MEMORANDUM OF AGREEMENT BETWEEN WILLIAM G. McADOO, DIRECTOR GENERAL OF RAILROADS, AND THE AMERICAN RAILWAY EXPRESS COMPANY.

This agreement, made this 26th day of June, 1918, between William G. McAdoo, Director General of Railroads, hereinafter called the Director General, acting on behalf of the United States and the President, under the powers conferred on him by proclamations of the President dated December 26, 1917, and March 29, 1918, and the American Railway Express Company, hereinafter referred to as the Express Company,

Witnesseth:

That for and in consideration of the mutual covenants, separate services, and payments hereinafter recited to be by the parties kept, performed, and made, the parties do hereby agree as follows:

I.

That in the interest of greater efficiency in express service and effecting economies in operating expenses of both the railroads under Federal control and the Express Company the Director General hereby employs the Express Company as the sole agent of the Government under the supervision of the Director General of Railroads to conduct the express transportation business upon all lines of railroad under Federal control and upon such other systems of transportation or parts thereof as in the judgment of the Director General it may be necessary or desirable to include.

II.

This contract shall take effect on July 1, 1918, and shall continue during the full period of Federal control as that period is limited by section 14 of "An Act to Provide for the Operation of Transportation Systems while under Federal Control, for the Just Compensation of Their Owners, and for Other Purposes," approved March 21, 1918.

III.

The express transportation business to be carried on under this contract is understood to mean such transportation business as is

commonly carried on by express companies at the present time, or as may be carried on by them during the continuance of this contract, and for the purpose of this contract it is agreed that the express business contemplated by this contract shall include all matter carried on passenger, express, or mail trains of the railroards, except baggage of passengers and theatrical scenery and belongings when checked on regular transportation, United States and railroad mail, including parcel-post matter, corpses when accompanied by some one in charge, news trunks and property necessary to carry on the usual news business, goods and material for the use of the railroads, and supplies for railroad eating houses and dining cars. The Director General as well as the Express Company shall have the right to carry on such trains freight from the Orient imported by Coast ports, newspapers, milk, and cream and returned empties: Provided, however, That nothing in this agreement shall prevent the Director General from transporting horses, carriages, or cattle or other classes of freight upon passenger trains when necessary in emergencies to avoid delay to freight shipments; and provided further, that no explosives, inflammable articles, or acids shall be considered express traffic except such as it may be lawful to transport on passenger trains when properly packed, marked, and certified to as required by the regulations of the Interstate Commerce Commission or other public authority for the transportation of explosives, by the rules of the American Railway Association, and such regulations for the transportation of inflammable articles and acids as may be fixed by the Director General. The maximum weight to be carried in any of the cars carrying express business shall not exceed a limit which in the judgment of the Director General is necessary for safety. Articles which can only be loaded and unloaded through end doors of express or baggage cars causing delays to passenger trains in switching for this purpose shall not be accepted by the Express Company unless a special car is furnished and charged for at the carload rate, and the Express Company shall not accept shipments which can not be so handled as to avoid unusual delays to the trains of the Government.

Said express transportation business shall be conducted under such rates, charges, classifications, regulations, and practices as are now or may hereafter be lawfully established. The Director General shall take all steps lawfully necessary to make any change in such rates, charges, classifications, regulations, and practices. The Express Company shall propose no reduction in rates or charges without the prior approval of such reduction by the Director General. The Express Company shall solicit no express shipments disapproved by the Director General.

IV.

The Director General shall furnish adequate and suitable space in cars properly equipped, heated, lighted, and lettered American Railway Express Company of the kind customarily furnished by railroad companies for the use of express companies on such passenger, mail and express trains as may be designated from time to time by the Director General over each of the lines of railroad covered by this contract for the transportation and proper handling en route of all express matter tendered by the Express Company at any station at which said trains make regular stops and shall carry such express matter and the safes, packing trunks, supplies, and equipment of the Express Company, together with the messengers, helpers, and guards of the Express Company necessary for the handling and protection of such express matter to destination or the proper transfer points on said railroads. The Director General shall, so far as it can conveniently be done without interfering with his business, permit the Express Company to use a portion of station buildings on the lines covered by this agreement without charge therefor for the reception, loading and unloading, safe-keeping, and delivery of express matter carried under this agreement. Where special services or facilities have been furnished upon payments by the express companies in addition to the percentage of gross earnings both parties hereto shall have the benefit of such arrangements until otherwise determined by the Director General or by the Express Company after notice and hearing. The movement of express shall be under the control of the Director General at all times and transported over such lines of railroad and on such trains as he may direct in the interest of economy in car service by utilizing available space and with proper regard for the necessity of prompt movement.

V.

Said Express Company shall use its teams, property, offices, and other facilities, and its agents and employees in operating an express transportation business on all the lines of railroad under Federal control, and upon such other systems of transportation, or parts thereof, as in the judgment of the Director General it may be necessary or desirable to include; and in the conduct of said business will exert itself in all proper ways to make said business satisfactory to the public and to the Director General. All contracts between the Express Company and railroads and systems of transportation not under Federal control shall be subject to the approval of the Director General.

VI.

The Express Company shall be liable for all loss or damage to the facilities furnished by the Director General to the Express Company for use in the express transportation business caused by the Express Company, its agents, or employees.

As between the Director General and the Express Company, the Express Company shall be liable for any and all claims on account of loss, damage, or delay to its own property or the property of others in its charge carried under the provisions of this contract, and it shall assume all risk of injury or death to its agents or employees while engaged in its business on any of the lines or premises covered by this contract; and shall indemnify and save harmless the Director General or any agent or employee of the Director General, including any railway company engaged in the operation of any railroad under Federal control covered by this contract, and the employees of any such company, against all claims, demands, suits, and actions whatsoever that may be begun against any of the same on account of any claim arising or growing out of the undertaking so above assumed whether in law or in equity or before any compensation board, tribunal, or court whatsoever; and any amounts paid hereunder shall be charged to operating expenses.

VII.

In any action at law or in equity or other proceeding brought against said Express Company before any compensation board, court, or other tribunal it will make no defense, except with the approval of the Director General, upon the ground that it is by virtue of this contract an instrumentality or agency of the Federal Government; nor will it seek to transfer to a Federal Court any such action brought against it in any state court upon the like ground except with the approval of the Director General. Any and all other legal rights of the Express Company except as above limited are expressly reserved.

VIII.

From the gross revenue earned on the transportation by the Express Company of all the express traffic on all lines under Federal control covered by this contract, under such rates, charges, and classifications as shall be in force, it shall pay to the Director General 50.25 per cent.

To the balance of the revenues thus remaining there shall be added the following:

Gross revenue derived from express transportation operations over any lines not under Federal control, less payments to such lines under contracts in force with them; all miscellaneous income derived from

express operations, including rentals, compensation received for the sales of money orders or other financial paper, charges assessed in addition to transportation charges, such as value charges, and income from money or securities invested in the dividend guaranty fund as described in paragraph 4 of this section. The resulting total shall be Gross Contract Income."

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own as

From the gross contract income as here defined, the Express Company shall defray the operating expenses, rentals, taxes, except war taxes, and any other proper expenditures not disapproved by the Director General incurred in express operations, the remainder being termed "Contract Income for Division." The term "Operating expenses," as herein used, shall embrace all items prescribed by the Interstate Commerce Commission's classification of express accounts as operating expenses for express companies.

From the contract income for division, an amount equal to 5 per cent of the total par value of the outstanding capital stock of the Express Company shall first be set apart for the payment of dividends or general corporate purposes, herein termed "Primary Allowance," which shall be cumulative. Any excess of contract income for division over said primary allowance, up to 2 per cent of the par value of the capital stock of the Express Company, shall be divided one-half to the said Company to be set apart for dividends or general corporate purposes, and one-half to the Director General. The remainder to the extent necessary shall be paid into a guaranty fund, which fund shall not at any time exceed an amount equivalent to 10 per cent of the total par value of the outstanding capital stock. This fund shall be held by the Express Company to insure its ability to pay for each year during the life of this contract an amount equal to 5 per cent upon the total par value of its capital stock from July 1, 1918. Any earnings from such fund shall be considered as contract income for division.

If the contract income for division in any year shall not be equal to five per cent of the capital stock as herein provided, any amount lacking shall be withdrawn from said guaranty fund to supply such deficiency to the extent that said fund is sufficient for that purpose, and the said fund shall thereafter be restored from the contract income for division after deducting the five per cent primary allowances and the next two (2) per cent as hereinbefore provided, in the same manner as the fund was originally created. Provided, that should there not be a sufficient sum in said guaranty fund to furnish the amount necessary to pay said primary allowance at any time, the said deficiency shall be paid from said fund when there shall be sufficient money therein.

Any amount in said guaranty fund at the termination of this contract, or that may be due thereto and not required for the purpose