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TRANSPORTATION AGREEMENT
BETWEEN
THE UNITED STATES POSTAL SERVICE
AND
FEDERAL EXPRESS CORPORATION
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<PAGE>
TRANSPORTATION AGREEMENT
BETWEEN
THE UNITED STATES POSTAL SERVICE
AND
FEDERAL EXPRESS CORPORATION
TABLE OF CONTENTS
<TABLE>
<S> <C>
Preamble.....................................................................1
ARTICLE 1 - DEFINITIONS .....................................................1
ARTICLE 2 - FEDEX SERVICES ..................................................8
ARTICLE 3 - DISPUTE RESOLUTION ..............................................9
ARTICLE 4 - INDEPENDENT CONTRACTOR...........................................11
ARTICLE 5 - TAXES ...........................................................11
ARTICLE 6 - FEDEX COMPENSATION...............................................13
ARTICLE 7 - PAYMENTS ........................................................13
ARTICLE 8 - GENERAL OBLIGATIONS OF FEDEX ....................................14
ARTICLE 9 - GOVERNMENT REGULATION............................................18
ARTICLE 10 - DISCLOSURE/TRADEMARKS ..........................................18
ARTICLE 11 - OBLIGATIONS OF USPS ............................................21
ARTICLE 12 - LIABILITIES OF THE PARTIES......................................23
ARTICLE 13 - RISK OF LOSS; CLAIMS PROCEDURE;
LIMITATION OF LIABILITY.........................................25
ARTICLE 14 - REPRESENTATIONS AND WARRANTIES..................................25
ARTICLE 15 - TERM AND TERMINATION............................................26
ARTICLE 16 - EVENTS OF DEFAULT...............................................29
ARTICLE 17 - CONFIDENTIALITY.................................................30
ARTICLE 18 - FORCE MAJEURE...................................................30
ARTICLE 19 - STANDARD USPS CLAUSES...........................................31
ARTICLE 20 - APPLICABLE LAW..................................................47
ARTICLE 21 - ENTIRE AGREEMENT................................................47
ARTICLE 22 - AMENDMENTS OR MODIFICATIONS.....................................48
ARTICLE 23 - ASSIGNMENT......................................................48
ARTICLE 24 - WAIVER OF BREACH................................................48
ARTICLE 25 - NOTICES.........................................................48
ARTICLE 26 - REPRESENTATIVES.................................................49
ARTICLE 27 - SEVERABILITY....................................................50
ARTICLE 28 - ORDER OF PRECEDENCE CLAUSE......................................50
EXHIBIT A -- OPERATION SPECFICATIONS
Attachment I Day-turn Operating Plan
Attachment II Night-turn Operating Plan
Attachment III Airworthiness
Attachment IV Unacceptable Packages
EXHIBIT B -- RATES
EXHIBIT C -- PAYMENT PROCEDURES
EXHIBIT D -- MEDIATORS LIST
EXHIBIT E -- FORM OF ESCROW AGREEMENT
</TABLE>
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TRANSPORTATION AGREEMENT
THIS TRANSPORTATION AGREEMENT (this "AGREEMENT") is entered into as of January
10, 2001 between:
THE UNITED STATES POSTAL SERVICE, an independent establishment of the United
States of America established pursuant to 39 United States Code Section 101
et seq., having an office at 475 L'Enfant Plaza S.W., Washington, D.C.
20260-1135 ("USPS"), and
FEDERAL EXPRESS CORPORATION, a company organized and existing under the laws of
Delaware, having an office at 3610 Hacks Cross Roads, Memphis, Tennessee 38125
(together with its Affiliate, "FEDEX" and together with USPS, the "PARTIES" and
each individually, a "PARTY").
PREAMBLE
WHEREAS, USPS is engaged in the transportation and delivery of, among other
things, deferred, day-certain and time-sensitive shipments to various
destinations throughout the United States and around the world,
WHEREAS, FedEx is engaged in the integrated air and ground transportation of, as
well as providing import and export customs services for, time-sensitive and
time-definite shipments to various destinations throughout the United States and
around the world,
WHEREAS, USPS desires to provide for the transportation and delivery of the
Products (as such term is defined in this Agreement) in accordance with the
Operating Specifications (as such term is defined in this Agreement),
WHEREAS, USPS desires FedEx to perform and FedEx is willing to provide the FedEx
Services (as such term is defined in this Agreement) to USPS.
FOR AND IN CONSIDERATION of the mutual covenants contained in this Agreement,
the Parties agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement and its Schedules, the following terms shall have
the following meanings:
"ACTUAL AIRCRAFT ARRIVAL" means the actual time that an aircraft blocks in at a
destination ramp.
"ADVERTISEMENT" means a free or paid mass or targeted communication under the
control of a party intended for the general public or a specific potential or
existing customer, the ultimate purpose of which is to promote the sale of such
party's products or services, including, but not limited to, television, radio
and internet commercials, out-of-home ads (e.g., billboards,
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sports stadium displays, transit signs), direct mail ads, print ads and free
standing inserts in newspapers, magazines, and electronic media.
"AREA DISTRIBUTION CENTER" (ADC) means any USPS or third Party location that
receives packages inbound to a market from FedEx or acts as a destination that
receives Packages inbound to a market from FedEx.
"AIR MAIL CENTER " (AMC) means any USPS or third Party location that acts as an
origin or destination location for tendering USPS packages to or from FedEx
outbound or inbound from a market or acts as an origin or destination location
for tendering USPS packages to or from FedEx outbound or inbound.
"AIRWORTHY" means the conformity of an ULD with the conditions set forth in
Attachment III to the Operation Specifications.
"AFFILIATE" means an entity that Controls or is directly or indirectly
Controlled by a Party or is under joint Control with a Party that Controls. An
Affiliate is also an entity that is under the common Control of another entity
that also Controls a Party.
"ALL PURPOSE CONTAINER" (APC) is a type of USPS mail transport equipment into
which Packages are sorted.
"ANNUAL TOTAL AIR FORECAST" means the forecast provided to FedEx by USPS
pursuant to Section 4.2.0 of the Operating Specifications.
"BASELINE COMMITMENT" means the Baseline Commitment by origin that FedEx is
committed to transport and that USPS is obligated to provide as set forth in the
Operating Plans.
"BY-PASS NETWORK FLOW" means the By-pass Network Flow that is to be developed by
the parties from time to time pursuant to the provisions of Section 3.6.0 of the
Operating Specifications.
"BY-PASS TARGET RATE" means the percentage, determined on a system-wide
aggregate basis, of ULDs that will be By-pass ULDs (which will not be less than
25% unless otherwise agreed by FedEx in writing). The By-pass Target rate will
be determined on a Schedule Period basis in accordance with the procedures set
forth in Section 3 of the Operating Specifications.
"BY-PASS ULDs" means a single ULD loaded at the origin location for a particular
destination. The volume in the ULD will not be individually processed in the
FedEx sort operation. USPS sometimes refers to By-pass ULDs as "intacts".
"CHANGE OF CONTROL EVENT" shall mean
(a) any Person or group (within the meaning of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules of the
Securities and Exchange Commission promulgated thereunder as in effect
on the date thereof) who is not a stockholder of FedEx Corporation as
of the date hereof becoming the beneficial owner pursuant to Rule
13d-3 or 13d-5 under the Exchange Act of Voting Stock of FedEx
Corporation having more than 30%
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of the voting power of all of the then outstanding Voting Stock of
FedEx Corporation;
(b) individuals who are not Continuing Directors constituting a majority
of the Board of Directors of FedEx Corporation, or individuals who are
not appointed or designated by FedEx Corporation constituting a
majority of the Board of Directors of FedEx;
(c) FedEx Corporation consolidating with or merging into any other Person,
or any other Person consolidating with or merging into FedEx
Corporation, unless the stockholders of FedEx immediately prior to
such transaction hold at least 50% of the outstanding Voting Stock of
the surviving corporation;
(d) FedEx consolidating with or merging into any other Person that is not
a direct or indirect subsidiary of FedEx Corporation, or any other
such Person merging with or into FedEx, unless Federal Express is the
surviving corporation;
(e) FedEx, in one transaction or a series of related transactions,
conveying, transferring or leasing, directly or indirectly, all or
substantially all of its assets to any other Person that is not a
direct or indirect subsidiary of FedEx Corporation; and
(f) FedEx Corporation and one or more of its direct or indirect
wholly-owned subsidiaries ceasing to own and control 80% of the issued
and outstanding Voting Stock of FedEx.
"COMMITTED VOLUMES" means the volumes that USPS is committed to providing FedEx
and that FedEx is committed to transporting during any Schedule Period as more
fully described in Section 3.6.0 of the Operating Specifications.
"COMMITTED VOLUME SCHEDULE" means the schedule developed by FedEx as described
in Section 3.6.0 of the Operating Specifications.
"CONSOLIDATION SCAN" (CONS) is a scan that associates multiple package tracking
numbers to a consolidated unit and can associate multiple consolidated units to
a single unit. This is the scan that is performed when individual pieces are
consolidated into a ULD.
"CONTINUING DIRECTOR" means an individual who is a member of the Board of
Directors of FedEx Corporation on the date of this Agreement or who shall have
become a member of the Board of Directors of FedEx Corporation subsequent to
such date and who shall have been nominated or elected by a majority of the
other Continuing Directors then members of the Board of Directors of FedEx
Corporation.
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"CONTAINERIZED TRANSPORT VEHICLE" (CTV) means any truck that is used to
transport ULDs.
"CONTROL" or "TO CONTROL" means with respect to an entity ownership of more than
50% of the capital stock or equity interest and voting control of any entity and
the power to designate a majority of the board of directors of such entity.
"DAILY RECONCILED AMOUNT" means the FedEx invoice amount for the specified
shipping day.
"DANGEROUS GOODS" OR "HAZARDOUS MATERIAL" means articles or substances which are
capable of posing a significant risk to health, safety or to property when
transported by air and which are classified according to Section 3
(Classification) of the International Air Transport Association (IATA) Dangerous
Good Regulations, regardless of variations, exceptions, exemptions, or limited
quantity allowances.
"DAY-TURN OPERATING PLAN" means the Day-turn operating plan attached to the
Operating Specifications as Attachment I and relates to the Day-turn Operations.
"DAY-TURN OPERATIONS" means the FedEx operation that operates Tuesday through
Sunday and processes FedEx Economy Service volume.
"DELIVERY SCAN" means a scan performed by FedEx that indicates that FedEx has
tendered volume to USPS.
"DISPATCH AND ROUTING TAG" (D&R TAG) means a bar coded USPS label that is
attached to Handling Units. The D&R Tag provides an identification number that
is unique for thirty days from generation in human and machine-readable format
as well as the destination FedEx ramp identifier of the Handling Unit in human
readable format.
"EMPLOYEES WITH ACCESS TO THE MAIL" means FedEx employees who transport, sort,
load and unload mail to and from the aircraft including supervisors of such
employees.
"ESCROW AGREEMENT" means the form Escrow Agreement attached to this Agreement as
Exhibit E into which funds may be deposited pursuant to the provisions of
Section 3.1 and 7.3 of this Agreement.
"FEDEX HOLIDAYS" means the holidays that FedEx does not operate as listed in
Section 3.9.1 of the Operating Specifications.
"FEDEX SERVICES" means the services described in the Operating Specifications to
be provided by FedEx to USPS.
"GOVERNMENTAL BODY" means any:
(i) international, federal, state or local jurisdiction of any nature;
(ii) international, federal, state or local government;
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(iii) international, federal, state or local governmental or
quasi-governmental authority of any nature (including any
governmental agency, branch, department, official, or entity
and any court or other tribunal); and
(iv) international, federal, state or local body exercising, or
entitled to exercise, any administrative, executive, judicial,
legislative, police, regulatory, or taxing authority or power
of any nature.
"INBOUND MARKET VOLUME" means all inbound Handling Units to a destination AMC or
ADC.
"HANDLING UNIT" means a ULD (other than a Partial ULD), Mailbag, Tub, Mail Tray,
or Outside that is individually processed by FedEx. The term "Handling Unit"
does not include the contents of a By-pass ULD.
"HAZARDOUS MATERIALS" has the meaning set forth in the definition for Dangerous
Goods.
"HUB SCAN" means a scan performed by FedEx at a HUB.
"LEGAL REQUIREMENT" means any federal, state, local or other administrative
order, constitution, law, ordinance, principle of common law, rule, regulation,
statute, policy, procedure, directive, binding guideline or interpretation, or
treaty.
"LOCAL" means the location closest to where an event or circumstance exists.
"LOCAL PLAN" means the individual plans that will be entered into at the Local
level between FedEx and USPS in accordance with the Operating Specifications.
"MAIL BAGS" means USPS bags with maximum dimensions of 30 inches by 15 inches by
15 inches. The closure of the Mail Bag must be such that no straps or strings
are hanging loose. The Mail Bag must have a permanently affixed location on the
side of the bag which allows the routing label to be affixed in such a manner
that it can be scanned by the FedEx automated sorting equipment.
"MAIL TRAYS" means closed and secured containers with dimensions no greater than
21 inches by 19 inches by 19 inches used to carry mail.
"MARKET LANE" has the meaning set forth in Section 3.2.0 of the Operating
Specifications.
"MARKET SERVICE COMMITMENT TIME" means the time specified by which FedEx commits
to tender volume to USPS as more fully described in Section 8.5 hereof.
"MEDIATOR'S LIST" means the list of potential mediators as jointly agreed by the
parties and attached as Exhibit D hereto.
"MINIMUM GUARANTEED VOLUMES" means the minimum volumes that USPS is obligated to
provide to FedEx as more fully set forth in Section 11.1 hereof.
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"NATIONAL DISRUPTION" means the declaration of a national disruption by FedEx in
accordance with its standard procedures for its national customer base [*].
"NETWORK EXPANSION REIMBURSEMENT" means an amount equal to [*] to be paid by
USPS to FedEx pursuant to the provisions of Section 6.3 of this Agreement and
any additional amounts that become payable by USPS to FedEx pursuant to the
provisions of Section 11.4 of this Agreement.
"NIGHT-TURN OPERATING PLAN" means the Operating Plan attached to the Operating
Specifications as Attachment II that relates to the Night-turn Operations.
"NIGHT-TURN OPERATIONS" means the FedEx operation that operates Monday night
through Friday night and Sunday and processes primarily FedEx Overnight
packages.
"OPERATING PLAN" means either the Day-turn Operating Plan or the Night-turn
Operating Plan, individually or collectively.
"OPERATING SPECIFICATIONS" means the description of the services to be provided
by FedEx under this Agreement and the responsibilities and obligations of each
of the parties in connection therewith as set forth in Exhibit A to this
Agreement.
"ORDER" means any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"OUTBOUND MARKET VOLUME" means all outbound Handling Units originating from the
geographic area served by an AMC.
"OUTSIDES" means individual packages with dimensions no greater than 108 inches
in combined length and girth and with no single dimension greater than 84
inches.
"PACKAGE" means any box or envelope that is accepted by USPS for delivery to the
consignee.
"PARTIAL ULD" means a ULD that is used to convey loose Handling Units from the
AMC to the FedEx ramp. This ULD will be unloaded at the origin ramp.
"PERSON" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"POSSESSION SCAN" means a scan performed by FedEx that indicates FedEx has
accepted volume from USPS.
"PRELIMINARY NETWORK FLOW" has the meaning set forth in Section 3.6.0 of the
Operating Specifications.
"PROCEEDING" means any action, arbitration, audit, hearing, investigation,
litigation or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought,
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conducted or heard by or before, or otherwise involving, any Governmental Body
or arbitrator.
"PROCESS CODE" means the code set forth in each Operating Plan that describes
the method of and time periods for the pickup and delivery from and to each AMC
and ADC.
"READY FOR CARRIAGE" means adequately packaged, labeled and secured Shipments in
the condition required by the Operating Specification.
"REGIONAL DISRUPTION" means a major event that adversely affects transportation
networks on a regional basis as evidenced by the declaration of a state of
emergency by a state or Federal Governmental Body.
"SCANNING SPECIFICATIONS" means the specifications that are attached to the
Operating Specifications as Attachment VI and which relate to the requirements
for the D&R Tag and the scanning devices to be used by FedEx personnel in the
performance of the FedEx Services.
"SCHEDULED AIRCRAFT ARRIVAL" means the planned block-in time at the FedEx ramp
in accordance with the Schedule Period Operations Schedule.
"SCHEDULE BLOCK" means one or more Schedule Periods grouped together by FedEx
for purposes of determining flight schedules during such period.
"SCHEDULE BLOCK IMPLEMENTATION DATE" means the first day of scheduled flights
during any Schedule Block Period.
"SCHEDULE PERIOD" means one of the twelve periods ranging from twenty-eight (28)
to thirty-five (35) days as shall from time to time be specified by FedEx.
"SCHEDULE PERIOD IMPLEMENTATION DATE" means the first day of scheduled flights
during any `Schedule Period.
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"SCHEDULE PERIOD OPERATIONS SCHEDULE" means the flight schedule that is
applicable during each Schedule Block as developed pursuant to the provisions of
Section 3.6.0.
"SCHEDULE PERIOD REQUEST FORECAST" means the forecast provided to FedEx by USPS
pursuant to the provisions of Section 3.5.0 of the Operating Specifications.
"SCHEDULE PERIOD TOTAL AIR FORECAST" means the forecast provided to FedEx by
USPS pursuant to the provisions of Section 3.4.0 of the Operating
Specifications.
"SERVICE COMMENCEMENT DATE" means August 27, 2001 or any earlier or later date
on which FedEx begins the performance of the FedEx Services.
"SERVICE LEVEL" means the measurement of FedEx's performance calculated in the
manner described in Section 8.5 of this Agreement.
"SERVICE LEVEL COMMITMENT" means the percentage of service level that FedEx
commits to achieve as provided in Section 8.5 of this Agreement.
"SHIPMENT" means all Packages moving on an individually processed D&R Tag.
"SHIPPING DAY" means a day on which FedEx performs the FedEx Services.
"SHIPPING PERIOD" means Saturday through Friday.
"SHIPPING PERIOD RECONCILED AMOUNT" means the FedEx invoiced amount for the
Shipping Period.
"TRANS LOG FILE" means the USPS data file that contains, for each D&R Tag, the
actual weight, origin, and destination market for each Handling Unit. All
changes to the Trans-Log File including layout, valid data values or data
definitions must be communicated to FedEx not later than 60 calendar days prior
to the implementation of the change unless otherwise mutually agreed.
"UNACCEPTABLE PACKAGES" means packages that are unacceptable for transportation
in the FedEx network as described in Attachment IV to the Operating
Specifications.
"UNIT LOAD DEVICE" (ULD) means the general name used to refer to FedEx air
containers.
"UNIVERSAL ROUTING AND SORT AID" (URSA) means the alphanumeric code on FedEx
packages to designate its routing.
"VOTING STOCK" means all outstanding shares of capital stock of a Person
entitled to vote generally in the election of directors.
ARTICLE 2
FEDEX SERVICES
Effective as of the Service Commencement Date, USPS wishes FedEx to provide the
FedEx Services and FedEx hereby agrees to perform the FedEx Services. The
Parties expressly agree
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that, subject to the condition that FedEx shall remain liable hereunder, FedEx
may provide the FedEx Services through an Affiliate or any sub-contractor. FedEx
may not sub-contract the FedEx Services except in the ordinary course of
business and in a manner that does not discriminate against USPS without the
prior written consent of USPS. Notwithstanding the foregoing, FedEx may not
sub-contract more than [*].
ARTICLE 3
DISPUTE RESOLUTION
3.1 The parties shall attempt in good faith to resolve any dispute arising out
of or relating to this Agreement in the following manner:
(a) Either Party may give the other Party written notice of any dispute
not resolved in the normal course of business. Said notice as it
relates to FedEx shall be the submission of a claim as described in
Article 19, Clause B-9. Said notice as it relates to USPS shall be the
provision to FedEx of a Contracting Officer's written Final Decision
as described in Article 19, Clause B-9. That notice must set forth the
basis for the initiating Party's claim and the documentation that the
initiating Party believes supports its claim. The authorized
representatives of both parties (the "Representatives"), will meet at
a mutually acceptable time and place within ten days after the date of
the delivery of that notice and as often after that time as they
reasonably deem necessary for the purpose of exchanging relevant
information and attempting to resolve the dispute.
(b) If, following the referral of the matter to their respective
Representatives, either Party declares the matter to be at an impasse,
the parties will jointly select a mediator from the Mediators List. If
the parties cannot agree upon the selection of a mediator within seven
days, each Party will select a mediator and the two mediators will
then select a third mediator. The parties will develop the Mediators
List, within 60 days of the execution of this Agreement (or such later
time as the parties mutually agree). If parties fail to agree upon the
Mediators List within such time frame, then upon declaration of an
impasse as referred to above, each Party will designate a mediator and
the two mediators will then select a third mediator. In each case
where the parties select a mediator that then selects a third
mediator, the three mediators will serve as a panel at the Mediation
Hearing referred to in (c) below. Any required action of the mediators
will be as determined by a majority of the mediators.
(c) The place of mediation (the "Mediation Hearing") will be held in
Washington DC and shall be held within five days of the
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appointment of the mediator or mediators, as the case may be. At the
mediation hearing each Party will make a presentation supporting its
position on the matter in dispute. No later than five days following
the Mediation Hearing the mediator or the mediators, as the case may
be, shall render an opinion as to whether it is improbable or probable
that the initiating Party will prevail on the disputed matter if the
matter were to be litigated in a court of competent jurisdiction
without a jury. The mediator or mediators, as the case may be, must
base their decision on the evidence introduced at the hearing,
including all logical and reasonable inferences from that evidence. In
rendering their decision, the mediators will determine the parties'
rights and obligations according to the substantive and procedural
laws of the law governing this Agreement and the terms of this
Agreement.
(d) If the mediator or mediators have opined that it is probable that the
initiating Party will prevail on the disputed matter, and the
non-initiating Party remains unwilling to pay the amount of the claim,
the non-initiating party will make the payments referred to in Section
7.3 of this Agreement into an interest bearing escrow account pursuant
to the terms of the Escrow Agreement attached hereto as Exhibit E. The
dispute will then be resolved in accordance with the provisions of
Clause B-9 of Article 19 below. Upon resolution of the dispute, the
amount held in escrow will be released to the initiating Party if and
to the extent that a payment is to be made to the initiating Party
otherwise the amounts on deposit in the escrow account will be paid to
the non-initiating Party.
3.2 Either Party, in its discretion, may be represented by an attorney at the
Mediation Hearing.
3.3 The parties may extend any deadline specified in this Article 3 by mutual
agreement.
3.4 The parties will treat all negotiations conducted in accordance with the
requirements of this Article 3, including, without limitation, the exchange
of any position memoranda, as confidential and as compromise and settlement
negotiations for purposes of the Federal Rules of Evidence and the rules of
evidence of any court having jurisdiction over the dispute.
3.5 The provisions of this Article 3 shall not be applicable to the payment of
any amounts invoiced or reconciled in accordance with the provisions of
Exhibit C hereunder. All disputes arising from such payments will be
handled in accordance with Section 7.3 of this Agreement.
3.6 Each Party shall be responsible for the payments of its own costs incurred
in connection with the provisions of this Article 3. Each Party will bear
one-half of the costs of the Mediators utilized in connection with this
Article 3.
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ARTICLE 4
INDEPENDENT CONTRACTOR
The Parties intend that an independent contractor relationship will be
created by this Agreement. Each Party is interested only in the results of the
other Party's work and shall not exercise any control over the conduct or
supervision of the work or the means of its performance. Each Party shall have
full responsibility for the collection and payment of its own international,
federal, state and local employment-related taxes and contributions, including
penalties and interest, insurance, social security, income tax, workers'
compensation or any other similar statute Each Party shall indemnify and hold
the other harmless for any liability (including taxes, interest, and penalties)
resulting from its improper or incorrect tax reporting, withholding, remitting,
and similar activities or obligations, or from the failure to file, collect,
report or pay any of the above mentioned employment taxes.
ARTICLE 5
TAXES
5.1 Except as provided in 5.2 below, any and all taxes, excises, fees,
duties and assessments whatsoever (including interest and
penalties) ("Tax" or "Taxes") arising out of the sale or
performance of the FedEx Services, in any manner levied, assessed
or imposed by any Governmental Body or subdivision or agency
thereof having jurisdiction shall be the sole responsibility and
liability of USPS. FedEx reserves the right to add the amount of
any such Tax to its charges for the Services.
5.2 Except as provided in Section 5.3 below, USPS' obligations under
5.1 shall not extend to taxes based upon, measured by or with
respect to, the net or gross income, items of tax preference or
minimum tax or excess profits, receipts, capital, franchise, net
worth or conduct of business or any other similarly-based taxes of
FedEx.
5.3 USPS represents that it has obtained from the Internal Revenue
Service (IRS) a ruling which permits USPS to pay directly to IRS
the federal excise tax applicable to the air transportation of mail
within the United States, and which relieves air transportation
carriers of mail of any obligation to collect and remit to IRS such
excise tax on the air transportation of mail. USPS further
represents that IRS has recognized that the terminal handling of
mail is an accessorial service that is not subject to the federal
excise tax, provided the charges therefor are separately stated on
billing documents. In light of these representations the parties
agree as follows:
(a) USPS shall be exclusively responsible for payment to the IRS of
federal excise taxes on air transportation services under this
contract.
(b) Bills submitted by FedEx to USPS for air transportation services under
this contract shall not include any amounts for federal excise taxes,
whether separately stated or incorporated as an element of charges for
air transportation services. All charges for taxable transportation
and non-taxable terminal handling services shall be clearly identified
as such and shall be separately stated on all bills submitted by
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Fedex to USPS under this contract. This separate statement shall be
made in a manner consistent with Generally Accepted Accounting
Principles and with FedEx's then current methodology for calculating
its federal excise tax liability.
(c) USPS shall hold harmless, save and defend FedEx from any demand or
claim of, or on behalf of, the IRS or the United States based on the
application of federal excise taxes (including interest and penalties
thereon) to the transportation services performed by FedEx under this
contract, or any portion thereof. If FedEx's excise tax liability on
its services other than the FedEx Services provided to USPS is
increased as a result of providing the FedEx Services to USPS, USPS
shall indemnify FedEx for such increase as if such increase were a tax
subject to the indemnity of the first sentence of this Section 5.3(c).
Such increase shall be the difference between (x) FedEx's excise tax
liability if it had not provided the FedEx Services to USPS and (y)
FedEx's actual excise tax liability. The accuracy of the calculation
by FedEx of an amount payable pursuant to this Section 5.3(c) shall be
verified, upon the request of USPS, by a firm of independent public
accountants reasonably acceptable to FedEx and to USPS. In order to
enable such accountants to verify such calculations, FedEx shall
provide to such accountants (for their own confidential use and not to
be disclosed to USPS or any other person and subject to the execution
of a satisfactory confidentiality agreement) all information
reasonably necessary for such verification, including any computer
analyses used by FedEx to calculate such amount or amounts. This
verification shall be made in a manner consistent with Generally
Accepted Accounting Principles and with FedEx's then current
methodology for calculating its federal excise tax liability. The cost
of such verification shall be borne by USPS unless it is determined
that the actual amount payable deviates in favor of USPS by more than
5% from the amount originally determined by FedEx, in which case such
costs will be borne by FedEx.
(d) FedEx may, in its sole discretion, apply for a ruling from the
Internal Revenue Service to the effect that it may exclude the
revenues and transportation costs of providing the FedEx Services to
USPS in determining FedEx's excise tax liability on its services for
customers other than USPS. Such ruling application may include further
guidance as determined by FedEx. USPS agrees to fully cooperate with
FedEx in the application for any such ruling, including, but not
limited to, joining FedEx as a named Party on such ruling application.
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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.
6.3 To reimburse FedEx for a portion of certain expenses incurred or to be
incurred to expand FedEx's existing network to enable it to perform the
FedEx Services, USPS shall pay the Network Expansion Reimbursement as
follows: One half of the Network Expansion Reimbursement shall (subject to
the satisfaction of the condition set forth in Section 15. 2 (b)) be
payable on March 30, 2001 with the balance due on October 15, 2001. USPS's
obligation to pay the Network Expansion Reimbursement is unconditional and
shall not be refundable except to the extent that the parties shall
mutually agree that the costs to be reimbursed have not been and will not
be incurred. For the avoidance of doubt, the parties acknowledge that while
the FedEx actual expenses to be incurred will be in excess of the Network
Expansion Reimbursement amount, USPS's obligation will be limited to such
amount. The parties further agree that the Network Expansion Reimbursement
represents the [*].
ARTICLE 7
PAYMENTS
7.1 Payments shall be made in accordance with the Payment Procedures set forth
in EXHIBIT C to this Agreement. All payments shall be in United States
Dollars in current funds, without offset or reduction. If such charges are
not paid when due, the defaulting Party shall be charged interest in the
manner and amount prescribed by the Prompt Payment Act.
7.2 In no event whatsoever shall either Party exercise a lien on any Shipment
for reason of a claim against the other Party.
7.3 USPS agrees promptly to pay all amounts invoiced by FedEx without setoff or
adjustment as follows: USPS will pay 100% of all amounts invoiced for FedEx
Services rendered under the contract (whether or not such amount is
disputed by USPS). For amounts that either Party claims entitlement
("Claims") as described in Article 3 , the non-initiating Party will pay
into Escrow, in the manner described in Article 3 an amount [*].
Payment by either Party under the dispute process is not to be construed,
in any manner, as an admission by that Party of liability to the other or,
in any proceeding, as evidence of entitlement on the part of such Party.
Each Party expressly reserves its
13
<PAGE>
right to assert a claim for the recovery of any payment, or part of a
payment, through the disputes procedures of this contract, to which it
believes the other was not entitled. By making a payment pursuant to the
dispute process of this Agreement, no Party is waiving any claims, defenses
or other matters relating to or against FedEx.
ARTICLE 8
GENERAL OBLIGATIONS OF FEDEX
8.1 FedEx shall at all times during the term of this Agreement comply in all
material respects with the terms and conditions of this Agreement and all
Exhibits and Schedules attached hereto, which shall be considered as an
integral part of this Agreement.
8.2 FedEx shall provide USPS timely, reasonable assistance and cooperation to
enable USPS representatives to understand significant individual or
trending claims for lost, damaged or delayed Shipments.
8.3 FedEx shall provide to USPS ongoing access to a designated service
representative who shall (i) provide prompt response to unsatisfactory
trends, perform root cause analysis with regard to each such trend and
help, advise and assist with the development of commercially reasonable
corrective actions acceptable to FedEx so as to mitigate any future damage
or injury resulting therefrom and to minimize the risk of the reoccurrence
of the same or similar situations prospectively, and (ii) provide claims
processing and support.
8.4 (a) FedEx and USPS will work together to determine USPS's data requirements
relating to non-proprietary volume scans, network performance and billing
statistics. FedEx will provide the following data to USPS:
[*]
(b) FedEx will provide all USPS scan data one business day following the
Shipping Day.
(c) The Local Plans referenced in the Operating Specifications will provide
for the availability of data to USPS relating to:
[*]
(d) In addition to the foregoing data and reports, FedEx will exercise its
good faith efforts to provide a report that sets forth actual transported
container weights.
8.5 FedEx agrees that it will perform the FedEx Services consistent with the
Service Level Commitments calculated in accordance with the following
procedures:
(a) The Day-turn Operating Plan and the Night-turn Operating Plan shall
each set forth a Market Service Commitment Time for each ADC or AMC. Each
Market Service Commitment Time assumes that the ADC or AMC will be served
by a wide-body aircraft type. If, at any time, the scheduled last aircraft
servicing an ADC or
14
<PAGE>
AMC changes, the Market Service Commitment Time will be adjusted as
follows: The Market Service Commitment Time will be [*] than specified if
the aircraft is changed from a wide-body aircraft to a narrow-body aircraft
and will be [*] than specified if the aircraft is changed form a
narrow-body aircraft to a wide-body aircraft. This adjustment will be made
each time the scheduled last aircraft servicing an ADC or AMC changes. If,
as a result of either a local or national Air Traffic Control (ATC) system
degradation, the Day-turn or Night-turn Market Service Commitment Time for
a specific location can not be maintained, both parties will meet to
discuss adjustments for each affected ADC or AMC. If, because of such ATC
degradation, FedEx requests a Market Service Commitment Time later than the
one then in effect and if USPS refuses to grant the request, FedEx may [*].
(b) For each Handling Unit tendered to USPS prior to the Market Service
Commitment Time, as conclusively evidenced by the time-stamp on the
Delivery Scan, service will have been met. The Service Levels will be
calculated independently for the Day-turn and Night-turn network for each
Schedule Period by dividing the total cubic feet (for the Day-turn network)
or total weight (for the Night-turn network) of product for which service
has been met during the Schedule Period by the total cubic feet (in the
case of Day-turn network) or the total weight (in the case of the
Night-turn network) of the product accepted from the USPS by FedEx during
the Schedule Period. There shall be excluded from the calculation of the
Service Level any days on which a [*]. In addition, if the percentage of
By-pass ULDs shall be more than [*] less than the By-pass Target Rate,
there shall be excluded from the calculation of the Service Level
Commitment, the cubic footage equivalent of the deficiency below the
By-pass Target Rate. For Handling Units that are not Bypass ULDs, the
weight will be the weight shown in the Trans-Log file.
(c) The following Service Level Commitments shall apply for each network
following the completion of a five-month transition and testing period (the
"Transition Period"). The Transition Period shall begin on the first month
in which FedEx carries the Minimum Guaranteed Volumes:
[*] % of product delivered prior to the Market Service Commitment Time
except December and January
[*] % of product delivered prior to the Market Service Commitment Time for
the period December 9 through and including December 24, [*]% for the rest
of December and [*]% for January.
The following service times shall apply during the Transition Period:
Month 1--[*]% Month 4 - [*]%
Month 2--[*]% Month 5--[*]%
Month 3--[*]%
Notwithstanding the foregoing, if any of the first five months after Month
2 are a December or January, then the customary Service Level Commitments
for December and January shall apply to those months. If either Month 1 or
Month 2 is a December
15
<PAGE>
or January, then the Month 1 or Month 2 Service Level Commitments, as the
case may be, shall apply.
(d) Should no Delivery Scan be found in the FedEx scan record for a
Handling Unit (excluding ULDs) for which a Possession Scan has been made,
[*]. Not less than quarterly, the parties will jointly perform a test to
determine the number of Handling Units that have received a Possession Scan
without a corresponding Delivery Scan. The parties will discuss methods to
minimize this problem during the SWORD Committee meetings referred to in
Section 13.6.0 of the Operating Specifications.
(e) Should the actual Service Level be less than the Service Level
Commitment, FedEx will [*].
(f) [*]
8.6 (a) Employees with Access to the Mail that are hired after the Service
Commencement Date must undergo the pre-employment screening activities set
forth below. These employees may commence employment on an interim basis as
USPS completes its review. Upon completion of the USPS review, these
employees will receive a non-sensitive clearance. If USPS does not grant
this non-sensitive clearance, the employee may not act in the capacity of
an Employee with Access to the Mail. In addition to completing the standard
FedEx pre-employment screening, the following must occur:
i). Complete drug screening for those substances identified by the
Substance Abuse and Mental Health Service Administration (SAMHSA) as
the five most abused substances which are: cocaine, marijuana,
amphetamine/methamphetamine, opiates and phencyclidine (PCP).
ii). Complete and forward to the Contracting or his designee a single
Finger Print card for each employee.
iii). Forward to the Contracting Officer or his designee a completed,
signed and dated PS From 2181-C (Contractor Authorization and Release)
on each employee.
iv). Forward to the Contracting Officer or his designee on each
employee a completed, signed and dated PS Form 2025 or such other form
as may be mutually agreed by the Parties.
v). Forward to the Contracting Officer or his designee a completed
Certification and Transmittal Cover Sheet (CAT) and the items
referenced therein to be forwarded. Items identified for retention
therein should be retained in Memphis notwithstanding any contrary
statement in such form.
Said forwarded information shall be submitted to Contracting Officer
and will be reviewed by the Postal Service Inspection Service, and
FedEx employee
16
<PAGE>
security clearances will be granted in accordance with the Postal
Service's standard policies.
(b) With respect to Employees with Access to the Mail hired before the
Service Commencement Date, USPS will grant a waiver of the requirements
listed in (a) above if FedEx submits to USPS within 30 days after the
Service Commencement Date, a certification that all Employees with Access
to the Mail have:
(i) Undergone a criminal history check for the seven year period
prior the date of employment;
(ii) If hired after 1985 have satisfactorily completed a FedEx drug
screening test; and
(iii) Undergone FedEx's standard pre-employment screening.
ARTICLE 9
GOVERNMENT REGULATION
9.1 FedEx shall remain a company in good standing under the laws of the State
of Delaware.
9.2 FedEx shall substantially comply with all laws, orders or regulations that
may be applicable to the performance of the FedEx Services and shall obtain
and keep current all licenses, permits and authorizations from all
governmental agencies and authorities necessary for the performance of the
FedEx Services.
9.3 FedEx shall not be required to perform any material FedEx Services that
have been determined by a court of competent jurisdiction or by a
Governmental Body with subject matter jurisdiction to be in violation of
any applicable law or regulation.
9.4 USPS agrees that none of its obligations and rights contemplated by this
Agreement constitute sovereign acts within the meaning of the "sovereign
acts doctrine."
9.5 USPS shall have the right to audit FedEx's books and records for the
limited purpose of investigating alleged criminal activity or civil fraud.
This provision shall not be deemed to limit the audit or investigative
rights or obligation of any Governmental Body including without limitation
the Office of the Inspector General and the Postal Inspection Service that
have been granted or imposed by applicable statute or regulation. In
addition to the foregoing, FedEx will provide such supporting documentation
as it shall in its discretion deem necessary to allow USPS properly to
review any Claims, disputed payments, and compliance with the Service
Standards.
ARTICLE 10
DISCLOSURE/TRADEMARKS
[*]
17
<PAGE>
10.2 Notwithstanding the provisions of Section 10.1 above, neither party shall
be required to obtain prior written approval before providing information
regarding this Agreement:
a. To Members of Congress (their staffs or designees), provided that
while the Chairperson of the House Subcommittee with oversight
responsibility of USPS may receive copies of this Agreement, other
members of Congress, their staffs or designees may receive copies that
are redacted in the same manner that will apply to a Freedom of
Information Act request.
b. In response to legal process or otherwise required by law.
c. In response to a request from the Department of Justice Antitrust
Division attorneys or economists in pursuit of a non-public
investigation.
d. In response to requests submitted to USPS under the Freedom of
Information Act. In this regard, the USPS shall follow the procedures
promulgated at 39 CFR Section 265.8.
10.3 USPS shall not use in Advertisements, the trademarks, tradenames, service
marks or logotypes of FedEx without the prior written consent of FedEx to
do so, which consent may be withheld in FedEx's sole discretion. USPS shall
have 120 days from the commencement date of this Agreement to obtain
FedEx's approval of any Advertisements currently in use that include FedEx
Marks.
10.4 FedEx shall not use in Advertisements, the trademarks, tradenames, service
marks or logotypes of USPS without the prior written consent of USPS to do
so, which consent may be withheld in USPS' sole discretion. FedEx shall
have 120 days from the commencement date of this Agreement to obtain USPS'
approval of any Advertisements currently in use that include USPS Marks.
10.5 Both Parties acknowledge the need to market their respective products and
services aggressively.
ARTICLE 11
OBLIGATIONS OF USPS
11.1 For the period beginning on the Service Commencement Date and ending twelve
Schedule Periods thereafter, the average daily Minimum Guaranteed Volume
for the Day-turn Operations will be [*] and for the Night-turn volume, will
be [*] with not more than [*] individual Handling Units for each Schedule
Period. This amount is calculated by dividing the total volume measured on
a cubic foot basis for the Day-turn Operation and on weight for the
Night-turn Operation to be moved during the Schedule Period by the total
number of operating days for the Schedule Period (six days per operating
week for Day-turn and five days per operating week for Night-turn minus, in
each case, the number of FedEx Holidays occurring during that Schedule
Period). On each anniversary of the Service Commencement Date, the Day-turn
Minimum Guaranteed Volume for the ensuing year will increase by [*] and the
Night-turn Minimum Guaranteed volume will increase by [*] the previous
year's amount
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<PAGE>
including any increased volume arising as a result of the exercise by USPS
of its option granted in Section 11.4 below.
11.2 [*]
11.3 Except as provided in Section 11.4 below and in Sections 3.8.0 and 8.1.1 of
the Operating Specifications, FedEx shall not be required to transport more
than the Minimum Guaranteed Volume.
11.4 USPS is hereby granted an option, exercisable in writing only during a 12
month period beginning on the Service Commencement Date, to increase the
Minimum Guaranteed Volume for the Day-turn Network [*]. If USPS exercises
this option, the pricing in effect as of the effective date of the increase
in Minimum Guaranteed Volume will be applicable to the increased volume.
USPS's notice of election of the exercise of this option shall specify the
Market Lanes to which it desires the increase to apply. No volume for any
origin market will increase by more than [*] the pro rata share of the
request without FedEx approval. FedEx will, within 60 days of its receipt
of the notice of the exercise of USPS's option, notify USPS of the
implementation date of the increase in the Minimum Guaranteed Volume. The
implementation date of the increase in the Minimum Guaranteed Volume shall
not be later than eighteen months from the date of FedEx's receipt of USPS
exercise of its option to increase the Minimum Guaranteed Volume. In order
to reimburse FedEx for the continuing costs of network, USPS will pay to
FedEx an additional Network Expansion Reimbursement payable as set forth in
the table below. One half of the additional Network Expansion Reimbursement
shall be payable four months prior to the implementation date of the
increased Minimum Guaranteed Volume with the balance payable on the
effective date of the increase. If USPS exercises the option granted in
this Section 11.4, USPS's obligation to pay this additional Network
Expansion Reimbursement will be unconditional and will not be refundable
except to the extent that the parties shall mutually agree that the costs
to be reimbursed have not been and will not be incurred. For the avoidance
of doubt, the parties acknowledge that while the FedEx actual expenses to
be incurred will be in excess of the amount of the additional Network
Expansion Reimbursement amount, USPS's obligation will be limited to the
amounts specified below. The parties further agree that the Network
Expansion Reimbursement represents the first amounts of such costs incurred
or to be incurred.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
NUMBER OF MONTHS FROM USPS EXERCISE OF ADDITIONAL NETWORK EXPANSION
OPTION THAT INCREASED MINIMUM GUARANTEED REIMBURSEMENT (NOTE: THE REIMBURSEMENT
VOLUME IS EFFECTIVE AMOUNT ASSUMES THAT THE INCREASED AMOUNT IS
[*].
<S> <C>
-----------------------------------------------------------------------------------------
ONE THROUGH EIGHT [*]
-----------------------------------------------------------------------------------------
NINE [*]
-----------------------------------------------------------------------------------------
19
<PAGE>
-----------------------------------------------------------------------------------------
TEN [*]
-----------------------------------------------------------------------------------------
ELEVEN [*]
-----------------------------------------------------------------------------------------
TWELVE [*]
-----------------------------------------------------------------------------------------
THIRTEEN [*]
-----------------------------------------------------------------------------------------
FOURTEEN [*]
-----------------------------------------------------------------------------------------
FIFTEEN [*]
-----------------------------------------------------------------------------------------
SIXTEEN [*]
-----------------------------------------------------------------------------------------
SEVENTEEN [*]
-----------------------------------------------------------------------------------------
EIGHTEEN [*]
-----------------------------------------------------------------------------------------
</TABLE>
11.5 USPS shall substantially comply with all laws and regulations that may be
applicable to this Agreement and to all transactions and activities to be
performed hereunder. Except as provided in Section 15.4 below, USPS shall
not be required to perform any of its obligations hereunder that have been
determined by a court of competent jurisdiction or by a Governmental Body
with subject matter jurisdiction to be in violation of any applicable law
or regulation.
11.6 USPS shall tender all Shipments to FedEx Ready for Carriage.
ARTICLE 12
LIABILITIES OF THE PARTIES
12.1 USPS shall be liable to FedEx for all Losses (as hereinafter defined) to
the extent such Losses arise out of or result from (directly or
indirectly), or are in connection with:
(a) any breach by USPS of any of the terms of this Agreement;
(b) any breach of any representation or warranty made by USPS in this
Agreement, the Schedules hereto or any other certificate or document
delivered by USPS pursuant to this Agreement;
(c) any failure by USPS to perform or comply with any of its covenants or
obligations under this Agreement;
(d) any third Party customer claims arising from or in connection with the
loss, damage or delay of any Shipment; or
(e) injuries to persons or property on or at USPS's property which arise
from the negligent or wrongful act or omission by a USPS employee
while within the scope of his employment, under circumstances where
USPS, if it were a
20
<PAGE>
private person, would be liable in accordance with the law of the
place where such negligent or wrongful act or omission occurred.
12.2 FedEx shall be liable to USPS for all Losses, to the extent such Losses
arise out of, result from, or are in connection with:
(a) any breach by FedEx of any of the terms of this Agreement;
(b) any breach of any representation or warranty made by FedEx in this
Agreement, or any other certificate or document delivered by FedEx
pursuant to this Agreement (other than Article 5);
(c) any failure by FedEx to perform or comply with any of its covenants or
obligations under this Agreement; or
(d) any injuries to persons or property on or at FedEx's property which
arise from the negligent or wrongful act or omission by a FedEx
employee while acting within the scope of his employment.
12.3 For purposes of this Agreement, "Losses" shall mean the aggregate of any
and all payments for claims, liabilities, suits, actions, proceedings,
demands, charges, damages, impositions, assessments, levies, duties,
losses, diminution in value, costs, or expenses (including reasonable
attorney fees, expert witness fees, court costs and other costs of
investigation and defense) of every kind and nature, whether or not
involving a third-Party claim, incurred by the Party suffering the Losses
and which are awardable under Federal Contract Law.
12.4 The parties agree that in the event of any dispute arising hereunder or
pursuant to a third Party action against a Party, the parties shall
cooperate in good faith in providing requested information and access to
persons with knowledge of the dispute, which includes, but is not limited
to, the production of requested documents, securing evidence, obtaining the
attendance and cooperation of witnesses, and providing prompt responses to
all discovery requests.
12.5 Except as otherwise provided in this agreement, neither Party shall be
liable to the other for the payment of any indirect, special or
consequential damages arising as a result of the performance,
non-performance or malperformance hereunder.
12.6 The liability of the parties set forth in this Article 12 shall not be the
exclusive area of liability of the Parties under this Agreement.
21
<PAGE>
ARTICLE 13
RISK OF LOSS; CLAIMS PROCEDURE; LIMITATION OF LIABILITY
FedEx shall not be responsible for any Losses arising as a result of any loss,
damage or delay to any shipment except to the extent of any insurance proceeds
received as a result of a catastrophic loss of an aircraft or other vehicle
transporting the shipment and attributable to USPS Packages.
ARTICLE 14
REPRESENTATIONS AND WARRANTIES
14.1 USPS makes the followings representations and warranties:
(a) The execution and delivery by USPS of this Agreement and the
performance by USPS of its obligations hereunder have been duly
authorized by all necessary action of USPS, and this Agreement has
been executed and delivered by duly authorized officers of USPS.
(b) No authorization, approval, consent, permit, license, order,
designation, or declaration of or filing by or with any Governmental
Body under the federal laws of the United States is necessary in
connection with the execution and delivery of this Agreement by USPS
and the consummation of each of the transactions contemplated hereby.
As promptly as possible after the date of this Agreement, USPS will
make all notices and/or filings required by Legal Requirements to be
made by USPS in order to consummate the transactions contemplated by
this Agreement, and, as promptly as possible after the date of this
Agreement, USPS will cooperate with FedEx with respect to any and all
notices and/or filings that FedEx is required by Legal Requirements to
make.
(c) To the best of the USPS' knowledge, except for the case entitled Emery
Worldwide Airlines, Inc. v. The United States Postal Service filed
with the United States Court of Federal Claims on January 5, 2001,
there is no Proceeding pending, that challenges, or that prevents,
delays, makes illegal, or otherwise interferes with, this Agreement
and the transactions contemplated hereunder.
(d) To the best of the USPS' knowledge, there is no Order to which USPS is
subject that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interferes with, this Agreement
and the transactions contemplated hereunder.
(e) USPS is not a Party to any exclusive contract, agreement, arrangement,
plan or understanding with any Person to provide to USPS any of the
products and services to be provided by FedEx to USPS under this
Agreement.
22
<PAGE>
14.2 FedEx makes the following representation and warranties:
(a) The execution and delivery by FedEx of this Agreement and the
performance by FedEx of its obligations hereunder have been duly
authorized by all necessary corporate or other action of FedEx, and
this Agreement has been executed and delivered by duly authorized
officers of FedEx.
(b) No authorization, approval, consent, permit, license, order,
designation, or declaration of or filing by or with any Governmental
Body under the federal laws of the United States is necessary in
connection with the execution and delivery of this Agreement by FedEx
and the consummation of each of the transactions contemplated hereby.
As promptly as possible after the date of this Agreement, FedEx will
make all notices and/or filings required by Legal Requirements to be
made by FedEx in order to consummate the transactions contemplated by
this Agreement, and, as promptly as possible after the date of this
Agreement, FedEx will cooperate with USPS with respect to any and all
notices and/or filings that USPS is required by Legal Requirements to
make.
(c) Neither the execution of this Agreement nor the performance of its
obligations hereunder violate the terms of any contract, indenture or
other agreement under which FedEx or its properties is bound.
(d) To the best of the FedEx's knowledge, there is no Order to which FedEx
is subject that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interferes with, this Agreement
and the transactions contemplated hereunder.
ARTICLE 15
TERM AND TERMINATION
15.1 INITIAL TERM
This Agreement shall commence on January 8, 2001 and shall expire on last
tender by FedEx of shipments on the last day of the August Schedule Period
in 2008. Not later than twenty-four (24) months prior to the expiration
date, the Parties shall commence discussions with a view to renewing this
Agreement. The Parties shall agree not later than eighteen months prior to
the expiration of this Agreement whether this Agreement shall be renewed.
If the parties have not agreed to extend this Agreement by such date, this
Agreement shall expire in accordance with its terms. During the six-month
negotiation period, USPS agrees not to negotiate with any third Party for
the performance of the FedEx Services. At all times during the referenced
negotiation period, FedEx shall have the resources or the capacity to
acquire the resources necessary to provide the services to USPS which are
the subject of the negotiations between the parties.
23
<PAGE>
15.2 (a) Conditions Precedent. The Retail Agreement shall have been executed and
delivered to FedEx and all conditions precedent to the effectiveness
thereof shall have been satisfied.
(b) Condition Subsequent. The obligation of FedEx to provide the FedEx
Services hereunder is subject to the condition subsequent that [*], FedEx
shall have entered into a letter agreement with the FedEx Pilot Association
concerning the transactions contemplated hereby.
15.3 The following optional termination events shall apply:
(a) Either Party may terminate this Agreement without cause upon [*] months
prior written notice to the other Party.
(b) If USPS terminates or is deemed to have terminated the Retail Agreement
or defaults in the performance of its obligations thereunder, FedEx may
terminate this Agreement upon [*] months notice without the payment of a
penalty of any amount.
(c) If FedEx terminates or is deemed to have terminated this Agreement or
defaults in the performance of its obligations hereunder, USPS may
terminate the Retail Agreement upon [*] months notice without the payment
of a penalty of any amount.
(d) If a Change of Control Event occurs with respect to FedEx, USPS may
terminate this Agreement upon [*] months notice without the payment of a
penalty of any amount.
(e) Either Party shall have the right to terminate this Agreement on May
15, 2001 or such earlier date as the Parties shall mutually agree if a
Governmental Body with subject matter jurisdiction has indicated to either
Party a concern with a material provision of this Agreement. The General
Counsel of the Party intending to terminate this Agreement will consult
with the General Counsel of the other not less than three days prior to its
election of its right under this Section 15.3 (e).
15.4 Consequences of Termination
(a) If either Party exercises its option to terminate the Agreement (other
than a termination referred to in Section 15.4 (b) below) pursuant to
Section 15.3 (a) above, it shall be liable to the other Party for the
payment of termination fees in accordance with the following schedule:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Notice Date of Termination Termination Fee Payable
<S> <C>
--------------------------------------------------------------------------------
July, 2001 through June, 2002 [*]
--------------------------------------------------------------------------------
July, 2002 through June, 2003 [*]
--------------------------------------------------------------------------------
July, 2003 through June, 2004 [*]
--------------------------------------------------------------------------------
July, 2004 through June, 2005 [*]
--------------------------------------------------------------------------------
24
<PAGE>
--------------------------------------------------------------------------------
July, 2005 through June, 2006 [*]
--------------------------------------------------------------------------------
July, 2006 through June, 2007 [*]
--------------------------------------------------------------------------------
</TABLE>
(b) If as a result of an order of a court of competent jurisdiction or any
agency or department of a Governmental Body, this Agreement is terminated
prior to the commencement of the FedEx Services, USPS will pay the
following liquidated amounts to FedEx to compensate FedEx for its costs in
preparing for the start up of the FedEx Services and not as a payment of a
penalty. If USPS has paid the Network Expansion Reimbursement on March 30,
2001, no additional amounts will be paid to FedEx pursuant to this Section.
If the termination of this Agreement is as a result of a final
determination by a court of competent jurisdiction or any agency or
department of a Governmental Body that this Agreement is in violation of
the provisions of United States anti-trust laws, or as a result of the
election of a Party of its rights pursuant to Section 15.3 (e) above, the
amount payable to FedEx will be one-half of the amount indicated below:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
If the Termination is ordered before the first USPS pays to FedEx the following Amount:
day of this month:
<S> <C>
-----------------------------------------------------------------------------------------------
February, 2001 [*]
-----------------------------------------------------------------------------------------------
March, 2001 [*]
-----------------------------------------------------------------------------------------------
April, 2001 [*]
-----------------------------------------------------------------------------------------------
May, 2001 [*]
-----------------------------------------------------------------------------------------------
June, 2001 and thereafter until [*]
commencement of Services
-----------------------------------------------------------------------------------------------
</TABLE>
(c) Upon either Party's exercise of a right to terminate this Agreement
pursuant to this Article 15, except as otherwise provided in Section 15.4
(a) above, neither Party shall be liable to the other, for any fees,
expenses, other compensation or damages of any kind whatsoever including
loss of profit, whether on account of the loss by either Party of present
or prospective profits or fees on sales or anticipated sales, or
expenditures, investments or commitments made in connection with the
establishment, development, or maintenance of the services performed
hereunder, subject to payment of all fees and compensation for the FedEx
Services pursuant to this Agreement and without prejudice to the payment to
one Party of any indemnities resulting from the breach by the other Party
of any of the dispositions under the present Agreement, as the case may be.
Such termination shall not prejudice the Parties' respective rights to be
paid for any services rendered or debts arising prior to the effective date
of termination.
ARTICLE 16
25
<PAGE>
EVENTS OF DEFAULT
16.1. The occurrence of any one or more of the following events (the
"Events of Default") will constitute a default and breach of
this Agreement:
(i) Failure by either Party to pay any fee, reimbursable or other
payment due pursuant to this Agreement, including, but not by
way of limitation, the obligation of either Party to make
payments in accordance with the provisions of Section 7.3 of
the Agreement and the continuance of that failure for more
than forty five (45) days following the date of a notice (the
"Default Notice") from the Senior Vice President and General
Counsel (or an equivalent level position) of the
non-defaulting Party to the Senior Vice-President and General
Counsel (or an equivalent level position) of the defaulting
Party with, in the case of USPS, a copy to the Manager,
National Mail Transportation, Purchasing (or any successor
position); provided, however, that if, as of the thirty fifth
day following the date of the Default Notice, payment has not
been received by the non-defaulting Party, the non-defaulting
Party shall have sent a second notice (the "Second Default
Notice") to the same parties to whom the Default Notice was
sent. The Default Notice and the Second Notice shall be sent
by either USPS Express Mail or FedEx Priority Overnight or any
successor overnight product of either as confirmed by a proof
of delivery receipt;
(ii) Failure of either Party to observe or perform any of the
material covenants, conditions or provisions of this
Agreement, other than the late payment of fees, reimbursable
or other payments, where the failure continues for a period of
sixty (60) days after the defaulting Party's receipt of notice
of such failure; or
(iii) Failure of either Party to observe or perform its obligations
in accordance with the provisions of Section 10.1 (c), 10.3 or
10.4 of this Agreement.
16.2. Upon the occurrence of an Event of Default specified in
Sections 16.1 (i) or (iii) above, the non-defaulting Party may
exercise and shall be entitled to any remedies available to it
in law or equity, including the right to terminate this
Agreement in whole or in part without demand or judicial
resolution, by written notice effective upon 365 days notice
to the defaulting Party. Upon the occurrence of an Event of
Default other than those specified in the first sentence of
this Section 16.2, the non-defaulting Party may exercise and
be entitled to any remedies available to it in law or equity
but shall not be entitled to terminate this Agreement absent
the consent of the other Party.
ARTICLE 17
CONFIDENTIALITY
17.1 During the term of this Agreement and until the earlier of five (5)
years after such termination or until such time as the information is
no longer confidential as described in Article 17.2, each Party shall
treat as confidential and appropriately safeguard and shall not use
for the benefit of any person or corporation other than the other
Party:
(i) written information identified in writing as confidential or oral
information promptly confirmed in writing as being confidential;
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(ii) written information or oral information disclosed by the
parties during the negotiation of this Agreement and
written information or oral information promptly
confirmed in writing as confidential pertaining to a
Party's pricing, business or assets which is received at
any time from a Party or its Affiliates that is
identified in writing;
(iii) any information or knowledge concerning the methods of
operation, promotion, sale, or distribution used by a
Party or its Affiliates which may be communicated to the
other Party or its Affiliates or which a Party may
otherwise acquire by virtue of its performance of this
Agreement; or
(iv) any information that the recipient of which actually
knows or should reasonably have known is confidential or
proprietary to the other Party.
17.2 Information shall not be considered confidential if it is:
(i) Generally known to the trade or public;
(ii) Rightfully possessed by a Party prior to the date of this
Agreement;
(iii) Received by a Party from a third Party which rightfully
possesses it;
(iv) Independently developed by the other Party; or
(v) Releasable pursuant to Postal regulations addressing how
information is maintained by USPS. Those regulations are
contained at 39 CFR 265.8.
ARTICLE 18
FORCE MAJEURE
Each Party shall be excused from performance under this Agreement, including
delivery times and commitments, and neither Party shall be liable to the other
or any other person or entity for loss, damage, delay, mis-delivery or
non-delivery of shipments transported pursuant to this Agreement, resulting in
whole or in part from any of the following: perils of the air, public enemies,
criminal acts of any person or entity, public authorities acting with actual or
apparent authority (including U. S. Postal Inspectors), civil commotion, hazards
incident to a state of war, local or national weather conditions, national or
local disruptions in transportation networks or operations (of any mode) of
FedEx or any other entity, strikes or anticipated strikes of FedEx, USPS or any
other Person, natural disasters, disruption or failure of communication and
information systems, or any conditions that present a danger to each Party's
personnel. In every case the failure to perform must be beyond the control and
without the fault or negligence of the Party claiming that its performance is
excused hereunder. As provided in Section 8.5 (f) of this Agreement, except for
National or Regional Disruptions, nothing in this Article 18 shall relieve FedEx
of its obligations under Section 8.5 of the Agreement.
If, as a result of the occurrence of one of the foregoing events, FedEx is
excused from performance, the parties will meet to agree upon a pro rata
adjustment of the Minimum Guaranteed Volumes.
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ARTICLE 19
STANDARD USPS CLAUSES
CONTRACT TYPE
This Agreement is a contract for the purchase of commercial services, and
is awarded pursuant to Section 4.3 of the Purchasing Manual (which may be
referred to herein as the "PM"), and is subject to such deviations from the
Purchasing Manual as have been duly authorized by USPS.
INCORPORATION BY REFERENCE
This Agreement, including its exhibits and schedules, constitute the
parties' entire agreement on the subject matter set forth herein. There are no
contract clauses, regulations, provisions of the Purchasing Manual or other
provisions of law incorporated herein, except as explicitly stated in this
Agreement. The Christian Doctrine shall not apply to this Agreement, and the
parties specifically reject the incorporation by reference or operation of law
of any terms that are not specifically referenced or described herein.
COMMERCIAL SUBCONTRACTS
Except as required by law, notwithstanding any other provision of this
Agreement, FedEx is not required to include any PM clause, other than those
listed below (and as may be required by an addenda to this paragraph) in a
subcontract for commercial items or commercial components:
(1) Clause 9-7, Equal Opportunity (January 1997)
(2) Clause 9-14, Affirmative Action for Disabled Veterans and Veterans of
the Vietnam Era (January 1997)
(3) Clause 9-13, Affirmative Action for Handicapped Workers (January 1997)
CLAUSE B-8 ASSIGNMENT OF CLAIMS
a. If this contract provides for payments aggregating $10,000 or more, claims
for monies due or to become due from the USPS under it may be assigned to a
bank, trust company, or other financing institution, including any federal
lending agency, and may thereafter be further assigned and reassigned to any
such institution. Any such assignment or reassignment must cover all amounts
payable and must not be made to more than one Party, except that assignment or
reassignment may be made to one Party as agent or trustee for two or more
parties participating in financing this contract. No assignment or reassignment
pursuant to the provisions of this clause will be recognized as valid and
binding upon the USPS unless a written notice of the assignment or reassignment,
together with a true copy of the instrument of assignment, is filed with:
(1) The contracting officer;
(2) The surety or sureties upon any bond; and
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(3) The office, if any, designated to make payment, and the contracting
officer has acknowledged the assignment in writing.
b. Assignment of this contract or any interest in this contract other than in
accordance with the provisions of this Agreement will be grounds for termination
of the contract for default at the option of the USPS
CLAUSE B-9 CLAIMS AND DISPUTES
a. This contract is subject to the Contract Disputes Act of 1978. (41 U.S.C.
601-613) ("the Act").
b. Except as otherwise provided in the Act and this Agreement (including
specifically the provisions of Article 3, Sections 7.3 and Article 16 all
disputes arising under or relating to this Agreement must be resolved under
this clause.
c. "Claim", as used in this clause, means a written demand or written
assertion by one of the contracting parties seeking, as a matter of right,
the payment of money in a sum certain, the interpretation of contract
terms, or other relief arising under or relating to this Agreement.
However, a written demand or written assertion by FedEx seeking the payment
of money exceeding $100,000 is not a Claim under the Act until certified as
required by subparagraph d.2 below. A voucher, invoice, or other routine
request for payment that is not in dispute when submitted is not a Claim
under the Act. The submission may be converted to a claim under the Act by
complying with the submission and certification requirements of this
clause, if it is disputed either as to liability or amount is not acted
upon in a reasonable time.
d. (1) A Claim by FedEx must be made in writing and submitted to the
contracting officer for a written decision. A Claim by the USPS against FedEx is
subject to a written decision by the contracting officer.
(2) (a) For FedEx Claims exceeding $100,000, FedEx must submit with the
claim the following certification:
"I certify that the claim is made in good faith, that the supporting data
are accurate and complete to the best of my knowledge and belief, that the
amount requested accurately reflects the contract adjustment for which
FedEx believes the USPS is liable, and that I am duly authorized to certify
the claim on behalf of FedEx."
(b) For USPS Claims exceeding $100,000, USPS must submit with the claim the
following certification:
"I certify that the claim is made in good faith, that the supporting
data are accurate and complete to the best of my knowledge and belief, that
the amount requested accurately reflects the contract adjustment for which
USPS believes FedEx is liable, and that I am duly authorized to certify the
claim on behalf of USPS."
(3) The certification may be executed by any person duly authorized to bind
FedEx with respect to the claim.
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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.
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
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was filed, the court in which the petition was filed, and a list of USPS
contracts and contracting officers for all USPS contracts for which final
payment has not yet been made. This obligation remains in effect until
final payment under this contract.
CLAUSE 9-1 CONVICT LABOR
In connection with the work under this contract, FedEx agrees not to employ
any person undergoing sentence of imprisonment, except as provided by
Public Law 89-176, September 10, 1965 (18 U.S.C. 4082(c)(2) and Executive
Order 11755, December 29, 1973.
CLAUSE 9-2 CONTRACT WORK HOURS AND SAFETY STANDARDS ACT - OVERTIME
COMPENSATION
a. Overtime Requirements. No supplier or subcontractor contracting for
any part of the contract work may require or permit any laborer or mechanic
to work more than 40 hours in any workweek on work subject to the
provisions of the Contract Work Hours and Safety Standards Act, unless the
laborer or mechanic receives compensation at a rate not less than
one-and-one-half times the laborer's or mechanic's basic rate of pay for
all such hours worked in excess of 40 hours.
b. Violation, Liability for Unpaid Wages, and Liquidated Damages. In the
event of any violation of paragraph a above, FedEx and any subcontractor
responsible for the violation are liable to any affected employee for
unpaid wages. FedEx and subcontractor are also liable to the USPS for
liquidated damages, which will be computed for each laborer or mechanic at
$10 for each day on which the employee was required or permitted to work in
violation of paragraph a above.
c. Withholding for Unpaid Wages and Liquidated Damages. The contracting
officer may withhold from FedEx, from any moneys payable to FedEx or
subcontractor under this or any other contract with the same supplier, or
any other federally-assisted contract subject to the Contract Work Hours
and Safety Standards Act held by the same supplier, sums as may
administratively be determined necessary to satisfy any liabilities of
FedEx or subcontractor for unpaid wages and liquidated damages pursuant to
paragraph b above.
d. Records. FedEx or subcontractor must maintain for three years from the
completion of the contract for each laborer and mechanic (including
watchmen and guards) working on the contract payroll records which contain
the name, address, social security number, and classification(s) of each
such employee, hourly rates of wages paid, number of daily and weekly hours
worked, deductions made, and actual wages paid. FedEx or subcontractor must
make these records available for inspection, copying, or transcription by
authorized representatives of the contracting officer and the Department of
Labor, and must permit such representatives to interview employees during
working hours on the job. (The Department of Labor information collection
and record keeping requirements in this paragraph d have been approved by
the Office of Management and Budget (OMB) under OMB control numbers
1215-0140 and 1215-0017.)
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e. Subcontracts. FedEx must insert paragraphs a through d of this clause
in all subcontracts, and must require their inclusion in all subcontracts
at any tier.
CLAUSE 9-7 EQUAL OPPORTUNITY
a. FedEx may not discriminate against employees or applicants because of
race, color, religion, sex, or national origin. FedEx will take
affirmative action to ensure that applicants are employed, and that
employees are treated during employment, without regard to race, color
religion, sex, or national origin. This action must include, but not
be limited to, employment, upgrading, demotion, or transfer;
recruitment or recruitment advertising; layoff or termination; rates
of pay or other forms of compensation; and selection for training,
including apprenticeship. FedEx agrees to post in conspicuous places,
available to employees and applicants, notices provided by the
contracting officer setting forth the provisions of this clause.
b. FedEx must, in all solicitations or advertisements for employees
placed by it or on its behalf, state that all qualified applicants
will be considered for employment without regard to race, color,
religion, sex, or national origin.
c. FedEx must send to each union or workers' representative with which
FedEx has a collective bargaining agreement or other understanding, a
notice, provided by the contracting officer, advising the union or
workers' representative of FedEx's commitments under this clause, and
must post copies of the notice in conspicuous places available to
employees and applicants.
d. FedEx must comply with all provisions of Executive Order (EO) 11246 of
September 24, 1965, as amended, and of the rules, regulations, and
relevant orders of the Secretary of Labor.
e. FedEx must furnish all information and reports required by the
Executive Order, and by the rules, regulations, and orders of the
Secretary, and must permit access to FedEx's books, records, and
accounts by the USPS and the Secretary for purposes of investigation
to ascertain compliance with these rules, regulations, and orders.
f. If FedEx fails to comply with this clause or with any of the said
rules, regulations, or orders, this contract may be cancelled,
terminated, or suspended, in whole or in part; FedEx may be declared
ineligible for further contracts in accordance with the Executive
Order; and other sanctions may be imposed and remedies invoked under
the Executive Order, or by rule, regulation, or order of the
Secretary, or as otherwise provided by law.
g. FedEx must insert this clause, including this paragraph g, in all
subcontracts or purchase orders under this contract unless exempted by
Secretary of Labor rules, regulations, or orders issued under the
Executive Order. FedEx must take such action with respect to any such
subcontract or purchase order as the USPS may direct as a means of
enforcing the terms and conditions of this clause (including sanctions
for non-compliance), provided, however, that if
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FedEx becomes involved in, or is threatened with, litigation as a
result, FedEx may request the USPS to enter into the litigation to
protect the interest of the USPS.
h. Disputes under this clause will be governed by the procedures in 41
CFR 60-1.1.
CLAUSE 9-9 EQUAL OPPORTUNITY PREAWARD COMPLIANCE OF SUBCONTRACTS
FedEx may not enter into a first-tier subcontract for an estimated or
actual amount of $1 million or more without obtaining in writing from
the contracting officer a clearance that the proposed subcontractor is
in compliance with equal opportunity requirements and therefore
eligible for award.
CLAUSE 9-10 SERVICE CONTRACT ACT
a. This contract is subject to the Service Contract Act of 1965, as
amended (41 U.S.C. Section 351 et seq.), and to the following provisions
and all other applicable provisions of the Act and regulations of the
Secretary of Labor issued under the Act (29 CFR Part 4).
b. (1) Each service employee employed in the performance of this
contract by FedEx or any subcontractor must be (a) paid not less than the
minimum monetary wages and (b) furnished fringe benefits in accordance with
the wages and fringe benefits determined by the Secretary of Labor or an
authorized representative, as specified in any wage determination attached
to this contract.
(2) (a) If a wage determination is attached to this contract, the
contracting officer must require that any class of service employees
not listed in it and to be employed under the contract (that is, the
work to be performed is not performed by any classification listed in
the wage determination) be classified by FedEx so as to provide a
reasonable relationship (that is, appropriate level of skill
comparison) between the unlisted classifications and the
classifications in the wage determination. The conformed class of
employees must be paid the monetary wages and furnished the fringe
benefits determined under this clause. (The information collection
requirements contained in this paragraph b have been approved by the
Office of Management and Budget under OMB control number 1215-0150.)
(b) The conforming procedure must be initiated by FedEx before the
performance of contract work by the unlisted class of employees. A
written report of the proposed conforming action, including
information regarding the agreement or disagreement of the authorized
representative of the employees involved or, if there is no authorized
representative, the employees themselves, must be submitted by FedEx
to the contracting officer no later than 30 days after the unlisted
class of employees performs any contract work. The contracting officer
must review the proposed action and promptly submit a report of it,
together with the agency's recommendation and all pertinent
information, including the position of FedEx and the employees, to the
Wage and Hour Division, Employment Standards Administration, U.S.
Department
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of Labor, for review. Within 30 days of receipt, the Wage and Hour
Division will approve, modify, or disapprove the action, render a
final determination in the event of disagreement, or notify the
contracting officer that additional time is necessary.
(c) The final determination of the conformance action by the Wage and
Hour Division will be transmitted to the contracting officer, who must
promptly notify FedEx of the action taken. FedEx must give each
affected employee a written copy of this determination, or it must be
posted as a part of the wage determination.
(d) (i) The process of establishing wage and fringe benefit rates
bearing a reasonable relationship to those listed in a wage
determination cannot be reduced to any single formula. The approach
used may vary from determination to determination, depending on the
circumstances. Standard wage and salary administration practices
ranking various job classifications by pay grade pursuant to point
schemes or other job factors may, for example, be relied upon.
Guidance may also be obtained from the way various jobs are rated
under federal pay systems (Federal Wage Board Pay System and the
General Schedule) or from other wage determinations issued in the same
locality. Basic to the establishment of conformable wage rates is the
concept that a pay relationship should be maintained between job
classifications on the basis of the skill required and the duties
performed.
(ii) If a contract is modified or extended or an option is exercised,
or if a contract succeeds a contract under which the classification in
question was previously conformed pursuant to this clause, a new
conformed wage rate and fringe benefits may be assigned to the
conformed classification by indexing (that is, adjusting) the previous
conformed rate and fringe benefits by an amount equal to the average
(mean) percentage increase change in the wages and fringe benefits
specified for all classifications to be used on the contract that are
listed in the current wage determination, and those specified for the
corresponding classifications in the previously applicable wage
determination. If these conforming actions are accomplished before the
performance of contract work by the unlisted class of employees, FedEx
must advise the contracting officer of the action taken, but the other
procedures in b.2(c) above need not be followed.
(iii) No employee engaged in performing work on this contract may be
paid less than the currently applicable minimum wage specified under
section 6(a)(1) of the Fair Labor Standards Act of 1938, as amended.
(e) The wage rate and fringe benefits finally determined pursuant to
b.2(a) and (b) above must be paid to all employees performing in the
classification from the first day on which contract work is performed
by them in the classification. Failure to pay unlisted employees the
compensation agreed upon by the interested parties and/or finally
determined by the Wage and Hour Division retroactive to the date the
class of employees began contract work is a violation of the Service
Contract Act and this contract.
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(f) Upon discovery of failure to comply with b.2(a) through (e)
above, the Wage and Hour Division will make a final determination of
conformed classification, wage rate, and/or fringe benefits that will
be retroactive to the date the class of employees commenced contract
work.
(3) If, as authorized pursuant to section 4(d) of the Service
Contract Act, the term of this contract is more than one year, the
minimum monetary wages and fringe benefits required to be paid or
furnished to service employees will be subject to adjustment after one
year and not less often than once every two years, pursuant to wage
determinations to be issued by the Wage and Hour Division, Employment
Standards Administration of the Department of Labor.
c. FedEx or subcontractor may discharge the obligation to furnish fringe
benefits specified in the attachment or determined conformably to it by
furnishing any equivalent combinations of bona fide fringe benefits, or by
making equivalent or differential payments in cash in accordance with the
applicable rules set forth in Subpart D of 29 CFR Part 4, and not
otherwise.
d. (1) (a) In the absence of a minimum-wage attachment for this
contract, neither FedEx nor any subcontractor under this contract may
pay any person performing work under the contract (regardless of
whether they are service employees) less than the minimum wage
specified by section 6(a)(1) of the Fair Labor Standards Act of 1938.
Nothing in this provision relieves FedEx or any subcontractor of any
other obligation under law or contract for the payment of a higher
wage to any employee.
(b) This Agreement provides for the periodic adjustment of wages
and fringe benefits pursuant to future determination, issued in the
manner prescribed in Section 351 of the Services Contract Act, no less
than one every two years during the term of this Agreement, covering
the various classes of service employees.
(2) (a) If this contract succeeds a contract subject to the Service
Contract Act, under which substantially the same services were
furnished in the same locality, and service employees were paid wages
and fringe benefits provided for in a collective bargaining agreement,
in the absence of a minimum wage attachment for this contract setting
forth collectively bargained wage rates and fringe benefits, neither
FedEx nor any subcontractor under this contract may pay any service
employee performing any of the contract work (regardless of whether or
not the employee was employed under the predecessor contract), less
than the wages and fringe benefits provided for in the agreement, to
which the employee would have been entitled if employed under the
predecessor contract, including accrued wages and fringe benefits and
any prospective increases in wages and fringe benefits provided for
under the agreement.
(b) No supplier or subcontractor under this contract may be relieved
of the foregoing obligation unless the limitations of section 4.1(b)
of 29 CFR Part 4 apply or unless the Secretary of Labor or an
authorized representative finds, after a hearing as provided in
section 4.10 of 29 CFR Part 4, that the wages
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and/or fringe benefits provided for in the agreement vary
substantially from those prevailing for services of a similar
character in the locality, or determines, as provided in section 4.11
of 29 CFR Part 4, that the agreement applicable to service employees
under the predecessor contract was not entered into as a result of
arm's-length negotiations.
(c) If it is found in accordance with the review procedures in 29 CFR
4.10 and/or 4.11 and Parts 6 and 8 that wages and/or fringe benefits
in a predecessor supplier's collective bargaining agreement vary
substantially from those prevailing for services of a similar
character in the locality, and/or that the agreement applicable to
service employees under the predecessor contract was not entered into
as a result of arm's-length negotiations, the Department will issue a
new or revised wage determination setting forth the applicable wage
rates and fringe benefits. This determination will be made part of the
contract or subcontract, in accordance with the decision of the
Administrator, the Administrative Law Judge, or the Board of Service
Contract Appeals, as the case may be, irrespective of whether its
issuance occurs before or after award (53 Comp. Gen. 401 (1973)). In
the case of a wage determination issued solely as a result of a
finding of substantial variance, it will be effective as of the date
of the final administrative decision.
e. FedEx and any subcontractor under this contract must notify each
service employee starting work on the contract of the minimum monetary wage
and any fringe benefits required to be paid pursuant to the contract, or
must post the wage determination attached to this contract. The poster
provided by the Department of Labor (Publication WH 1313) must be posted in
a prominent and accessible place at the work site. Failure to comply with
this requirement is a violation of section 2(a)(4) of the Act and of this
contract. (Approved by the Office of Management and Budget under OMB
control number 1215-0150.)
f. FedEx or subcontractor may not permit services called for by this
contract to be performed in buildings or surroundings or under working
conditions provided by or under the control or supervision of FedEx or
subcontractor that are unsanitary or hazardous or dangerous to the health
or safety of service employees engaged to furnish these services, and FedEx
or subcontractor must comply with the safety and health standards applied
under 29 CFR Part 1925.
g. (1) FedEx and each subcontractor performing work subject to the Act
must maintain for three years from the completion of the work records
containing the information specified in (a) through (f) following for each
employee subject to the Service Contract Act and must make them available
for inspection and transcription by authorized representatives of the Wage
and Hour Division, Employment Standards Administration of the U.S.
Department of Labor (approved by the Office of Management and Budget under
OMB control numbers 1215-0017 and 1215-0150):
(a) Name, address, and social security number of each employee.
(b) The correct work classification, rate or rates of monetary wages
paid and fringe benefits provided, rate or rates of fringe benefit
payments in lieu thereof, and total daily and weekly compensation of
each employee.
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(c) The number of daily and weekly hours so worked by each employee.
(d) Any deductions, rebates, or refunds from the total daily or
weekly compensation of each employee.
(e) A list of monetary wages and fringe benefits for those classes of
service employees not included in the wage determination attached to
this contract but for whom wage rates or fringe benefits have been
determined by the interested parties or by the Administrator or
authorized representative pursuant to paragraph b above. A copy of the
report required by b.2(b) above is such a list.
(f) Any list of the predecessor supplier's employees furnished to
FedEx pursuant to section 4.6(1)(2) of 29 CFR Part 4.
(2) FedEx must also make available a copy of this contract for
inspection or transcription by authorized representatives of the Wage and
Hour Division.
(3) Failure to make and maintain or to make available the records
specified in this paragraph g for inspection and transcription is a
violation of the regulations and this contract, and in the case of failure
to produce these records, the contracting officer, upon direction of the
Department of Labor and notification of FedEx, must take action to suspend
any further payment or advance of funds until the violation ceases.
(4) FedEx must permit authorized representatives of the Wage and
Hour Division to conduct interviews with employees at the work site during
normal working hours.
h. FedEx must unconditionally pay to each employee subject to the Service
Contract Act all wages due free and clear and without subsequent deduction
(except as otherwise provided by law or regulations, 29 CFR Part 4),
rebate, or kickback on any account. Payments must be made no later than one
pay period following the end of the regular pay period in which the wages
were earned or accrued. A pay period under the Act may not be of any
duration longer than semimonthly.
i. The contracting officer must withhold or cause to be withheld from the
USPS supplier under this or any other contract with FedEx such sums as an
appropriate official of the Department of Labor requests or the contracting
officer decides may be necessary to pay underpaid employees employed by
FedEx or subcontractor. In the event of failure to pay employees subject to
the Act wages or fringe benefits due under the Act, the USPS may, after
authorization or by direction of the Department of Labor and written
notification to FedEx, suspend any further payment or advance of funds
until the violations cease. Additionally, any failure to comply with the
requirements of this clause may be grounds for termination of the right to
proceed with the contract work. In this event, the USPS may enter into
other contracts or arrangements for completion of the work, charging FedEx
in default with any additional cost.
j. FedEx agrees to insert this clause in all subcontracts subject to the
Act. The term "supplier," as used in this clause in any subcontract, is
deemed to refer to the subcontractor, except in the term "supplier."
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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.
(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,
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and exemptions, which the Secretary of Labor, pursuant to section 4(b) of
the Act before its amendment by Public Law 92-473, found to be necessary
and proper in the public interest or to avoid serious impairment of the
conduct of government business:
(1) Apprentices, student-learners, and workers whose earning capacity
is impaired by age, or physical or mental deficiency or injury may be
employed at wages lower than the minimum wages otherwise required by
section 2(a)(1) or 2(b)(1) of the Service Contract Act without
diminishing any fringe benefits or cash payments in lieu thereof
required under section 2(a)(2) of the Act, in accordance with the
conditions and procedures prescribed for the employment of
apprentices, student-learners, handicapped persons, and handicapped
clients of sheltered workshops under section 14 of the Fair Labor
Standards Act of 1938, in the regulations issued by the Administrator
(29 CFR Parts 520, 521, 524, and 525).
(2) The Administrator will issue certificates under the Service
Contract Act for the employment of apprentices, student-learners,
handicapped persons, or handicapped clients of sheltered workshops not
subject to the Fair Labor Standards Act of 1938, or subject to
different minimum rates of pay under the two Acts, authorizing
appropriate rates of minimum wages (but without changing requirements
concerning fringe benefits or supplementary cash payments in lieu
thereof), applying procedures prescribed by the applicable regulations
issued under the Fair Labor Standards Act of 1938 (29 CFR Parts 520,
521, 524, and 525).
(3) The Administrator will also withdraw, annul, or cancel such
certificates in accordance with the regulations in Parts 525 and 528
of Title 29 of the Code of Federal Regulations.
p. Apprentices will be permitted to work at less than the predetermined
rate for the work they perform when they are employed and individually
registered in a bona fide apprenticeship program registered with a State
Apprenticeship Agency recognized by the U.S. Department of Labor, or if no
such recognized agency exists in a state, under a program registered with
the Bureau of Apprenticeship and Training, Employment and Training
Administration, U.S. Department of Labor. Any employee not registered as an
apprentice in an approved program must be paid the wage rate and fringe
benefits contained in the applicable wage determination for the journeyman
classification of work actually performed. The wage rates paid apprentices
may not be less than the wage rate for their level of progress set forth in
the registered program, expressed as the appropriate percentage of the
journeyman's rate contained in the applicable wage determination. The
allowable ratio of apprentices to journeymen employed on the contract work
in any craft classification may not be greater than the ratio permitted to
FedEx for its entire workforce under the registered program.
q. An employee engaged in an occupation in which he or she customarily
and regularly receives more than $30 a month tips may have the amount of
tips credited by the employer against the minimum wage required by section
2(a)(1) or section 2(b)(1) of the Act in accordance with section 3(m) of
the Fair Labor Standards Act and Regulat