash compensation (Base Salary and Bonus Compensation) that an
      Eligible Employee elects to defer under the Plan to his or her Retirement
      Distribution Account, that, when aggregated with all other compensation payable
      to the Eligible Employee for the fiscal year, would have been in excess of
      the
      162(m) limit (including the value of any deferred Company Stock under this
      Plan
      that vests during the fiscal year), the Company shall credit Matching Units
      at a
      rate of 20% of the excess amount to the Eligible Employee’s Retirement
      Distribution Account as follows: The Company shall credit such Eligible
      Employee’s Retirement Distribution Account with a number of Units of Company
      Stock calculated by dividing 20% of the amount of such cash compensation in
      excess of the 162(m) limit by the Fair Market Value of Company Stock on the
      last
      day of the fiscal year as of which the Matching Units are credited to the
      Retirement Distribution Account pursuant to subsection (iii) below. An Eligible
      Employee will not receive Matching Units with respect to any compensation that
      is deferred to an In-Service Distribution Account.

     

    (iii)  Matching
      Units shall be credited to the Eligible Employee’s Retirement Distribution
      Account as of the last day of the fiscal year of the Company for which the
      deferred Company Stock or cash compensation would otherwise have been deductible
      by the Company, after it is determined whether and to what extent an Eligible
      Employee’s compensation would have exceeded the 162(m) limit had no deferral of
      Company Stock or cash compensation been made. If an Eligible Employee defers
      a
      combination of Company Stock, Base Salary and Bonus Compensation and only a
      portion of such compensation would exceed the 162(m) limit, Matching Units
      shall
      be applied to such compensation in excess of the 162(m) limit in the following
      order: (i) Company Stock deferrals, (ii) Base Salary deferrals and (iii) Bonus
      Compensation deferrals.

     

     

    
      
         

      

      
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    (e)  Dividends.
      If
      dividends are declared with respect to shares of Company Stock, the amount
      of
      the dividend that would have been distributed with respect to the Units
      allocated to a Participant’s Retirement Distribution Account, had each such
      whole Unit been a share of Company Stock, shall be converted into additional
      Units based on the Fair Market Value of the Company Stock on the date the
      dividend is paid. The additional Units shall be credited to a Participant’s
      Retirement Distribution Account as of the date the dividends are paid. All
      Units
      attributable to dividends shall become Vested, or shall be forfeited, according
      to the vesting of the Units to which they relate.

     

    (f)  Distribution.
      Distribution of Vested amounts credited under this Section 4.6 shall be made
      in
      accordance with the provisions of Section 6.2; provided that all distributions
      attributable to Matching Units and Units representing deferred Company Stock
      (including Units attributable to dividends) shall be made in Company Stock.
      

     

    4.7  Vesting.
      

     

    (a)  Base
      Salary; Bonus Compensation Deferrals.
      A
      Participant shall always be 100% Vested in Base Salary Deferrals, Bonus
      Compensation Deferrals, and related earnings. 

     

    (b)  Matching
      Contributions.
      A
      Participant shall become Vested in 25% of the Matching Contributions and related
      earnings after two Years of Service and 25% of the Matching Contributions and
      related earnings for each Year of Service in excess of two. After five Years
      of
      Service, a Participant will be 100% Vested in the Matching Contributions and
      related earnings. Notwithstanding the foregoing, a Participant shall become
      100%
      vested in Matching Contributions and related earnings upon attainment of age
      65
      (age 55 if the Participant has 10 or more Years of Service), if the Participant
      is still an Employee. A Participant is automatically 100% Vested in the Matching
      Contributions and earnings if the Participant becomes Disabled or dies while
      an
      Employee or if a Change of Control occurs while the Participant is an Employee.
      Matching Contributions and related earnings are forfeited when a Participant’s
      Service terminates, to the extent not then Vested.

     

    (c)  Company
      Stock Deferral; Matching Units on Deferred Company Stock.
      The
      Units credited to Participant’s Retirement Distribution Account with respect to
      a deferral of Company Stock pursuant to Section 4.6 shall be subject to the
      vesting requirements set forth in the applicable Equity Plan and the restricted
      stock agreement or restricted stock unit agreement governing the Company Stock
      deferred by the Participant under the applicable Equity Plan. The Matching
      Units
      with respect to Units attributable to Deferred Company Stock shall vest on
      the
      same terms as the Units to which they relate.

     

    (d)  Matching
      Units on Deferred Cash Compensation.
      The
      Matching Units credited to a Participant’s Retirement Distribution Account
      pursuant to Section 4.6 with respect to a deferral of cash compensation shall
      be
      100% Vested at all times.

     

     

    
      
         

      

      
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    4.8  2005
      Special Elections.
      For the
      2005 Plan Year, as permitted by IRS Notice 2005-1, (i) an Eligible Employee
      may
      make an election on or before March 15, 2005 to defer Base Salary or Bonus
      Compensation for services performed on or before December 31, 2005, provided
      the
      amounts to which the deferral election relates have not been paid or become
      payable at the time of the election, and (ii) an Eligible Employee may elect
      in
      writing in 2005 to cancel a deferral election with respect to amounts that
      are
      earned in 2005 and are subject to section 409A of the Code, and to receive
      payment of such cancelled deferral amount in 2005 or on such later date on
      which
      the cancelled deferral amount vests, according to procedures established by
      the
      Committee in accordance with IRS Notice 2005-1. 

     

     

    ARTICLE
      5  

     

    Distribution
      Option Accounts

     

    5.1  Distribution
      Option Accounts.
      

     

    (a)  The
      Committee shall establish and maintain separate Distribution Option Accounts
      with respect to a Participant. A Participant’s Distribution Option Accounts
      shall consist of a Retirement Distribution Account and an In-Service
      Distribution Account. 

     

    (b)  The
      amount of Base Salary and/or Bonus Compensation deferred pursuant to Section
      4.1
      or Section 4.3 shall be credited by the Company to the Participant’s
      Distribution Option Accounts no later than the first day of the month following
      the month in which such Base Salary and/or Bonus Compensation would otherwise
      have been paid, in accordance with the Distribution Option irrevocably elected
      by the Participant in the annual Enrollment Agreement. Any Company Stock
      deferred pursuant to Section 4.6 shall be credited by the Company to the
      Participant’s Distribution Option Accounts as of the date the shares are
      deferred following the Committee’s receipt of the Participant’s completed and
      executed Enrollment Agreement. Matching Units and Units attributable to
      dividends as described in Section 4.6 shall be credited to the Participant’s
      Distribution Option Accounts as described in Section 4.6. Matching
      Contributions, when credited, are credited to the Distribution Option Accounts
      in the same proportion as the Base Salary and/or Bonus Compensation they match.
      

     

    (c)  The
      Participant’s Distribution Option Accounts shall be reduced by the amount of
      payments made by the Company to the Participant or the Participant’s Beneficiary
      pursuant to this Plan. 

     

     

    
      
         

      

      
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    5.2  Earnings
      on Distribution Option Accounts.
      

     

    (a)  Except
      as
      provided in subsection (b) below, a Participant’s Distribution Option Account
      shall be credited with earnings in accordance with the Earnings Crediting
      Options elected by the Participant from time to time. Participants may allocate
      each of their Retirement Distribution Account and In-Service Distribution
      Account among the Earnings Crediting Options available under the Plan only
      in
      whole percentages of not less than one percent. The deemed rate of return,
      positive or negative, credited under each Earnings Crediting Option is based
      upon the actual investment performance of the corresponding investment
      portfolios of the Hudson River Trust or EQ Advisers Trust, open-end management
      investment companies under the Investment Company Act of 1940, as amended from
      time to time, or such other investment fund(s) as the Company may designate
      from
      time to time, and shall equal the total return of such investment fund net
      of
      asset based charges, including, without limitation, money management fees,
      fund
      expenses and mortality and expense risk insurance contract charges. The Company
      reserves the right, on a prospective basis, to add or delete Earnings Crediting
      Options.

     

    (b)  The
      value
      of any Matching Units and any Units credited to an Eligible Employee’s
      Distribution Option Accounts pursuant to Section 4.6 shall be based on the
      Fair
      Market Value of shares of Company Stock and shall not be subject to the
      provisions of subsection (a) above relating to Earnings Crediting
      Options.

     

    5.3  Earnings
      Crediting Options.
      Except
      as otherwise provided pursuant to Section 5.2, the Earnings Crediting Options
      available under the Plan shall consist of hypothetical investment alternatives
      which correspond to certain investment portfolios of both the Hudson River
      Trust
      and EQ Advisers Trust. Notwithstanding that the rates of return credited to
      Participants’ Distribution Option Accounts under the Earnings Crediting Options
      are based upon the actual performance of the corresponding portfolios of these
      Trusts, or such other investment funds as the Company may designate, the Company
      shall not be obligated to invest any Base Salary and/or Bonus Compensation
      deferred by Participants under this Plan, Matching Contributions, or any other
      amounts, in such portfolios or in any other investment funds.

     

    5.4  Changes
      in Earnings Crediting Options.
      A
      Participant may change the Earnings Crediting Options to which his Distribution
      Option Accounts are deemed to be allocated in accordance with procedures
      established by the Committee. Each such change may include (a) reallocation
      of
      the Participant’s existing Accounts in whole percentages of not less than five
      percent, and/or (b) change in investment allocation of amounts to be credited
      to
      the Participant’s Accounts in the future, as the Participant may elect.

     

    5.5  Valuation
      of Accounts.
      The
      value of a Participant’s Distribution Option Accounts as of any date shall equal
      the amounts theretofore credited to such Accounts, including any earnings
      (positive or negative) deemed to be earned on such Accounts in accordance with
      Section 5.2 through the day preceding such date, less the amounts theretofore
      deducted from such Accounts.

     

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    5.6  Statement
      of Accounts.
      The
      Committee shall provide to each Participant, not less frequently than quarterly,
      a statement in such form as the Committee deems desirable setting forth the
      balance standing to the credit of each Participant in each of his Distribution
      Option Accounts.

     

    5.7  Distributions
      from Accounts.
      Any
      distribution made to or on behalf of a Participant from one or more of his
      Distribution Option Accounts in an amount which is less than the entire balance
      of any such Account shall be made pro rata from each of the Earnings Crediting
      Options to which such Account is then allocated.

     

     

    ARTICLE
      6  

     

    Benefits
      To Participants

     

    6.1  Election
      of Time and Manner of Distribution Option Payments.
      In each
      annual Enrollment Agreement filed with the Committee or in the election form
      described in Section 6.7 or 6.8, an Eligible Employee shall elect the time
      and
      manner of payment pursuant to which the amounts credited to the Eligible
      Employee’s Distribution Option Accounts under that Enrollment Agreement
      (including earnings thereon) will be paid, in accordance with the options set
      forth in Sections 6.2 and 6.3, as modified in accordance with Sections 6.7
      and/or 6.8, if applicable.

     

    6.2  Benefits
      Under the Retirement Distribution Option.
      Benefits under the Retirement Distribution Option shall be equal to the value
      of
      the Vested portion of amounts credited to the Participant’s Retirement
      Distribution Account as of the distribution date. Annual installments (if any)
      shall be an amount equal to (i) the value of such Retirement Distribution
      Account as of the distribution date, divided by (ii) the number of installments
      remaining. Benefits under the Retirement Distribution Option shall be paid
      to a
      Participant as follows:

     

    (a)  Form
      of Payment Upon Retirement.
      A
      Participant’s Retirement Distribution Account shall be distributed in one of the
      following methods, as elected by the Participant pursuant to Section 6.1: (i)
      in
      a lump sum or (ii) in 5 or 10 annual installments. The first annual payment
      shall be made as soon as practicable (but no later than 90 days) following
      the
      Participant’s Retirement, except as required by Section 6.6, and each subsequent
      payment shall be due on each following anniversary of the Participant’s
      Retirement date for the specified number of years. If a Participant makes no
      election as to form of payment, the Retirement Distribution Account will be
      paid
      in a lump sum as soon as practicable (but no later than 90 days) following
      the
      Participant’s Retirement, except as required by Section 6.6. All distributions
      attributable to Matching Units and Units representing deferred Company Stock
      (including Units attributable to dividends) shall be made in Company
      Stock.

     

     

    
      
         

      

      
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    (b)  Benefits
      Upon Termination of Employment.
      In the
      case of a Participant’s termination of Service prior to the earliest date on
      which the Participant is eligible for Retirement, other than on account of
      becoming Disabled or by reason of death, the Vested portion of a Participant’s
      Retirement Distribution Account, determined as of the distribution date, shall
      be distributed in a lump sum as soon as practicable (but no later than 90 days)
      following the Participant’s End Termination Date, except as required by Section
      6.6. 

     

    6.3  Benefits
      Under the In-Service Distribution Option.
      Benefits under the In-Service Distribution Option shall be equal to the Vested
      amount credited to the Participant’s In-Service Account as of the distribution
      date. Benefits under the In-Service Distribution Account shall be paid to a
      Participant as follows:

     

    (a)  Payment
      of In-Service Distributions.
      The
      Vested portion of a Participant’s In-Service Account shall be distributed in a
      lump sum payment on the date designated by the Participant in the Enrollment
      Form, except as described below. 

     

    (b)  Prior
      In-Service Period.
      If a
      Participant’s In-Service Account includes amounts deferred for an In-Service
      Period that began before the Effective Date, that portion of the Vested
      In-Service Account that is not a Grandfathered Account shall be distributed
      in a
      lump sum or installments payable over 2, 3, 4 or 5 years, as elected by the
      Participant in the Enrollment Form. The first payment shall be made on the
      date
      elected by the Participant in the Enrollment Form, and each subsequent payment
      shall be made on each following anniversary of the commencement date for the
      specified number of years. Annual installments (if any) shall be an amount
      equal
      to (i) the value of such Vested In-Service Distribution Account as of the
      distribution date divided by (ii) the number of installments remaining. If
      a
      Participant makes no election as to the form of payment, the In-Service
      Distribution Account will be paid in a lump sum.  

     

    (c)  Benefits
      Upon Termination of Employment.
      Notwithstanding the provisions of 6.3(a) and (b), in the event the Participant’s
      Service terminates prior to the date elected by the Participant, other than
      on
      account of becoming Disabled or by reason of death, the Vested portion of such
      In-Service Distribution Account shall be distributed in a lump sum as soon
      as is
      practicable following the Participant’s End Termination Date.

     

    6.4  Distribution
      following Change of Control.
      In the
      event of a Change of Control that is a “change in control event” as determined
      under the regulations under Code section 409A, notwithstanding anything else
      in
      this Article 6 to the contrary, the Participant’s Distribution Option Accounts
      shall be distributed in a single lump sum, on the date of the Change of Control
      consistent with Code section 409A. 

     

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    6.5  Mandatory
      Cash-Out.
      Notwithstanding anything in this Article 6, or Article 7 or 8 to the contrary,
      in the event that the value of a Participant’s Vested Distribution Option
      Accounts (including any Grandfathered Accounts and amounts credited to a
      Participant under the Company’s Supplemental Executive Retirement Plan or any
      other account balance deferred compensation plan that is required to be
      aggregated with this Plan under Code section 409A) is less than $50,000 at
      the
      time of the Participant’s End Termination Date, the Participant’s Vested
      Distribution Option Account under this Plan (excluding Grandfathered Accounts)
      will be paid to the Participant (or his or her Beneficiary, in the event of
      benefits payable upon the death of the Participant) in a lump sum as soon as
      practicable following his End Termination Date.

     

    6.6  Special
      Rule for Key Employees.
      

     

    (a)  Notwithstanding
      any provision of the Plan to the contrary, if a Participant who is a Key
      Employee (as defined below) becomes entitled to receive a distribution on
      account of separation from Service, the distribution may not be made earlier
      than six months following the date of the Participant’s separation from Service,
      if required by Code section 409A and the regulations thereunder. If
      distributions are delayed pursuant to Code section 409A, the accumulated amounts
      withheld on account of Code section 409A shall be paid on the first business
      day
      after the end of the six-month period. If the Participant dies during such
      six-month period, the amounts withheld on account of section 409A shall be
      paid
      to the Participant’s Beneficiary on or around 90 days after the date of the
      Participant’s death. 

     

    (b)  The
      term
“Key Employee” means (i) an officer of the Company or its Affiliates having
      annual compensation greater than $130,000 (adjusted for inflation as described
      in section 416(i) of the Code), (ii) a five percent owner of the Company and
      its
      Affiliates, or (iii) a one percent owner of the Company and its Affiliates
      who
      has annual compensation from the Company and its Affiliates greater than
      $150,000, as determined by the Committee in accordance with Code section 409A.
      The number of officers who are considered Key Employees shall be limited to
      50
      employees as described in Code section 416(i). The Committee shall determine
      the
      Key Employees each year in accordance with Code section 416(i), the “specified
      employee” requirements of Code section 409A, and applicable regulations. Key
      employees shall be identified as of December 31 of each year with respect to
      the
      12-month period beginning on the next following April 1.

     

    6.7  Special
      2006 Elections.
      Notwithstanding anything in Article 4 or this Article 6 to the contrary, to
      the
      extent permitted under section 409A of the Code and the regulations issued
      thereunder, a Participant may make a new election on or before December 31,
      2006
      as to the time and manner of payment of amounts credited to his or her
      Retirement Distribution Account and/or In-Service Distribution Account, on
      such
      terms as shall be determined by the Committee, provided that a Participant
      shall
      not be permitted in calendar year 2006 to (a) change payment elections in a
      manner that will defer distribution of amounts that the Participant otherwise
      would have received in 2006 or (b) cause payments to be made in 2006 pursuant
      to
      the special 2006 election. 

     

     

    
      
         

      

      
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    6.8  Special
      Second Election Rules.
      To the
      extent permitted under section 409A of the Code and the regulations issued
      thereunder, a Participant may change the distribution option previously selected
      for any Distribution Option at any time by submitting a new distribution
      election form to the Committee. However, a change in time or manner of any
      distribution shall be effective only if: (a) the Committee receives the new
      distribution election form at least 12 full months before distributions under
      the Plan related to that change commence, (b) the new distribution election
      is
      not effective for a period of 12 months from the date made, (c) the first
      payment with respect to which the new election is made is deferred for a period
      of five years from the date such payment otherwise would have been made, and
      (d)
      the new election does not result in an impermissible acceleration of payment
      as
      described in Code section 409A and the regulations thereunder.

     

    6.9  Grandfathered
      Accounts.
      The
      terms of this Plan as amended and restated effective January 1, 2005, including
      this Article 6, shall not apply to Grandfathered Accounts, which shall continue
      to be subject to, and governed by, the terms of the Plan as in effect on
      December 31, 2004.

     

     

    ARTICLE
      7  

     

    Disability

     

    Subject
      to the provision of Section 6.5, in the event a Participant becomes Disabled,
      the Participant’s right to make any further deferrals under this Plan shall
      terminate as of the date for which the Participant first receives benefits
      under
      the Company’s Long-Term Disability Benefit Plan, as amended from time to time.
      The Participant’s Distribution Option Accounts shall continue to be credited
      with earnings or dividends, as applicable, in accordance with Section 5.2 or
      Section 4.6 until such Accounts are fully distributed. For purposes of this
      Plan, a Disabled Participant will not be treated as having terminated Service.
      The Participant’s Retirement Distribution Account shall be distributed as soon
      as practicable (but no later than 90 days) following the later of (a) the date
      on which the Participant first becomes eligible for Retirement, or (b) the
      date
      on which the Participant first becomes Disabled within the meaning of Code
      section 409A. The Participant’s Retirement Distribution Account shall be
      distributed to the Participant in accordance with the form of payment elected
      by
      the Participant in the applicable Enrollment Agreement. The Disabled
      Participant’s In-Service Distribution Account will be distributed to the
      Participant in accordance with Section 6.3. Notwithstanding the foregoing,
      in no
      event will distribution be made with respect to Units credited to a
      Participant’s Retirement Distribution Account attributable to deferred Company
      Stock prior to the time such Units are Vested in accordance with Section 4.6(d);
      any such Units that are not Vested when distribution under this Article 7
      commences, if not otherwise forfeited under the terms of the applicable Equity
      Plan and the restricted stock agreement or restricted stock unit agreement
      governing the Company Stock deferred by the Participant, will be distributed
      as
      soon as practicable after they vest. 

     

     

    
      
         

      

      
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    ARTICLE
      8  

     

    Survivor
      Benefits

     

    8.1  Death
      of Participant Prior to the Commencement of Benefits.
      Subject
      to the provisions of Section 6.5, in the event of a Participant’s death prior to
      the commencement of benefits in accordance with Article 6 benefits shall be
      paid
      to the Participant’s Beneficiary, as determined under Section 10.3, pursuant to
      Section 8.2 or 8.3, whichever is applicable, in lieu of any benefits otherwise
      payable under the Plan to or on behalf of such Participant. 

     

    8.2  Survivor
      Benefits Under the Retirement Distribution Option.
      In the
      case of a Participant with respect to whom the Company has credited amounts
      to a
      Retirement Distribution Account, and who dies prior to the commencement of
      benefits under such Retirement Distribution Account pursuant to Section 6.2,
      distribution of such Retirement Distribution Account shall be made in a lump
      sum
      as soon as practicable following the Participant’s death, but in no event later
      than 90 days after such date. The amount of such lump sum benefit payable in
      accordance with this Section shall equal the value of such Vested Retirement
      Distribution Account as of the distribution date. 

     

    8.3  Survivor
      Benefits Under the In-Service Distribution Option.
      In the
      case of a Participant with respect to whom the Company has credited amounts
      to
      an In-Service Distribution Account, and who dies prior to the date on which
      such
      In-Service Distribution Account is to be paid pursuant to Section 6.3,
      distribution of such In-Service Distribution Account shall be made in a lump
      sum
      as soon as practicable following the Participant’s death, but in no event later
      than 90 days after such date. The amount of such lump sum benefit payable in
      accordance with this Section shall equal the value of such Vested In-Service
      Distribution Account as of the distribution date.

     

    8.4  Death
      of Participant After Benefits Have Commenced.
      In the
      event a Participant who elected payment of benefits in the form of annual
      installment under Article 6 dies after benefit payments have commenced, but
      before the entire balance of such Retirement Distribution Account and/or
      In-Service Distribution Account has been paid, any remaining installments shall
      continue to be paid to the Participant’s Beneficiary, as determined under
      Section 10.3, at such times and in such amounts as they would have been paid
      to
      the Participant had he or she survived.

     

     

     

    
      
         

      

      
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    ARTICLE
      9  

     

    Emergency
      Benefit

     

    9.1  Unforeseen
      Financial Emergency.
      In the
      event that the Committee, upon written request of a Participant, determines,
      in
      its sole discretion, that the Participant has suffered an unforeseeable
      financial emergency, the Company shall pay to the Participant from the Vested
      portion of his Distribution Option Account, as soon as practicable following
      such determination, an amount necessary to meet the emergency, including amounts
      for any and all taxes as may be required pursuant to Section 10.9 (the
“Emergency Benefit”). For purposes of this Plan, an unforeseeable financial
      emergency is an unexpected need for cash arising from an illness, casualty
      loss,
      sudden financial reversal, or other such unforeseeable occurrence. Cash needs
      arising from foreseeable events such as the purchase of a house or education
      expenses for children shall not be considered to be the result of an
      unforeseeable financial emergency. Emergency Benefits shall be paid first from
      the Participant’s Vested In-Service Distribution Account, if any, to the extent
      the balance of such In-Service Distribution Account is sufficient to meet the
      emergency. If the distribution exhausts the Vested In-Service Distribution
      Account, the Vested Retirement Distribution Account may be accessed. With
      respect to that portion of any Distribution Option Account which is distributed
      to a Participant as an Emergency Benefit in accordance with this Article, no
      further benefit shall be payable to the Participant under this Plan. It is
      intended that the Committee’s determination as to whether a Participant has
      suffered an “unforeseeable financial emergency” shall be made consistent with
      the requirements under Code section 409A.

     

     

    ARTICLE
      10  

     

    Miscellaneous

     

    10.1  Amendment
      and Termination.
      The
      Plan may be amended, suspended, discontinued or terminated at any time by the
      Board of Directors of Charming Shoppes; provided, however, that no such
      amendment, suspension, discontinuance or termination shall reduce or in any
      manner adversely affect the rights of any Participant with respect to benefits
      that are payable or may become payable under the Plan based upon the balance
      of
      the Participant’s Accounts as of the effective date of such amendment,
      suspension, discontinuance or termination. In the event of termination, existing
      Accounts shall be paid in accordance with the terms of the Plan or in lump
      sum
      payments consistent with Code section 409A. If a Change of Control that
      constitutes a “change in control” event within the meaning of Code section 409A
      occurs, the Plan shall terminate as of the date of the Change of Control and
      the
      benefits payable based upon the balance of each Participant’s Accounts shall be
      distributed as soon as practicable thereafter, consistent with Code section
      409A.

     

    10.2  Claims
      Procedure.
      

     

    (a)  Claim.
      A
      person who believes that he is being denied a benefit to which he is entitled
      under the Plan (hereinafter referred to as a “Claimant”) may file a written
      request for such a benefit with the Benefits Department of the Company, setting
      forth his or her claim.

     

     

    
      
         

      

      
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    (b)  Claim
      Decision.
      Upon
      receipt of a claim, the Benefits Department of the Company shall advise the
      Claimant that a reply will be forthcoming within ninety (90) days (forty-five
      (45) days in the case of claims relating to Disability). The Benefits Department
      of the Company may, however, extend the reply period under special circumstances
      for an additional ninety 90 days (or up to two thirty (30) day extensions in
      the
      case of claims relating to Disability), and shall, in fact, deliver such reply
      within such period. If the claim is denied in whole or in part, the Claimant
      shall be provided a written opinion, using language calculated to be understood
      by the Participant, setting forth:

     

    (i)  the
      specific reason or reasons for the denial;

     

    (ii)  specific
      reference to relevant provisions of the Plan on which the denial is
      based;

     

    (iii)  a
      description of any additional or material information necessary for the Claimant
      to perfect his or her claim and an explanation why such additional or material
      information is necessary;

     

    (iv)  appropriate
      information as to the steps to be taken if the Claimant wishes to submit the
      claim for review; 

     

    (v)  the
      time
      limits for requesting a review under subsection (c) and for review under
      subsection (d) hereof; and

     

    (vi)  the
      Claimant’s right to bring an action for benefits under Section 502 of the
      Employee Retirement Income Security of 1974, as amended (“ERISA”), following an
      adverse benefit determination on appeal.

     

    (c)  Request
      for Review.
      Within
      sixty (60) days (one-hundred and eighty (180) days in the case of claims
      relating to Disability) after the receipt by the Claimant of the written opinion
      described above, the Claimant may request in writing that the Committee review
      the determination of the Benefits Department of the Company. The Claimant
      written request for review must set forth all the facts upon which the appeal
      is
      based. The Claimant or his duly authorized representative may, but need not,
      review the pertinent documents and obtain, upon request and without charge,
      copies of all information relevant to your claim. If the Claimant does not
      request a review of the initial determination within such sixty (60) day (or
      one-hundred and eighty (180) day for claims relating to Disability) period,
      the
      Claimant shall be barred and estopped from challenging the
      determination.

     

     

    
      
         

      

      
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    (d)  Review
      of Decision.
      Within
      sixty (60) days (forty-five (45) days in the case of claims relating to
      Disability) after the Committee’s receipt of a request for review, it will
      review the initial determination. After considering all materials presented
      by
      the Claimant, the Committee will render a written opinion, written in a manner
      calculated to be understood by the Claimant, setting forth the specific reasons
      for the decision, specific references to the pertinent Plan provisions on which
      the decision is based, the Claimant’s right to receive, upon request and free of
      charge, reasonable access to, and copies of, all documents, records and other
      information relevant to the claim for benefits, and the Claimant’s right to
      bring a civil action under section 502(a) of ERISA. If special circumstances
      require that the sixty (60) day (forty-five (45) day in the case of claims
      relating to Disability) time period be extended, the Committee will so notify
      the Claimant and will render the decision as soon as possible, but no later
      than
      one hundred twenty (120) days (ninety (90) in the case of claims relating to
      Disability) after receipt of the request for review.

     

    (e)  Exhaustion;
      Scope of Review.
      No
      Claimant may bring an action for any alleged wrongful denial of Plan benefits
      in
      a court of law unless the claims procedures set forth above are exhausted and
      a
      final determination is made by the Committee. If the Claimant challenges a
      decision under this Section 10.2, a review by the court of law will be limited
      to the facts, evidence and issues presented during the claims procedure set
      forth above. Facts and evidence that become known to the Claimant after having
      exhausted the claims procedure must be brought to the attention of the Benefits
      Department of the Company or the Committee for reconsideration of the claims
      determination. Issues not raised during the claims procedure will be deemed
      waived.

     

    10.3  Designation
      of Beneficiary.
      Each
      Participant may designate a Beneficiary or Beneficiaries (which Beneficiary
      may
      be an entity other than a natural person) to receive any payments which may
      be
      made following the Participant’s death. Such designation may be changed or
      canceled at any time without the consent of any such Beneficiary. Any such
      designation, change or cancellation must be made in a form approved by the
      Committee and shall not be effective until received by the Committee, or its
      designee. If no Beneficiary has been named, or the designated Beneficiary or
      Beneficiaries shall have predeceased the Participant, the Beneficiary shall
      be
      the Participant’s estate. If a Participant designates more than one Beneficiary,
      the interests of such Beneficiaries shall be paid in equal shares, unless the
      Participant has specifically designated otherwise.

     

    10.4  Limitation
      of Participant’s Right.
      Nothing
      in this Plan shall be construed as conferring upon any Participant any right
      to
      continue in the employment of the Company, nor shall it interfere with the
      rights of the Company to terminate the employment of any Participant and/or
      to
      take any personnel action affecting any Participant without regard to the effect
      which such action may have upon such Participant as a recipient or prospective
      recipient of benefits under the Plan.

     

     

    
      
         

      

      
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    10.5  No
      Limitation on Company Actions.
      Nothing
      contained in the Plan shall be construed to prevent the Company from taking
      any
      action which is deemed by it to be appropriate or in its best interest. No
      Participant, Beneficiary, or other person shall have any claim against the
      Employer as a result of such action. Any decisions, actions or interpretations
      to be made under the Plan by the Company or the Board, or the Committee acting
      on behalf of the Company, shall be made in its respective sole discretion,
      not
      as a fiduciary, need not be uniformly applied to similarly situated individuals
      and shall be final, binding and conclusive on all persons interested in the
      Plan.

     

    10.6  Obligations
      to Company.
      If a
      Participant becomes entitled to a distribution of benefits under the Plan,
      and
      if at such time the Participant has outstanding any debt, obligation, or other
      liability representing an amount owing to the Employer, then the Employer may
      offset such amount owed to it against the amount of benefits otherwise
      distributable. Such determination shall be made by the Committee.

     

    10.7  Nonalienation
      of Benefits.
      Except
      as expressly provided herein, no Participant or Beneficiary shall have the
      power
      or right to transfer (otherwise than by will or the laws of descent and
      distribution), alienate, or otherwise encumber the Participant’s interest under
      the Plan. The Company’s obligations under this Plan are not assignable or
      transferable except to (a) any corporation or partnership which acquires all
      or
      substantially all of the Company’s assets or (b) any corporation or partnership
      into which the Company may be merged or consolidated. The provisions of the
      Plan
      shall inure to the benefit of each Participant and the Participant’s
      Beneficiaries, heirs, executors, administrators or successors in
      interest.

     

    10.8  Protective
      Provisions.
      Each
      Participant shall cooperate with the Employer by furnishing any and all
      information requested by the Employer in order to facilitate the payment of
      benefits hereunder, taking such physical examinations as the Employer may deem
      necessary and taking such other relevant action as may be requested by the
      Employer. If a Participant refuses to cooperate, the Employer shall have no
      further obligation to the Participant under the Plan, other than payment to
      such
      Participant of the then current balance of the Participant’s Distribution Option
      Accounts in accordance with his prior elections.

     

    10.9  Withholding
      Taxes.
      The
      Company may make such provisions and take such action as it may deem necessary
      or appropriate for the withholding of any taxes which the Company is required
      by
      any law or regulation of any governmental authority, whether Federal, state
      or
      local, to withhold in connection with any benefits under the Plan, including,
      but not limited to, the withholding of appropriate sums from any amount
      otherwise payable to the Participant (or his Beneficiary). Each Participant,
      however, shall be responsible for the payment of all individual tax liabilities
      relating to any such benefits. 

     

    10.10  Unfunded
      Status of Plan.
      The
      Plan is intended to constitute an “unfunded” plan of deferred compensation for
      Participants. Benefits payable hereunder shall be payable out of the general
      assets of the Company, and no segregation of any assets whatsoever for such
      benefits shall be made. Notwithstanding any segregation of assets or transfer
      to
      a grantor trust, with respect to any payments not yet made to a Participant,
      nothing contained herein shall give any such Participant any rights to assets
      that are greater than those of a general creditor of the Company.

     

     

    
      
         

      

      
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    10.11  Severability.
      If any
      provision of this Plan is held unenforceable, the remainder of the Plan shall
      continue in full force and effect without regard to such unenforceable provision
      and shall be applied as though the unenforceable provision were not contained
      in
      the Plan.

     

    10.12  Governing
      Law.
      The
      Plan shall be construed in accordance with and governed by the laws of the
      Commonwealth of Pennsylvania, without reference to the principles of conflict
      of
      laws.

     

    10.13  Headings
      and Captions.
      Headings and captions are inserted in this Plan for convenience of reference
      only and are to be ignored in the construction of the provisions of the Plan.
      

     

    10.14  Gender,
      Singular and Plural.
      All
      pronouns and any variations thereof shall be deemed to refer to the masculine,
      feminine, or neuter, as the identity of the person or persons may require.
      As
      the context may require, the singular may read as the plural and the plural
      as
      the singular.

     

    10.15  Notice.
      Any
      notice or filing required or permitted to be given to the Committee under the
      Plan shall be sufficient if in writing and hand delivered, or sent by registered
      or certified mail, to the Benefits Department, or to such other entity as the
      Committee may designate from time to time. Such notice shall be deemed given
      as
      to the date of delivery, or, if delivery is made by mail, as of the date shown
      on the postmark on the receipt for registration or certification.

     

    10.16  Code
      Section 409A of the Code.
      The
      Plan is intended to comply with the applicable requirements of Code section
      409A
      and its corresponding regulations and related guidance, and shall be maintained
      and administrated in accordance with section 409A to the extent section 409A
      applies to the Plan. Notwithstanding anything in the Plan to the contrary,
      distributions from the Plan may only be made in a manner, and upon an event,
      permitted by section 409A. 

     

    

    

    

    

    
      
         

      

      
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